The Chinese will likely do to the lithium sector what they have done to every other sector they've turned their minds to: buggger it up. Because they have access to so much easy credit which is not doled out on the merits of the targetted investment, they first cause a massive hike in prices by trying to stockpile supplies ahead of physical demand, then they produce a massive overcapacity for production which then causes the players to either operate at a loss or go out of business.
The two advantages I think Orocobre has in that scenario is that they have the jump on the Chinese by already being in production - plenty of lithium mining hopefuls have missed the wave and will be destroyed by the Chinese - and by using a process, brine not hardrock, that allows for low operating costs, which means that Orocobre should be able to compete on a cash basis with the Chinese even when the Chinese continue to operate at losses. Orocobre's higher initial capital costs, once they are been spent, are less of a worry (see how oil companies operate under what is referred to as the bygones rule).
The two threats to Orocobre I give most weight to is a new technology that overwhelms lithium use in batteries and a new technology that allows for lithium to be cheaply produced from hardrock. A third is country risk, but that has been there since day one.
ORE Price at posting:
$3.54 Sentiment: Hold Disclosure: Held
