South West Arkansas is being developed as a domestic source of battery-grade lithium carbonate.
By Penny Langford
LG Energy Solution has signed a binding 10-year, take-or-pay agreement to purchase 8,000 metric tonnes of battery-grade lithium carbonate annually from Smackover Lithium, adding a major U.S. supply commitment to the South West Arkansas project.
Deliveries are expected to begin in 2029, after the project reaches commercial production. Smackover Lithium, a joint venture between Standard Lithium and Equinor, expects construction to begin in 2026 following a final investment decision.
The agreement gives LG Energy Solution access to a planned domestic source of lithium carbonate for its North American battery operations while providing Smackover Lithium with a long-term customer commitment for its first commercial development in the Smackover Formation.
Under a take-or-pay structure, LG Energy Solution remains obligated to pay for contracted volumes even if it does not take the full physical quantity, subject to the agreement’s terms. Pricing and other commercial conditions were not disclosed.
Deal terms at a glance
| Item | Details |
|---|---|
| Buyer | LG Energy Solution |
| Supplier | Smackover Lithium, a Standard Lithium-Equinor joint venture |
| Product | Battery-quality lithium carbonate |
| Annual volume | 8,000 metric tonnes |
| Contract term | 10 years |
| Total contracted volume | 80,000 metric tonnes |
| Project | South West Arkansas lithium project |
| Extraction method | Direct lithium extraction and purification |
| Construction | Expected to begin in 2026, subject to project milestones |
| First deliveries | Expected from 2029 |
| Pricing | Confidential |
The agreement was announced by LG Energy Solution on Aug. 31. Standard Lithium separately identified the contract as the second binding customer offtake agreement for the South West Arkansas project.
U.S. lithium supply chain
The South West Arkansas project is located near Magnolia and Lewisville in southern Arkansas, close to the Texas and Louisiana borders. According to Standard Lithium’s project description, the wider development area covers about 30,000 acres of brine leases.
The first phase is focused on the Reynolds Brine Unit and is designed to produce 22,500 tonnes per year of battery-quality lithium carbonate. Standard Lithium owns 55% of Smackover Lithium and operates the joint venture, while Equinor holds the remaining 45%.
LG Energy Solution’s contract covers about 36% of the project’s planned initial annual capacity. Together with an earlier agreement with commodities trader Trafigura for another 8,000 tonnes per year over 10 years, contracted volumes would total 16,000 tonnes annually.
Smackover Lithium has said those two agreements represent roughly 90% of the total offtake volume it is targeting for the initial phase. That calculation is based on a target of securing customers for approximately 80% of the project’s 22,500-tonne annual nameplate capacity.
Trafigura’s March offtake announcement said its deliveries would also begin at commercial production. The agreement covers 80,000 tonnes over the 10-year period.
The project is expected to combine brine production with a central lithium processing facility.
Direct lithium extraction remains central
Smackover Lithium plans to recover lithium from underground brines using direct lithium extraction, or DLE, followed by purification and conversion to lithium carbonate.
Unlike conventional hard-rock mining or large evaporation ponds, DLE is designed to selectively remove lithium from brine using specialized materials and processing equipment. The treated brine can then be handled separately, although the environmental performance of any commercial plant will depend on its water management, energy use, chemical inputs and operating results.
Standard Lithium’s project materials say the South West Arkansas facility would be among the first commercial-scale DLE operations in the United States. The company has reported field-pilot testing of a lithium-selective sorption process and says the testing was used to support engineering and vendor qualification.
The project’s feasibility work anticipates a central processing facility and a network of brine wells. Standard Lithium has reported a planned initial production capacity of 22,500 tonnes per year and a modeled plant operating life of at least 20 years, although those figures remain subject to project execution and operating performance.
The company’s South West Arkansas technical overview also identifies construction timing as dependent on a final investment decision. The project has completed front-end engineering design and a definitive feasibility study, but a final investment decision, financing, permitting and construction remain important milestones before production can begin.
Why the agreement matters for LG Energy Solution
LG Energy Solution said the agreement will help it secure a locally produced cathode material for lithium iron phosphate, or LFP, batteries used in electric vehicles and energy-storage systems.
The battery manufacturer operates seven production facilities in the United States, including three standalone sites, according to its announcement. It said U.S.-produced lithium carbonate from Arkansas would help connect domestic raw-material sourcing with battery manufacturing in North America.
That integration has become more important as battery manufacturers face tighter scrutiny of mineral origin, processing locations and ownership structures.
The Inflation Reduction Act established incentives tied to North American manufacturing and the sourcing of critical minerals from the United States or eligible trading partners. Subsequent rules and policy changes have also increased attention on foreign-entity restrictions, supply-chain tracing and documentation.
LG Energy Solution described the material from Smackover Lithium as meeting non-Prohibited Foreign Entity, or non-PFE, requirements. That is the company’s characterization of the planned supply. It does not, by itself, establish eligibility for every federal credit or incentive, since eligibility can depend on the final supply chain, product use, ownership, processing steps and applicable rules at the time of production.
The agreement nevertheless shows how regulatory requirements are influencing procurement decisions. Battery manufacturers are seeking supplies that can be traced through extraction and processing while reducing exposure to disruptions in overseas markets.
DLE projects must demonstrate consistent recovery and product quality at commercial scale.
Project milestones and risks
The agreement is a commercial milestone, but it does not remove the development risks facing the South West Arkansas project.
The next major step is a final investment decision. Smackover Lithium expects construction to begin in 2026 after that decision, with first commercial production and deliveries targeted for 2029.
Several issues will determine whether that schedule holds:
- Financing: The project will require substantial capital for wells, pipelines, processing equipment and supporting infrastructure. Smackover Lithium has said the offtake agreements are structured to support anticipated project financing, but financial close has not been announced.
- DLE scale-up: Pilot performance does not guarantee commercial operating results. The project must demonstrate reliable lithium recovery, brine handling, impurity control and product quality over sustained operations.
- Permitting and construction: Wellfield development and processing infrastructure must be completed in sequence, with delays in procurement, permitting or site work capable of affecting the delivery schedule.
- Customer qualification: Battery-grade lithium carbonate must meet the specifications required by cathode and battery manufacturers. Product qualification and consistency will remain important as the project advances.
- Policy compliance: U.S. supply-chain benefits depend on continued compliance with applicable rules governing critical minerals, foreign entities and domestic content.
LG Energy Solution and Smackover Lithium did not disclose a purchase price or minimum annual payment under the contract. The companies also did not provide details on the allocation of the material between electric-vehicle and energy-storage applications.
A larger test for U.S. lithium production
The agreement links a planned Arkansas lithium operation with one of the world’s largest battery manufacturers at a time when the United States is trying to expand domestic critical-mineral production.
For LG Energy Solution, the contract offers a long-term source of lithium carbonate that is geographically closer to its North American manufacturing network. For Smackover Lithium, it provides a second anchor customer and increases the proportion of planned first-phase output tied to commercial agreements.
The remaining test will be execution. Construction, financing, DLE performance and product qualification must all progress before the 2029 delivery target can be met.
If the project reaches production as planned, the LG Energy Solution agreement would deliver 80,000 tonnes of U.S.-produced lithium carbonate over a decade. That volume would represent a modest share of global lithium demand, but it would give a major battery producer a defined domestic source for a material central to the North American energy-storage and electric-vehicle supply chain.
For broader market context, Skillings’ analysis of lithium brine development examines how project scale, processing technology and long-term supply agreements are reshaping the lithium sector.
