Oleblue
3 months ago
Arkansas Lithium: Strategic Discussions, Part 2
by Brian Umberson February 13, 2024
(Editor’s note: This is the second of a two-part commentary on the lithium play in south Arkansas.)
This week’s Arkansas Lithium Innovation Summit serves as an excellent opportunity to let the rapidly growing US battery industry know that Arkansas is the “Lithium State” and is open for business. The idea for this event was first instigated by Arkansas native and Director of Government Relations for Standard Lithium, Jesse R. Edmondson, who is a critical minerals geologist passionate about establishing sustainable domestic supply chains. Mr. Edmondson detailed his goals, “The two goals of this event are to: 1) Plant the flag of Arkansas into the middle of the US lithium-ion battery and EV supply chain, so that this entire industry sees that Arkansas should be considered a top state for building out this new industry, leveraging the globally significant lithium resource from the Smackover Formation, and 2) To get the state internally firing on all cylinders so that our federal/state/local officials, academia, infrastructure managers and existing industries are working together to seize this incredible opportunity and moment in time.”
Hugh McDonald serves our great State as the Secretary of our Department of Commerce and has been an integral part of the Arkansas Lithium Innovation Summit. Secretary McDonald masterfully captured the value of the Lithium Summit, “In Arkansas, we have the raw materials that will make our state a focal point for the lithium industry. Prominent companies, like Albemarle, Standard Lithium, Tetra, and ExxonMobil, have already established operations in Arkansas and are continuing to build out with production dates set at the end of the decade. Arkansas is on the verge of being a major player in this industry, which will have global implications and impact. We look forward to more companies doing business in our state, and they will find a favorable business environment with low taxes, pro-industry public policy and a strong workforce. During the Arkansas Lithium Innovation Summit, global experts, policymakers and industry experts will highlight the opportunities that our state has in the lithium industry and will show the advantages of doing business in Arkansas.”
As a refresher, Arkansas provides environmentally responsible lithium that supports the production of batteries for use in homes and cars. Our lithium boom goes beyond batteries in homes and EV cars, because it ties into our national security, military industry, energy security, electric distribution, etc.
I hope this 2nd part of a 3-part series provides a view of what is at stake and the strategic issues for leaders to discuss in productive conversations at this important Summit. Strategic discussion and even difficult subjects have to be on the table when this many of our state’s leaders are in the same room. We must take advantage of this opportunity so that we do not allow another FedEx to slip through our fingers.
Part 2 Overview
ExxonMobil, Tetra, Albemarle, Lanxess and SLI have all set their sights on the unique Lithium resources found within the Smackover formation in South Arkansas. As an Arkansan with roots back to 1828 in our state, I am thankful Lanxess and Standard Lithium partnered to prove a new technology would provide environmentally responsible access to the lithium in South Arkansas.
Exxon, Tetra and SLI are at a point of critical mass within the Arkansas Lithium opportunity as we establish a royalty structure. The Nation is watching us pioneer a new market segment, new technology, new production model, and new royalty structure. There is no precedent for us to copy, so we must be objective and fair so Arkansas can benefit from a new economic engine. The whole Nation can benefit from our impact upon national security, defense weaponry, battery supply chain, power grid, geothermal, etc.
Market Correction
Lithium demand and supply reached record levels that created a spike in pricing that reallocated priorities and investment. The lithium market price dropped most of last year, which has corrected to a transition of multiple reallocations. Many technology and investment decisions were made when Lithium was considered a supply chain risk and very expensive.
Lithium pricing and product allocation will reposition after more domestic supply creates stable prices that should redirect or reduce alternative materials investments. The behaviors of China and Russia raised additional red flags about supply chains and National security issues tied to lithium. Record high prices and supply concerns created the following dynamics:
Raised the price of the EV cars to levels that decreased sales growth but expanded Hybrid car sales.
Increased investment in Sodium and Zinc based alternatives to Lithium batteries.
Developers of new products that utilize battery power shifted their designs to accommodate sodium or zinc batteries.
Damaged Lithium processors in free market countries while Chinese state-run companies were protected.
Pre DLE-Decisions
In the last 6 months, Arkansas’ Lithium resource was proven to be credible as Standard Lithium (SLI) validated the efficacy of their new Direct Lithium Extraction (DLE) technology to extract Lithium from Smackover brine. SLI’s validation is so new that very few of the current market researchers include the new lithium resource in Arkansas. As you can see in the map below, we are not included in a map of projects and offtake agreements. from Dec 22, 2023. Like other outlets, the article is using old data or sales agreements that don’t consider Arkansas. SLI’s definitive feasibility study published just over two months ago on Nov. 20, 2023. Additionally, we are still two years away from SLI’s Arkansas lithium impacting the market. We are at a delineation of what I call the Pre DLE or Post DLE periods.
Corner the Market?
The intentional actions or ineptitude of outside forces have damaged markets to protect their position or damage competition. OPEC was not happy about the growth of US oil production via shale fracking, so they dropped oil prices below the break-even point of shale fracking to decimate our shale boom. China controls a large amount of the critical minerals in the battery supply chain. China has proven to flood the steel market with cheap steel to hurt US and European steel sectors. Why should we allow China’s state-controlled lithium companies to influence the lithium price?
Unfortunately, the market uses the Chinese price for lithium carbonate, which is marred by lack of transparency, China’s own desire to control the market, unreliable information, inconsistent quality and simple cornering of the market. US and European incentives spiked record demand for a limited supply of lithium and other battery supply chain minerals controlled by China. Market speculation then poured gas on the fire as you can see in the price chart below. The Chinese price reached record levels in 2022 but the price of lithium carbonate dropped almost 80% in 2023.
Many researchers speculate that China could use the volatility to hurt their competition and expand their control of the lithium market. Some outlets are reporting that Chinese state-run companies are buying up lithium feed stocks during this low-price cycle. Arkansas’ new domestic supply will eventually protect our Nation from supply disruptions, possible wars, price spikes, etc.
Lithium based products have become far too expensive because of the record high prices, so their sales have been terribly impacted. Lithium based product companies changed strategies and commitments when the market reached $60k-80k a ton for lithium carbonate from 2021 to 2023. Current lithium carbonate pricing is very low, but many lithium processors and battery manufacturers still have higher priced inventory to sell.
We should see another transition from high priced to lower priced inventories that will eventually lower the price of lithium-based products. Our current low lithium prices will lower the cost of lithium-based products because the battery will be much lower in cost. This transition provides the following impacts:
Increase the sales of Utility scale storage (high volume lithium use)
Increase the sales of powerwalls for home energy storage.
Increase the sales of EV (battery = 40-50% of cost) and hybrid cars
Increase market stability and customer trust.
Furthermore, the US market for Lithium products could improve because of our commitment to domestic DLE sources that are detailed here and in my previous articles. Wars and national security will lead to priorities that will incentivize domestic sources. We will see market improvement from the adjustment of vehicle manufacturer priorities from over-emphasis of EVs to a combined emphasis of EV and hybrid cars.
SLI details many of the pricing and transitional issues in their quarterly report that ended Dec. 31, 2023. “In 2023, the lithium sector has been under pressure, with lithium prices experiencing a significant decrease from the all-time highs seen in 2022, a situation compounded by the prevailing interest rate environment and other macroeconomic factors,” says Robert Mintak, CEO and Director of Standard Lithium. “Despite the industry-wide market challenge, the long-term fundamentals for lithium continue to be strong, particularly for projects situated in geopolitically stable regions such as the United States, where policy support and other key strategic advantages are enabling for project differentiation. The Smackover region, in particular, is attracting interest from major players in the global energy sector. Discussions around strategic partnerships, joint development opportunities, and long-term off-take are robust and moving forward. In response to these market dynamics, we are taking responsible and appropriate actions that are in the best interests of our shareholders, ensuring that Standard Lithium remains well-positioned to capitalize on what continues to be an exciting sector with extraordinary growth prospects.”
Please review the strategic issues below for part 2 that details the opportunities and threats we can optimize or reduce. Part 1 and part 2 support strategic discussions at the Summit, so that more of Arkansas’ batteries are connected and fully charged to propel us to a better future.
National Security
China is dominating the global battery supply chain. China mines and processes some of the lithium battery components and rare earth minerals used in the battery supply chain. China is the current leader in manufacturing and assembling the lithium batteries. We must increase domestic production of the lithium components required to be able to improve our energy system storage, improve energy security, manufacture advanced military products and manufacture alternative energy vehicles.
Recently, SLI has proven that Arkansas Lithium + DLE + brine wells will increase production of Lithium at surprising quality and quantities. We are now in a Post DLE market but the market still hasn’t officially recognized the positive impacts. The new lithium source in Arkansas, reopening of Albemarle’s mine in North Carolina, and the massive deposits recently found in the Western US have changed the supply chain risk dynamic. Most of the world has been using mines or evaporation ponds to extract Lithium, but now SLI has proven DLE is very productive in South Arkansas. DLE is much faster than evaporation process models that require up to an 18-month production cycle. Wars and catastrophes do not wait 18 months to ramp-up.
Modern warfare utilizes high-tech weapons that require remote power via batteries. In the 1970s, lithium batteries were first utilized in military equipment, space equipment and communications equipment of the US military. Now light weight lithium batteries with high density energy enable the US Military to have the best weapons used in land, sea and air operations. A critical application uses lithium batteries to protect encamped soldiers by replacing gas engine generators to keep the troops from being targeted via detection of sound and radiant heat from the gas engine generators. Numerous weapons that use lithium batteries range from drones, all electric drone ships, underwater unmanned mine searchers, night vision, tactical radios, thermal imagers, portable computing, missiles, video surveillance, lasers, acoustic, sensors, etc.
Strategic applications need mobile power so Lithium can improve our military superiority. “Current solid-state batteries that have high energy density have limited charge/recharge cycles …… in aggressive performance environments,” said Vishnu Sundaresan, MINT program manager in DARPA’s Defense Sciences Office. “The teams we’ve selected will develop and demonstrate novel morphogenic interface materials to enable long-lasting and high-performance solid-state batteries that power everything from warfighter battery packs to unmanned aerial and ground vehicles.”
Defense Advanced Research Projects Agency (DARPA) has been very concerned about the strategic issues and risk tied to critical minerals controlled by China and other bad actors. Our government agencies like DARPA have been funding expensive research to find alternatives for Lithium since it was considered to be very limited in supply. The recent validation of Arkansas Lithium confirms a large domestic supply of high-quality Lithium, which reduces the need for our government to invest in Lithium alternatives. Now domestic Lithium enables DARPA to firmly position Lithium as the strategic energy storage now and use the funds elsewhere.
A new DARPA program seeks to develop near-zero-power technologies that exist reliably for years and support growing network of mobile connected devices. State-of-the-art military sensors use “active electronics” to detect vibration, light, sound or other signals. The always-on status constantly consumes battery power which limits a sensor’s lifecycle to a few weeks or months. The constant need to redeploy power-depleted sensors is expensive, time-consuming and increases warfighter exposure to the enemy. Stable domestic sources and lithium that is now lower cost, enables DARPA to invest in higher performance Lithium and further improve weaponry by reducing active power requirements.
“It is the waiting for a specific event or activity that constrains mission life and drains the battery energy of these essential electronics,” said Troy Olsson, DARPA program manager. “By cutting reliance on active power and enhancing battery life, N-ZERO aims to enable wireless, ubiquitous sensing that is energy efficient and safer for the warfighter. Our goal is to use the right signal itself to wake up the sensor, which would improve sensors’ effectiveness and warfighters’ situational awareness by drastically reducing false alarms.”
Dr. Kathleen Hicks, Deputy Secretary of Defense, is the second person in command of the Department of Defense (DOD) as she oversees the operations and personnel of the entire U.S. military. According to the Deputy Secretary in a November 8, 2021, speech that, “…a healthy battery supply chain is essential to the military. When it comes to batteries, America needs to lead the world. That means innovation, but it also means manufacturing, ensuring we have healthy supply chains to get what we need, when we need it. It is estimated that investment committed to the global lithium-ion battery supply chain is approaching $1 trillion. The problem, however, is that China presently dominates that supply chain.”
She added that the DOD sustainability plan will be focused upon developing an electrified non-tactical vehicle fleet, “Electric vehicles are quiet. They have a low heat signature, and incredible torch, and because they tend to be low maintenance with fewer moving parts. They have the potential to reduce logistics requirements, all with these attributes can help give our troops an edge on the battlefield.” Additionally, Dr. Hicks stated, “currently the Department of Defense has about 170,000 non-tactical vehicles. The cars and trucks we use on our bases. That’s the largest fleet in the Federal government, next to the U.S. Postal Service.”
Deputy Secretary Hicks further detailed the importance of non-tactical vehicles in the military and the connection with other military elements, “The Army center, for instance, is developing a vehicle centric micro-grid, designed to provide on the go power for our next generation combat capabilities. At General Motors, I also had the opportunity to tour their battery lab. Battery technology and lithium-ion batteries specifically, are the lifeblood of electrification and the future auto industry, but batteries are also essential to thousands of military systems from handheld radios, to unmanned submersibles and to future capabilities like lasers, directed energy weapons and hybrid electric tactical vehicles.”
Deputy Secretary Hicks added that DOD wants to work with industry to develop our domestic supply chain which add more validity to the Arkansas lithium opportunity, “Improving the U.S. competitive position will create resilience of our domestic supply chains, and this will bring jobs to America and ensure our national security. DOD is committed to working with industry to increase resiliency in the supply chain, which strengthens our industrial base. The department has joined the Federal Consortium for Advanced Batteries, which is interested in ensuring a domestic supply of lithium batteries and is committed to accelerating the development of a robust and secure domestic industrial base.”
The DoD has published the Lithium Battery Strategy 2023-2030 which includes the primary recommendation for improving battery security as outlined in Securing Defense-Critical Supply Chains. The James M. Inhofe National Defense Authorization Act for Fiscal Year 2023 started the initiatives to pursue internal DoD, industrial, interagency, and international opportunities and objectives. It also created the DoD Lithium Battery Science and Technology Strategy, as well as DoD investments in test and evaluation infrastructure, analytics and battery standardization.
Last October, the Office of the Assistant Secretary for Industrial Base Policy, through its Manufacturing Capability Expansion and Investment Prioritization (MCEIP) office, entered into an agreement with Albemarle Corporation to support the expansion of domestic mining and production of lithium.
“The agreement with Albemarle demonstrates the DoD’s ongoing commitment to meeting the needs of our warfighter, today and in the future,” said Mr. Anthony Di Stasio, MCEIP Director. “This investment directly supports President Biden’s April 2022 Presidential Determination for Critical Materials in Large-Capacity Batteries.”
The $90 million agreement under the Defense Production Act augments the MCEIP five-year investment plan to secure supply chains for minerals and materials critical to the DoD and the commercial sector. There is further evidence of DOD supporting industry to create better batteries for its war fighters, and it’s partnering with private companies like NanoGraf. “Just like we civilians are increasingly relying on cell phones and tablets and everything else, the modern soldier is also transitioning towards these really power heavy devices in the field, [like] night vision goggles, weapon optics, all of the communications devices, GPS,” said Chip Breitenkamp, NanoGraf vice president of business development. “All of those things require more and more power.
“If you take a look at what the soldier has to bring on the field already, between guns, ammunition, water, food, right now the best estimate that I’ve seen […] is that every soldier for every mission goes out with somewhere between 15 and 25 pounds of batteries just to power all of this stuff,” he continued. The Military benefits greatly from a Post DLE market. The DOD needs Arkansas to provide lithium for energy dense batteries to power high tech weapons, possibly missile systems made in Camden, logistics, and to reduce weight so soldiers have less fatigue and can operate longer before recharging their batteries.
Arkansas Can Improve the Power Grid, Energy Storage and Energy Efficacy in Vehicles
Vertical integration creates additional value that reduces the risk of investing in Arkansas. As I detailed in a previous article, “The Arkansas Advantage” is our unique vertical integration that positions our state as a major player in energy storage that provides another unique advantage.
We are uniquely positioned with lithium and electrical grade steel in an excellent location to make batteries and frames for powerwalls, hybrid cars and electric vehicles (EV). Arkansas is a major producer of the Advanced High Strength Steel (AHSS) that is used to build EV and Hybrid cars as well as battery frames for powerwalls (buildings), utility scale battery modules, and batteries for Hybrid & EV cars.
Our location between the Missouri, Texas and I-65 Auto assembly zones is an advantage when you consider the shipping costs of Steel and Lithium. Our advantage is even more pronounced for the assembly of powerwalls and vehicle battery modules, because the assembly’s percentage of steel and lithium are much higher than that in the high component mix assembly of a car. Arkansas is the superior location for assembly of powerwalls, utility scale and vehicle battery modules.
There is an element of our population that dislikes EV cars, but despite the recent media hype, EV cars really aren’t for everyone. The recent messaging forced the tried-and-true hybrid to take a back seat to the over emphasized EV product. Finally, the EV smoke cleared to expose the truth that EVs are great for metropolitan commuters that return home each night to re-charge. Now the hybrid is selling to the non-commuter market again.
Car buyers have already shifted to more hybrid vehicles instead of EVs. Hybrids will still create lithium demand, but they have smaller lithium-ion batteries than EVs. Ford doubled production plans for the hybrid F-150 pickup trucks for 2024. As a result of their new hybrid plans, Ford’s January 2024 sales reported an impressive 43% jump in Hybrid sales, which offsets an 11% drop in EV sales. They also reported a 2.6% sales increase of traditional vehicles in January. Ford’s recent sales increases do not include lower pricing for vehicles via the current low lithium prices.
Tesla built Giga Factories in very expensive San Francisco CA, Austin TX, Sparks NV and Buffalo, NY. Tesla could benefit greatly if they had a Giga Factory in Arkansas, which would improve their efficiency and logistics cost. The heaviest components of an EV car are the steel and lithium battery, which is uniquely available in Arkansas. Tesla is also dropping their prices to compete with the new EV competitors, so a better cost structure would allow them to create lower cost cars. It would also allow them to create entry level EVs to expand the great brand loyalty into a younger demographic. Tesla has tried to reduce costs by controlling more of the lithium supply chain – Would Tesla still decide to create their own lithium processing facility if the decision was made Post DLE with domestic sources at today’s lithium prices? As stated above, we are the superior location for assembly of Tesla’s powerwalls, vehicle battery modules and the large batteries for electric utility scale systems.
Tesla Megapack for utility-scale projects
Speaking of utilities, the Energy Grid is a critical element of our American infrastructure. Our leaders have recognized we can stabilize the grid with lithium-ion batteries, thus utility-scale storage is predicted to grow 15-fold by 2030. Energy storage is going to redefine tomorrow’s energy grid with lithium-ion batteries for daily load balancing to reduce volatility from energy fluctuations. For example, load balancing switches between direct solar power and battery storage for evening power. The concept can apply to residential, commercial, or utility scale battery applications. Some reports predict that load balancing will comprise 61% the new energy storage systems by 2030.
Batteries are an important component of storage-as-a-transmission asset (SATA) for decentralized placement of customer-sited batteries and utility scale batteries to augment the current electricity grid. The use of SATA as neighborhood, local and regional batteries will initially upgrade the grid to capture and store alternative power generation in a “crawl-walk-run” scenario. It will require much more investment to progress to the “walk and run” phases. It is expensive to build a decentralized grid with upgraded transmission lines to safely manage renewable power in both directions.
The utility scale battery system implementations slowed when $60k-80k per ton lithium carbonate prices forced a lot of utilities to reduce their utility storage commitments over the last 2 years. Pre DLE supply chain disruptions will subside as Arkansas lithium hits the market. Utility scale battery systems require far more lithium than other applications. Now the lithium prices have dropped so much that Utilities can renew their commitments and implementation plans.
Unique Steel further sets Arkansas apart from the competition. Lee Morgan is CEO of The Systems Group in El Dorado that supplies both of Arkansas’ steel giants. Lee is glad the Arkansas steel companies could provide more value for Arkansas Lithium companies. Lee was proud to declare that, “after U.S. Steel opens our state’s 3rd AHSS mill, Arkansas will have the largest concentration of AHSS mills in the Nation and should become the largest flat rolled steel State in the Nation.”
https://armoneyandpolitics.com/arkansas-lithium-discussions-part-2/
nowwhat2
3 years ago
https://seekingalpha.com/article/4484526-standard-lithium-short-report-a-big-ol-nothing-burger
Standard Lithium: Short Report A Big Ol' Nothing Burger
Feb. 04, 2022 3:07 PM ET
Standard Lithium Ltd. (SLI)ALB, BLILF, CYDVF, DJIFF, LISMF, LLKKF, LTHHF, LTHM, PEMIF8 Comments11 Likes
Summary
A short seller report was released full of speculation, misdirection, and general obmissions.
This might present an opportunity for long term lithium / electric car investors.
We go though the short seller report and point out flaws in the argument.
Arkansas
omersukrugoksu/iStock via Getty Images
As a writer you have to respect good writing. The writers at Hindenburg Research (an infamous short seller firm) are quite talented. Part of a good short piece is throwing a ton of spaghetti at the wall. In some cases short sellers do good work; in other cases (when the tips cease to flow) they pen hit pieces.
In this article we will review how much Hindenburg got right and how much it got wrong concerning Standard Lithium (SLI). Was the $100 million investment (at $7.42) by Koch simply blissful ignorance? Let's explore some of Hindenburg's claims.
Paint a Picture
Realize a writer can write in several tones. We see the tone of general doom and gloom all over this report and why not? They are short after all. A good writer can paint a picture that might not reflect reality accurately, i.e., spinning reality in a twisted manner by omitting facts. So let's focus and examine the twists and omissions in the article.
Nothing Burgers
The first gray tone in which Hindenburg tries to paint is stock promotion. (Another term for this is marketing.) This obviously carries a negative tone with investors, but in the mining industry stock marketing is the norm and is fine if disclosed by the promoter. Now of course marketing comes in various flavors: Paid interviews, research reports, and trade shows can all be considered marketing. Obviously, the first two are the ones to be cautious about. As long as the promoters disclose they are paid to write Bob Ross-like "happy little trees" pieces all is kosher, but the reader must be astute to recognize that any negative information will be ignored or glossed over in these paid reports. That is the danger in reports (be it a bullish or bearish report). Take them with a grain of salt. It is really not that much different from a short seller writing a misguided hit piece full of half truths and then admitting "Well, it is only my opinion, but I get paid if I bash it." In both cases your internal "Danger, Danger... Danger" needs to surface. The take away on marketing is to read, mull it over, and then do your own diligent research.
Breaking Down the Hindenburg Groups Misdirection
Any questionable article is going to try to direct your mind down a singular path hoping you concur with their conclusions. It is a bit more organic if you put 2+2 together in your mind rather than the author having to tell you the answer is 4. Let's look at some pathing the author is attempting.
1. Stock promotion aka Marketing. This is a reoccurring theme in the Hindenburg article and it is an easy win. Saying the word "promotion" comes with negative connotations. Yet (as previously stated) promotion is normal in the mining industry. Pull up ANY mining company and you will see some degree of promotion. Now how much promotion is too much is a topic of debate. Too much promotion and yes the stock price rockets up; but if the underlying company is not sound it then comes back to earth. Too little promotion and the company never gets the attention it needs and the share price does not rise. This limits the company's ability to tap the markets for capital in order to grow. The prudent thing to do is to examine peers and ask yourself "Is marketing out of line compared to peers?"
Breath in Your Fear - DLE
Now that Hindenburg has pushed the company as having spent some money on marketing, next up they attack the technology being used by calling DLE (Direct Lithium Extraction) into question.
Now on this one I got quite the kick out of the tone employed. DLE is everywhere in the industry. Many companies are using or testing DLE. One must also realize though that a part of the industry may not want DLE to be successful as they are extracting lithium via Brine (salt water) evaporation pools or they are crushing rocks to extract lithium.
Clay and DLE is the new kid on the block and some vested interests do not want the new kid stepping on their turf. The report tries to paint a glass half empty picture by saying the company received only one of three patents for its DLE tech and then continues on to say that DLE is old tech. Well, yes, it is but like engines in cars. Car engines are rather old (1807 in fact) but that does not mean you will not see new patents for engines. Another way of looking at this was Standard was successful in obtaining one patent for DLE, but frankly this point is a nothing burger presented by Hindenburg. Many companies are using DLE and I do not see any patent wars breaking out as, simply put, DLE is too common.
But Wait There's More!
To quote the late great Billy Mays "But wait there's more!" concerning DLE. Riddle me this. If DLE in general was so unsuccessful why would Bill Gates, Jeff Bezos invest in DLE technology via Liliac Solutions? Why are many players in the industry looking to DLE? Companies such as:
Cypress Development (OTCQB:CYDVF) in Nevada has teamed up with none other than the famous Craig Brown of Chemionex (whom Hindenburg noted but failed to research.) If Craig Brown were so inexperienced and the process did not work it's a small wonder that Cypress Development went with it and paid Craig Brown $350,000 CAN dollars and 1 million shares in Cypress (Currently $1.44 USD).
Pure Energy (OTCQB:PEMIF) - Has teamed up with Schlumberger for DLE in Clayton Valley Nevada. Note: Everyone in Clayton Valley, except Albemarle (ALB) has gone the DLE route to my knowledge due to extreme lack of water and ALB is eying the tech (more on this later).
HeliosX Lithium (OTCQB:DJIFF) - Formerly known as Dajin Lithium. They have teamed up with Liliac solutions for one of its Nevada properties.
Lake Resources (OTCQB:LLKKF) - Has teamed up with Liliac.
Vulcan Energy in Europe is going down the DLE route. Livent (LTHM) is using DLE and producing revenue. Lithium South (OTCQB:LISMF) is exploring DLE technology and the list goes on and on.
Additional information about DLE and companies using it can be found via Matt Bolshen's article on the subject. It has some informative graphics in it. Moving on.
Cherry Picking Quotes
I also find it interesting when an author cherry picks a quote from a big name but provides no context nor the full picture. Case in point when Hindenburg quotes Eric Norris but skews the full picture by omitting quotes that go against the picture they are trying to paint. Hindenburg paints DLE in a negative light via:
"It's more capital intensive and actually consumes a lot more water and energy" - Eric Norris, President of Lithium Division, Albemarle Corporation
Yet in the same article we see Eric Norris of Albemarle talking about Arkansas DLE in a somewhat positive light via:
"Norris, Albemarle’s president for Lithium, said the company continues to look at its Magnolia-area chemical plants “as being a spot where we could process lithium in DLEs. There is potential technology for that.”
(Source: Magnoliareport.com via the Hindenburg Report)
You the reader are not being presented with the entire truth but simply one misdirected angle. So now it is time to paint my own picture for you and show you that the big boys are indeed looking at DLE.
Albemarle and DLE Tech
Let's see if Albemarle is playing coy with us. Looking at the September 2021 Investor Day presentation, we see that 35% of sales are from bromine. Keep this in mind as we go to the next slide.
Bromine, Hidenburg short seller attack, Lithium, Standard Lithium
Overview of ALB Revenue (Albemarle)
(Source: Albemarle)
Now realize that only two locations produce bromine for Albemarle (one of which is right next door to where Standard Lithium is operating). Looking at slide #26 of the ALB presentation, we can guess that the Arkansas location brings in 25% of bromine 2021 estimated capacity, if we assign them 175 kT of capacity.
Bromine, Smackover, Lithium Smackover, Bromine extraction, Arkansas
Bromine Capacity (Albemarle)
(Source: Albemarle Slide #26)
Do you think ALB is going to ignore the capability to tap that market much like Standard Lithium is currently endeavoring to do? I think not. Now let's do a bit of guesswork. Given all the locations ALB has world wide, it does not hurt them to expand tried and true processes (like lithium rock extraction or brine), while DLE technology is proven and matures. It hurts them nothing to watch Standard Lithium to see if the technology works, and (if so) mimic it for their bromine operation.
Now realize that ALB has some DLE plans even though they might not advertise it constantly. We can theorize this via "Albemarle to double capacity at Silver Peak lithium brine operation". Note the use of the word "clay" in the below snippet. Clay = DLE in many cases. Per the article:
"Albemarle Corp has confirmed it will expand capacity at its lithium production facility in Silver Peak, Nevada, USA, and begin a program to evaluate clays and other available Nevada resources for commercial production of lithium.
Beginning in 2021, the company plans to invest $30-$50 million to double the current production at the Nevada site by 2025, making full use of its brine water rights. Additionally, the company plans to commence exploration of clay and evaluate technology that could accelerate the viability of lithium production from clay resources in the region this year."
Our good friend Eric Norris, Albemarle President, (whom Hindenburg cherry picked earlier) pops up via:
Eric Norris, Albemarle President, Lithium, said: “As a leader in the lithium industry, our priority is to optimize our world-class resources and production. This includes Silver Peak, a site uniquely positioned as the only lithium-producing resource in the United States.
“This investment in domestic capacity shows that we are committed to looking at the many ways in which Silver Peak can provide domestic support for the growing electric vehicle market.”
When I read "many ways" I translate that as clay to support domestic lithium, and if it is clay that means DLE technology. The majority of lithium clay resource I've seen uses some form or mutation of DLE tech, but wait Hindenburg said DLE is pie in the sky right... right? (Insert Anakin meme). Moving on.
Next Fear Point - Costs
The next avenue of attack is hitting the Standard Lithium project via unnamed "sources". Why not name them so we can see the credentials? Oh well. The conjecture of the unnamed "sources" is costs will be "stunningly expensive". Let's see how expensive the costs will actually be via 3rd party verified NI 43-101 Preliminary Economic Assessment Technical Report. This is a document you will often see via Canadian based mining companies. Consider it a required standard. Can it be off a bit? Sure. Remember, it is preliminary (after all), but typically they are somewhat close to reality (give or take) since it is created by 3rd parties and they have to certify the report. In this case, Worley created the 43-101. You can download the 43-101 and read it yourself rather than go out and party on a Saturday night.
Per the 43-101, we can see
All-in operating costs, including all direct and indirect costs, reagent, sustaining capital, insurance and mine-closure costs of US$4,319 per tonne of lithium carbonate (4)"[4] Includes all operating expenditures, including sustaining capital and allowance for mine closure.
So the estimate is $4,319 costs per ton and selling prices of lithium were modeled at $13,550. Obviously these modeled prices are a bit low now days. Granted, it is a bit hard to nail down what average selling prices are with long term agreements in place by various large lithium sellers (ALB, SQM, etc.) and such, but take the below chart. Subtract a large imaginary number and you are still much higher than the $13,550 SLI was projecting back in the day as prices are approaching $60,000. Again, this does not always mean a company will get $60,000 a ton but you can see that $13,550 is on the low side of the equation.
Lithium, lithium prices, white gold,
Lithium Prices 2017 - Feb 2022 (Daily Metal Price)
(Source: Daily Metal Price)
If you take anything away from this article it should be this: Always sit down and read the entire 43-101. You will not initially understand all of it but the more of them you read the more you will learn. The 43-101 is chock full of valuable data and plans. It is THE blueprint for a project. If you are not reading them then you are at a severe disadvantage in this game of financial Mortal Kombat.
More Nothing Burger Than Nothing
So far, we have covered bogus marketing claims of Hindenburg, then the negligent DLE side of the equation along with unconfirmed cost fears. The next stage of attack is to try to tie the CEO Robert Mintak to various companies and shady actions. Oddly they fail to mention Mr. Mintak was recognized as CEO of the top mining companies on the TSXV50 in both 2016 & 2018.
Here is the thing to note while reading this: Did the CEO commit these actions and then somehow get listed on the New York stock exchange and then somehow magically Koch never bothered to look into management while plopping down $100 million, technical support, and an LOI offtake agreement? Seems unlikely, but what the heck. Let's see what Hindenburg says as it paints a picture to profit at the expense of other investors.
Space Balls
Anyone remember the comedy "Space Balls"? Reading over the Hindenburg report I feel like I'm watching Space Balls via some of the far fetched connections they are grasping at.
Dark Helmet: I am your father’s brother’s nephew’s cousin’s former roommate. Lone Star: So what does that make us? Dark Helmet: Absolutely nothing.
(Source: Space Balls)
Point #1 - Hindenburg says CEO Mintak worked for an IR firm back in 2005 and now (gasp) his former coworker Jeremy Poirier in 2022, at a totally different company (Bearing Lithium), is being investigated by the B.C. Securities Commission for failure to disclose promotional material.
It should be noted that Hindenburg once again displays its apparent lack of knowledge by calling Bearing Lithium (OTCQB:BLILF) "another failed lithium project". I suppose they do not realize that Bearing owns 17.14% of the Maricunga lithium project. The rest of the project is owned by Lithium Power International (OTCPK:LTHHF) at 55.55% and Minera Salar Blanceo at 31.31% (but enough digressions). To wrap up every single error on Hindenburg's part would require a small treatise.
Point #2 - Hindenburg paints:
"Many of Mintak’s ventures, often involving Jeremy Poirier, saw meteoric rises in share price on the back of paid stock promotion, only to collapse just as quickly during major sell-offs. As we will demonstrate, several also came under regulatory scrutiny."
I would not personally call a gold company that Mr. Mintak is a director at a "Mintak Venture" and I do not see any promotion going on at the surface. If we did, we would see a meteoric rise in share price and a collapse. This chart does not meet that definition for ticker GIDMF. All we see is a small penny stock that has drifted down and one might surmise that is why the CEO stepped down.
stock chart, GIDMF, gold, white gold,
Golden Independence Mining Corp (Yahoo Finance)
(Source: Yahoo Finance)
Frankly, the Hindenburg nothing burgers go on and on. I could continue to break this down but frankly it is a waste of my time and your time to continue down this nothing burger hole concerning the CEO.
Land Deals
While Hindenburg goes down a land rabbit hole the real question here is simply this: Does Standard Lithium hold rights to the land claims in Arkansas and to a lesser importance in California? The answer is yes.
Reverse Merger
Why Hindenburg even included this one is a mystery. This one is easy. Shell companies that have a ticker symbol have value. This is Finance 101. Much easier to do a reverse merger than start afresh. Now it is time to shift the article back to reality and look at what the company is actually doing.
Financials Misconstrued
It is not hard to misconstrue financial statements. Now I will not venture if this was a deliberate act or not on the part of Hindenburg. I will leave that to the readers to decide. However per Standard Lithium we can see they made a rather obvious goof up when looking at the math. Per Standard Lithium:
It is claimed in the report that only approximately CDN $ 1.7 mm has been spent on research and development. This figure is incorrect and does not include either the CDN $ 29,409,930 spent on the various pilot and demonstration plants that has been capitalized, or the CDN $ 6,932,598 spent on operating expenses at our pilot and demonstration plant, both of which constitute our ongoing R&D program, and are disclosed as of September 30, 2021 in the Company’s most recent financial statement and the end of year statement as at June 30, 2021.
(Source: Standard Lithium)
$100 Million Dollars Invested by Koch
Now let's get to the good part. I'm talking about the part where you can tell Hindenburg just threw in the towel and almost quipped "missed red flags and failed in its due diligence in its haste to deploy capital." and yet they do not tell us what red flags they missed or what due diligence they failed to carry out. The translation is they do not know and are unable to counter this point.
$100 million was injected into the company via Koch via a direct investment at $7.42 USD a share. Does anyone honestly think a company is going to invest one hundred million dollars without having a thorough understanding of every nut and bolt at a company?
Now the first response the short sellers will offer is to look at project X that Koch put money into and it went down. Yes, this happens to any investor or investing firm. I've had my fair share of companies that I entered too early and lost money (SSD hard drives come to mind ten years ago or GPGPU on graphics cards back in 2006). Point is, I'll bet that the boys at Koch kicked the tires quite a bit before investing $100 million and this does not look like their first foray into the lithium sector.
Koch invests $100 million in Li-Cycle
Koch forms a 50/50 partnership for a battery company w/ FREYR.
Koch invests in charging solutions.
And Koch stands by the due diligence and Standard Lithium via:
Koch responded with this statement: “As with all of our investments, Koch has conducted extensive due diligence and found Standard Lithium’s technology a promising bright spot on the path towards lithium production here in the U.S. We remain excited to continue fostering innovation and growing the battery value chain across the Koch enterprise.”
(Source: Marketwatch.com)
Conclusion & Musings
Short sellers have a role in the market and that is to shed light upon the darkness. Short sellers can uncover financial games and trickery. However one must question the motivations of some short sellers at times when presented with facts. This is one such case in my opinion. Could I be incorrect? Absolutely and that is why you need to trust but verify. Do your own research, read those 43-101 reports and question them too. This way you are educated and when Mr. Market goes loco you will have the knowledge to either roll the dice on options (be it long or short) or even step out for the day. My takeaway is yesterdays sell off is an unjustified reaction to a bogus nothing burger. With time the stock should recover as investors realize this. Hence Mr. Market might be presenting us with an opportunity if our assessment is correct.
This article was written by
Austin Craig profile picture
Austin Craig
6.21K Followers
Disclosure: I/we have a beneficial long position in the shares of SLI, LAC, CYDVF, DJIFF, LITOF either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: We have also bought July $7.50 calls in SLI.
We have sold $7.50 and $5 April puts.
We own LPI (lithium power international on the ASX).
We own Lithium South (LISMF)
We own Dajin on the Canadian exchange under HeliosX (ticker HX).
We own long calls in LAC and have sold covered calls as well.
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Jpsychc
Today, 3:42 PM
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Why do you claim they “received” one of 3 patents when they have zero approved. Two rejected and 1 is not reviewed yet.
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Austin Craig
Today, 3:45 PM
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@Jpsychc It is pending but yes, I should alter that as it could be put in a better way. Minor revision pending. Good catch.
patents.google.com/...
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nottheboss1
Today, 3:34 PM
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Thanks, again, Austin. I didn’t need to wait on your article. Your “lol” comment yesterday was enough for me, and it came in time for me to take action.
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Austin Craig
Today, 3:55 PM
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@nottheboss1 You might be surprised how many people flipped the script on that comment. LOL
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nottheboss1
Today, 3:58 PM
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@Austin Craig - Maybe, they’re like me, and the only thing they wanted to know is “what does Austin think?”
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Splinter007
Today, 3:30 PM
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Mic Drop
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ShortySk8n
Today, 3:19 PM
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I haven't even read this article yet. Thank you so much.
OK, Now that I've read your article. I'm even more thankful. But confused about one thing. These two statements /quotes from your article seem to contradict each other?
1) Note: Everyone in Clayton Valley, except Albemarle (ALB) has gone the DLE route to my knowledge due to extreme lack of water.
2)Hindenburg paints DLE in a negative light via:
"It's more capital intensive and actually consumes a lot more water and energy" - Eric Norris, President of Lithium Division, Albemarle Corporation.
The first says everyone but ALB is using DLE because of the lack of water in Clayton NV. The second says DLE uses more water. So which is it?
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Austin Craig
Today, 3:56 PM
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@ShortySk8n I'm sure to get a few things wrong. Spellling errors, minor article flow problems, pretty much any article an author is going to screw something up.
This was a rather quick article due to popular demand. Typically I like to spend about 2 weeks crafting something.
Today, 3:18 PM
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Austin, Thank you for putting out a report on refuting the Short sellers claims…Great read
Today, 3:17 PM
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And , of course , you see it’s up 16% today. Way to shed some light on the dark side of short selling!
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Rmc7744
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