Social licence to operate (SLO)

A social licence to operate (SLO) is a fundamental component of a just transition, defined as the ongoing acceptance or approval granted to organisations by communities and stakeholders affected by their activities. Unlike formal regulatory permissions, an SLO is built on trust, transparency, and fairness. It is particularly critical in the mining industry, which faces heightened environmental, social, and governance (ESG) risks. For transition-related activities, such as lithium mining, failing to secure an SLO can impede production and prevent the long-term benefits of the energy transition from being realised.

Rio Tinto

Rio Tinto is one of the world’s largest mining companies, operating in 34 countries with a focus on iron ore, copper, aluminium, and lithium. As of 2025, iron ore accounts for 48% of underlying revenue, followed by aluminium at 27% and copper at 23%. Lithium currently constitutes a small share (2%) of revenue, but the company plans rapid growth in this segment. In March 2025, Rio Tinto acquired Arcadium Lithium for USD6.7 billion, becoming the world’s third-largest lithium producer. This strategy contrasts with peers like BHP Group and Anglo American, who have avoided large-scale lithium investments. However, credit rating agency Fitch notes that this expansion entails significant execution risk, including social risks.

Jadar mining project

The Jadar mine in Serbia, discovered in 2004, contains one of the world’s largest lithium deposits, potentially meeting approximately 90% of the EU’s lithium demand. Consequently, the EU designated it a strategic project under the Critical Raw Minerals Act (CRMA). Although the Serbian government granted permission for extraction in 2017, Rio Tinto faced criticism for failing to adequately consult the local population or provide sufficient information regarding environmental impacts, such as water contamination and biodiversity loss. Nationwide protests led to the project being halted in January 2022. Despite a temporary unblocking of the project in July 2024, persistent public discontent forced Rio Tinto to mothball the mine in November 2025.

Financial impact

Failure to earn an SLO has resulted in significant financial consequences. Rio Tinto aimed to produce 2.3 million tonnes of lithium carbonate over the mine’s 40-year lifespan, with the project expected to generate EUR11.5 billion in undiscounted net profit. By January 2022, the company had already spent USD450 million on pre-feasibility and feasibility studies. The suspension meant Rio Tinto missed the 2023 lithium bull cycle, where prices surged due to electric vehicle demand. The acquisition of Arcadium Lithium in 2025 is viewed as a strategic response to these struggles, allowing the company to access immediate production rather than developing its own assets.

Previous experience in Juukan Gorge

Rio Tinto’s reputational challenges were compounded by the destruction of the Juukan Gorge caves in Western Australia in May 2020. This ancient Aboriginal site, showing continuous human occupation for 46,000 years, was destroyed to expand iron ore mining at a site worth USD104 million. The incident caused international outcry, leading to the resignations of the board chair and CEO, and a significant shareholder revolt over executive remuneration. This loss of trust may have hindered Rio Tinto’s ability to earn social acceptance for subsequent projects, including Jadar.

Engagement

The Juukan Gorge incident demonstrated the influence of equity market engagement in pressuring management to adopt social licence as a core objective. Fixed income investors also possess tools for effective engagement to ensure social risks are considered. These tools are outlined in the AFII’s toolkit on bondholder engagement.

SLO concerns can be addressed

Successful examples exist within the mining sector, such as Skeena Resources’ Eskay Creek gold-silver mine in British Columbia. The company collaborated with the indigenous Tahltan Central Government, which made a CAD5 million equity investment in the project in 2021. By treating the Tahltan as decision-makers and securing their consent before proceeding, Skeena achieved a streamlined regulatory process, receiving its Environmental Assessment Certificate in January 2026. This project is expected to benefit from high-grade deposits and a long-term gold price of approximately US$3,000 per ounce.

Rio Tinto spread performance

Analysis of Rio Tinto’s bond pricing following project suspensions in January 2022 and November 2025 shows that credit spreads widened. In January 2022, spreads on selected bonds increased by between +4bps and +7bps, while the broader market index (USD US Composite A BVAL Curve) widened by +5bps. In November 2025, spreads widened by +2bps to +5bps, compared to a market move of +3bps. Because Rio Tinto’s bonds moved largely in line with the broader market, it cannot be concluded that the Jadar suspensions specifically drove the spread widening.

Conclusions

While social risks are traditionally associated with the shift away from fossil fuels, they are equally relevant to the move toward renewable technologies. Lithium is critical for the energy transition, yet mining remains fraught with just transition risks. Rio Tinto’s experience in Serbia illustrates how failure to secure an SLO can damage growth aspirations and lead to significant sunk costs. While market pricing has not yet reacted significantly to these specific project halts, repeated failures to manage social risks could lead to future bond volatility as lithium production becomes more central to the company’s business.