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Permalink Reply by Skip Peel - Mineral Consultant on June 4, 2023 at 11:54

Here is the lithium leasing article that appeared in the Cass County Citizens Journal-Sun newspaper on May 31.

Cass%20County%20Citizens%20Journal-Sun%20Lithium%20article.pdf

Permalink Reply by Skip Peel - Mineral Consultant on June 15, 2023 at 9:15

EV revolution leads to lithium land grab in Arkansas

Worth Sparkman  axios.com

White is the new gold.

What's happening: Robert Mintak, CEO of Canadian company Standard Lithium (SLI), is confident it can capture the silvery-white metal from the geological Smackover Formation that runs from east Texas to Florida.

Why it matters: Nearly all lithium, a key ingredient in rechargeable batteries, comes from abroad.

• Since the most expensive part of an electric car is its battery, U.S. consumers are stuck with high-priced EVs — a hindrance to adoption — until raw materials and manufacturing are on-shored.
• One estimate suggests there's enough lithium in the Smackover Formation to power 50 million EVs.

The big picture: There's a modern-day rush to riches underway. EnergySource Minerals of San Diego plans to do much the same near the Salton Sea. It's just beginning for the project, which faces the additional challenge of cooling geothermal water before it can filter out the lithium.

• Galvanic Energy of Oklahoma City had secured land leases to mine lithium in Arkansas' Lafayette and Columbia counties, but sold drilling rights to ExxonMobil last month for $100 million.

How it works: Mintak gave Axios a tour of SLI's demonstration plant in El Dorado in early April. The formation has been tapped as a source of oil and gas since the 1920s, so the plant "piggybacks" on existing operations owned by Lanxess of Germany, which extracts bromine from the formation's water, then pumps that water back into the ground.

• SLI effectively adds a filter to capture lithium from that water before it's returned.
• The company plans to process it on-site into lithium carbonate or lithium hydroxide suitable for batteries.

The arrangement takes advantage of Lanxess' established infrastructure of wells, pipes and pumps, giving SLI an economic and time advantage, Mintak said.

Meanwhile, SLI is doing exploratory work throughout the formation. The company claims it cultivated the highest concentration of lithium from brine in the state at a well in its "South West Arkansas Project."

• A separate well in east Texas has produced the "highest confirmed lithium grade brine in North America," the company says.

Context: Work on the demonstration plant began in 2018, but the COVID-19 pandemic slowed things down, Mintak told Axios.

• The plant — three stories of pipes, tanks and catwalks under a temporary structure — is designed to prove the concept.

Reality check: A commercial plant is likely years and untold millions of dollars away from producing lithium for batteries. During that time, a number of things could go wrong.

• For example, the U.S. Department of Energy made a $15 million grant to Berkshire Hathaway to develop tech in California, only to rescind the offer due to disputes over patents and other issues.

What's next: A definitive feasibility study from a third party is due on Mintak's desk at the end of the month. It will dictate the financial investment needed to build the company's first commercial plant.

• He hopes to begin making plans for the new facility by year's end, he told us, but won't speculate on when commercial lithium will come from the formation.

Standard issue with short-sellers

SLI has critics.

Flashback: Two hit pieces from short-seller research companies Hindenburg and Blue Orca Capital delivered blows to Mintak in 2021 and 2022.

Details: They claim there's not much to SLI and its technology is based on three patent applications the company purchased in 2018. They also state the company's extraction rates are lower than reported and that Mintak isn't qualified to run the company.

The other side: Mintak didn't want to talk on the record about the reports, referring us to the company's public statements. He did say he was shocked by both.

• Mintak noted the company is publicly traded and required to report its financials and activities to the Arkansas Oil and Gas Commission.

What they're saying: Anthony Patterson, an El Dorado native and investor in SLI, told us he has concerns about why the company is using resources on exploration in Texas when it hasn't sold any lithium.

Yes, but: "I see this as a good project that's working," he said. "This affiliation with Laxness really carries a lot of weight because I don't see a conglomerate of that size associating itself with something that's not likely to succeed."

Permalink Reply by Skip Peel - Mineral Consultant on June 15, 2023 at 10:54

Long time GHS.com members will know the answer to the statement by Mr. Patterson, an El Dorado native and investor.

"What they're saying: Anthony Patterson, an El Dorado native and investor in SLI, told us he has concerns about why the company is using resources on exploration in Texas when it hasn't sold any lithium."

Arkansas missed out on the Haynesville Shale land rush and thus did not get the lesson that flipping leasehold was more profitable than drilling wells.  Aubrey McClendon, using a landman's mind set, aggressively leased in a number of unconventional basins.  Long time members will recall $25k bonus offers in Ft. Worth (Barnett Shale).  That announcement also included:  the Fayetteville Shale and the Marcellus and Lower Huron Shales in Appalachia.

Other than the terms and legal language in leases, the land rush in areas believed prospective for commercial concentrations of lithium is no different from an O&G land rush.  In this case, the pace will be moderated because regulations have to catch up with development.  There are currently no regulations for Texas lithium development.  There may not be any until the next Texas legislative session.  Plenty of time for speculators to acquire brine leases.  Mineral owners beware.

Permalink Reply by Thomas Teekell on June 18, 2023 at 16:09

I got this lease and special provisions proposal last week for property in Cass County. 3% royalties on the lithium and 3/16 on all the solution gas.  I have only one small lease in the Haynesville Shale in LA, so I'm not very experienced with leases, but the term periods and renewals (which add up to 24 years) seem a little silly to me. That's a very long time to tie up property on a single lease that isn't producing.  I'm happy to hear any comments about this.  

Brine%20Lease%20Form%20.pdf.   
Special%20Provisions.pdf

Permalink Reply by Skip Peel - Mineral Consultant on June 23, 2023 at 3:37

My two cents.  Never ever sign a standard form lease.  Spend a few hundred dollars with an experienced attorney who handles oil and gas leases on a regular basis and has years of knowledge as to applicable case law.  Yes, this is a crummy lease.  Thanks for posting Thomas.  Realize that any royalties are far in the future as drilling will only be done initially to confirm what areas fit the water volume and lithium concentration minimums.  Then facilities to process the brine must be built.  There will be a period where numerous investors will try to lease up rights at terms favorable to them, not to the mineral owner.  The upfront bonus is not worth signing any of these early lease offers.  Wait!  As development drilling gets underway and processing facilities come online, competition will force lease terms to improve for the mineral owner.

There is always one caveat to be stated early in a land rush like this.  Some mineral owners may find that their area doesn't meet those minimum commercial requirements.  When we hear reports of leases for lithium being offered in areas such as Titus County and Kaufman County, we should realize that not every area of the Smackover will turn out to be commercial.

Permalink Reply by Joe B. Lovelace on June 23, 2023 at 3:59

Thanks Skip.  Advice that is worth more than two cents. 

Permalink Reply by Skip Peel - Mineral Consultant on June 23, 2023 at 4:03

Thanks, Joe.  Sorry to have been silent for a while.  My power was out for a week.  It's back on and I am now home picking up the pieces.

Permalink Reply by Rock Man on June 23, 2023 at 4:28

Echoing Skip's last sentence "...not every area of the Smackover will turn out to be commercial", lithium concentrations in formation water appear to vary and change from area to area as quickly as O&G traps in that formation.

The USGS has a collection of detailed water analyses from across the USA, In Cass County, there are three samples - all from the same general area.

These results show two areas with lithium concentrations of about 2/3's the values posted from early discussions (i.e. 600+ mg per liter). But over the distance of about 4-5 miles, these values decrease to about 2 mg per liter.

Lots of factors controlling lithium concentrations - basically the combination of geology, chemical interactions between formations at various depths and temperatures and the "migration pathways" that connect lithium rich source rocks to areas where lithium rich waters can be accumulated.

I am sure that there are more water analyses available than what is present in this USGS reference as operators gather more and more data.

As Skip indicates, the lithium extraction effort will be a long drawn out process with any royalty payments well into the future.

PS Note - I did the math on that 600+ mg per liter lithium concentration mentioned above - if an extraction facility could process 1000 barrels per day of Smackover formation water of this concentration, one would end up with a max of about 222 POUNDS of lithium per day.

I then googled this fact - a Tesla Model "S" battery contains about 138 pounds of lithium.

Numbers to keep in mind as to this whole process.

Permalink Reply by Jamie Rhymes on August 29, 2023 at 4:50

Rock Man, where can I find the USGS data on lithium concentrations?

Permalink Reply by Thomas Teekell on June 23, 2023 at 11:06

Thank you, Skip!  That is very helpful for me.  Is it worth spending money to see a lawyer at this point?  Sounds like I ought to wait until I get a non-standard lease, which means someone might be more serious about it?

Permalink Reply by Skip Peel - Mineral Consultant on June 23, 2023 at 11:17

Lease terms should improve as the point of actually extracting lithium nears.  A good lawyer, especially one experienced with oil and gas leases, can draft an Exhibit A to go with any standard form lease you may choose to accept.  The Exhibit A terms override or supersede the terms in the standard form lease and can be crafted to address your particular concerns.  I would wait until actual production is on the horizon and then I would seek professional legal advice.  As with many O&G leases, you and your heirs may be held to those lease terms for decades and for generations.  Best to perform your due diligence on the front end.

Permalink Reply by Thomas Teekell on June 27, 2023 at 2:52

Thanks, again, Skip! Very helpful!

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