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Big players hit Latin Resources up for lithium offtake

Latin Resources managing director Chris Gale. Credit: File

Latin Resources has appointed Macquarie Capital to formally assess a spate of offtake enquiries from big players looking to secure lithium from its Salinas project in Brazil. The company says it has received interest from battery makers, original equipment manufacturers and trading companies looking to pick up a supply of lithium from Latin’s project that shows a crazy high NPV of A$3.6b and an after-tax IRR of 132 per cent.

Latin’s key objective will be to partially tie the capital funding of the project to an offtake agreement, potentially limiting the number of shares it will need to issue to bring the project to life.

The 100% Latin Resources’-owned Salinas lithium project boasts a sizeable and advanced lithium resource at the Colina deposit. Extending over a 2km strike, and still open at depth and along strike to the southwest, the resource consists of 45.2m tonnes grading a very respectable 1.32 per cent percent lithium oxide using a cut-off of 0.5 per cent lithium oxide. An attractive 67 per cent of that resource now sits in the more reliable measured and indicated categories, after a whopping 241 per cent increase to the JORC mineral resource estimate was tabled in June this year.

Latin now has a preliminary economic assessment (“PEA”) under its belt that was completed in late September, which has demonstrated a two phased, lowish capital operation using dense media separation to deliver a 5.5 percent spodumene concentrate, and a 3 percent fine spodumene concentrate. Remarkably, the total life of mine free cash flow estimation for the initial 11 years of the project comes in at a staggering of A$6.8 billion, and a stellar pay-back of Phase 1 capital expenditure in just 7 months with Phase 2 capital fully funded by Phase 1 production.

The Salinas lithium project is ideally situated 10km from the 40,000 strong town of Salinas in the Bananal Valley region, host to the fertile eastern Brazilian pegmatite province. The project has excellent logistics and infrastructure, with sealed roads to the site and the state of Minas Gerais offering well-serviced infrastructure, hydroelectric power and water, and a port some 380km away in the adjacent state of Espirito Santo.

The Salinas project rubs shoulders with Sigma Lithium’s sizeable 87 million tonne ‘Grota do Cirilo’ project that has produced pilot-scale battery-grade lithium concentrate since 2018. With significant support from the local community, the Minas Gerais government, and key funding support for development license approval applications, the company has just added $35M to its coffers to fast-track the drilling program at Salinas and help fund the definitive feasibility study (DFS), bringing its sizeable hoard of cash to $65M.

Latin has now doubled down on fast tracked step-out drilling to increase the project footprint It still expects to meet development timing expectations at the project which lies within a well-defined geophysical corridor that the company hopes is one large continuous mineralised lithium system.

With Latin’s ‘dance card’ filling up with quality looking potential offtake partners and the world seemingly going nuts for lithium supply, Latin has a real shot at getting the mine away. Its challenge now will be to limit the number of shares it needs to put out to fund the equity portion of the project and a suitable offtake partner that is prepared to put some money on the table up front might be just the ticket.

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