Latin Resources Ltd (ASX:LRS, OTC:LRSRF) has released its preliminary economic assessment (PEA) for the Colina Lithium Project in Brazil - a technical and financial study showcasing strong economic viability for the project, which is on track to become one the world’s largest spodumene mines with very low operational costs.
The PEA, led by independent consultants SGS, demonstrates a low-capital, two-phase operation that delivers environmentally sustainable production of high-quality 5.5% lithium oxide spodumene concentrate (SC5.5) and a lower 3% lithium oxide (SC3) spodumene tails concentrate product.
The project’s after-tax net present value (NPV8%) came in at A$3.6 billion for an internal rate of return (IRR) of 132% for the two phases combined.
Over an 11-year mine life — with first production expected in 2026 — the PEA estimates total revenues of A$12.6 billion, with free cash flow of A$6.8 billion. This would see average annual production over the mine life of 405,000 tonnes of high-quality SC5.5.
"Compelling economic results"
Managing director Chris Gale said, “Latin Resources is extremely proud to have produced such compelling economic results with our first feasibility study on the Colina Project.
"The low-cost capex and fast track to production in 2026 will hit the sweet spot of rising lithium prices many are predicting over the coming years.
"The Colina Project is on track to become one the world’s largest spodumene mines with very low operational costs.”
Latin Resources vice president of operations - Americas Tony Greenaway said, “This is an exceptional result for the company, demonstrating our early belief that the Colina Lithium Deposit has the potential to be a world-class lithium mine that will deliver significant financial returns to our shareholders.”
Amongst world’s lowest-cost producers
As for costs, Phase 1 capital expenditure is estimated at US$253 million (A$398 million), with a payback period of seven months.
Phase 2 capital expenditure of US$55 million will be fully funded by Phase 1 production and will increase average life of mine production to 525,000 tonnes per annum of SC5.5 and 159,000 tonnes of SC3 annually.
The phased development strategy provides a viable ramp-up that self-funds its expansion to become a tier-one lithium mine.
Based on the project’s mineral resource estimate of 45.2 million tonnes at 1.32% lithium oxide, the two-stage expansion plan for Colina has potential to establish Latin as Brazil’s second-largest spodumene concentrate producer and among the lowest-cost spodumene concentrate producers globally.
Resource expansion & DFS
Latin continues to expand the project’s mineral resource through a resource drilling program. It expects to announce an updated mineral resources estimate in the fourth quarter of 2023, with the goal of increasing tonnage and converting existing Colina resources to higher JORC classifications.
The results of the PEA and expected mineral resource expansion will serve as the foundation for the DFS that’s due for completion in mid-2024. Eleven drill rigs are now on-site supporting the completion of the DFS. The potential for Phase 3 extension and expanded production will be evaluated in the DFS.
“As we move into the full definitive study phase for the Colina Project, we continue to aggressively explore our highly prospective tenement package, focusing on brownfield Colina extensions, as well as new greenfield discoveries within our defined lithium corridor," said Greenaway.
"The entire exploration team is confident that we will continue to make new discoveries in the wider project area like our new Fog’s Block Prospect, where we believe we will be able to define additional lithium resources that will continue to grow production and profitability.”
An excellent lithium jurisdiction
Given the project’s location in the Brazilian state of Minas Gerais, it will enjoy significant cost-saving benefits and competitive market advantages.
Gale explained, “Minas Gerais is an excellent jurisdiction to support delivery of the Colina Project into a sustainable, large and low-cost spodumene operation on an accelerated basis.
"Latin Resources alongside Sigma Lithium will propel Lithium Valley, Brazil, into one of the global top four lithium provinces.”