Sep 30, 2021 More Detail About Standard Lithium Hello, Savio. A four-word phrase I never imagined thinking was, "Thank you, Jim Cramer." But that's the exact thought that came to mind during the September 22 airing of CNBC's Mad Money program. On the "Executive Decision" segment of that show, host Jim Cramer conducted an interview with Robert Mintak, CEO of my newest "Buy" recommendation, Standard Lithium Inc. (SLI). (Note: I recommended Standard Lithium on September 9.) Thanks to that favorable nationwide exposure, the stock popped more than 17% the following day… and has continued inching higher ever since. However, Cramer's influence alone did not create the new buzz around Standard Lithium stock. CEO Mintak deserves some credit as well. During his conversation with Cramer, he presented a compelling case for investing in the EV battery supply chain generally, and in Standard Lithium specifically. At the outset of the seven-minute chat, Mintak pointed out that the demand for lithium has never been greater. And yet, six decades have passed since the U.S. has added any new lithium output. The production that does exist here in the States, Mintak said, is merely a "rounding error" on the global stage. But Standard Lithium, he insisted, is on the verge of changing that narrative – and doing so in a dramatic way. That's because his company is utilizing its new technologies to extract lithium from brine lands in Arkansas, then converting it into high-quality battery-grade lithium carbonate. The process is much faster, cheaper, and environmentally friendly than the current evaporation-based process. As I mentioned in my previous alert about Standard Lithium, the company has been operating a "demonstration plant" in El Dorado, Arkansas for several months. This flagship project is the first phase of a joint venture with LANXESS Aktiengesellschaft (LNXSF), a German global specialty chemical company that has been extracting bromine from its Arkansas brine lands for many years. Standard Lithium brings its proprietary direct-extraction technology to the joint venture, and Lanxess brings its fully permitted 150,000 acres of brine lands, along with extensive infrastructure. The Lanxess brine facility is the largest of its kind in North America. Its existing infrastructure includes three permitted brine processing plants, 250 miles of pipeline, 26 supply wells, and 36 disposal wells. As President and COO Andy Robinson explained in a February 2021 interview with Crux Investor: In Arkansas we're going to be piggybacking onto existing infrastructure, existing assets that are already in the ground, [and] permits that are already in place… A lot of the tricky stuff that takes up a lot of time to move a project into production, we don't have to complete. It's already been done by our partners and the regulatory environment in Arkansas.
Standard Lithium's new plant is essentially a "bolt-on" to the existing Lanxess facility. The company has made some tweaks and refinements to its demonstration plant along the way, such that it has now become the only "start-to-finish brine-to-carbonate plant in North America." Ten months ago, Standard Lithium announced it had successfully produced "better than battery quality" lithium carbonate using its two proprietary technologies; the finished product was 99.9% pure lithium carbonate. Four months later, the company upped the ante by announcing it had produced lithium carbonate of even higher purity at its demonstration plant: 99.985% pure. Clearly, the company's technology does actually yield extremely high-quality lithium carbonate and does so in a ground-breaking way that offers immense commercial opportunity. Assuming the JV advances to the next phase, Lanxess would fund commercial development and operation to receive 70% of the net profit. Standard Lithium would receive the remaining 30%, along with an option to boost that percentage to 40%. Importantly for Standard Lithium, this promising JV is merely the first of many potential opportunities that lie before it. The company could strike similar JV deals with other companies that are already operating permitted brine extraction facilities. In such arrangements, Standard Lithium could take advantage of existing permits, infrastructure, and operations, just like it is doing with the Lanxess operation. Additionally, Standard Lithium controls brine land leases of its own. For starters, it has an option to conduct exploration, production, and lithium extraction activities on 27,262 brine lands that are close to the Lanxess operations. That parcel, called the TETRA land package, is a very high-quality resource with excellent lithium grades, reservoir characteristics, and existing infrastructure. Summarizing these various prospects during his appearance on Mad Money, CEO Mintak stated: The opportunity in Arkansas is globally significant… Our plan is to replicate our extraction facilities across South Arkansas, to deliver battery-quality lithium chemicals, primarily with a focus on the U.S. EV and U.S. stationary battery industry… The location in South Arkansas is perfectly geographically centered to so many EV battery and EV operations that are being built out there. Plus, the proximity to the Gulf Coast for export to Europe… This is the best place to build a lithium project that has a resource, and now, a technology to unlock it. It's true; as I pointed out in my recent alert about Novonix, the southeastern part of the U.S. is fast becoming the nation's hub of EV and battery production. Ford Motor Co. (F) and South Korea's SK Innovation Co. underscored that point last Monday by announcing plans to spend $11.4 billion to construct three battery factories and an EV assembly plant in Tennessee and Kentucky. The projects are part of Ford's plan to invest $30 billion in electric vehicles by 2025. Once the factories become operational in 2025, they will have the capacity to churn out enough batteries each year to equip more than one million electric vehicles. The Tennessee location, to be known as Blue Oval City, will be the first all-new assembly plant Ford has built since 1969. The six square-mile site will include both a battery and an assembly plant that will produce an electric version of Ford's F-Series pickup truck. In Glendale, Kentucky, Ford and SK will construct two new battery plants. These new facilities will increase the tally of major EV and battery production plants that will be operating within a 600-mile radius of Standard Lithium's Arkansas lithium plant. The list below shows the proximity of eight major EV and/or battery production plants to El Dorado, Arkansas. - Tesla's brand-new Gigafactory in Austin, Texas is 428 miles away.
- Volkswagen's new EV and battery hub in Chattanooga, Tennessee is 568 miles away.
- The Nissan plant in Smyrna, Tennessee is 486 miles away. It has been producing the Nissan Leaf for many years.
- The General Motors plant in Spring Hill, Tennessee is 461 miles away. It will begin producing the all-electric Lyriq SUV next year.
- The Mercedes-Benz plant in Tuscaloosa, Alabama is 370 miles away. It will begin the EQE and EQS luxury electric SUVs next year.
- The Hyundai plant in Montgomery, Alabama is 433 miles away. The company recently announced plans to begin building EVs at the facility next year.
- The newly announced Ford EV battery facility in Glendale, Kentucky will be 588 miles away.
- The other newly announced Ford facility will sit just 300 miles away in Stanton, Tennessee.
As it turns out, south Arkansas is not only a geographically appealing location, it is also a geologically appealing one. Both the Laxness and Standard Lithium brine lands sit atop the Smackover Formation, a massive Jurassic limestone aquifer that contains the largest lithium brine resource in the U.S. In the same February interview with Crux Investor, Robinson described the Smackover Formation as "a gargantuan resource… It is enormous." Robinson continued: The Smackover Formation is big enough to supply the world's Lithium chemicals for decades to come. Never mind just North America's, this is a globally significant resource that, when the commercial unlocking starts, it can move incrementally through additional build to additional build, and easily we can move to 75,000 to 100,000 tons of lithium chemicals production per annum from the Smackover resource. It is huge, and it runs from London to Rome, the equivalent. It is truly gargantuan. Assuming Standard Lithium's project achieves full commercial viability, its production of lithium carbonate would offer at least two valuable traits, relative to competing sources of supply. - It would result from a process that is much cleaner and greener than current extraction technologies.
- It would be U.S.-based.
Increasingly, companies up and down the EV and energy storage supply chain are seeking the most environmentally sound supplies of battery metals available. After all, isn't protecting the earth supposed to be the raison d'etre of the renewable energy industry? An EV isn't much good for the planet if battery metal extraction and processing technologies create a bigger mess than what fossil fuel extraction and combustion produce. Traditional lithium extraction methods cause negative environmental impacts ranging from modest to severe. Standard Lithium's process does not. Again from Robinson: Part of the reason we set Standard Lithium up is because of the ESG component… We don't have to go and dig up and despoil virgin areas of land to get lithium resources out of the ground… North America's lithium can come from a very green, very sustainable, very large resource without having to move into pristine deserts and do work in those sorts of environments. Quite clearly, Standard Lithium is a fascinating company that possesses better-than-average growth potential. However, since this company is still so early in its development, quantifying its growth potential is more of an impressionistic exercise than a scientific one. That said, a few back-of-the-envelope calculations offer some worthwhile perspectives. The company's market cap is $1 billion, which is: - Only about 1/25 the size of today's total addressable market (TAM) for lithium carbonate, about 1/40 the size of the projected 2025 TAM, and about 1/70 the projected 2030 TAM.
- Less than three times the gross operating profit the company could generate from its initial annual production target of 21,000 tonnes of lithium carbonate.
- Less than one time the gross operating profit the company could generate from the annual production target of 50,000 tonnes it hopes to hit within a few years.
Based on these comparisons, Standard Lithium's market value possesses considerable room to grow, assuming the company achieves its production plans, and the lithium price does not weaken much from current levels.  The company's large land package in California could add significant "blue sky" to its growth potential. Standard Lithium has struck option agreements in California's Mojave Desert that cover 45,000 acres of brine land. The agreements are with two active brine processing companies that have been producing industrial minerals from brine at Bristol Dry Lake for decades. Both agreements would enable Standard Lithium to access raw brine while taking advantage of existing mining permits and extensive existing infrastructure. The company has no immediate plans to advance this project toward production, but it nevertheless offers "blue sky" potential. Lastly, it bears mentioning that many of the executives and advisors who are guiding Standard Lithium possess impressive and directly relevant credentials. - President and COO Dr. Andy Robinson has a Ph.D. in Geochemistry and more than 20 years of global experience in the resource sector.
- Senior Project Manager, Steve Ross, is a licensed geologist and an environmental and water resource professional. His water resources background includes hydrology, hydrogeology, water quality, groundwater modeling, and water resources evaluation.
- Technical Advisor Jason Hein is a recognized global expert on the development and commercial application of artificial intelligence (AI) and robotics on reaction optimization. His work with Standard Lithium integrates machine learning and robotic tools to visualize and control reactions as they happen in real time.
In addition to these individuals, the company's Scientific Advisory Council includes: - Dr. Ron Molnar, a chemical engineer and solvent and ion-exchange specialist. He has successfully built more than 60 pilot plant circuits worldwide, extracting a wide range of metals.
- Barry Sharpless, a professor of chemistry at Scripps Research who received the Nobel Prize for Chemistry in 2001 and the Priestley Medal, the American Chemical Society's highest honor, in 2019.
- Craig Brown, a hydrometallurgical expert with over four decades of experience developing processes for separating chemicals from aqueous solutions. He was a central figure in the development and application of ion exchange technology.
- Larry Lien has over 30 years' experience in the application of membrane technology to selectively remove target metals, including lithium, from brine mixtures.
Scientific pedigree and experience do not guarantee commercial success, but it doesn't hurt… especially when you're a company that is trying to commercial new scientific technologies. I consider Standard Lithium to be one of the most promising speculations on U.S.-based, sustainably sourced battery metals. Regards, 
Eric Fry
The Speculator
|
Comments
Post a Comment