Latin Resources Ltd (ASX:LRS) surged 111% late yesterday on news of an agreement to acquire Electric Metals Pty Ltd which holds a project with one of Australia’s few known natural occurrences of tubular halloysite and a separate silver-lead project in WA’s Paterson Range, one of the country’s most highly endowed yet under-explored mineral provinces.
The proposed acquisition of the Noombenberry Halloysite Project near Merredin in WA and the Big Grey Silver-Lead Project in that state’s Paterson region will provide a new strategic direction for the company with shares up almost 70% in early trade today.
Noombenberry, which also hosts kaolin, presents a particularly compelling opportunity for LRS with halloysite being a globally scarce commodity with strong demand drivers.
The main markets for halloysite are ceramics and also the petroleum industry as a catalyst for fluid catalytic cracking.
There are also emerging markets developing such as nanotube technologies and cancer therapeutics.
The 54 square kilometre project is less than 300 kilometres east of Perth and covers two contiguous tenements, E77/2622 and E77/2624 still in the application process.
Noombenberry Halloysite tenement map.
Potential low-cost operation
All services required for a low-cost mining operation are in close proximity with minimal ground disturbance required while Fremantle Port is easily accessible via the Great Eastern Highway.
Scientists from the Geological Survey of Western Australia identified the mineral occurrence in 1999, however, it remained undiscovered by commercial explorers until being located this year by Electric’s project generation team.
There has been recent success with the minerals kaolin and halloysite in South Australia by mineral resource company Andromeda Metals Ltd (ASX:AND) in joint venture with Minotaur Exploration Ltd (ASX:MEP).
Andromeda last month published a scoping study for a proposed open-cut mine and dry processing plant for Carey’s Well deposit at the Poochera Halloysite-Kaolin Project on the Eyre Peninsula.
This study, which was completed within 18 months of the JV agreement being signed, delivered key Life of Mine (LOM) financial metrics:
- All in Sustaining Cost (AISC) averages A$396/tonne of fully refined kaolin with an anticipated selling price of A$700/tonne;
- Project cash flow is approximately A$800 million;
- Net Present Value (pre-tax using an 8% discount rate) is A$413 million; and
- Internal Rate of Return of 174%.
The anticipated timeline for project development is to conduct environmental and pre-feasibility studies from October 2019 to mid-2020.
Subject to satisfactory progress on a subsequent definitive feasibility study and obtaining all necessary regulatory approvals and agreements, commencement of operations is targeted for mid-2021.
In prolific Paterson region
The Big Grey project is a 138 square kilometre granted exploration tenement in WA’s Paterson region, which has been attracting plenty of interest in recent times through mining and exploration successes.
This region hosts two of Australia’s biggest copper and gold mines - Telfer operated by Newcrest Mining Limited (ASX:NCM) and Metals X Limited’s (ASX:MLX) Nifty - along with recent major discoveries at Havieron and Winu, which sparked significant interest.
The Greatland Gold plc (LON:GGP) discovery hole at Havieron returned 275 metres at 5.75 g/t gold equivalent with Newcrest committing to a staged US65$ million earn-in to acquire a 75% interest in the project.
Newcrest has met its minimum exploration expenditure commitment of US5$ million ahead of schedule and now has six drilling rigs on site as it moves into the second phase of its exploration program.
Rio Tinto Limited (ASX:RIO) has revealed significant copper-gold mineralisation at Winu project and is undertaking a major work program with around 180 people on-site and diamond and RC drilling returning impressive results. There are eight diamond rigs and three RC rigs drilling at Winu.
Paterson region exploration tenements.
Other active explorers in region include Artemis Resources Ltd (ASX:ARV) with its Armada project adjacent to Havieron, Sipa Resources Limited (ASX:SRI) with Paterson North, Antipa Minerals Ltd (ASX:AZY), Carawine Resources Ltd (ASX:CWX), Encounter Resources Ltd (ASX:ENR) and Metalicity Ltd (ASX:MCT).
LRS managing director Chris Gale said the new Western Australian focus came at an opportune time with the Peruvian copper joint venture with First Quantum beginning drilling over the coming months and with lithium prices down currently placing the lithium projects in Argentina and Brazil on hold.
He said the company believed it was now very close to finalising the process of obtaining the necessary permitting to enable exploration drilling to start on the Ilo Sur properties in Peru.
“The company remains hopeful that this joint venture will deliver the upside it has long promised, and we look forward to receiving good news on this project in the medium term.”
Owing to the temporary decline in the lithium sector at a global level, Gale said the company would only continue with its lithium operations via a sale or in conjunction with suitable joint venture partners.
He said the Electric Metals acquisition was consistent with the strategic direction announced earlier this month to identify and develop strategic mineral projects in Australia.
“The company is excited with the potential of this new opportunity and believes it will add value to the existing portfolio of mineral projects.”
Terms Sheet details
LRS’ conditional Binding Terms Sheet signed with Electric Metals is subject to the satisfaction of the usual conditions for a transaction of this nature, including due diligence by both parties and obtaining shareholder approvals.
Consideration for the acquisition will comprise the issue of 25 million fully paid ordinary LRS shares and 6.25 million options to subscribe for shares at an exercise price 1.2 cents and expiring on December 31, 2022.
Electric will also be eligible for 16.5 million milestone shares and 4.125 million milestone options on a successful kaolinite/halloysite JORC inferred resource of 3 million tonnes at 30% ceramic alumina (Al2O3) or greater.
LRS is also conducting a share placement to raise up to $1 million, a convertible note issue to raise up to $520,000 to professional and sophisticated investors and a rights issue to all shareholders on the same terms as the placement. This could provide well over $2 million for the company to develop its new WA projects.
The aim of the capital raising is to provide funds for exploration, project development, working and other capital requirements.
Positive investor reaction
The new strategic direction by acquiring projects in Western Australia has been seen as a major positive move by Latin Resources as indicated by the strong share price move after the company’s acquisition announcement was released by the ASX.
Securities increased 111% to a new 12-month high of 1.9 cents yesterday as investors welcomed the new WA strategy.
The positive response continued at opening today with shares up almost 70% in early trade to 3.2 cents.