Why Brazil's lithium sector has not yet taken off

Although the development of lithium projects boosts Brazil’s global energy transition profile, investments in the segment are still less significant than in other minerals.

Of the US$64.4 billion of estimated investments during 2024-28, only US$1.19bn will go to lithium projects, according to mining association Ibram.

"Lithium is still a segment where projects are much smaller than in more consolidated segments, such as iron ore or copper. It is difficult to make a very long-term projection, especially because lithium still needs to be proven in the long term. But I think it is difficult for projects linked to lithium to require so much investment and have such large scales as we see with iron ore and copper," Wilfred Bruijn, a former CEO of Anglo American in Brazil and ex-Ibram chairman, told BNamericas.

While the iron ore and copper segments are dominated by global mining giants, participation is more fragmented when it comes to lithium, where junior companies and investment houses may play key roles.

"The lithium stage does not yet represent a point of entrance for large mining companies because there is still great volatility regarding the formation of lithium prices and doubts about the use of lithium in a very long-term scenario," Bruijn, who is now a consultant, said.

"But this does not mean that the scenario cannot change. If lithium is consolidated as part of global efforts supporting the energy transition, at some point we could see large mining companies entering the lithium segment more strongly," he added.

Meanwhile, financial players are increasingly relevant in the segment.

Development bank BNDES approved a 487 million-real (US$87mn) financing for a lithium processing unit at Sigma Lithium's Grota do Cirilo project in Minas Gerais state.

With the proceeds coming from the bank’s New Climate Fund, the company will increase lithium concentrate output from 270,000t/y to 520,000t/y.

Sigma Lithium is a Canada listed firm and was founded by Brazilian Ana Cabral-Gardner, an investment banking professional and manager of private equity firm A10 Investments.

Also, global financial giants Goldman Sachs and UBS assumed stakes in Australia listed firm Latin Resources, now holding 5.20% and 5.37%, respectively, according to securities documents.

Latin Resources recently unveiled a US$308mncapex plan for its Salinas lithium project in Minas Gerais.

And in July, British investment firm Appian Capital Advisory entered the segment after concluding a royalty agreement with Lithium Ionic, owner of the Bandeira project in Minas Gerais.

The key projects are in the so-called Lithium Valley in Minas Gerais, where Companhia Brasileira de Lítio, Sigma, Atlas Lithium, Latin Resources and Deep Rock operate.

The Brazilian lithium segment is also attracting companies involved in electric vehicle manufacturing that want to secure inputs for battery production, including Chinese EV maker BYD.

“BYD has been ramping up its investments in Brazil, undeniably influenced by the tensions between China and the US, leading to the redirection of some of BYD's planned US investments to Brazil,” Marcello Schneider, institutional director of BYD in Brazil, told a recent event.

“Looking ahead, BYD aims to invest across the entire electrification chain, including lithium processing phases in Brazil, battery production and energy storage,” he added. 

PROBLEMS

The Lithium Valley is in the Vale do Jequitinhonha area, which is underdeveloped, so companies face difficulties in attracting talent there.

While local governments are generally open to new entrants, community opposition is an issue.

During a public hearing by Minas Gerais’ environment and sustainable development committee in July, community members said their rights were violated, and that they were not consulted about a lithium project and exploration, which advanced without regard for the proper procedures.

Projects in more consolidated segments like iron ore and copper faced similar problems due to a lack of community dialogue, which caused licensing delays.