Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on April 22, 2024 at 13:10

Lisa, if someone is in a financial bind and the bonus to sign a lease could solve that problem that would be the only scenario where leasing now would be a reasonable decision.  Texas is a good bit behind Arkansas as far as knowing how royalty will be structured but we should know how that works out before Texas gets there.  Until Texas comes up with development regulations and royalty structure, leasing now is like rolling dice.  Is there a risk for waiting?  Possibly. 

Lithium development will be located in areas where the concentration of lithium in the SMK brine is high and there is a sufficient quantity of brine for a processing facility.  Right now there is little public knowledge of where those areas may be located.  Lithium companies and speculators are trying to generate the data required to locate those areas but will not be making that public knowledge.  Right now companies are leasing with little hard data to go by and for that reason they are offering terms that recognize the risk that they may lease areas that turn out to be less than ideal.   In other words, very low terms for the land owner.  Those that wait and end up in a sweet spot for lithium development should be able to negotiate a favorable lease.  Those that  do not may see the opportunity to lease go away.  This play will be like historic oil and gas exploration in that productive areas may be limited in size and that areas not far away may not be economic.  The same way the oil business used to drill 4 or 5 dry holes for every well that was commercial.  That's my best guess as to how things will unfold at this time.

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Permalink Reply by Lisa on April 22, 2024 at 18:36

Very helpful! Thank you!

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Permalink Reply by Skip Peel - Mineral Consultant on April 23, 2024 at 2:07

You're welcome, Lisa.  I hope there are few landowners in your county that would feel the need to take a low ball offer for their short term financial needs.

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Permalink Reply by phoenix on April 24, 2024 at 5:01

Skip,

Does anyone have any projections as to what a moderate and/or a good lithium well would produce initially, decline projections, price received and an estimate as to dollar amount per acre a royalty might receive.  A lot of variables here but just some ball park figure as the bonus amounts being offered are not very attractive only incentive I see is production or possibly finding new oil and gas pays during their drilling.

Thanks

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Permalink Reply by Skip Peel - Mineral Consultant on April 24, 2024 at 13:50

phoenix, we're too short of specifics at this point to speculate about per well production and royalty revenue.  I do expect that the wells will be unitized meaning that regardless of location all mineral interests in the unit will share in gross revenue production.  So if you own 70 acres in a 700 acre drilling & production unit you would receive revenue based on 10% of cumulative unit production times your royalty fraction less any post production deductions for transportation and treating.  In a rather limited common pool, I would expect all the wells to have similar flow dynamics.  I expect the lithium brine play to be unlike unconventional reservoir production like the Haynesville Shale and very similar to the historic conventional production of the last hundred or so years.  I expect that the sweet spots for brine in the Smackover will have reasonably high porosity and permeability.  Once they cease to flow from formation pressure, the wells will be put on some type of lift system.  The actual field design for wells and pipeline systems have not been discussed in any articles or reports that I have read.

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Permalink Reply by Skip Peel - Mineral Consultant on May 8, 2024 at 3:29

Equinor buys 45% stake in two US lithium projects

By Reuters  May 8, 2024

 Equinor on Wednesday said it has entered an agreement with Standard Lithium Limited to acquire a 45% stake in lithium projects located in Southwest Arkansas and East Texas.

Equinor will initially compensate Standard Lithium $30 million and cover project expenses up to $33 million. Potential future milestones could see Equinor pay an additional $70 million in aggregate to Standard Lithium if a final investment decision is taken, the release added.

Standard Lithium will retain operatorship, with Equinor contributing its experience in subsurface operations.

"We see sustainably produced lithium as an enabler in the energy transition," as this partnership allows Equinor to enter the lithium space while focusing on environmentally friendly Direct Lithium Extraction (DLE)technologies, Equinor senior vice president Morten Halleraker said.

President Joe Biden's landmark climate change law created big subsidies for producers of minerals like lithium, a key material for electric vehicles and battery storate, and copper that are needed in equipment like batteries and solar panels.

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Permalink Reply by Skip Peel - Mineral Consultant on May 15, 2024 at 5:25

Equinor Takes Ownership Stake of US Lithium Brine Projects

The Norwegian oil company said it may spend more than $130 million to get in on the emerging lithium brine business in Texas and Arkansas.

May 8, 2024 By Trent Jacobs  spe.org

Equinor announced this week that it has finalized a deal with Standard Lithium to acquire a 45% interest in two lithium projects located in Texas and Arkansas. The projects targeting the lithium brine-rich Smackover formation that extends across both states could see Equinor investing more than $130 million.

Standard Lithium, headquartered in Vancouver, Canada, will maintain a 55% ownership and continue as the project operator. In addition to its new funding, Equinor will provide subsurface and project execution expertise to the partnership.

Last year, Standard Lithium reported discovering North America’s highest conce...

Under the terms of the partnership, Equinor will reimburse Standard Lithium $30 million for past capital expenditures.

Additionally, Equinor has pledged $33 million toward future expenses to advance these projects to a final investment decision on large-scale development. Should the projects move past this stage, Equinor may also make milestone payments totaling up to $70 million to Standard Lithium.

Morten Halleraker, a senior vice president for new business and investments at Equinor, said in a statement, "This investment is an option with limited upfront financial commitment. We can utilize core technologies from oil and gas in a complementary partnership to mature these projects toward a possible final investment decision."

Standard Lithium previously estimated that the proposed facilities in Texas would cost $365 million and could produce an average of 5,400 tonnes of battery-quality lithium annually.

Standard Lithium CEO, Robert Mintak, commented on the deal, “This partnership with Equinor is a major accomplishment for Standard Lithium. It has long been our belief that success in this sector hinges on strategic partnerships with companies who share our vision and bring complementary strengths.”

The new investment underscores a growing interest in direct lithium extraction (DLE), an emerging technology that offers an efficient method to extract high-purity lithium from reservoir brines that is suitable for battery production. The process, which Equinor has been investing in through other equity deals since 2018, involves several stages including pretreatment, extraction, concentration, purification, and crystallization.

Equinor’s entry into the Smackover play follows similar initiatives by ExxonMobil which has amassed a 120,000 acre position in southern Arkansas. ExxonMobil has said it intends to produce enough lithium from the Smackover by 2030 to build enough batteries for 1 million electric vehicles.

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Permalink Reply by Skip Peel - Mineral Consultant on May 15, 2024 at 6:30

Here is an excerpt from the article linked in the above which was posted to the website some months ago.

Standard Lithium reported this week that its drilling program in east Texas discovered significant concentrations of lithium-grade brine. Independent testing of wellbore fluid samples taken from an upper bench of the targeted Smackover formation registered a lithium concentration of 806 mg/L, a level that the mineral exploration company said it believes represents a new North American record.

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Permalink Reply by Rock Man on May 15, 2024 at 8:16

That is a great Lithium content number - now the question is "How pervasive is the concentration as well as how much reservoir / storage area in this Smackover member has this high-grade content?"

I will always go back to the USGS info from Cass Co near Bryan Mills Field where the lithium concentrations went from over 400 to less than 100 across only a few miles.

Bottom line on this - sample, sample, sample / this is the only way to determine lithium concentrations since there is no remote or logging related indicator of this mineral available today.

Permalink Reply by Sam Goodman on May 15, 2024 at 12:06

I realize this is in Utah and not Texas, but IBAT is going to prove their DLE process works by processing brine at US Magnesium.  It's my understanding they plan to scale up over time and it should be a good example process to show what can be done in Texas and Arkansas sooner rather than later.

International Battery Metals (IBAT) and US Magnesium Sign Agreement...

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Permalink Reply by Joe B. Lovelace on May 15, 2024 at 12:14

Thanks for posting Sam.  A read of the article refers to Dr. John Burba.  He has a local connection to Texas as he lives in Atlanta, Texas.  Atlanta is due north of east Cass County where Standard Lithium has taken brine leases under their LLC - Cass County Brine.

Permalink Reply by Sam Goodman on May 23, 2024 at 3:51

Speaking of Dr. John Burba of IBAT, I same across this interview from a few days prior to the US Magnesium announcement.  It's pretty interesting and they really talk about how they can set up in Texas and Arkansas on a minimal footprint to extract lithium from oil wells.  They also talk about how there is plenty of lithium in the US just waiting for the right DLE technology to extract it.

The Future of Lithium with Daniel Layton and John Burba of IBAT 

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