On August 23, 2022, President of Mexico Andres Manuel Lopez Obrador issued a Decree (published in the Diario Oficial de la Federación on August 24, 2022) setting up a new state-owned company called LitioMx (Litio para Mexico), which will be responsible for managing the exploration, mining exploitation, and refining of lithium throughout the national territory of Mexico, as well as controlling the economic value chains of this mineral. The new agency will begin to operate within 180 days from the publication of the Decree.
The measure is the first step in implementing an amendment to the Mining Law, passed by the Mexican Congress in April 2022 (promulgated by Decree published in the Diario Oficial de la Federación on April 22, 2022). The amendment declared lithium to be a strategic mineral and property of the Nation, and as such of "public utility." The legal effect of this declaration is spelt out by the Law as follows:
- The exploration, mining exploitation, refining, and use of lithium are reserved in favor of the people of Mexico; and such activities will be carried out by a government agency;
- No concessions, licenses, contracts, permits, or authorizations will be granted for those activities; and
- The economic value chains of lithium will also be managed and controlled by such agency.
About the new state-owned company
LitioMx will be a decentralized public entity attached to the Secretariat of Energy and will coordinate with the Under-Secretariat of Panning and Energy Transition. The company’s main responsibilities will be as follows:
- Preparation of medium and long-term strategic programs for the exploration, mining exploitation, refining, and use of lithium, and its economic value chains;
- Development and execution of engineering projects, research, and all geological activities related to the exploration, mining exploitation, refining, and use of lithium;
- Research and development of the technology required by industry related to the use of lithium;
- Location and recognition of the geological areas in which there are probable lithium reserves with the help of the Mexican Geological Service;
- Generation of basic geological information on lithium located in the national territory with the support of the Mexican Geological Service;
- Promotion of the sustainable use of lithium for the energy transition, for the benefit of the population in general; and
- Management and control of the activities necessary for the production, transformation and distribution of lithium by-products, for which it may involve other public and private entities.
According to the US Geological Services, Mexico has the ninth largest identified lithium resources in the world (1.7 million tons). However, there is currently no commercial mining exploitation of lithium in Mexico, only some exploration projects in Jalisco, Guanajuato, Nogales, Sonora, and Puebla. The implementation of the new amendment to the Mining Law raises at least two issues:
- How it will affect on-going private projects, including the most advanced one in Sonora which is being carried out by a joint-venture between a British and Chinese consortium; and
- To what extent private companies will be able to participate in the Mexican lithium market: the amendment to the Mining Law is clear that primary activities (e.g., exploration, mining exploitation, and refining) will be carried out by the new government agency, but the Decree seems to open the door for LitioMx to partner with private companies in lithium by-product projects (e.g., manufacturing of batteries for EVs and personal electronics, such as mobile phones and computers).
State of lithium in Bolivia, Chile and Argentina
Bolivia, Chile and Argentina, which together account for 55% of the world’s lithium reserves, have followed different legal models. All treat lithium as property of the State; however, Argentina is the only country which has not declared it as a "strategic resource."
In Bolivia (and now in Mexico), the State manages the production process through a public company. The State will only partner with private companies to add value once the resource is obtained. In contrast, Chile and Argentina both allow private initiatives. Chile treats lithium like oil and gas and leases its exploitation for a certain period of time to private companies through a bidding system. The current leases will expire in 2030. In Argentina, the provinces have original dominion over lithium and other natural resources existing within their territories. The provinces all manage their resources according to the federal Mining Code, which allows mining activities by state-owned enterprises and private companies, domestic or foreign. Exploration permits are granted perpetually, subject to certain obligations for maintenance. However, lithium resources are scarce, and provincial state-owned companies already hold most of the exploration and mining exploitation rights. As a result, newcomers (i.e., domestic or foreign, state-owned or private companies) usually need to partner with those companies to set up large lithium projects. The provincial state-owned company keeps a minority state in the joint venture while the investor supplies the necessary funding and expertise for the project.