Lithium miners look to ExxonMobil to transform industry with direct extraction

ExxonMobil Corp.'s move into direct lithium extraction has the potential to revolutionize the lithium industry by drawing more investment from oil and gas players to the sector, mining sources said.

The oil giant is drilling its first lithium well in the Smackover formation in southern Arkansas, targeting first production in 2027, it said Nov. 13. The company aims to supply the lithium needed for over 1 million electric vehicles per year by 2030.

With ExxonMobil's entry, "you're going to see a large number of oil and gas companies move into this space," David Dickson, managing director and CEO of Lake Resources NL, told S&P Global Commodity Insights. "They not only have all the skill set, but more importantly the balance sheet to make it work." Lake Resources is planning to use direct lithium extraction (DLE) at the Kachi project in Argentina.

DLE "has an extremely low environmental footprint ... so why wouldn't Exxon be going heavily into this industry?" Paul Lloyd, managing director of Arizona Lithium Ltd., told Commodity Insights.

"If a company the size of Exxon is going into oil field brines for lithium production, then there must be something really special about that space," Lloyd said. "They're not going to go in there and be half a percent of the market. They're going to go in hard."

Arizona Lithium's Prairie Lithium project in Saskatchewan, which Lloyd said is "very similar" to ExxonMobil's project, has 5.7 million metric tons of lithium carbonate-equivalent resources, with production due in the first quarter of 2025.

Nervous investors

The fact that DLE is yet to be deployed at scale and "is a pretty tough challenge to tackle" has led some to question ExxonMobil's confidence in the technology, Patrick Howarth, lithium global business manager for ExxonMobil Low Carbon Solutions, told Commodity Insights.

The DLE process extracts lithium from brine water and removes impurities to yield high-grade lithium carbonate and lithium hydroxide, rather than relying on evaporation ponds. Many in the mining sector think it has the same potential to cut costs and shorten project timelines as hydraulic fracturing, which ushered in the shale boom for US oil and gas production in the 2000s.

Oil and gas companies are used to dealing with brine as a byproduct of well drilling, completion and production operations, but "the next step of processing the DLE — whether it's ion absorption or solvent extraction methods — is not really an oil and gas thing," Reg Spencer, head of mining research for Canaccord Genuity, told Commodity Insights.

"The mining investment community struggles with [the concept that] the technology works. Whilst a lot of people are nervous, [the oil and gas industry has] been doing this for a long time," said Dickson, who previously led oil and gas service providers Mcdermott International Ltd. and Technip USA Inc.

"[DLE] is all hydrogeology, which is more akin to oil and gas than it is to hard-rock mining," Spencer said. "Investors are concerned anytime anyone talks about a new technology. And until someone can make it work at a commercial scale, there will be cynicism and uncertainty from investors."

Aiming for decades of production

"It's about understanding the process," ExxonMobil's Howarth said, touting the company's pool of "over 2,000 PhDs" that it's able to pull for each step of DLE. "How do you scale it up and integrate it and get it to the point that you can deliver decade after decade of production?"

Various DLE technologies are already being developed. US oil producer Occidental Petroleum Corp. is developing a DLE technique through its TerraLithium subsidiary. And Chevron Corp. is already considering opportunities to extract lithium, which "fits within the core capabilities" of large oil and gas producers, CEO Mike Wirth told Bloomberg News in July.

"DLE is at an inflection point. You've got this wall of new projects coming onstream that are lower cost, higher purity, more sustainable and are backed by oil and gas expertise, including many of the people building our Vulcan project in Germany," Francis Wedin, executive chair of Vulcan Energy Resources Ltd., told Commodity Insights.

Wedin also said that 10% of global lithium chemicals production is already being achieved through adsorption-type DLE, also known as solvent extraction, so "there's no reason for there to be any skepticism at all" about the technology.

"Adsorption-type DLE, combined with oil and gas expertise, is going to make the lithium industry much bigger, more efficient and have greater economies of scale," Wedin said.

Current struggles

Fellow miners embracing DLE have reported challenges on the road to proving the technology.

Rio Tinto Group, which expects DLE to significantly boost lithium recoveries at its Rincon project in Argentina, flagged in July that first salable production would be delayed to the end of 2024 from the first half of that year. It also raised the cost estimate to $335 million from $140 million due to "changes to scope and higher inflation."

Lake Resources has 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 $1.1 billion-$1.5 billion from a 2020 estimate of just $544 million.

Goldman Sachs said in an April note that, "while there may still be challenges around scalability and water consumption/brine reinjection, with the ongoing efforts, DLE could be implemented between 2025 and 2030 in both Chile and Argentina."

DLE "has the potential to significantly impact the lithium industry, with implementation on the extraction of lithium brines potentially revolutionary to production/capacity, timing, and environmental impacts/permitting," Goldman Sachs said.

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