U.S. Lithium Exploration and Development Projects: Low Commodity Prices and Other Challenges: Fed Bank of Dallas Report

     I have been working occasionally on a very large post about the North American lithium industry, and I recently came across a very informative report by the Federal Reserve Bank of Dallas about U.S. lithium projects, which I will summarize in this post.

     The report identifies and compares 66 U.S. lithium projects, most in the early stages of development. Several are currently under construction and could increase U.S. lithium output tenfold by the end of the decade. Whether this happens is dependent on several factors, including the ability to scale up the projects, lithium prices, which are currently quite low, and the permitting snafus that often affect mining projects, especially in the U.S.

     The report classifies the lithium projects into four types: hard rock, clay, brine, and direct lithium extraction (DLE), which also comes from brine. 25 projects, mostly in Nevada, involve mining lithium from clay. These involve mining from sedimentary rocks, soils, and brines with high lithium concentrations. 21 projects involve direct lithium extraction (DLE), which is a set of new technologies that can extract lithium from brines without the use of evaporation ponds. This eliminates the significant environmental problems associated with those ponds. The only operating lithium mine in the U.S., Silver Peak in Nevada, uses evaporation ponds. These projects are of several types. Hot mineral-rich geothermal brines in the Salton Sea area of Southern California are a major U.S. lithium play. These resources are being co-developed along with geothermal power plants for an added revenue stream. Those brines are also rich in other minerals that can be extracted alongside lithium. Deep, underground brine in Utah and Nevada is also being developed for DLE, although some are being developed with evaporation ponds as well. Oilfield brines, or produced water, basically oilfield wastewater, are also being targeted with ongoing and new DLE projects in Northeastern Pennsylvania, North Dakota, and West Texas.   

     One of the major DLE lithium plays is the Smackover brine in Southern Arkansas, Northern Louisiana, and East Texas. There, wells have been drilled into the brine that show very high lithium concentrations, close to or exceeding those of the Lithium Triangle area in South America’s Chile, Argentina, and Bolivia. ExxonMobil, Chevron, and Norway’s Equinor are involved in the Smackover lithium play. That region also benefits from a long history of extracting minerals from brines as well as available drilling and producing infrastructure.

     Below is a chart of the stages of U.S. lithium projects, which may take ten years or more to be fully developed. Most of the 66 identified projects, 38 of them, are in the initial stages of development and will be subject to the limitations of resource estimates and lithium market prices.

“Most projects that advance beyond this first stage subsequently release increasingly detailed reports. These range from a resource estimate, a precursory estimate of the size and quality of the resource, to a definitive feasibility study, which provides numerous details about the project, including expected capital costs and profitability. Only 10 percent of the projects identified are currently at that stage.”

     Since many of these projects are in the West and on federal lands, they are subject to additional timelines for permitting and approval, and subject to the possibility of environmentalist-driven litigation, which can delay projects considerably. There is also difficulty in securing financing as investors weigh the resource potential and market projections. After a project reaches a final investment decision (FID), the project construction timeline can be several years.

     Thacker Pass, an open-pit clay mine in Nevada, is one of three projects currently under construction. It expects Phase One production of up to 40,000 tons of lithium annually in late 2027. This will be significant since current U.S. production is just 4,000 tons annually. Two smaller projects in East Texas and Pennsylvania are expected to begin production in 2026 with a combined estimated rate of less than 10,000 tons per year. Other projects could come online by 2030, but these are less certain, according to the report. If built and once producing, these projects could produce an additional 100,000 tons per year. However, as noted below, we would still likely need to ship lithium to China for the processing of intermediate products.

“Importantly, these projects are often designed to produce the specific lithium chemicals used in lithium-ion batteries, lithium carbonate or lithium hydroxide, rather than intermediate lithium products. These intermediate products, such as lithium chloride, would require additional processing, likely requiring shipment to China and exposure to the very supply chain many sponsors hope to avoid.”

     One major hurdle is lithium market prices, which have fluctuated wildly over the last few years but are now quite low. Will the prices be enough to develop these projects? That is a major uncertainty. At current prices, the revenue is not enough to cover operating expenses, let alone upfront costs. Low lithium prices have also led to slower development of these existing projects. Some mines outside of the U.S. are currently shut-in due to low prices. This is another example where economic feasibility rules viability.

     Upfront costs for clay and hardrock lithium mines are into the billions, and long payout periods are expected, which makes future profitability questionable.  

     Government support is key, acknowledging the need for domestic critical mineral production. Chinese critical mineral leverage is also a concern.

“Government support could prove decisive in determining which projects move forward and, therefore, to what extent U.S. production grows. Indeed, federal interest in securing domestic production has already shaped the industry through billions in subsidized loans and grants and with policies intended to boost demand for domestically produced lithium.”

“Recent policy shifts have led to some retrenchment but have also introduced the possibility of new forms of assistance, such as price floors or direct capital investment in firms. Financial support of this type, or additional loans or grants, could materially shift the direction of U.S. production levels, especially if lithium prices remain low or companies encounter difficulties scaling up projects focused on unconventional resources.’

“This support, of course, is not a free lunch in the economic sense. Instead, it builds in a trade-off between the more uncertain outcomes and relatively higher costs associated with domestic lithium production versus the potential insurance against the risk of future lithium supply chain disruptions.”

     

 

References:

 

Rush for U.S. lithium production encounters tough economics. Michael Plante and Isabelle Tseng. Federal Reserve Bank of Dallas. October 14, 2025. Rush for U.S. lithium production encounters tough economics - Dallasfed.org