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Transcript: Standard Lithium (SLL) - $34.5M For Lanxess Agreement & Final Build

April 7 2021, 16:55 GMT+01:00

Standard Lithium Ltd.

  • TSX-V:SLL
  • Shares Outstanding: 138.2M
  • Share price C$3.87 (07.04.2021)
  • Market Cap: C$514.2M

Interview with Andy Robinson, President & COO of Standard Lithium (TSX-V:SLL) Standard Lithium is an innovative technology and lithium development company.

The company’s flagship project is located in southern Arkansas, where it is engaged in the testing and proving of the commercial viability of lithium extraction from over 150,000 acres of permitted brine operations. The Company has commissioned its first-of-a-kind industrial-scale Direct Lithium Extraction Demonstration Plant at LANXESS’ South Plant facility in southern Arkansas.

We Discuss: 

  • 2:02 - Share Price Growth: Market VS Company
  • 2:48 - Moving Forward: Raise of $34.5M, NYSE Listing, & Relationship with LANXESS
  • 6:18 - An Advanced Project, How is it Valued at Market?
  • 9:38 - Commerciality: Positioning at Market & Products
  • 17:53 - Timeline for Growth & Expansion: Scale, Costs, LoM, & Differentiation
  • 22:54 - Moments to Expect in 2021

 

Matthew Gordon: The market has really reacted quite strongly. That’s obviously good news - or do you put that down to your own best endeavours? 

Andy Robinson: Obviously, we’d love to. I think there’s a general secular awakening on where the world is going. The niche of the Lithium business has been in the doldrums for 18 to 24-months. It softened I think towards the end of last year. People are starting to get where this thing is going now. We’re seeing everything. 

Matthew Gordon: We’ve spoken to a few this week, some companies have put themselves in the position of being able to raise some capital. You’re one of them. But you did it before Christmas. You did it shortly after we spoke - maybe you missed a trick there. You raised $34.5M. Why did you feel the need to do it then?

Andy Robinson: Well, the timing was right for us. We’re moving over the balance of this year for 2021 and moving into 2022, we have a couple of key milestones that we’re going to hit. The principal one is obviously signing the joint venture with Lanxess. Then moving from that once that relationship is cemented, moving to the final investment decision for the first commercial build. That’s something where we want to have a solid treasury to allow us to do the required engineering work, to understand the economics, to get everything in place, and also to build to some degree a small operating team in Arkansas that allows us to execute on that joint venture and move towards commercial deployment.

Matthew Gordon: You’re probably one of the most significantly advanced in North America so I think that should be taken as read, but you used a phrase there - you’re still yet to cement your relationship with Lanxess. Where are you today, what needs to happen, and when’s that going to happen by? 

Andy Robinson: We’re in the final stretches of that relationship-building exercise. The goal is to form a separate joint venture company that will be a US company and there’ll be shared ownership in that joint venture between Lanxess and ourselves. The current status is that 70% will be Lanxess, 30% will be Standard Lithium. We have the option to move that to 40%. We have internal goals as to when we would like that to be fully signed up and formed. I’m not going to say an exact date but certainly this side of the middle of the year, we’re hoping to have that relationship fully formed and publicly announced.

Matthew Gordon: Clearly there are 2 parties involved, it’s going to be a question of coming to an agreement over how it moves forward. You’re currently TSX-V listed but the clear implication is, you’re in Arkansas, there’s going to be an NYC listing at some point. Is that right? 

Andy Robinson: Yeah, absolutely. We’re moving inexorably in that direction. It makes perfect sense for the story that we’re trying to tell and right now it makes perfect sense for the company that we will become over the next couple of years as we move into production. Yes, it’s an inevitable thing for us to organically move into and the nuts and bolts are in process right now. 

Matthew Gordon: You’re nearly a $500M company as well so not only are you the most advanced but you’re probably the most valuable. Do you feel you’re getting fair viewing and appreciation?

Andy Robinson: I think for the key investors who followed us throughout, they get what we’re doing and the story that we’re trying to tell, and the company that we’re trying to become. I think that certainly in the raise we did before Christmas, there was a key fund who underpinned that entire raise, the BNP Paribas Energy guys, that ESG fund, they underpinned that entire thing. They see where Standard Lithium Lanxess JV Smackover Resources is going. The wider market, the retail market, a lot of the analysts who still play in this space, I think our story gets left behind a little bit. I think when most people talk about the domestic supply of Lithium chemicals in the US and North America, the usual couple of names tend to get trotted out. They’re good projects and worthy projects. I think we tend to get left behind a little bit and I think we are comfortable saying that we’re more advanced than they are. We’re more likely to come into production ahead of those companies.

The real reason is, I’m sure Robert went through this in some detail before, we picked Arkansas for a reason, which was to not have to do a lot of the hard yards that any greenfield project has to complete. Whereas in Arkansas, we’re going to be piggybacking onto existing infrastructure, existing assets that are already in the ground, permits are already in place. It’s not simple or a facile exercise but a lot of the complexities and the tricky stuff that ends up taking 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 by the regulatory environment in Arkansas. That’s why we’re comfortable saying as long as we pass certain thresholds with Lanxess, with our partners, as long as financing is in place - with our relationship with Lanxess that’s already a given, as long as we can prove that technology works, is coherent, economic, feasible, and doing all of that work right now, then we move very quickly through that next stage. We then do the work to define the project and we start procuring and building. It’s very simple in that respect. That’s why we think, and we’re happy to say that we’re so much more advanced than a lot of the other companies and projects out there, which still have a lot of the unpleasant and rather tedious legwork still to do in reality.

Matthew Gordon: I think one of the things that I’ve noticed this week is, certainly from the questions that have been sent through, people understand hard rock easily, they understand brine easily, and they understand the benefits of each and where they sit in the marketplace. Anything that sits outside that like claystone or Direct Lithium Extraction, or introduction of projects that are linked to Oil and Gas fields as well. It gets difficult to wrap your head around. Do you feel that you guys have done a good job explaining where you sit in the marketplace in relation to your peers? 

Andy Robinson: Well, whether we’ve done a good job or not is up for debate.

Matthew Gordon: Have you done a good job, Andy? It’s your job.

Andy Robinson: Have I done a good job? Hopefully, I’ve done a decent enough job. It’s difficult to tell the story because it is a technology, it’s fine chemistry, I think it’s great if you’re a mining company and you can tell a story about how you found a rock in the ground and can dig the rock out and crush it. People totally get it. Also, when you point to the brine operations in South America, you can show people pictures of evaporation ponds and they find it makes sense and they know what’s going on there. I think we have had to develop the technology. We’ve spent a lot of time, money, and hours of the technical team figuring out how to solve the problem of the brine in the Smackover Formation. That has been the crux, the value proposition for Standard Lithium, to use a word. That’s where we spent all of our efforts. We haven’t had to do resource discovery, drilling work, any of that, assays, we haven’t had to do all that. It’s all been about how do we get the Lithium out of this brine, which we know is extremely plentiful, and how do we make it into a technology that actually works at scale. Anyone can do anything on a laboratory benchtop. It’s very easy to extract Lithium at a laboratory scale. That’s typically what we see. We see people doing quite small-scale work, but we solved that problem very early, and we moved to de-risk, moved to a larger and larger scale, and running the plant in Arkansas in El Dorado at the facility there. That was the nub of the problem for us, can we do this continuously at scale? We had to do everything opposite to a conventional brine resource.

To explain DLE, it’s like a classic brine, you pump the brine to the surface, then you basically try and get rid of as much water as you can through evaporation. You add chemical reagents to try and precipitate out the contaminants: Calcium, Magnesium, Boron, Sulphate, whatever’s in your particular brine. At the end of it, you’re left with this concentrated Lithium solution you can then convert to carbonate. Whereas in Arkansas, in El Dorado, we can’t do that. It rains, it’s hilly, we can’t build massive evaporation ponds and it’s not really a very smart way to do it in the 21st century anyway. We have to do exactly the opposite. We bring Lanxess’s tail brine in, and then we just selectively pull the Lithium out of that brine to create a concentrated Lithium Chloride solution. The rest of the brine goes on its merry way back to the ground through the reinjection well network, as it has done for 6-decades. That’s what Lanxess, the Bromine, the brine processing industry in Arkansas. That’s what it’s been doing for 60-years. It’s something they do extremely efficiently and very well, with a high degree of social licence. That’s what we had to find, that process. Certainly, there are previous analogues, FMC Lithium or Livent as they are now, they’ve used a variation of a DLE type process at their plant in Argentina. There are predecessors who have done a lot of that work, but we had to use a different form of technology to be suitable for the Smackover formation.

Matthew Gordon: Do you think you guys have now been doing this long enough at a scale large enough to prove the commerciality here yet? Have you over the line in terms of getting that confidence yourselves? Do you think you’re able to communicate that, certainly with - you don’t go and raise nearly $35M by not being able to explain that? How did you explain it?

Andy Robinson: I guess the thing is we set ourselves up as a developer and we had to develop the technology for the resource. We did not set ourselves up as a technology company trying to develop a solution and then find a problem to fit it, which is what some companies are doing. We went in, we signed the necessary commercial relationships we needed to get access to the brine in very large volumes, and then we solved the chemistry and the process issues for that resource. It was all done specifically for that resource, for ours, and is the most efficient way to get the Lithium out of the brine and convert it into something we could sell. That was where we spent the money and time, solving that problem rather than just solving a generic, technical problem and then trying to apply it at multiple resource locations. We solved the problem for deployment in the Smackover. I think it would be great if one day when we can travel, we can start to show people around the plant again in El Do, which is pretty impressive. It is a large, precommercial scale plant. We didn’t mess about. We bit the bullet and we spent the necessary money to build a large, precommercial plant that does all the de-risking that needs to fit - this is not bench scale, this is not a classic small-scale pilot plant inside of a 20-foot C-Can. This is a large, 3-storey high. 100ft by 100ft fully precommercial 24/7 plant. From this, we can move directly into a commercial plant. It’s eyeing and feeling the process. We’re very comfortable with the process. Clearly, our partners are comfortable with the process. Whether the wider market in general really gets what we’re doing, I think that’s probably an open question. It’s tricky. It’s complicated chemistry and it’s an industrial process, and a lot of peoples’ eyes just glaze over as soon as you start to talk about it in real detail.

Matthew Gordon: Remind everyone what you’re actually going to be producing once you have gone through this DLE process. What are you selling into the marketplace? What are you selling into with your partner?

Andy Robinson: Initially, we make a Lithium Chloride Intermediate, so that’s when we pull the Lithium out of the brine and mix it into the product. You can then convert that into a couple of different things. Initially, the first commercial plan will make and sell battery-quality Lithium Carbonate, however, we certainly plan to make other product offerings over time. We’re looking at, again this is one of the great benefits of working in Southern Arkansas on existing infrastructure, the build-out is phased. We don’t have to blow our brains out with $1Bn going all-in on a single thing. It can be built out over a decade; we can learn from the first phase and then move to phase 2. It’s de-risked further. Also, we can move to additional product offerings. The first train to make product Y, which will be battery-quality Lithium Carbonate, but we can easily move to battery-quality Lithium Hydroxide and other materials as the market evolves. You look at the world right now and here we are, February, about to become March 2021, and we’re already seeing ridiculous movement in a hypothec scale, talking about solid-state batteries. Who knows where the cathode chemistry could go? What final chemicals will be needed? The battery market is evolving at an extraordinary pace so to say we’re going to make product X now for the lifetime of the project is a questionable strategy. I think we fully appreciate that in Southern Arkansas we can have a nimble, flexible approach to the products that we can make. We do additional test work to make the materials. That’s all going on. 

Matthew Gordon: I think that’s really important for people to understand about this project, you’re not going to rush into it because of some massive Capex requirement out of the gate. You’ve got the scale here. This is a large resource, which gives you the flexibility of having some time to ramp up in a financially more astute way. 

Andy Robinson: Yeah, this is one of the things. Again, you try and tell the story of Smackover, and investors’ eyes glaze over a little bit. It’s a gargantuan resource. People still have not fully understood the size and scale of the Smackover formation and the Lithium brine that it contains. It is enormous. We house access to a large footprint in Southern Arkansas through Lanxess and through our own leases that we control. In the background the last 4-years, we’ve been looking at lots of other potential areas where we hope to-

Matthew Gordon: Put it in language we can understand. Most people understand life of mine.

Andy Robinson: The Smackover formation is big enough to supply the world’s Lithium chemicals for decades to come. Never mind just North America, this is a globally significant resource that, when the commercial unlocking starts, can move incrementally through additional build to additional build and easily we can move to 75,000t - 100,000t 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.

Matthew Gordon: It’s an important point actually because if you think about the existing producers and their ability to turn the dial up slightly, you guys have got to be measured and cautious about how you approach and go about this.

Andy Robinson: It’s a commercial procedure, to move on to the next project phase, which will always be based on market conditions, future output, etc. It’s just that the resource is big enough to handle that degree of production. When we look at the Lithium industry and where it’s going to move over the next 10 to 20-years - part of the reason we set Standard Lithium up is the ESG component. It truly is that we don’t have to go and dig up and despoil virgin areas of land to get Lithium resources out of the ground. The Smackover resource, that area has been exposed to resource extraction for over a century in that formation, in that region. We can continue to drill new wells where they’re needed but mostly reuse existing infrastructure. North America’s Lithium can come from a very green, sustainable, large resource without having to move into pristine deserts and do work in those sorts of environments. 

Matthew Gordon: Just to finish off, this has been a nice little reminder to us that you’re out there busy beavering away. You’ve got this money. There’s going to be an FID this year, is that what you’re aiming for?

Andy Robinson: This calendar year.

Matthew Gordon: Right, New York listing this year if that does happen?

Andy Robinson: Yes.  

Matthew Gordon: Right, and in the meantime, while people are waiting for that listing in America, they can go to the OTCQX where you are one of the best 50 companies on there apparently. I couldn’t help but notice that. You’ve got to love an award, don’t you?

Andy Robinson: Yes.  

Matthew Gordon: Did that make your day? Or would you rather get this over the line quicker? 

Andy Robinson: We would rather move into commercial production faster, that’s what we’re thinking. 

Matthew Gordon: Good answer. Correct answer. Andy, I appreciate your time today. Thanks for the update. It was just that with things moving so quickly in the Lithium space, we saw what you guys have been up to. You’ve got a little way to go but not too far. Stay in touch and let us know how you get on, okay?

Andy Robinson: Great stuff. Thanks for your time.

To find out more, go to Standard Lithium's Website.


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