Mexico is moving ahead with plans to nationalize its emerging lithium industry聽after a member of the ruling Morena party , which calls for the battery metal to be deemed the exclusive property of the nation, with production controlled by the state.
Alejandro Armenta, head of the Senate鈥檚 finance commission, is proposing the creation of a new state-owned entity, LitioMex, to regulate lithium mining.
鈥淚t is not about closing the door to investment,鈥� Mena said in an . 鈥淭here needs to be regulation (鈥�) We are currently giving away our lithium to Chinese, Americans and Canadians (鈥�) We shouldn鈥檛 be a paradise for exploitation. That鈥檚 called looting.鈥�
Mexico has already scared private investors away by renegotiating gas pipeline contracts that the government declared exorbitant. It has also attempted to change regulations聽for renewable energy projects.
El debe ser propiedad de la naci贸n como instrumento de desarrollo econ贸mico, no cometamos el error de ignorar su valor. Actuemos con responsabilidad para uso exclusivo de la naci贸n.
鈥� Alejandro Armenta (@armentaconmigo)
En la sesi贸n a distancia, expliqu茅 la trascendencia de la iniciativa a favor de .
Eyes on Sonora
While the silver-rich country is not a lithium producer, the situation is about to change when Bacanora聽Minerals (LON:BCN) and JV partner聽Ganfeng Lithium聽begin commercial production at their Sonora聽project, which is expected in 2023.
The mine will initially produce 17,500 tonnes of lithium per year. At full-tilt, Sonora will generate 35,000 tonnes of the battery metal per year.
Hong Kong-listed Ganfeng, which has agreements to supply lithium to Tesla and South Korea鈥檚聽LG Chem,聽recently increased its stake from 22.5% to 50% in the project, which it believes to be 鈥渨orld-class.鈥�
Chief executive Wang Xiaoshen has expressed its reservations about the country鈥檚 plans for its lithium industry.
鈥淣ationalization may not be a good idea; there are many bad examples of nationalization of resources,鈥� Wang in September. 鈥淎n example is Bolivia. There are big lithium resources there but for many years no project has been built because Bolivians don鈥檛 allow foreign companies to own mining properties. That鈥檚 a big hurdle for attracting investment.鈥�
Armenta, however, claims the value of Mexico鈥檚 lithium resources is more than four times the country鈥檚 sovereign debt and, as such, could be a solution to the nation鈥檚 current economic woes.
London-based investment firm SP Angel said it was hard to see how Mexico鈥檚 government would take over early stage assets like Sonora without killing the project.
鈥淲e do not see Bacanora鈥檚 Sonora as a target for this nationalization, though it could get caught by the new legislation if approved,鈥� analysts at SP Angel said.
Prices for lithium are聽expected to climb by 2022, when shortages in the market caused by curtailed production and halted expansions start to emerge.
Before coronavirus, lithium prices were in free fall due to an聽avalanche of new supply.聽The glut made majors tame their growth plans.
BMI had forecast supply at 572,000 tonnes for 2023, but now sees that number at 543,000 tonnes, with a shortfall of 8,000 tonnes. The company believes the deficit in later years will grow significantly.