Government to Review Legality of Granted Lithium Concessions
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Government to Review Legality of Granted Lithium Concessions

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Paloma Duran By Paloma Duran | Journalist and Industry Analyst - Wed, 04/20/2022 - 15:56

President López Obrador announced that the lithium concessions previously granted to private companies will be reviewed to see whether they complied with all applicable procedures and regulations. Although the government did not clarify if concessions would indeed be eliminated, experts say that using this option will ensure further lawsuits against the administration.

López Obrador explained that following the Mining Law’s reform, the legality of the eight permits granted to national and foreign private companies will be reviewed to see whether they are to be maintained or suspended. “We must see if all the companies correctly followed the procedures. Therefore, all contracts awarded will be reviewed. The review will be for lithium projects only, contracts for other minerals will not be suspended. We do not want to create uncertainty with the producers of other metals such as gold, copper and silver,” said the president.

Currently, the country has 36 lithium projects controlled by 10 foreign companies, including Organimax Nutient, Bacanora Lithium, One World Lithium, Radius Gold, Infinite Lithium, Rock Tech Lithium, Alien Metals, Zenith Minerals, Lithium Mex, Pan American Lithium and ZEOX. Of all the companies, only three have advanced their projects: Bacanora, Organimax and One World Lithium, according to an Expansión report. The 36 projects cover 97,000ha. However, there are other projects that were under review that cover 537,000ha, equivalent to 84 percent of the concessions associated with lithium. These new projects are expected to become paralyzed due to the reform because of Mining Law reform.

The government had already stated that past concessions could be cancelled in the past. Bacanora Lithium, which is developing the country’s frontrunning Sonara Lithium Project with Ganfeng Lithium, said that the company did not feel not at risk because the concessionaire meets all government criteria. However, López Obrador announced that the project is the main one to review, especially since the Federal Economic Competition Commission (COFECE) recently authorized the full acquisition of the Sonora Lithium Project by Ganfeng Lithium. COFECE's action was strongly criticized by the president, but the competition watchdog said it greenlighted the purchase because it did not represent any risk to competitors or consumers. In addition, the commission explained that Mexico´s laws enable national and international investments. As such, Ganfeng Lithium had the right to request an acquisition.

Furthermore, Rockland Resources, which last year signed an agreement to take a 100 percent interest in the Elektra clay lithium project in Sonora, said it was also not worried about López Obrador’s statements because its projects are protected under the Mexican Constitution by. Article 14 of establishes that a law will not be issued retroactively if it is detrimental to a person or entity, for which the new initiative could not affect the concessions granted, Mike England, CEO, Rockland Resources explained.

Industry experts are still not sure what will happen to the concessions, as the reform itself offers no clarity. However, most agree that if the concessions are withdrawn, this would usher in many lawsuits against the government. “The initiative that the president sent yesterday says absolutely nothing about the concessions already granted and explored. This creates more significant legal uncertainty regarding what will happen to existing investment. There are going to be many problems, lawsuits and amparos,” said Armando Alatorre, President of the College of Mining Engineers, Metallurgists and Geologists of Mexico (CIMMGM).

Photo by:   Gobierno de México

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