Are you wanting to invest in the beaten down lithium industry? If you are and have a high tolerance for risk, then it could be worth taking a look at Latin Resources Ltd (ASX: LRS).
That's because analysts at Bell Potter believe the ASX lithium stock could deliver very big returns for investors over the next 12 months.
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What is the broker saying about the ASX lithium stock?
Bell Potter notes that Latin Resources has updated the mineral resource estimate for its Salinas Lithium Project in Brazil. It was pleased to see that it has increased since its last update. It said:
LRS has announced an updated Mineral Resource Estimate for its 100% owned Salinas Lithium Project located in Minas Gerais, Brazil. The Salinas global MRE is now 77.7Mt grading 1.24% Li2O (compared with the December 2023 estimate of 70.3Mt at 1.27% Li2O). Importantly, the Measured & Indicated component of the Colina deposit (within the global MRE) is now 67.3Mt grading 1.27% Li2O (previously 41.0Mt at 1.36% Li2O). Infill drilling at Colina is now complete and this large M&I component will form the basis of an initial Reserve estimate and Definitive Feasibility Study due for release in the September 2024 quarter.
The broker highlights that the ASX lithium stock is now in the process of preparing a final investment decision by the end of the year. And if all goes to plan, development at Salinas could commence next year and production the year after. It adds:
LRS is actively progressing permitting, offtake and financing to support a Final Investment Decision at Salinas by the end of 2024. Commencement of development in 2025 could enable first production in 2026. Financing and lithium offtake proposals have been received and are being assessed. The DFS is expected to be based on a similar scale project to the September 2023 Preliminary Economic Assessment. The PEA outlined ramp-up to 3.6Mtpa mining and processing rates to ultimately support +500ktpa Spodumene Concentrate production. Based on the PEA throughput assumptions, the current M&I MRE could support a +15 year project life.
Big returns
Bell Potter has responded to the update by retaining its speculative buy rating and 40 cents price target on the ASX lithium stock.
Based on its current share price of 26 cents, this implies potential upside of 53% for investors over the next 12 months. If this proves accurate, a high risk investment of $10,000 would turn into over $15,000.
The broker then summarised its bullish view on the stock. It said:
Colina has the potential to deliver new lithium supply into what we expect to be structurally short markets. Uncommitted offtake and an open share register provide further strategic appeal.
