SGML - A Look At 4 Promising Lithium Juniors With Projects In Brazil

Summary

• Some background on Trend Investing's past success in the lithium sector since 2015. Who will potentially be the next Sigma Lithium?
• We discuss the lithium projects and the potential of four lithium juniors with projects in Brazil.
• Risks include exploration and development risks for mining projects and moderate country risks in Brazil.

This article first appeared in " Trend Investing marketplace " on January 20, but has been updated for this article.

Some background on Trend Investing's past success in the lithium sector since 2015

Trend Investing was very early to the electric vehicle ("EV") and lithium booms, writing on Seeking Alpha about these trends since early 2015. The early years focused on the established lithium producers (Albemarle ( ALB ), SQM ( SQM )) and some new producers/juniors such as Lithium Americas [TSX:LAC] ( LAC ), Ganfeng Lithium [SHE:002460], Allkem [ASX:AKE] ( OROCF ) (then Orocobre & Galaxy Resources), and Pilbara Minerals [ASX:PLS] ( PILBF ). All of these have performed exceptionally well.

The focus continued on finding the next potential producers and rising stars. In 2018-2021, we discovered several new stars in Australia such as Core Lithium [ASX:CXO] ( CXOXF ), Piedmont Lithium [ASX:PLL] ( PLL ), Sayona Mining [ASX:SYA] ( SYAXF ), Argosy Minerals [ASX:AGY] ( ARYMF ) and several others. In 2022, we focused on the Canadian and USA juniors such as Piedmont Lithium, Frontier Lithium [TSXV:FL] ( LITOF ), Patriot Battery Metals [TSXV:PMET] [ASX:PMT] ( PMETF ) and our recent star Winsome Resources [ASX:WR1] ( WRSLF ). We also looked at the European lithium juniors (European Lithium [ASX:EUR] ( EULIF ) etc.) who may be set to do well in 2023 as Europe unveils the European Critical Raw Materials Act due by end March 2023. Then there was Brazil. We caught Sigma Lithium [TSXV:SGMA] ( SGML ) very early and had great success (see below), and it now looks like there is significant potential in Brazil in 2023 for other lithium juniors to succeed.

Sigma Lithium has been a huge success, jumping from C$5.00 to ~C$40 in under 2 years (an 8x return)

With the tremendous success of Sigma Lithium (read our April 2021 article here at C$5.00) today we take a look at four promising lithium juniors with projects in Brazil. At the time of our article, Sigma Lithium had a Measured and Indicated Resources of 45.7m tonnes @ 1.38% and a market cap of C$408m. Today Sigma Lithium has Measured and Indicated Resources of 77m tonnes, a post-tax NPV8% of US$15.3b, is about to start lithium spodumene production, and has a market cap of C$4.12b.

Even Tesla ( TSLA ) now appears to be interested in Sigma Lithium, based on the report linked below from February 17, 2023.

• Tesla weighing takeover bid for Sigma Lithium - Bloomberg .

Sigma Lithium's stock price chart says it all ( source )

Who will potentially be the next Sigma Lithium?

A look at four promising lithium juniors with projects in Brazil (in alphabetical order)

Atlas Lithium ( ATLX ) ("Atlas") (formerly Brazil Resources) - Price =US$7.22.

Atlas Lithium ( ATLX ) ( ATLXD ) uplisted its stock to Nasdaq and raised US$4m at US$6.00 per share in early January 2023.

Atlas states : "We own the largest hard-rock lithium mineral property portfolio in Brazil, spanning 293 km2."

Atlas is developing their flagship Minas Gerais Lithium Project in Brazil. Atlas also has a separate second lithium project located in Brazil's Northeast region.

They also have several other projects/properties covering battery metals such as nickel, rare earths, titanium, and graphite as well as holding an equity interest in two companies (see chart below).

Atlas Lithium's portfolio of projects/properties in Brazil and equity interests ( source )

At the Minas Gerais Lithium Project, Atlas owns 52 mineral rights (227 km2) in and around the municipalities of Araçuaí and Itinga, a well-known district for lithium. At the Neves Area, where 20 pegmatite outcrops have been identified thus far, drilling in some of these targets has yielded intersects of up to 3.26% Li2O. Metallurgical test work has achieved samples of up to 6.78% Li2O.

Atlas states :

Several of our mineral rights are adjacent to Sigma Lithium's; our Neves Area, currently under our first drilling campaign, is immediately adjacent to a Sigma Lithium mineral right.

Five diamond-core drills are currently on site as of Jan 2023 with a goal of delivering a resource.

On January 18, 2023 Atlas reported :

Atlas Lithium Signs Memorandum of Understanding with Mitsui & Co....... with respect to Mitsui's potential interest in acquiring the right to purchase Atlas Lithium's future lithium concentrate production. Mitsui is a global enterprise headquartered in Tokyo, Japan, with $122.3 billion in assets, $96.4 billion in annual revenues.......the MOU contemplates potential funding from Mitsui to Atlas Lithium of up to $65 million (the "Offtake Funding"), in tranches and subject to the achievement of specific milestones acceptable to Mitsui, that would give Mitsui the right to buy up to 100% of Atlas Lithium's production from its planned plant with output capacity of 150,000 tons of lithium concentrate per year (the "Plant"). The Offtake Funding would be primarily used by Atlas Lithium for the construction of the Plant. Lithium concentrate produced by the Plant would then be available for purchase by Mitsui at a price generally based on the then-prevailing market price.

Mitsui made a similar deal with Sigma Lithium so this bodes very well for Atlas if they can build a decent size and quality lithium resource.

Atlas Lithium trades on a market cap of US$43m .

Still early stages, but it would appear Mitsui thinks Atlas may be onto something big. Definitely worthy of consideration, but early stage warrants some caution.

You can view the company website here and presentation here .

• Feb. 2023 - ATLX: For Those About Hard-Rock (Lithium); Initiating Coverage With a Buy Rating, $12 Price Target .

Latin Resources Ltd [ASX:LRS] [FRA:XL5] ( OTCPK:LRSRF ) ("LRS") - Price = AUD 0.127

LRS' flagship is the 100% owned Salinas Lithium Project (over 38,000 hectares when including the recent 29,940 hectares expansion ) in the pro-mining district of Minas Gerais, Brazil. LRS also has several other projects that you can view here , including lithium spodumene in Argentina.

The Salinas Project has already undergone 14,000m+ of drilling and has a maiden Indicated & Inferred JORC Mineral Resource estimate of 13.3Mt @ 1.2% Li2O (2.08Mt Indicated and 11.17Mt Inferred) at the Colina deposit of the Salinas Project.

At Salinas South, LRS has identified outcropping pegmatites containing spodumene over a strike extent of 4km.

Location map and tenements of the Salinas Lithium Project (LRS original tenements in red, new in orange) updated to show the new 29,940 hectares of tenements expansion in the north ( source )

Latin Resources tenements before the expansion ( source )

The Salinas Project resource definition block model as of December 2022 (open with exploration upside) ( source )

Hole 33 drilled at Colina West confirmed significant results and a new discovery of 18.71m @1.32% Li2O from 319.40m to 341.94m, so quite deep.

In February 16 news Latin Resources announced : "COLINAWESTCONTINUESTOGROWWITHHIGH?GRADE ZONEEXTENDEDTOOVER500MALONGSTRIKE.....

? SADD061:20.70m@1.51%Li2Ofrom159.00m?SADD062:10.00m@1.13%Li2Ofrom149.51m

?SADD063:4.03m@1.60%Li2Ofrom125.12m......

Seven diamond drilling rigs currently on site and one additional diamond drilling rig due in late February ? early March with 2023 drilling campaign well on track....."

The Colina West resource is growing and remains remains open in all directions, which is very positive news for Latin resources to further grow their resource in 2023.

Updated resource block model as of Feb. 2023 ( source )

Note: Some assumptions of where the resource appears to be at Colina West (LHS of image above) will need further drilling to verify.

LRS plans to complete a massive ~65,000m of infill and expansion drilling at Colina and Colina West in 2023.

Metallurgical DMS pilot plant and other test work has commenced. A PEA is targeted for completion by mid to end Q2, 2023 and a DFS and permitting by end 2023. That's super fast and perhaps a bit optimistic, we will see.

Latin Resources timeline targets ( source )

Latin Resources trades on a market cap of A$280m and Yahoo shows a price target of A$0.24 (~100% potential upside). Looks to be a potential winner and 2023 should be a huge year for the Company with a massive drill campaign looking to grow a significant size resource.

You can view the company website here and Feb. 2023 presentation here .

Lithium Ionic Corp. [TSXV:LTH] ( LTHCF ) - Price = CAD 2.51

Lithium Ionic 100% owns the Itinga Project ( 7,700 hectares land package) in Minas Gerais, Brazil. Their claims are strategically located within 800m from the producing CBL lithium mine (36,000 tpa of spodumene @5.5%) and Sigma Lithium's Grota do Cirilo property.

Lithium Ionic's claims now cover 7,700 hectares ( source )

Lithium Ionic describes themselves stating : "AN EMERGING CLEAN ENERGY PROJECT IN AN ESTABLISHED LITHIUM-PRODUCING DISTRICT." ( source )

Investment opportunity summary for Lithium Ionic Corp. ( source )

Some past drill results from the Bandeira prospect include:

• 1.44% Li2O over 8.33m (hole ITDD-22-012)
• 1.99% Li2O over 6.75m (hole ITDD-22-011)
• 1.93% Li2O over 5.66m (hole ITDD-22-002)
• 1.55% Li2O over 5.2m (hole ITDD-22-001)
• 1.56% Li2O over 3.90m and 1.66 Li2O over 2.76 (hole ITDD-22-013).

Recent drill results include 1.71% Li2O over 5.7m, 1.49% Li2O over 6.7m and 2.22% Li2O over 3.7m, at Bandeira Deposit in the Itinga Project. Also announced since these results was "1.69% Li?O over 9.6m, 1.27% Li?O over 10m and 1.61% Li?O over 4.7m at its Bandeira target."

The Galvani prospect looks better with longer drill lengths and good grades including:

• 1.98% Li2O over 25.63m.
• 1.94% Li2O over 19.78m.
• 1.71% Li2O over 21.91m.
• 1.77% Li2O / 10.85m.
• 1.68% Li2O over 20.7mThere have also been some positive initial metallurgical test results (77.99% recoveries at Bandeira and 82.52% at Galvani achieved with Heavy Liquid Separation (HLS) gravity separation tests).

Lithium Ionic is targeting to produce a Maiden Mineral Resource estimate in Q1, 2023 and is currently undergoing a 30,000m drill program.

Lithium Ionic Corp. trades on a market cap of C$293m . Great location, Galvani looks promising, not exactly cheap and the stock price has surged higher the past month. Might be one to wait on and see the resource estimate first, or accumulate on any dips. Stay tuned.

You can view the company website here and presentation here .

Oceana Lithium [ASX:OCN] - Price = AUD 0.325

Oceana Lithium commenced trading on the ASX on July 1, 2022, following a A$6m IPO. This included a $1m cornerstone investment (7.8%) by Yahua International Industrial Group, the third largest lithium hydroxide producer globally. Yahua is also a major supplier to Tesla ( TSLA ).

Oceana Lithium's two lithium pegmatite projects are:

• Solonopole Project in Ceara, Brazil (114 km2)
• Napperby Project in the Northern Territory of Australia (650 km ² ) - Numerous pegmatite outcrops.

Both projects are at the very early exploration stage undergoing pegmatite mapping and rock chip sampling etc.

Solonopole Project

Field work conducted by a previous explorer in 2017-2018 at the Solonopole Project returned values of up to 9.29% Li2O and up to 4,311 ppm Ta2O5 respectively. There are several outcropping of pegmatites and historic artisanal mines as well as a regional exploration database of the Solonopole area. A maiden drilling program at the Solonopole Project is expected to start soon. More details here in the Sept. 2022 Quarterly report.

Also some details here on some new tenements recently acquired adjacent to the Solonopole Project. Oceana state :

High-grade lithium rock grab samples and the various exposed and mapped pegmatite outcrops provide us with drill-ready hard-rock lithium targets. Oceana plans to mobilise RC (reverse circulation) and/or diamond (core) drill rigs in the current quarter to immediately test the new ground as well as a number of other high-potential targets identified by the Company within the existing Solonópole project area.

The Solonopole Project location map and tenements ( source )

Solonopole Project - Lapinha area showing high grade lithium and tantalum values recovered by previous explorer's field work in 2017-2018 and focus of current sampling ( source )

Oceana Lithium trades on a market cap of A$21m . Early stages but the Yahua interest bodes well as does the positive Li2O fieldwork findings. Upcoming drilling will be key to watch closely.

You can view the company website here and January 2023 Quarterly report here .

January 2023 Quarterly report highlights ( source )

• Oceana Lithium poised for 'aggressive exploration' in Brazil and Australia

Risks

• Any global slowdown that results in lower EV sales and therefore less demand for lithium. Falling lithium prices.
• The usual mining risks - Exploration , permitting, production, environmental risks, project delays and cost blowouts. Permitting in Brazil seems to work faster than in many other countries.
• Business risks - Management, liquidity, funding, debt, and currency risk.
• Sovereign risk - Moderate in Brazil .
• Stock market risks - Dilution, lack of liquidity (best to buy on local exchange), market sentiment.

Conclusion

Brazil is still in the very early stages in terms of discovering and developing large scale lithium projects. Sigma Lithium has ignited the Brazilian lithium sector with their brilliant success the past 5 years. Who will potentially be the next Sigma Lithium?

Of course we cannot predict the future, but we do see potential for others to follow in Sigma's footsteps. Here are our four to follow (ranked by most advanced):

• Latin Resources - The most advanced and with a 13.3Mt @ 1.2% Li2O Resource and massive 2023 drilling campaign. Looks to be a potential winner. Market cap is A$280m.
• Lithium Ionic Corp. - Great location between CBL Mine and Sigma's project. Not cheap and the stock has surged higher the past month. Maiden resource due Q1, 2023. Stay tuned. Market cap is C$293m.
• Atlas Lithium - Some good grades from past drilling and a recent off-take MOU with Mitsui with potential of up to $65m of project funding is very promising. Market cap is US$43m.
• Oceana Lithium - Early stages but the Yahua interest bodes well as does the positive Li2O fieldwork findings. Also a lithium project in Oz. Market cap is A$21m.

Of the above, Latin Resources is the only one yet with a resource, so that alone makes it more valuable and a bit less risky. Please read the risks section.

Our strategy is to invest some smaller dollars into all four with a 5-7 year investment time horizon. Hard to pick the winner just yet and maybe they can all do well.

As usual, all comments are welcome.

For further details see:

A Look At 4 Promising Lithium Juniors With Projects In Brazil