Mexico taps into lithium to power foreign investments

Mexico saw two near-simultaneous developments last month.

First, President Andres Manuel Lopez Obrador handed responsibility for the country's lithium reserves to the energy ministry, tightening state control over the metal that powers rechargeable batteries in electric vehicles.

Days later, Tesla owner Elon Musk announced a "giga factory" in the northern Mexico city of Monterrey to produce the company's best-selling electric vehicles.

In a country with estimated lithium reserves of around 1.7 million tonnes, Mexico is pushing to maintain control over its resources while luring private investments in the lucrative sector.  

Last April, the Mexican President  – popularly known by the acronym AMLO – announced his government's decision to nationalise lithium, paving the way for founding LitioMx, a state-owned company that will control extraction and marketing of the light metal.

He said Mexico was implementing the measures so that lithium deposits "cannot be exploited by foreigners, neither from Russia, China nor from the United States".

In 2020, Latin America's lithium industry reached 29.5 percent of global production. The 'Lithium Triangle' – made up of Argentina, Bolivia and Chile – is estimated to hold 50 percent of the world's lithium deposits.

Isidro Tellez Ramirez, a researcher at the Economic Research Institute UNAM, says its deposits "place Mexico among the ten countries with the potential to produce lithium in the coming years".

Jose Arturo Barbosa Moreno, a researcher and engineer at the National Technological Campus in Ciudad Madero, Tamaulipas  says Mexican lithium is found in clay, whereas elsewhere, it is mined from brine or mixed alongside "diverse minerals". Lithium in clay lacks an "efficient manner" to exploit it, as one method typically requires significant water and chemicals.

Nevertheless, several foreign companies already have a footprint in the country.

Ganfeng Lithium Co, a Chinese lithium mining and battery producer, has the most advanced project in Sonora, where the metal deposits are concentrated. Rockland Resources Ltd, a Canada-based firm, has another project named 'Elektra' in the same region.

Advance Lithium Corp and Silver Valley Metals Corp, both Canada-based exploration companies, have projects in the states of Zacatecas and San Luis Potosi, according to a report published in February by MiningWatch Canada and Mexico's network of people affected by mining (REMA).

In total, there are around a dozen foreign companies with active mining concessions for lithium.

Demand for the metal is projected to increase 40-fold within the next two decades as the world moves towards the Paris Agreement climate objectives to cut greenhouse emissions so that temperature rise is kept "well below" 2.0 degree-Celsius this century.

Globally, China is leading the way, producing three-quarters of all lithium-ion batteries and over half of lithium, cobalt and graphite.

One report suggests the government could resort to the potential use of "expropriations" as leverage in negotiations.

Ganfeng Lithium Co has nine concessions granted between 2010-2015, with some running until 2065.

However,  Tellez Ramirez expects concessions granted before 2018 to Ganfeng Lithium Co to be respected, suggesting the reform did not entail "expropriation".

The US' loss of "hegemony" to China amid the geopolitical dispute has driven lithium producers to set up across Latin America to meet the demand of the US electric car industry, which Tellez Ramirez says has allowed Mexico to position itself as "a potential producer".

With mining under the direction of the State to drive Mexico's economic development, Tellez Ramirez argues that the AMLO government is once again looking to take advantage of "offshoring".

However, he argues that lithium was not nationalised last year, as Mexico's constitution already stipulates minerals found in the country's subsoil belong to the country, while the State has already granted concessions to interested parties - both Mexican and Foreign.

Tellez Ramirez suggests Mexico’s lithium drive cannot be understood without taking into account AMLO’s policy shift in mining. 

Between 1982-2018, the sector received multiple benefits from “the declaration of mining as a preferential activity over any other (except hydrocarbon exploitation); the elimination of any geographical limit to mining concessions; the validity of mining concessions for 50 years with the possibility of renewal for the same period and paying a fee that does not exceed 7 dollars; the facility to repatriate the profits obtained by foreign companies without any tax, especially those coming from the signatory countries of the USMCA."

"The current government did not eliminate these benefits but only prohibited the awarding of new mining concessions, considering that it had been an excess of past administrations (between 13 percent and 18 percent of Mexico's continental territory)," he adds.

Moreno hopes recent developments will help Mexico to be more independent.

He says 70 percent of Mexico's minerals are operated by foreign companies, arguing it has had a detrimental economic impact on the country.

"Like many Latin American countries, Mexico has allowed foreign companies to dominate many markets, which is bad for the country since it is difficult to be self-sufficient, despite having our own natural resources," says Moreno.

However, with drought impacting the region, there are environmental concerns despite numerous laws, regulations and commitments.

"Regarding mining, like any other process, if it is not carried out efficiently, it can bring environmental consequences, but the fact that a foreign company carries out the mining does not guarantee that these consequences will not exist," argues Moreno.

Ramirez says that "Mining is one of the least regulated activities in environmental terms," underscoring the Sonora River spill, which has been called the "worst environmental disaster in the history of mining in Mexico."

In 2014, 40 million litres of toxic leaching material and heavy metals from a copper mine spilled into the Bacanuchi and Sonora Rivers in northern Mexico, travelling 160 miles and impacting 25,000 people.

MiningWatch Canada and REMA note implications for water resources, with 47 percent of projects around aquifers experiencing a water deficit.

"It is estimated that for each ton of lithium salts, 2 million litres of water evaporate, in addition to the fact that it is an activity that requires more than 2,000 tons of chemicals to process the metal," explains Tellez Ramirez.

MiningWatch Canada and REMA note numerous negative impacts of mining, which they argue come "at the expense of the territories (water, land, biodiversity and culture) and the lives of the communities" and suggest the green energy transition invariably contributes "to false solutions that capitalism provides to the socio-ecological and economic crisis we are experiencing."

However, AMLO has said Tesla will help with “a series of commitments to tackle the issue of water scarcity”.