- The hunt for lithium is, obviously, the attempt to stop the planet boiling from fossil fuel use
- The environmental movement appears to get confused about this at times, as Rio Tinto is finding out in Serbia
- Yes, save the planet, but don’t dig a hole here – Nimby is a problem for miners
Rio Tinto PLC’s (LON: RIO) share price won’t be hit very much by this news out of Serbia concerning lithium. But it does highlight a problem that all miners have concerning the environment. The Nimby (“not in my back yard”) and Banana (“build absolutely nothing anywhere near anything”) movements are powerful things. Even when considering the need to wean the planet off fossil fuels and replace them with renewables and electric vehicles.
This is the problem that Rio has run into with its Serbian lithium prospect. Rio Tinto has put the Loznica lithium project in Serbia on hold. Not because there’s any doubt that there is lithium there, or that it can be extracted, but because the process of licencing and permission is being constrained by environmental complaints against the very idea of a mine being placed there.
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Jadar, as the deposit itself is called – Loznica is the place it’s near – is an interesting deposit containing lithium. It passes the usual economic tests and Rio Tino has committed $2.4 billion to develop it. It would, on completion and full production about a decade out lead to Rio being one of the world’s major lithium producers. Given the possible demands for lithium batteries, this could well be most profitable.
However, the locals – quite possibly egged on by varied environmental NGOs – seem to be unhappy about a big hole in their backyard. Well, that’s their privilege of course.
From all of this, we should probably be taking two lessons.
The first is that this isn’t really material to the Rio Tinto share price right now. The potential revenues from Jadar/Loznicka are far enough away in time – and small enough even then compared to Rio’s gross revenues – that there’s not much of that value in the current share valuation. If Rio were a junior miner and this were the only prospect then of course the effect would be substantial. But Rio’s share price is going to be driven by the iron ore and copper prices more than this lithium project.
The second is that our current system now has a further barrier to miners. There’s the usual worry about finding a deposit that’s worth mining, the costs of proving that to the necessary legal and economic standards. Then there’s that usual worry over what everyone else is doing – if every lithium mine currently planned comes to fruition the market price is going to be rather lower than most are assuming. But over and above all of that, we’ve got this question of what are the NGOs – or perhaps the locals unprompted – going to have to say about that appearance of a large hole?
Rio Tinto’s problems at Loznicka or Jadar aren’t a huge problem for Rio Tinto. But they are a signifier of the increased risk that all miners face in this more environmentally aware world.