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Mexico now ready to welcome private lithium miners

CommoditiesJun 02, 2021 07:06AM ET
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2/2 © Reuters. Mexican Senator Alejandro Armenta Mier, chairman of the upper chamber's finance committee and a key ally of President Andres Manuel Lopez Obrador, speaks during an interview with Reuters at his office in Mexico City, Mexico, May 25, 2021. REUTERS/David Alire 2/2

By David Alire Garcia

MEXICO CITY (Reuters) -Mexico's leftist ruling party has dropped plans to nationalize lithium production and is now pushing to welcome private investors to help develop the country's potential in the metal used to make batteries, the senior lawmaker behind the proposal told Reuters. Mexico, a major copper and silver producer, is home to large potential reserves of lithium, used in electric vehicle (EV) batteries. Most of it is in hard-to-tap clay deposits that are costly and technically difficult to mine. After touting the possibility of a state-run lithium monopoly late last year, Sen. Alejandro Armenta, chairman of the upper chamber's finance committee and a key ally of President Andres Manuel Lopez Obrador, said he will instead author a bill to promote a regulated marketplace in the nascent sector. "We're convinced that we need private investment and we're allies of domestic investors and also foreign investors who respect us," said Armenta, attributing his new posture to having studied regulatory frameworks for lithium in other countries. Armenta said a market-friendly lithium bill will be introduced in September with the start of a new legislative session, following June 6 mid-term elections. Mexico's nationalistic president, who favors state-centric oil and power markets, said in March that his government was analyzing the possibility of taking a larger stake in lithium. He did not go into detail. In recent weeks, a friendlier message to business has emerged from officials and candidates from the ruling National Regeneration Movement (MORENA) after Lopez Obrador's clashes with business elites. Economy Minister Tatiana Clouthier told local radio last month that the government was considering a public-private partnership to develop lithium. She suggested the state might have a 51% stake, a blueprint Armenta says he also now backs. In the energy sector, private oil majors have mostly balked at joint ventures with national oil giant Pemex if the state-run company runs operations and it was unclear if lithium investors would react similarly.

TRAPPED IN CLAY

Surging demand for the ultra-light metal has fueled a global scramble to secure supplies, spurred by a planned wave of new electric autos by mid-decade from the likes of General Motors (NYSE:GM) and Ford. Developing Mexico's lithium riches could help diversify global sources currently concentrated in a few countries, led by Australia and Chile. Lithium producers have been seeking to aggressively ramp up output. Top producer Albemarle (NYSE:ALB) this year eyes doubling capacity, and No. 2 SQM expects to grow volumes of lithium carbonate by more than 70% in 2021.

Lithium is produced either from brine, commonly found in South America, or spodumene hard rock, usually in Australia, with proven extraction technologies largely limited to saline evaporation ponds and traditional ore processing.

Lithium-rich saline brines account for about three-quarters of global output, with rock mining making up the rest. Mexican deposits found to date, however, are mostly trapped in clay soils. That distribution is why Fernando Alanis, former chief executive of top silver miner Peñoles, is downbeat on Mexico's potential to become a new lithium hot spot. "Unfortunately, Mexico's potential doesn't really exist because there isn't a commercial process to remove lithium from clays," said Alanis, who in his role as a president of Mexico's mining chamber is normally an industry cheerleader.

Several lithium clay projects are under development elsewhere including Lithium Americas (NYSE:LAC) Corp.’s Nevada project. The company has said it is confident it will be able to extract lithium from clay through a process that involves acid leaching Top Mexico prospector Bacanora Lithium, which holds four concessions in the northern state of Sonora, has claimed to be closest to launching production. In 2018, it forecast output of 17,500 tonnes of lithium carbonate by 2020. The target has been pushed back, and the firm's current guidance is production will begin in 2023 and ramp up to 35,000 tonnes annually. If achieved, its one project would catapult Mexico to major producer status. Global production stood at about 82,000 tonnes last year, according to the U.S. Geological Survey. Bacanora's delays have not slowed bets on the firm which saw its London-listed shares surge 30% in early May (May 6)after China's Ganfeng Lithium, a major battery maker and Tesla (NASDAQ:TSLA) supplier, offered to take over the company. Bacanora declined comment on how it aims to process the clay-based lithium deposit in Sonora or its view of Armenta's new legislative proposal.

Mexico now ready to welcome private lithium miners
 

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