Latin Resources Ltd (ASX: LRS) shares are having a strong session on Friday.
In afternoon trade, the ASX lithium stock is up 9% to 25 cents.
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Why is this ASX lithium stock rising today?
Investors have been buying Latin Resources shares after a leading broker responded positively to the preliminary economic assessment (PEA) of its 100% owned Colina Project in Brazil.
According to a note out of Bell Potter, its analysts have retained their speculative buy rating with an improved price target of 47 cents.
This implied a potential upside of 104% based on yesterday's close price. And while the ASX lithium stock has jumped today, there's still an 88% upside left according to the broker's valuation.
What did the broker say?
Bell Potter was pleased with the PEA and notes that it was ahead of its expectations. The broker said:
The PEA in aggregate beat the initial notional development scenario which supported our LRS valuation. The two-phase development reduces upfront permitting requirements thereby compressing the project's time to first production. A Mineral Resource Estimate update is expected by the end of 2023, which will feed into potentially a larger/longer life project assessed in a Definitive Feasibility study due in mid-2024. LRS' current timeline has project FID in late-2024/early-2025.
The good news is that the broker sees scope for further value creation from other deposits at the project. It adds:
We expect material value accretion as LRS adds to the Colina MRE and defines its production potential and path to development. LRS is funded to aggressively pursue a DFS and environmental permitting to de-risk the project. Regional exploration provides further potential upside.
Bell Potter is forecasting revenue of $530 million, EBITDA of $296 million, and a net profit after tax of $186 million in FY 2026.
