Exxon reaches lithium supply agreement with LG Chem

Exxon Mobil (NYSE:XOM) and South Korean battery parts maker LG Chem said Wednesday they signed a non-binding memorandum of understanding for a multiyear supply contract for up to 100K metric tons of lithium carbonate.

The lithium would be supplied from Exxon’s (XOM) planned project in Arkansas to LG’s cathode plant in Tennessee, which is expected to be the largest of its kind in the U.S.

Exxon (XOM) announced plans last year to extract lithium from the Smackover Formation, an underground brine deposit that stretches from Florida through Arkansas and into Texas, using at least one type of direct lithium extraction technology.

Exxon’s (XOM) move would allow it to incorporate LG Chem’s lithium quality specifications into its design plans.

The agreement would require Arkansas to set a state lithium royalty rate; state officials recently rejected a proposed lithium royalty rate of 1.82% from Exxon (XOM) and others.