Friday, January 21, 2022

Rio Tinto shares plunge as Serbia pulls plug on $2.4 bln lithium project

CONTRIBUTOR
Sonali Paul 
Reuters
PUBLISHED
JAN 20, 2022

CREDIT: REUTERS/DAVID GRAY
The mine is Rio's only lithium project and the company Rio, builds its battery materials business for $825 million, as it looks to build its battery materials business.


MELBOURNE, Jan 21 (Reuters) - Shares in Rio Tinto tumbled on Friday after Serbia revoked its lithium exploration licences over environmental concerns, hurting the Anglo-Australian miner's ambition to become Europe's largest supplier of the metal used in electric vehicles.

The move by Serbia comes as the Balkan country approaches a general election in April, and as relations between Belgrade and Canberra have soured after Sunday's high-profile deportation of tennis star Novak Djokovic from Australia over the latter's COVID-19 entry rules.

It is also a major setback for Rio RIO.L, RIO.AX, which was hoping the project would help make it one of the world's 10 biggest producers of the lithium, a key ingredient in batteries and much in demand in the electric vehicle boom.

The mine is Rio's only lithium project and the company announced just a month ago a deal to buy second lithium asset for $825 million, as it looks to build its battery materials business.

Rio's shares fell as much as 4.8% in the Australian stock market, its worst intra-day drop since August 2021. The benchmark index was down 2.1% at 0324 GMT.

Serbian Prime Minister Ana Brnabic told a news conference in Belgrade that the government's decision came after requests by various green groups to halt the $2.4 billion Jadar lithium project that was planned to start production in 2027.

Australia's foreign ministry has no immediate comment on the decision.

Rio said it was "extremely concerned" by Serbia's decision and was reviewing the legal basis for it.

"The level of opposition to it (Jadar) has really ratcheted up over the last six months," said Credit Suisse analyst Saul Kavonic.

"We've been highlighting for a while now there would be about $2 a share at risk if the (Serbian) government cancels it," Kavonic said.

Thousands of people blocked roads last year in protest against the government's backing of the project, demanding Rio Tinto leave the country and forcing the local municipality to scrap a plan to allocate land for the facility.

Earlier this week, Rio had pushed back the timeline for first production from Jadar by one year to 2027, citing delays in key approvals.

LITHIUM SHORTAGE TO WORSEN

At full capacity, the Jadar mine was expected to produce 58,000 tonnes of refined battery-grade lithium carbonate per year, making it Europe's biggest lithium mine by output.

"There aren't that many projects like Jadar, and the Western world is not going to have its own supply chain if these are not developed," Sam Brodovcky, Standard Chartered's head of global metals and mining M&A.

"There will be an even greater shortage of lithium and other critical and battery materials."

Experts said the world's shortage of lithium had been forecast to last for another three years at least, but with the cancellation of the Jadar project, the shortfall will now last for several years.

"We're at the point now where lithium supply is going to set the pace of electric vehicle rollout," Kavonic said.

Robust global demand for the metal far outstripping supply growth has pushed lithium prices to a record in recent years.

Lithium futures LTHc1, which started trading on the CME in May last year, have jumped 171% to a record $38 per tonne on Thursday, according to Refinitiv data.

In China, cash prices of lithium hydroxide monohydrate AM-LIOH0008-LHM are trading around a record 262,500 yuan ($41,387.47) per tonne, up by more than 400% from a year ago.

Its state planner said on Friday that restrictions on purchases of new energy vehicles including EVs will be gradually removed in a "vigorous" push to promote "green consumption," a move likely to further increase demand for lithium.

($1 = 6.3425 Chinese yuan renminbi)

Benchmark lithium hydroxide prices surge to record highs on global demand boomhttps://tmsnrt.rs/3GJNHky

(Writing by Praveen Menon; Editing by Kenneth Maxwell and Raju Gopalakrishnan)

Serbia scraps planned Rio Tinto lithium mine after protests


BELGRADE, Serbia (AP) — Trying to defuse large protests by environmentalists, Serbia’s populist government said Thursday that it was canceling all licenses for mining giant Rio Tinto to open a lithium mine in the Balkan country.
© Provided by The Canadian Press

“We have fulfilled all the requests of the environmental protests and put an end to Rio Tinto in the Republic of Serbia,” Serbian Prime Minister Ana Brnabic said in a televised address. “Everything is finished. It’s over.”


Used in batteries for electric cars, lithium is considered one of the most sought-after metals of the future as the world shifts to more renewable energy sources.

For several weekends, thousands of demonstrators in Belgrade and other Serbian towns have blocked main roads and bridges to protest the planned mine in western Serbia, despite an intimidation campaign by authorities. Opponents say the project would cause severe environmental damage.

The protests posed the biggest challenge yet to the increasingly autocratic rule of President Aleksandar Vucic, who has denounced the road blockades as illegal and claimed they are being financed from abroad to destabilize the country.

Brnabic said all the licenses granted to Rio Tinto, which has been exploring mining possibilities in the country for about two decades, were provided by the previous, pro-Western government.

But Serbia's independent media allege that the main contracts with Rio Tinto were signed with the current right-wing leadership. Critics argued that by sidelining Rio Tinto, the government is doing damage control ahead of April general elections.

Earlier Thursday, Rio Tinto in a statement expressed “concern” over reports that the project would be scrapped.

The company said any decision should be accompanied by “discussion and dialogue based on facts.” It added that it is dedicated to developing the project in accordance with Serbian and international regulations.

“We are not afraid of Rio Tinto,” Brnabic said. “We are here for our people and our country. They can do whatever they think they should do. This is the final decision of the government of the Republic of Serbia. "

It is widely believed that Serbia, which formally seeks European Union membership but instead has been forging close ties with Russia and China, may want to hand over the lithium mining to China by sidelining Rio Tinto from the project in which it has pledged to invest $2.4 billion.

Throughout its almost 150-year history, Rio Tinto has faced accusations of corruption, environmental degradation and human rights abuses at its mining sites.

Environmentalists are also upset at the Serbian government’s lack of response to rising pollution in the country.

___

Jovana Gec contributed to this story.

Dusan Stojanovic, The Associated Press

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