The Smackover Formation, more than 33,000 acres extending over Texas, Arkansas, and Louisiana, is receiving attention from Canadian-based Standard Lithium as a possible source for the production and development of lithium, which is used in the creation of electric car batteries (Li-ion batteries).
Recently, the Vancouver company announced it had entered into an option agreement with TETRA Technologies Inc., a non-affiliated NYSE-listed company, to acquire the rights “to conduct exploration, production and lithium extraction activities on up to 33,000 acres of brine leases located in an area where the Smackover Formation is known to be highly productive in southern Arkansas,” the company stated.
“In our search for opportunities of significance, this is one that could really move the needle,” said Standard Lithium CEO Robert Mintak. “We believe the Smackover (Formation) may be one of the lithium industry’s most promising regions to develop, given the potential resource size and large-scale brine-handling infrastructure in the region. This agreement highlights our excellent working relationship with TETRA, and signing this deal allows Standard Lithium access to the last available large lease package in the key brine production zone of the Smackover.”
Standard Lithium President and COO Dr. Andy Robinson said the company chose the Smackover Formation “as a key development target, precisely because it combines a very large resource potential, with well-studied and documented geology and hydrogeology, along with a permitting regime that has a long history of approving operations that remove, process and re-inject massive volumes of brine.”
Robinson continued: “Combined with a wealth of existing infrastructure in the project area (power, rail, gas, water, trained workforce, cheap reagents, etc.), this makes Standard’s new opportunity in Southern Arkansas the perfect location to locate a modern lithium brine processing operation. Due to the wealth of already-available data from our new project area, we can start the process of compiling a maiden resource estimate for this large lease package extremely quickly, with a minimum of additional intrusive investigation.”
The exploration site is on “up to 33,000 acres” of brine leases in the key brine production fairway in southern Arkansas, adjacent to producing Albemarle leases, the company noted, adding that historical data from the lease area shows “370-424 mg/L lithium in brines.” Arkansas currently produces the equivalent of 42.6 million cubic meters (9.38 billion gallons) of brine per year, based on the Arkansas Oil and Gas Commission’s 2010-2016 report. Most of the amount comes from the Smackover Formation.
On Dec. 20, 2017, President Donald Trump signed an executive order to boost U.S. production of critical minerals. The move has many speculating the U.S. could become a hub for lithium battery production as vehicle manufacturers dive deeper into the electric vehicle (EV) space first launched by Tesla.
According to data from Global Market Insights, Inc., the worldwide market for Li-ion batteries alone is set to exceed $60 billion by the year 2024, which means one lithium mine would need to be launched each year through 2025 to meet demand.
Under the terms of its option agreement with TETRA, Standard Lithium will be granted the rights in consideration for a series of cash payments, as well as certain ongoing royalties tied to lithium production from the properties. The company has made a non-refundable cash payment to TETRA of $500,000, with further cash payments owing to TETRA as follows:
- $500,000 on or before the date that is 30 calendar days following the Agreement Date;
- An additional $600,000 on or before the date which is 12 months following the Agreement Date;
- An additional $700,000 on or before the date which is 24 months following the Agreement Date;
- An additional $750,000 on or before the date which is 36 months following the Agreement Date; and
- An additional annual payment of $1 million on or before each annual anniversary of the Agreement Date, beginning with the date that is 48 months following the Agreement Date, until the earlier of the expiration of the 10-year exploratory period or, if Standard Lithium exercises the option, the company begins payment of royalty.
Upon commercial production, Standard Lithium will pay TETRA a 2.5% royalty on gross revenue derived from the sale of lithium produced from the properties, subject to a minimum annual royalty payment of $1 million.
Standard Lithium’s value creation strategy encompasses “acquiring a diverse and highly prospective portfolio of large-scale domestic brine resources,” the company noted, adding that efforts are led by a management team with “a strong focus on technical skills.”
Standard Lithium is currently focused on the immediate exploration and development of the Bristol Dry Lake Lithium Project located in the Mojave region of San Bernardino County, California. That location has significant infrastructure in place as well, with easy road and rail access, abundant electricity, and water sources, and it is already permitted for extensive brine extraction and processing activities.
Standard Lithium is listed on the TSX Venture under the trading symbol “SLL”; quoted on the OTCQX under the symbol “STLHF”; and on the Frankfurt Stock Exchange under the symbol “S5L.”