Innovation and New Projects Direly Needed to Stem “Problematic” Lithium Supply Gap
FN Media Group Presents Microsmallcap.com Market Commentary
New York, NY – November 20, 2018 – Stress is mounting in the lithium sector, as producers are struggling to keep up with booming demand. Production increases are going to need to come not only from established sources, but also from expansions and innovations, from companies such as Standard Lithium (TSX-V:SLL) (OTC:STLHF), Albemarle Corporation (NYSE: ALB), Livent Corporation (NYSE: LTHM), Nemaska Lithium Inc. (TSX:NMX) (OTC:NMKEF), and Critical Elements Corporation (TSX-V:CRE) (OTC: CRECF).
According to industry leaders, the struggle for producers to match the unstoppable rise in demand for the rechargeable-battery ingredient is “problematic.” The boom will further tighten the market.
“It’s almost impossible for me to see a meaningful decrease [in lithium prices]”, said Paul Graves, CEO for Livent Corp, after his company presented quarterly earnings. “Whenever you have less supply than expected, it will create more tightness.”
It doesn’t help when governments in lithium-producing countries put up roadblocks towards companies looking to boost output. In Chile, leading lithium producer Albemarle Corp. was blocked by regulators from expanding output from the Salar de Atacama salt flat.
Beyond the three major producer countries (Australia, Argentina, and Chile), new projects involving new technology and untapped resources are starting to gain some momentum. Within the USA, Standard Lithium (TSX.V: SLL) (OTC: STLHF) has begun development on its innovative flagship 180,000-acre “Smackover Project” in Arkansas.
Feeding the project will be brine produced as a byproduct of existing bromine production facilities in the southern state. On November 14th, an NI 43-101 maiden resource report was announced for the 150,000 acres south central Arkansas project with Standard Lithium (TSX.V: SLL) (OTC: STLHF) and global specialty chemical company LANXESS Corporation. The report includes 3,086,000 metric tonnes of lithium carbonate equivalent (LCE) at the Inferred Resource category. Standard Lithium is also pursuing the resource development of 30,000 acres of separate brine leases located in southwest Arkansas.
Efforts like Standard Lithium’s present a potentially commercially-viable solution to help ease the lithium production gap. The company is making an example of innovation in lithium production, marketing and the sale of battery-grade lithium products extracted from brine produced within Arkansas’ Smackover Formation.
New Lithium Must Come from New Sources
Demand for lithium continues to rise, thanks to increased sales in electronics, as well as electric vehicles (EVs). However, the lithium market’s struggle to keep up has become alarming, as producers struggle to meet demand through 2025.
US manufacturers such as Tesla Motors continue to put the pedal to the metal on marketing sales for new vehicles. Demand for lithium is growing globally, making domestic supplies inside North America that much more important— such as innovative domestic lithium production, such as projects like Standard Lithium’s (TSX.V: SLL) (OTC:STLHF) Smackover Project in Arkansas.
Through a proprietary rapid lithium extraction process developed by Standard Lithium (TSX.V: SLL) (OTC: STLHF), lithium is extracted by a method that uses a solid ceramic adsorbent material. The process selectively pulls Li + ions from the “tail brine” or waste brine through a crystal lattice after it has gone through the bromine-extraction step.
Waves of Lithium Brines Untapped
To effectively and rapidly build out the south Arkansas project, Standard Lithium (TSX.V: SLL) (OTC:STLHF) has strategically positioned itself to piggyback off the region’s significant existing brine production infrastructure, and well established permitting guidelines.
Most recently the company announced a planned joint venture with partners LANXESS Corporation in South Arkansas at the 150,000-acre project. Brine production at the project is ongoing, and based on publicly available data for the period January 2013 to December 2017, an average volume of approximately 126 million barrels of brine per year (20 million m3 per year) was pumped, processed for bromine and reinjected across the property. This corresponds to an average amalgamated flow rate of approximately 636 litres/second, or 10,076 gallons per minute. To put these figures into context, the total brine resource beneath the Property is calculated to be 3.52 cubic kilometres, whereas the average annual pumping rate is approximately 0.02 cubic kilometres, meaning that only 0.57% (approx.) on average of the resource is processed (for bromine) per annum.
The state of Arkansas currently produces the equivalent of 42.6 million m3 of brine per year—roughly 9,380,000 gallons, or over 35.5 million litres. Historical data on the area shows 370-424 mg/L lithium in brines.
From these sources, Standard Lithium (TSX.V:SLL) (OTC:STLHF) has already drawn and sampled multiple tanker trucks worth of brine for process testing and development, and completed additional drilling and sampling combined with significant geophysics work. More recently, high-quality lithium brine samples taken from the program conducted in Q3 2018 yielded lithium grades ranging from 347- 461 mg/L.
Now with a planned joint venture deal with LANXESS announced, the project continues to move forward rapidly. Under the proposed terms of the joint venture, LANXESS will contribute lithium extraction rights and grant access to its existing infrastructure to the joint venture. Standard Lithium, under the proposed terms, will contribute existing rights and leases held in the Smackover Formation and the pilot plant being developed on the project, as well as its proprietary extraction processes including all relevant intellectual property rights. Upon proof of concept, and subject to proof of concept and a feasibility study, LANXESS is prepared to provide funding to the joint venture to allow for the commercial development of the future commercial project.
As the lithium industry struggles to come up with new sources of the metal to meet rising demand for items such as EVs and other batteries, projects like the Smackover provide a refreshing potential solution. Standard Lithium (TSX.V:SLL) (OTC:STLHF) has found a shortcut to potentially produce significant amounts of lithium domestically, and efficiently.
By securing access to existing, commercial brine production and the associated infrastructure, access to cheap chemical reagents,power, water and a skilled workforce, Standard Lithium (TSX.V:SLL) (OTC:STLHF) is making a play to provide stable lithium supplies from within the USA—potentially reducing the reliance on production from Australia, Argentina, and Chile.
Further Lithium Production Developments
The world’s largest lithium producer, Albemarle Corporation (NYSE: ALB), is in the process of planning an expansion of production in Australia. The shift comes from recent news that the company will halt plans to expand its lithium carbonate production in Chile. The Chilean halt comes in the aftermath of a move by Chilean environmental regulators rejecting Albemarle’s proposal to expand output from the Salar de Atacama salt flat. Moving forward, it appears the company will plow funding into a Western Australia project that produces lithium hydroxide—a rarer form of the metal that’s growing in use and fetches higher prices than lithium carbonate.
Across the border from Chile in Argentina, recent FMC Corp. spinoff company Livent Corporation (NYSE: LTHM) is planning to expand operations at the Hombre Muerto salt flat. CEO Paul Grave has stated that the company has all the approvals it needs to start construction there, which will ramp up its first 9,500-ton-per-year expansion in the second half of 2020, and will work toward three more expansions of similar size through 2024. However, Graves has also expressed grave concerns that the lithium industry won’t be able to meet rising demands in the coming years, despite production increases.
Much like Standard Lithium, Nemaska Lithium Inc. (TSX:NMX) (OTC PINK:NMKEF) has chosen to focus its production from North America. However, unlike Standard, Nemaska is based in Canada’s and is moving forward on a hard rock spodumene mining operation in the mining-friendly province of Quebec. The company is making construction progress on its Whabouchi lithium mine and Shawinigan electrochemical plant. Whabouchi is located upon one of the richest lithium spodumene deposits in the world in both volume and grade.
Also operating in Quebec is Critical Elements Corporation (TSX.V:CRE) (OTC: CRECF), which is developing its flagship project, the Rose Lithium-Tantalum Project in the Northern Quebec region of James Bay. The 100%-owned lithium spodumene project is planned to be a conventional truck and shovel open pit operation with a conventional mill operation. Based on a September 2017 feasibility study, the advanced-stage project comes with an estimated CapEx of $341.2 million price tag attached.
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