We are now in the era of a modern day ‘white’ gold rush, where demand is driven by the call to decarbonize mobility and energy technologies. What may look like a simple chemical element in the periodic table, lithium today is a critical raw material input for batteries and electric vehicles.
Under its sustainable development scenario, the International Energy Agency (IEA) forecasts lithium demand to grow by 43 times. Consumption of lithium quadrupled since 2010, batteries accounted 74% of that intake in 2021.
Lithium is susceptible to price cycles as any other commodity determined by market forces. During the pandemic from 2019 to 2020 low prices for a brief period pressured producers and delayed new developments coming on stream. Even with the recent surge in demand, there has been a lack in investment of upstream capacity.
Simon Moores CEO of Benchmark Mineral Intelligence, stresses on an important note that “capacity does not equal quality of supply. To make it into a lithium-ion battery, these minerals and metals must go through an extensive physical and chemical process. They must be physically and chemically engineered in a consistent manner to be accepted by a battery producer.
Therefore, scaling battery grade material is always going to be a tougher than building new mine and an oversupply of mined material does not equal an oversupply of battery grade material.”
Outcomes of the latter disconnect by demand exceeding supply, increased prices and miners profits which are linked to the value at which producers can sell the commodity. Lithium potential in Portugal was investigated since the early 2000’s.
According to the USGS, Portugal’s reserves are 60,000 tonnes. Among countries with the largest lithium reserves as of 2021, Portugal ranks 9th place. Savannah Resources PLC Barroso Lithium Project in the northeast of Portugal close to the Spanish border contains the most significant hard rock spodumene lithium resource in Western Europe. Savannah has initially taken a 75% stake subsequently becoming the sole owner of the project.
The Barroso Lithium Project was then expanded by adding the adjacent ‘Aldeia’ Mining Lease Application (3 blocks totaling 2.94km²) to the original granted C-100 Mining Lease (5.42km², valid until 2036, extendable for 20 years).
A scoping study conducted in 2018 demonstrated highly positive economics, low technical risk and added value from co-products. The established infrastructure adds to the development’s potential where local electricity will be produced from Portugal’s renewable power. After processing, the lithium concentrate will be transported by truck to a local refinery or to other customers.
An additional logistical benefit is the port of Leixões is located just 145 km by truck to the west a short distance to the port providing an advantage of reduced carbon footprint for the delivered product. The development by the company will build upon existing infrastructure and leave some of the mine’s structures on site for shared use by the community such as: warehouses and offices which may allow hosting organizations that promote local heritage and even install nurseries for indigenous plants or monitoring teams.
As for the status of the project, the progression is pending approval based on a full evaluation by the Portuguese regulator, Agência Portuguesa do Ambiente (‘APA’) of the Environmental Impact Assesment (EIA), mine plan, and public consultations.
Both the CEO David Archer and Chairman Mathew King of Savannah point out that the delay in the review of EIA and other documentation submitted by Savannah in relation to the project is due to “awaiting a treaty mandated cross‐border consultation process with Spain and an impromptu general election that was called for 30 January 2022, which has impacted on decision‐making processes in the relevant government agencies”.
According to Mathew King “If APA does approve our EIA, we will re‐initiate the fieldwork required for completion of the Definitive Feasibility Study (‘DFS’) and accelerate the build‐out of our in‐country team”.
A further pledge by the CEO stated in the annual report and financial statement of 2021 on Savannah’s commitment “will be to make an annual allocation of €500,000 for the implementation of the Benefit Sharing Plan and estimates an operating amount of €100,000 per year to comply with the Good Neighbour plan” stated on page 39 section 8.4 of the EIA. Portugal’s industrial policy does not only rely on mining lithium but also incorporates a fully integrated value chain approach to serve battery manufacturing and decarbonization plans of the EU automotive sector.
Apart from Savanah which positioned itself as the miner, Galp and Northvolt announced to establish a joint venture ‘Aurora’ to become Europe’s largest Lithium refinery conversion facility. The most recent announcement by the latter parties is the selection of the facility site.
From several locations, Setúbal was chosen because it fulfilled all the requirements set forth by Aurora. The plant will be in the Sapec Bay Industrial Park as it has good access to infrastructure, railway, and port facilities.
One would assume or even anticipate from a commercial point of view that it would make more sense for the refinery to be close to lithium mining operations. To put distances into perspective, Aurora will be located 484 km (an approximately five-hour drive) from Covas do Barroso where the Barroso Lithium project is established.
However, the news of the plant’s location was welcomed by Savannah as stated by the CEO in the 2021 annual report. Northvolt and Galp’s decision on Aurora was also as commercially strategic having its refinery ideally placed to source reagents and is close to by-product users (cement and pulp & paper industries), but also close to Portugal’s current car manufacturing center.
The upside is Savannah has a potential customer in-country to offtake its lithium raw product to convert it for use in batteries and electric mobility.
Aurora will be able to deliver lithium hydroxide sufficient for 50 GWh of battery production per year (sufficient for more than 700,000 electric vehicles). As part of the JV agreement, Northvolt will secure an offtake for up to 50% of the plant’s capacity for use in its battery manufacturing.
There is a polarized perception of mining in Europe and Portugal. Despite the concerns voiced by the community, the Portuguese government moved ahead with approving lithium mining and a potential lithium auction in the next two months. The result of such a decision can only aggravate tensions between the community, mine operator and the government. Apart from the political risk (i.e., change in regime) the mining company and country authorities must not take lightly nor overlook the social license to operate (SLO). Negligence of the SLO or lack of consultation prior to acquiring the license to mine and production can only result in disturbances such as protests or even a complete halt to operations.
Portugal possesses the potential to mine, refine and supply lithium. Savannah’s lithium operation and the Northvolt-Galp joint venture facility have initiated the establishment of an in-country integrated value chain to serve the EU’s battery and electric mobility ecosystem. However, multi-stakeholders (government, companies, and communities) must come together to avoid future project disruptions and frustrations from a lack of social license to operate.
(Jamil Hijazi is a Mineral Economist and writer who holds a Dual Master’s Degree from the University of Dundee Centre for Energy, Petroleum, Mineral Law, and Policy (CEPMLP). His expertise and research interests are in: Supply Security of Critical Minerals, Energy transition, Industrial Policy, Economics of Mining and Metal Markets.)