Featured Company / Standard Lithium

Every industry goes through cycles, a fact that is especially true for emerging industries.  Look at the fluctuations cannabis stocks have gone through in recent years as part of a broad uptrend amid sweeping marijuana legalization across North America.  Buying on downturns has been a profitable strategy.  The same could be said for what is happening with electric vehicles (EVs), another industry gaining momentum, but still in its infancy.

The future of EVs – and green power in general – underscores broad analyst bullishness on companies that produce materials key to energy storage, such as rechargeable batteries and power walls (large, stationary batteries).  Lithium, the metal integral to rechargeable lithium-ion batteries that power cars, laptops, cell phones, tools and more, has enjoyed a nice run lately, tripling in value in less than a year.

Those looking for a pullback are finally getting one.  Some sluggishness in production in China is being blamed for prices of battery grade lithium carbonate being halved from the first quarter to an average of $13,000 per tonne in August.

The long-term outlook for lithium remains strong, with analysts saying that they expect lithium to grow at a compound annual growth rate (CAGR) of 17.0% in the next decade.  Pundits see prices rising and an accompanying problem evolving: the need for a bigger supply chain to avert a shortage.  If demand outstrips supply, like some experts assert is going to happen, prices will accelerate even faster than anticipated. 

There is plenty of lithium in the ground, but the problem is that it will takes years or decades to develop the infrastructure and mines to unearth it.  Hard rock mining is expensive and slow.  Traditional solar evaporation is less expensive, but the process still takes about two years - whereas typically projects take a decade or more to build.

In North America, there is only one lithium-producing operation, the Silver Peak Mine of Albemarle (NYSE:ALB) in Clayton Valley, Nevada.  With President Trump signing an Executive Order calling for all efforts to be made to source key minerals, including lithium, in the U.S., there is a “company-maker” of an opportunity and a friendly regulatory climate to produce lithium domestically.

Standard Lithium (OTCQX:STLHF) (TSX-Venture:SLL), a TSX Venture 50 company, has the technology, the resources in a friendly region, the leadership and huge partners to start supplying lithium in short order.  With its proprietary selective extraction technology, Standard Lithium is leading the next generation of lithium producers with a strategy that not only expedites the lithium extraction process to under 48 hours, it minimizes the resource, political and permitting risks at the same time.

The Vancouver-based company is focused on developing the largest portfolio of high quality, domestic U.S. lithium brine assets.  To that end, Standard Lithium has acquired, signed leases and holds binding agreements on its projects. This allowing the company access to large brine resources that are already permitted and currently extracting industrial minerals and chemical at commercial scale, on top of the lithium that is in that brine.

The company’s 180,000 acre flagship project is located in southern Arkansas, where it is engaged in the testing and demonstration of the commercial viability of lithium extraction from permitted brine operations utilizing its novel rapid lithium extraction technology.  For this, the company has signed a binding MOU with Lanxess (ETR:LXS) (OTC:LNXSF), a $7 billion chemical company, for the purpose of demonstrating the commercial viability of lithium extraction from brine that is produced as part of Lanxess’ bromine extraction business at its three Southern Arkansas facilities.

Standard will be locating its demonstration scale rapid lithium extraction pilot plant at one of Lanxess’ three bromine processing facilities in Eldorado, Arkansas.

In January, Standard entered an option agreement with TETRA Technologies (NYSE:TTI, $535 million market cap) to acquire the rights to conduct exploration, production and lithium extraction on 30,000 acres of brine leases located in an area of the Smackover Formation in southern Arkansas.  The Smackover may be the most promising region for future lithium production in North America, as billions of barrels of lithium-bearing brine are extracted and re-injected every year in the formation.  Standard has a commanding position, aligning the company as the premier lithium brine player in the region.

Through decades of brine production, the area has world-class infrastructure, including rail, power, water, gas, skilled labor, etc.  Average annual brine production from 2010-2016 is estimated at 9.4 billion barrels, with bromine extracted and the water then re-injected in the aquifer it came from.

Recently, four brine samples recovered from two existing oil and gas wells in the project area showed lithium concentrations ranging between 347–461 mg/L lithium, with an average of 450 mg/L lithium in one of the wells, and 350 mg/L in the other.

These samples, along with production data received from the Arkansas Oil and Gas Commission will be included in a resource assessment report expected by the end of the quarter.

In the Western U.S., the company’s 45,000+ acre Bristol Lake, California brownfield project is permitted for related mineral production and has accompanying world class infrastructure, both of which are expected to contribute to faster, lower cost exploration and commercial development programs.

Just as it is in the Smackover, world-class infrastructure is in place, as Standard Lithium has an agreement with the National Chloride Company of America, which has a large-scale, permitted commercial calcium chloride operation in Bristol Lake.  Bristol Lake has recorded historic lithium values and offers Standard Lithium immediate access to raw brine.

Testing indicates that passive solar evaporation may be an option to concentrate the lithium concentrations (from an average initial level of 146 mg/L to 686 mg/L in just six weeks) before being processed with the company’s rapid lithium extraction technology.

If Standard Lithium can be judged by the company it keeps, there is nowhere to go but up with partners like Lanxess, TETRA and National Chloride.  With these companies producing from their properties, the idea of incorporating Standard’s technology to produce lithium is a logical extension (and a bit of an “a-ha” moment), so it’s not surprising that these peers are on board.  Being aligned with these companies lends a great deal of validation that Standard Lithium stands out with its technology at a time when lithium demand is ramping upward.  The company’s coffers are lined with $13.0 million in cash, plenty to carry it forward as it builds out both projects.

Much like lithium prices, SLL stock has pulled back in the months through August, touching a 52-week low at 80 cents on August 21.  A new uptrend looks to be developing, including a touch of a 10-week high at $1.42 recently, making this a well-positioned company trading at a discount that should be the subject of due diligence for anyone looking for exposure to the burgeoning EV market.