El Dorado, Arkansas.

From a distance, it looks like any other small town that has seen better days. The population has been slowly shrinking since the 1970s, sliding below 18,000 as of the last census. So you can expect to see a few signs of decay: shuttered store windows. Derelict gas stations. Peeling paint on long-dead restaurants.

That’s not to say it’s a ghost town. Winner of the Great American Main Street Award in 2009, El Dorado has charming downtown boutiques and eateries, the historic Rialto Theatre, a small airport, and a lively arts and entertainment district.

Still, despite restoration efforts, the town feels a little faded and worn. It’s certainly not the bustling industrial hub that it once was. Named for Spanish explorers who passed through the area centuries ago, El Dorado’s earliest source of wealth wasn’t gold, but timber. It was the discovery of crude oil in 1921, though, that turned the sleepy little settlement into a true boomtown.

Much like the California gold rush 70 years earlier, the promise of riches lured thousands of workers and speculators. Almost overnight, the local population exploded from 4,000 to 30,000. Shortly after, even larger oil reservoirs were found 15 miles north in nearby Smackover. Within six months, approximately 1,000 wells were drilled — at an incredible 92% success rate.

Keep in mind, this was long before the introduction of computer-aided geophysical seismic surveys and other modern tools. Still, producers extracted 69 million barrels in 1925, making southern Arkansas the nation’s No. 1 oilfield — the Permian Basin of its day. That bonanza gifted the local economy with the finest furniture and automobiles.

But by the 1930s, oil output had begun to taper, giving way to a broiling saltwater brine. The boom was over. Nearly a century later, the only real reminders of the region’s oil-soaked past are museums and historical markers.

But I’m not telling you all this out of nostalgia. You see, another renaissance is at hand. Because this part of the country has been geologically endowed not only with abundant hydrocarbons, but also massive underground reserves of another untapped resource dubbed as the “oil of the 21st century.”

Yes, I’m talking about lithium.

This critical mineral has many uses, but its true utility stems from some rather unique physical properties. Lithium is the lightest of all metals (it floats on water) and has twice the energy storage density of other materials. That ideal combination is coveted by battery makers.

You’ve probably got lithium compounds within arm’s reach. They are found in just about anything that needs to be recharged. Not just phones, but power tools, tablets, golf carts, portable video games and countless other products.

Global annual production of handheld lithium batteries surpassed 5 billion units a decade ago and is showing no signs of stopping. Of course, electric vehicles (EV) need far more, about 17 pounds on average — equivalent to 270 laptop computers and 2,700 mobile phones.

And don’t forget about power grid infrastructure. Renewable power standards continue to hasten the installation of new wind and solar power projects, but these intermittent sources of electricity can’t generate when night falls or the wind dies down. There’s an acute need to store that power until it needs to be distributed to homes and businesses.

What better way than banks of lithium-ion batteries?

All these applications have a hungry appetite for lithium. Yet, the United States accounts for a scant 1% of the world’s supply. Most comes from briny pools in Chile’s Atacama Desert or hard rock ore mining in Australia. Meanwhile, China has a 60% stranglehold on downstream refining infrastructure.

If politicians can agree on anything, it’s that we need to reduce dependance on foreign sources and advance domestic production. Along with cobalt, titanium, and other metals, lithium has been named on the government’s list of critical materials.

You can understand why.

Fortunately, homegrown supplies are there for the taking.

The Saudi Arabia of Lithium
It’s long been known that southern Arkansas has a treasure trove of natural resources. When oil first began to run dry, producers quickly made the switch to bromine, which also gushed to the surface in large quantities. Toxic in raw form, bromine is widely used in pesticides and flame retardants.

Multinational chemical companies such as Albemarle (NYSE: ALB) set up shop decades ago and continue to churn out about 250,000 tons of the stuff per year. That accounts for nearly one-quarter of the world’s entire supply. About $3 billion or so in yearly revenues for something that was once considered a worthless byproduct.

But the future belongs to its briny sibling: lithium.

Not long ago, the U.S. Geological Survey (USGS) conducted an extensive survey of this area to get a better understanding of the high-grade briny deposits in this ancient limestone seabed. The resulting headline figure was shocking.

The so-called “Smackover Formation” contains between 5 and 19 million tons of lithium.

Let’s be clear, that is just a rough estimate of the potential resources in place, not a proved reserve figure. It’s too soon to tell how much is economically recoverable — especially since new direct lithium extraction (DLE) techniques are still largely untested.

But even at the low-end of 5 million tons, this discovery won’t just satisfy domestic usage and eliminate the need for imports. According to the International Energy Agency (IEA), it would be enough to meet 2030 global EV battery demand nine times over.

Figures vary widely by source (and whether you’re looking at raw or refined materials). But one trusted supply chain research publication is forecasting annual global lithium carbonate equivalent (LCE) consumption to double over the next five years.

The International Lithium Association (ILA) sees global demand hitting 2.8 million metric tons by 2030. That consumption could possibly overtake supply growth and create a deficit. With 19 million tons, Smackover could help fill that gap.

For context, that’s more than double the size of the Atacama Desert, which is thought to hold 9 million tons. Better still, these brines are less acidic than other domestic sites (such as California’s Salton Sea) and less environmentally taxing than the rock blasting, crushing, and leaching that occurs in the open pit mines of Nevada.

They are also highly concentrated, making extraction easier and more efficient — and thus more profitable. That explains the land rush we’re seeing. Exxon Mobil (NYSE: XOM) has already sunk $100 million to plant its flag here, acquiring a 120,000-acre parcel.

It has already broken ground and plans to use DLE techniques to strip out lithium ions, which will then be treated on-site to remove impurities and form battery-grade lithium hydroxide. Exxon Mobil expects to produce enough lithium to manufacture 1 million car batteries per year.

But what’s another million to Exxon?

If you’re interested in a smaller pure-play, then consider Exxon’s next door neighbor Standard Lithium (NYSE: SLI).

Standard Lithium may have a mailing address in Vancouver, but its future lies squarely in the Smackover Formation. Through a series of joint venture partnerships, the company has multiple projects underway across the region and a deep-pocketed financial backer in Equinor (NYSE: EQNR), Norway’s state-owned energy producer.

It has also been awarded a $225 million grant from the Department of Energy. That cash, funded through the Infrastructure Investment and Jobs Act, is earmarked for a new processing facility — in keeping with the government’s desire to foster the supply chain of critical minerals.

Standard’s flagship southwest Arkansas project holds 1.5 million tons of potential resources. It occupies prime real estate right between Exxon Mobil and Albemarle. Once fully operational, the site is expected to initially deliver 22,000 tons of battery-grade lithium hydroxide annually and eventually scale up to 45,000 over its 20-year lifespan.

Operating expenditures are projected to average just over $2 per pound, or $4,500 per ton. That’s quite lean and would rank within the lowest quartile of the industry’s cost curve.

The future cash flows from the sale of this lithium, discounted back into today’s dollars, have a net present value (NPV) of $1.7 billion, assuming a sales price of $22,000 per ton — less than half of the 2022 peak. Keep in mind, that’s just one site; the company is developing others in nearby east Texas.

These projects are still in the early stages and will take time (and over $1 billion in development capex) to bring online. And as I mentioned earlier, direct lithium extraction (DLE) is still a work in progress. However, once optimized, Goldman Sachs believes DLE has the potential to be “revolutionary.”

This is where Standard has an edge. Specifically, it has been given exclusive regional access to a proven proprietary technology called Lithium Selective Sorption (LSS). This technique was developed by privately-owned Koch Industries, which, incidentally, is Standard’s largest shareholder.

Koch commissioned and installed a large-scale LSS unit last year that has since run 12,000 cycles and processed 35 million gallons of Smackover brine. The results speak for themselves: 99% of contaminants were removed and 97.3% of the lithium was recovered.

When I first recommended SLI in November 2024, I saw the stock returning to previous highs above $4 per share. It has since soared more than 200%, closing yesterday at $4.62. Yet, Standard Lithium’s high-grade assets are still underpriced at a market cap of just $1 billion.

As one of the few large-scale, homegrown lithium suppliers, Standard stands ready to capitalize on the country’s escalating demand for this versatile resource.