On August 31, 2026, Smackover Lithium signed a long-term purchase agreement to supply LG Energy Solution with 8,000 tons per year of battery-grade lithium carbonate. The agreement runs for 10 years starting after commercial production begins, and follows a take-or-pay structure, meaning certain payment obligations apply even if actual offtake falls below the contracted volume. Combined with a similarly sized agreement signed with Trafigura in March, the total contracted volume now stands at 16,000 tons per year.
What this reduces is the risk that the lithium carbonate planned for production will go unsold. The plant for the South West Arkansas Project (SWA Project) has not yet been built, and financing along with the final investment decision (FID) have not been completed. The company's characterization—"about 90% of the purchase agreement target"—raises the question of exactly how much distance to commercial production this narrows. Checking the denominator reveals both how the contract functions and what conditions remain.
8,000 Tons a Year for a Decade, Starting After Production Begins
What LG Energy Solution is purchasing is lithium carbonate from the planned SWA project in southwest Arkansas. LG Energy Solution operates seven production sites in the United States, three of which are wholly owned. According to the announcement, most of these sites already have production capacity for lithium iron phosphate (LFP) batteries.
On the supply side, Smackover Lithium is a joint business brand operated by Standard Lithium and Equinor. Standard Lithium holds a 55% stake and Equinor 45%, with Standard Lithium serving as project operator. The venture combines subsurface resource expertise developed through oil and gas development with lithium separation technology, but this announcement does not change the ownership split or roles between the two companies.
In North America, rising electricity demand has driven growing deployment of stationary battery storage systems, and LG Energy Solution cited the need to source LFP battery materials domestically as the backdrop for this agreement. The lithium carbonate involved is said to meet the requirements for not being classified as a Prohibited Foreign Entity (PFE) under US regulations. However, the company has not disclosed which plants the material will be shipped to or how it will be allocated between stationary storage and electric vehicle applications.
While the agreement is binding, the start date for supply is not fixed on a calendar. The condition is "after commercial production begins," meaning that if Smackover Lithium's targeted 2029 production start is delayed, the timing of procurement would shift accordingly. Pricing, price adjustment formulas, and termination conditions are also confidential. As a result, the total contract value cannot be calculated from publicly available information.
The Denominator Behind ~90% Is Not Annual Production Capacity
Smackover Lithium's policy is to sell "about 80%" of its initial design annual production capacity of 22,500 tons through long-term contracts. The combined contracted volumes from LG Energy Solution and Trafigura total 16,000 tons per year. Against the sales contract target of 18,000 tons—which represents 80% of the 22,500-ton annual capacity—this amounts to 88.9% (expressed by the company as "about 90%"). Against total annual capacity, however, it represents only 71.1%.
The approximately 90% figure uses as its denominator not the plant's full production capacity, but rather the portion the company had already decided to allocate to long-term contracts. Moreover, since the target itself is "about 80%," the 88.9% figure was calculated using 80% as a convenient round number. Smackover Lithium intends to sign one more smaller contract to fill the remainder, but the counterparty and volume have not been finalized.
Still, the 16,000-ton contract carries meaning. Smackover Lithium explains that purchase agreements serve as important material for determining the scale, term, and repayment structure of financing. When future sales volumes are visible, lenders can more easily evaluate revenue projections. What has moved forward here is not production capacity, but rather the demand-side conditions needed to secure financing for the project.
Direct Lithium Extraction: 15,000 Cycles and the Distance to Commercialization
The SWA project plans to pump brine from the underground Smackover Formation and use direct lithium extraction (DLE) to selectively separate lithium. After refining, the lithium would be converted into battery-grade lithium carbonate, with the spent brine returned underground. The US Department of Energy's final environmental assessment anticipates processing up to 200,000 barrels of brine per day, along with a central processing facility, five well pads, and associated piping.
The technology employed is Aquatech's selective sorption process. Standard Lithium reported that its demonstration facility in El Dorado, Arkansas, processed 1 million barrels of brine from the Smackover Formation and ran DLE for more than 15,000 cycles. According to company-published figures, lithium recovery exceeded 95%, and removal of key impurities exceeded 99%.
This track record supports the process design and operational experience using actual brine. However, the El Dorado demonstration facility and the commercial facility with 22,500 tons of annual capacity are not the same thing. The recovery and removal rates are also performance metrics set by the company, not figures that prove continuous operation or annual production volumes at a completed commercial plant. For DLE to move from technical demonstration to mass production, the remaining steps include building the facility, maintaining performance during startup, and consistently shipping lithium carbonate that meets contract quality standards.
After Securing Buyers, Financing, Investment Decision, and Construction Remain
The initial capital expenditure for the SWA project is estimated at $1.449 billion. While the US Department of Energy is supporting initial-stage construction with $225 million, the more than $1 billion in financing interest that Smackover Lithium announced represents expressions of interest under review by three export credit agencies. This does not mean financing agreements have been signed or funds disbursed.
With sales agreements now in place, the project developer has an easier case to make regarding demand. Even so, whether a final investment decision can be reached within 2026 depends on financing terms and decisions by equity partners. After that decision, construction and commissioning must follow before commercial production is finally reached. Only after that point would the 8,000-ton annual contract begin.
Therefore, 2029 should be read not as a guaranteed year of supply, but as a current process target. Once the final investment decision and financing agreements are finalized, the next steps—construction start date, construction progress, and recovery rates and product quality at the mass-production facility—can be verified against reality. Only when these conditions are met will this long-term purchase agreement transform into an actual supply chain delivering US-produced lithium to LFP batteries.