Fun The Chinese will likely do to the lithium sector what they...

Fun

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.