The State Will be Unable to Exploit Lithium Without Risks

The Association of Geologists and Mining Engineers of Mexico (AIMMGM) reported that the lithium exploration the government aims to carry out involves higher financial risks than it should realistically want to tackle.

Moreover, AIMMGM explained that to construct a medium-sized mine, around US$300 million is needed, in addition to the investment required for exploration. From 1,000 traces of general mineralization, only one can be turned into a mine. As such, the exploration stage can take between 5 and 20 years. In the case of lithium, this can take from 10 to 15 years, as the light metal has already been detected in clay deposits, rocks and brines, according to the Mexican Geological Service (SGM).

“As of today, there is no lithium production in Mexico. Clay deposits with lithium have been located and to our knowledge, no country has produced and commercialized lithium derived from clay. We still have to wait and see if the company that found the deposit in Sonora carries out production in an efficient and cost-effective manner,” said AIMMGM.

In Mexico, 82 locations of lithium have so far been discovered in the states of Sonora, Chihuahua, Coahuila, San Luis Potosí, Zacatecas, Oaxaca and Puebla. However, there is still only one advanced project, owned by the Chinese enterprise Gangfeng lithium and located in Sonora. The SGM informed that eight months ago, it started works to localize further lithium. As of February 2022, 66 locations of the 82 programmed were verified, with 73 lithium areas detected and 16 still pending.

The results showed that 8 locations in Puebla, Jalisco and San Luis Potosi present the most favorable geological context to develop lithium further.

Nevertheless, there has been little investment toward the exploration of mining potential, as the exploration budget of the SGM stands at MX$52 million (US$2.55 million) per year. Mexico may hold reserves of up to 1.9 million tonnes, equivalent to 2 percent of the lithium discovered around the world. Nevertheless, lithium development needs significant amounts of money that the state alone will not be able to provide.

According to an analysis made by Financiero Base Group, the price of lithium has increased since 2021 because of the increase of metal demand for batteries, whereas the price of lithium hydroxide has increased by 157.85 percent in 2022. The analysis also noted that there is not enough capacity from primary lithium resources to satisfy the demand expected for 2030. In this context, Mexico nationalized its lithium resources by reforming the Mining Law. Nonetheless, lithium is already considered a national asset in Mexico’s Constitution. What the government appears to be missing instead is a state-owned company to produce the resource, says the group.