Equatorial Mining & Exploration
Consolidation vehicle to acquire and upgrade artisanal tantalum mines in central Africa which provide 60% + of world production
Equatorial Mining & Exploration (EME) was established in 2012 focused on developing industrial mineral assets in Africa. EME gained control over 550km² of Nigerian coal licences, but the initial attempt to commercialise proved unsuccessful. The end result was a boardroom clear-out and the arrival of a new management team which has masterminded the acquisition of Eastinco and that has a JV deal with the artisanal coltan mining Kuaka co-op in Rwanda. This initial transaction looks to be the blueprint for a series of copy-cat deals which offer a highly compelling opportunity to provide strong and sustained earnings growth.
New regulations forcing artisanal miners to improve H&S or shut down
The Kuaka co-op deal sees EME get an 85% stake in the mine for a US$500,000 cash injection to upgrade the operation. EME could do very nicely as ahead of an expected 5-fold increase in production, the locals have already achieved up to US$125,000 revenue and a net profit of US$75,000 per month.
Ultra-rare tantalum is a vital component in smart phones & computers
Coltan is refined to produce tantalum, one of the rarest elements on the planet. Tantalum capacitors have an extremely high capacitance packed in a small space, allowing for the increased functionality of smart phones.
Development of its own more profitable mines in the medium term
The acquisition of Eastinco will give EME its own mining licences which the team plans to develop to create more profitable independent mining operations.
Risked conservative NPV suggests a 0.0468p target price
Our conservative valuation shows the potential. We initiate coverage of EME with a target price of 0.0468p and Conviction buy stance.
RISK WARNING & DISCLAIMER
Equatorial Mining & Exploration is a research client of Align Research. Align Research owns shares in Equatorial Mining & Exploration. Full details of our Company & Personal Account Dealing Policy can be found on our website http://www.alignresearch.co.uk/legal/
For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.
| Year to Dec | 2017A | 2018A | 2019E | 2020E |
|---|---|---|---|---|
| Revenue (£'000) | - | - | 1,187 | 9,188 |
| Pre-Tax (£'000) | (309) | (221) | (658) | 1,766 |
| EPS (p) | (0.005) | (0.003) | (0.0033) | 0.0045 |