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LEWISVILLE, Ark. - Standard Lithium Ltd. (TSXV:SLI) (NYSE:A:SLI), currently trading at $1.57 with a market capitalization of $305 million, and energy company Equinor announced the closure of a $225 million grant from the U.S. Department of Energy for their South West Arkansas lithium project. The grant will fund Phase 1 of the project, which aims to become one of the first commercial-scale Direct Lithium Extraction (DLE) facilities in the world. According to InvestingPro data, the company maintains a strong financial position with more cash than debt on its balance sheet.
The project, which is jointly owned by Standard Lithium at 55% and Equinor at 45%, is located in Lafayette and Columbia Counties, Arkansas. The facility is expected to produce 45,000 tonnes of lithium carbonate annually, with a two-phase development plan. The first phase is anticipated to commence production in 2028, following a Final Investment Decision (FID) by the end of 2025. InvestingPro analysis suggests the stock is currently undervalued, with analysts setting a target price of $3.50 per share. Subscribers can access 10+ additional ProTips and detailed financial metrics to better evaluate this investment opportunity.
David Park, CEO and Director of Standard Lithium, highlighted the grant as a reflection of the project's quality and a step towards securing America's domestic lithium supply chain. Hege Skryseth, Executive Vice President for Technology, Digital & Innovation at Equinor, echoed the sentiment, emphasizing the support from the Department of Energy and the project's integration of innovative technology.
The SWA project is expected to create approximately 100 direct long-term jobs and 300 construction jobs, with a commitment to hire at least 40% of the operations workforce from the local area. It is also set to bring additional benefits to the community through infrastructure improvements, healthcare initiatives, educational partnerships, and workforce development programs. The company's financial health score is rated as GOOD by InvestingPro, with a current ratio of 4.37 indicating strong short-term liquidity.
The project's advancement is subject to the completion of an Environmental Assessment (EA) under the National Environmental Policy Act (NEPA), which is expected to be finalized this year before reaching FID. The public will have the opportunity to comment and review the process starting in 2025.
This partnership between Standard Lithium and Equinor is part of a broader effort to develop sustainable lithium resources in the United States, with Standard Lithium focusing on high-grade lithium-brine properties and utilizing a scalable DLE and purification process. The information in this article is based on a press release statement from Standard Lithium.
In other recent news, SWA Lithium, a joint venture between Standard Lithium and Equinor, has secured a licensing agreement with Koch Technology Solutions for its Li-Pro Lithium Selective Sorption technology. The technology, which boasts a lithium recovery rate of over 95% and impressive impurity rejection rates, will be used in the South West Arkansas Project's Phase 1. Meanwhile, Standard Lithium has been selected for award negotiations of up to $225 million by the US Department of Energy, a development linked to the company's South West Arkansas project.
BMO Capital has subsequently upgraded its outlook on Standard Lithium, raising the price target to Cdn$3.25. The Arkansas Oil and Gas Commission is also set to consider an application from lithium companies, including Standard Lithium, which could influence royalty rates for lithium extraction in the state. The companies have proposed a royalty rate of 1.82%, while landowners are advocating for a rate of 12.5%. BMO Capital's projections are based on a royalty rate assumption of 2.5%.
These recent developments have direct implications on Standard Lithium's project economics and future cash flows in the region. The licensing agreement, potential award from the Department of Energy, and the upcoming decision on royalty rates by the Arkansas Oil and Gas Commission all play crucial roles in the company's growth trajectory.
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