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By Kishori Krishnan Exclusive To Lithium Investing News

The war between oil and alternate fuel/power sources has been a long drawn one, if not a highly public one. For decades, oil won the battle but it now looks like electrical energy is about to win the war.

The search for an alternate to the fast depleting global oil reserve may seem to be fluctuating between solar, wind and other similar sources of  “electric” power but at the heart of all these technologies, ladies and gentleman, is the humble battery, as we mortals know it.

Dubbed under the loose nomenclature,  “new technology”,  the latter is expected to replace 148 billion barrels of oil over the next 50 years, and that has the potential of saving over $10.4 trillion, even at current crude oil prices.

As the roar of the “black gold” supply gets muted, the global push to find an  alternative to oil has been inversely proportional to the drop in oil supply.  Over time, big investors, of course on the look out for a “lucrative business alternative”,  have already done their bit to corner a part of the emerging market.

Warren Buffet is one such investor. Last year, almost to the month,  Buffet picked up a 10 per cent stake in a little known Hong Kong company which is primarily into making batteries.  Over the next 13 months, the company, BYD Co Ltd,  much to the delight of its share holders,  found its share price multiply to the extent that Buffet’s initial investment of US$ 230 million is today US$ 1.5 billion.

That the investment was made just after the global meltdown had started in September last, only helped in adding to the folklore. For Buffet, it was yet another one for the record books, but the investment story is far from the real deal. The real McCoy is the fact that the world’s most famous investor has thrown his weight behind a simple battery maker.  BYD Co is into making cell phone and automobile batteries.

Buffet is known for cherry picking. His uncanny acumen for searching out companies with potential futures, and then buying stakes in them, is by now legendary.  So, why BYD?

Power rush

Analysts seem to suggest that Buffet’s interest in the Hong Kong company has only underlined what they have been saying so far – that technology powered by battery power in all probabilities, will take over from where oil leaves.

The market for rechargeable batteries alone,  for example,  is expected to power up to S$ 330 million in 2014  from the present US$ 36 billion. Battery power may not be making newspaper headlines exactly, and getting less column per inch space in the spreadsheets, as compared to the lesser developed solar or wind power,  yet,  that is the way the world of Power is all set to go.

Last year, vehicle owners across the world watched in consternation and alarm as oil prices zoomed to as much as $147 a barrel. Frustrated auto industry guys wrung their hands by the sidelines like car owners,  wondering when the shift from oil to “plug-in” technology ( read batter power) would enable them to breathe.

Buffet seems to be dead on in his reckoning, since the world’s only remaining global superpower  has decided to put its might behind the development of alternate, viable energy.

Almost as soon as he was elected, US President Barack Obama promised to invest at least $150 billion on alternative energy during his 4-year term.

Not only that, but a large portion of his $787 billion stimulus package will also finance the development of a new, rechargeable battery technology for Plug-in Hybrid Electric Vehicles (PHEV), so vehicle owners can rejoice.

The American Reinvestment and Recovery Act allocates $2 billion for the development of battery systems, components and software for advanced lithium-ion batteries and for hybrid electric systems.

The Lithium way

Modern batteries may be the way out of the oil crisis. But there is a slight problem. Unlike oil, there is not enough deposits of lithium -ion, the key element that make a rechargeable battery. The positive side at least for the Warren Buffets of the world – like oil, Lithium is set to increase the bottom lines of early investors.

Lithium-ion became a global word with the advent of the cellphone.

Lithium based rechargeable batteries did exist before that, but for two reasons went practically unnoticed. One was their higher cost compared to the ordinary, non-rechargeable cousin, and the other, the lack of any real need in day-to-day equipment except very high-end electronics.

Lithium, considered to be the lightest metal in the Universe, is believed to have been one of the few elements released by the “Bing Bang” that created the Universe.

Today, it is used in everything – from medicines to nuclear bombs.  Its extreme inflammable nature makes it one of the most compact and powerful fuels. With the demand for renewable energy going up, lithium finds itself in all kinds of batteries, most importantly, the new class of  rechargeable batteries needed for the “plug-in” car market.

The other ingredient, of course, is money.

So, while President Obama’s fund allocations will help develop the lithium-ion technologies, another program will help encourage end-users to switch to hybrid-vehicle buyers.  Starting this year, commercial vehicle owners will get a tax rebate of upto $7500, if they buy “plug-in” electric vehicles.

China wants in

When the existing super power has already bought itself into the new technology, can the emerging super power be far behind? China, with its third largest lithium reserves in the world, is eyeing the lithium-ion rechargeable battery market and wants to get a piece of the action too. And fast.

Though the Japanese staked early claims in the great lithium grab, its dominance peaked in late 1999, when it accounted for 95 per cent of the global lithium ion battery output. When inflation pinched Japan’s industrial bottom lines, two of its Asian neighbors, China and South Korea, rushed in to fill the gap in this sector

The end result has been a three-way race among the three countries in the hunt for market shares.

The growth of both global demand for lithium ion batteries and China’s production capacity has led experts to believe that China will be a major supplier of electric power sources in the future.

Although only 10 years have passed since the first home-made version was produced in Tianjin, large amounts of government funding and pressure has been placed on refining the battery to produce optimal energy storing capabilities.

The future of electric automobiles has further increased the appeal of the lithium ion battery, and the United States’ Miles Electric Vehicles Company has recently established a joint venture deal with China’s battery manufacturer Lishen to build and sell electric cars in the United States and China.

China’s stated goal is for 15 per cent of its energy consumption in 2020 to come from renewable sources, which Beijing says include large hydropower projects and nuclear plants.

Clearly, companies that are `in’ with the new technology are red hot.

Company news

Western Lithium Canada Corporation (TSX-V:WLC) and Rocky Mountain Resources Corp (TSX-V:RKY) have entered into a non-binding letter of intent pursuant to which Western Lithium proposes to acquire all of the outstanding shares of Rocky Mountain.

The deal is at a 43 per cent premium over Rocky Mountain’s closing price on October 22, 2009, based on Western Lithium’s 20 day weighted average share price on the TSX-V of $1.24 per share. The total number of shares Western Lithium would issue under the transaction is approximately 6,749,091.

Western Lithium is developing its Nevada lithium deposit to support the new generation of hybrid/electric vehicles.

Canada Lithium Corp (TSX.V:CLQ) plans to develop a former lithium mine near Val d’Or, Que., which operated from 1955 to 1965. Teaming up with Gold Summit Corporation (TSXV: GSM) the firm has announced drilling at the Paymaster lithium brines property in Esmeralda county. Nevada has intersected subsurface aquifers.

The firm is also acquiring and testing the economics of several spodumene pegmatite deposits in Canada and has also initiated lithium brine exploration in the Great Basin of the United States.

Galaxy Resources is to develop its proposed $55 million factory in Jiangsu province in China to process lithium carbonate for use in batteries and electronic devices.

Following a positive result to a definitive feasibility study on the proposed plant, which confirmed previously estimated returns, Galaxy plans to start site preparation in December and start construction in April, with first production scheduled in the 2010 fourth quarter.

The planned 17,000 tonnes a year designated plant capacity was almost three times bigger than the existing current largest producer at 6000 tonnes a year. Galaxy will source the spodumene input to the Jiangsu plant from its $68 million Mt Cattlin lithium and tantalite mine in southwest Australia, now under development.

The company has already secured long-term financing for both projects from Creat Group, a private sector investment company based in Beijing.

Creat has a 19.9 per cent stake in Galaxy and provided the company with 100 per cent debt finance of about $130 million to develop the mine and processing plant.

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