LRS gets new lithium tenement. Drilling to start immediately

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.