The growing demand for lithium – a metal crucial to the global energy transition – on the international market is causing Brazil to attract increasing interest on a global scale. Although the country hosts less than one per cent of global reserves of the metal according to the United States Geological Survey (USGS), more optimistic domestic estimates, coupled with loosening regulations on lithium exports, are attracting a growing number of investors. In fact, in just two years, exploration and prospecting requests for the metal rose from 45 in 2021 to 851 in 2023, a nearly 18-fold increase. The region of the State of Minas Gerais, where around 85% of the national lithium reserves are concentrated, has become the beating heart of this booming mining activity.
Many companies have therefore started mining projects in the region, including Companhia Brasileira de Lítio, but also Canada’s Sigma Lithium and the Dutch Advanced Metallurgical Group (AMG). Other foreign companies such as Lithium Ionic, Latin Resources and Atlas Lithium Brasil are waiting for authorisation from the Federal Government to develop projects in the Jequitinhonha Valley, while Pilbara Minerals has announced a EUR 380 million investment to create one of the world’s largest hard rock lithium extraction plants.
The extraction of this metal in Brazil, however, raises some concerns. From an environmental point of view, lithium production has a considerable ecological impact: deforestation, the massive use of explosives to crush rocks, the construction of dams that alter the land and the accumulation of polluting waste pose major challenges. From a socio-economic viewpoint, the intensification of mining risks disrupting traditionally fragile local economies without ensuring an adequate redistribution of economic benefits. Moreover, the lack of an internal value chain limits opportunities for economic growth, relegating Brazil to the role of raw material supplier, without a processing industry that can fully exploit lithium’s potential.
Therefore, in May 2023, the Lithium Valley Brazil project was launched on the Nasdaq in New York, which aims to turn North and Northeast Minas Gerais into an international hub for lithium exploration and develop a state technology centre. The aim is to generate more than 10,000 jobs and attract investment of up to 30 billion Brazilian reais (around EUR 5 billion) by 2030, while also promoting the economic development of 14 cities in the region. At the same time, the Federal Government is drawing up an inter-ministerial plan to minimise the impact of mining activities and share the benefits with local communities, creating a domestic industry for processing lithium in high-tech sectors such as batteries, wind turbines and electric motors.
The interest in Brazilian lithium also affects the global automotive industry. In particular, China’s Build Your Dreams (BYD), the world’s largest producer of electric vehicles, is considering partnerships with Sigma Lithium to reduce production costs and make electric cars more affordable in Brazil. Indeed, BYD is building its largest electric vehicle factory outside Asia right in Camaçari, Bahia State, which will be operational by 2025 and could turn Brazil into a strategic hub for Chinese electric vehicle production in Latin America. Germany’s Volkswagen is also looking at Brazilian lithium, trying to reduce its dependence on China for the components needed to produce electric cars.
Lithium
Lithium is an alkaline, extremely light and highly reactive metal with many industrial and technological uses. It is a key element in battery production, particularly in lithium-ion batteries, which power electronic devices such as telephones, laptops and electric vehicles. The growing demand for electric vehicles has also led to a significant increase in the demand for lithium, as these batteries are lightweight, durable and have a high energy density. In addition to batteries, lithium is used in metal alloys, particularly in aerospace, due to its strength and low density. It is also used in some pharmacological treatments, such as the treatment of bipolar disorder, and in various chemical compounds such as lithium chloride.
