After the destruction of ancient caves in 2020 caused global embarrassment and management cleansing, Rio Tinto’s new chief bet developing a massive lithium project would be the key to a fresh start. His plan is now in tatters.
On Thursday, the Serbian Prime Minister Ana Brnabic cited environmental concerns for his government’s decision to put a “full stop” on the Rio chief executive’s offer, Jacob Stausholm, to develop Jadar, the largest lithium mine in Europe. “It’s all over,” she said. “It’s finish.”
Serbia’s decision is a blow to Stausholm, who, after taking charge just over a year ago, said he was aiming to win back the trust of the world’s second-biggest miner among communities host following the Juukan Gorge fiasco. These remote caves in the Australian Outback were used by indigenous people for around 46,000 years until they were destroyed to create a new iron ore mine.
With Jadar now sabotaged, Stausholm will be well aware that the company still faces a handful of complex issues, including streamlining its revamped executive ranks, intensifying scrutiny of its corporate governance and managing sensitive local relationships not only in Australia, but also in Mongolia and the United States. from Arizona.
Rubbing salt in its wounds, Serbia’s announcement came on a day when arch-rival BHP Group won shareholder backing for one of its own major strategic shifts.
The abandonment of the lithium project crowns a “very difficult” first year at the head of Stausholm, according to Peter O’Connor, an analyst at Shaw & Partners, based in Sydney.
“The business is underperforming with social governance, internal culture and operations not working as well as they should,” O’Connor said on Friday, adding that improving its environmental, social and governance will take time and “Serbia’s project has just shown how tough it is.
After winning leadership in December 2020 amid increased pressure on Rio Tinto from investors over environmental and social policies, the approval of the $2.4 billion Jadar project last July was one Stausholm’s first major decisions.
SLAM-DUNK
Although initially there were no plans to start production until 2026 at the earliest, the move appeared to be a slam dunk for the new chief and was welcomed by battery manufacturers who need an increased supply of lithium. in a context of increasing demand.
But Rio Tinto failed to convince the Serbian community in the west that Jadar would not be like the polluting old lithium mines. Thousands of protesters took to the streets in December to urge the government not to allow the project to continue, amid growing controversy that has been seized upon by both environmentalists and opposition politicians.
Rio is not alone in facing growing opposition from local populations and governments in developing projects, even as miners around the world rush to increase supply.
Southern Copper Corp. is struggling to win government support for a controversial $1.4 billion project in Peru, and Lithium Americas has been in US federal court over its Nevada mine project. And back in Serbia, protesters demand an unconditional ban on lithium exploration and mining by any company, not just Rio Tinto.
RECORD BREAKS
As well as creating new revenue-generating challenges for the London-based company, Serbia’s move will add to supply-side risks in an already tight lithium market: prices for the crucial raw material for making batteries to power an electrified world have shattered records over the past year. Brnabic did not respond to questions about whether the government would allow lithium mining in the future.
Meanwhile, BHP won shareholder support on Thursday to unify public holdings, part of a strategic shift under its new chief executive, Michael Henry. Investors in London and Australia overwhelmingly approved the move, according to a statement from BHP on Thursday.
“Investors have confidence in BHP’s strategies as to how they can move the business forward and unlock its potential,” O’Connor said. “On the other hand, Rio does not have many opportunities for organic growth and the Serbian opposition highlights the risks to its growth profile.”
