According to the OBJ .mtl file format spec*, ‘blanks’ (by which I read whitespace characters) are not valid in material names:
"name" is the name of the material. Names may be any length but cannot include blanks. Underscores may be used in material names.
The Rhino OBJ exporter happily exports materials with spaces in names. Some other CAD software seems to do the sensible thing and import without problems but we are using a C library which chokes on white space in mtl names. Could an option be added to the Rhino OBJ export dialog to substitute underscores for white space in mtl names (and their corresponding references in the OBJ file)?