Sunday, June 23, 2024

Chinese company says cancellation of lithium mining concessions confirmed

The federal government has reportedly confirmed its decision to cancel lithium mining concessions held by a Chinese company for a project in Sonora.

Reuters reported that Ganfeng Lithium said Thursday that the Economy Ministry has maintained cancellations of certain mining concessions held by its subsidiaries.

Mexico is estimated to hold around 3% of total global lithium reserves. The mineral is a key ingredient in the production of batteries. (Alexander Schimmeck/Unsplash)

Ganfeng told its investors in August that it had been advised by Mexico’s General Directorate of Mines that it had failed to meet minimum investment requirements between 2017 and 2021 and nine concessions it held for its Sonora lithium project had been canceled as a result.

However, President López Obrador – whose government nationalized lithium last year –subsequently said that the cancellation of the concessions was still under consideration.

Reuters cited a statement from Ganfeng, in which the company said it would file for international arbitration in response to the decision to cancel its concessions.

Peter Secker, the UK-based CEO of Bacanora Lithium, a Ganfeng subsidiary that is managing the Sonora project, told the El País newspaper in October that the company would defend the firm’s ownership of the licenses in Mexican courts.

He said that Bacanora, which was acquired by Ganfeng in 2021, has spent tens of million of dollars in Sonora over the past 12 years, adding that when initial mining law changes were made, the belief was that existing concessions would be respected.

“And then obviously, … we were informed that the government would be canceling the licenses,” Secker said.

“We do not believe that it’s legally valid” to cancel the concessions, he said, expressing an opinion also voiced by the president of the Mexican Mining Chamber.

“… We will maintain all our legal rights to defend this … [given] that we have spent many tens of millions. We’ve exceeded all the requirements for spending on the licenses. We’ve built a pilot plant; we have a design for a project that will produce 35,000 tonnes a year of lithium carbonate. It would be one of the largest plants in the world,” Secker said.

He told Reuters earlier this month that the Sonora lithium project couldn’t proceed until issues with the Mexican government were resolved, adding that there was no clear timetable for that to occur.

Economy Minister Raquel Buenrostro at the signing of the nationalization decree last year. (Presidencia/Cuartoscuro)

“Construction work for Ganfeng’s [US] $800 million production plant has not started, which had already made a 2023 production start target unreachable even without the government challenge,” Reuters reported.

Secker reiterated that Bacanora/Ganfeng has “exceeded the minimum spend required” to hold onto the concessions.

He told El País that Ganfeng is open to forming a joint venture with Mexican authorities to carry out the project in Sonora, where the potential lithium reserves are in clay deposits that are technically difficult and expensive to mine.

“Ganfeng has the money to do this. It’s got the technology, and it has the people to develop this project without any assistance from the government. However, we have had discussions with the government over the last few years and, and we’re happy to work with the government. We just need to sort out their apparent attempt to cancel the licenses,” Secker said in late October.

Bacanora CEO Peter Secker said owners Ganfeng are able to complete the project if licenses are restored by the Mexican government. (Bacanora Lithium)

“It would be silly for the government not to work with Ganfeng to develop a strategy,” he told Reuters.

The Finance Ministry has estimated that lithium reserves in Sonora – where Mexico’s largest potential deposits are located – could be worth as much as US $600 billion. There are smaller deposits in other states including Baja California, San Luis Potosí and Zacatecas.

According to the Bacanora website, the company owns ten mining concessions covering approximately 100,000 hectares in the northeast of Sonora. It is estimated that there is some 8.8 million tonnes of lithium carbonate in the area for which the company received 50-year concessions in 2011.

Lithium is highly sought after because it is a key component of lithium-ion batteries used for green energy storage and can thus play an important role in the transition to clean energy.

Reuters reported that “battery production and recycling plants are set to be part of a larger project” in Sonora, slated to be developed after lithium production begins.

Secker said that construction of the lithium production plant will take 18 months, but when that project will be able to commence – if ever – is unclear.

With reports from Reuters 

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