Brazil’s lithium makes its presence known with silvery-white promise

Brazil’s Jequitinhonha Valley, a remote expanse of hills, scrubby mountains and dusty roads, was once so poor it was known as “Misery Valley”. Now, local politicians and mining entrepreneurs dream of it being known by a different sobriquet: Lithium Valley.

The discovery of significant deposits of the silvery-white metal have turned this corner of northeastern Minas Gerais state into a hotspot on the global hunt for what is an essential ingredient of the rechargeable batteries that power phones, laptops and electric vehicles.

In Araçuaí, a municipality of 34,000 where a mine operated by Toronto-listed Sigma Lithium recently opened, buildings springing up are evidence of money and outsiders flooding in. “It was always a quiet little town. Now, there’s so much movement,” says Pedro Martins Lage, whose family-run hotel is doubling its number of rooms. “It’s not going back to the way it was before.”

The great hope in the sun-baked Jequitinhonha Valley — twice the size of Switzerland and with a population of about 1mn — is that the natural resource can transform its fortunes. With a number of other companies prospecting in the area, investments of R$6.8bn ($1.3bn) have been committed over the past five years, say state officials.

Around half the world’s lithium currently comes from hard rock mining in Australia. But the greatest concentration of deposits are found in Bolivia, Argentina and Chile — the so-called “lithium triangle” — where it is extracted from brines in evaporation ponds. Although Brazil’s known quantities are smaller, those in Minas Gerais are of high purity, according to the federal government.

Jequitinhonha Valley’s hard rock deposits give Brazil the chance to be an key supplier, reckons Daniel Jimenez, founding partner of consultancy iLiMarkets. “There’s untapped exploration potential there,” he says. Minas Gerais is “a very favourable mining jurisdiction”.

We were a small town with practically nothing and all of a sudden there’s all this money and mining

Men from the valley often used to travel away to work but Araçuaí townspeople say lithium and the trade it has spurred — from accommodation to catering — are making that a thing of the past. “Now, people only leave if they want to,” says Eliana Pereira dos Santos, kneading dough in her kitchen for the pastries she makes for a living.

Through a microcredit scheme run for local women by Sigma Lithium, she received a R$2,000 loan to replace a broken oven and says her sales have risen 70 per cent: “I see a bright future here. I believe it will be a first-world town. Everyone will come out winning”.

Alongside the excitement are the tell-tale strains of a boom town, with some residents pointing to a rising cost of living. Others worry about public services and wonder how far any newfound wealth will spread.

Gilvan Gomes Caldeira, serving drinks at a bus station kiosk, is glad his son found work in lithium but rent rises mean his daughter cannot find her own place to live. A lot of employment is being created, he says, but landlords do not want to rent to locals. “We’ve always been at the end of the world in our little town, but not anymore”.

In previous decades, lithium was extracted by the Companhia Brasileira do Lítio on a small scale. Over the past five years, however, the company has quadrupled its annual output.

Sigma Lithium’s Grota do Cirilo project, which dispatched its first shipment of lithium concentrate almost a year ago bound for China, is considered a game-changer. The company was the sixth-largest primary lithium supplier globally in 2023, says commodity consultancy CRU.

Standing above a deep open pit carved in terraces, where yellow excavators dig, chief executive Ana Cabral-Gardner explains why Sigma calls its product “green”. It uses no potable water or hazardous chemicals at its processing plant, which runs on renewable power. Nor are there tailings dams — structures for storing mining waste, two of which have burst to devastating effect elsewhere in Minas Gerais over the past decade.

“We became an example of what Brazil can be in this 21st century new industrialisation process,” she says, noting that Sigma has created 1,000 jobs and 85 per cent of the workforce are locals. Most had lived outside the area and were recruited through a “homecoming” campaign.

However, in the hillside village of Piauí Poço Dantas, overlooking the site, some residents complain about the environmental impact. “There’s so much noise and dust,” says one, “it’s worsened the quality of life. We are very unhappy with the situation.”

Sigma says it monitors noise, vibration and dust and that levels are “significantly below” legal limits and best practice standards. It points to its renovation of a local school and sports facility as evidence of its civic engagement.

Still, wider concerns are voiced about whether the region is equipped to deal with a big rise in mineral activity. Aline Weber Sulzbacher, researcher at the Federal University of the Valleys of Jequitinhonha and Mucuri (UFVJM), says higher prices have led some families to move to the outskirts of Araçuaí. She points to “the rapid deterioration of highways and increased demand on the health system”.

Visitors need only drive the 45km on the federal highway between Araçuaí and the neighbouring municipality of Itinga. Cars zigzag to avoid massive potholes, which motorists blame on trucks loaded with logs for pulp mills. “There are fears about public safety, too, because we were a small town with practically nothing and all of a sudden there’s all this money and mining,” says Itinga’s mayor, João Bosco.

He is optimistic that lithium sales will in the long run help fund public services like sewerage, health and education. “We’ll be able to think about financial reserves to create a regional sovereign wealth fund.”

The commodity remains vulnerable to market volatility, though. Sharp falls in lithium prices — linked to a slowdown in electric vehicle sales — have caused “disappointment”, the local politician admits. Lithium’s value is down about four-fifths from a peak of around $15,000 per tonne in late 2022, says data group Benchmark Mineral Intelligence.

But Sigma Lithium appears undeterred. It recently unveiled plans to make a sizeable increase in annual output capacity.

And another company, US-based Atlas Lithium, aims to begin production in Araçuaí by the end of 2024. “The Valley of Jequitinhonha has the potential to become one of the most efficient producers in the world”, argues chief executive Marc Fogassa.