Uncertainty Looms Over Future Of Mexico’s Lithium Industry

Mexican officials recently decided to increase their authority over their valuable lithium reserves. But this move does not address the challenge of bringing the private sector on board.

As the things stand, the government will retain the majority of profits. Yesterday, Mexican President Manuel Lopez Obrador issued a Presidential order regarding lithium.

President Manuel established a new region for lithium mining, the area spans over 900 square miles in the northern Sonora state.

This newly created area is already been considered a safe haven for lithium mining. But the order has also declared that anyone other than government officials mining the lithium in that area is prohibited.

The Newly Issued Presidential Order Seems Unfair

As a result Presidential order, the newly established state-owned company in Mexico may be granted exclusive permission to utilize the local reserves of lithium.

Experts and analysts believe that given the fact lithium’s demand is ever-rising in the global market, the Mexican government can see lucrative growth in its lithium exports.

As the private sector is prohibited from exploiting the country’s lithium reserves, the government will be the biggest victor.

A famous Mexican lawyer, Fernando Quesada stepped into the discussion by declaring the recent Presidential order as illogical.

The experienced lawyer also said that this new order means that government might initiate talks with companies that possess concessions in the area.

For instance, Ganfeng, a Chinese company that also carries out lithium mining and battery production, might negotiate with the government. Ganfeng also has a stake in Mexico’s most developed lithium project.

The current Federal officials have been working for over a year to declare nationalism regarding its lithium reserves.

The aim behind the nationalism plans is to ensure that the country gets maximum benefits out of its lithium reserves amid the high demand for lithium.

The reason that lithium is seeing an increase in its demand is simple, it has been considered a white battery, and the most obvious source to power electric vehicles.

President Lopez Obrador is Firmly Standing behind Nationalism

Since Lopez has taken over as the President of Mexico has not shown any interest in investing in the oil and gas sector.

He has even discouraged a joint venture with state-owned Pemex, as he is reluctant that this would lead the way for the private sector to lurk in.

Experts do believe that he thinks the same about lithium, any foreign investment or joint venture in the lithium sector would cut off the government’s income stream.

Experts have the opinion that the political implications of controlling a particular metal reflect a wider strategy of prioritizing state control over resources.

Elsewhere, a renowned geologist and lithium expert, Armando Alatorre said that a recent decree can also force modifications to current concessions.

He also expressed his opinion that creating a fresh mining zone that overlaps with the current mining permits would lead to confusion.

This new Presidential order has sparked too many uncertainties in the investors’ minds regarding their investment in the lithium sector.

Mexico’s finance ministry has said that they are working on creating another plan. That will accommodate the private investors who are willing to step into lithium sector mining.

But how space this will offer to private investors is highly questionable. It is expected that LitioMx might be selected to carry out the mining operations on newly announced locations.

Various research papers have been revealing that the country’s lithium reserves are around 1.7 million tons.

But these reserves have been heavily coated by layers of hard soil. This suggests that the Mexican government has to work hard to bring these reserves to use.

To date, there hasn’t been any implementation of large-scale lithium extraction from clay soils for commercial purposes.

Before thinking about earning profits from exporting Lithium, Mexican officials first have to initiate the technology to separate Lithium from mud.

This might be a loophole where the private sector can force the government.