Mexico advancing mining concessions review, lithium exploration

Mexican authorities are advancing work programs which could prove pivotal to the future of mining concessions and development of the country’s fledgling lithium industry.

President Andrés Manuel Lopez Obrador (AMLO) has imposed a freeze on new mineral concessions and presented plans to bring lithium resources under state control, two of the most controversial steps taken relating to the mining sector since he came to office in December 2018.

The moves are widely seen as major challenges for the mining sector, hampering project development and undermining investment.

But administrative and exploration programs are progressing which could sway the government’s decisions and next steps on both fronts.

LITHIUM EVALUATION

On the lithium front, geological service SGM, which falls within the economy ministry, has been tasked with exploring and evaluating potential resources in the country.

This process is nearing its conclusion, according to Efraín Alva Niño, head of the ministry’s extractive industries co-ordination unit.

“This work is now in the final stages of exploration. We are evaluating all the results from the laboratory and… in a short space of time the raw data will be presented to the executive, and they will make a decision,” Alva told a webinar hosted by the Mexican association of geologists and mining engineers (AIMMGM).

The work has focused on nearly 60 locations, Alva said.

Areas for which concessions have previously been granted were excluded, as were potential targets within protected natural areas or on lands owned by indigenous communities.

The SGM announced a budget of 55.2mn pesos (currently US$2.7mn) to explore for potential lithium deposits in October.

The aim of the work was to find an economically viable deposit of the battery metal for development by the state.

AMLO is currently seeking to secure political support for his lithium nationalization plans, which would see the current concessions system scrapped and the state taking over exploration and development of lithium resources.

The proposal, part of a wider planned overhaul of the energy industry, is currently stalled while the ruling Morena Party and its allies seek the two-thirds majority in both houses of congress needed to pass what would be constitutional reforms.

Mexico is not yet a lithium producing country, but this is set to change as Bacanora Lithium and JV partner Ganfeng Lithium advance their US$420mn Sonora project (in picture), which is scheduled for first production next year.

Despite its small budget, SGM’s exploration program could be key to determining the government’s next steps, given the lack of knowledge of Mexico’s lithium resources.

“We still don’t know exactly what quantity or quality of lithium we have in the country, and this is fundamental because the [known] resources are very different from those that exist in Argentina or Chile,” Jaime Gutiérrez, president of mining chamber Camimex, told the AIMMGM event.

Sonora, which is by far Mexico’s biggest and most advanced lithium project identified to date, is a clay deposit, which are far more costly to process lithium carbonate from than the brine projects of South America.

It is unclear what technology will be needed to develop Mexico’s clay deposits, Gutiérrez added.

The government lacks the financial muscle and technological expertise to develop a thriving lithium mining industry without private sector involvement, he said previously.

CONCESSIONS FREEZE

Alva also shed some light on the situation regarding the concessions freeze.

AMLO has repeatedly stated that his administration has not awarded any new mineral concessions, claiming his predecessors handed out swathes of the country to mining companies too easily.

Industry leaders have warned the freeze will impact exploration, which is vital to the long-term viability of mining.

But the halt comes as the economy ministry digitizes the previously paper-based concessions system, and checks that existing concessions remain valid, Alva told the event.

This process was delayed by COVID-19 but is now underway again.

Holders of some concessions stopped paying the required fees a long time ago, Alva added, and they are being contacted to determine if the concessions remain valid.

“This is the strategy of the executive now. New concessions are not being delivered, we are going for a revision… to check what [concessions] we have, which are active and which are inactive,” he said.

“Those which are not active will be cleaned out, and when the results [of this revision process] are delivered to the executive, they will have the final word.” 

Alva did not state whether new concessions would be awarded once the digitization and revision process is complete – something AMLO has said will not happen under his term.

“It’s worth recalling that while we’re in government, transgenic maize will not be allowed to enter, fracking will not be used to extract oil, new mining concessions will not be awarded…,” he told crowds in Mexico City’s Zócalo or central square at the three-year mark of his six-year presidency in December.