Both Left and Right unite in opposition to the Rio Tinto lithium project in Serbia

Rio Tinto (NYSE: RIO; LSE: RIO; ASX: RIO) is set to undergo a pivotal challenge this month in Serbia, as leaders of a small municipality cast their votes on the approval of Europe's largest lithium project, the $2.4 billion Jadar development.

The Loznica municipality, with a population of approximately 20,000 and located roughly 100 kilometers west of Belgrade, is deliberating on whether to revise its official plan to accommodate the 250-hectare lithium mine. This hard-rock lithium project has sparked extensive protests and has oscillated between official support and opposition for several years.

Scheduled to commence in 2028, the Jadar mine is projected to produce 58,000 tonnes of battery-grade lithium carbonate annually, fulfilling about 17% of European demand and sufficient for one million electric vehicles. The mine's lifespan could span 40 years. Rio Tinto, the world's second-largest mining company by stock market value, and the Serbian government faced massive demonstrations once again this week, fueled by an unusual combination of factors.

"Rio Tinto is currently the hottest topic in the country," Vuk Vuksanovic, an associate at the London School of Economics' Ideas foreign policy think tank, stated via email on Friday.

"The anti-lithium protests and environmentalism are the only issues that temporarily unite both the left and right in Serbia. The left views it as a resistance against the arbitrary and illiberal governance of the incumbent coalition, while the right sees it as a struggle against Western dominance."

Legal Decision

The Loznica municipality has yet to set a date for the vote, but local Balkan Insights media reported that it is expected to take place this month. In August, Serbia's Constitutional Court sided with Rio Tinto in overturning a 2022 government decision to halt the project. Commentators suggest that Serbian President Aleksandar Vu?i? may have canceled the project's permit in January 2022 as a strategy to win re-election in April of that year.

However, analysts perceive Vu?i? as pro-mining. In June, he vowed to revive the project and later signed a partnership with the European Union (though Serbia is not a member) in July to supply critical minerals. His administration defeated an opposition-led motion on October 10 to ban lithium exploration.

Vu?i?'s critics argue that he has tightened control over the media and rewarded supporters with government positions. Whether he will allow a local council vote to derail the Jadar Valley project remains uncertain. Yet, miners have often benefited from authoritarian governments' willingness to push through projects.

Rio Tinto is no stranger to challenging ventures. It is advancing the Simandou high-grade iron ore deposit in Guinea, where it is assisting in the construction of a 600-kilometer railway and port, considered Africa's largest mining and related infrastructure project. In Arizona, the company faces opposition to its Resolution copper project from the Apache Stronghold coalition of tribes.

Major Mergers and Acquisitions

Rio Tinto has limited experience in lithium, with most of its production focused on iron ore, aluminum, and copper. However, this month, it announced the $6.7 billion acquisition of Arcadium Lithium (ASX: LTM; NYSE: ALTM), positioning it as the third-largest lithium miner. The company is also developing the Rincon lithium brine project in Argentina and expects to obtain lithium from a pilot plant, along with a feasibility study and final investment decision on the broader project this quarter.

At Jadar, Rio Tinto plans to apply for a permit in December for geotechnical work while preparing an environmental impact assessment that could take two years to complete. In its third-quarter production results this week, Rio Tinto reiterated its stance on the project:

"We continue to believe that the Jadar project has the potential to be a world-class lithium-borates asset that could catalyze the development of other industries and create thousands of jobs for current and future generations in Serbia."

Last month, Rio Tinto CEO Jakob Stausholm traveled to Serbia to participate in public information meetings broadcast on television. He was addressing what the company and Serbia's mining and energy ministry have termed disinformation campaigns. Media reports have highlighted the spread of online conspiracy theories, such as the project causing sulfuric acid rain, polluting drinking water, or even secretly mining uranium.

Despite this, Stausholm acknowledged locals' concerns about air quality and soil contamination, which he and the company are working to address. Rio Tinto aims to "encourage an open, fact-based dialogue" during legally mandated public consultations, it stated this week.

Environmental Opposition

The project, initiated following the discovery of a hard rock deposit by Rio geologists in 2004, has garnered significant opposition throughout its existence, according to Teresa Kramarz, an assistant professor at the University of Toronto's School of the Environment. Post-exploration studies indicated heightened levels of boron, arsenic, and lithium in nearby water bodies, she noted.

"These protests and the environmental costs associated with the project underscore the necessity for broader discussions on the trade-offs involved," Kramarz emphasized in an email. "The notion that there is a singular path to decarbonization, and that individuals will willingly accept the transfer of risk from one group to another or exchange one type of risk for another, is unrealistic—especially for those who face disproportionate disadvantages and unequal outcomes."

The Wall Street Journal cited analysts who remarked on the remarkable intensity of the opposition since the project's revival. The US State Department has suggested that the disinformation resembles Russian tactics, akin to those aimed at discouraging shale-gas drilling to uphold Russian energy dominance in Europe. Alternatively, some believe it is an attempt to dissuade Belgrade from leaning towards the West and potential EU membership.

However, Vuksanovic disagrees, acknowledging the impact on the West but asserting, "The Russians are not orchestrating this, though they take solace in the growing nationalist sentiment within the protest." He further told The Northern Miner, "Even the left-wing, civic, and pro-EU segments of Serbian society are increasingly cynical about the West and Europe's willingness to engage with the incumbent government and tolerate its domestic transgressions for the sake of lithium exploitation, thereby further weakening the EU and the US's prestige in the country."

Mikhail Korostikov, a visiting fellow at the Belgrade Centre for Security Policy, observed that a large number of Serbians oppose the project due to their lack of confidence in the government's ability to enforce environmental regulations. Even if enforceable, Korostikov noted in a recent report for the center, the regulations are insufficient.

He proposed importing the EU's environmental framework to oversee the project and creating as many mine-related jobs as possible in procurement and mineral processing. To overcome the opposition, he suggested making the project's benefits outweigh any environmental consequences.

"This will require considerable courage and strategic foresight from all stakeholders in the political process, but it is crucial," Korostikov emphasized. "Such an opportunity to integrate into the new economy and gain bargaining power with the EU may not arise again in the coming decades."