Latin Resources Logo (ASX-LRS).png

Latin Resources Limited

ASX:LRS

Last Price:

$0.120

Our Investment Summary

Date of
Initial Coverage

26-Nov-20

Initial
Entry Price

$0.018

Returns from
Initial Entry

582%



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

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

Halloysite-kaolin resource now 33% larger - offtake discussions

ASX:LRS Nov 29, 2022 Announcement

Investment Memo: LRS IM-2022


Our lithium Investment Latin Resources (ASX: LRS) just upgraded its halloysite-kaolin resource by 33%.

Today, LRS announced an increase in its JORC halloysite-kaolin resource to 280mt of kaolinised granite.

Importantly, LRS also managed to convert ~70mt of the resource into the indicated category, improving the confidence around the estimation of LRS's JORC resource.

The significance of this is that when it comes time to develop the project, financiers generally look for a higher level of confidence in the JORC resource estimate and a better understanding of the ore body.

We also note LRS's comments on its project being open in all directions meaning that should market demand for halloysite-kaolin increase, LRS still has plenty of upside to add to its JORC resource.

LRS has already shipped bulk samples of its kaolin material to potential customers, and offtake discussions are progressing.

While the halloysite-kaolin project is not the core focus for LRS, we like the project's optionality in terms of near term cash flow opportunities should LRS start selling its product.

What's next for LRS?

LRS has a lot going on at the moment, with the company currently drilling its copper porphyry target in Peru and completing mapping/fieldwork at its Argentinian Lithium project.

The next major catalyst we are looking for is the maiden JORC resource estimate at LRS's Brazilian lithium project.

Our expectations for the resource number are as follows:

  • Bull case (exceptional) = >15Mt JORC resource
  • Base case = 5-15Mt JORC resource
  • Bear case = <5Mt JORC resource

Read our latest LRS article to see how we came up with these expectations: Lithium deposit getting bigger - plenty more drilling to come.


Diamond drilling a ~5km copper porphyry target in Peru

ASX:LRS Nov 24, 2022 Announcement

Investment Memo: LRS IM-2022
Risk 1: Exploration risk


Our lithium Investment Latin Resources (ASX: LRS) has a $29.2M cash balance to use and is now drilling a copper porphyry target in Peru.

This morning LRS started a two hole diamond drilling program at its MT03 copper project in Peru, drilling a large ~5km EM anomaly.

LRS’s project sits along trend from an existing porphyry deposit at Southern Copper’s (capped at ~$68BN) Tia Maria project, which has a 639Mt resource with grades measuring 0.39% copper & 0.19g/t gold.

LRS is running a two hole program over 2,000m of drilling - basically running two holes straight into the middle of that EM target to see if there is any indication of copper porphyry style mineralisation.

We are hoping the next bit of newsflow from this project is visual sulphides, this will be a good sign LRS may have actually hit a porphyry target.

While our primary focus with LRS is on its lithium project in Brazil, we like that LRS is putting its strong cash balance to use testing low capital commitment and potentially high reward drill targets like this.

Worst case scenario, LRS spends a small amount of cash (relative to its cash balance) chasing a potential company making discovery.

What’s next for LRS?

Outside of the results from the drilling at the Peru copper prospect, we want to see LRS’s maiden mineral resource estimate, for which we previously set our expectations as follows:

  • Bull case (exceptional) = >15Mt JORC resource
  • Base case = 5-15Mt JORC resource
  • Bear case = <5Mt JORC resource

Read our latest LRS article to see how we came up with these expectations: Lithium deposit getting bigger - plenty more drilling to come.


High grade lithium in Argentina?

ASX:LRS Nov 24, 2022 Announcement

Investment Memo: LRS IM-2022
Investment Thesis 1: Exposure to Lithium


This morning Latin Resources (ASX: LRS) detailed its exploration plan for its lithium projects in Argentina.

While we wait for LRS to put together its maiden JORC lithium resource at its Brazilian lithium project, LRS will complete geological mapping and sampling of some of the outcropping pegmatites.

Notably, LRS will target areas where the company has identified spodumene-bearing pegmatites and those that sit along strike previous drilling results, which measured up to ~12m thick and with lithium grades as high as 2.98%.

Those drill results were from a 2017 RC drilling program before the lithium market cooled off.

Remembering that LRS’s Brazilian discovery was made off a 4.31m intercept with lithium grades of ~2.22%, we will be watching to see what comes off this exploration work.

It is still too early to tell how big the discovery potential for LRS’s Argentinian project is, but it has the right early indicators to make us interested.

Considering LRS had $29.2M in cash in the bank at the end of the September quarter, we think putting some funds behind low-cost field work like this is a prudent use of LRS’s cash balance.

The ultimate aim for this round of fieldwork will be to rank high priority drilling targets that LRS can test in future exploration programs.

Next for LRS:

We want to see LRS’s maiden mineral resource estimate, for which we previously set our expectations as follows:

  • Bull case (exceptional) = >15Mt JORC resource
  • Base case = 5-15Mt JORC resource
  • Bear case = <5Mt JORC resource

Read our latest LRS article to see how we came up with these expectations: Lithium deposit getting bigger - plenty more drilling to come.


A whiff of rare earths at LRS’s Cloud Nine

ASX:LRS Nov 03, 2022 Announcement

Investment Memo: LRS IM-2022


Our lithium development Investment, Latin Resources (ASX:LRS) also has a halloysite-kaolin project called Cloud Nine, which as of this morning, looks to also have rare earths potential.

It’s early days, but LRS did analysis on “a small random selection (one out of every 20) of existing <45 µm fraction samples collected from the recent infill drill programme” at the WA halloysite-kaolin project.

We like the results from this initial sampling program:

  • Anomalous rare earths concentrations in 38% of the samples
  • 3,617 ppm, 0.36% total rare earth oxide (TREO)
  • Of these TREO results average key magnetic rare earth oxides (MREO) of 21-28%, mainly Neodymium (Nd) and Praseodymium (Pr)

Nd and Pr are found in the permanent magnets in electric vehicles and wind turbines - two key planks of the energy transition.

This would be a clay hosted rare earths deposit which is amenable to extraction via weak acids or ionic solutions.

As a result, the threshold for economic clay hosted deposits is lower than other rare earths deposits - LRS says 500–2000 ppm TREO is suitable for clay hosted deposits.

LRS’s results came in well over the top of those parameters - so our initial take here is that this is a very promising development in a macro environment that favours rare earths discoveries due to increasingly prominent geopolitical factors.

What’s next for LRS? In addition to the upcoming mineral resource estimate at LRS’s Brazilian lithium project, we’re looking for LRS to analyse further samples and hopefully further down the track, update the resource estimate model at Cloud Nine to include these rare earths results.


Brokers comparing LRS to $5.7BN capped Sigma Lithium

ASX:LRS Nov 02, 2022

Macro: Lithium

Investment Memo: LRS IM-2022
Investment Thesis 1: Favourable peer comparison


Late last week we saw both Bell Potter and PAC Partners initiate coverage and release research reports on our lithium exploration Investment Latin Resources (ASX: LRS).

Both reports made mention of LRS’s upcoming maiden mineral resource estimate, while also detailing how LRS’s project could grow into a project analogous to that of its $5.7BN neighbour, Sigma Lithium.

Bell Potter said that they “expect that the deposit could notionally support +200ktpa spodumene concentrate operation. A potential analogue of Salinas is Sigma Lithium’s project located around 100km to the southeast”.

An interesting point that we took from the PAC Partners report was a comparison of Sigma Lithium’s rise to where LRS finds itself today.

PAC speculated that LRS’s maiden mineral resource estimate “could be of size range 11Mt to 17Mt with a grade range 1.3% to 1.5%” and that, “For comparison, Brazil peer Sigma’s initial mineral resource estimate was 13Mt at 1.56% in 2018”.

When Sigma announced that resource estimate, its market cap was around the same as LRS’s is today.

Sigma has since defined a total of five different deposits.

In a similar fashion, LRS is now putting together its first JORC resource and has just announced a new discovery, just 500m from its first discovery.

The following chart showing Sigma’s share price and notable events puts LRS’s progress into perspective:

Sigma now trades with a $5.7BN market cap, or 25 times as much as LRS’s $230M market cap.

To see the two broker reports click on the following links:

  1. PAC Partners research report
  2. Bell Potter research report

What’s next:

We want to see LRS’s maiden mineral resource estimate, for which we previously set our expectations as follows:

  • Bull case (exceptional) = >15Mt JORC resource
  • Base case = 5-15Mt JORC resource
  • Bear case = <5Mt JORC resource

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


McKinsey on Battery Materials Demand

Oct 21, 2022

Macro: Lithium


There’s a really interesting article here from McKinsey on the huge demand EVs will create AND how the battery materials supply chain can meet this demand.

Key takeaways:

  • Lithium and nickel - “the battery industry’s demand for lithium is expected to grow at an annual compound growth rate of 25 percent from 2020 to 2030, while demand for nickel could multiply as battery demand shifts to nickel-rich products”
  • Asia making the batteries and Europe buying - “70 percent of the key equipment suppliers, for both coating and general cell assembly equipment, are based in Asia…companies in North America and Europe may need to consider developing strong international sourcing relationships.”
  • Geopolitics a major factor - lithium is widely abundant, but ~70 percent of current global production is in Australia and Chile, meanwhile the majority of global cobalt production is in the Democratic Republic of the Congo - which has faced criticism over its mining practices

There’s a great chart here too, which shows the demand growth from EVs and the geography and battery chemistry breakdown:

We’re Invested in a broad spectrum of battery materials companies as part of a decade long investment thesis.

To find out what what battery materials companies we hold in our Portfolio click the button below:


Final lithium assays are in

ASX:LRS Oct 21, 2022 Announcement

Investment Memo: LRS IM-2022
Objective 1: JORC resource at the Brazilian lithium projects
Milestone 1: Assay results (ongoing)


Yesterday, Latin Resources (ASX: LRS) reported final assay results from its resource definition drilling program at the high-grade Colina Lithium Prospect in Brazil.

We're pleased at how quickly LRS drilled out its Salinas lithium project and we think LRS could be on track to hitting our bull case after these results.

We’re also eagerly awaiting the JORC resource due before the end of the year.

The drilling that produced these assays returned further outstanding intersections, confirming the continuity of high-grade at depth and along strike.

These final results show the consistent nature of the pegmatite mineralisation at Colina and allow for LRS to incorporate them in preparing its maiden JORC resource, which is on track to be delivered in December.

These assay results were key milestones that we wanted to see LRS meet on its way to achieving our key objective for the company for 2022 — defining a JORC resource — that we had set in our LRS Investment Memo back in June.

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

Our expectations we set included an overall grade for the resource of >1% lithium, while we set our overall tonnage expectations as follows:

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

Now that the resource drilling is complete, the rigs can shift their focus to the recently discovered Colina West pegmatites. LRS hopes to incorporate this second area into the preliminary economic assessment (PEA) and other studies that are underway.


Lithium supply shortage to continue

Sep 26, 2022

Macro: Lithium


The lithium supply shortage is set to continue for at least the rest of this decade and into the 2030s, says a key adviser to the London Metals Exchange and LME lithium committee inaugural chairman Ron Mitchell.

As reported in the AFR this morning, Mitchell said that for lithium production to come anywhere near meeting upcoming demand, a lot of new mines would be needed and that “a lot is going to have to go right if we’re going to get the tonnes we need in the market”.

The increasing demand from European car makers has driven a steep rise in prices for the key battery ingredient since 2020.

Yet the market still has a lack of price transparency, which was largely behind the reason that the LME joined forces with reporting agency Fastmarkets in mid-2021 to launch a futures contract for lithium hydroxide.

But even with this lithium futures contract, it remains hard to compare lithium to other commodities. Because it is a nuanced specialty chemical, every lithium product is different, making it difficult to trade off a futures index and apply discounts or premiums based on quality.

Mitchell also highlighted the challenges around the shelf-life of the material that make it hard for physical trading as well, explaining that “you can’t just store it in a shed and leave it there for two or three months and then as the price increases bring it to market. There’s risk in doing that.”

Mitchell also commented on the trend of car makers taking equity positions in lithium producers and explorers, such as Toyota with Allkem, Ford with Liontown and Great Wall with Pilbara Minerals. We’d add Vulcan Energy Resources (ASX: VUL) to that list which last year received a A$76M (€50M) equity investment from Stellantis N.V.

Looking ahead, Mitchell expects that trend to continue and it to also extend to producers and explorers of other battery minerals

.


Critical minerals quickly becoming a priority in the EU

Sep 20, 2022

Macro: Commodities


Readers who follow our Investment Portfolios will know that we have been making strategic Investments in commodities that have made critical minerals lists for the EU, USA, Japan, India and Australia.

These minerals are considered critical to the digitisation and decarbonisation macro thematic and include lithium, graphite, cobalt, nickel and PGE’s, to name a few.

Over the weekend, the following speech from the president of the European Commission, Ursula von der Leyen, gave a speech announcing that the EU would look to pass a “European Critical Minerals Act”.

The aim is to avoid the position Europe finds itself in with oil and gas, where it relies on a single trading partner like Russia.

The act would see the EU put in place:

  1. Agreements with partners like Chile, New Zealand, Mexico, India and Australia for the supply of critical minerals.
  2. Identification of strategic projects across all along the supply chain from mine sites to processing/refining projects.
  3. The act would also see the setting up of strategic reserves of these critical minerals.

All of this bodes well for our Investments across commodities identified as “critical minerals” giving these projects strategic importance on the world stage.

To see a list of all the critical minerals in the Australian Critical Minerals strategy document, check out the following link.

Here is a snippet from that speech:


Lithium prices now trading at all time highs

Sep 20, 2022

Macro: Lithium


The following Bloomberg article touches on the structural supply shortages experienced across the lithium supply chain.

This comes as the lithium price traded at a record high on Friday at US$71,315 per tonne.

For us, it points to just how important it is for the mining industry to make new lithium discoveries match the exponentially increasing demand for lithium.

Without massive investment in new exploration, we simply won’t have enough lithium to catch up with the demand from battery makers.

Last week, we saw a presentation from Benchmark Minerals Intelligence senior lithium analyst Dr Cameron Perks, who touched on the timing differential between building upstream (new lithium mines) and downstream demand (battery manufacturing facilities).

Whilst it could take ~25 years for a new discovery to be put into production, downstream facilities can be built as quickly as <24 months.

As a result, we see the shortage lasting for at least the next five years.

Read the full article here.

Our key takeaways:

  • Lithium carbonate traded at all time highs on Friday (US$71,315/ tonne) - almost 3x higher than this time last year.
  • Price increases coming from higher electric vehicle (EV) sales forecasts which are expected to hit a record 6 million this year, double the 2021 total.
  • Soc. Quimica & Minera de Chile SA (SQM), the world’s No. 2 lithium producer, predicted a “very tight market” in the years ahead.
  • Battery-makers and automakers are rushing to lock in reliable and stable lithium supplies. Still, the lithium price continues to remain extremely high.

We hold investments from the exploration stage up to development ready projects in the lithium space.

Below is a list of our lithium Investments:

Vulcan Energy Resources (ASX: VUL) - Next Investors Portfolio

  • Zero Carbon Lithium, development stage, Germany (European Union)

European Metals Holdings (ASX: EMH) - Wise Owl Portfolio

  • Lithium, development stage, Czech Republic (European Union)

Tyranna Resources (ASX: TYX) - Catalyst Hunter Portfolio

  • Lithium, exploration stage, Angola

Latin Resources (ASX: LRS) - Catalyst Hunter Portfolio

  • Lithium, exploration stage, Brazil

Ragusa Minerals (ASX: RAS) - Catalyst Hunter Portfolio

  • Lithium, exploration stage, Northern Territory


Melbourne lithium update - We attended

ASX:LRS Sep 16, 2022 Announcement

Investment Memo: LRS IM-2022
Investment Thesis 1: Potential to re-rate again
Objective 1: JORC resource at the Brazilian lithium projects


Yesterday afternoon we attended a Melbourne shareholder update for our lithium exploration Investment Latin Resources (ASX: LRS).

To view the presentation slides, click here.

After a few years stuck behind a computer screen, these types of in person meetings are great to get along to, and it’s always good to see how presentations by our portfolio companies are received.

First up, managing director Chris Gale gave an update on LRS’s resource definition drilling at its new lithium discovery.

The major takeaway from the presentation was that Chris is focused on getting a maiden JORC resource defined by the end of the year, although there is still a lot of untested exploration upside that could make LRS’s project even bigger in the years to come.

Following Chris’ presentation, an analyst from research firm Benchmark Mineral Intelligence (BMI) gave an update on the supply/demand situation in the lithium market.

Our key takeaway was BMI’s belief that we are already experiencing a structural lithium supply shortage — a situation that will only worsen over the coming years.

The analyst also touched on a recent BMI report that says, “To meet the world’s lithium requirements would require 74 new lithium mines with an average size of 45,000 tonnes by 2035”.

With the macro outlook so strong, we think LRS’s strategy of fast tracking its project to a maiden JORC resource and preliminary economic assessment should bring much more interest to what LRS is doing with its lithium discovery.

What’s next for LRS?

We want to see LRS complete its resource definition drilling program and establish a maiden JORC resource to form a preliminary economic assessment report.


Battery materials demand will need more than 300 new mine

Sep 16, 2022

Macro: Lithium


The battery materials thematic is a major part of our Portfolio.

After a nasty down day for the market two days ago driven by inflation fears emanating from the US, we remain confident that this theme will be part of a decade long trend.

A recent Benchmark Mineral Intelligence report highlights just how much battery materials are needed for the world to reach its ambitious decarbonisation goals.

The report notes that, “At least 384 new mines for graphite, lithium, nickel and cobalt are required to meet demand by 2035.

Here are the companies in our Portfolio that we hold as exposure to each of the four battery materials referred to in the report (click the company name to see our Investment Memo):

Graphite:

Sarytogan Graphite (ASX:SGA) - early stage development, Kazakhstan

Evolution Energy Minerals (ASX:EV1) - late stage development, Tanzania

Lithium:

Tyranna Resources (ASX:TYX) - exploration, Angola

Latin Resources (ASX:LRS) - resource definition, Brazil

Vulcan Energy Resources (ASX:VUL) - development, Europe

Ragusa Minerals (ASX:RAS) - exploration, Northern Territory (recently acquired)

European Metals Holdings (ASX:EMH) - development, Europe

Nickel:

Galileo Mining (ASX:GAL) - exploration, Western Australia (currently in resource definition mode on PGE project)

Cobalt:

Kuniko (ASX:KNI) - exploration, Europe (KNI also has a nickel project)

The report also had a great infographic outlining the required tonnages of the various materials which can be found below:

We note that one Barrenjoey analyst recently upgraded their forecasts for the lithium prices for 2023 and 2024 by 36% to and 86% respectively.

As a bellwether of the battery materials space, the lithium price remains strong:

We remain confident in our battery materials Investments now, as well as over a long term +3 year timeframe.


Lithium JORC resource by December - drilling with multiple rigs.

ASX:LRS Sep 07, 2022 Announcement

Investment Memo: LRS IM-2022
Investment Thesis 1: Potential to re-rate again
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 has multiple drill rigs on site, and is now ~35% of the way through its 25,000m drilling program, after which it hopes to put together a maiden JORC resource in December 2022.

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

The key takeaway from today’s results was that LRS continues to increase the width of its discovery and continues to hit more lithium mineralisation at depth.

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

  • Drillhole 23: 26.88 at 1.4% lithium from 94m
  • Drillhole 26: 28.8m at 1.16% lithium from 307m.
  • Drillhole 24: 10m at 1.05% lithium from 186m.

The images below give us an idea of the size and scale of LRS’ discovery.

Outside of the resource definition drilling, LRS also confirmed that it would run a geochemical sampling program along the southern part of its discovery, looking to test for extensions across what it calls a ‘lithium corridor’ extending across 4km.

At present LRS is yet to drill test for extensions to its discovery in that southern part of its project area - so we will be watching to see what comes from the sampling work.

While we wait for news of a maiden JORC resource expected by December 2022, here’s our expectations for LRS’s JORC resource, which are 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 the reasoning behind our expectations: Lithium deposit getting bigger - plenty more drilling to come


Updated presentation on Brazilian lithium project

ASX:LRS Aug 25, 2022 Announcement

Investment Memo: LRS IM-2022


This morning our lithium exploration Investment Latin Resources (ASX: LRS) released a new investor presentation.

A lot has changed for LRS since it first hit spodumene bearing pegmatites at its Brazilian lithium project in ~February this year.

Since then, LRS has gone on to raise $35M and is now fast tracking its project towards a JORC resource estimate and a preliminary economic assessment which will put some colour around the potential project economics of its discovery.

The presentation gave us a good retrospective look at what LRS has done to date and what's coming up next for the company, particularly the "progressing the Salinas Lithium project" slide.

To check out the updated investor presentation click here. Alternatively click on the image below:


First pass met work results looking positive

ASX:LRS Aug 24, 2022 Announcement

Investment Memo: LRS IM-2022
Objective 1: Start feasibility studies


This morning our lithium exploration Investment Latin Resources (ASX: LRS) put out some positive metallurgical test work results from its Brazilian lithium project.

Interestingly, with a simple heavy liquid separation (HLS) processing technique, LRS was able to show:

  • Recovery rates of ~78.72% lithium oxide.
  • Production of high grade lithium oxide concentrates (grades of up to 6.57%).

The significance of today’s news is that with a relatively simple processing method, LRS is able to turn samples from its deposit into high grade spodumene concentrates.

The simple processing method will mean lower operating costs when it comes time to actually mine and produce lithium from LRS’s project. This should have a positive impact on the overall project economics.

The obvious caveat to today’s announcement is the fact that it is only the first set of results from the test work LRS is doing.

We expect to see these results expanded on and optimised as part of the Preliminary Economic Assessment, which LRS expects to have completed by March 2023.

We will be watching to see how things develop as LRS continues to test samples from its deposit.

Next:

With a 25,000m resource definition drilling program being run, we expect to see plenty more drilling newsflow over the coming weeks/months leading up to the maiden JORC resource, which LRS expects to complete by the end of this year.

The chart from LRS’s recent announcement gives us a good summary of what to expect over the next six months.


Structural shortage in lithium supply now a bigger problem

Aug 24, 2022

Macro: Lithium


The following Bloomberg article is more proof of how fragile the lithium industry's supply-demand situation is.

A shutdown in a particular part of China can quickly cascade into supply shortages, leading to increased prices and scenarios where end users cannot purchase the amount of lithium they need.

Read the full article here.

Our key takeaways:

  • Sichuan, a city home to more than a fifth of China's lithium production, is experiencing industrial power cuts. This means the already tight lithium market is experiencing more by way of supply shocks.
  • Supply disruptions are expected to lead to increased lithium prices.
  • Rystad Energy analyst (Susan Zou) said the following - "We are estimating the lithium price momentum will last for a while, and the spot price for lithium carbonate will climb to 500,000 yuan per ton (US$73,000 per tonne) shortly,"

Another article highlighting the structural supply shortages in the lithium industry.

For us, it points to just how important it is for the mining industry to make new lithium discoveries match the exponentially increasing demand for lithium.

Without massive investment in new exploration, we won't have enough lithium to catch up with the demand from battery makers.

We hold investments from the exploration stage up to development ready projects in the lithium space.

Below is a list of our lithium Investments:

Vulcan Energy Resources (ASX: VUL) - Next Investors Portfolio

  • Zero Carbon Lithium development stage, Germany (European Union)

European Metals Holdings (ASX: EMH) - Wise Owl Portfolio

  • Lithium, development stage, Czech Republic (European Union)

Latin Resources (ASX: LRS) - Catalyst Hunter Portfolio

  • Lithium, exploration stage, Brazil

Ragusa Minerals (ASX: RAS) - Catalyst Hunter Portfolio

  • Lithium, exploration stage, Northern Territory


Spodumene bearing pegmatites 500m west of existing discovery

ASX:LRS Aug 16, 2022 Announcement

Investment Memo: LRS IM-2022
Objective 1: Additional exploration at lithium tenements
Risk 1: Exploration risk


Drilling results from our lithium exploration Investment Latin Resources (ASX: LRS) may indicate a new discovery 500m west of its existing lithium project in Brazil.

This morning LRS announced that a drillhole completed ~500m to the west of its existing Colina discovery hit a series of 17 separate pegmatites starting from a depth of ~62m, with several intercepts showing spodumene mineralisation.

One of those spodumene bearing pegmatites measured ~18.75m in thickness.

LRS is calling the discovery “Colina West” but will continue testing the ~500m distance between these intercepts and its existing Colina discovery to see if the two make up one larger discovery.

In addition to the intercepts, LRS confirmed that it has now mapped more outcropping pegmatites ~1km to the west of today’s drilling results.

This means that even after LRS puts together a maiden JORC resource over its existing discovery, it may be able to significantly increase its lithium project's size and scale by systematically drilling out these new prospects.

At this stage, LRS has a bunch of outcropping pegmatites and some drillholes confirming the presence of spodumene bearing pegmatites.

With assays pending, we will be watching to see just how much lithium is in these intercepts before considering the scale implications these new prospects have on LRS’s project.


Pilot plant commissioned to aid offtake discussions

ASX:LRS Aug 10, 2022 Announcement

Investment Memo: LRS IM-2022
Objective 1: Offtake Agreement


In its announcement yesterday, our lithium exploration Investment Latin Resources (ASX: LRS) said it is commissioning a pilot plant to produce samples of lithium concentrate from its project in Brazil.

LRS confirmed that the Dense Media Separation (DMS) pilot plant would allow the company to provide a representative lithium concentrate product from its project to potential offtake customers.

More interestingly, LRS also confirmed that it has “held preliminary discussions with several international car and battery manufacturers as well as leading lithium trading houses with respect to future supply of its lithium product”.

We suspect the decision to build out a pilot plant comes as a response to the demand LRS is seeing from potential customers.

We are not surprised by the interest in LRS’s product given the comments made by Kent Masters (CEO of the world’s largest publicly traded lithium producer - Albemarle), who expects lithium supply to remain tight for up to seven to eight years.

We are especially pleased that the company is making such quick progress given it has only been around six months since first hitting spodumene at its Brazilian lithium project.


Preliminary Economic Assessment for lithium project started

ASX:LRS Aug 10, 2022 Announcement

Investment Memo: LRS IM-2022
Objective 1: Start feasibility studies


Yesterday morning our lithium exploration Investment Latin Resources (ASX: LRS) announced the early commencement of a Preliminary Economic Assessment (PEA) on its new lithium discovery in Brazil.

LRS has appointed consultants SGS Geological Services (SGS) to carry out the metallurgical test work, JORC resource estimation, and a preliminary economic assessment into the economics of its lithium discovery.

Interestingly, the consultants are the same outfit that delivered a Definitive Feasibility Study (DFS) for LRS’s Brazilian neighbour - lithium developer Sigma Lithium (capped at CAD$2.7 billion).

LRS set out the following indicative timeline for when it expects this work to be completed:

  • JORC resource by the end of the 2022 calendar year
  • Preliminary economic assessment by March 2023

As soon as these are delivered, LRS is planning to launch straight into a DFS.

Having tucked away a $35M capital raise, LRS ended the June quarter with $33.5M cash in the bank. It is putting its balance sheet strength to use accelerating progress at its new discovery.

With a 25,000m resource definition drilling program being run concurrently we expect to see plenty more drilling newsflow over the coming weeks/months leading up to the maiden JORC resource, which LRS expects to complete by the end of this year.

The gant chart from LRS’s announcement today gives us a good summary of what to expect over the next six months.


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.