The Politics of Lithium in Mexico: Much Ado About Nothing?

Mexico is a key producer of many metals needed for the coming energy transition, from hydrocarbons to alternatives needed to reduce pollution and slow climate change. One of the most important metals critical to a green economy is lithium. But Mexico’s defined reserves of lithium are very small compared to global supply and the country currently produces no lithium.

All this could change for the positive if domestic and foreign mining companies were able to apply for mineral concessions to explore for and develop potential lithium deposits. But the current administration has frozen the issuance of new mining concessions and President AMLO recently pushed changes to the Mining Law through Congress to reserve lithium mining as a state-only enterprise.

This approach may sound great to the general populace who know little about lithium mining but assume it will be fabulously profitable and, therefore, it is a great idea to preserve it as a natural resource for the people. Unfortunately, this concept ignores some basic facts about mining in general and lithium mining in Mexico in particular.

The problems with this concept of lithium mining as a state-only enterprise are fourfold:

1. The exploration, development and mining of lithium is highly specialized, as lithium occurs in several different minerals naturally, and lithium batteries come in several different types — each mineral type and battery type requires different skills and technologies to discover, develop and process different end products — but Mexico currently has none of these skills and technologies, nor any competitive advantage over lithium-producing countries that currently have those skills and technologies.
2. The world is actually awash in lithium deposits, which are very common and occur on most continents, so there is certainly no restriction to the potential supply of lithium – Bolivia alone holds over 25 percent of the known global lithium reserves and yet they are a very small producer of lithium, why? Because they reserved it as a state-only enterprise.
3. Like all mines, lithium mining is capital-intensive and requires many years and millions of dollars to build and operate a commercially viable lithium mine – from where will the Mexican government get the money to discover, develop and operate new lithium mines?
4. Last but not least, given the historic corruption, mismanagement and under-performance of PEMEX, why would another state-only enterprise in Mexico be any different?

According to the US Geological Survey (USGS), there are around 19 million tons of identified reserves globally as of 2019 and 80 million tons of resources (deposits not yet well defined). That’s up almost 30 percent compared to a year earlier. Chile is the lithium reserve leader with 9.2 million tons, followed by Australia with 5.7 million tons and Argentina with 2.2 million tons.  Regarding lithium resources, Bolivia has an estimated 21 million tons, followed by Argentina at 17 million tons and Chile at 9 million tons. Mexico currently reports 1.7 million tons of lithium reserves and 7.3 million tons of resources.

According to Capitalight Research Inc., global lithium supply increased from ~28,000 tons in 2010 to ~105,000 tons last year, a nearly threefold increase. Lithium mine production from brine deposits dominated annual totals until 2017. Over the last five years, however, production from hard-rock sources has averaged slightly under 60 percent of the annual global total.

Currently, the majority of lithium mining occurs from either salar-brines or hard-rock deposits. Brine deposits are primarily mined from areas within the “Lithium Triangle” (which includes Argentina, Chile and potentially, in the future, Bolivia) and are also mined in China. Actual mining from brine deposits involves the pumping of saline groundwater enriched with dissolved lithium from underground reservoirs to the surface for solar evaporation in successions of ponds. Hard-rock sources are dominated by spodumene deposits, primarily located in Australia. The Greenbushes operation, presently the world’s largest lithium mine, is located in Western Australia.

Following ore concentration, the next step in the lithium supply chain is processing and conversion. Lithium carbonate is a first intermediary chemical in the lithium supply chain, which is used in various manufacturing processes (including ceramics and glass, aluminum and steel castings) as well as some electric vehicle (EV) battery types. Lithium carbonate may also be further processed to obtain lithium chloride and lithium-hydroxide, the latter of which is used in the manufacture of nickel-containing (often called “nickel rich”) lithium-ion batteries.

The conversion of hard-rock (spodumene) lithium concentrate is more flexible in terms of production processes. It allows for a streamlined production of lithium hydroxide while the processing of lithium from brine concentrates produces lithium carbonate, which must then be further processed to obtain lithium hydroxide.

Critical to processing is the control of the many impurities that may coexist with lithium in concentrated ore, such as magnesium, sodium and potassium that negatively impact battery cathode performance further down the supply chain. Through the conversion steps, whether in the form of lithium carbonate or lithium hydroxide for eventual use in EVs or batteries for other electronic devices, the purity of lithium is increased to >99.5 percent. In terms of geopolitical risks within the lithium supply chain, currently over 60 percent of the facilities that convert lithium ore into the intermediate products of lithium carbonate and lithium hydroxide are located in China.

End-use applications include air conditioning and industrial process cooling, thermoplastics, pharmaceuticals (for bipolar and depression) and as an alloy in aluminum production to add strength and corrosion resistance. In the manufacture of glass and ceramics, lithium carbonate allows for lower processing temperatures and, thus, lower energy input. Other uses include steel casting applications and finally in the manufacturing of lithium-ion batteries.

Batteries now require ~75 percent of annual global demand. At present there are five general types of lithium-ion battery chemistries: lithium cobalt oxide (LCO), lithium manganese oxide (LMO), lithium ferro (or iron) phosphate (LFP), lithium nickel manganese cobalt (NMC) and lithium nickel cobalt aluminum (NCA).

Given the abundance of lithium deposits worldwide, and the skills and technologies and capital needed to unlock the diverse mineralogy, complex processing and multitude of end products for the lithium market, is it really wise to lock out private enterprise from the exploration, development and production of lithium in Mexico? I suspect the recent changes to the Mining Law to reserve lithium mining as a state enterprise may be “much ado about nothing.”