I am not saying there is no risk just that risk will be appropritely discounted and IMHO that means Olaroz is worth more than AUD$5M. Lithium itself is a risk because the jury isn't in yet that lithium batteries can be economically scaled up to auto size for a cost that will mean large volume uptake. Thing is IF lithium PEV battery development falls our way and IF Argentina don't screw us and FMC etc over big time then it WILL be worth billions (and the Argie government will make bloody good money too). That is the whole idea of risk-reward investing in the amoeba end of the gene pool. Heightened risk but heightened returns and you sound like you've been around enough to know completely risk free lunches don't exist.
ADY is an excellent peer comparison project though a complete basket case of a comapny! It will be very interesting to see what it sells for, keeping in mind the following:
PT and board are full of sht. The first $36M sale was probably a friendly and not arms length. Games are still probably being played to get a lower price for friendly on the vinegar stroke of bankruptcy Even an arms length sale is a fire sale by idiots that don't care much so what meaning the price? Rincon has more challenging chemistry (higher cost base) and lower grades. No evidence has been published yet that their extraction process is low cost or efficient in reality(only PT's word :) The lithium market will likely not be ready for Rincon product until post recession or PEV battery demand circa 2012. Hard to get top dollar.
That all said would they get more than AUD$5M for it (ORE enterprise value)... no doubt. Part of the value for ORE at this stage is my belief that the resource size, grade and chemistry will all come up trumps and lead to a resource/reserve others will pay well for. We were buying cheap before any drilling was done and so far the geology is behaving beautifully, touch wood.
Battery weight. Lithium is a very light element (3rd lightest)but other elements in the anode and cathode chemistry weigh considerably more. Add to the battery chemicals the individual cell casing, copper/alli plates, wiring, cooling gear, monitoring stuff, overall casing and architecture and therein lies the significant weight impost. I expect as they perfect the chemistry, heating/cooling, safety, electronic architecture etc that the weight will come down. Larger but stable cells meaning less casing and more battery for example. Double the energy density with technology improvement and bob's your uncle.
All this won't happen overnight which is why ORE is a low risk play compared perhaps to SQM. Fluctuations in lithium price over the recession and EV development phase of the next few years is of no consequence to a junior start-up with no value attributed but all upside to come.
cheers
ORE Price at posting:
16.2¢ Sentiment: Buy Disclosure: Held
