The mining industry may be witnessing a seismic shift following ExxonMobil Corp.’s entry into lithium mining in the US. The company’s move could be a signal of growing interest from the oil and gas industry into green energy initiatives, with some branching into solar, wind, and nuclear.
In November, oil giant ExxonMobil announced plans to produce lithium in southern Arkansas, with a goal to achieve initial production by 2027 and aims to supply lithium to over 1M electric vehicles (EVs) annually by 2030.
The US currently only produces a small amount of lithium, though, several mining companies are looking to produce more of the white metal in places like Arkansas, California, Nevada, and North Carolina.
Exxon has commented that thousands of depleted oil wells drilled over the last century could eventually be rehabilitated to produce lithium. Dan Ammann, president of ExxonMobil Low Carbon Solutions said lithium is essential to the energy transition.
“This landmark project applies decades of ExxonMobil expertise to unlock vast supplies of North American lithium with fewer environmental impacts than traditional mining operations,” Ammann said.
The main difference lies in the method of extraction and technology, focusing predominantly on extracting lithium from saltwater (brine) deep underground. This process has more in common with oil production than digging holes and crushing rocks commonly found in most mineral mining practices.
CEO of Lake Resources NL, David Dickson, suggested that ExxonMobil’s entry into lithium mining might encourage others to follow suit. “You’re going to see a large number of oil and gas companies move into this space,” he commented to S&P. “They not only have all the skill set, but more importantly the balance sheet to make it work.”
Drawing on its expertise in geology, drilling, hydraulic fracturing, and chemical production, ExxonMobil plans to utilize the direct lithium extraction (DLE) method, which involves using solvents or membranes to produce lithium from brine. This approach is touted for its faster processing and greater water efficiency compared to traditional mining methods.
While oil and gas companies are familiar with handling brine as a byproduct of their operations, the processing techniques involved in lithium extraction present new challenges. Reg Spencer, head of mining research for Canaccord Genuity, notes that “the next step of processing the DLE — whether it’s ion absorption or solvent extraction methods — differs from typical oil and gas practices.” However, he acknowledges that the oil and gas industry’s experience in similar processes could give them an advantage.
Recently enacted legislation, such as the Inflation Reduction Act, has provided additional incentives for increased lithium production, battery manufacturing, and EV assembly in the US. However, establishing new mining operations and processing plants domestically is anticipated to be a time-consuming process.
Rio Tinto Group, which expects DLE to significantly boost lithium recoveries at its Rincon project in Argentina, flagged in July that first saleable production would be delayed to the end of 2024 from the first half of that year. It also raised the cost estimate to US$335M from US$140M due to “changes to scope and higher inflation.”
Lake Resources has also demonstrated battery-grade lithium carbonate production at 99.8% purity on a consistent basis for nine months, yet first production from Kachi has been delayed to 2027 from 2024. The company announced in June that the estimated capital cost for Kachi had ballooned to US$1.1B-US$1.5B from a 2020 estimate of just US$544M.
While some question the confidence in DLE technology, the process offers a low environmental footprint and cost-cutting potential similar to hydraulic fracturing. Last year, investment bank Goldman Sachs compared the potential impact of DLE with the technologies which turned shale into an important source of oil and gas.
“Much like shale did for oil, DLE has the potential to significantly increase the supply of lithium from brine projects,” Goldman Sachs said in a report titled: DLE: A Potential Game Changing Technology.
Early trials of DLE have been encouraging, but what ExxonMobil is proposing is a substantial increase in anything currently operating.
Goldman Sachs estimates that conventional brine projects yield between 40% and 60% of the lithium in liquid with final production taking months and sometimes years. DLE yields should be between 70% and 90% with production in hours to days.
Hardrock lithium production, favoured in Australia, the world’s biggest lithium producer, operates between 60% and 80% yields with production taking weeks to months
ExxonMobil’s entry into the lithium mining industry signifies a noteworthy development for the company and the sector. Other major oil companies, including Chevron and Occidental, have also shown interest in investing in lithium mining, recognizing the potential growth and significance of the emerging lithium market.
While the price of lithium has experienced recent declines due to increased supply and slower growth in the EV market, industry experts anticipate a potential shortage by the end of the decade, which could lead to higher prices.
