Wednesday, June 26, 2024

Ganfeng Lithium Initiates Arbitration Against Mexico

By Paloma Duran | Journalist and Industry Analyst 
- Mon, 06/24/2024 - 
MEXICAN BUSINESS

China's Ganfeng Lithium, together with its subsidiaries Bacanora Lithium and Sonora Lithium, have initiated arbitration against the Mexican government following the cancellation of its mining concession for the Sonora Lithium project. This move, registered last Friday on the website of the International Centre for Settlement of Investment Disputes (ICSID), marks a significant escalation in the discussion.

The dispute stems from the approval of López Obrador's Mining Law in April 2022, which granted the State exclusive control of lithium exploration and production. Subsequently, President López Obrador cancelled the lithium concessions of the company, claiming that Ganfeng and its subsidiaries did not meet the required investment thresholds. "This decision was driven by both the nationalization of the lithium resources and the failure to meet investment, which led to the withdrawal of our concession," stated Alfonso Durazo Montaño, Governor, Sonora.

The Sonora Lithium project was originally scheduled to begin commercial production in 2023, officially making Mexico a lithium producer. However, political uncertainty has left the future of lithium exploration efforts in Mexico uncertain. While industry stakeholders have supported Ganfeng's position, arguing that the government's decision to revoke the concessions lacked a legal basis, the Ministry of Economy has not changed its stance.

Peter Secker, CEO, Bacanora, stressed that if the matter is not resolved through the courts or through the creation of a new partnership, the project could end up being sold. "No one is going to invest a billion dollars unless they have some kind of security. People will prefer, for these larger projects, to go to lower risk jurisdictions," Secker said.

According to a US Geological Survey's 2024 report, Mexico ranks ninth in lithium reserves with 1.7Mt. Despite Mexico’s lower lithium reserves, experts suggest that with the exploitation of economically viable deposits, Mexico could emerge as a major player in lithium production. However, the country faces two challenges. First, Mexico's lithium reserves are mainly in clay formations- Second, the government has limited the participation of private companies in lithium production.

In July 2023, CONAHCYT began developing a method to separate clay from lithium in Sonora, stating it was a technology previously only held by China, and that CONAHCYT had made 95% progress in this task.

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