Serbia’s Rio smash dents EU electric-car dream

LONDON (Reuters Breakingviews) - Novak Djokovic has clawed one back against Australia. A week after authorities in Canberra deported the Serbian tennis ace, Belgrade nixed a $2.4 billion lithium project run by Anglo-Australian mining giant Rio Tinto,. The decision puts Serbia’s reputation as an investment destination on the line, along with Europe’s dream of securing local supplies of raw materials for electric-vehicle batteries.

Demonstrators from environment groups hold banners as they block the streets in front of a government building during a protest against Rio Tinto's plans to open a lithium mine, in Belgrade, Serbia, December 18, 2021.

The battle over the Jadar lithium mine in western Serbia has been brewing for months, with green groups and communities complaining about potential contamination of local rivers. Djokovic sided with the protesters in an Instagram post in December, raising the stakes for Prime Minister Ana Brnabic, who faces an election in April. The volleys of bad-tempered rhetoric between Serbia and Australia over the star’s Covid-19 vaccination status further reduced her room for manoeuvre.

The 3% drop in the $120 billion group’s shares on Friday morning looks an overreaction, though. Rio should be able to smooth things over with the government after the election while addressing local concerns with plans for more rigorous treatment of mining waste. The cost to Serbia of leaving Jadar’s 2.3 million tonnes of lithium carbonate in the ground forever is probably too great. Rio reckons the project would deliver a 4% bump to the Balkan country’s $60 billion economy.

Still, the spat is a setback for Rio Chief Executive Jakob Stausholm, who is desperate to shift the company away from the iron ore that currently accounts for two-thirds of its revenue, towards metals like copper, cobalt and lithium that are central to a decarbonised global economy. Based on current lithium prices, Jadar’s 58,000 tonnes of projected annual production would have yielded $2.2 billion of revenue. That’s around 5% of Rio’s long-term forecast top line, according to analyst estimates compiled by Refinitiv.

Companies like Volkswagen, which is investing 30 billion euros in plants to make batteries for electric vehicles, will also be watching nervously. Even though Australia and Chile are the world’s top producers of lithium ore, Chinese companies control 80% of supply of the refined metal. Jadar would loosen that grip by producing enough to power a million cars a year from the 119 billion euro auto giant’s doorstep. The six-fold jump in lithium prices since mid-2021 points to a serious supply crunch. For Europe’s auto industry, Djokovic may have made matters worse.

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- Serbia on Jan. 20 revoked Rio Tinto’s lithium exploration licences, bowing to pressure from environmental protesters opposed to a mine proposed by the Anglo-Australian resources giant.

- Prime Minister Ana Brnabic described the decision as “an end” for the $2.4 billion Jadar lithium project, which would have made Rio a top 10 producer of the metal, an important ingredient of electric-vehicle batteries.

- At full capacity, the mine was expected to produce 58,000 tonnes of refined battery-grade lithium carbonate per year, enough for more than a million electric vehicles.

- Rio said it was “extremely concerned” by Serbia’s decision, which comes ahead of a general election in April, and was reviewing its legal basis.

- Rios’ Australia-listed shares fell as much as 5.1%. Its London-listed shares were down 3% at 54.09 pounds by 0900 GMT on Jan. 21, against a 1% decline by Britain’s blue-chip FTSE 100 index.


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