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5 reasons Orocobre Limited (ASX:ORE) could be the best lithium share on the ASX

Many ASX share market speculators have been attracted to the lithium space as the metal is an important ingredient in the batteries required to power electric vehicles.

Given that the production of electric vehicles globally looks set for accelerating growth over the long term it makes sense that demand for lithium is going to rise.

However, investors should be careful to remember that just because demand for a commodity rises it’s no given that its price will.

Just ask long-term shareholders in the likes of Woodside Petroleum Limited (ASX: WPL) or BHP Billiton Limited (ASX: BHP). There share prices have traded no better than flat over the last 10 years, despite rising demand for oil and iron ore.

So while it’s possible that an oversupply of lithium could eventually hurt prices one there’s one lithium miner that is already posting healthy profits with big plans to grow.

So here are 5 reasons why Orocobre Limited (ASX: ORE) could be a good bet for investors.

  1. It’s already profitable in posting a net profit after tax of US$1.9 million in FY 2018, or on an adjusted basis it posted a profit of US$25.7 million when backing out asset impairments and some other non-cash costs
  2. The group has a strong balance sheet to invest with cash on hand of US$308.7 million as at September 30, 2018, its net cash position is US$221.7 million
  3. It’s achieving rising prices for its lithium mined mainly in Argentina. For the September 2018 quarter the price received was US$14,699 per tonne, compared to US$11,190 per tonne in the September 2017 quarter.
  4. Its cost of sales is falling from US$4,987 per tonne mined in the September 2017 quarter to US$4,640 in the September 2018 quarter
  5. It has substantial capacity expansion plans and is fully funded to implement them given its balance sheet strength.

Orocobre is far from the only player in the lithium space, with others including Galaxy Resources Ltd (ASX: GXY) and Pilbara Minerals Ltd (ASX: PLS).

If you’re a long-term believer in rising lithium prices then one of these companies could be for you, if you prefer companies that make prices, rather than take them you could read on below….

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Motley Fool contributor Yulia Mosaleva has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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