Tuesday, March 15, 2011

Fuel Innovations

Our March 11, 2011 post “China’s Dark Skies” focused on the growth vs. environment dilemma faced by China’s decision makers.  There are a couple of ways to resolve the conflict between providing jobs and prosperity for China’s 1.3 billion citizens and protecting the environment in which they live.

Coal is China most abundant energy source.  Policy makers and enterprise alike are hard at work developing ways to reduce pollution from burning coal.  AuraSource, Inc. (ARAO:  OTC/BB) is developing a technology that could tilt the scales in favor of environmentally friendly growth.

AuroSource recently applied for China Patent Protections for its AuraFuel process that uses shock waves to pulverize coal aggregate into fine particle sizes.  The coal material can be mixed with water and chemicals to make coal water slurry, an alternative fuel for industrial and commercial boilers.   Burning pulverized coal suspended in water produces fewer particulates and toxic gases than burning coal aggregate.  It is easily transported in tanks or pipelines.  Coal water slurry has been included on the lists of acceptable alternative green fuels in several China municipalities that are prohibiting burning coal aggregate in the future.

The technology was originally developed by China-based Beijing Penchuang Technology Development Co., Ltd.  The use of shock waves produces finer particle sizes compared to ball mill processes, improving fluidity.  AuraSource has also found that the fine coal material helps accelerate chemical reaction processes.

AuraSource plans to license its AuraCoal technology, but has yet to record any license revenue.  The shock wave technology could be applied in other material grinding processes such as those used in making solid lubricants.

As a developmental stage company AuraSource is still burning cash to support operations  -  $1.0 million in the year 2010.  The company has just over $900,000 in cash on its balance sheet, suggesting that without a change in fortunes, AuraSource could run out of fuel itself by the end of 2011.  The company is not entirely dependent upon its AuraCoal to earn its living.  AuraSource is also working on technologies to extract fuel or dry gas from shale.  

AuraSource has plans for a plant near Qinzhou in the southern province of Guangxi.  Using low-cost oil shale from Indonesia, the company plans to use its AuraFuel technology to produe lightweight fuel oil and dry gas.  The carbon-rich waste can then be used as feedstock to produce coal-water slurry.  The project could cost as much as $80 million and management has been actively talking to investors in China and the U.S.

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.  ARAO is included in the Crystal Equity Research Beach Boys Index in the Alternative Oil and Gas Group.

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