The government of Serbia has revoked Rio Tinto's lithium exploration licences following months of protests in the country over environmental concerns, damaging the Anglo-Australian mining company's ambition to become the largest producer of the metal in Europe.
Rio Tinto lithium mine protests, Belgrade, Serbia, 4 Dec, 2021. Credit: Zivko Trikic / Shutterstock
Protesters blocked a highway in Belgrade, Serbia, in protest to Rio Tinto's plans, 4 Dec, 2021. Credit: Zivko Trikic / Shutterstock
The decision comes as Serbia is gearing up for a general election in April, and as relations with Australia have soured following the deportation of tennis star Novak Djokovic on Covid-29 entry grounds.
The government in Belgrade said that it would hold a referendum on the project after election day.
The news comes as a major setback for Rio Tinto. The company was aiming to become one of the world's top ten producers of lithium, an important ingredient in electric vehicle batteries.
The Serbian mine was Rio Tinto's sole lithium project and the company announced last month a deal to purchase another lithium asset for $825 million (€720 million) in Argentina.
Read more: RMF: Rio Tinto's destruction of heritage site is "loss for humanity"
Shares in the company were down 4.1% at the day's closing on the Australian stock market, being down by 5.1% during the trading day. This was its worst drop since August 2021 in the wake of the Juukan Gorge incident, when the company destroyed an ancient aboriginal sacred site during the expansion of an iron ore mine.
The news of the decision came during a press conference in Belgrade by Serbian Prime Minister Ana Brnabic. She told reporters that it was made following numerous requests by environmental groups to stop the $2.4 billion (€2.12 billion) lithium project at Jadar.
Serbia had been rocked by months of protests, with thousands of people blocking roads and demanding Rio Tinto leave the country as well as forcing the local municipality to abandon a plan to allocate land for the facility.
Rio Tinto has said it was "extremely concerned" by the decision and was looking at the legal basis for it.
The Australian government said that it regretted the Serbian decision to revoke the licences.
"We note the strong economic benefits of the significant investment by Rio Tinto in Serbia. Australian resources companies have an outstanding reputation around the world, particularly when it comes to their expertise," Canberra said in a statement to Reuters.
Rio Tinto has already paid around $450 million (€398 million) in pre-feasibility, feasibility and other studies at Jadar in order to understand the deposit's nature, the company said in a project fact sheet published last July.
Last week, the company announced a one year delay for the mine's first production, pushing it back to 2027.
Read more: Serbia rocked by protests against pollution & Rio Tinto lithium mine
The Jadar mine was expected to produce 58,000 tonnes of refined battery-grade lithium a year when running at full capacity, which would have made it the largest lithium mine in Europe by output.
The world's shortage of lithium was already forecast to last for another three years, but the cancellation of Jadar means it could last several more.
Credit Suisse analyst Saul Kavonic told CNN Business that the world is at the point now where lithium supply will set the pace of the rollout of electric vehicles.
The rapidly growing demand has pushed prices for the metal to a record high in recent years. Lithium futures began trading on the CME in May 2021 and since then have skyrocketed by 171% to a record $38 per kg last week, according to data from Refinitiv.
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