There is Limited Upside to Leasing for Lithium in S. Arkansas

By | April 15, 2024

The hot play of 2023 was the Lithium leasing play in South Arkansas. That play focuses upon Exxon’s involvement as well as the high, but since fallen, price of lithium.  The Lanxess project indicates that it is economy to extract lithium from the tail waters of the nearby Great Lakes bromine facility.

The bromine is extracted from produced water in the depleted wells of the old El Dorado play of the 1920s. It requires a lot of acreage and the plant recycles the water from the Smackover formation, which are known to be some of the heaviest mineralized brines found in America.

Today, Exxon has a lot of mineral rights in the region due to the purchase of Mobil, who owned many of the early mineral rights via its acquisition of other companies from decades ago.  So they have a potential to develop the extraction of lithium from the wells. And, are in the best areas (the old depleted fields) to develop.

Today, speculators are leasing a lot of acreage north of the area, and in areas that have no proven potential to be developed for lithium. And lithium has to have a processing plant to extract the mineral. No easy feat for sure, and certainly an expensive proposition. Therefore, these speculators are taking a far more dangerous speculation than they may think.

Further, the royalties are going to be set by the state and will be an annual fee per acre. There will be no big payouts. Regardless production, the landowner will only get that annual check, which is something similar to $60 an acre per year currently. Simple math suggests that the mineral right will be limited to a couple hundred dollars in exchange (sold.)