Tuesday, September 22, 2009

Battery Charge

In our quick and dirty review of available substitutes for oil as a transport fuel (See “Mission Impossible” post on September 8th), the electric vehicle was rudely sent to the back of the room. Electric cars have just not taken hold, which might seem surprising to those of us who go to and fro each day on electric trains. Why is it that the huge monsters traveling through subway tunnels and coursing up and down the country side run so well on electric engines, but engineers cannot get a tiny little Prius to go more than a couple hundred miles?

The efficiency of electric engines - or locomotives as the train people like to say - is not in doubt. The idea of converting electrical energy into mechanical energy by electromagnetic means was proven by British scientist Michael Faraday way back in the early 1800s. Today we have electric locomotives that offer efficiencies well above 90% - i.e. percentage of energy converted to mechanical motion. Additional efficiency can be gained from regenerative braking, which allows kinetic energy to be recovered during braking to put some power back on the line.

So why is the success on the rails not been translated to passenger and commercial vehicles? Did we mention the third-rail or overhead electrical lines that must be installed everywhere the train is supposed to run? Installing such a complex infrastructure for cars would be cost prohibitive to say the least, not to mention the environmental consequences.

So here we are trying to figure out how to carry the electric power supply in the car. So far the Prius and all the other electric car wannabees have been left sitting by the roadside waiting for a battery charge! There are no clear winners in the automotive power battery sector - at least in my point of view.

At least lithium ion battery technologies appear to have percolated to the top as the battery material of choice, even if neither the batteries nor the cars are perfected. This makes lithium sources a strong play while we wait for an electric car manufacture or even a battery manufacturer to achieve traction.

Western Lithium (WLC: TSX) is counting on the electric car market and is actively drilling in Nevada. Western Lithium management believes their Nevada lithium deposit is potentially one of the world's largest sources of high quality lithium. Accordingly to management, the company is being positioned as a major U.S.-based lithium supplier. Western Lithium has yet to post revenue and is still burning cash to support operations. Thus the stock price near CND$1.00 is something like an option on the company’s mining rights and ability to tap the expected demand for lithium ion batteries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

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