The EU is set to mine at least 10% of the lithium and similar materials it uses by 2030, as part of the European Commission’s planned Critical Raw Materials Act (CRMA). Martin Morris hears from Emanuel Proença, CEO of Savannah Resources, and Alex Gorman, mining analyst at Peel Hunt, to learn why the success of newly opened lithium mines in Portugal will prove critical in delivering on the CRMA’s targets across Europe.
EU set to mine at least 10% of the lithium and similar materials it uses by 2030. (Credit: Vardan Papikyan on Unsplash)
Given its objective of hitting net zero by 2050, Europe finds itself at the proverbial crossroads. Possessing fewer mineral resources than other continents, the need to double down when codifying the strategic importance of metals such as lithium has never been greater. Against this backdrop, the European Commission’s planned Critical Raw Materials Act (CRMA) is aimed at “significantly improving the refining, processing and recycling of critical raw materials” in Europe.
The act – first announced in March 2023 – has four key pillars: benchmarks for domestic capacities along the strategic raw material supply chain; new measures to strengthen critical raw material capacities along the entire value chain, including recycling; actions to improve EU preparedness and mitigate supply risks; and a common governing structure to advise and coordinate the implementation of measures and relations with third countries.’
Support for legislation
Putting some numbers on this means that at least 10% of EU annual consumption must come from extraction inside the EU. The act also aims to ensure that no third country should provide more than 65% of any strategic raw material. Yet, as Emanuel Proença, CEO of Savannah Resources – and a growing player in Portugal’s mining space via its Barroso Lithium Project (BLP) – is quick to point out, “With no battery-grade lithium production in Europe at present, from a raw material perspective, meeting or surpassing targets set by relevant pieces of legislation is challenging, particularly as the demand for electric vehicles (EVs) increases.
“However, Savannah wants to be part of the solution and our contribution is the Barrose Lithium Project (BLP), which hosts enough lithium spodumene for approximately 500,000 vehicle battery packs per annum – equivalent to 12.5% of the expected four million EVs to be produced in Europe in 2025,” he adds.
Of course, Europe is never going to be entirely self-sufficient in terms of critical resources, and the numbers aren’t as dire as they might appear. Noting there is potentially a significant amount of critical material resources across Europe – both discovered and yet to be discovered – Proença points to a speech in September 2022, by European Commission Vice-President Maroš Šefcovic.
At the time, Šefcovic stated that, “if all 11 potentially viable lithium projects in the EU become operational, they could produce some 38% of the expected lithium demand by 2030”, which Proença says would be “a very meaningful contribution from domestic sources”. However, while Europe might have the opportunity to secure its own supply chain for EVs, possessing both the necessary minerals in the ground and in the process of developing the infrastructure, it also needs the support of governing bodies in order to accelerate.
For Alex Gorman, mining analyst at Peel Hunt, the CRMA doesn’t go far enough to achieve this goal. “Probably the biggest issue with the CRMA – and certainly the one you hear the most about – is that at this stage it doesn’t bring any new financing or additional resources to the table,” she says.
“It’s difficult not to compare it to the US’s Inflation Reduction Act (IRA), which bundles together $500bn in clean energy spending, and from which we’re already seeing an impact in terms of primary spend by government entities on critical raw material supply chains and a secondary benefit as investors back companies they perceive to be in line for subsidies.”
Gorman further argues that while the CRMA promises to speed up the permitting process, this is ultimately down to individual countries, meaning that it remains open to question the extent to which the EC can influence permitting through redirection of existing financing and facilitation.
The narrative of ‘localism’
In the case of lithium, for example, enacting the CRMA is but one narrative – even if it is an important one. Another key focal point is around localism, where pushback against lithium mining projects is already being seen – Serbia providing a case in point, where the Jadar lithium project has at least been postponed, perhaps indefinitely, on environmental and archaeological grounds. Resistance is also being seen in Portugal. While this is nothing new, it does – in the majority of cases – amplify important issues needing to be hashed out between mining operators, local communities and governments.
Savannah’s Proença is quick to point out that the company is “committed to protecting the environment around the BLP, and included as part of its approved DIA many initiatives to accomplish this, including the comprehensive rehabilitation and revegetation of land impacted by the project.
“There are many stakeholders, both at government and local level, in Portugal, who are wholly supportive of the Project and recognise the very significant environmental benefit that lithium from Barroso can bring to society in Portugal and Europe,” he adds. As a result, Savannah has produced a design and operating plan for the project, which incorporates industry best practice and feedback from stakeholders. It has similarly undergone stringent review by Portugal’s environmental regulator.
There is a lot to play for. While Portugal possesses more than 60,000t of known lithium reserves and is Europe’s biggest lithium producer – mining roughly 900tpa in 2020 – its industry, at present, is geared towards selling lower-quality product to the ceramics industry. This material is unusable for the production of EV batteries, but interested parties in the country – including Savannah – are now seeking to rectify this. Indeed, earlier in 2023, the Portuguese Environment Agency (APA) gave the thumbs-up for local company Lusorecursos to extract battery-grade lithium and for Savannah to develop four open-pit mines. Both projects are in the north of the country.
The need to communicate
The important thing for all parties, then, is communication with one another. “Our task now is to clearly communicate the key features about the approved design and operating plan for the project to all stakeholders,” says Proença, “so that everyone can have an informed view on the project based on accurate, factual information.” This will include, once in production, data on key indicators of its environmental performance – such as water quality, air quality, noise levels and so on – in real time through a new mobile phone app and website, and via Savannah’s yet-to-be-established local information centres.
“We are hopeful the socio-economic benefits that will be seen by the local communities, such as a large increase in jobs and investment in the local area, will become more evident as the project progresses,” Proença continues. “We would like BLP to become a poster child for how critical mineral resources can be developed in a responsible way, and our team continue to work on this as we move towards the completion of our definitive feasibility study (DFS) due next year.”
Complicating matters, however, is a recently launched corruption probe – at the behest of the Public Prosecution Service of Portugal (DCIAP) – into lithium, ‘green’ hydrogen and data centre deals, including the mining concessions awarded to Lusorecursos and Savannah Resources. Already, this probe has claimed the political scalp of Prime Minister Antonio Costa, who tendered his resignation in early November after prosecutors announced that he was under investigation and police searched dozens of addresses, including his official residence and the environment and infrastructure ministries.
Meanwhile, Afonso Salema, CEO of the Start Campus data centre project, was initially detained and then released by the same investigation – the project was previously described as one of the largest foreign direct investments in Portugal in recent decades. Salema denies any wrongdoing.
In response to all of this, Savannah issued a statement to the London Stock Exchange on 7 November 2023, noting: “As part of these actions Savannah confirms that investigating officials attended certain business locations in Portugal today.” It added that it had cooperated fully with the investigating officials and it would continue to do so. “Neither Savannah nor any of its directors or employees are targets of the investigation – termed as ‘arguidos’ in Portuguese,” the statement added.
The company also confirmed that its work at the Barroso Lithium Project is continuing unencumbered while the DCIAP’s investigation is ongoing. “The project’s mining lease, issued in 2006, remains in good standing and Savannah has, and always will, conduct its business in a fully lawful and transparent manner,” it further noted.
Required changes require resubmission
It has been a long process for Savannah, according to Gorman. Barroso received preliminary approval in 2021 for an open pit mine, but with the APA subsequently asking for amendments to be made to the proposal.
“That proposal was resubmitted with changes and approved late with a host of new measures aimed at limiting damage – no water taken from a nearby river, limited removal of vegetation, restoration of the site to exactly as it was found,” she explains. “That being said, there are still crucial elements of the licensing process that need to be approved, including a social impact assessment – and a compensation package for the municipality – as well as […] offtake agreements, financing [and so on] before they break ground.”
Meanwhile, if the global Covid-19 pandemic and subsequent war between Russia and Ukraine has taught us anything, it’s that the old ways of doing business – when it comes to supply chain security – no longer suffice. As a result, ‘de-risking’ has led to a growing clamour for ‘near-shoring’ that should, in theory, give a boost to the domestic mining industry, both in Portugal and elsewhere in Europe.
Yet, the larger question, in many ways – given rapidly rising demand for EVs and battery electric vehicles (BEVs) – is whether lithium extraction in Europe will make much of a difference.
For Gorman, the answer is no – at least in the short term. “Research house Fastmarkets has done a lot of work on this, taking into account the nature of lithium occurrences – many in Europe are unconventional [or] early stage and therefore could be projects that are uneconomic – and lengthy permitting processes,” she says. “As they say, the risk is firmly to the downside. Fastmarkets forecasts European mine supply to reach 135kt lithium carbonate equivalent (LCE) by 2030, but expects EV demand to reach 380kt LCE in the same year – a shortfall of approximately 245kt LCE.”
A long way to go
However, there has been a sea change in attitudes on the part of European governments, with lawmakers increasingly inclined to not only do more to promote the industry but also to allow for proposals to be expedited more quickly. This is no small thing, given the ongoing threat to supply from China – with that country’s recent export restrictions on germanium and gallium, and its upcoming curb on graphite products, serving as a potential warning of things to come.
Gorman remains cautious, however. “There’s still a long way to go in terms of promoting the industry,” she says, adding that “because of the nature of news, those not involved with the industry only see the mines that go wrong, not the successful ones – and until that’s sorted out, we’re only going to see increased resistance from community stakeholders.”
The CRMA isn’t a magic bullet, of course, and the reality is that relatively resource-poor Europe will continue to be dependent on China and other potentially hostile non-EU actors. It does represent an encouraging start, however.
This article first appeared in World Mining Frontiers magazine.