Tetra Technologies nears decisions on bromine/lithium production in Columbia and Lafayette counties – Magnoliareporter
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Some passing clouds. Low 41F. Winds light and variable.
Updated: November 27, 2022 @ 9:31 pm
The potential for bromine and lithium production in Southwest Arkansas was a major part of Tetra Technologies’ recent third quarter earnings release and conference call with financial analysts.
Tetra Technologies, based in The Woodlands, TX, is not currently a bromine producer itself. However, it does manufacture many chemical compounds from bromine. These include oil well completion fluids and additives, calcium chloride, and water treatment chemicals.
Tetra Technologies has brine leases on thousands of acres that straddle Columbia and Lafayette counties.
Tetra will publish an economic assessment of its bromine assets in December, which will lay out its production plans. A similar assessment for lithium production from the brine is expected in mid-2023.
Typical chemical plants can cost tens of millions of dollars to build, and employ dozens – if not hundreds – of workers. Albemarle Corporation recently announced a $540 million expansion to its brine and bromine facilities in Columbia and Union counties. It will increase its 500-person workforce by about 100. Albemarle also intends to eventually produce lithium in Columbia County.
Tetra Technologies recently “executed exclusive technologies agreements for recycling produced water from oil and gas wells for the purpose of beneficial reuse. These are also key enabling technologies for the extraction of lithium from our Arkansas brine leases, as well as the extraction of key minerals from operators’ produced water – a rapidly increasing interest from our customers,” said Brady M. Murphy, president and chief executive officer.
Murphy said that the results of an earlier inferred resource report for its brine leases were confirmed during the past quarter. It’s estimated that the brine resource underlying the approximately 40,000 gross acres where it holds bromine mineral rights contain about 5.25 million short tonnes of elemental bromine.
The brine resource underlying approximately 5,000 gross acres where Tetra holds lithium mineral rights that are not subject to a lithium option agreement with Standard Lithium – which also has brine leases in the Columbia-Lafayette area — are estimated to have 44,000 short tonnes of elemental lithium.
“We’re currently well into an initial economic assessment for the bromine resource development and production, initially from the 5,000 acres that we expect to complete by year-end. We’re also finalizing our detailed reservoir model and are planning to drill another well on our 5,000 acres in the first quarter of 2023 that we will use to further refine the reservoir characteristics, as well as the estimated lithium and bromine volumes,” Murphy said.
Once the company has detailed reservoir modeling in hand, it will design and position its next well as the first of several production wells from the acreage.
“The initial economic assessment will essentially communicate a business plan and returns on our bromine assets. This will be the first time we will communicate to the market the expected uplift in revenue and margins of bringing this bromine resource to the market,” Murphy said.
Tetra Technologies is continuing work on its own direct lithium extraction (DLE) technology to pull lithium from brine.
“This will involve proving out each step in the process, from the lithium rich brine production from the wells of our Smackover leases, through the DLE and purification process, to the high purity of lithium chloride solution.
“We continue to believe we are in a unique position with a U.S. resource, rich in two key minerals, bromine and lithium, for the energy storage markets, and the ability to produce both minerals from much of the same brine production wells and production infrastructure,” Murphy said.
Tetra is also interested in bromine production because it has bumped against the limits of its annual contracts with suppliers. This forces the company to buy bromine on the more expensive spot market so that it can fulfill production agreements with its customers.
Murphy acknowledged the spot purchases of bromine will affect its fourth-quarter margins.
Elijio V. Serrano, senior vice president and chief financial officer, said anticipated revenues from bromine and lithium production “will allow for a very high conversion of profit before tax and cash flow from operations and to fund some of the expected investments from our low-carbon initiatives.”
“The $1 trillion bi-partisan infrastructure bill, and the $400 billion Inflation Reduction Act that was passed earlier this year, contain several grants and loan programs we believe are applicable to bring critical minerals such as lithium and bromine in the Smackover formation to market, and to build and expand the manufacturing capacity to support battery storage,” Serrano said.
Tetra Technologies is “very engaged” with the U.S. Department of Energy in the grant/loan process, he said.
Regardless, the company expects liquidity of around $100 million at the end of 2022. “We expect to generate significant free cash flow in 2023 and 2024 to fund a significant portion of our expected bromine investment,” Serrano said.
“When we publish the bromine initial economic assessment in December, we’ll essentially be communicating our bromine business plan, with our capital investment and expected returns on capital. We’ll be doing the same in 2023 for lithium,” he said.