PAC Partners has provided its take on Latin Resources Ltd (ASX:LRS, OTC:LRSRF)’s recently released preliminary economic assessment (PEA) for the Colina Lithium Project in Brazil.
The research and capital markets provider says the company is a Buy and has a 50 cent price target on the stock — almost double Latin’s current 26 cent share price.
PAC Partners provided the following commentary on Latin and its newly released Colina PEA:
“At first glance this is a compelling project in a low cost geography that promises strong returns - even if not within the range of highest tier one projects in Western Australia - this project is a compelling proposition. The overall project valuation is largely as expected in the multi billions with only a couple of hundred million capex required,
“What may surprise is a higher strip ratio than our expectations (18x v 13x) and input commodity price used (equivalent to $2,000/tonne) higher than our $1,500, but is clearly based on industry consultants - so not aggressive - and the project also takes advantage of a market for 3% concentrate which is can extract from the 5.5% concentrate tailings.
“First production target is 2026 so plenty to do for first time development company and investors will be keenly watching the next resource upgrade in Q4 and for ad hoc exploration success announcements before then - we think exploration success remains the key to realise our target price in the near term (next 12 months).
“Key aspects of the study versus our estimates (US$ unless stated):
- Output: Phase 1: 405,000 tonnes per year of 5.5% spodumene concentrate and with an additional $55 million Phase 2 capex key product output increases to 525,000 tonnes per year (PAC: 600,000 tonnes per year)
- Product also includes a saleable 3% tails product of 159,000 tonnes per year - assuming an 11% recovery using spirals over the 33.8% not captured in stage 1 DMS recovery 67.2%.
- Processing method: simple Dense Media Separation over coarse ore. Feed grade is 1.24% (we used 1.32% in our project model)
- Plant size: 3.6 million tonnes per year mined ore / PAC 4 million tonnes per year. Year 1 ROM feed 1.5 million tonnes ramping up to 3.6 million tonnes from year 4
- Mine life: 11 years / PAC: 12 years.