• Serbia revokes Rio’s lithium exploration licences
  • Share prices drop as move seen as major setback
  • Cancellation to lead to greater shortage of lithium- analyst

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.

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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. read more


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 , 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 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. read more

($1 = 6.3425 Chinese yuan renminbi)

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Benchmark lithium hydroxide prices surge to record highs on global demand boom

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

Our Standards: The Thomson Reuters Trust Principles.

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