• SLIDE: The small town of Bacadéhuachi in Mexico’s northern Sierra Madre holds the world’s largest lithium deposit, and the dash to develop it has already sent shockwaves across the Atlantic. A controversial nationalization proposal put forward in the Mexican Senate has sent tumbling shares of Bacanora Lithium, a British publicly-listed company, by almost 30 percent since the start of 2021.
• PROJECT: Bacanora Lithium has already invested more than US $40 million in the project, creating dozens of jobs in the region. The exploration phase has shown that the site could hold as much as 4.5 megatons of lithium carbonate equivalent (LCE). At current market prices, that would be worth in excess of US $50 billion (close to 5 percent of Mexico’s GDP). However, the highly complex production stage is not due to start until 2023 at the earliest. Bacanora Lithium has partnered with the Chinese leading firm Gangfeng Lithium to create a British-Sino consortium to develop the site.
• WHITE OIL: Lithium has become a highly-prized mineral over the last two decades, largely owing to the fact that it is an integral component in batteries for electric vehicles, sales of which have grown almost fourfold between 2015 and 2020, and will continue to rise quickly. Despite high volatility, commodities analysts expect the price of lithium to triple by 2025. Mexico is among the handful of countries where natural lithium deposits occur, something that has not gone unnoticed in the U.K. and Europe.
• NATIONALIZATION: Last year, Mexico’s ruling party (MORENA) put forward a controversial legislative proposal in the Mexican Senate demanding the “nationalization” of lithium. MORENA’s Senator Alejandro Armenta argued that there was a need to stop the “gifting” of valuable resources to “the Chinese, the British and the Canadians”. The proposal is inspired by the Bolivian lithium regulation model which has shunned private investment. This, in turn, has lead to a minimal amount of LCE production despite the enormous reserves the South American nation possesses. Gangfeng’s chief executive, Wang Xiaoshen, has been critical of the Bolivian model in the past.
• HALT: Mexican President Andrés Manuel López Obrador has taken up the legislative proposal for the nationalization of lithium as well as halting any new mining concessions, citing past examples of “excess”. López Obrador has gone as far as saying that more than 200 million acres, or “40 percent of (Mexico’s) territory,” are under some kind of concession to mining companies. Using a rhetoric reminiscent of the 1938 nationalization of Mexico’s oil industry, López Obrador claimed mining companies often avoided paying any taxes at all. The figures could not be verified independently but were at odds with previous ones López Obrador has provided.
• INFEASIBLE: “Nationalization is infeasible”, a Bacanora Lithium spokesperson told Mexico in Europe when contacted about the proposal. “(Production of LCE) requires billions of dollars in investment along with highly specialized know-how and technology…Bacanora is expecting the Mexican government to respect its (mining) concessions”. Probed on whether the company would consider co-developing the Bacadéhuachi site with the Mexican government, the spokesperson made it clear that is not an option.
• OUTLOOK: The coming months will be essential for the future of the lithium industry in Mexico. The U.K. and Mexico signed a continuity of trade agreement in December 2020 which protects British investments in Mexico. Yet, the López Obrador administration has set further roadblocks to business since 2018. The U.K. is Mexico’s 17th biggest commercial partner and bilateral trade is valued at US $5 billion every year. Mexico’s trade with the U.K grew nearly 10% in 2019 despite not being as large as that with other European countries. The U.K.’s Foreign Direct Investment (FDI) in Mexico amounted to nearly US $800 million in 2019, the 10th highest among all countries. Following through with nationalization, Mexico risks squandering the opportunity presented by “white oil” and further undermining investors’ confidence, particularly in the U.K. and Europe.
NEWSSTAND:
•GERMANY: Die Zeit, the German weekly, carried a piece on the crisis at the U.S.-Mexico border highlighting the arrival of Mexican and Central American migrants in numbers not seen for 15 years. In an distressing trend, the German publication underlined the fact that many of those apprehended were unaccompanied minors, something that has become a mainstay of migration flows in the region.
•U.K.: Four Labour MPs signed a letter addressed to the U.K.’s Foreign Secretary, Dominic Raab, urging him to give the disappearance of Claudia Uruchurtu his “full attention”. Ms Uruchurtu, who holds dual Mexican-British citizenship, went missing in Nochixtlan, Oaxaca, after taking part in a protest in local council buildings after a local was beaten. The story was first reported by the BBC.
•ITALY: Il Corriere della Sera, Milan’s paper of record, carried a piece on the world’s most congested cities as ranked by Inrix, the traffic analysis firm. Mexico City, which was previously ranked as the 3rd most congested city in the world, came 26th, faring better than some European capitals such as Paris (6), London (16) and Rome (18). The sharp improvement is likely linked to the pandemic.
DIGESTIF:
•1964: On the week of the passing of Prince Philip, Duke of Edinburgh, we remember his visit to the ‘extremely well planned capital of Mexico City’ where he visited the famed Palace of Fine Arts for a show of folkloric dances.
