As lithium exploration companies such as AmeriLithium (OTCQB: AMEL) map promising deposits and successfully obtain drilling permits, lithium manufacturers are getting closer to producing batteries for utility-scale energy storage. As the demand for renewable energy grows, so too is the desire to store wind and solar power off-grid. Increasingly, the answer to the storage problem is lithium-ion batteries. Lithium batteries have long been used in consumer electronics and are the keystone of hybrid car technology. Now, they are increasingly seen as the answer to bridge the gap between peak generation and consumption hours of renewable resources. In these situations, lithium batteries serve as storage systems that can release power during high consumption times and store power during high generation periods.
Lithium Exploration Feeds Demand
While these developments are promising, the resulting demand for lithium to produce the batteries will quickly outgrow the supply chain. With their recent buyout of Talison Lithium (TSX: TLH), Rockwood Holdings (NYSE: ROC) now controls 55% of the world’s lithium-producing territory. Many experts don’t see the supply coming from that territory as sufficient enough to offset the growth over the next decade. This makes the need for lithium exploration companies such as AmeriLithium much more acute.
AmeriLithium has four properties covering about 12,730 acres in Nevada. Three of these surround the only U.S.-based lithium producing plant, which is operated by the neighboring Chemetall Foote Corporation. The plant has produced an estimated 40 million kg (44,000+ tons) of lithium through 2008 from the region’s rich brines. In Alberta Canada, the company is also sitting on over 650,000 acres covering formation waters that could potentially contain economic amounts of lithium, according to the Alberta Geological Survey. AmeriLithium is trading close to all-time lows and has a market of nearly $2.4 million, making it very attractive as a major turn-around candidate on any positive news coming from the industry.
Lithium-ion Batteries for Residential and Commercial Use
According to Pike Research, energy storage projects are increasing worldwide as companies with a global reach, like Walmart, are now turning to cleaner, more economical energy solutions. Walmart contracted a solar power provider to install hybrid solar systems at 10 stores in California as part of a pilot storage project. The provider, SolarCity, partnered with Tesla Motors (NASDAQ: TSLA) to install Tesla’s lithium-ion batteries as backup for rooftop solar panels. Meanwhile, companies such as Panasonic have begun mass producing lithium-ion batteries for solar energy storage for European homes.
As utility-scale applications for lithium-ion energy storage grow, opportunities for growth in exploration and production will explode. Companies such as AmeriLithium will be the primary beneficiaries of such a rapid expansion given their envious position in the supply chain. It is reasonable to expect significant growth in the global lithium industry in the coming years. As that growth occurs, AmeriLithium may possibly stand to make big gains.