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Dalaroo Metals (ASX: DAL) up 20% - Selling lithium now better than hopes later

This sounds like a perfectly reasonable move here to us

Update : 01 Dec 2023, 02:51 PM

Dalaroo Metals (ASX: DAL) shares have been up 100% today, falling back to only 20% up. The cause of the volatility in DAL shares is that they’ve sold off some lithium rights. This sounds sensible to us - we’re bear lithium and have been for a long time. Which is useful as the lithium price is down 75% over the past year. What Dalaroo hsa done is sell off some lithium rights for some cold hard cash. Which, given the size of the company, is a significant amount. They also retain a significant portion of any of the profits from any future exploitation of those lithium rights - without having to bear the costs in the interim. Finally, they gain access to a part share in other lithium rights at the same time.

Now, “deals” among junior miners can end up being a bit of pass the parcel. Assets change hands, share prices get excited and nothing real ever seems to happen. When actual cash changes hands that can be a little different. There’s a real transaction happening that is if there is that cold, hard, gelt involved.

The deal: “Dalaroo’s Lithium Mineral Rights at the Lyons River Project have been acquired by Delta Lithium Limited.Consideration for the transaction is $1,000,000, consisting of $500,000 in cash and $500,000 in Delta Lithium ordinary shares. In addition, Delta Lithium must expend a minimum of 50% of the annual statutory expenditure requirements on the Lyons River Project tenements (a commitment of $280,000 per annum at the date of the Sale Agreement). The shareholding in Delta Lithium will provide potential upside benefits to Dalaroo through exposure to future exploration success by Delta Lithium at the Lyons River Project and the drill out/resource definition underway at its nearby Yinnetharra Project as well as the mine development at the Mt Ida lithium Project.”

Dalaroo Metals share price from Google Finance

Now, we do not say that this is objectively a good deal - none of us know the future value of those lithium rights. But given the uncertainty over that it doesn’t look like a bad deal. Dalaroo’s current market capitalisation is around the $2 million mark so $500k in cash is real money, not some rounding error. Retaining 50% of the rights via the shares seems pretty good. And the shares also give exposure to those other lithium prospects as well.

We can also read the same deal from the other side

 

Tags: Dalaroo Metals, ASX DAL

https://data-api.marketindex.com.au/api/v1/announcements/XASX:DAL:6A1184205/pdf/inline/delta-lithium-acquires-lyons-river-lithium-mineral-rights?_gl=1*19fc4e2*_ga*MTI4MjMwMDY5MS4xNjgwNDk3OTA3*_ga_R504V9JPBH*MTcwMTQxNzM2Mi41OS4xLjE3MDE0MTczOTEuMzEuMC4w

 

https://www.google.com/finance/quote/DAL:ASX?hl=en&window=5D

 

https://data-api.marketindex.com.au/api/v1/announcements/XASX:DAL:6A1184230/pdf/inline/dli-delta-acquires-lct-mineral-rights-at-the-lyons-river?_gl=1*19fc4e2*_ga*MTI4MjMwMDY5MS4xNjgwNDk3OTA3*_ga_R504V9JPBH*MTcwMTQxNzM2Mi41OS4xLjE3MDE0MTczOTEuMzEuMC4w

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