Lithium Valley Brazil: Foreign Investment in the EV Value Chain

The state of Minas Gerais’ investment promotion agency InvestMinas launched the Lithium Valley Brazil at the New York Stock Exchange (NASDAQ) to promote four listed companies with interests in high-grade lithium mining in the Jequitinhonha Valley. Minas Gerais Governor Romeu Zema (see our Personality of the Week) and Secretary of Geology, Mining and Mineral Transformation and Petrobras board member Vitor Saback were present at the stock launch ceremony in New York. In 2022, Brazil produced 2,200 metric tons of lithium, becoming the fifth largest producer worldwide. In our view, output could quickly rise under the foreign investment promotion campaign.

The lithium initiative brings together allies of former President Jair Bolsonaro and the current administration of President Luiz Inacio Lula da Silva in a national push to accelerate Brazil’s energy transition and reindustrialization. In 2022, Zema won re-election by appealing to Bolsonaro voters without enthusiastically supporting the incumbent in the first round of the presidential election. He beat Lula’s ally, former Mayor of Belo Horizonte Alexandre Kalil of the Social Democrat Party (PSD), by over a 20% margin, demonstrating his pervasive influence in Brazil’s second-largest state and setting up his prospective presidential bid in 2026.

Zema’s priorities are deepening the sustainability of his state’s mining sector and harnessing its lithium deposits to develop an electric vehicle (EV) industry. Minas Gerais is one of the top auto manufacturers in Brazil and home to Fiat Chrysler Group’s largest manufacturing facility worldwide.

Since taking his post at the Mines and Energy Ministry (MME) in April, Saback has worked alongside Zema’s team to kickstart Lithium Valley Brazil and advance the sustainable hydrogen play to fuel Minas Gerais’ large iron mining and steel manufacturing complex. Although Zema and Saback had been associated with the previous Bolsonaro administration, they are working with Lula’s federal and state government allies to advance the state’s lithium projects.

Indeed, State Deputy Jean Freire of Lula’s Workers Party (PT), who hails from Itaobim in the Jequitinhonha Valley, has introduced legislation in the state assembly that would promote and regulate the lithium value chain (PL 1.992/20). Freire is working with Zema and Saback to align the state’s legislation with the federal government’s efforts to promote lithium production through its sustainable mining initiative, a targeted investment promotion and regulatory framework to boost Mines and Energy Minister Alexandre Silveira’s gubernatorial aspirations in Minas Gerais. The federal government plans to spend $2.1bn by 2030 to promote the lithium value chain and ramp up battery and EV production, which could disproportionately benefit Minas Gerais.

Lithium Valley Brazil aims to benefit four NASDAQ-listed firms with interests in Brazil’s high-grade lithium: Canada’s Sigma Lithium and Lithium Ionic, Atlas Lithium from the US and Latin Resources from Australia. Currently, the privately-held Companhia Brasileira de Litio (CBL) is the largest lithium producer in Brazil, but the Lithium Valley Brazil initiative could accelerate foreign investment in the coming years to expand and diversify production and downstream processing.

Indeed, Sigma Lithium is near the completion of phase one construction of its Groto do Cirilo installation near Itinga in the Jequitinhonha Valley. The project plans to extract 270,000 tons of high-purity 5.5% lithium concentrate over the mines’ eight-year lifespan at one of the lowest production costs in the world. We expect operations to commence shortly. The company is betting on the project to make it one of the largest lithium producers in the world.

Brazil’s lithium initiative promises broader value chain opportunities than Argentina and Chile’s projects, although the Lula administration will likely promote regional integration of lithium mining, processing and battery manufacturing. Minas Gerais offers modern mining and logistics infrastructure alongside Fiat’s vehicle manufacturing plant in Betim, making the lithium play attractive to foreign investors interested in the EV value chain. The federal and state authorities still need to finalize the associated fiscal and regulatory frameworks, but we expect progress in the coming six months that could boost investments in Jequitinhonha Valley’s lithium promise and set Brazil on a trajectory to become a player in the global EV assembly line.