Portugal's environmental protection agency gave a green light Wednesday for a massive lithium mine that could become western Europe's biggest and give a boost to the continent's growing electric car industry.

The southern European nation is thought to have the continent's largest reserves of lithium, a vital raw material to produce the batteries that power electric vehicles.

The agency said that the Barroso project in northern Portugal, which is owned by British group Savannah Resources, obtained a "positive declaration of environmental impact, under several conditions".

The original proposal was "considerably modified" for the protection of waterways and biodiversity, the agency said in a statement.

Savannah Resources said the approval was a "key decision" allowing the project to move to the next stage of the environmental licensing process.

"This is an extremely important step forward, not only in the development of the Project, but also in the development of the lithium raw material industry in Portugal," said Savannah chief executive Dale Ferguson.

The European Union is racing to build up its own supply chain to produce electric vehicles, from mining raw materials to building battery factories -- as it has set a 2035 deadline to phase out the sale of new fossil fuel vehicles.