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L1M: Drilling in coming weeks - following up ~4% lithium found in artisanal mine

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Published 17-JAN-2025 11:45 A.M.

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12 minute read

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 7,625,696 L1M shares and 3,523,077 L1M Options at the time of publishing this article. The Company has been engaged by L1M to share our commentary on the progress of our Investment in L1M over time.

In a few weeks, $7M capped Lightning Minerals (ASX:L1M) is going to drill into a wall of lithium bearing pegmatites they found in an artisanal mine...

This is south of the ground where LRS made the discovery that propelled it to a $448M takeover by Pilbara Minerals.

L1M’s upcoming drilling in a few weeks is our next “roll of the dice” to find another LRS style 10x return on a big, new lithium discovery in Minas Gerias, Brazil.

(of course it's no guarantee - exploration stocks are risky investments)

L1M’s lithium exploration ground is nestled between:

  • ~$448M Latin Resources (ASX: LRS) (soon to be acquired by $7BN Pilbara Minerals), and;
  • ~$2.2BN Sigma Lithium - a lithium producer.

Further to the north sits swathes of lithium exploration ground controlled by none other than $156BN capped mining behemoth Rio Tinto.

And now we are only a few weeks away from L1M drill testing its ground right in the thick of it:

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After months of preparatory work to find the best possible targets, L1M is now about to put its first drill hole into its ground, with a few more drilling campaigns to come this year.

To date L1M has identified 5-6 relatively strong target areas across its three projects - which is a good sign...

The planned first drill hole is going straight into an artisanal mine found on L1M’s land that has a large wall of spodumene bearing pegmatites...

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With grades that tested up to 4% lithium:

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We are Invested in L1M to hopefully see it do what its neighbour Latin Resources did -

Deliver a major valuation re-rate off a big lithium discovery.

In low cost Brazil - emerging as one of the world’s top lithium producers.

Latin Resources was one of our best ever Investments - it went from ~3c to ~43c off the back of a discovery on ground to the north of L1M.

At its peak, Latin hit a market cap of $1BN.

There are a lot of people out there that made money on LRS’s lithium discovery (including us) who want to try and do it again in the same region.

Solis Minerals (ASX: SLM) is another micro cap stock that was recently hunting lithium in Brazil (incidentally LRS has a significant shareholding in Solis).

We saw what happened with Solis Minerals (ASX: SLM) just before it drilled into its “pegmatite cliff face” in Brazil.

A massive run on volume from 8c to $1.20...

... but unfortunately for SLM (and us) the drilling didn’t yield a new discovery, and the price came back down.

Exploration drilling can be very high reward (LRS), but is also very high risk (SLM).

As we mentioned above, L1M’s upcoming drilling in a few weeks is our next roll of the dice to find another LRS style 10x return on a big, new lithium discovery.

We were Invested in Latin way back when the company was first picking up its ground in Brazil, years before any drilling.

We have followed a similar approach with our Investment in L1M - Investing when sentiment is low, pre-discovery.

In a few weeks time will get to see if L1M can repeat Latin’s success and make a further discovery with the drill bit.

L1M is planning 2,000m of diamond drilling this quarter.

It also has more targets in the back pocket that it wants to follow up after the first drilling campaign - which means multiple shots on goal over the rest of 2025.

Right now, L1M is capped at just ~$7M, and we think the company is highly leveraged to any early exploration success here.

More on L1M’s first drill target - drilling in a few weeks

Today’s announcement all but confirmed where L1M would be drilling first.

L1M has confirmed spodumene bearing pegmatites at Esperança - along with promising soil sampling results from elsewhere on the project.

Esperança is one of L1M’s three projects in the region and is currently L1M’s highest priority.

Today’s positive soil sampling results are following up on previous results where rock chips were confirmed grading up to 4.04% lithium oxide.

There’s also some really strong lithium soil sampling results across L1M’s other two projects - which provide those additional targets for L1M to follow up after the drilling this quarter at Esperança.

So L1M has the right type of rocks (spodumene bearing pegmatites), high grades (4.04% lithium) and good soil sampling results.

In a region proven to hold monster deposits.

Now we just need to see L1M drill to see what’s beneath.

Below is the northwest corner of L1M’s project where the company intends to drill:

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(Source)

And below is the larger project area, matched up with the broader Lithium Valley in Brazil:

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(Source)

This small area in the top left of the above image, which again, features spodumene grading +4% lithium (from L1M’s on site readings), has numerous pegmatites on it.

Pegmatites are the typical host rock for high grade lithium deposits.

+4% lithium is is very high grade.

(but at the same time - on site analysis is NOT as accurate as assay results from drilling)

And the spodumene crystals they found measure up to 50cm in length.

How did L1M find this so quickly?

L1M got very lucky here...

L1M’s imminent drill targets were identified while the L1M team was walking the ground...

They literally stumbled onto a small-scale "artisanal mine” that some locals had been digging in the past.

Inside they found “large, elongated spodumene crystals up to 50cm in length” in the walls:

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Based on these artisanal workings and today’s confirmation of spodumene across the samples taken from the area, it makes a lot of sense to us to go out and drill Esperança first.

They know there is spodumene bearing pegmatites with lithium here, now they need to drill test it to find out how deep and thick it goes, and which direction any mineralisation runs.

Lithium exploration playbook - one final step left for L1M...

Most of the world’s lithium is produced from spodumene bearing pegmatites.

So finding spodumene is big when it comes to lithium exploration.

So far L1M is three steps of the way through the tried and tested playbook that has led to the discovery of some of the world's biggest lithium deposits.

Most of which were “company makers” - creating hundreds of millions of dollars (and sometimes billions) of value.

The lithium exploration process playbook for a company is broadly as follows:

  1. Map outcropping pegmatite structures which are likely to host lithium mineralisation

    L1M has mapped pegmatites across its project. More soil sampling results are now in. ✅
  2. Sample these outcrops to confirm if there is lithium mineralisation

    L1M has shown its pegmatites have lithium... November’s announcement had grades up to 4.04%. ✅
  3. Confirms if spodumene hosted mineralisation

    Spodumene is the source rock for the majority of the world’s lithium supply. Today, L1M confirmed again that its pegmatites contain spodumene. ✅
  4. Drill into the outcropping pegmatites to determine if there is a large lithium bearing structure

    The only thing left to do is drill to see if these pegmatites are part of a bigger lithium system.

L1M’s is planning to drill this quarter (which means next few weeks) 🔃

Latin Resources was the most recent of our Investments to deliver all four of those steps with its Brazilian lithium project.

There is corporate and market interest in lithium discoveries in Minas Gerais

LRS post discovery was up ~24x from our Initial Entry Price.

We have talked about L1M’s neighbours a few times in today’s note, but we are going to do it again.

At its peak LRS was capped above $1BN, and the much bigger regional peer Sigma at its peak was capped above $6BN.

In addition to Sigma and Latin Resources, the world’s biggest miner, Rio Tinto, has pegged a huge swathe of ground in the same region as L1M has a position.

So Rio, Pilbara... and at some points even Elon Musk’s Tesla was rumoured to be interested in discoveries in this part of Brazil.

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(Source)

... giant Chinese EV maker BYD too - that company was also in ‘talks’ about potentially acquiring Sigma Lithium.

Clearly there is global corporate interest from large companies in securing Brazilian lithium assets, especially in Minas Gerais.

Partially because if the discovery is strong enough (like LRS or Sigma’s) these projects can have low operating costs compared to other hard rock lithium projects.

AND partially because of the supportive government - Minas Gerais is a pro mining state and is welcoming of foreign capital to grow its local lithium industry.

Minas Gerais - supportive for lithium miners

Below is L1M’s Managing Director Alex Biggs signing an MOU to fast-track its projects with Invest Minas:

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Invest Minas is the Minas Gerais State Government’s Investment Promotion Agency.

A few months ago, we saw the Invest Minas team present in Sydney - the message was pretty clear that Minas Gerais is open for business.

You can read more of that here: Insights from Industry Leaders at IMARC

We are substantial holders in L1M as we think it has a good chance of making the next big lithium discovery in Brazil’s Lithium Valley.

We went to site, and liked what we saw

Given our material shareholding in the company, we had one of our team members go on a site visit a few months back while in Brazil with the L1M team.

At the time, the historic artisanal mine that yielded the high grade lithium bearing pegmatite was not known.

But we did hike up some pretty interesting looking outcrops:

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Check out the write up from our Brazil site visit here

At the same time as our L1M site visit, we attended the “Brazil Lithium Summit” in Belo Horizonte, the capital of Minas Gerais, Brazil.

You can also read that note here:

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A lithium discovery forms the basis of our L1M Big Bet:

Our L1M Big Bet:

“L1M returns 1,000%+ by making a discovery significant enough to move into development studies, or attract a takeover offer.”

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved - just some of which we list in our L1M Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true

More on why we think L1M could be LRS 2.0 for our Portfolio

As mentioned earlier in our note, we are Invested in L1M to hopefully see it replicate Latin Resources’ success and become “LRS 2.0”.

L1M has been doing what LRS did for years before its discovery.

L1M has been using the cyclical low in the lithium market to its advantage, picking up new ground cheaply and doing all the lower cost groundwork to prove up drill targets.

This is at a time when most other ASX small caps have moved on to focus on other regions and other commodities...

This was the approach LRS took back in 2017-2018 when the lithium market turned negative in late 2018. LRS’s Managing Director Chris Gale sent his geologists out to Brazil to look for “the best ground”.

Over the next 4 years (while the lithium bear market played out), LRS did all the groundwork, finding ground and then identifying drill targets.

Then, in March 2022, LRS finally drilled one of those targets and made a discovery.

We covered the early days of LRS’ exciting discovery pretty extensively in these notes:

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The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

We think L1M is doing a lot of the same groundwork that was foundational to LRS’s discovery.

L1M has been picking up its ground at the depths of a lithium bear market where many aren't paying attention yet...

In recent months L1M has been doing low-cost field work to define targets worthy of drilling.

And now L1M is getting close to drilling to make a larger lithium discovery of its own.

What’s next for L1M?

Exploration drilling across Brazilian lithium projects 🔄

L1M has three projects in the Minas Gerais region of Brazil.

For the past few months L1M was working on defining targets across all three of its projects (Caraíbas, Canabrava and Esperança).

Objective #1: Find high priority drill targets

We want to see L1M conduct geochemical and geophysical surveys and determine the best drilling spots at its Brazilian lithium project.

Milestones
✅ Geological mapping
✅ Rock chip sampling
✅ Soil sampling
✅ Define high-priority drill targets

Source: “What do we expect L1M to deliver” section - L1M Investment Memo 2 May 2024

Today’s news means we now have all the soil sampling data and a pretty good look at where L1M will be drilling over the coming months:

(The image below does not include soil sampling data we saw in today’s announcement, but its a good overview of the three targets L1M is going after).

Now it's all about seeing L1M go out and drill test these targets.

Objective #2: Drill high priority targets

We want to see L1M drill its best targets

Milestones
🔲 Drilling permits
🔲 Drilling starts
🔲 Drilling completed
🔲 Assay results

Source: “What do we expect L1M to deliver” section - L1M Investment Memo 2 May 2024

Our L1M Investment Memo

Our Investment Memo provides a short, high-level summary of our reasons for Investing. We use this memo to track the progress of all our Investments over time.

Below is our L1M Investment Memo, where you can find the following:

  • What does L1M do?
  • The macro theme for L1M
  • Our L1M Big Bet
  • What we want to see L1M achieve
  • Why we are Invested in L1M
  • The key risks to our Investment Thesis
  • Our Investment Plan


General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

Publication Notice and Disclaimer

The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.