Column: US targets scrap to close the critical minerals gap
As the US government is discovering, investing in new scrap processing capacity is far cheaper and greener than building new mines.
After the destruction of ancient caves in 2020 led to global embarrassment and a management clean-out, the newly appointed chief of Rio Tinto Group was betting the development of a massive lithium project would be key to a fresh start. His plan is now in tatters.
On Thursday, Serbia Prime Minister Ana Brnabic cited environmental concerns for her government’s decision to put a “full stop” on the bid by Rio’s chief executive, Jakob Stausholm, to develop Jadar, Europe’s biggest lithium mine. “Everything is finished,” she said. “It’s over.”
Serbia’s decision is a blow to Stausholm, who after winning the helm just over a year ago said he was aiming to win back trust for the world’s second-largest miner among host communities in the wake of the fiasco at Juukan Gorge. Those remote caves in Australia’s Outback were used by Indigenous people for an estimated 46,000 years until being blown up to create a new iron ore mine.
Read more: Ancient sites, sacred snake raise risks for Australian resources
With Jadar now scuppered, Stausholm will be well aware the company is still facing a handful of complex issues including streamlining its reshuffled management ranks, intensifying scrutiny of its corporate governance, and handling sensitive local relationships not just in Australia but in Mongolia and the U.S. state of Arizona.
Rubbing salt in his wounds, Serbia’s announcement came on a day where larger rival BHP Group won shareholder backing for one of its own big strategic shifts.
The scrapping of the lithium project caps a “very challenging” first year in charge for Stausholm, according to Peter O’Connor, an analyst at Sydney-based Shaw & Partners Ltd.
“The company is underperforming with social governance, internal culture and operations not doing as well as they should,” O’Connor said on Friday, adding that improving its environmental, social and governance performance will take time and “the Serbia project just showed how hard this is.”
After winning the leadership in December 2020 amid increased pressure on Rio Tinto from investors on environmental and social policies, approving the $2.4 billion Jadar project last July was one of Stausholm’s first major decisions.
Although initially not expected to start production until 2026 at the earliest, the move seemed like a slam dunk for the new chief and was welcomed by battery makers who need increased supplies of lithium amid a surge in demand.
But Rio Tinto failed to convince the western Serbian community that Jadar wouldn’t be like the polluting lithium mines of old. Thousands of protesters took to the streets in December urging the government not to allow the project to proceed, amid a growing controversy that was seized on by both environmentalists and opposition politicians.
Read more: The world wants more lithium but doesn’t want more mines
Rio isn’t alone in facing increasing opposition from local populations and governments in developing projects, even as miners around the world scurry to expand supply.
Southern Copper Corp. is struggling to get government support for a controversial $1.4 billion project in Peru, and Lithium Americas Corp. was taken to U.S. federal court over its planned mine in Nevada. And back in Serbia, protesters are demanding an unconditional ban on lithium exploration and mining by any company, not just Rio Tinto.
As well as creating fresh revenue-creation challenges for the London-based company, Serbia’s decision will add to the supply-side risks in an already-tight lithium market: prices of the raw material crucial for making batteries to power an electrified world have smashed records during the past year. Brnabic didn’t respond to questions on whether the government would allow lithium mining in the future.
Meanwhile, BHP on Thursday won shareholder backing to unify public holdings, part of a strategic change under its new chief executive, Mike Henry. Both London and Australian investors overwhelmingly approved the move, according to a statement from BHP on Thursday.
“Investors have confidence in BHP’s strategies in how they can take the company forward and unleash the potential,” O’Connor said. “In contrast, Rio does not have much organic growth opportunity and the Serbia opposition highlights the risks to their growth profile.”
(By Annie Lee)
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