[VIDEO ANALYSIS] Is Orocobre the next lithium slam dunk?
Okay. Steven had a second part to his question. What are your thoughts on mineral company Ocobra ORE as a long term prospect? So, ORE is a lithium producer. It’s currently making a very high margin on it’s lithium production, as a gross margin of 62%. Which is about $5,600 a tonne. That’s mainly due to the recent spike in lithium prices. So, that lithium price has gone to above $9,000 a tonne. One year ago, it was around $5,000. So, that’s a huge jump in the price there. The risk for these lithium liners is that it is currently the flavour of the month in the mining space, and a lot of people are jumping on board. Lithium isn’t a rare metal. It’s actually very abundant. So there is a risk of a large amount of new supply coming online, as a result of these high prices. So, in the short term these companies are making huge margins. But, in the longer term, with that extra supply coming online, it could start to squeeze those margins back to a more reasonable level.
On the other hand, these companies are generally predicting pretty significant growth in battery production, globally. So, there is certainly the demand there, and there is expected to be pretty high demand growth for lithium. So, it’s kind of hard to predict with those two competing forces. But, certainly for now its generating plenty of money.
Yeah. I probably couldn’t have said it any better. We’ve seen these flavour of the month so many times and that’s always the responses, especially for these ones with really low barriers to entry. It’s not that hard for all of these companies sitting on great lithium deposits to say, well look at the prices. Let’s start developing it. You start to see so much new supply come on. Exciting potentially, but comes with so much risk and that’s why we rarely get involved in companies like this. The only way I think we would ever get involved, is if we got in at least with a view that, had we got in a year ago and said, we really like the potential for lithium, because what we think is going to emerge with these batteries, and that would have been the best opportunity. But, I think that time has passed now.
Right. Okay. Next question. David from ACT asks, can you please comment on the recently announced URB investments IPO.
So, URB investments is a new list investment company. Focusing on urban renewal property that they’ll invest in AS listed companies, as well as unlisted investments as well. Basically, backed by Sole Paddinson, which will end up earning 10% of the IPO. Issue price of $1.10. Comes with a free option. Very standard listed investment company structure that we’ve seen across the board. I guess, what can I say, they’re responding to what they see as a gap in the market. Which is why I think they’ll be able to raise the capital to fill this up. I guess, if their right, and if the theme pans out, I’m sure they’ll do well. But, as at on day 1, they’re effectively un-exciting.
They’re going to hold $1.10 worth of assets, which will largely be in some cash. But I know they are starting with some assets that they think Sole has provided to them. Whether they go well or not, I don’t know. Sole has obviously got a great track record, in it’s area. It’s starting to expose of more and more to funds management, as we’ve just talked about with [inaudible 00:04:01] Hall. Long term, they’re smart guys, who knows? I don’t really particularly have a view on the theme that they’re following on. Whether it’s going to be a great one, it’s certainly the individual manager. This one, they don’t have a track record in this either. So, it relies on a leap of faith which, over time, may pan out. But, on day 1, it’s hard to be excited about it.