State-owned lithium

Mexico establishes a state-owned company to extract and refine lithium.

Mexico’s President Andrés Manuel López Obrador (“AMLO”) recently approved the creation of LitioMx, a state-owned company responsible for the extraction and refining of the country’s estimated 1.7 million tonnes of lithium reserves – the ninth largest in the world. LitioMx will assume all primary operations but will be allowed to enter private partnerships for projects such as the production of batteries.

LitioMx will fall under the Ministry of Energy (“Sener”) after the Ministry of Finance did not provide budget support for LitioMx’s operations. Pablo Daniel Taddei Arriola, the son of Jorge Taddei Bringas, the Ministry of Welfare’s delegate to Sonora, will run the new company. According to AMLO, he is currently completing a doctorate in environmental health at Harvard University.

A mining executive in Mexico found the appointment laughable, “I’m sure he’s a nice guy but his appointment is ridiculous. He has no experience in the extractive industry. He doesn’t even have any experience running a company!”

“I’m sure he’s a nice guy but his appointment is ridiculous. He has no experience in the extractive industry. He doesn’t even have any experience running a company!”

Mining executive, Mexico

With the creation of LitioMx, the government intends to exploit its 1.7 million tonnes of lithium resources. The Mexican Geological Service (“SGM”) estimates that 18 Mexican states have some form of lithium reserves.

It is expected that the amendment of the Mining Law passed by the Mexican Congress last April will contribute to attract private investors to the sector. An executive at Asociación Mexicana de Distribuidores de Automotores wasn’t so sure, “AMLO has blown up the bridges of trust with the private sector and especially with multinational corporations. I find it hard to imagine that the reform of a secondary law (the Mining Law) is fundamental for the automotive industry, which expects much more than a disguised nationalisation of lithium.” AMLO stated that while LitioMx will assume primary operations such as exploration and exploitation, the company will be allowed to enter private partnership for projects such as the production of batteries.

Partnering with the private sector will be essential, according to a mining consultant in Mexico, “The infrastructure, technology and knowledge to extract and refine lithium at scale doesn’t exist in Mexico so, state-owned company or not, foreign companies will need to be involved. That’s before we even consider battery production, which will also need private sector partners.”

“The infrastructure, technology and knowledge to extract and refine lithium at scale doesn’t exist in Mexico so, state-owned company or not, foreign companies will need to be involved.”

Mining consultant, Mexico

That’s just as well for Bacanora Lithium (controlled by China’s largest lithium producer, Ganfeng Lithium), whose USD 240 million Sonora Lithium project, located 170 kilometres south of the US border, is expected to start production in 2023. It is unclear how the creation of LitioMx will affects the project but, in a surprising coincidence, the governor of Sonora, Alfonso Durazo Montaño, revealed that Ganfeng Lithium is interested in investing USD 1 billion in LitioMx.

While the situation is laughable to some the US automotive industry is watching closely –  having a local supplier of lithium batteries could be extremely helpful but not if those batteries are bound for China.

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