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Pantera Lithium (ASX:PFE) believes its Smackover project will be significantly derisked by the Arkansas Oil and Gas Commission endorsing a lithium royalty structure for brine-based lithium projects within a geological unit of the same name.
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The royalty will first be applied to the Standard Lithium–Equinor joint venture, but will also set a critical commercial precedent for all developers with projects in the Smackover Formation, including Pantera.
This royalty is expected to boost the company’s project economics in two ways: Firstly, through the protection of early-stage economics by requiring the royalty be paid only upon the sale of lithium carbonate or equivalent final product, not at the point of extraction; this would also ensure downstream margin retention.
Additionally, a royalty of 2,5% is relatively competitive and materially lower than royalty structures in other lithium brine jurisdictions, which will also improve the project economics for many companies operating in this area.
The setting down of this framework will also remove uncertainty about royalties – a boost when it comes to engagement with investors, who will also be able to see how the framework works for global lithium players.
This is expected to strengthen Pantera’s position in discussions with infrastructure, offtake, and capital market partners.
Executive chairman and CEO Barnaby Egerton-Warburton said this decision would support the company significantly.
“The AOGC’s endorsement of a structured lithium royalty is a gamechanger for Pantera and all serious developers in the Smackover Basin,” he said.
“We now operate in a regime that offers clarity, fiscal stability, and policy support for lithium as a critical mineral.”
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He added: “Combined with the Arkansas State enacting legislation to stimulate the industries growth by offering a temporary severance tax exemption that will mean lithium producers are exempt from the state’s severance tax on saltwater brine from July 1, 2028, through June 30, 2033 — a six-year tax holiday that further enhances the economic potential of Pantera.”
PFE has been trading at 1.4 cents.
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