Strategy Note /

Serbia stops Rio Tinto's Lithium mine, echo of Chile – renewables reality check

  • Serbia stops Rio Tinto's Jadar Lithium project, which was set to become Europe's largest. Two parts to the context...

  • 1) Serbia politics: Incumbent SNS in power since 2012, lead polls pre-April election but recent anti-government protests

  • 2) Global Lithium: 60 more Jadar-sized mines needed for net zero carbon, many face environmental opposition (eg Chile)

Serbia stops Rio Tinto's Lithium mine, echo of Chile – renewables reality check
Hasnain Malik
Hasnain Malik

Strategy & Head of Equity Research

Tellimer Research
21 January 2022
Published by

Obstacles for new Lithium projects are clearly supportive for Lithium commodity price and the value of existing Lithium operations.

The Serbian government announced a halt to Rio Tinto's Jadar Lithium project on 20 January. This was set to become Europe's largest Lithium mine, with US$2.4bn of capex and 58,000 metric tonnes per annum of battery-grade Lithium carbonate after full ramp-up in 2029.

There are two parts to the context for this event.

  1. Local politics in Serbia — The long-standing incumbent, SNS-led coalition is favourite to win re-election, but has faced protests over the Jadar Lithium project, which, in turn, followed a number of protests mainly over anti-authoritarian concerns over the last couple of years.

  2. Lithium's global environmental challenges — Lithium is a key input for the transition to net zero carbon emissions but its extraction causes irreparable local environmental damage and this event in Serbia is an echo of the recent suspension of new Lithium concessions in Chile.

Serbian general election in April 2022

Serbia has witnessed a recent history of protests against a government seen as authoritarian and well entrenched. The coalition led by the Serbian Progressive Party (SNS) has dominated government since 2012.

Anti-government protests have been sparked by various issues, most recently environmental opposition to Rio Tinto's Jadar Lithium project.

The last parliamentary election in 2021 was boycotted by the opposition and turnout dropped to 49%, compared to 56% in 2016. Media freedom is ranked 93rd out of 180 countries globally by Reporters Without Borders.

The coalition of fragmented leftist and rightist parties opposition was dissolved in 2021 and the SNS-led coalition are still comfortably ahead of any challengers (as long as the opposition remains divided).

The revocation of the Jadar project is presumably motivated by its desire to avoid any electoral challenge from a consolidated opposition.

Of course, whether the project's termination is reviewed should the SNS secure another mandate, after the April general election, remains to be seen.

Serbian Progressive Party (SNS) coalition dominates

Global Lithium's environmental paradox

On the one hand Lithium is a key input needed for the global transition to net zero carbon emissions because of its use in rechargeable batteries (eg electric vehicles), but on the other, its extraction via ore mining or evaporation of underground saltwater, causes irreparable local environmental damage.

Lithium demand growth dominated by electric vehicles

Lithium supply is currently dominated by Australia, Argentina, Chile, and China, but there are many others with as yet untapped reserves, eg Bolivia and, much lower down the scale, Serbia.

Lithium supply mainly from Australia, Chile, China, Argentina

Rapid demand growth (for many years beyond mere normalisation post-Covid) is driving Lithium commodity prices higher and underpinning the investment case in new projects.

Lithium commodity price double pre-Covid level

However, development risks are clearly high, given most existing developed and untapped resources are in countries with relatively democratic political systems, where populist concerns cannot be interminably suppressed.

Lithium untapped potential in Bolivia et al (including Serbia)

This U-turn in Serbia by the well-entrenched government in response to protests and heading into an election is an echo of the same popular environmental cause which, in Chile this month, led to the suspension of Lithium concessions for 80,000mtpa in aggregate, awarded to China's BYD and local Servicos y Oeraciones Meras del Norte, following legal appeal by Indigenous communities.