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Writer's pictureMichael Philipps

Latin to pull AU$600m a year from Brazilian lithium play

Updated: Apr 23


Latin Resources Brazil exploration manager Pedro Fonseca, centre, discovered the Colina deposit. Credit: File

Latin Resources looks set to pocket more than AU$600 million a year in average annual free cash flow from its Colina lithium project in Brazil once it becomes operational – and that is after tax.


According to a new independent preliminary economic assessment (PEA) into the operation released today, the company has outlined an after-tax average annual free cash flow of US$383 million (AU$601 million) in a mine life of 11 years.


The latest study into the project shows an after-tax net present value of US$2.5 billion (AU$3.6 billion), with an extraordinary internal rate of return of 132 per cent, in addition to a remarkable after-tax project payback period of about seven months.


The PEA – which is similar in nature to an Australian JORC scoping study – outlines an all-in sustaining cost of US$536 per tonne (AU$841 per tonne) and a life-of-mine revenue of US$8.4 billion (AU$12.6 billion).


The bold numbers signify a high-point in a 15-year rollercoaster journey for Latin, where the deepest dips had the company on its knees at times and wondering if it even had a future.


But management now believes its two-stage expansion plan for Colina has the potential to establish Latin as the second-biggest spodumene concentrate producer in Brazil and among the lowest-cost spodumene concentrate producers globally.


The project’s first-phase capital expenditure of US$253 million (AU$397 million) will aim to deliver first production in 2026. Production returns are expected to cover the second-phase capital expenditure of US$55 million (AU$86 million).


The completed second phase, which is due to start in 2029, is projected to increase the life-of-mine production to 525,000 tonnes per annum of 5.5 per cent lithium oxide spodumene concentrate and 159,000 of 3 per cent lithium oxide concentrate.

The low-cost capex and fast track to production in 2026 will hit the sweet spot of rising lithium prices many are predicting over the coming years. The Colina Project is on track to become one the world’s largest spodumene mines with very low operational costs. Latin Resources managing director Chris Gale

Colina currently boasts a mineral resource estimate of 45.2 million tonnes at 1.32 per cent lithium oxide, representing a lithium carbonate equivalent of 1.5 million tonnes. The classification includes 0.43 million tonnes at 1.34 per cent lithium oxide in the measured category, 29.7 million tonnes at 1.37 per cent in the indicated category and 15 million tonnes at 1.22 per cent in the inferred category.


However, Latin is expected to reveal an updated resource next quarter, with the aim of increasing tonnage and converting the current Colina resources in to a higher JORC classification. The company is maintaining an aggressive exploration program focused on near-surface brown field expansion of the Colina deposit to potentially increase tonnage in early years and provide ore-blending opportunities.


A total of 118 holes for 39,360m have been completed since the start of drilling in January this year, as part of a broader 65,000m campaign. The company says it now has an additional three diamond drilling rigs working on the project, bringing the total to 11.


Just last month, it proved it was able to produce a 5.5 per cent lithium oxide concentrate from the Colina deposit, with a 93.1 per cent recovery rate. Latin says the results are a reliable indication of the potential for simple and cost-effective commercial lithium production by using the dense media separation (DMS) process.


Also last month, the company recorded significant intersections from Colina infill drilling, including 9.94m at 1.5 per cent lithium oxide from 328.91m, 10.46m at 1.29 per cent from 160.04m, 18.12m at 1.67 per cent from 244.88m, 11.74m at 1.4 per cent from 76.26m and 10.13m at 1.63 per cent from 49.62m.


Management says the company is committed to developing a lithium mine with true sustainable mining practices, including hydro power, dry-stack tailings and recycled water systems.


In a recent Perth luncheon event to celebrate Latin’s 15-year anniversary as a company, chairman David Vilensky referenced Led Zepplin’s rock classic The Immigrant Song when reflecting on the often-testing journey he had shared with managing director Chris Gale.


Lyrics in the song include the poignant line: “So now you’d better stop and rebuild all your ruins, for peace and trust can win the day despite of all your losing”.


And rebuild is exactly what Latin has done.


Is your ASX-listed company doing something interesting? Contact: office@bullsnbears.com.au

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