Elon Musk has his eye on Brazilian lithium

At the end of May 2022, businessman Elon Musk was in Brazil. Apparently, it came due to the launch of a connectivity project in the Amazon to the SpaceX satellite network – the billionaire’s space technology company. However, due to the fact that he is the president of Tesla, a company that commands all phases of creation, engineering and global production of electric vehicles, battery products and solar energy, and is involved in controversial statements regarding lithium extraction in Bolivia, Much has been said about the real interests in Brazilian mineral resources, especially lithium.

Lithium is a singular metal with a whitish-silver color, it ranks third in the periodic table and is the lightest of the metals. It is called “white gold” or the “oil of the 21st century” due to its versatility. Within the use of renewable energy, lithium appears through solar and wind energy and reactors for nuclear energy. Raw material and protagonist of electronic equipment and electric vehicles, its biggest highlight in recent years has been the use of electric vehicle batteries and the hybrid energy storage system.

In the United States Department of Energy’s Critical Materials Strategy, lithium is included as the first of 16 raw materials considered fundamental to the energy transition. According to the United States Geological Survey (2021), currently, the main sources of lithium are brines and are mainly located in Latin America, in the so-called “lithium triangle” – Argentina, Bolivia and Chile – with 68% of the world’s reserves. At the moment, the main producer of lithium in brine is Chile and the main producer of lithium in rock is Australia.

Returning to the central question of this text: would Elon Musk be interested in Brazilian lithium?

At this moment there is no evidence that allows us to affirm that there is interest on the part of the richest businessman in the world in Brazilian lithium reserves, however his business depends essentially on the mining of nickel, cobalt and lithium.

It is important to mention that among the most recent studies detailed in the Strategic Minerals series, conducted by the Geological Survey of Brazil (CRPM), the Amazon is not a potential area for lithium exploration, nor is it among the main occurrences of lithium minerals in the Brazil, contrary to what was mentioned by some media outlets.

Regarding Brazilian lithium, the latest study published by the Geological Survey of Brazil (CRPM) pointed out potential areas for the discovery of new deposits, mainly in the Jequitinhonha Valley region (Minas Gerais). The result of this work, which mapped 45 occurrences, 20 of which were unprecedented, showed a jump in reserves from 0.5% to 8% in relation to world reserves. Although the occurrences of the metal are located in the states of Minas Gerais, Ceará, Rio Grande do Norte and Paraíba, it was the region of Minas Gerais that presented a certain “pioneership” in industrial terms and therefore stands out in the exploration of this resource. Currently, lithium production in Brazil is carried out by three companies located in Minas Gerais: Companhia Brasileira de Lítio (CBL), AMG Mineração and Canadian company Sigma Mineração.

Companhia Brasileira de Lítio (CBL) is a completely national company, one of the few companies in the world that dominates integrated ore-concentrate-chemical compound technology. In 2018, the government of Minas Gerais, through Codemig Participações (Codepar), a subsidiary of Companhia de Desenvolvimento de Minas Gerais (Codemge), acquired 33% of CBL’s shares (the value was not revealed).

The negotiation seemed to be promising. In 2020, Revista Fapesp published an article highlighting mobility, placing Brazil as the next country to join the group of countries that would manufacture batteries, a segment currently led by China, the United States, Japan and South Korea. The project would take place through of an agreement signed between Oxis Energy and the Minas Gerais Development Company (Codemge). According to the Fapesp article (2020), Codemge created its own investment fund (called Aerotec) and in 2019 invested R$18.6 million for a 12% stake in Oxis Energy, allowing it to bring the industrial battery production project to Brazil.

The factory would be installed in Juiz de Fora and, on May 22, 2020, in a statement given by the then governor of Minas Gerais, Romeu Zema, it was announced that the project would have an initial investment of R$245 million and would be coordinated by Codemge in partnership with the British company Oxis. He also announced that Codemge-Oxis signed a 15-year lease agreement for the installation of a factory in the Mercedes Benz industrial park.

However, in October 2021, news surprised the promising expectation and the process would have been closed due to the bankruptcy action of the company Oxis Energy. At the clarification meeting, the CEO of the Minas Gerais Development Company (Codemge), Thiago Coelho Toscano, explained that the State signed a contract in 2018 and that 6 million pounds were invested in this project for the production of battery cells, which at the exchange rate at the time corresponded to R$50 million. After the announcement of Oxis Energy’s bankruptcy, the State tried to negotiate with the British headquarters to participate in the sale of patents to recover the investment, but they believed they had no hope of success.

After very delicate negotiations regarding the use of public resources, Codemge opened an interest consultation last April with the purpose of receiving proposals from the private sector for the sale of its stake (33.33%) in Companhia Brasileira de Lithium (CBL). The CEO of Codemge Thiago Coelho Toscano drew attention to the need to reorder the strategic position of the State following privatization:

He makes it clear that reducing the size of the State is a state government agenda and that he sees no sense in government presence in a private company, even in a profitable business such as the exploration of lithium, present in the manufacture of plastics, glass, ceramics and batteries. , like those of electric cars. “If the business is good, what is the government doing there? The private sector does not have the limitations that the State has and, for it, it is much easier to access the capital market and raise resources for possible expansion. At the same time, it may face risks that it does not make sense for the State to take”, says Toscano.

What has been disclosed so far is that, initially, 13 investors were interested in acquiring 33% of Companhia Brasileira de Lítio.

Sigma Mineração, of Canadian origin, is located in Araçuaí – Minas Gerais, where the pegmatite bodies containing spodumene are located and also the processing plant. Sigma obtained the mining rights relating to Arqueana Minérios e Metais, the company has a lot of research in the Minas Gerais region in the prospecting phase with a high level of drilling and has considerable reserves. Sigma stated that it is interested in implementing the lithium chain built on a medium scale through continental hubs to meet the demands of the regional automobile industry. The company is expected to begin operations at the end of 2022, producing 240 thousand tons of high-purity battery-grade lithium concentrate/year.

AMG Mineração is a company of Dutch origin that has been operating in Brazil for 75 years with the exploration of various metals (aluminum alloys, tantalum and niobium oxides, lithium concentrate, tin, among others) and its plant in Brazil is located in the municipality of Nazareno, center-south of the State of Minas Gerais. The lithium hydroxide industrial plant was scheduled to be implemented in 2021, but changes to the project ended up modifying the deadlines and the inauguration should take place by 2024. Over the next five years, AMG will supply around 40 thousand tons/year of lithium concentrate, established through an advance sales contract signed with China. The project will contribute to the decharacterization of two deactivated dams and will provide an economic end to the tailings. When the tailings are exhausted, the new plant will continue to be supplied by new tailings generated during tantalum mining.

It seems that lithium, as an important raw material for energy storage equipment, should be crucial in the coming decades. From an energy perspective, understanding the positioning and strategies of the different companies operating in Brazil will be of fundamental importance for the country to be able to envision its own economic strategy and energy matrix.

However, in our analysis, Brazilian policy regarding lithium has been on the sidelines, especially when we look at Latin America, which in recent years has carried out several regional investigations and debates with the intention of forming an association of lithium-producing countries along the lines of OPEC (Organization of Petroleum Exporting Countries).

From a geopolitical point of view, although Brazil is part of the so-called global South, it is consolidating itself as a “regional power” – even playing the role of different semi-peripheral or sub-imperial theoretical references in South America – and in permanent tension, in the attempt to rise in the global order from a productive, commercial, financial, technological and even military point of view. In relation to lithium, what we have seen in recent years is an absence of a comprehensive policy for the production chain of this raw material, whose increased production is focused on exports, in addition to delivery through privatization.

The fact is that the new levels of extraction and the speed at which lithium mining projects, among others, will tend to significantly increase social/territorial conflicts and major environmental impacts, and will be very useful for carrying out the energy transition in the global North without changing the causes that lead to the socio-environmental crisis, using the so-called sustainability in a purely ideological way.

Therefore, if Elon Musk, who has already expressed interest in investing in lithium mining with a view to maintaining control of the supply chain, decides to make this move in Brazil, we will not even have a strategy to negotiate economically, politically and socio-environmentally resources favorable to the Brazilian reality. . Eduardo Galeano already announced, in his work The open veins of Latin America (1970): “But the region continues to work as a servant, it continues to work to satisfy the needs of others, as a source and reserve of oil and iron, copper and meat, fruits and coffee, raw materials and food, destined for rich countries, that by consuming them, they earn much more than Latin America earns by producing them”.

The article, published in Jornal da USP, was produced by Elaine Santos, post-doctoral fellow at the Institute of Advanced Studies at USP (USP-Global Cities), and Maria da Penha Vasconcellos, professor at the Faculty of Public Health (FSP) at USP