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The Russian government is currently spending billions of dollars to upgrade its electrical infrastructure ahead of the Olympic Winter Games in 2014, so this may be the first of several contracts for Ener1.
Ener1 (NAS:HEV) announced a significant contract with the Russian Federal Grid Company to cooperate on the development of utility scale lithium battery storage systems. The initial phase of the $40 million contract is already underway and focuses on grid integration of emergency power back up systems in economically critical areas.
The Russian government is currently spending billions of dollars to upgrade its electrical infrastructure ahead of the Olympic Winter Games in 2014, so this may be the first of several contracts for Ener1. A positive outcome may underscore a general policy shift in Russia, which has already been observed in both the United States and China, committing to deliver billions of dollars to research and fund the development of infrastructural changes required to move towards greener domestic transportation fleets.
Following Tuesday’s election results, the current administration of the United States may find it a challenge to deliver on some of its objectives and mandates; however, in the past it has indicated an undeniable commitment towards developing the electric vehicle market. The United States Department of Energy (DOE) launched an Electric Drive Vehicle (EDV) Battery and Component Manufacturing Initiative of the American Recovery and Reinvestment Act of 2009 (ARRA), which has been made available to provide approximately $2 billion in federal stimulus in part to promote the development of U.S.-based advanced battery production for the EDV market. Earlier this year, China also announced a budget of more than $15 billion for electric vehicles to include a draft plan for 2011 to 2020.
President of Ener1 Grid Storage, Bruce Curtis, was highly optimistic about the news, “This is a unique opportunity for an American company to get in on the ground floor of Russia’s historic shift toward energy efficiency as a full-fledged partner. FGC is in a leap-frog mode to incorporate lithium-ion storage technology for multiple uses in an overhaul of what is one of the world’s largest bulk power grids. Russia is the largest country in the world and we believe this contract is only the beginning for us there.” As a result of Monday’s positive news, the market has increased the share prices approximately 9 percent to its current valuation in the $4.03 price range.
Russian Logistical Context
Electric vehicle utility could be less likely to achieve market penetration or have a demonstrable impact for lithium investors as rail dominates the freight transportation industry in Russia, comprising approximately 42 percent of the country’s overall freight turnover in the first six months of 2010, and 86 percent if pipeline traffic is excluded. Such a high share of rail in the Russian freight transportation market is driven by the country’s geography, large volumes of commodities transported over long distances, as well as by the limitations of other transportation networks.
Russian road systems are insufficient in terms of coverage and capacity. The use of road transportation is not economically efficient for long-distance transportation of heavy, bulky cargoes like coal, metals, ores, and oil products, which account for a large proportion of Russian freight turnover. The railway system is likely to remain a key mode of transportation for Russia, with total length of general use railroad track approximating 85.2 thousand kilometers.
Mining and Exploration Company Organizational Changes
On Monday, Lithium Americas Corp. (TSE:LAC) announced that Ian Fodie has been appointed Chief Financial Officer of the company effective immediately. Mr. Fodie replaced Raymond Mitchell, who has resigned to pursue other interests. The newly appointed, Mr. Fodie had been serving as President and CEO of Oriental Minerals (now Woulfe Mining) (TSXV:WOF ), following his previous role as the CFO for Longview Capital Partners Inc. (now Resinco Capital Partners Inc.) (TSX:RIN). The market has reacted positively to the appointment, strengthening the share price approximately 9 percent before a mean reversion to its current valuation in the $1.77 price range. Mitsubishi Corporation and Magna International are shareholders in the company, in addition to both companies having off-take arrangements with Lithium Americas.
Last month, Lithium Americas reported progress on its continued exploration and development of the Cauchari-Olaroz Properties, comprising a significant portion of two adjacent Argentinean salt lakes located in the Puna Plateau. Operational highlights included the completion of a 53-hole exploration drilling program, totalling approximately 10,000 meters. Lithium Americas also openedan on-site pilot evaporation and analytical lab facility with full analytical capabilities to analyze lithium, potassium, magnesium, and all relevant elements present in the brine, as well as the ability to produce laboratory scale quantities of lithium carbonate.
An important note for investors included the disclosureof a timeline and key milestones leading to the completion of the feasibility study for its Cauchari Project, including: an upgraded NI 43-101 technical report, resource estimate, completion of the production drilling program and large test pond construction all expected by the end of this year. A Preliminary Economic Assessment (PEA) is expected to be finished the end of next spring and a final feasibility report scheduled to be completed by the end of next year.
