Federal prosecutors in Brazil have requested the suspension of lithium projects in Minas Gerais, citing environmental risks and insufficient consultation with local communities.
Earlier this month, the Federal Public Ministry (MPF) asked the National Mining Agency (ANM) to review exploration and extraction licences in Araçuaí and nearby municipalities in the Jequitinhonha Valley. Sigma Mineração, a subsidiary of Sigma Lithium (CVE: SGML) (NASDAQ: SGML) responded on Monday, defending its operations.
Prosecutors argued that indigenous groups, quilombola communities and other traditional residents were not consulted before project approvals. They stressed that permits must comply with principles of free, prior, and informed consent, conducted in good faith.
Furthermore, the MPF warned that existing operations have already harmed local communities. Quoting “expert reports,” prosecutors said the Neves project, operated by Atlas Lithium (NASDAQ: ATLX), disrupted water supplies when roadwork damaged pipelines in Calhauzinho, Passagem da Goiaba, and surrounding areas. The reports also showed that expanding mining operations could intensify pressure on local infrastructure and water resources.
Sigma faced similar scrutiny.
The MPF cited a 2021 technical review that flagged flaws in the company’s Environmental Impact Study for the Grota do Cirilo project. Water management issues in Araçuaí and Itinga raised concerns about two planned open pits. Prosecutors said these pits could affect the Piauí stream, a key water source for rural communities, especially during dry periods. Consequently, the MPF urged the ANM to intervene, warning that failure to act could lead to additional administrative and judicial measures.
Sigma further clarified that no indigenous peoples reside within the project’s legal radius.
“This has been confirmed by the responsible environmental agencies during the licensing process,” Sigma’s spokesperson said.
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Companies face heightened oversight
The company also rejected claims of insufficient consultation or flaws in its environmental studies, describing allegations as “incorrect and unfounded.”
The MPF’s action reflects growing scrutiny of lithium extraction in Brazil. This comes in the face of a global surge in demand for electric vehicle batteries and renewable energy storage.
In addition, the case shows tensions between mining expansion and the rights of local communities dependent on fragile water resources.
Meanwhile, both Atlas and Sigma face heightened oversight as authorities assess whether projects meet legal and environmental standards.
Subsequently, decisions by the ANM could shape lithium development in Minas Gerais, potentially affecting investment, community relations, and Brazil’s position in the global lithium market.
The coming weeks will test how Brazilian regulators balance resource development with environmental protection and social responsibility. Local communities, environmental experts, and the companies involved will closely watch whether proper consultation and safeguards are enforced before new mining activities proceed.
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