Smackover Lithium and LG Energy Ink Decade-Long Supply Agreement

LG Energy Solution (KRX:373220) signed a binding 10-year take-or-pay agreement to secure 80,000 metric tons of battery-grade lithium carbonate from Smackover Lithium, cementing the developer's second major offtake contract.

The total supply volume will provide enough cathode material to produce batteries for approximately 1.8 million high-performance electric vehicles capable of driving over 500 kilometers on a single charge.

Smackover Lithium will extract the material using low-carbon direct lithium extraction technology. The localized production network complies with US Inflation Reduction Act guidelines and strict restrictions on Foreign Entities of Concern, allowing LG Energy Solution to bypass reliance on Chinese chemical suppliers.

The transaction addresses rapid expansion within the North American energy storage market and prioritizes regionalized production for cathode materials used in lithium iron phosphate batteries.

LG Energy Solution currently operates or is constructing eight production facilities across North America, aiming to establish a closed-loop local supply chain spanning raw material extraction to final cell manufacturing.

Pricing and precise commercial terms within the agreement remain confidential. However, the partners structured the contract to support debt financing for the Arkansas asset.

The joint venture continues to advance due diligence processes with three major Export Credit Agencies, which previously indicated interest in providing over US$1 billion in project debt.

Smackover Lithium is a joint venture formed in May 2024 by Canadian developer Standard Lithium (TSXV:SLI,NYSEAMERICAN:SLI) and Norwegian energy producer Equinor (NYSE:EQNR).

“The Agreement further anchors our customer offtake portfolio, complementing the contract with Trafigura we announced in March of this year, and is another major milestone in the development of the SWA Project,” said Standard Lithium CEO David Park. “We have now secured a vast majority of the offtake agreements needed to move forward with our Project financing plans and a Final Investment Decision.

The LG Energy Solution contract, combined with the earlier Trafigura agreement, locks in commitments for roughly 90 percent of the project’s 22,500-metric-ton initial annual capacity.

The company also recently entered into an engineering, procurement, construction and commissioning agreement with S&B Engineers and Constructors for the site's Central Processing Facility.

The work package represents approximately two-thirds of the project’s estimated capital expenditure, finalizing the key construction vendor contracts required before the developers take a Final Investment Decision.

As for LG Energy, the agreement builds on previous deals that include a 100,000-ton lithium supply contract with Chile’s Sociedad Quimica y Minera (SQM) (NYSE:SQM) and a 1.75 million-ton lithium concentrate agreement with Australia’s Liontown (ASX:LTR,OTCPL:LINRF).

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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.