Changes in lithium industry in Mexico
2023.02.25 02:39
Changes in lithium industry in Mexico
By Ray Johnson
Budrigannews.com – The question of how to attract the necessary expertise from the private sector while keeping the majority of profits in state coffers remains unanswered by the Mexican government’s most recent effort to tighten control over its potentially lucrative lithium reserves.
The most recent presidential decree on lithium was signed by President Andres Manuel Lopez Obrador on Saturday, establishing a 235,000-hectare (900-square-mile) lithium mining zone in northern Sonora state and declaring that concessions within it “remain safe.”
However, the order also stated that “no mining activity related to lithium can be carried out in this area.”
According to sector experts and analysts, the decree could make it possible for Mexico’s newly established state-run company to acquire exclusive rights to exploit local reserves of the white metal, which is coveted by manufacturers of rechargeable batteries all over the world.
Fernando Quesada, a lawyer with extensive experience working on extractive projects in Mexico, stated, “It’s counterintuitive to declare (lithium) as reserved for the state, but that the concessions already granted will be respected.”
He went on to say that the new decree could mean that the government could use its power of expropriation to force negotiations with companies that already have concessions in the zone, like the Chinese lithium miner and battery manufacturer Ganfeng, which owns Mexico’s most advanced lithium project.
An extensive lithium nationalization was enacted by Lopez Obrador’s allies in Congress the previous year with the intention of ensuring that Mexico can capitalize on the rising demand for the ultra-light metal, which will power electric vehicle fleets in the future.
Since Lopez Obrador took office at the end of 2018, he has rejected new private investments in the oil and gas industry, including joint venture partnerships between potential private producers and the state-owned Pemex. Some experts say that the politics of lithium are a reflection of his overall state-centric approach to commodities considered strategic. He may view lithium in the same way.
Geologist and lithium expert Armando Alatorre stated that the most recent decree could result in additional modifications for existing concessions. He also argued that establishing a new legal mining area over existing mining concessions is a recipe for confusion.
He stated, “It creates a lot of uncertainty for investors.”
The decree’s economic ministry in Mexico and Lopez Obrador’s office did not respond to a request for comment.
In a research note, analysts at BTG Pactual stated that the state-owned LitioMx, which was established in August, will likely launch additional exploration efforts in the brand-new mining zone. However, they stated that it is still unknown whether those endeavors will be carried out independently or in partnership with private players.
According to the research note, “It is reasonable to expect that the locations just defined may be awarded to LitioMx.”
Mexico may contain 1.7 million tonnes of lithium, according to studies, but the majority of those deposits are trapped in clay-based soils.
Since no commercial-scale lithium extraction from clay soils has been attempted to date, the Mexican deposits will probably necessitate new technology, additional funding, and possibly processing facilities on-site.
According to BTG Pactual, LitioMx does not possess the required “capacity, technology, or mining know-how.”
Ramses Pech, an energy and mining analyst, stated that due to their complexity, such plants would necessitate significant expenditure commitments.
He emphasized the need to reduce political risks associated with the most recent government decree if Mexican lithium is to become a thriving, long-term industry from its raw potential.
He stated, “They have to give you certainty that you’ll be able to continue exploiting the reserves they’re granting for years to come.”
