Rio Tinto shares plunge as Serbia pulls plug on its $2.4 billion

By Sonali Paul

MELBOURNE (Reuters) – Shares in Rio Tinto (NYSE:) tumbled on Friday after Serbia revoked its lithium exploration licences over environmental concerns, hurting the Anglo-Australian miner’s ambition to become Europe’s largest supplier of the metal used in electric vehicles.

The decision by Serbia comes as it approaches a general election in April, and as relations between Belgrade and Canberra have soured after Sunday’s deportation of tennis star Novak Djokovic from Australia over its COVID-19 entry rules.

It is also a major setback for Rio, which was hoping the project would help make it one of the world’s 10 biggest producers of lithium, a key ingredient in batteries.

The mine is Rio’s only lithium project and the company announced just a month ago a deal to buy a second lithium asset for $825 million, as it looks to build its battery materials business.

Rio’s shares closed down 4.1% after falling as much as 5.1% in the Australian stock market, its worst intra-day drop since August 2021. The benchmark index ended down 2.3%.

Serbian Prime Minister Ana Brnabic told a news conference in Belgrade that the decision came after requests by various green groups to halt the $2.4 billion Jadar lithium project that was planned to start production in 2027.

Thousands of people blocked roads last year in a protest against the government’s backing of the project, demanding Rio Tinto leave the country and forcing the local municipality to scrap a plan to allocate land for the facility.

The decision came days after ties between Australia and Serbia hit rock bottom as tennis star Djokovic was deported before he could play in the Australian Open.

Djokovic spoke out in support of “clean air” in a December Instagram story post captioning a picture of the anti-mining protests, which was published by digital sports platform The Bridge.

Twitter (NYSE:) users were quick to joke about Rio being deported from Serbia.

Australia’s foreign ministry had no immediate comment on the decision.

Rio said it was “extremely concerned” by Serbia’s decision and was reviewing the legal basis for it.

Rio has already spent US$450 million in pre-feasibility, feasibility and other studies on Jadar to understand the nature of the deposit, the company said in a project fact sheet in July.

“The level of opposition to it has really ratcheted up over the last six months,” Credit Suisse (SIX:) analyst Saul Kavonic said of the Jadar mine.

“We’ve been highlighting for a while now there would be about $2 a share at risk if the government cancels it,” Kavonic said.

This week, Rio pushed back the timeline for first production from Jadar by one year to 2027, citing delays in approvals.

‘EVEN GREATER SHORTAGE’

At full capacity, the Jadar mine was expected to produce 58,000 tonnes of refined battery-grade…