When Good Things Happen to Good Companies

When Good Things Happen to Good Companies

Peter Epstein, CFA, MBA    @peterepstein2     Skype: peter.epstein3     Linked-In

Sometimes good news hits the tape and investors ignore it. To be fair, investors in the TSXV have been pounded for nearly 4 years. Retail investors are now the experts, not sell-side analysts or newsletter writers who are forced to be bullish on paying customers. When a big shot like Rick Rule says that now is the time to buy, guess what? He’s not buying because he can’t build a large enough position to move the needle. That’s really good news for savvy retail investors like us, allowing for the purchase of over-sold natural resource companies at fire sale valuations.

It sounds easy enough, how hard could it be? Find decent management teams, with liquidity to ride out the next 12 months and the ongoing ability to advance projects, even if not as rapidly as desired. For instance, in lithium I’m invested in Dajin Resources (TSX-V: DJI) (OTC: DJIFF) (Frankfurt: A1XF20)

Screen Shot 2015-11-25 at 6.22.41 AM

Juniors are low-cost call options on a rebound in natural resources, but some juniors have more time value and possible upside than others. With hundreds of zombie juniors exiting stage right, a tsunami of capital flowing back into the sector (timing unknown) will lift all surviving boats. Dajin is without question a survivor. For an excellent corporate website with info-graphics and the latest news on lithium and Dajin, please click here.

Dajin’s Nevada & Argentina Property Holdings, Valuable, Long-Dated Call Options on Continued Strength in Lithium Pricing 

On July 15th, Dajin Resources announced that it signed an agreement with the Mining Cooperative for the Production of Borates, Ltd., in Jujuy Province, Argentina. Before anyone shouts that Argentina isn’t a “safe” jurisdiction, don’t bother. Something like 75% of the world’s lithium comes from Argentina and Chile. Nevada has excellent early-stage prospects as well. The press release (see below) announced that Dajin  was able to lock down roughly 11,000 acres for a down payment of just C$60,000. That’s C$ 60k to control an additional 11,000 acres in Argentina, a great deal. This property is not in the middle of nowhere, Dajin’s management, Board, consultants, & technical advisors contemplated this move for some time before pulling the trigger.

A factor not well appreciated from reading the July 15th press release is that the agreement with an important agency in Argentina demonstrates that Dajin is doing the right things, it knows the right people. Simply put, its able to advance comfortably in Argentina. When was the last time you heard of a lithium junior optioning (not acquiring for cash or shares) highly prospective property in the most prolific lithium basin on the planet?

Cheap valuation, attractive opportunities in both Argentina & Nevada

Dajin has a fully-diluted Enterprise value, “EV” [market cap – cash  + debt] of a whopping C$6.5 million, assuming the exercise of in-the-money options. That equates to C$6.5 million divided by 253,216 acres (combined Argentina and Nevada, according to press release) = C$ 26/acre, or US$ 20/acre. Don’t think for a minute that a mid-tier or larger company couldn’t scoop up Dajin’s acres for two, three or four times that per acre valuation when the market turns. A mere drop in the bucket for an acquirer, but a possible 100% to 300% gain for Dajin shareholders. We’ve seen this movie before, it happens time and again. Uranium properties in Canada’s Athabasca basin are considered worthless and then there’s a blockbuster hole on a neighboring property, suddenly those acres are worth tens of millions. To be perfectly clear, big scores don’t happen all the time. Generally there needs to be a catalyst.

That catalyst is a recovery or bounce in the natural resource’s, “penny-dreadfulls.” When strong drill results and positive press releases move stocks up instead of providing higher trading liquidity for investors to exit positions, a recovery could be at hand. Dajin Resources, one of the cheapest lithium juniors on a per acre basis, could be one of the best performing with the right catalyst. Bear markets don’t last forever, Rick Rule told me so.

Screen Shot 2015-11-25 at 6.24.19 AM

Here’s the press release that compelled me to write a 6 paragraph introduction.

July 15, 2015  –  Vancouver, BC  –  Dajin Resources (TSX-V: DJI) (OTC: DJIFF) (Frankfurt: A1XF20) is pleased to report that it has signed an agreement with the Mining Cooperative for the Production of Borates, Ltd.) the, “Cooperative,” in Jujuy Province, Argentina. The Cooperative holds the mining rights to two properties in the southeastern part of the Salinas Grandes. This agreement has a payment of $60,000 which gives Dajin the exclusive right to explore the property during the term of three years. At the end of the three years, Dajin has the right to Option the property for a thirty-year time period for a payment of $700,000. During production Dajin will pay the Cooperative a 3% royalty.

The mining leases held by the Cooperative, “Navidad” and “San Jose,” cover a total area of 4,400 hectares (10,873 acres). An initial payment of $20,000 has been made and the Cooperative now must deliver the exploration permits to receive a further payment of $40,000. These permits will be the first to be granted to Dajin for exploration work in the Salinas Grandes, where Dajin has staked ground consisting of 80,248 hectares (198,000 acres).

Salinas Grandes is approximately 70 km to the east of Cauchari-Olaroz (Lithium America/Western Lithium) and Orocobre Limited (ORL-T: TSX).

The technical information in this news release has been prepared in accordance with the Canadian regulatory requirements set out in National Instrument 43-101 and has been reviewed and approved on behalf of the Dajin by Dr. Catherine Hickson, P.Geo, a qualified person.

About Dajin: (www.dajin.ca

Dajin is an early-stage energy metals exploration company that holds the Alkali Lake property which consists of 138 placer claims covering an area of 1,138 hectares (2,811 acres) of the enclosed basin. It also holds a 100% interest in claims known to contain lithium and boron values in the Teels Marsh region of Mineral County, Nevada. These claims cover 2,187 hectares (5,405 acres), and were the birth place of US Borax Corp’s first borax mine.

Dajin also holds a 100% interest in concessions or concession applications in Jujuy Province, Argentina that were acquired in regions known to contain brines with potassium, lithium and boron values. These concessions total approximately 100,000 hectares (247,000 acres) with 80,248 hectares (198,000 acres) located in the Salinas Grandes/Guayatayoc salt lakes basin adjacent to concessions held by Orocobre, who is partnered with Toyota Tsusho.


Dajin Resources (TSX-V: DJI) (OTC: DJIFF) (Frankfurt: A1XF20)This article was written by Peter Epstein, CFA, MBA. Dajin Resources is highly speculative and not suitable for all investors. Investors should consult with their own investment advisors before making investment decisions. Mr. Epstein is not an investment advisor. The article should be viewed in this context. The facts, opinions and assumptions are solely that of Mr. Epstein. At the time this article was written, Mr. Epstein, CFA, MBA owns shares of Dajin Resources. Dajin Resources is a paid sponsor of EpsteinResearch.com. 

Leave a Reply