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Brazil’s Minas Gerais state to sell stake in lithium miner

Brazil’s minerals and metals-rich state of Minas Gerais is looking to sell its 33.3% stake in Companhia Brasileira de Lítio (CBL), the country’s only producer of lithium carbonate and hydroxide.

The state’s Development Company (Codemge), which acquired the stake in CBL in 2018 for an undisclosed sum, said it will hold next week two events to outline details of the sale to potential investors. 

The presentations in Belo Horizonte and São Paulo, will also be broadcast live, Codemge said.

The move goes in the opposite direction of Brazil’s neighbours. While Argentina keeps boosting foreign investment in the sector, Mexico wants to create a state company with exclusive rights to mine the metal. The same goes for Chile, whose incoming left wing president Gabriel Boric, is also planning to create a state-run firm, but would let existing operations untouched.

CBL is one of Brazil’s pioneers in underground hard-rock lithium from high grade spodumene pegmatites.

The broader objective of the proposed sale, Codemge president Thiago Toscano said in the statement, is to boost the competitiveness of the state’s assets and seek alternatives for the best use of public resources.

CBL operates the Mina da Cachoeira lithium mine in Minas Gerais’ northeast as well as a chemical processing plant in Divisa Alegre, in the Jequitinhonha Valley.   

Source: Rio Tinto’s Investor Seminar 2021. (Click for full size)

Minas Gerais has long been known for its wealth of minerals and its mining activities, supplying more than half the mineral production of Brazil. 

There are several lithium explorers with concessions in the area, including Brazil Minerals (OTC PINK: BMIX), which obtained two additional explorations permits last year.

The South American nation, known for its vast deposits of iron ore and potash, has been boosting its lithium sector as of late.

Canada’s Sigma Lithium (TSX-V: NASDAQ: SGML) co-CEO, Ana Cabral-Gardner, told the Brazilian Congress last year the country had the potential to become a “green lithium powerhouse”.

The Vancouver-based company is building the Grota do Cirilo lithium mine, considered the largest hard rock lithium deposit in the Americas.

Lithium prices

Chinese lithium carbonate prices tracked by Asian Metal Inc. rose to a fresh record last month, as data showed a 35% month-on-month jump in EV registrations in December.

Nearly 400,000 EVs were registered during the month, according to the China Automotive Technology and Research Center. Tesla supplied about 18% of the total.

Last year alone, insights from Adamas Intelligence show, global EV sales jumped 83%

Ganfeng Lithium (SHE: 002460), which inked a long-term supply deal with Tesla in November, said its profits for 2021 will be up as much as 437%, fueled by the “fast development” of the EV industry.

The government of Chile, which holds the world’s largest lithium reserves, recently published a report showing the EV sector will dominate demand for the battery metal, accounting for almost three quarters of its consumption by 2030.

ESG Challenges

Lithium miners are facing increasing pressure from investors, regulators and other stakeholders as the full EV value chain is subjected to growing scrutiny from an Environmental, Social and Governance (ESG) perspective.

Despite the key role lithium-based batteries play in the green transition, producers are not without their ESG challenges, BMO analyst Joel Jackson wrote in a note to investors.

“There’s no free lunch – lithium is helping to decarbonize transportation systems and fuel the EV transition, but it’s an extractive commodity, Jackson said. “Freshwater use in South American brine operations is frequently raised as a sustainability concern, but lithium produced from spodumene conversion seems more problematic when considering GHG emissions and by-products”.

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