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Mexico’s lithium and the global race to lock in ‘white gold’ | Business and Economy News

by 198 Mexico News
December 21, 2021
in MEXICO CHINA NEWS
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Mexico City, Mexico  – This year’s political moves surrounding Mexico’s lithium reserves have tested the limits of President Andres Manuel Lopez Obrador’s (AMLO) pledges to keep the country’s most precious natural resources firmly in Mexican hands.

In October, AMLO unveiled a sweeping energy reform bill that included nationalising Mexico’s lithium deposits as a strategic mineral – a move that threw into doubt China’s ability to lock in a critical reserve of lithium to support its green energy transition plans.

Also known as “white gold” and “the new oil”, lithium is a key ingredient in lithium-ion batteries that are used for green energy storage, including powering electric vehicles.

China’s Ganfeng Lithium had set its sights on upping its stake in a massive lithium mining project in Mexico’s Sonora state by buying all the concessions held by its partner in the project, United Kingdom-based mining and exploration giant Bacanora.

After the news of AMLO’s nationalisation plans hit the markets in October, the government scrambled to assure firms with active lithium mining permits in Mexico that they would be exempt from any new legislation. That, in turn, was interpreted to apply to Ganfeng, because construction had started on the Bacanora Sonora Lithium deposit in February.

Last week, Mexican regulators made good on that theoretical grandfather clause and without fanfare gave the green light to Gengfeng’s takeover of Bacanora’s Sonora lithium mining concessions.

The official exemption illustrates that AMLO’s government is willing to concede some of Mexico’s natural resources to a foreign economic power. It also reveals what analysts see as a vector of tension between AMLO’s quest for Mexican strategic mineral sovereignty and the much larger geopolitical race surrounding lithium.

Shareholders protest

Not everyone was supportive of Ganfeng’s takeover of Bacanora’s Sonora lithium mining rights.

A cohort of individual shareholders in Bacanora who call themselves the “Think BIG” Bacanora investors group, has campaigned against the takeover.

Customers look at a Tesla Inc Model Y electric vehicle at the automaker’s showroom in Shanghai, China [File: Bloomberg]

Think BIG spokesperson Dawood Patel, told Al Jazeera that they were originally promised that Ganfeng would “not try to monopolise” the Sonora lithium reserves that had “proven to be larger with every survey.” He also said that private shareholders had been “recommended” by Bacanora’s board to accept Ganfeng’s offer, even though “a significant proportion” of the risks associated with mining exploration had already been mitigated, allowing Ganfeng to “solely profit”.

“We feel the Board and Ganfeng only spoke about partnerships and production to keep us small shareholders invested until Ganfeng could take control at an opportune moment,” Patel said, adding that his group is also concerned about “the geopolitical risks in allowing one of the world’s largest lithium resources to fall under the control of a single country”.

“This is a resource that the world – including Mexico – should benefit from,” he said.

Ganfeng did not respond to Al Jazeera’s request for comment.

The global race for lithium

As economies around the world decarbonise, the race has only intensified to lock in lithium supply chains.

Ganfeng, which supplies Tesla with lithium, accounted for 24 percent of the global output of lithium hydroxide last year, according to China Minmetals – a substantial increase of the 18 percent market share it commanded in 2019.

Brine pools at the Rincon Mining lithium camp, at the Salar del Rincon salt flat, in Salta, Argentina [File: Agustin Marcarian/Reuters]

With warnings of potential lithium shortages looming, Mexico’s lithium deposits, as well as those in Argentina, Bolivia and Chile, have become prime prizes in the ever-heating competition between Washington and Beijing for economic supremacy and influence over the most powerful industries of the near future.

Margaret Myers, director of the Asia and Latin America Program at the Washington-based Inter-American Dialogue, said that China “will rely on lithium in order to ensure that it grows efficiently in the coming years”.

As such, lithium in Latin America is “a critical mineral for its (China’s) own growth, and also a potential choke point” with the US or with other countries that may rely heavily on lithium, as well as rare earths and other tech essential minerals.

Nationalist rhetoric versus investment realities

AMLO had already taken steps to reduce any potential fallout from grandfathering a Chinese company against his high-profile pledges to nationalise strategic minerals.

As talk of nationalising lithium ramped up in October, Mexico hosted an international mining conference in Acapulco, during which the Mexican federal geological service downplayed the significance of the Sonora lithium deposit, describing it as “in reality, clay” and saying that claims of large reserves of lithium in Mexico had been exaggerated.

That balancing act, analysts have said, is born of AMLO’s need to maintain Chinese investment in Mexico.

Carlos Flores, an expert on Mexico’s energy sector, told Al Jazeera that Mexico and China have been growing closer in recent years.

“Chinese companies, for example, are responsible for the refurbishment of one of the lines of Mexico City’s subway,” he said. “[They] are also in charge of the construction of one of the sections of the Mayan Train (Tren Maya) located in the Yucatan peninsula. There is also one Chinese company that invested in renewables in Mexico, they own … wind farms.”

But Myers noted that China is nevertheless “very concerned” by AMLO’s efforts to potentially nationalise certain sectors of Mexico’s economy, “or to impose regulations that would make certain sectors unprofitable and untenable for Chinese companies”.

“This is evident among oil companies,” she said.  “[China’s] CNOOC, in particular, has assets in Mexico.”

At the same time, said Meyers, “of all of the countries in Latin America, especially the major economies, Mexico is the least dependent on China economically speaking noting that the vast majority of Mexico’s trade is with the United States, while “the extent of Chinese investment in Mexico is minuscule in comparison to what’s coming from the US.”

“So in Mexico, China just doesn’t have the sort of leverage in Mexico that it does in other places,” she said.



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