EconomyFinancialLithium: the new dispute that opens between the Mexican...

Lithium: the new dispute that opens between the Mexican government and the private sector

An initiative to reform the Mining Law, which seeks to guarantee that the exploitation of this resource remains in the hands of the State, is being discussed today in Congress. Lithium, considered the oil of the 21st century, will be key in the energy transition promoted by various powers around the world. Guaranteeing its control has become a priority for governments that know they have this mineral in their territories.

In a recent study by the World Bank , it is estimated that the production of minerals such as graphite, lithium and cobalt will have to grow by 500% by the year 2050 to meet the needs of the so-called energy transition on a global scale. like those manufactured by Tesla in a plant in the southern United States, could generate an increase, between now and 2050, in the extraction of up to 250 million tons of minerals, mainly graphite, nickel and cobalt.

In Mexico there are 36 foreign capital mining projects for lithium extraction that are controlled by 10 companies. These projects represent 97,000 hectares under concession, but there are another 537,000 hectares , equivalent to 84% of the concessions associated with the extraction of lithium, which were in process and would be stopped after the approval of the reform to the Mining Law .

Lithium deposits in Mexico

Today there are only three companies that have really advanced with their extraction projects: Bacanora Lithium, Organimax and One World Lithium. The rest are idle mining projects that are mostly controlled by small Canadian companies on the verge of bankruptcy. “These companies depend on the speculation process to generate resources on the Canadian stock exchanges,” says a report by GeoComunes, REMA and MiningWatch Canada.

The Bacanora project in Sonora

The project with the greatest progress and the most mediated in the last year is that of the British company, formerly Canadian and now Chinese, Bacanora Lithium. This project, located in the municipality of Bacadehuachi, in the Sierra Madre Occidental in the state of Sonora, has been recognized by the specialized magazine Mining Technology as “the lithium mining project with the largest proven reserves worldwide with 243.8 million tons”. .

In 2018, the company forecast a production of 17,500 tons of lithium carbonate for 2020. The target, however, suffered delays and the company’s current estimate is that production will start in 2023 and increase to 35,000 tons per year. The company plans to invest up to 2,000 million dollars more in the next 10 years.

The company is headquartered in the United Kingdom and has a variety of investors, the main one being Ganfeng Lithium , which last year became its majority shareholder and which will provide the project with technological equipment for the design of the production process in Sonora. , since this company has a lot of experience in the extraction of lithium as well as its commercialization.

The Japanese company Hanwa signed an agreement with Bacanora Lithium for the supply of lithium extracted during the first 10 years of the project.

Organimax projects in Zacatecas and San Luis Potosí

Organimax Nutient Corp, formerly Alset Minerals Corp., is a junior mining company primarily engaged in speculation and exploration work. Organimax trades shares on the Toronto Stock Exchange, an exchange criticized for having few controls and accountability mechanisms.

Organimax has acquired five concessions on the border between the states of Zacatecas and San Luis Potosí with a total area of 22,100 hectares. It intends to exploit 15 salt flats with methods similar to those used in South America for brine extraction to first extract potassium (to make organic fertilizers) and lithium. At the moment the company, which has just 2.5 million dollars in goods and assets and which, until before the pandemic, had reported operating losses every year, has only carried out analyzes in three of the 15 salt flats.

The One World Lithium project in Baja California

The third lithium extraction project in an advanced phase is the Salar del Diablo, Baja California, of the Canadian company One World Lithium, formerly One World Minerals. The project passed into the hands of One World Lithium in 2017, as part of the purchase of the Canadian Lithium Investments Ltd. “According to the acquisition agreement – indicates the report by GeoComunes, REMA and MiningWatch Canada – the One World Lithium company has 60 % of the Salar del Diablo project and the right to obtain 90% of the project after completing various exploration phases”.

One World Lithium is a Canadian junior mining company that has $3.3 million in property and assets, but has an accumulated debt of $18 million Canadian, which, according to the company’s auditors, raises “concerns about the ability of the company to continue working.

The project is made up of three concessions in a total area of 73,500 hectares (according to the surface information of the mining concessions in process) or 103,400 hectares (according to what the company announces). It is a salt flat project with the possibility of having lithium in the brine.

The company began the 12-well drilling program in May 2019. However, it suspended the program in June of the same year because it did not reach any indicative samples in five wells. In September 2020, the company announced a new financing of 1.5 million Canadian dollars to continue drilling in the southern part of the project.

State-owned concessions

In addition to these concessions in the hands of private parties, there are four mining assignments in process in charge of the Mexican Geological Service (SGM) to carry out exploration works, as part of , which for a couple of years began to be considered “strategic”.

Mexican lithium: between the interests of Asia and the United States

The emphasis that has been placed on the control of this mineral has provoked a process of financial speculation, as well as disputes over obtaining sources of supply between the United States and Asia. Today China, and other Asian countries, dominate the lithium market.

The United States today is totally dependent on foreign markets for lithium carbonate and industrialized lithium. Although, until before the pandemic, 90% of its lithium imports came from Argentina and Chile, its proximity to Mexico could make the country a natural supplier. The Bacanora project and the Salar del Diablo are located less than 200 kilometers from the border with the United States.

Until now, there is not much clarity about what will happen to the lithium that is extracted from the deposits located in Mexico. There is only one existing agreement with the Hanwa company to export lithium from the Bacanora project for 10 years to Japan, via the port of Guaymas, Sonora. The lithium could have the Chinese market as its final destination, but it could also end up in the United States, due to commercial commitments between Hanwa and Tesla.

In addition, the new trade agreement (T-MEC) signed between the governments of Mexico, the United States and Canada, indicates that lithium batteries are an “essential” component for the automotive industry that operates in the region, and determines a term of three years to reach 75% regional lithium content so that these batteries do not pay tariffs.

These measures to increase the consumption of lithium products extracted in the region, added to the fact that world production is currently concentrated in Australia, South America and Asia; put more pressure on the deposits of this mineral located in Mexico and Canada. The reform to the Mining Law that is being discussed in Congress could lay the foundations for who and how will take advantage of the lithium that is under Mexican soil. The so-called white gold, whose demand will explode in the next decade.

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