By: Jason Smith
Standard Lithium tries the “Moneyball” approach
With electric vehicle sales taking off, the search for the lithium required for the batteries that power them has kicked into high gear.
Most players are focused on the hard rock lithium deposits of Australia and the brine-hosted deposits of Chile and Argentina. Those countries account for almost 90 per cent of the world’s lithium production.
Junior explorers looking for a me too lithium development story have tried to snap up properties in Chile, Argentina and, to some extent, in Australia.
The problem is that these projects face extended lead-times to get from discovery to production. In seeking to hit that development “home run”, these companies seem willing to accept and risk the delays that come with lack of infrastructure, cumbersome and lengthy permitting, and the technical processing challenges that inevitably may stand in the way to building a successful project.
That’s where Standard Lithium Ltd. (TSX.V: SLL) has decided to take a less conventional but more analytical approach. Rather than trying to bring a lithium deposit from discovery to production, it’s skipping the middle man and focusing on brownfields projects. And with a flagship brownfield project located in the heart of North America’s largest brine processing region, in the U.S. state of Arkansas, it’s an approach that appears to be bearing fruit.
A “Moneyball” Approach
Standard’s President and CEO, Robert Mintak, likens his company’s strategy to “Moneyball,” the Michael Lewis book about the Oakland A’s unconventional approach to success in baseball.
“We focused on finding a resource that was potentially productive from the start,” says Mintak. “We combed through a significant amount of published data on resources and projects to identify projects that met our objectives. We are looking at opportunities with a lens focused on the clearest and fastest path to production, looking at opportunities that others have ignored or overlooked because these projects require a new approach.”
“In doing so, we identified what we believe are projects of significant merit — projects where the lithium grades are well documented and located in regions with current permitted brine production — that are just not extracting lithium from these brines. Then we set out to secure agreements that would align us with permitted producers to leverage existing infrastructure and large resource opportunities.”
Rather than focusing on grade at a remote Salar in Argentina, the company determined the most opportune location to set up shop was in Southern Arkansas, an area not familiar to most investors, but an area referred to as a “world class lithium brine resource” by Albemarle, the world’s largest lithium producer. Over a ten month period, the company secured agreements for the only large brine leases available on the highly productive region of the “Smackover Formation” that straddles the southern U.S. from Texas to Florida, and is most concentrated in southern Arkansas.
The recently announced agreements give the company not only a large land position in this strategically important region, but more importantly, a binding MoU with an existing and permitted producer that gives the company access to massive amounts of brine (several hundred thousand barrels per day) produced in the area for bromine production. This brine is rich in lithium. This production fairway in Arkansas produces 200-300 million barrels of brine per year — greater than 10 billion gallons on average annually.
Mintak believes the company can eliminate months, if not years, in the project’s development time line, and save a significant amount of capital by extracting lithium from the waste brine, or “tail brine”, as it is known, produced by the bromine producers, which currently re-inject it back into the ground.
A Deal for Bromine Processing
In support of that effort, Standard recently announced a binding MoU with global specialty chemical company LANXESS AG (ETR:LXS), the largest bromine processor in the region. That agreement will also allow the company to build a selective lithium extraction demonstration plant on one of LANXESS’s three production facilities.
Mintak notes, “Currently, the brine is pumped to the surface through an extensive network of well fields and pipelines. The brine sits under a large oil and gas field, so first the hydrocarbon is removed, then the bromine is extracted from its brine, then the brine is adjusted for pH, and it is reinjected it back into the ground. Our agreement will allow us to demonstrate the proprietary technology we’ve developed for lithium extraction from that brine. Our intention is to demonstrate the process, define project economics, and if successful, we’ve effectively gotten rid of all the barriers to production. All the infrastructure’s in place already.”
Lithium major Albemarle also operates in the area. In 2011 it successfully ran a lithium extraction pilot plant and has included the project in its investor day corporate presentations as a world-class lithium project ready for plant design. By proving a process to economically and commercially extract lithium from the area’s voluminous brine reserves, Standard has the chance to put the area on the map as a globally significant lithium region.
A Play Out of the Shale Playbook
When shale oil and gas production kicked into high gear in the mid-2000s, it supercharged North America’s energy production. This unconventional extraction method allowed exploration companies to tap resources previously thought to not be worth the trouble.
In pursuing a new extraction method for the lithium in its Arkansas property’s brines, Standard is essentially taking a play out of the shale playbook. Finding an effective way to produce lithium from this world-class brine fairway could be a game-changer for the industry.
It could also put the U.S., one of the world’s more stable mining jurisdictions, into play for lithium production. Mintak notes, “Rule of law. Well established business practices. The best infrastructure anywhere globally. The ability to take the finished product and get it to market. The continental U.S. is great for all that.”
Add in the Trump administration’s recent inclusion of lithium in its executive order of critical minerals, and you have a project in Standard’s Arkansas property that has the potential to make this part of the world a viable lithium production centre.
Project Checks All the Boxes
In an industry where the goal is to find the fastest way to production and eliminate project execution risk, the Arkansas project appears to check all the boxes.
It eliminates geological risk because the lithium content in the brine produced in the area is already a known quantity. It’s location in the U.S. eliminates jurisdictional risk. It’s abundance of in-place infrastructure eliminates development risk and mitigates permitting risk.
With the agreement with LANXESS in place, Standard (TSXV: SLL) will move quickly to install a pilot plant on one of its facilities. Then, in the third quarter of 2018, it plans to generate NI 43-101 compliant reports on the resources in Arkansas and produce a flowsheet on the selective extraction process. The company is targeting Q1 2019 to commission its demonstration plant at one of the three permitted, operating brine processing facilities that LANXESS has in Southern Arkansas.
It all adds up to one of the most intriguing lithium stories in the sector. Says Mintak, “The most significant opportunities for growth are in front of us right now.”
This story was provided by Market One Media Group for commercial purposes.