Originally posted by mpj7256
I don’t really have a clear idea of how much demand there currently is and what the expected demand will be over the next few years. I don’t know how much supply the world currently has from all of the well known producers, collectively. I get a sense that there are many explorers who may have reasonable Li resources but will likely never get of the ground. I’m hoping that our timing, location and economics make us viable and in due course we’ll be a highly profitable company. EV story is only just beginning....
I agree with you here and welcome to the forum.
A huge advantage (IMO) for CXO is and will be its timing to market. There has been a noted shortfall from South American brine producers and their inability to meet expected targets (this is aside from the recent industry alignment with lithium hydroxide which is better produced from hard rock), which means that there is likely to be a hole in the market over the next few years that any producers operating in the market will have an opportunity to fill. CXO's money making ability will be cemented in the next few years as it fills this gap until the big producers really fire up in the 2021-2023 (approx). CXO is in the box seat now and for the next few years, and even after this, I see that we still have some huge advantages.
There is plenty of commentary in economic circles regarding a perfectly competitive market. This means that (and has been demonstrated throughout history) that where there are profits to be made, new entrants will continually enter the market place until nobody makes any money, and then, companies begin to close out of the industry. Look at the lithium sector now and the number of explorers that are competing for their place as a producer....they all see profits and have been drawn into exploration in pursuit of it. Now, if we look at the big miners in Australia right now, there are only a few majors competing. Fortescue has been able to hold its own over recent years because of its ability to compete on a per tonne cost basis with BHP and RIO. In the longer term, I see CXO with the same potential. Its proximity to services and infrastructure will mean that as the industry matures and gets toward being competitive, it will have the location and the resources to compete with the big players on a per tonne basis which will guarantee its survival in the long run (even if it doesn't have the same size resource). I have stayed away from other explorers such as LTR for this reason, they definitely appear to have the resource size, but timing to market and cost per tonne may be the issue for ongoing survival (not trying to down ramp them here, just using them as a practical example of my thought process) - it is our strength to capitalise on and their obstacle to overcome.
As explained above, I think we have huge potential in the short and long term. 2019 will be the definitive year for CXO and should spell out our story for the next 5-10 years. The beauty of this is that we only have an absolute maximum of 12 months to know our future (and more like 3-6 months in reality). As I have stated in previous posts, I do not see a recession in 2019 (maybe in later years), but the ability to compete on cost will be a massive advantage should one come - our biggest risk is the potential slow down in China (remains to be seen whether the Chinese government can control this - will be great for us if they can), given that both of our major investors are Chinese, this could pose a problem - to mitigate this risk, it would serve CXO management well to consider supplying the proposed battery factories in Australia to help diversify the customer base.
All in my opinion, and good luck to all.......I believe in the CXO story and am fairly screwed if it all falls over by the way!
(20min delay)