Standard Lithium Q1 2025 Earnings Call Transcript

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November 21, 2024

Key Takeaways

  • Received a $225 million conditional grant from the U.S. Department of Energy and partnered with Equinor to de-risk the Southwest Arkansas lithium project.
  • Licensed Coke Technology’s LiPro LSS DLE process exclusively for the Smackover, achieving over 95% lithium recoveries in 10,000 demonstration plant cycles.
  • East Texas exploration returned up to 806 mg/L lithium (average 644 mg/L); reentry of existing wells and a new drill are underway ahead of a maiden resource report next year.
  • Q1 net loss narrowed to $4.8 million from $7.3 million, driven by improved demo-plant efficiencies, lower reagent use and reduced share-based compensation.
  • Ended the quarter with $28.9 million in cash and plans to fund development via offtake/customer financing, low-cost project debt, the DOE grant and selective equity raises.
AI Generated. May Contain Errors.
Earnings Conference Call
Standard Lithium Q1 2025
00:00 / 00:00

There are 9 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Standard Lithium's First Fiscal First Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. It is now my pleasure to turn today's call over to Salah Gamudi, Chief Financial Officer.

Operator

Sir, please go ahead.

Speaker 1

Thank you, and welcome everyone to our fiscal Q1 earnings conference call. Joining me on the call today are David Park, CEO and Director Andy Robinson, President, Director and COO and Mike Farman, Chief Development Officer. As a reminder, some of the statements made during our call, including any forward expectations, company performance and timing of projects may constitute forward looking statements. Please note the cautionary language about forward looking statements contained in our press release, which also applies to this call. I'll now turn the call over to David.

Speaker 2

Thanks, Alain, and thanks to everyone for joining us on the call today. If you are new to the Standard Lithium story, welcome. You joined us at an exciting time for the company as we evolve from a developer to a producer and deliver a low cost environmentally friendly domestic source of lithium to meet the needs of the global energy transition. Today marks just over 60 days of me and the seat as CEO standard. In my many meetings with shareholders, analysts and members of the local community in Arkansas, I've often been asked what tempted me to forego retirement and join the Standard team.

Speaker 2

And my answer is simple. It's a great story where the reality meets the rhetoric. I truly believe we have the right resource in the right place, which we've matched with the right technology and that we've selected the right partners. The team says what they're going to do. As an example, we said we would secure government funding for our projects and we did that.

Speaker 2

We also said we'd find a strategic partner to help execute our projects and we did that. Receiving the $225,000,000 conditional grant from the DOE validated the world class potential of the Southwest Arkansas project and our partnership with Equinor further validated the quality of our Smackover asset as well as the efficacy of our direct lithium extraction process and the expertise of our team. What I found most attractive about Standard Lithium was knowing the people and knowing that this was a group of humble, intellectually honest, hardworking and transparent people that were focused on driving shareholder value. In 2025, we plan on doing just that. We have a handful of milestones expected to be coming in the calendar year, which I'll leave to Andy to address here shortly.

Speaker 2

Now is the time for us to prioritize, focus and execute and bring production online for our shareholders. I'll now turn it over to Andy to discuss the next steps we're taking to continue to derisk our business and move our world class lithium prime projects forward. Andy, over to you. Thanks, David. As you mentioned, we're focused on advancing and derisking our largest and highest grade projects within the Smackover

Speaker 3

formation. Our landmark agreement with Coke Technology Solutions was a key derisking event for our projects. Subsequent to quarter end, we entered into a license agreement to deploy KTS' LiPro LSS technology at our Southwest Arkansas project. As part of the agreement, we have exclusive use of LSS technology in the Smackover and a performance guarantee from Coke, ensuring lithium recoveries of at least 95%. As we mentioned before, the key to unlocking our world class lithium resources in the Smackover is successful commercial execution of our DLE process.

Speaker 3

And the only way to know if your flow sheet actually works is to operate it continuously for long periods of time with large volumes of brine pumped directly from your resource. And we're doing exactly that at our demonstration plant in Arkansas. The LFS process has been run for nearly 10,000 operational cycles at our demo plant with recent commercial scale results exceeding expectations. Lithium recoveries have consistently exceeded 95%, and the rejection of impurities has been truly excellent. Coke's LSS technology and its integration into our flow sheet is proven and now guaranteed to work.

Speaker 3

The commercial scale DLE column at the demo plant is identical to those currently being integrated into the engineering design for the SWA project. We've got field activities now underway for SWA projects, both for additional definition of the quality of the resource as well as project specific process testing, and we look forward to sharing news on those programs in the near future. The Standard and Equinor project team continues to work towards completion of the FEED studies while executing on several parallel work streams. Completion of FEED will be a major milestone for the project. We're currently aiming to wrap up all those studies by mid-twenty 25, the feasibility study that follows soon after.

Speaker 3

Turning to East Texas. We continue to be excited by the potential there, with our most recent drill results yielding lithium concentrations up to 806 milligrams per liter and an average concentration of 6 44 milligrams per liter. Our team is currently working in East Texas to confirm and expand our understanding of this globally significant resource, which includes reentering and sampling our existing wells and drilling 1 new well within our growing land position. We're working on a maiden resource report proportion of our holdings in East Texas, and we hope to be able to deliver that within the next calendar year. And with that, I'll turn the call over to Talan, who will speak to our quarterly results.

Speaker 3

Talan? Thank you, Andy.

Speaker 1

Before I dive into the numbers, I would like to highlight that the figures I'm sharing with you today are in U. S. Dollars. Effective at the start of our fiscal Q1, we have converted our reporting currency from Canadian dollars to U. S.

Speaker 1

Dollars. We have decided to make this conversion in reporting currency as our projects are located in the United States and therefore most of the underlying transactions, assets and liabilities that support our financial statements occur or held in U. S. Dollars.

Speaker 2

As well some of

Speaker 1

our most significant U. S. Focused lithium exploration and production peers report in U. S. Dollars, and therefore, this change should provide greater ease of comparability for our investors.

Speaker 1

For our Q1 ended September 30, 2024, we reported a net loss of $4,800,000 or $0.03 per basic share.

Speaker 4

This compares to a net loss in

Speaker 1

the Q1 of 2023 of $7,300,000 or 0 point share. The reduction in our net loss was primarily driven by meaningful reductions in expenses from our demonstration plant as a result of the great work our operations team has done to reduce reliance on reagents, improve efficiencies through changes in our flow sheet, bringing our personnel in house versus outsourcing and reduced testing applications as we honed in on the use of LSS technology for DLE. We believe these improvements at the demonstration plant will pay dividends on our commercial projects. G and A was reduced by approximately $200,000 despite increasing back office activities and a larger executive team to support moving forward towards FID on Southwest Arkansas as well as expanding and further defining our resources in East Texas. This relatively flat G and A profile is both a result of back office cost sharing via our joint venture and our approach to smart outsourcing, select hiring of key back office leaders in accounting, finance, internal audit and engineering roles, better and more efficient processes and strong attention to cost management.

Speaker 1

You'll notice a meaningful reduction in share based compensation expenses of approximately $1,100,000 This is primarily driven by changes in our compensation structures for both management and personnel that are built for the long term, with longer term vesting schedules of equity based compensation that best align our team with our investors for long term value creation. Moving on to capital sources. We ended the quarter with a very healthy working capital balance of approximately $24,700,000 $28,900,000 in cash. Cash outflows during the quarter were primarily driven by the aforementioned cash basis expense items on our income statement in addition to approximately $2,400,000 in payments made on previously accrued expenses, deriving primarily from legal and advisory fees associated with our joint venture transaction with Equinor, in addition to fees paid associated with the co development of our DLE technology that we plan to use at Stage 1 of our Southwest Arkansas project. As David mentioned at the beginning of the call, we are focused on securing the necessary funding to advance our projects in the coming months and plan to do so in a way that best minimizes our cost of capital.

Speaker 1

For us, this means pursuing funding via 1, offtake and potential customer financing 2, low cost project debt 3, the closing of our conditional $225,000,000 grant with the Department of Energy and 4, parent company level equity financing. Our approach to capital formation prioritizes coupling the de risking of our projects alongside lowering the cost of capital for our shareholders through the thoughtful, measured and strategic pursuit of the most efficient capital sources. David,

Speaker 3

back

Speaker 1

to you for closing remarks.

Speaker 2

Thanks, Salab. While uncertainty regarding lithium demand, price direction and the pace of recovery continues to weigh on our sector, we're focused on what's within our control. For us, that means continuing to derisk and advance our portfolio projects. In the Q1, we did what we said we were going to do and secured a $225,000,000 conditional grant from the U. S.

Speaker 2

Department of Energy for the Southwest Arkansas project. The grant was one of the largest of its kind awarded to a U. S. Critical Minerals project. Now it's time for us to prioritize, focus and execute.

Speaker 2

We look forward to working with Equinor to advance Southwest Arkansas through DFS and FEED and concurrently progress East Texas where we see the potential to develop what could be one of the best lithium resources in the world. We have a team that's focused on building long term value for our shareholders, and we plan to do so by continuing to deliver on our commitments and prioritizing our lowest cost of capital options to finance the next phase of our company's growth. Thank you. Operator, back to you.

Operator

Thank you. The floor is now open for questions. And our first question comes from the line of Greg Jones with BMO Capital Markets. Please go ahead.

Speaker 5

Hi, good afternoon, David and team. Thanks for taking my question. Just in regards to the Arkansas royalty process, what do you envision the next steps to be towards a final outcome there? And at what point does sort of the lack of clarity start impacting the good work that your team is doing on advancing projects and investigating the financings and the overall project schedule?

Speaker 2

Thanks, Greg. Obviously, we're somewhat disappointed that the application wasn't approved on November 5. However, we understand the complexity of the decision for the commissioners and we remain confident that we'll get a satisfactory answer or satisfactory resolution by midyear. And assuming we're able to do so, that should not have an impact on our project schedule.

Speaker 5

Great. Thank you. And with respect to the DOE award, can you maybe provide a little bit of color on how you envision sort of the next steps on that and what might be required to get everything fully contracted and closed?

Speaker 2

Sure. I'll just say that getting the DOE grants finalized is a high priority for both the DOE staff as well as the SLI, the Standard Lithium team. Both sides are motivated to get it done by year end. We are engaged in a regular dialogue with the DOE. And to date, we have found no surprises or constraints to getting this done.

Speaker 2

And we remain confident that we should be able to be final before mid January.

Speaker 5

Okay. Thank you. I'll turn it back to the queue.

Operator

Your next question comes from the line of Joseph Reagor with ROTH Capital. Please go ahead.

Speaker 6

Hey, David and team. Thanks for taking the questions. Greg hit on both the topics I wanted to touch on, but maybe a little follow on to those. On the royalty structure for Arkansas, do you guys have a sense of why they rejected the initial one? The reporting around it suggests that it might be related to not having financial documents.

Speaker 6

I'm assuming that's not from you guys, but maybe from other companies.

Speaker 3

Joe, it's Andy here. I think a lot of the reasons were echoed in the commissioner's sort of closing marks at the hearing, Joe. I think they were looking for a little bit more clarity on sort of benchmarking against other jurisdictions around the globe where lithium products are produced. I think there was a little bit more clarity required on some of the background information for some of the projects. So it was a little bit sort of searching for some additional information.

Speaker 3

But I think if you've sort of followed the hearings, Joe, you would have noticed that the commission has kind of closed out by giving a pretty good steer for the direction of the royalty. I think that was very helpful for sort of all of the co applicants who were part of that submission. And so we're taking our cues from that and sort of, yes, restructuring and thinking about what the next steps are. But I think we've got a very good steer from the commissioners as to the overall direction and magnitude.

Speaker 6

Okay. Fair enough. And then on that second topic of the DOE grant, do you guys have an expectation of what the structure and timing of that might look like, assuming you can finalize by year end? Like when would the cash be available to you? Would it be a payable grant or a free grant, those types of things?

Speaker 6

Or is that what you're negotiating now?

Speaker 2

Why don't I hand that one over to Mike Barmand?

Speaker 7

Hi. So it is so what we've been given now is a conditional award. We're working through the terms and conditions now with the officials over in DOE and MASK. But it is a grant that doesn't require prepayment or repayment, sorry, if that's what the question was.

Speaker 6

Okay. Yes, no, that's good. And then, if for some reason it doesn't get finalized by year end, how long do you guys have into the New Year before the regime changeover in our country would impact the DOE's ability to finalize things?

Speaker 2

I think as a practical matter, if it's not resolved by Inauguration Day, it would likely take a couple of quarters for new people to be in their seats and to get to a final answer.

Speaker 6

Okay. So hopefully by year end, but if not, it's not the end of the world?

Speaker 2

Correct.

Speaker 6

Yes. All right. Thanks. I'll turn it over.

Operator

Your next question comes from the line of Jeff Robertson with Water Tower Research. Please go ahead.

Speaker 4

Thank you. Good afternoon. Exxon has signed 2 memorandum of understanding for offtake agreements for lithium from its Arkansas project. Can you just provide an update on where SLI is with potential offtake customers discussions? And can you add any color around the type of structure that you all would like to see for your project?

Speaker 4

And then lastly on that, is part of those negotiations tied to the royalty discussion for the state?

Speaker 2

So, first off, we have been engaged in a long dialogue, long informal dialogue with a number of potential offtakers for the project. However, we are about to be kicking off a more formal process to have a dialogue, a more structured dialogue with multiple off takers at the same time. We initiated some discussions just last week with a number of them at the Benchmark Lithium Conference. But go forward, our goal is to put in place firm offtake agreements that would then support a project finance process. So I don't know, Andy, if you have anything else to add there?

Speaker 3

No, I think, Jeff, we've been I would say we've been very disciplined over the last few years. I think lots of potential offtake contracts have been available and have been discussed. We always wanted to be very straightforward and put those offtake contracts in place at the right time and with the right structure, to David's point that they were deeply supportive of then the project finance process. We wanted to make sure the 2 are very closely married together because those working together are the things that are going to get us towards FID.

Speaker 2

In other words, you should expect us to be announcing offtake agreements when they are binding agreements as opposed to non binding agreements.

Speaker 1

Okay. Thank you. And can I have a follow-up? I think you

Speaker 4

said you have one exploration well planned for East Texas. Do you can you share when you think that well will or when you think you might have results from that well to factor into your maiden study work you're doing?

Speaker 3

Yes, sure. Actually, the maiden studies are likely going to be based around the resource areas that we have leased where we've actually already drilled some wells, Jeff. So there is going to be some reentry and resampling of those wells during the first half of twenty twenty five. And the data from that reentry resampling work will be fed into those resource statements. The additional well is more exploratory in nature.

Speaker 3

This is in East Texas. And that's in another area that we're currently leasing and expanding significantly.

Speaker 1

Thank you.

Operator

Your next question comes from the line of Noah Parks with Tuohy Brothers. Please go ahead.

Speaker 8

Hi, good afternoon. I just had a couple. One thing I was just thinking about on more of a macro level, there are signs that maybe lithium has been close to bottoming out. And we have seen in sort of the broader Queen Tech universe, we've seen some companies have good customer news or good sort of project news and had pretty impressive runs of their stock and so forth. So if we assume that looking out a year from now that we're in a better place pricing wise than we are now, Just thinking, are there practical implications?

Speaker 8

I'm just thinking what they might be if you do end up looking at a much better price environment in the future. I'm thinking either implications for your CapEx or implications for more on the overhead or your ability to sort of maybe do development on the projects more simultaneously? Just any thoughts about if things get better from here?

Speaker 2

Well, assuming things get better, which we expect they will, we would expect to be there to be more investor interest and in our projects and, as a result, make future capital raises for projects, it would facilitate future capital raises. Don't expect it would impact the capital costs of our projects or our cost structure.

Operator

Okay. Okay, good enough. And

Speaker 8

you I was just thinking, talking about your discussions with off takers and you've been having structured discussions for quite some time. As you go through negotiation with them, I'm wondering what sort of their thinking is on price, whether they're very preoccupied with trying to sort of protect themselves from future pricing volatility or if they're more concerned with sort of logistics and maybe, I guess, like service level guarantees and so forth and sort of not so worried about what market pricing looks like down the road?

Speaker 2

Yes. I think one of the things that happened is the offtake community is very interested in the quality of the project and the probability that the project will actually happen. So key things like quality of your partners, the provenness of your technology, the competitive advantage of or your competitive cost structure are all things that matter a great deal to them. And I believe we've differentiated ourselves from others on those fronts.

Operator

Great. That's it for me. Thanks a lot. This concludes our Q and A and today's conference call. Thank you for joining.

Operator

You may now disconnect.

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