Mining Law Could Grant State Control Over Lithium

Although the government said that the vote on the Electricity Industry Law (LIE) could reveal the possible positive result of President López Obrador desired energy reform, strong resistance from opposition groups could may to its rejection. Consequently, the president stressed that if the reform is not approved, the Mining Law will be changed to ensure state control over lithium.

Last week, the National Supreme Court of Justice (SCJN) voted on the LIE. With seven votes in favor of unconstitutionality and four against, the LIE will reactivate, yielding CFE a stronger position in the market. Although the vote of the LIE did not consider the nationalization of lithium, López Obrador said that the result would be key to determining who will vote in favor of the energy reform and, therefore, expose its possible outcome.However, despite the favorable result in the LIE vote, experts are skeptical about whether the energy reform will be approved, especially since the strongest opposition groups have publicly said they will vote against it. Consequently, López Obrador assured that if his new energy reform is not approved, he will send an initiative to modify the Mining Law so that State control over lithium is ensured.

“If there is a betrayal, we will send a reform to change the Mining Law, which does not need a two thirds majority vote from Congress to be approved. We only need a simple majority and because legislators, even those from opposition groups, do not want foreign companies to benefit disproportionately, we will have the necessary votes so that lithium becomes a mineral for Mexicans,” López Obrador said.

However, experts have said that if the Mining Law is to include the lithium issue, many investors would leave the country as Mexico would further deteriorate its political and investment certainty. "There may be a flight of investments and some cases will even end up in international arbitration," said Juan Pablo Gudiño Gual, Founding Partner and General Director, IGUAL Consultores. In addition, experts highlighted that although the law cannot be applied retroactively, mining companies with lithium concessions will be affected, so there will be an increase in legal protection cases for the SCJN.

What does the energy reform seek regarding lithium?

On Oct. 1, President López Obrador announced he sent his new energy reform to Congress, which seeks to guarantee energy security in the country and control costs by handing 56 percent of the country's energy market to CFE, while 46 percent will go to the private sector. López Obrador announced that the new electricity reform includes the issue of lithium so the state can have optimal control over the ‘white gold’.

The reform seeks to modify the sixth paragraph of Art. 27 of the Constitution to stop granting concessions on strategic minerals, such as lithium, giving the state the exclusive right to exploit and produce them. The interior affairs ministry explained that the concessions that have already been granted for other minerals will be maintained but cannot be used for lithium.

In terms of potential, Mexico’s reserves look promising on the surface. Bolivia ranks first regarding the largest lithium reserves with 21 million tonnes; followed by Argentina with 19 million tonnes, Chile with 9.8 million tonnes, the US with 9.1 million tonnes, Australia with 7.3 million tonnes, China with 5.1 million tonnes, Congo with 3 million tonnes, Canada with 2.9 million tonnes, Germany with 2.7 million tonnes and in tenth place, Mexico with 1.7 million tonnes, according to the US Geological Survey.