LSB Industries, Inc. Announces Landmark 5-Year Agreement to Supply Low Carbon Ammonium Nitrate Solution

Rhea-AI Summary

LSB Industries (NYSE: LXU) has announced a significant 5-year agreement to supply up to 150,000 short tons annually of low carbon ammonium nitrate solution (ANS) to Freeport Minerals , beginning January 1, 2025. This supply will come from LSB's El Dorado, Arkansas facility and is part of their ongoing carbon capture and sequestration project with Lapis Energy. The project aims to capture and sequester over 450,000 metric tons of CO2 annually, producing more than 375,000 tons of low carbon ammonia. The EPA approval for the project is expected by the second half of 2025, with operations starting in 2026. LSB's President and CEO, Mark Behrman, highlighted the importance of this agreement in supporting industrial and mining customers' decarbonization efforts and positioning LSB as a leader in the global energy transition. Freeport will use the low carbon ANS for its U.S. copper mining operations.

Positive

• 5-year agreement to supply up to 150,000 short tons per year of low carbon ANS.
• Partnership with Freeport Minerals , enhancing market reach.
• Carbon capture and sequestration project with Lapis Energy.
• Expected EPA approval by the second half of 2025.
• Potential production of 375,000 tons of low carbon ammonia annually.
• Positions LSB as a leader in the global energy transition.

Negative

• Project commencement contingent upon EPA approval, which poses a delay risk.
• Operations to start only in 2026, affecting short-term financial outlook.
• Dependence on the success of carbon capture technology and regulatory compliance.

Financial Analyst

LSB Industries' new five-year agreement to supply up to 150,000 short tons of low carbon ammonium nitrate solution (ANS) to Freeport Minerals Corporation contains significant financial implications. The deal represents a steady revenue stream for LSB, reducing market volatility and providing predictable cash flows. Supply contracts of this magnitude often signal confidence in the financial health and operational capacity of the company, reflecting positively on its balance sheet.

Additionally, the long-term nature of the agreement allows LSB to plan better for future investments and operational improvements. With the contract's commencement in 2025, there's ample time for LSB to scale its production capacities effectively. This can also positively affect LSB's credit rating, potentially lowering its borrowing costs.

The carbon capture and sequestration project in partnership with Lapis Energy not only enhances LSB's product offerings but also positions it well within the growing market for low carbon solutions. This sustainability angle could appeal to environmentally conscious investors, potentially driving up the stock’s price. However, the project's success hinges on obtaining EPA approval, which introduces regulatory risk.

Market Analyst

The agreement with Freeport Minerals highlights a growing trend towards sustainable practices within the industrial and mining sectors. By committing to purchase low carbon ANS, Freeport is addressing regulatory pressures and stakeholder expectations regarding carbon footprint reduction. This agreement can be seen as a validation of LSB's strategy to pivot towards low carbon products, aligning with global carbon reduction goals.

For retail investors, this strategic alignment could mean an uptick in demand for LSB's offerings, positioning it favorably against competitors who might not have similar sustainability credentials. The timing of the agreement in conjunction with the anticipated EPA approval suggests that LSB is strategically preparing to capture a significant market share once regulatory frameworks tighten around carbon emissions.

However, investors should consider the phasing in of the contracted volume, which may delay the full financial benefits. The competitive landscape in the low carbon solutions market may also present challenges, with other companies potentially entering the space.

Environmental Analyst

The environmental implications of this agreement are substantial. LSB's partnership with Lapis Energy to capture and permanently sequester over 450,000 metric tons of CO2 annually aligns with broader global efforts to combat climate change. By converting this captured carbon into low carbon ammonium nitrate, LSB is not just reducing its carbon footprint but also creating a marketable product that meets the rising demand for sustainable industrial solutions.

This initiative positions LSB at the forefront of the low carbon product market, potentially giving it a competitive edge as industries increasingly prioritize sustainability. The success of this project could serve as a model for other companies, potentially setting new industry standards. However, the success is contingent on EPA approval, which introduces an element of uncertainty.

For retail investors, the emphasis on sustainability and the clear environmental benefits offer a compelling narrative, supporting the long-term growth potential of LSB. However, it is important to monitor regulatory developments and market reactions closely.

OKLAHOMA CITY--(BUSINESS WIRE)-- LSB Industries, Inc. (“LSB” or “the Company”), (NYSE: LXU) today announced that it has entered into a landmark agreement to supply up to 150,000 short tons per annum of low carbon ammonium nitrate solution (“ANS”) to Freeport Minerals Corporation (“Freeport”). LSB will supply the ANS from its El Dorado, Arkansas facility (“El Dorado”) for 5 years commencing January 1, 2025, with a phasing in of the low carbon contracted volume.

LSB’s low carbon product offering stems from the carbon capture and sequestration project that it currently has underway with its partner, Lapis Energy, who will capture and permanently sequester more than 450,000 metric tons of CO₂ produced annually from El Dorado’s ammonia production. The carbon sequestration is expected to result in more than 375,000 tons of low carbon ammonia that LSB can sell or upgrade and sell to customers in the form of other low carbon nitrogen products, such as ANS. The project is expected to commence operations in 2026 pending approval by the Environmental Protection Agency (EPA) of LSB and Lapis’ Class VI permit application, which the companies expect to receive in the second half of 2025.

“This important agreement validates our belief that our industrial and mining customers will identify the low carbon nitrogen products that we plan to produce as an important part of their decarbonization journeys and value them accordingly,” said Mark Behrman, LSB’s President and CEO. “We view this contract with Freeport as a major step towards attaining our vision of becoming a leader in the global energy transition and look forward to partnering with them as a strategic supplier as they advance toward their net zero aspiration.”

Freeport intends to use the low carbon ANS purchased from LSB for its United States copper mining operations.

About LSB Industries, Inc.

LSB Industries, Inc., headquartered in Oklahoma City, Oklahoma, is committed to playing a leadership role in the energy transition through the production of low and no carbon products that build, feed and power the world. The LSB team is dedicated to building a culture of excellence in customer experiences as we currently deliver essential products across the agricultural, industrial, and mining end markets and, in the future, the energy markets. The company manufactures ammonia and ammonia-related products at facilities in Cherokee, Alabama, El Dorado, Arkansas and Pryor, Oklahoma and operates a facility for a global chemical company in Baytown, Texas. Additional information about LSB can be found on our website at www.lsbindustries.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240522806037/en/

Investor Contacts:

Fred Buonocore, CFA, Vice President of Investor Relations

(405) 510-3550

fbuonocore@lsbindustries.com

Media Contact:

David Kimmel, Director of Communications

(405) 815-4645

dkimmel@lsbindustries.com

Source: LSB Industries, Inc.

FAQ

What is the significance of LSB Industries' new agreement with Freeport Minerals?

The 5-year agreement to supply up to 150,000 short tons annually of low carbon ammonium nitrate solution is a major step towards LSB's vision of leading in the global energy transition.

When will LSB Industries start supplying low carbon ammonium nitrate to Freeport?

LSB will begin supplying the low carbon ANS starting January 1, 2025.

What facility will produce the low carbon ANS for Freeport?

The El Dorado, Arkansas facility of LSB Industries will produce the low carbon ANS.

What is the expected EPA approval timeline for LSB's carbon capture project?

LSB expects to receive EPA approval by the second half of 2025.

How much CO2 will LSB's carbon capture project sequester annually?

The project aims to capture and sequester over 450,000 metric tons of CO2 annually.