Mexico’s López Obrador moves ahead with his crusade for lithium, revoking nine concessions from Ganfeng Lithium, a Chinese firm

The Mexican government has redoubled its commitment to gain control of lithium, a strategic mineral considered to be new white gold. The General Directorate of Mines has canceled nine lithium concessions that were previously held by the Chinese firm Ganfeng Lithium, under the argument that the mining company failed to meet the minimum investment requirements.

These annulled concessions cover the largest projected deposit of this mineral so far identified in Mexico. They are located in the municipality of Bacadéhuachi, in the state of Sonora. The Chinese company – the largest producer of lithium batteries in the world – has already informed its investors that the termination of the permits is arbitrary, violating both national and international rights. They have already filed appeals for review with the Secretariat of Economy.

At the end of 2021, Ganfeng Lithium bought the largest lithium clay deposit in Mexico from Bacanora Lithium, a British firm. The transaction – valued at more than $260 million – gave them the power to exploit the rights to nine mining concessions, until between 2060 and 2065. The acquisition made complete sense when considering the projected reserves in this deposit in Sonora: 8.82 million tons of lithium carbonate equivalent (LCE), according to Ganfeng’s most recent annual report. Globally, lithium has become a strategic mineral, as it’s crucial in the manufacture of batteries.

The sale was carried out despite the fact that, months earlier, in April of 2021, the Mexican government began the process of reforming its mining laws. This involved vetoing new lithium concessions from being granted to private parties, while also granting the Mexican state the exclusive rights to lithium exploration, production and commercialization, given that it’s classified as a strategic mineral. At the time, however, Ganfeng assumed that the modifications to the laws wouldn’t have repercussions on concessions that had already been granted. However, years later, this confidence has begun to fade.

In its most recent report to investors, the mining company emphasized that its projects in Sonora wouldn’t be affected by the planned reforms, as the mining rights were granted before the legislative modifications. As recently as this past May, the firm also presented evidence that it had met the minimum investment requirements. Despite this, the company protests, nine of its concessions have been canceled by the General Directorate of Mines. “The resolutions that cancelled the concessions violate Mexican law and international law… they are arbitrary and unfounded. The company and the Mexican subsidiaries have filed administrative review appeals with the [Secretariat] of Economy,” Ganfeng Lithium notes, in a message to investors.

Amidst the “lithium fever” that’s gripping Latin America, Mexico doesn’t want to be left behind. Currently, the countries that extract the most lithium from their subsoil are Australia, Chile and China. The López Obrador administration – working towards its goal of nationalizing the mineral – has created Litio Mx, a decentralized public body that, to date, doesn’t have its own budget. According to the mandate of the state company, its resources will come from allocations in the federal budget and from its own activities surrounding lithium. However, this income still seems to be far off, as there’s no planned extraction of the mineral.

Rigoberto García – an academic and researcher who specializes in the mining sector – emphasizes that the potential of the mineral in Mexico is still in its infancy, because, to date, not a single gram of lithium has been extracted in the state of Sonora. “I believe that the potential that lithium has as a mineral for technological development has been exaggerated. Nothing guarantees that lithium will be an indispensable mineral for batteries, due to ongoing technological developments. And I think that public-private partnerships are preferable for this type of project… but there’s still a lot of uncertainty about the potential,” he affirms. The academic also insists that the global battle for strategic minerals shouldn’t be ruled out in the geopolitical context – especially considering that it was a Chinese company that was set to exploit lithium in Mexico.

So far, neither the Secretariat of Economy nor Litio Mx have issued statements or taken a firm position on the issue. Meanwhile, Ganfeng Lithium has indicated that it’s still too early to know the economic impact that this measure will have on its operations.

According to the United States Geological Survey, Mexico has 1.7 million tons of lithium reserves in total. The most recent report released by the Mexican Mining Chamber of Commerce (Camimex) reported that, of the thousand mining projects across the national territory, 24 are focused on the extraction of lithium.

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