Latin Resources Logo (ASX-LRS).png

Latin Resources Limited

ASX:LRS

Last Price:

$0.075

Our Investment Summary

Date of
Initial Coverage

26-Nov-20

Initial
Entry Price

$0.018

Returns from
Initial Entry

326%



Investment Memo: Latin Resources (ASX:LRS) - CLOSED

Opened: 17-Feb-2022

Closed: 10-Jun-2022

Shares Held at Open: 12,475,000

Shares Held at Close: 5,755,000

Reason Memo Closed: OUTPERFORM: LRS made a lithium discovery, subsequently raising $35M to define the size of the discovery. These are two material events that have triggered a new Investment Memo for us to track.


What does LRS do?

Latin Resources (ASX: LRS) is a multi-commodity exploration and development company focussed primarily on lithium in Brazil and halloysite and kaolin in WA.

What is the macro theme?

Lithium is the key component of EV battery cathodes and has experienced strong upwards price momentum recently after a long period in the doldrums. We believe battery metals are the most compelling investment theme of this decade.

Halloysite is a carbon nanostructure clay with a range of high-tech and emerging use cases. With current use cases in the medical industry, ceramics and coatings. Due to its unique composition scientists are exploring further use cases for halloysite. This includes using it for carbon emission mitigation and advanced materials.

[Memo Assessment - 10-Jun-2022]: Grade A

Our assessment that lithium prices could take LRS higher was on point we’re bullish on battery metals as part of a decade long investment thematic.

Why did we invest in LRS?

Exposure to Lithium

The tenements that LRS holds in Brazil have been underexplored for lithium and early stage work has looked promising to date. We believe given market dynamics, a lithium discovery could generate significant upside and become a company making event.

[Memo Assessment - 10-Jun-2022]: Grade A

This reason for holding LRS materialised early in the year with LRS making a new lithium discovery at its Brazilian lithium project. Off the back of this discovery LRS re-rated to a $200M+ market cap and managed to get a $35M capital raise completed. We think that the discovery was a clear “company making event”.

Exposure to Halloysite

LRS has a significant high grade halloysite deposit in WA with an existing JORC Mineral Resource Estimate. We believe this is the most likely near-term source of revenue for the company.

[Memo Assessment - 10-Jun-2022]: Grade C

The halloysite project has taken a back seat ever since LRS made its new lithium discovery in Brazil. We were expecting this to become a slightly stronger part of the LRS story in the second half of the year and still think it may come into play but for now we are solely focused on seeing LRS developing its Brazilian lithium project. We don’t expect LRS’s halloysite project to drive significant value over the next 12 months.

Potential to re-rate

LRS has a large retail following and hence has the potential for significant share price re-rates on good news. This is a double edged sword however as the share price can drop too on average news or long periods without news.

[Memo Assessment - 10-Jun-2022]: Grade A

This also materialised early in the year, LRS made its new discovery and the market rewarded it by taking the share price from ~3.5c per share all the way up to a high of 22.5c per share. We think this sharp rise in a matter of only 2-3 weeks was a result of LRS’ large retail following and the ability for the good news to spread really quickly bringing more eyeballs to the company.

What do we expect LRS to deliver in 2022?

Objective #1: JORC resource at the Brazilian lithium projects

Complete at least two or three rounds of drilling to try and delineate a JORC lithium resource. We want to see LRS deliver lithium grades > 1% across the drilling programs which would make it more likely that a high grade JORC resource can be established.

[Memo Assessment - 10-Jun-2022]: Grade = Unchanged

This is a key objective we have carried over into our new Investment Memo.

Objective #2: Offtake agreement for Halloysite project

We want to see an offtake agreement for the LRS halloysite project, following product qualification. This would firm up the prospect of LRS making near-term revenue from this project.

[Memo Assessment - 10-Jun-2022]: Grade = C

This was not achieved in the first half of the year and we’re hoping to see this in the second half of 2022. As a result, we think it would be unfair to give the company a lower rating than C for this objective.

Objective #3: Progress cattle rumen methane emissions reduction project

Methane makes up only 10% of greenhouse gas emissions - but over a 20-year period, it is 80 times more potent at warming the world than carbon dioxide.

Agriculture, and cattle in particular, compose a big part of these methane emissions. LRS has committed $3.2M in funding to a research organisation and engaged a former CSIRO Chief Research Scientist to explore the possibility for their high grade halloysite to reduce methane emissions from livestock, in particular cattle.

This project could help establish an additional end use for their resource and we want to see preliminary results from the research in 2022.

[Memo Assessment - 10-Jun-2022]: Grade = C

While this project is expected to take some time to deliver, LRS has been fairly quiet with respect to this hence its C rating. We can understand the lack of updates on this project, given the lithium discovery made and shift in company focus.

What could go wrong?

Exploration risk

There are no guarantees that LRS finds more lithium. Alternatively, LRS doesn’t find enough lithium to justify a mine.

[Memo Assessment - 10-Jun-2022]: Grade = B

LRS made a new lithium discovery which mitigates this risk significantly. LRS now needs to prove that the discovery can become a commercially viable lithium deposit worthy of development. Hence, the B rating. For us, a JORC resource would be when a company completely eliminates “exploration risk”.

Market risk

Lithium prices have cratered before and its possible supply/demand dynamics change and in turn impact market sentiment to lithium exploration companies such as LRS.

[Memo Assessment - 10-Jun-2022]: Grade = A

The lithium market is still fairly strong with prices for lithium carbonate trading only ~5% off all time highs. There is always a risk that lithium prices fall off a cliff and we see a situation similar to ~2017-18. Working in LRS’ favour is that it raised $35M at a market peak. This gives LRS enough runway to continue to define its discovery. We think LRS has managed this risk really well.

Production risk

The halloysite that LRS has may not be of sufficient quality for offtake partners or they may not be able to produce enough of it to make the deposit economic.

[Memo Assessment - 10-Jun-2022]: Grade = Unchanged

This risk is still present given halloysite has not been sold to anyone yet.

Geographic risk

While the region of Brazil that LRS operates in is a mining friendly jurisdiction, political changes could alter that.

[Memo Assessment - 10-Jun-2022]: Grade = Unchanged

This is still a risk factor that we have carried into our new Investment Memo.

Funding risk

LRS had $643k in cash at the bank as of 31 December 2021. As a result, we believe LRS will need to find sources of funding to continue its exploration and development activities. These may come through the exercise of options or a capital raise.

[Memo Assessment - 10-Jun-2022]: Grade = A

LRS was running its cash balance relatively low going into the first drilling program at its Brazilian lithium project. LRS has now made a new discovery and raised $35M off the back of it. This gives LRS a significant amount of breathing room and has completely transformed the company’s balance sheet. We think LRS have mitigated this risk completely for at least the next 12 months.

What is our investment plan?

We added more LRS to our position in early 2022 - we are holding to see what comes from the initial lithium drilling campaign and assays. If the share price runs we will look to sell down about 20% of our current position.

[Memo Assessment - 10-Jun-2022]: Grade = A

Share price had a serious run on discovery, hit our points for partial de-risk so we Top Sliced and Took Profit - we are now left with a Free Carried position into the next phase (covered in the next Investment Memo).


Disclosure: The authors of this article and owners of Catalyst Hunter, S3 Consortium Pty Ltd, and associated entities, own 12,475,000 LRS shares at the time of writing this memo. S3 Consortium Pty Ltd has been engaged by LRS to share our commentary on the progress of our Investment in LRS over time.

Investment Memo: Latin Resources (ASX:LRS) - LIVE

Opened: 10-Jun-2022

Shares Held at Open: 5,755,000


What does LRS do?

Latin Resources (ASX: LRS) recently discovered a high grade lithium resource in Brazil. The company is now actively defining the size of the discovery and aiming to become a lithium producer.

What is the macro theme?

Lithium is the key component of EV battery cathodes and has recently experienced strong upwards price momentum after a long period in the doldrums.

We believe battery metals are the most compelling investment theme of this decade. With a lithium supply deficit anticipated in 2024.

We think spodumene resources like LRS’s Brazilian lithium discovery should do well in this environment.

Why did we invest in LRS?

Exposure to Lithium

Following the company’s Brazilian lithium discovery in March 2022, our LRS holdings give us exposure to lithium. We think lithium offtakers will really need new supply as EVs continue to gain market penetration.

Potential to re-rate again

LRS has a large retail following and hence has the potential for significant share price re-rates on good news. The opposite also applies if the news is bad. We hope the definition of a JORC resource or offtake deal could see LRS re-rate again with this retail backing.

Favourable peer comparison

LRS is at an early stage in its development as a lithium company, meaning its current valuation may have more upside as compared to its peers.

Funding risk mitigated

LRS raised $35M in April 2022 and we think it is well funded to advance its Brazilian lithium project over the next 12 months.

Billion $ capped neighbour with similar geological setting

US$1.7B capped Sigma Lithium’s project, ~100kms to the south, is a good model for how LRS can progress its project. Sigma’s project is in the construction phase and LRS can take learnings from Sigma.

What do we expect LRS to deliver in 2022?

Objective #1: JORC resource at the Brazilian lithium projects

A JORC resource would allow LRS to engage in more substantive conversations with offtake partners and allow the market to appropriately value LRS versus its peers.

We want to see an overall grade for the resource >1% lithium and have set up our expectations for overall tonnage as follows:

  • Bullish case (Exceptional) = >15Mt JORC resource
  • Base case = 5-15Mt JORC resource
  • Bearish case= <5Mt JORC resource

Milestones

25,000 metre infill resource definition drilling

Assay results (ongoing)

Objective #2: Start feasibility studies

We expect LRS to begin a feasibility study (scoping study or pre feasibility study) at some point over the next 12 months following resource definition.

Milestones

Testwork reporting (metallurgy) (Q3-Q4)

Commencement of feasibility study (Q3-Q1 2023)

Bonus: completion of feasibility study (Q2 2023?)

Objective #3: Offtake Agreement

While demand for lithium remains strong, we are hoping LRS manages to sign an offtake agreement in the next 12 months. Perhaps around the time that its JORC resource comes out.

Milestones

Letter of Intent or Non Binding MoU / Binding Offtake (by end of year)

Binding Offtake Agreement

Objective #4: Additional exploration at lithium tenements

LRS is looking to do more drilling at a recently acquired lithium prospect and an existing lithium prospect that has previously not been focussed on - this could increase the size of its resource.

Milestones

Drilling at recently acquired lithium tenements

Assays

Drilling at existing under explored lithium tenements

Assays

What could go wrong?

Development risk

After the discovery hole, LRS will face a new set of challenges with regards to developing the project. LRS will have to start thinking about feasibility studies as well as factors like logistics and processing plants.

Exploration risk

There are no guarantees that LRS continues to find more (or enough) lithium at its newly acquired and under explored lithium tenements. Alternatively, LRS doesn’t find enough lithium in infill and resource definition drilling at its lithium discovery to justify a mine.

Market risk

Lithium prices have cratered before and its possible supply/demand dynamics change and in turn impact market sentiment to lithium exploration/development companies such as LRS.

Geographic risk

While the region of Brazil that LRS operates in is a mining friendly jurisdiction, political changes could alter that.

What is our investment plan?

We are now free carried and have taken profit in our LRS Investment.

We currently hold 5,755,000 LRS shares and we intend to hold the majority of these shares while the fully funded LRS executes on its business plan to develop its lithium resource.

If the share price re-rates significantly on major news, likely either to be an offtake agreement, or the JORC resource exceeds expectations, we may look to take a profit once again.


Disclosure: The authors of this article and owners of Catalyst Hunter, S3 Consortium Pty Ltd, and associated entities, own 5,755,000 LRS shares at the time of writing this memo. S3 Consortium Pty Ltd has been engaged by LRS to share our commentary on the progress of our investment in LRS over time.


Investment Milestones for LRS

Initial Investment @ 1.765c
✅ Top Slice
✅ Free Carry
✅ Increase Investment @ 4.49c
✅ Free Carry
✅ Increase Investment @ 3c
✅ Free Carry

Take Profit
✅ Price increases 250% from initial entry
✅ Price increases 500% from initial entry
✅ Price increases 1,000% from initial entry

✅ 12 months capital gains tax discount
🔄 Hold remaining for 2+ years


Investor Presentation

More assay results on its way to a JORC resource

ASX:LRS Jul 27, 2022 Announcement

Investment Memo: LRS IM-2022
Objective 1: JORC resource at the Brazilian lithium projects
Milestone 1: 25,000 metre infill resource definition drilling
Milestone 2: Assay results (ongoing)



This morning Latin Resources (ASX: LRS) put out an update on its resource definition drilling program at its Brazilian lithium project.

LRS is now ~25% of the way through its 25,000m drilling program, after which it hopes to put together a maiden JORC resource.

Some of the notable intercepts from today’s release were:

  • Drillhole 17: 13.86m at 1.33% lithium from 173m.
  • Drillhole 18: 9.16m at 1.68% lithium from 133m.
  • Drillhole 19: 11.96m at 1.64% lithium from 206m.

Given these results are from an infill drilling program, the lithium intercepts are expected by the market, and we think the reason why there was limited share price movement on this news today.

These results continue to prove out LRS’s lithium deposit, and with the arrival of a fourth diamond drill rig on site, LRS is moving quickly to establish a maiden JORC resource estimate for its new discovery.

We think that this will be LRS’s next major catalyst, allowing the market to compare its deposit to larger peers with established JORC resources.

We set the following expectations for LRS’s JORC based on peer comparisons in the lithium sector.

  • Bullish case (Exceptional) = >15Mt JORC resource
  • Base case = 5-15Mt JORC resource
  • Bearish case = <5Mt JORC resource

Read our latest LRS article to see our reasoning behind these expectations: Lithium deposit getting bigger - plenty more drilling to come.


Noosa Mining Investor Conference round-up

Jul 22, 2022

Macro: Commodities


Spanning three days on the pristine Sunshine Coast of Queensland, the Noosa Mining Investor Conference kicked off its 12th year on Wednesday. Attracting a diverse and large spread of corporates, brokers, retail and institutional investors, this year’s event featured over 60 companies presenting and over 1,000 people in attendance, all hosted within the coastal town's Peppers Resort.

At the event, we caught up with a number of executives from our Investment companies (including AKN, AOU, BPM and PFE) as well as companies of interest, either as potential additions to one of our Portfolios, or to gain expert insight to macro and regional headwinds impacting the markets.

The conference is held in the ideal location to mix work with pleasure, and meet a host of CEOs of ASX juniors. Each day ends with a short ‘business at the bar’ session that quickly morphs into talking tactics about where to eat and drink. On Thursday and Friday nights, many head to the Noosa Surf Club for its networking sessions, enjoying its glassed indoor area and open deck to the beach.

We look forward to providing updates on companies we met with down the road.


Tesla profit jumps, ASX lithium stocks jump

Jul 22, 2022

Macro: Lithium


Yesterday, Elon Musk’s Tesla notched a 57 per cent jump in adjusted earnings per share (EPS) in its latest quarter, a 42% rise in revenue on this time last year and forecasted annual sales growth of 50 for the foreseeable future:

The good numbers out of Tesla were enough to see a number of ASX listed lithium stocks jump on the news, including three of our lithium Investments.

These include the following (with yesterday’s moves):

Vulcan Energy Resources (ASX:VUL) - +8.76%

Latin Resources (ASX:LRS) - +8.33%

European Metals Holdings - +5.33%

What we think is playing out here is perhaps a bit of market pushback against bearish lithium narratives - which in part originated out of Goldman Sachs and Credit Suisse in mid-June.

This, despite the lithium price holding steady at a very elevated level for the last three months:

After tax loss selling in June slowly ground to an end - we’re seeing a bit of life coming back into the market - with potentially a bit of bargain hunting going on.

We remain bullish on lithium’s prospects as part of a decade-long battery metals boom and remain long-term holders of the three companies listed above.

There’s an easy way to see these companies on our portfolio page, along with our other portfolio filters (click the image to see our lithium companies all in one place):


China considering US$1.1 trillion infrastructure stimulus

Jul 15, 2022

Macro: Commodities


China plans to make up to US$1.1 trillion in financing available for infrastructure spending, which we think will increase commodity demand. Read the following Bloomberg article for details.

Read the full article here.

Below are our key takeaways:

  • China is making 7.2 trillion yuan ($1.1 trillion) in funds available for infrastructure spending.
  • According to Citigroup, infrastructure investment in 2022 is likely to rise by 7.7% versus 2021.
  • President Xi Jinping has called for an “all out” effort to increase infrastructure spending this year to fuel economic growth and meet a GDP growth target of around 5.5%.

The Bloomberg article touches on the impacts of China’s COVID induced lockdowns on the domestic economy.

With economic growth tipped to slow, the Chinese government is getting ready to lean on fiscal stimulus through infrastructure investment to spur economic growth.

We think this type of fiscal stimulus is likely to become a common theme in China and the West, with macro themes like decarbonisation requiring massive CAPEX.

This infrastructure spending forms part of our “commodities supercycle” investment thesis, where we see increased fiscal stimulus and CAPEX investment spurring higher demand for commodities already facing supply shortages.


Metallurgical test work progressing at LRS’s lithium discovery

ASX:LRS Jul 13, 2022 Announcement

Investment Memo: LRS IM-2022
Objective 1: JORC resource at the Brazilian lithium projects
Objective 2: Start feasibility studies


This morning our lithium exploration Investment Latin Resources (ASX: LRS) confirmed that metallurgical test work was being progressed concurrently to its 25,000m resource drilling program.

LRS said that samples had been dispatched to the required labs with preliminary metallurgical test work commenced as part of the Company’s fast-track strategy to define a JORC resource for its new lithium discovery.

The planned test work will ultimately look to determine final lithium concentrate recovery rates.

This will mean LRS have the information needed to progress its project towards a maiden JORC resource and eventually into feasibility studies.


Potential strike zone at lithium discovery increased to 2.2km

ASX:LRS Jul 13, 2022 Announcement

Investment Memo: LRS IM-2022
Objective 1: JORC resource at the Brazilian lithium projects
Risk 1: Exploration risk


This morning our lithium exploration Investment Latin Resources (ASX: LRS) managed to increase the size of its new lithium discovery in Brazil.

The increase comes through the securing of tenements immediately to the south of LRS’s 21.1m @1.2% lithium intercept, where the lithium deposit is open trending southwards.

Before the increase in the project area, LRS’s discovery sat on a ~1km strike length, after today’s news, LRS has an additional 1.2km of potential strike to test.

This means LRS could potentially increase the size of its project over a total strike length of ~2.2km.

LRS currently has three diamond drill rigs running on site (with a fourth rig arriving in late July) as part of a 25,000m resource drilling program.

With the deposit open along strike to the south LRS have already started drilling into this newly secured strike zone with drillholes 24 and 25 testing for extensions to its lithium discovery to the south.


Gold project option exercised ahead of non-core asset divestment

ASX:LRS Jul 08, 2022 Announcement

Investment Memo: LRS IM-2022



Our lithium exploration Investment Latin Resources Ltd (ASX: LRS) has exercised its option to secure 100% ownership over a gold prospect in the southern Lachlan Fold Belt in NSW.

The decision followed the completion of extensive regional exploration including reprocessing and interpretation of the available airborne geophysical data, on-ground reconnaissance mapping, and outcrop sampling and systematic soil sampling.

This prospect — the Peep O’Day prospect — is the southern portion of the original Yarara Tenement and the most prospective area, returning high-grade gold in outcrops over a strike length of 1.3 kilometres.

This all bodes well for LRS, which is currently in discussion with a number of third-party groups in relation to the divestment of Peep O’Day and other non-core assets.

Our primary reason for holding LRS remains its South American Lithium project, so we like to see that the company is making decisions to centre its focus on its lithium business.


China considering US$220Bn in infrastructure stimulus

Jul 08, 2022

Macro: Commodities


The following Bloomberg article highlights China’s plan to spend up to US$220 billion to spur economic growth through infrastructure spending.

All of this new infrastructure will require more commodities.

Read the full article here.

Below are our key takeaways:

  • China’s Ministry of Finance is considering US$220 billion of infrastructure funding aimed at shoring up the country’s beleaguered economy.

  • The funding is to be brought forward from next year’s quota, marking the first time the issuance has been brought forward due to concerns around the dire state of the world’s second largest economy.

  • The funding would primarily be used on infrastructure spending to boost an economy hit by Covid lockdowns and a housing downturn.

  • Commodities rallied in European trading hours following the news, with copper moving 3.6% higher on the London Metal Exchange.

For over two years, we have been writing about an upcoming commodities supercycle brought about by infrastructure spending, following decades of underinvestment in the “real economy”.

All this investment in the “real economy” requires raw materials, which is why we think the macro backdrop for commodities over the next decade is strong.

The Bloomberg article highlights the readiness of the Chinese government to lean on fiscal stimulus to spur economic growth at a time when the Chinese economy is slowing down.

Generally, governments would try to respond to slowdowns in economic growth by cutting interest rates. With this tool exhausted after the COVID pandemic, we think infrastructure spending will become the new policy of choice for governments worldwide.

Again, this infrastructure spending will increase demand for commodities which we expect will take commodity prices higher.


VW CEO breaks down batteries and supply chain issues

Jul 08, 2022

Macro: Commodities


The following Bloomberg article showcases the moves major carmaker Volkswagen is making in the batteries industry.

Read the full article here.

Below are our key takeaways:

  • VW is pressing forward with investments along its battery supply chain, commencing construction at a new cell factory in Salzgitter, Germany, one of five facilities in Europe under the carmaker’s PowerCo subsidiary.
  • Salzgitter is home to VW’s main motor factory, and it is where the company last year opened an $80 million facility to research, develop and test EV batteries.
  • Roughly $2 billion will be invested in the new cell factory, where production is scheduled to begin in 2025.
  • VW expects its battery business to generate €20 billion in revenue by the end of this decade.
  • VW CEO Herbert Diess said, “We are invested in some startups and we are looking forward to a joint venture together with Bosch for the machine tools and equipment for those plants, so we’re really gearing up to become one of the bigger battery cell producers”.

The news is just another sign that downstream investment in battery supply chains is showing no signs of slowing down.

VW is one of the world's largest carmakers and is heavily investing in downstream production capacity. It expects this part of its business to generate over €20 billion in revenues by the end of the decade.

This is a situation where investment in midstream/downstream (manufacturing/battery industry) is far ahead of upstream investment (mining), this leads to the supply/demand imbalances for the raw materials required to produce batteries only becoming worse.

The imbalance comes from the timing of these mega projects. Building a downstream / midstream facility could take 1-4 years whereas it takes around 7 years on average to bring a new resource discovery into the production stage.

As a result, we think that raw materials prices will remain high for at least the next decade whilst the mining industry catches up to demand.


Infill drilling revelas more spodumene bearing pegmatites

ASX:LRS Jun 02, 2022 Announcement


Investment Memo: LRS 2022

Objective #1: JORC resource at its Brazilian lithium projects


This morning our exploration Investment Latin Resources (ASX: LRS) announced that its infill drilling program at its Brazilian lithium project has intercepted more spodumene bearing pegmatites.

Particularly important was the fact that the this intercept was made down dip from hole 16 (SADD016), which is a good sign that the discovery is getting bigger at larger depths.

LRS also confirmed that the infill drilling program would now consist of ~100 holes over 22,000 to 25,000m with the aim of getting a maiden JORC resource put together over the new discovery.

Next: We are looking forward to LRS making more progress on this front and think that a JORC resource will be the next key catalyst to re-rate LRS’ share price.


Drilling at newly acquired lithium prospects commenced

ASX:LRS May 20, 2022 Announcement


Investment Memo: LRS 2022

Objective #1: JORC resource at its Brazilian lithium projects


As part of yesterday’s announcement, our exploration Investment Latin Resources (ASX: LRS) also confirmed that drilling at the newly acquired lithium prospect to the east of its new discovery had commenced.

LRS confirmed that the first three drillholes would be targeting the highest priority outcropping pegmatites structures that had previously been mapped over this project area.

Similarly to where LRS made its latest discovery, these outcropping pegmatites had previously been assayed and returned lithium results grading as high as ~2.3% lithium. We are hoping LRS can repeat the success it had on its other tenements here and add another discovery to its Brazilian lithium portfolio.

We covered the acquisition of these new prospects in a previous note which you can read here.


More spodumene bearing pegmatites intercepted

ASX:LRS May 20, 2022 Announcement


Investment Memo: LRS 2022

Objective #1: JORC resource at its Brazilian lithium projects


Yesterday, our exploration Investment Latin Resources (ASX: LRS) announced that the first drillhole as part of the expanded 25,000m resource definition drilling program had delivered a total of ~27.78m in pegmatite interceptions.

This drillhole comes after LRS had completed ~12 different drill holes and confirmed that it had made a new lithium discovery which so far sits over a ~800m x ~200m strike zone.

Yesterday’s drillhole was drilled in between two previous discovery holes and has now confirmed that in fact the area in between is filled with more spodumene bearing pegmatites.

Yesterday’s announcement did not include any assay results, but considering the two holes to the north/south of this one contained economic lithium mineralisation we suspect that this drillhole is just a continuation of these structures.

LRS in yesterday’s announcement also confirmed that it expects to bring in another drill rig in early June to speed up the 25,000m drilling program (increasing the total number of rigs on site to three) and then bring in a larger fourth rig in July to complete the drilling that is planned to target mineralisation at depths >300m.

We expect to see LRS continue to punch out holes in and around this part of its discovery as it builds up a database of intercepts which can then feed into a maiden JORC resource over its new discovery.


Thickest intercept to date at Brazilian lithium project

ASX:LRS Apr 26, 2022 Announcement


This morning, Catalyst Hunter exploration investment Latin Resources (ASX: LRS) put out the assays from drillholes five and six at its Brazilian lithium project.

The headline intercepts were as follows:

  • SADD005 (drillhole 5)= 4.25m @ 1.32% lithium from 125m
  • SADD006 (drillhole 6)= 21.1m @ 1.2% lithium from 209m. (the thickest intercept made at the project to date)

Importantly drillhole 6 is located at the far south of the areas LRS has drilled to date meaning it now proves that the mineralised lithium structure extends over a ~800m strike length.

In today’s announcement, LRS also confirmed that drilling at the newly acquired Monte Alto prospect had commenced, in parallel with the ~25,000m resource definition drilling program taking place in and around drill holes one to six in the above image.

At the time of writing this the LRS share price is down ~13% for the day which we suspect is a result of broader market conditions and possibly as a result of the thinner intercept received at drillhole five.

We expected the thinner intercept from drillhole five considering the JORC table listed the pegmatite intercepts at ~10.58m for that particular drillhole.

On balance, we think the key takeaway from today was that the thickest intercept to date has been recorded at the far south of the ~800m strike length LRS has so far identified. The significance of this being that more drilling to the south could lead to extensions to the discovery.

With ~25,000m in additional drilling planned, we suspect LRS will look to target extensions to the south in the coming weeks/months as it looks to establish a maiden JORC resource for the project.

We set the maiden JORC resource as Objective #1 in our 2022 LRS Investment Memo and expect it to be delivered after several rounds of drilling.

With ~$35M raised just a few weeks ago, LRS now has cash in the bank and the drill rigs on site to get this delivered before the end of the year.

To see all of the key objectives we set for LRS in our 2022 Investment Memo, the reasons why we hold LRS in our portfolio and the key risks to our Investment thesis, click here.


Positive lithium drilling results from Salinas Lithium Project

ASX:LRS Apr 11, 2022 Announcement



Latin Resources (ASX:LRS) came out with a new batch of lithium assays from their diamond drill program in Brazil today.

We think they’re very good.

The intercepts made to the south of its first two holes have returned more high grade lithium pegmatites.

The more outstanding assay results include a peak of 2.0m @ 3.07% Li2O. All results remain open along strike and down dip.

Here’s are the intercepts from the two holes:

Importantly, both of the new assays were on intercepts >17m and well above economic lithium grades. This provides LRS with the confidence to expand the drilling team to facilitate the fast tracking of systematic mineral resource definition drilling.

In today’s announcement LRS also put out the results from some drilling ~350m to the north of the two confirmed lithium bearing zones with a spodumene bearing pegmatite intercept of ~8.4m.

If we continue to see these type intercepts that far to the north then we think we could see the ~500m strike length almost double.

In our 2022 LRS Investment Memo, we set the JORC resource estimate as Objective #1 for what we wanted to see LRS achieve this year and we hoped that with a bit of luck it could be something LRS ticked off later in the year.

With today’s announcement, LRS is now looking to bring all of this forward by adding drilling rigs to its current drilling program which could potentially mean we see this objective achieved much earlier in the year.

We think it’s an aggressive approach but appropriate given the strong results.

What’s next:

Assays pending from other drillholes 🔄

LRS is now up to the 12th drillhole of its current drilling program. Holes five and six both intercepted between 10m and 32m of spodumene bearing pegmatites so we will be watching to see the assays from both those holes.

LRS expects to receive these in the “coming weeks” and we will be hoping that the assays are indicative of even more high grade lithium mineralisation.

Below is an image of the spodumene crystals from drillhole 6 (assays pending).

Drilling at the newly acquired Monte Alto prospect 🔄

Mobilisation of one drill rig to the newly acquired Monte Alto tenement to the east — a newly acquired tenement that delivered strong rock chip grades.

Additional drill rig being added to do infill resource definition drilling 🔄

LRS will now be drilling on “two fronts”. One drill rig will chase higher risk exploration targets aimed at making new discoveries, the other rig focusing on drilling the current discovery with infill and step out drilling to fast track the resource definition process.

Here is why we invested in LRS and what we expect them to achieve in 2022 - LRS Investment Memo.


LRS gets new lithium tenement. Drilling to start immediately

ASX:LRS Apr 06, 2022 Announcement


Our lithium exploration investment, Latin Resources (ASX:LRS), expanded its footprint at its Brazilian hard rock lithium project today and plans to immediately move one of its two diamond drill rigs to drill the new tenement.

The agreement with the vendor is for an additional 50 hectares to the east of Latin’s existing tenements which features outcroppings of spodumene bearing pegmatites grading up 2.3% lithium.

As long term LRS investors, we like to see companies acquire additional land when they’ve had early success as it increases exploration optionality.

Below in orange is the new tenements:

The best assay results from the rock chips include - 1.27%,1.34%, 1.77% and 2.30% lithium.

We’ve circled where these grades came in on the map of the tenement below:

We think LRS might be able to replicate their early success at the tenements to west in these new tenements, as it looks structurally similar to what they were working with when they got their most recent assay results back.

The process for LRS is quite straightforward - find pegmatites, get high grade rock chip samples and then drill.

LRS flagged that they will immediately shift one of their two diamond drill rigs over to this new tenement to drill a 2,000m reconnaissance program.

Given the high grade rock chip samples, we believe the terms for this new tenement are reasonable within the context of a very hot lithium market - US$21k to be paid in 30 days, US$4.2k to be paid monthly for a period of 12 months, with a Call Option (if LRS chooses wants to keep the tenements) to pay US$240k in cash, and LRS shares worth US$120k at a 30 day VWAP.

This agreement includes a 3% net smelter royalty, an additional milestone payment of US$50k and US$50k worth of LRS shares within 30 days of declaration of the JORC Resource.

It’s our view that the Call Option is a good move - LRS gets a shot at expanding on their initial success and can pull out if drilling disappoints.

We also note that the closest lithium miner to LRS in Brazil, Sigma, pulled together a variety of smaller deposits to create a larger resource.

A more detailed look at those deposits can be found in our most recent LRS coverage.

Here is why we invested in LRS and what we expect them to achieve in 2022 - LRS Investment Memo.


Major shareholder converts $1.2M in options @ 1.2c

ASX:LRS Apr 01, 2022 Announcement


This morning LRS major shareholder Mr Jose Luis Manzano converted $1.2M in options at 1.2c, increasing LRS’s cash balance by $1.2M.

In our previous notes we mentioned that LRS had already managed to secure a financing deal with financier Lind for $2.5M. As part of that financing arrangement any options converted would be used to pay off the $2.5M loan, except for conversions made by LRS’ biggest option holder.

This means that the entirety of the $1.2M will sit in LRS’s bank account, instead of being used to pay down this debt facility.

With LRS confirming high grade lithium mineralisation in the first two holes of its drilling program, these funds can now be used to aggressively drill out the rest of the project area.

The market seems to like this news too with the share price hitting a high of 14.5c, while at the time of writing LRS is up 49%.

What’s next: LRS is now moving its drill rigs back towards its southern target where it will be doing infill and extensional drilling over the ~500m strike zone that was identified with the first 6 holes of this drilling program.

We also expect to see some more assay results and hope to see these confirm more high grade lithium.


Assay results confirm high-grade lithium pegmatites - Brazil

ASX:LRS Mar 31, 2022 Announcement


We recently did an in-depth analysis of the latest assay results out of LRS’ Brazilian lithium project.

Here’s the full article: High Grade Lithium in Pegmatites, Open Across Strike Length… Four More Holes from LRS Still to Come

The key points from that article are:

  • LRS announced a peak lithium grade of 3.22% along with grades of 2.22% and 2% - meaning LRS has significantly exceeded our expectations
  • Attention on lithium has never been higher - and there’s four more holes worth of assay results to come in the next few weeks
  • We think the geological trend that LRS is mapping in Brazil bodes well for the next batch of assays because the pegmatites are generally increasing in thickness along strike to the south

This progress directly contributes to Objective #1 from our LRS Investment Memo:

What’s next: We want to see further assays as well as infill and step-out drilling in and around the South Target area eventually leading to a maiden JORC resource at LRS’ Brazilian lithium project.


Trading halt for Brazilian lithium project assays

ASX:LRS Mar 28, 2022 Announcement


LRS entered a trading halt today “pending the release of an announcement in relation to assay results from the Salinas lithium project in Brazil”.

We have been covering the drilling program over LRS’s lithium project in Brazil ever since the first two drillholes intersected multiple zones of spodumene bearing pegmatites immediately down-dip from high-grade (2.71% lithium and 1.45% lithium) outcropping pegmatites.

We looked at the first two drill holes in our first note on this drilling program, which can be read here. The assays will likely be from these two drillholes.

Since then LRS have continued to intercept spodumene bearing pegmatites along strike and down dip so any indication of lithium mineralisation could really mean LRS are onto something here.

Since drilling started the share price has gone from ~3c to now trade at ~7.6c a ~150% increase off spodumene intercepts. If the assays now come in and prove lithium mineralisation we suspect this could only be the start of a move higher.

LRS has now defined a ~500m spodumene bearing pegmatite structure in the southern part of the project. This could be the first sign of what we hope is a new lithium discovery.

As of the last drilling update, LRS released on the 16th March, LRS had completed 6 out of 14 of the planned drillholes.

With the remainder of the drilling program to focus on the northern section of LRS’s project, we expect to see if the strike length can be increased to the north and will be watching to see if LRS continue to drill out spodumene intercepts.

Of course the ultimate tell of whether or not LRS have made a new lithium discovery will depend on the assays from all those drillholes.


Metwork drilling leading up to maiden trial mining program at it

ASX:LRS Mar 22, 2022


This morning our investment Latin Resources (ASX:LRS) announced that it had commenced a 10 hole diamond drilling program at its WA halloysite project with the ultimate aim of:

  1. Upgrading its 207mt JORC resource.
  2. Obtaining core samples from the existing JORC resource footprint, so they can be used in upcoming metallurgical testing programs.

At the same time LRS also confirmed that permits have been submitted for a small scale test pit where a pilot mining run would take place.

Today’s announcement will directly contribute to objective #2 of “What we want to see LRS achieve in 2022” as part of our 2022 LRS Investment Memo - which is to see LRS secure offtake agreements for its halloysite project.

With the drilling program designed so that product qualification work can be done through metallurgical testing and the permitting commenced on a pilot mining run, the upcoming drilling program is just a precursor to producing some of the end product that LRS will be hoping to sell to customers.

Also, given that the program is made up of diamond infill drilling we don't expect the JORC resource to get too much bigger. Instead, we expect to see some of the inferred resources move into the measured/indicated category.


More spodumene intercepts at its Brazilian lithium project

ASX:LRS Mar 16, 2022


Today, LRS announced that it has intersected more spodumene bearing pegmatites in both drillhole no 5 and 6.

In our last note we wrote that the results from drillhole four would start to prove out whether or not a spodumene structure is getting bigger across its project. Today LRS announced that in that particular hole LRS returned ~36m of cumulative pegmatite intercepts with one intercept alone measuring ~17m.

LRS also confirmed that both holes five and six also made pegmatite interceptions with hole six still ongoing.

All of this means LRS has now put together a ~500m section of its total ~1.5km strike zone, confirming spodumene bearing pegmatite intercepts across the entire 500m southern section of the prospective strike zone.

Finally, LRS confirmed that the assays from drill holes one and two are expected within the next few weeks.

If those assays confirm the presence of high grade lithium across the structure then we think LRS will be in a strong position to potentially tick off objective #1 in our 2022 Investment Memo of putting together a maiden JORC resource for its Brazilian lithium project.


$2.5M funding package + drilling program expanded to 5,000m

ASX:LRS Feb 28, 2022


Today LRS announced a $2.5M financing package signed with Lind Asset Management over a 14 month loan term.

With fresh funding secured, LRS also announced that the 2,000m drilling program at its Lithium project in Brazil would be expanded to 5,000m with the ultimate aim of putting together a maiden JORC resource.

The terms of the funding facility are as follows:

  • $2.75M face value loan, repayable over a 14 month period.
  • LRS to issue Lind 35 million unlisted options with an exercise price of 5c, expiring March 2026.
  • LRS to pay Lind a $75k commitment fee.
  • Funds raised from “in the money” options being exercised must be used to repay the principal of the loan.

So in total over the 14 month loan term, LRS is paying $325k in loan fees and 35m in unlisted options exercisable @ 5c.

In our last note, where we covered LRS’ first spodumene intercept from its drilling program at its Brazilian lithium project, we mentioned we wanted to see LRS shore up its balance sheet so we welcome the news from Monday.