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. A new management team has masterminded the acquisition of Eastinco a company which 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.

Table: Financial Overviev

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

Source: Company accounts & Align Research

 

CONVICTION BUY - Price target 0.0468p

 

Key data

Share price

0.004p

52 week high/low

0.3/0.01p

Exchange

NEX

EPIC

EM.P

Shares in issue

15,259m

Market Cap

£6.1m

Sector

Mining

IMPORTANT: EME is a research client of Align Research. Align Research owns shares in EME. For full disclaimer information please refer to the last page of the full document.

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