Latin Resources Limited (ASX: LRS) – First Mover in Peru
Latin Resources listed in September 2010 on a substantial portfolio of Peruvian exploration projects. Since listing, the company has traded within a price range of $0.16 to $0.40 and is currently showing strength around $0.20 on the back of several positive announcements over the past few weeks. Share price weakness in late 2012 was caused by the sell-off of shares, now finished, which had just come out of escrow.
At the end of the December 2012 quarter Latin Resources had $1 million in cash. While cash is tight, the company has historically been able to raise cash at appropriate prices, as required. Further, subject to general market sentiment, ongoing news flow is likely to be very positive.
Peru has experienced strong economic growth over the past decade, coming after two decades of violent civil war. Mining has been the main driver of growth, with China being the largest export partner. President Ollanta Humala commenced his political career as a far left acolyte of Hugo Chávez but soon moved towards the middle. Since election in 2011 he has presided over a strongly growing economy and a very stable business environment.
This economic growth has not been without problems. In particular, social unrest amongst rural communities concerned about the environmental impact of various mining projects. Latin Resources is well aware of this issue and has devoted considerable effort to developing close relationships with local communities.
Peru has been a popular destination for mining and exploration companies over the past few years which has led to considerable M&A activity. It is quite feasible that with ongoing success Latin Resources itself will become a target.
The company has three main projects which are discussed in brief below, more detail will be provided in subsequent updates. It should be noted that all three projects are superbly located in terms of infrastructure. They are all near the coast, close to sealed roads, ports, water and electric power. There are steel mills and a copper smelter in the near vicinity.
Guadalupito - Iron and Mineral Sands
This project hosts Inferred Resources of 1.4 billion tonnes at a grade of 5.7% heavy minerals. The heavy mineral component is primarily comprised of iron oxide, mostly magnetite (22-25%); andalusite (21-24%); the titanium minerals rutile, leucoxene, ilmenite and titanate (6.4%); along with minor amounts (2-3%) of other heavy minerals and gangue (pronounced “gang”) or waste at 44.9%.
A scoping study completed in September 2012 gave generally positive results based upon dredging and conventional heavy mineral concentration. The results are sufficiently positive, and the resource sufficiently large, to justify further feasibility and related studies. This is a project that could well major interest as project economics become better understood.
Mariela – Iron, Copper & Gold
In November 2011 Latin Resources entered into a joint venture with a Chinese company, Junefield High Value Metals Limited, for Junefield to acquire a 70% interest in Mariela through either completion of a bankable feasibility study or expenditure of AUD35 million.
This project is primarily prospective for iron, along with associated copper and possible gold. The “type” example in Peru is the Marcona deposit, 1.9 billion tonnes at 55.4% iron and 0.12% copper.
Junefield commenced drilling in May 2012 .The initial holes have intersected varying thicknesses (up to 227 metres) of iron mineralisation at grades in the range 30% to 55%, along with associated copper. However, to date most mineralisation is at or below a depth of 500 metres.
Ilo – copper and gold
The target at Ilo is copper-gold mineralisation of replacement or “Iron Ore Copper Gold” type. Latin Resources is planning to commence drilling at Ilo Norte this month. I like the look of this project and plan to review it in a few days.
Chris Gale, the Managing Director of Latin Resources, should be well pleased with progress since listing. The company has very good land position in Peru, a country where activity in the resource space continues to accelerate.
In two years, Latin Resources has advanced the Guadalupito project to feasibility on the back of a very large heavy mineral resource. Either of its two other major projects have the potential to be company makers.
This is a company well worth keeping on the watch list.
13 February 2013
Disclosure: Market Capital holds securities in Latin Resources Ltd as at the date of publication of this