North American brines could answer the global call for more lithium

With growing adoption of battery electric vehicles, it is no surprise that global lithium demand is forecast to climb from the current 750,000t to between 3Mt and 4Mt by 2030.

The question of course is how this demand can be met and global management consultancy McKinsey & Company believes that at least one potential source is high quality, lithium-rich brines sourced from existing oil and gas wells in North America.

Lithium brines located in such places, which have resources in the millions of tonnes of lithium carbonate equivalent, are intriguing as all the infrastructure in place from previous oil and gas production can potentially be repurposed for use in pumping brines to surface.

Operators in these regions can also benefit from an existing workforce with experience drilling for the oil and gas industry and policymakers are looking for a new source of royalties.

That this source of lithium neatly meets the US Inflation Reduction Act’s requirement that EV manufacturers seeking up to US$7,500 in tax credits have to source battery materials locally or from free trade agreement partners is just the icing on top of the cake as it could replace supply from excluded countries with greater levels of geophysical risk.

Standout projects

McKinsey highlighted Arizona Lithium’s (ASX:AZL) Prairie project in Saskatchewan, Canada along with Standard Lithium’s Lanxess project and Galvanic Energy’s project in Arkansas.

Galvanic has drawn interest due to supermajor ExxonMobil acquiring the lithium drilling rights to a 120,000 acre area covering the Smackover Formation near Albemarle’s assets in southern Arkansas from the company from US$100m.

This acreage could host some 4Mt LCE, enough lithium to power 50 million electric vehicles.

Likewise, Standard currently operates a demonstration plant that processes brines from the same formation where its sampling has returned an assay of 581mg/L lithium – the highest grade in Arkansas.

Brines from the Smackover Formation have already been pumped in southern Arkansas as a source of bromine, which incidentally also hosts commercial quantities of lithium.

Australian junior has equally big potential

While both Galvanic and Standard have bigger presences with the latter worth C$976n ($1.0778bn), Arizona is no less attractive despite – or perhaps because of – its much smaller market cap of about $115.5m.

Its Prairie project in Saskatchewan currently hosts an Inferred Resource of 4.1Mt LCE at 111mg/L Li, which stands as the highest quality inferred lithium brine resource in Canada, though efforts are underway to upgrade this resource.

The company is expediting development of the project by committing to a larger third phase pilot direct lithium extraction (DLE) plant, which is planned for November, to provide data to help with the scope and design for a commercial facility.

Previous phases of offsite DLE testing have already yielded highly encouraging results with Arizona Lithium evaluating third party DLE providers and developing its proprietary DLE technology in tandem.

DLE has the potential to transform the lithium brines sector as it offers a more sustainable alternative to evaporation ponds.

Adding further interest, work has started on a Pre-Feasibility Study to confirm the internally produced economic model with highly robust economic numbers anticipated given that production costs are expected to be in the bottom quartile of lithium producers.

This article was developed in collaboration with Arizona Lithium, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.