Sonali Paul

MELBOURNE, Reuters – Rio Tinto shares tumbled Friday following the Serbian revocation of its exploration licenses for lithium. This was due to environmental concerns and hurt Rio Tinto’s plans to be Europe’s biggest supplier of this metal.

Serbia has taken this decision as it nears a general elections in April and after relations between Belgrade, Canberra and Serbia have soured following Sunday’s expulsion of Novak Djokovic (Australia) over COVID-19 entry regulations.

Rio was also disappointed by the decision. It had been hoping that the project would allow it to become one of 10 world’s largest lithium producers, an important ingredient in battery manufacturing.

Rio has the only lithium mine, and just one month ago, it announced a deal for an $825 million purchase of a second lithium assets. This is as part of its plans to expand its battery materials business.

Rio’s share closed at 4.1%, after losing as much as 5.1% to the Australian stock exchange. It was its largest intra-day decline since August 2021. The benchmark index fell 2.3%.

Ana Brnabic, Serbia’s Prime Minister, stated that she took the decision after being asked by several green groups to stop the Jadar lithium project worth $2.4 billion. It was due to begin production in 2027.

In protest of Rio Tinto’s support of the project last year, thousands blocked roads. The local municipality was forced to cancel a plan to allocate land.

After ties between Australia & Serbia fell apart, tennis star Djokovic had to be deported days before he was allowed to play in the Australian Open.

Djokovic supported clean air in an Instagram Story posted December 1st, captioning a photo of anti-mining protests. The post was published on digital platform The Bridge.

Users of Twitter (NYSE:) joked about Rio’s deportation from Serbia.

The Australian foreign ministry did not immediately comment.

Rio expressed concern about the Serbian decision, and said that it was reviewing the legal grounds.

Rio spent US$450 million on Jadar studies, feasibility, and pre-feasibility to better understand the deposit’s characteristics, Rio stated in a July project statement.

“Over the last six-months, opposition has intensified.” Credit Suisse Saul Kavonic, an analyst at SIX, spoke about the Jadar mine.

Kavonic stated that “we’ve been stressing for some time now that there would be approximately $2 per share at risk” if the government cancelled it.

Rio has pushed back Rio’s timeline to produce the first Jadar product by one year, from 2027. This was due to delays in approvals.

‘EVEN GREATER SHORTER’

Jadar’s mine could produce up to 58,000 tonnes annually of lithium carbonate, which would make it Europe’s most prolific lithium mine.

“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 (OTC:)’s head of global metals and mining M&A.

The shortage will continue to grow for lithium and other vital and important battery materials.

Experts predicted that the global shortage of lithium would last at most for three more years. However, with the Jadar project being cancelled, this shortfall will now be for many years.

Kavonic stated that “we’re now at the point where lithium supply will set the pace for electric vehicle rollout.”

In recent years, lithium prices reached record levels due to robust global demand that has outpaced growth of supply.

The record-breaking $38/kg price of lithium futures that began trading on CME’s May 2013 have seen a 171% jump according to Refinitiv data.

China’s cash price of lithium hydroxide monohydrate is at an all-time high of 262,500 Yuan (41,387.47 per tonne), up more than 400% over a year.

According to the state planner, restrictions on purchasing new energy vehicles such as EVs would be removed gradually in a vigorous push for “green consumption.” This will likely increase lithium demand.

($1 = 6.3425 renminbi)