Liontown Resources Limited (ASX: LTR)

Liontown Resources Limited (ASX: LTR)

Liontown Resources Limited (ASX:  LTR) had a spectacular result from its latest drilling.  On the 20th May 2019, the company released the headline numbers( See image below).  I am always a sucker for significant intercepts.  As I have always said, there is nothing better than a great long length of intercept.  You can see the market expectation with the stock rising from 2c territory to nearly 10c.

 

Highlights from the 20th May 2019 release by Liontown Resources Limited (ASX: LTR). True widths 60-100% of down-hole widths listed above – see Appendix 2 in the announcement for details. (source: LTR)
Corporate Information

Market Capitalisation:  31M
Outstanding Shares:  1.1B
Top Twenty Shareholding: Approx. 50%  (Tim Goyder: 18%)

From the share price chart below, you can see the market liked the results.  I agree that it is still too early to say if this price rise is going to be supported.  I think in this market, it is hard to say.  Buyers are scattered, and the majority of the buyers are punters who are not the “sticky” money.  The fear in the market is also not encouraging punters to stick around.  The uncertainty in the lithium market is another factor.

A recent chat with industry people highlighted that there is just no retail trade.  The T+2 system in the market is not allowing “real punters” to do their thing, and that is to “gamble” on these kinds of situations.

Liontown Resources Limited share price chart. (source; Commsec)
What is the Fuss?

The fuss is all about this nice diagram you see below which is part of the Kathleen Valley Lithium project.  The announcement of a 90m of intercept with grades of 1.3% Li2O has excited the market.  The project has a current “resource estimate”. The results were in line with the ongoing story, and I think this shows that the Kathleen Valley project has some good legs.  Whether it turns out to be a profitable mine is another story.  The cross sections show where the intercepts were and how they appear with the other pegmatites.

The drill plan location plan (Figure 1)  does give an impressive look at the potential of the area.  The ongoing issue for mineral resource deposits such as this is that the real possibility is not observable yet. Many punters assume the best, but for those trying to prove economic viability, there is still a long way to go.

Figure 1: Liontown Resources 2019 drilling plan showing better results. (source: LTR)

You can see in Figure 2 the orientation of the pegmatites.  As promising as the story is being told, I am cautious as to how this story will end.  From an exploration point of view, there is a good reason for excitement.  The grades are looking consistent and without knowing other aspects of the mineralogy, it is hard to have any firm conclusion on the outlook.  Notwithstanding all the doubts, this is indeed an exciting time for the company and the story.

 

Figure 2: Cross section showing the latest drilling results. (source: LTR)

Currently, there is an excellent strike length of 600m, which I would assume that the company will want to extend. The intercept is deep, but it does give a level of optimism that there is endowedment of the system in the region.  Some of these pegmatites can be very wide and be reasonably consistent.  I am not sure if the grade is sufficient to make everything work.  I remember that the figure needs to be higher.  As I have always mentioned in my previous articles, it is more about the end size than a spectacular grade.

All the deposits, irrespective of the commodity is about the mining grade and the mining tonnage, which then will be determined by the AISC (All-In Sustaining Costs).  As you can see in Figure 2, the pegmatite layers are pretty deep down.  I remember my Galaxy days when I was freezing in the paddocks logging the drill chips.  They were very shallow, and at that time, it was considered deep. If I am not mistaken, they were no more than 20m+ below but were stacked with waste in between.

Figure 3: Cross section showing the latest drilling results. (source: LTR)

I am not saying that this is not going to happen as a mining proposition, but I think it is worth a thought.  Liontown also has the Buldania project, and that looks interesting too. Beautiful thick intercepts that are carrying some grade.  However, I think, for now, Kathleen Valley is giving some needed profile to this lithium sector.

Always good to see people have exploration success and making our small-cap exploration sector buoyant and full of hope.  That is what drives this industry, and job creation is always a welcome result.

 

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Samso provides bespoke research and presentation for clients to engage their customers or investors. Bespoke research is useful for clients who require a two-way flow of communication with their customer/investor base by utilising a social media strategy.

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Samso has nearly 30 years of experience in developing business ideas and concepts in the Australasian region. Samso has worked primarily in the mineral resources industry, capital markets and corporate finance. Noel Ong is the founder of SAMSO.

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