Elementos Ltd reiterated its purchase after the Andalusian government designated Oropesa as an important mining project

The Andalusian government assigned Oropesa to its Project Acceleration Unit for expedited and streamlined regulatory assessment and processing.

Elementos Ltd’s (ASX:ELT, OTC:ELTLF) Oropesa project in Spain was recently named one of seven significant mining projects entrusted to the Government of Andalusia’s Project Accelerator Unit.

The Acceleration Unit was created to centralize and streamline regulatory assessments and provide additional government support to ensure successful project start-up and execution.

“Most significant regulatory milestone in project development to date”

The scope of action of the Accelerator Unit includes the promotion of strategic projects which, due to their importance or nature, contribute to the achievement of the objectives of Andalusia.

Elementos chief executive Joe David said he appreciated the junta’s support, describing it as the most significant regulatory milestone in the project’s development to date.

David added: “This confirms the importance of the project to the region and the strong working relationship we have established with regulators.

“We look forward to working even more closely with the Junta de Andalucía to bring the Oropesa tin project into service for the benefit of the region and all stakeholders.”

“The Unit will also assist in coordination with the various ministries with powers over procedures that affect investment initiatives, as well as with the corresponding local administrations,” David said.

He said that as part of Oropesa’s definitive feasibility study currently underway, an optimization study was due to be released within a month and would confirm Oropesa’s size and scale as well as regulatory submissions.

“Environmental Impact Assessment (EIA) and (mining) permit applications are also being drafted,” he added.

Shares reiterated a “buy”

Following Oropesa’s assignment to the Andalusian government’s project acceleration unit, BW Equities reiterated its “buy” recommendation for Elementos.

Here is an excerpt from the research update:

Accelerated regulatory pathway: ELT has announced that an application to the Andalusian government’s “Project Accelerator Unit” has been accepted, placing Oropesa in a small group of only 7 mining projects in the region to be admitted to the program. This paves the way for a simplified approval process for Oropesa and underlines the strength of the partnership established between ELT and the local authorities concerned. We note the elections scheduled for later this year and believe that this decision signals an emerging political imperative for the need to boost regional jobs and investment. As Oropesa’s economics are very attractive in the current tin price environment, a faster-than-expected approval process provides a potentially fast track for the near-term project.

Tin Price Update: The price of tin on the London Metal Exchange hit a new high of US$50,000/t (cash) (~US$22.68/lb) in early March and has since corrected to the price current US$42,700/t. Extreme volatility has emerged in recent weeks in commodity markets as the conflict between Russia and Ukraine escalated, casting significant uncertainty over the supply of many key commodities. Although we expect volatility to continue this year, we note that the current price of tin is more than double that assumed in the May 2020 economic assessment carried out for the Oropesa project (19 US$750/t), and significantly higher than the current base tin price assumption adopted in our financial modeling (US$30,000/t). Assuming tin spot prices (US$42,700/t) are received over the life of the project in our DCF analysis, this implies a $2.00/share valuation for ELT shares.

2022 milestones: The completion of the DFS for Oropesa is scheduled for “the second half of 2022” and by the end of this month, ELT will publish an optimization/scoping study which will provide an indicative overview of the updated project specifications. We believe an 18-24 month lead time to build the project will follow a positive DFS, putting Oropesa on track to achieve first production in 2025.

Estimate & Recommendation: ELT offers investors exposure to a tin project in a stable geographic region (Spain), with a defined economic valuation that shows very strong fundamentals at current tin prices. Oropesa has modest pre-production capital requirements (we assume US$75 million for a 1 mtpa expanded processing plant) for open pit mining and conventional processing circuit. The shares are trading at a significant discount to our valuation of $1.00/share (AUD), established using a tin price of $30,000/t (LME spot = ~42,700 USD/t) and a DCF valuation analysis. As such, we reiterate our buy rating. Key risks include availability of financing, tin prices, permits/approvals and operational issues.