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American Vanadium’s Flow Batteries

According to Lux Research, the global grid storage market is expected to rise from a mere $200 million in 2012 to $10.4 Billion in 2017. Flow batteries are an especially attractive solution given their quick response times, environmentally friendly composition, and long lifetimes. In previous articles we highlighted the zinc flow battery offered by companies such as Primus Power and ZBB Energy. Another type of flow battery is the vanadium redox flow battery. One company which sells a vanadium battery in North America is American Vanadium (OTCMKTS:AVCVF).

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American Vanadium is currently developing the only vanadium mine in the United States but has yet to realize any revenues from it. The company is traded on the Canadian Venture Exchange (CVE:AVC) and on the over-the-counter market under the symbol (OTCMKTS:AVCVF). While American Vanadium refers to itself as “an energy storage company”, the company does not produce batteries but instead acts as a re-seller for Gildmeister Energy’s CellCube vanadium battery. Advantages of the CellCube include:

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The below statement taken from American Vanadium’s latest financial statement defines their relationship with Gildemeister:

The Company entered into a Memorandum of Understanding in February 2013 with Gildemeister Energy of Germany under which it is contemplated that American Vanadium will provide a long-term supply of vanadium electrolyte with stable pricing to Gildemiester. Pursuant to that Memorandum of Understanding, the Company has entered into a master sales agreement with Gildemeister whereby the Company will market and sell Gildemeister’s CellCube vanadium redox flow batteries in North America.

A “memorandum of understanding” and a “contemplation” to provide vanadium electrolyte is hardly a firm commitment. Likewise, a “master sales agreement” does not provide any indication of exclusivity. Gildmeister’s parent company, DMG Mori Seiki AG (ETR:GI} has more than 140 national and international sales and service locations (including in the US) that ensure direct contact with their customers. What’s to stop them from invoking their existing sales and distribution channels as opposed to relying solely upon American Vanadium’s efforts? After all, American Vanadium has a mineral property they need to focus on developing. Even if American Vanadium is successful in selling the Cellcube battery into North America, just what sort of markups can they expect to receive as a result? Will they have the sales and support infrastructure in place to service the batteries they cell?

American Vanadium recently announced that the National Renewable Energy Laboratory (“NREL”) will evaluate and demonstrate the CellCube vanadium redox flow energy storage system after which it will be sold to a US utility. This would be American Vanadium’s first sale while Gildmeister has already sold over 50 devices in Europe and Asia.

Investors may see potential in American Vanadium for their mine development, however a recent article by Greentech Media quotes the CEO of American Vanadium as stating that “scale-up of the Gibellini project could cost $100 million or more, and isn’t expected to get underway until 2015 or so“. Many other companies in other countries are producing vanadium already and more projects are coming online. For example, Largo Resources (OTCPK:LGORF) is in the final stages of developing their Maracas Vanadium project in Brazil with production to begin this quarter. The company claims to have the highest grade vanadium deposit in the world. This means a  low cost of production since high grade vanadium has a much higher recovery rate due to less energy required and lower reagent costs. Largo has a 6-year take-or-pay agreement with Glencore, the world’s largest trader of vanadium, for 100% of their output.

With American Vanadium focused on reselling flow batteries and bringing their vanadium resources online, any signs of revenue in the future may show they are making making progress in either of these areas.

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