Latin Resources Ltd (ASX:LRS) has received an upgraded target price of 25 cents per share from PAC Partners following a site visit by the capital markets provider to Latin’s Salinas Lithium Project in Brazil.
PAC Partners noted that after booking its maiden resource in December, Latin started the year with the game changing Colina West discovery.
While Latin was already stepping up to intensify activities in 2023, PAC Partners’ visit to site has shown how Colina West has changed the whole project approach for the company.
The JORC defined Colina deposit was satisfactory at 13.3 million tonnes and 1.21% grade, albeit on the smaller side and relatively deep, supporting a potentially decent but middling lithium project.
However, with the discovery of the Colina West pegmatites in January, which are longer and thicker and exhibit superior grades, Latin’s focus has pivoted to focus on bringing together an enlarged JORC resource across the whole of Colina to support a potential project of true critical mass (500,000 tonnes/year output).
The following are the key conclusions from PAC Partners’ 4-day site visit:
- Colina West is a breakthrough with implications for the whole of project approach. The priority is chasing Colina West pegmatites to the west where they approach surface cover (up dip but won’t see daylight).
- Forming into one single deposit. Colina and Colina West now looked at as one “open pitable” deposit.
- Project potential of critical scale. Theoretical production scenarios suggest larger scale (500kt/yr concentrate output > Sigma Phase 1 ~275kt/yr), and 2026 is the first feasible fast track production timeline.
- Drilling remains the focus rather than rushing into sub optimal scale production studies and early offtake.
- Latin is the landholder. Project site farmland has been purchased by Latin providing ease of access.
- Location and infrastructure almost ideal with key highway access 20km from site (already has hundreds of trucks per day), site consists of farmland and bush vegetation, plentiful cheap grid power and water resources (local significant dam) nearby.
- Development area. The region is development hungry as outlined to us by the local mayor. A full scale project would provide much opportunity for the local community.
- ESG compliant. Latin has established its ESG credentials with strong community engagement and support, carbon friendly power sources and a strengthening governance structure.
- Increase target price to $0.25c and reiterate BUY recommendation. Share price target is realisable in 2023 in PAC’s view.
- PAC incorporated a new base case JORC resource tonnage (36Mt and one coherent minable ore body) and increased target price based on EV:Resource valuation (using A$500/t LCE).
- For a blue-sky perspective, PAC steps through a Colina project scenario model based on its site trip observations: (a larger than Sigma Phase 1) world class Colina project 4Mt/yr mining, 500kt/yr concentrate output, US$200m capex and yielding a theoretical A$1.9bn valuation (with 2026 being earliest possible fast track to production).
- Coming days: Release of pending assay results for observed pegmatite widths 26.87m and 33.05m thick at Colina West.
- Coming weeks: Results from an additional 3 exploration drill holes that chase Colina West up dip. This should ascertain shallower near surface mining potential and present the team with a more optimal open pit starting point for the Colina Project development.
- Mid-year 2023 (June): JORC resource update that should cement Colina into the class of 20Mt+ single ore bodies. Simple observation suggests Colina West discovery can, on its own, be meaningfully larger than existing Colina’s 13.3Mt at 1.21%.