Toxic mining combinations

Despite a poor record, the latest mining + oil experiment is underway in the red-hot business of lithium where some of the world's biggest oil companies have started dabbling.The mining + government problem area is potash where a second Australian mining adventure with strong government involvement has unwound spectacularly with last week's collapse into insolvency by one-time high-flyer Kalium Lakes.Lessons from history?Lithium has caught the eye of oil companies because one of its primary production routes is through the processing of metal-rich brine (salt water) which is similar to processing oil liquids and is a vast an improvement for an oil company on trying to bulldoze its way into the earthmoving business.Back in the 1970s and 80s big oil companies such as BP and Exxon invested in a variety of mines, including the big Australian copper and uranium project at Olympic Dam which was launched with the help of BP's mining arm Selection Trust.But after a few difficult years the culture clash of oil and mining proved too much, as did the relatively low returns on minerals compared with the fatter and faster profits from oil which spewed cash from the day the spigots were opened.Most oil companies quit their mining deals, just as most mining companies quit oil with BHP the last to exit when it offloaded its petroleum business two years ago after heavy lobbying by US investment funds which particularly dislike the oil and minerals mix.Different this time?This time around, investors are being told it is different (a famous warning if ever there was) because the lithium and oil are naturally combined in a liquid form ready for separation using a technology such as Direct Lithium Extraction (DLE).Exxon, though its subsidiary Imperial Oil, is leading the way in Canada in a joint venture with E3 Metals which is exploring for lithium in Alberta (E3 starts drilling Alberta's first lithium well, MJ, June 27).Chevron, Occidental and Equinor are also looking closely at lithium which not only can be produced using liquid processing tools but has the appeal of being an energy metal favoured in renewable technologies which might burnish the polluting reputation of an oil company.Time and testing will prove whether the lithium + oil experiment holds water (sorry), though that is likely to be just the start of trying to prove that lithium is an easy fit for an oil major like Exxon which might not be dabbling in lithium as a simple business opportunity but also as part of a reputational clean-up.Kalium LakesKalium Lakes, one of the early movers in Australian potash, was placed in the hands of insolvency experts after failing to post profits from its Beyondie project located deep in the outback and based on a theory that potash could be extracted from the top of dry salt lakes.Apart from the traditional Australian problem of high costs caused by working over long distances the potash business also suffered from an inability to get machinery to work as promised with high wage costs and a COVID-caused shortage of workers compounding the challenge.Rather than becoming a new industry for Australia the outback potash experiment has become a graveyard which is causing problems for government because of loans advanced in the name of remote area development.First project with a government loan to fall over was Salt Lake Potash which collapsed last year owing $47 million to the Australian Government's Clean Energy Finance Corporation.Kalium Lakes, from what's been reported so far, owes the Government's Northern Australia Infrastructure Fund (NAIF) $54 million and the German Government, through its export finance agency KfW $79 million.If it was just money owing to government agencies the failure of Kalium Lakes would be treated as a brave try; shame it didn't work out.However, claims published in Australia's leading business newspaper, The Australian Financial Review, today, mean that there's now a possibility that the NAIF may be investigated for its role in the collapse of the companyThe upshot is that the Beyondie project is not working as promised and is likely to be sold at a bargain basement price which is what happened to Salt Lake Potash, while one arm of the Australian Government (ASIC) considers whether to investigate another arm of government (NAIF) for overstepping its role as a financier or lender of last resort.Some things really were never meant to mix.

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