Orocobre - A Potential Takeover Target In The Lithium Space
Sep. 21, 2017 2:54 PM ET|
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About: Orocobre Ltd. (OROCF), Includes: ALB, AVLIF, FMC, SQM, TLTHF, TYHOY
Livio Filice
Long-term horizon, Growth, momentum, Deep Value
(239 followers)
Summary
Low commodity prices have spurred activity in resources which support new technologies and applications.
The lithium mining industry has consolidated and the oligopoly has only seen one new company enter the production regime.
Orocobre has successfully brought on its Argentine lithium brine project into production; only company to bring meaningful capacity to the market in 40 years.
Asian technology and cash rich resource companies could be eyeing an entrance to the highly profitable lithium industry.
Orocobre – A Potential Takeover Target in the Lithium Space
With energy and mineral prices at rock bottom, there has been very little interest for investments in the exploration and mining industry. Low commodity prices have led to poor project economics and deterred capital investment in expanding production capacity at existing facilities. The end result is that many exploration companies have had to consolidate with other venture companies, close their doors or sell off their once prided assets.
However, there has been at least one bright spot in the commodity market driven by new technology demand – lithium. Lithium mining companies have been on fire in the past year while each major lithium producer has seen their stock price double. In addition to stock price appreciation over the past years, there has been a slew of acquisition activity in the space by large chemical companies looking to enter the lithium production industry. The primary targets have been companies who are actively in the mining stage. In addition to the acquisitions, Australia based Orocobre (OTC:OTCPK:OROCF)is the only company in the world which has successfully brought on new meaningful “greenfield” capacity . A perfect storm is brewing as battery grade lithium carbonate remains in tight supply while global automotive markers have begun a massive ramp-up in electric vehicle production. With such strong macro-level activity on both the supply and demand side and the first round of industry consolidation completed, it is fair to project that the next round of acquisitions will begin to occur in the years ahead. Orocobre stands as one of the only pure play lithium mining companies who is backed by a strong project partner, Toyota Tsusho Corp. (OTCMKTS:OTC:TYHOY) and a road map to quickly accelerate shareholder value. Orocobre remains a strong buy for investors looking for a lithium pure play with a time horizon of 2-5years.