President Andrés Manuel López Obrador said Thursday that the government of Mexico will seek an agreement with Ganfeng Lithium after the Chinese company filed an international arbitration case over disputed mining concessions for a project in the northern state of Sonora.
However, he stressed that Mexico would “defend our right” to lithium, a highly sought-after metal that was nationalized in Mexico in 2022.
Last Friday, Ganfeng and two of its subsidiaries, Bacanora Lithium and Sonora Lithium, filed a “request for the institution of arbitration proceedings” with the World Bank’s International Centre for Settlement of Investment Disputes.
The dispute between Ganfeng and Mexico is over the federal government’s cancellation of concessions granted in 2011 for the Chinese company’s proposed Sonora Lithium Project.
Ganfeng told its investors last August that Mexico’s General Directorate of Mines said it had failed to meet minimum investment requirements between 2017 and 2021, resulting in the cancellation of nine lithium mining concessions it held for its project.
The company has asserted that its subsidiaries have presented “ample evidence of their compliance with the minimum investment obligations,” and had in fact “significantly” exceeded them.
At his morning press conference on Thursday, López Obrador acknowledged that there was a dispute over “a few” lithium mining concessions, and said it was the result of the Mexican government’s view that “lithium belongs to the nation.”
He said that the federal government believes that concessions were previously issued in a “generic way, not specifically for lithium, but for mining” in general.
“And we think [Ganfeng’s concessions] don’t apply” for lithium mining, López Obrador said.
Nevertheless, the government will “seek an agreement” with the company, he said.
“Relatively recently, three months ago, the person in charge of Chinese diplomacy was here and I spoke about the issue. There has to be an agreement because lithium was nationalized and we don’t want private companies to participate. Yes, there can be a [public-private] partnership, but with the predominance of the national interest,” López Obrador.
“… That is the only issue we have and we’re going to go to these international panels to defend our right,” he said.
Peter Secker, the UK-based CEO of Bacanora Lithium, said late last year that Ganfeng had formed the view that it was not “legally valid” to cancel the company’s concessions in Sonora. The president of the Mexican Mining Chamber has expressed the same view.
Secker said the company would defend its ownership of the lithium mining concessions, including in Mexican courts. But he also said that Ganfeng was open to forming a joint venture with Mexican authorities to carry out the project in Sonora.
The government created a state-owned lithium company, Litio para México (Lithium for Mexico), but there are significant doubts about its capacity to mine lithium on its own. The potential lithium reserves in Sonora 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 last October.
“… It would be silly for the government not to work with Ganfeng to develop a strategy,” he said.
It remains to be seen whether the government will seek to enter into a joint venture with Ganfeng and its subsidiaries.
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.
Lithium is in high demand because it is a key component of lithium-ion batteries for electric vehicles and green energy storage. The alkali metal can thus play an important role in the transition to clean energy.
Based in Shanghai, Ganfeng is one of the world’s leading lithium miners and battery makers.
With reports from El Financiero and Reuters
