The revised valuation follows the recent delivery of a Scoping Study for the Guadalupito Iron Sands Project in northern Peru that indicates the potential for a profitable mining operation.
The following is an extract from the report.
GUADALUPITO PROJECT SCOPING STUDY COMPLETE
- On 19 September 2012, Latin Resources Limited (LRS) announced that the scoping study for the Guadalupito Project had been completed by Ausenco.
The scoping study determined that a mining operation is economically viable. The results of the study have provided the company with the confidence to proceed to a Pre-Feasibility Study (NYSE:PFS).
- The scoping study was based on the Proof of Concept study completed by Snowdens and was based on a conceptual exploration target of 2.7 billion tonnes of heavy minerals.
- The scoping study has assumed that mining will be undertaken in two stages, with the second stage commencing four years after the first.
Each stage will involve the use of bucket line dredges and a pumping system that delivers the screened dredged material to a floating heavy mineral concentrator in a dredging pond before being pumped to a mineral separation plant.
- The company intends to produce concentrates containing magnetite, andalusite, zircon, ilmenite, rutile and gold. Magnetite tends to be a higher quality concentrate than hematite and as such attracts a premium to high grade hematite.
This, in addition to the current high values of zircon, rutile and gold provides the potential for a profitable mining operation.
- The company expects to commence a PFS in the 1Q'13. The company will seek to increase the JORC resources during the PFS and upgrade the JORC category of existing resources.
Completion of the PFS will be a significant milestone for the company and will assist in finding a JV partner and funding to develop the Project.
- The scoping study determined that the Project can operate at a low operating cost of just US$1.26/t, post the completion of stage 2 operations. This is low compared to its peers.
- The heavy mineral market dynamics suggest that long-term prices should be maintained at levels above historical prices, although will moderate from the current high levels.
- High grade iron mineralisation has been intersected at the Mariela Project. The drill program remains in the early stages, however we expect that given the initial results the Project will be advanced quickly.
LRS will be free-carried through to the completion of a Bankable Feasibility Study (NYSE:BFS) by the Junefield Group or to a total spend of US$35M, as per the Earn-In Agreement.
- Valuation: We have revised the valuation of LRS with the application of a different valuation methodology to determine the value of the Guadalupito Project.
We have used a discounted cashflow model to determine a value for the Guadalupito Project after the release of the scoping study, which detailed the expected economics of the Project. We have a revised fair value target for LRS of $0.60 per share.
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