Why Standard Lithium Stock Sank on Thursday

Standard Lithium (NYSEMKT: SLI) was the subject of investor interest on Thursday, thanks in no small part to an important operational update. Although the stock traded nearly 7% higher at one point during the trading session, it ultimately deflated to a nearly 3% loss on the news. Meanwhile, the S&P 500 index landed in positive territory, closing up by 0.4% on the day.

An important fee agreed

Before market open, Standard announced that Smackover Lithium -- a joint venture between it and Norway-based energy company Equinor -- has won approval for a 2.5% royalty rate on a project in Arkansas.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Image source: Getty Images.

A royalty rate is the fee that is paid to holders of an asset where a good, such as lithium, is mined. That 2.5% rate will be in force for the Reynolds Unit for phase 1 of Smackover's play stretching across Arkansas' Lafayette and Columbia counties.

In the press release announcing the news, Standard didn't hesitate to mention that this is the first royalty rate for lithium derived from brine approved by the Arkansas Oil and Gas Commission (AOGC).

The royalty is to be dispensed to the brine owners, who will also receive an additional "brine fee," totaling just over $65 per acre annually. Standard said that this will bring the total proposed royalty consideration up to roughly 3%.

Every step is important

It's important to note that this is only an early phase of Smackover's project and, particularly considering that Standard hasn't yet launched mining at scale, it must be considered speculative. That might be what ultimately drove the stock down, as investors like it when a company puts its money where its mouth is, rather than reporting news of agreements or fees.

Still, this does mark an advancement in Standard's business, so perhaps that bearish market response was unwarranted. The company is certainly moving in an encouraging direction, and hopefully for shareholders, it can continue doing so.

Should you invest $1,000 in Standard Lithium right now?

Before you buy stock in Standard Lithium, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Standard Lithium wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $651,761!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $826,263!*

Now, it’s worth noting Stock Advisor’s total average return is 978% — a market-crushing outperformance compared to 170% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 19, 2025

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Equinor Asa. The Motley Fool has a disclosure policy.