Mexico Going Forward with Plan to Nationalize Lithium Production

Mexico is going forward with its project to nationalize its growing lithium industry. This comes after Alejandro Armenta, a member of the Morena Party, introduced the proposal in parliament on Nov. 11, 2020. The proposal calls for lithium to be declared as the country’s exclusive property. This means that its production will be managed by the state.

To do this, Armenta, the head of the Senate Finance commission, proposes that a new state-owned entity be created to regulate the mining of lithium. The proposed name of this entity is LitioMex. During a parliamentary online session, Armenta explained that the proposal wasn’t about hindering investment but hindering exploitation from other nations.

The commencement of production in Mexico’s Sonora project by Ganfeng Lithium and Bacanora Minerals in 2023 is expected to boost the lithium production of Mexico, which is the largest silver-producing country globally. The project will generate 17,500 tons of lithium every year initially, with projections showing that at its prime, the mine could produce 35,000 tons of lithium annually.

Ganfeng Lithium, a firm with contracts to supply LG Chem and Tesla with the battery metal, recently grew its stake in the project to 50% from 22.5%, showing that the project may generate huge and valuable returns.

Wang Xiaoshen, CEO of Ganfeng Lithium, voiced his reservations on Mexico’s plan to nationalize its lithium industry. He stated that the decision may not be a good idea, citing the lack of investment projects in Bolivia, which has considerable lithium resources.

However, Armenta asserts that the value of the country’s battery metal resources is four times greater than Mexico’s sovereign debt, or more. This, he says, may be a solution to the country’s present economic woes.

Analysts at SP Angel, a London-based investment firm, say that while the Sonora project may not be a target for the country’s plans, it may be impacted if this new law is approved. Analysts add that it wouldn’t be easy for the country’s government to undertake a project such as Sonora without failing.

It is projected that by 2022, lithium prices will have increased significantly, as a result of halted expansions and reduced production. Before the onset of the COVID-19 pandemic, the prices of lithium were in free fall because of overwhelming new supply.

For 2023, prior BMI forecasts show supply at 572,000 tons. However, recent numbers show that an 8,000-ton deficit will be experienced, with the supply decreasing to 543,000 tons. BMI believes that the shortfall will grow in the years that follow significantly.

Elsewhere, the mining industry is moving ahead at a blistering pace. Josemaria Resources Inc. (TSX: JOSE) (OTCQB: JOSMF) is one entity moving full steam ahead. This firm has devoted its energies to exploiting its Argentinian-based Josemaria project, which has gold and copper deposits.

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