Brazil's Minas Gerais state is fast-tracking the development of a "lithium valley" that it hopes will rival Latin American "lithium triangle" jurisdictions Argentina, Bolivia and Chile.

The state government's lithium valley initiative aims to "make the connection between the potential production of lithium" and pro-mining policies, said Fernando Passalio de Avelar, economic development secretary of Minas Gerais.

Minas Gerais — a state whose name literally means "general mines" — hosts over 300 mines and is Brazil's largest producer of steel, graphite, beryllium, phosphate, iron ore, gold and zinc. It is home to over half of Vale SA's iron ore production and the world's largest niobium mine, Araxa.

Brazilian Geological Service studies from 2016 indicate 45 large lithium deposits with "high potential for economic use" in Minas Gerais, suggesting the state could multiply its lithium reserves 20 times over, local newspaper O Tempo reported. Argentina, Chile and Bolivia currently account for over half the world's lithium resources, according to the US Geological Survey.

Fernando Passalio de Avelar, economic development secretary of Minas Gerais state in Brazil. Source: Paydirt Media

Minas Gerais' "fast environmental permitting process" is "very important because today the most expensive asset in the world is time," and it ensures "faster payback and return on investment," Passalio de Avelar told the Paydirt Battery Minerals Conference in Perth, Australia, on March 22.

Fast-moving projects

Sigma Lithium Corp. is set to start in April the production of 270,000 metric tons of lithium per year at Grota do Cirilo, which is touted as the Americas' largest hard-rock lithium deposit, after receiving the environmental permit in 2021 and starting construction in February 2022.

That timeline "gives an idea of how quick Minas Gerais moves," said Chris Gale, executive director of Latin Resources Ltd., which signed a nonbinding memorandum of understanding with Minas Gerais' State Economic Department in late March. The state will facilitate approvals, licensing and suppliers for Latin Resources' Salinas asset, which it marked as a "priority project."

Sigma Lithium's capital expenditure is "another testament to Brazil of how efficient and cost-effective you can be in building a plant, with one-month payback," Gale told the conference. "Unbelievable. We hope to emulate what Sigma [Lithium] has done."

Latin Resources achieved a similar pace by producing Salinas' maiden resource estimate of 13.3 million metric tons, grading 1.2% lithium oxide, within 10 months of sinking its first drillhole in February 2022, Gale said.

Minas Gerais Governor Romeu Zema had restructured the state's civil service to be more efficient and business friendly, said Verde AgriTech Ltd. CEO Cristiano Veloso, a Minas Gerais native. The CEO said state officials are "absolutely" serious about ambitions to take a bigger slice of the lithium market.

"It's not just words when they say it. It's not run by politicians, but professionals who were chosen on merit," Veloso said.

Luring lithium investors

Passalio de Avelar said Minas Gerais beats regional lithium rivals Argentina and Bolivia on legal stability, logistics, infrastructure and the wider consumer market. Brazil also has a lower corporate tax rate than Argentina, Chile and Bolivia, according to PwC.

Minas Gerais is a "fundamentally attractive region" due to its "ESG-compliant" nascent hard-rock lithium industry, Marc Fogassa, CEO of Atlas Lithium Corp., told S&P Global Commodity Insights. Lithium operations in Argentina and Bolivia largely rely on brine extraction, which is "highly detrimental to the environment and many in the lithium supply chain consider it to be non-ESG" friendly, the executive said.

Atlas Lithium produced over 10 kilograms of commercial-grade lithium concentrate from its Minas Gerais project in March.

Fogassa also touted the "availability of qualified and experienced human capital at all levels" in Minas Gerais. While much of the world's miners struggle with a chronic skills shortage, the state government pays for courses for the "much-needed workforce," making "qualification of the workforce ... another benefit," Passalio de Avelar said.

Companies have invested about 3.6 billion Brazilian reais in Minas Gerais' lithium supply chain, Passalio de Avelar said.

Lithium Ionic Corp. acquired Neolit Minerals Participações Ltda. in March to take a strategic step into the northern region of the Eastern Brazilian Pegmatite Province, which the company said was "quickly emerging as one of the largest lithium spodumene districts globally."

Infinity Stone Ventures Corp. optioned two Brazilian lithium projects in February, including one near Sigma Lithium's Grota do Cirilo, while Spark Energy Minerals Inc. secured six exploration permits in the state in March.

Sigma Lithium was unavailable for comment by publishing time.

Environmental balancing act

While the state touts its fast environmental permitting, Veloso cautioned that "tailings disasters have tainted mining as a dangerous and destructive industry" following two deadly tailings dam breaches in the past decade.

Brazil has had to do more than most nations in balancing swift permitting with adherence to the highest environmental standards in recent years, UK-based Critical Minerals Association founder Jeff Townsend said in an email interview.

Despite former Brazilian President Jair Bolsonaro's efforts to legalize mining on Indigenous lands in the Amazon rainforest, mining companies such as Rio Tinto Group, Vale and Anglo American PLC withdrew their requests to explore and extract minerals in the areas. The Brazilian Mining Association, whose members account for about 85% of the country's legally produced ore, said "it is not possible to request mining and research authorizations on Indigenous lands unless you have constitutional regulation," the Associated Press reported in May 2022.

"This episode, in combination with the fact that mining is of the utmost importance to the Brazilian economy ... would imply that Brazil is performing the balancing act between top environmental standards and fast permitting rather well," Townsend said.

The National Mining Agency, the regulatory body that enforces Brazil's mining code, isn't "a toothless regulatory body either," Townsend said. "These legal procedures are further evidence that Brazil is by no means prioritizing fast approvals over environmental standards."

As of April 3, US$1 was equivalent to 5.06 Brazilian reais.

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.