By Peter Epstein
LOS ANGELES, Oct. 15, 2015 /CNW/ - Nevada is a well-known gold & silver mining state. Gold mined in Nevada alone represents 80% of the United States' total output, and Nevada's storied history in silver led to it being called the "Silver State." Nevada is not only the single best mining jurisdiction the U.S, it's ranked #3 globally by the respected, "Fraser Institute's annual Survey of Mining Countries." In addition to gold & silver, Nevada is making headlines as a center for emerging lithium exploration companies. Elon Musk's Tesla Motors (NASDAQ: TSLA) chose Nevada for its first giga-factory for good reason. Will Nevada become the, "Lithium State?" It's difficult to know for sure, but it calms me in a mood-stabilizing kind of way to think of it.
Dajin Resources Corp (TSX-V: DJI) (OTC: DJIFF) (Frankfurt: A1XF20) is the 100% owner of 2 prospective properties in Nevada. Roughly 7,000 acres are split between Alkali Lake and Teels Marsh, both in the sweet spot of the what's known as the "Lithium Hub." Alkali Lake is 12 km from Albemarle's Rockwood Lithium's operations, home to North America's only brine lithium-producing mine in North America, in operation for 50 years. Teels Marsh, the more advanced of the two, completed a gravity survey, resulting in 3D interpretation images of a deep, closed basin, plus fluid and sediment samples to be analyzed in preparation for deep drilling. At Alkali Lake, Dajin is reviewing its gravity survey & 3D gravity / airborne magnetic basin modeling data.
Dajin's Alkali Lake Property Location
Central western Nevada is the location of a lithium land rush, closer to the beginning than the end. Public and private companies are staking ground and making acquisitions, while existing and new entrants look at a multitude of alternatives to articulate a meaningful position in the Lithium Hub. Importantly for lithium junior Dajin Resources, exploration is well underway on its Nevada properties, giving it a valuable early entrance.
Early entrance is critical not just in land grabs but for takeout potential, off-take agreements, and myriad other de-risking corporate initiatives. Permitting and a number of time consuming, capital eating, early-stage logistics need to be carried out before actual exploration and testing can commence. This puts Dajin Resources years ahead of later entrance players.
Time is money, and very early stage and grass roots capital is hard to come by, highly dilutive to say the least.
Why all the excitement, causing a central western Nevada land rush?
Consider this, the "smart money" is entering the lithium land rush. Royce Resources recently signed a LOI to acquire prospective property from a privately-held firm. The CEO Brian Paes-Braga and his partner, legendary business mogul Frank Giustra, are the financier of countless natural resources deals. Royce is acquiring an option to earn a 100% interest in an area covering 629 hectares, (1,554 acres). It's doubtful that expert mining investor Giustra is late to the Nevada lithium party.
Lithium fundamentals are a highly important underlying catalyst, which is always a good thing! Readers should understand that lithium is found in abundance the world over, but economically viable deposits are far and few between. If I had written this article a month or two ago, it would already be out of date. Two new players have stepped up in the State and third-party analysts and consultants are updating demand metrics, which are only headed in one direction. I mentioned in prior articles that lithium demand to satisfy Electric Vehicles, "EVs," (aka Battery Electric Vehicles, "BEV"), and giant grid-scale utility users (among other large, lithium ion based storage systems) could double every 3 years, a CAGR of about 25%.
Dajin Lithium Price Drivers
Recently, there has been headline-grabbing reports and commentary about lithium demand. A market forecast published by analysts at industry consultant Navigant estimates the lithium market could reach nearly $16 billion a year by 2024, up from $675 million in 2014. That's an 11-year CAGR of roughly 33% for all lithium uses, not just EVs and grid-scale battery storage. TechNavio's analysts forecast the Global BEV market to grow at a CAGR of 59.42% over the period 2014-2019. Rest assured, I don't accept these optimistic research reports at face value, I simply refer to them to demonstrate that lithium demand CAGR estimates continue to move higher across the board. These figures make my annual 25% EV / Grid-scale CAGR look more reasonable.
Not only a land rush, but angry Nevada lawmakers call Tesla Motors out
After offering Tesla more than $1.3 billion in tax incentives to construct its giga-factory near Reno, lawmakers expressed frustration that Tesla signed a lithium deal with Bacanora Minerals and JV partner Rare Earth Minerals in northern Mexico. "Like everyone, I was thinking we were going to use Nevada products if we could," said Republican Sen. Pete Goicoechea of Eureka. "I think everyone's a little bit concerned. We gave Tesla this big tax break and now they are sourcing raw materials from outside of the country."
There are a number of Nevada lithium companies, one producing and others in various stages of preparation, that Tesla could have tapped. "It was my understanding that Nevada's Western Lithium would be able to ramp up in a like timeframe to meet Tesla's needs," said a Nevada law maker. In response to that story, Tesla's CEO Elon Musk was forced to back peddle, "... this lithium deal is not exclusive (and) has many contingencies. The press on this matter is unwarranted."
It's important to note, Tesla purchased 1,200 acres next to the current giga-factory, according to Dean Haymore of the Storey County Commission. According to Haymore, the giga-factory was supposed to consist of four modular, "blocks," but Tesla is now planning to build seven. Haymore said that the enlargement would bring the Giga-factory's total size up to 24 million square feet. If true, Tesla's giga-factory #1 would become by far the world's largest building.
Lithium prices increases support strong demand today, not in 2-3 years when giga-factory #1 is ramped up
The FMC Corporation recently announced Lithium Price Increases:
"FMC Corporation announced that effective October 1, 2015, it will increase prices for its lithium products in all global regions. All products including lithium carbonate, lithium chloride, lithium hydroxide will increase by 15%. The increases apply to all standard and non-standard pricing. 'Continued market growth is outpacing current industry supply capabilities for most of our product lines,' said Chris Senyk, global marketing director, FMC Lithium. 'Price increases are necessary to re-invest in our global manufacturing facilities and continue reliable supply of high-quality lithium products.'"
"At FMC, we believe demand for lithium will grow more than 10% yearly throughout the next decade."
Evidence of increasing estimates of annual demand include a comment directly from FMC's web page. According to FMC forecasts, greater than 10% annual growth for a decade is expected. If it were to be 12%, that would equate to a tripling in demand in the next 10 years.
Dajin Resources a balance of market cap, first mover's advantage, acreage, (nearly 7,000 acres), squarely in the fairway
There are a number of lithium-related fundamentals I will save for another article. As mentioned, private companies are busy staking ground as well. As far as land rushes go, this one appears to be closer to the beginning than the end. Dajin Resources is beyond the land grab stage, although it continues to search for attractive ground to stake, joint ventures, and outright acquisitions of assets. With no debt, solid financial backing, and as much as 2-3 years head start on other green field players, first mover's advantage belongs to Dajin.
The Company has a strong Management Board and Technical Advisory Board, absolutely critical in a fast moving market environment. These are not money guys from Vancouver or London; they're true experts, highly valuable assets to the Company. It's fair to assume that Dajin owns some of the best property in Nevada, that's what first mover's advantage is all about. Dajin Resources is methodically and prudently advancing its Nevada properties, but they're also moving fairly rapidly in some respects due to the company NOT being constrained on the capital front.
Corporate Presentation: http://dajin.ca/Cpres.pdf
Teels Marsh Facts: http://dajin.ca/teels-marsh/
Alkali Lake Facts: http://dajin.ca/alkali-lake/
Salinas Grandes: http://dajin.ca/salinas-grandes/
S&P Market Access Profile: http://reports.standardandpoors.com/aidata/maccess/pdf/23406720.pdf
Links to infographics explaining lithium: http://dajin.ca/infographics/
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