Lithium leap: Brazil makes journey to become a leading supplier

Brazil's legislative overhaul in lithium export regulations has transformed the country into a burgeoning hub for lithium production, unlocking vast economic potential and attracting global investments.

"Thanks to a legislative change made four years ago regarding lithium exports, we can now transform this mineral asset into an economic resource," Fernando Passalio, secretary of state for economic development of Minas Gerais, told S&P Global Commodity Insights.

With three operational plants and eight more planned, Brazil's lithium carbonate equivalent output reached 29,976 mt in 2023, with expectations of up to a fivefold increase by 2028, as reported by S&P Global Market Intelligence.

Although Brazil continues to lag behind countries like Australia, China, Argentina and Chile on lithium reserves and resources, the country provides significant opportunities for investment. Also, Brazil's competitive production costs -- ranging between $400 and $500/mt -- contrast sharply with other countries, where costs generally exceed $700/mt.

Uncovering the potential, challenges ahead

Raw lithium in Brazil is primarily extracted from hard rock pegmatites containing spodumene, a mineral renowned for its exceptionally high lithium content, particularly in the Lithium Valley region of Southeastern Minas Gerais. In contrast, the countries within the Lithium Triangle -- Argentina, Bolivia, and Chile -- are characterized by natural deposits of lithium found beneath salt flats, predominantly extracted from brines.

Despite its advantages and growth potential, Brazil faces several challenges, including legal uncertainties, impacts on local communities and infrastructure bottlenecks. Freight costs can vary significantly due to the irregularity of shipping flows. Efforts are being made to establish more consistent transportation routes to ensure cost-effectiveness for exporting lithium.

The primary ports for exporting lithium products are Vitória, Santos and Ilhéus, about 600 km (373 miles), 700 km and 1,000 km from Lithium Valley, respectively. Also, emerging port facilities, such as Açu Port, 700 km away, are investing in infrastructure to support the increased spodumene exports.

"The freight cost varies greatly because there is still no regular flow. Our challenge is to build something that compensates for the distance difference," said João Braz, commercial and industrialization director of Açu Port.

"The government values mining within the highest standard of responsibility, but there will be some impact. Communities need to be heard to mitigate impacts, but we cannot make mining activities unfeasible, so our focus is on harmonizing these two paths," Passalio said.

On the potential side, Brazil could also benefit from countries seeking to diversify their supply chains away from China, considering that Brazil is geographically well-positioned for supplying Europe and North America.

New projects fuel Brazil's growing lithium output

Local industry players remain confident that the low-cost structure of their projects and projected competitive production costs will help them withstand the ongoing pricing pressure, which has seen lithium chemical prices fall by 40% year to date and over 80% from last year's high.

Sigma Lithium, Brazil's largest lithium producer, began production in mid-2023 and is currently achieving an output of 270,000 mt per year. Sigma CEO Ana Cabral said the company has made substantial investments to develop the world's fourth-largest industrial mineral lithium complex.

"The remarkable success of our Greentech processing plant has prompted Sigma to initiate a second phase that will double our production capacity," she told Commodity Insights. "Construction is expected to be completed next year."

Also operating in Brazil, miner AMG announced that its Volta Grande plant is projected to reach a full nameplate capacity of 130,000 mt per year of spodumene during Q4 2024. Also, AMG is planning a lithium carbonate plant.

"It is an ambitious project with a significant investment of up to $300 million," CEO Fabiano Costa said. "Construction is set to begin next year, with maximum production capacity anticipated by 2028."

Lithium Ionic is another company investing in Brazil, with three projects under development: Bandeira, Salinas and Outro Lado. The Bandeira project will be the first to commence operations, with a ramp-up scheduled to begin in Q3 2026.

"Our current strategy involves securing an agreement with an investor to partially fund the capital expenditure. For the remaining amount, we plan to establish a long-term offtake contract with advance presales," Lithium Ionic CEO Paulo Misk said.

Atlas Lithium intends to achieve initial production and sales of lithium concentrate at its Neves project in the Middle Jequitinhonha region by Q4 2024, expecting an output of 150,000 mt per year. According to Rodrigo Menck, advisor at Atlas Lithium, commercial production is expected to begin early next year.

"We have already defined our offtake contracts, with 40% of the output allocated to Chengxin, 40% to Yahua, 10% to Mitsui and 10% to the spot market," Menck said.

Latin Resources has announced a mineral resource estimate of 70.7 million mt for its Salinas project, with a feasibility study on track for completion in Q3 2024. Production is anticipated to begin in Q2 2026, with an initial output of 200,000 mt/year.

In a strategic move, Pilbara Minerals is seeking to acquire Latin Resources for A$559.88 million ($370.6 million) to gain access to the Salinas lithium project in Minas Gerais, as confirmed by both companies Aug. 15.

The Salinas project is estimated to have a lithium mine life of around 11 years, with plans for a mining and processing plant capable of producing 3.6 million mt/year. Upon development, Salinas is projected to achieve a spodumene concentrate production rate of about 499,000 mt/year with a lithium oxide grade of 5.2%.

In the same region, Brazilian Lithium, a pioneer in mineral exploration in Brazil, aims to double its annual spodumene production by 45,000 mt through a $70 million investment, according to CEO Vinícius Alvarenga.

However, Alvarenga cautioned that "exporting spodumene means sending 95% of the slag to other countries, which is not sustainable in the long term. In the future, carrying products with higher added value will make a significant difference."

CBL is currently the country's only producer of lithium carbonate and hydroxide.

"Investments in lithium production in Minas Gerais are projected to range from $3.9 billion to $5.8 billion by 2030," according to João Paulo Braga, CEO of the state investment promotion agency, Invest Minas.

He emphasized that few countries besides Brazil have such an advantageous position to attract investment, as other Latin American nations face uncertainties and political risks.

Role of capital markets

Another major challenge identified is financing, "as there is the need for substantial investments for the expansion and development of new mines and processing facilities," said Guilherme Ferreira, researcher and head of the Economic Geology Division of the Brazilian Geological Survey.

Early stage mining companies rely on capital markets for financing, but traditional stock exchanges often impose restrictions, such as minimum revenue or market value, which can hinder IPOs and limit access to necessary capital.

Canada is a key source of IPOs for early stage mining firms, particularly through the TSX-V, which supports companies seeking initial funding and has significantly promoted Brazil's mineral sector.

From 2019 to 2023, the Toronto Stock Exchange -- TSX and TSXV -- accounted for 36% of global mining capital raised, with Latin America representing 20% of all mineral projects listed.

Currently, 410 Latin American mining companies are listed on these exchanges, managing 1,067 properties. In Brazil, 34 mining companies are listed with 95 properties, having raised C$487 million in equity capital in 2023, according to Guillaume Légaré, head of TSX/TSXV for South America.