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Decree adds to doubts about Mexican lithium industry’s future

admin by admin
February 28, 2023
in News


But the order also declared “no mining activity can be carried out related to lithium” within this area.

The decree could pave the way for Mexico’s newly-created state-run company to get exclusive rights to exploit local reserves of the white metal, coveted by rechargeable battery makers across the globe, sector experts and analysts said.

“It’s counterintuitive to declare (lithium) as reserved for the state, but that the concessions already granted will be respected,” said Fernando Quesada, a lawyer with extensive experience working on extractive projects in Mexico.

He added that the new decree could mean the government may use its power of expropriation as a tool to force negotiations with companies that already have concessions in the zone, like Chinese lithium miner and battery maker Ganfeng, which controls Mexico’s most advanced lithium project.

Last year, Lopez Obrador’s allies in Congress enacted a sweeping lithium nationalization aiming to ensure that Mexico can profit from surging demand for the ultra-light metal, which is needed to power future fleets of electric vehicles.

Since he took office in late 2018, Lopez Obrador has rejected new private investment in oil and gas, including even joint venture partnerships between state-owned Pemex and would-be private producers. He may view lithium the same way, with some experts describing the politics of the metal as echo of his broader state-centric approach regarding commodities deemed strategic.

Armando Alatorre, a geologist and lithium expert, said the latest decree could lead to further changes for existing concessions, and he argued that establishing a new legal mining area superimposed over existing mining concessions is a recipe for confusion.

“It creates a lot of uncertainty for investors,” he said.

Neither Lopez Obrador’s office or Mexico’s economy ministry, which was part of the decree, responded to a request for comment.

Created last August, state-run LitioMx will likely launch further exploration efforts in the new mining zone, BTG Pactual analysts said in a research note. But they said it remains unclear if those efforts will be carried out alone or in partnership with private players.

“It is reasonable to expect that the locations just defined may be awarded to LitioMx,” according to the research note.

Studies suggest Mexico may hold some 1.7 million tonnes of lithium, but those deposits are mostly trapped in clay-based soils.

To date, no commercial-scale lithium extraction from clay soils has been deployed, meaning the Mexican deposits will likely require new technology, extra investment and perhaps on-site processing plants.

BTG Pactual stressed that LitioMx lacks the necessary “capacity, technology, or mining know-how.”

Such plants would require a significant spending commitment given their complexity, said energy and mining analyst Ramses Pech.

He emphasized the need to minimize political risks associated with the government’s latest decree, if Mexican lithium has any hope of transforming its raw potential into a thriving industry with a long-term horizon.

“They have to give you certainty that the reserves they’re granting, that you’ll be able to keep exploiting them for years to come,” he said.

(By Carolina Pulice; Editing by David Alire Garcia and Alistair Bell)


Related Article: Beijing probes illegal mining activities in Chinese lithium hub





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