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Mexico plans to open its lithium mines to private investors

Mexico City, Mexico — Mexico plans to open lithium mines to private investors. The move came in a new bill which will be presented in September, that would boost the industry and provide growth opportunity with T-MEC.

The government has abandoned its plans to nationalize lithium production and is now promoting private investments to help develop the country’s potential in the metal used to make batteries.

Mexico, a major producer of copper and silver, is home to large potential lithium reserves. Most of it is found in difficult-to-mine clay deposits, which are expensive and technically difficult to extract.

Instead of establishing a state monopoly on lithium as proposed at the end of last year, a bill will be drawn up to promote a regulated market in the nascent sector, explained Senator Alejandro Armenta, chairman of the Senate Committee of Finance.

“We are convinced that we need private investment. We are allies of nationalist investors and also of foreign investors who respect us,” Armenta said in an interview with Reuters.

The bill will be presented in September with the start of a new legislative period after the midterm elections on June 6, which will renew the Chamber of Deputies.

Tatiana Clouthier, head of the Secretariat of Economy of Mexico, stated last month that the Mexican government was considering a public-private partnership to develop lithium. She suggested that the state could have a 51 percent stake, a scheme that Armenta also supports.

In the energy sector, the large private oil companies have generally preferred to avoid alliances with the state oil giant Pemex if the company is the operator of the joint projects. It was unclear if investors in lithium would react similarly.

Growing demand for the mineral has fueled a global struggle to secure supply, but the development of Mexico’s lithium riches could help diversify global sources currently concentrated in a few countries led by Australia and Chile.

Lithium producers have been looking to aggressively increase production. Albemarle, for example, expects to double capacity this year, and rival SQM plans to increase lithium carbonate volumes by more than 70 percent in 2021.

Lithium is produced from brines, commonly found in South America or from hard rock generally in Australia with extraction technologies largely limited to salt evaporation ponds and traditional mineral processing.

Lithium-rich salt brines account for roughly three-quarters of global production, with rock mining accounting for the remainder.

The Mexican deposits found to date are mostly trapped in clay sediments.

That distribution is the reason why Fernando Alanís, former CEO of silver mine Peñoles, is not optimistic about Mexico’s potential to become a new player in the global industry.

“Unfortunately, the potential that Mexico has is nil because there is no commercial process to process lithium from clays and I am speaking at a global level,” said Alanís.

Several lithium clay projects are under development elsewhere including one for Lithium Americas in Nevada. The company has said it is confident that it can extract lithium from the clay using a process that involves acid leaching.

The main Mexican prospector Bacanora Lithium, which owns four concessions in Sonora, has said it is close to starting production. In 2018, it forecast a production of 17,500 tonnes of lithium carbonate for 2020.

The target has been delayed and the company’s current estimate is that production will start in 2023 and increase to 35,000 tonnes annually. If successful, their only project would catapult Mexico to become one of the largest producers in the world.

World production stood at about 82,000 tonnes last year, according to the United States Geological Survey.

Bacanora’s delays haven’t slowed bets on the company, which saw its London shares soar 30 percent in early May after China’s Ganfeng Lithium, a major battery maker and supplier to Tesla, offered to acquire the company.

Bacanora declined to comment on how it intends to process the clay-based lithium deposit in Sonora or to comment on Armenta’s new legislative proposal.