By Valentine Hilaire
MEXICO CITY (Reuters) – A recent government push to cancel Ganfeng Lithium’s concessions has forced the Chinese company to indefinitely postpone its target to start mining the battery metal in Mexico, a company executive told Reuters.
Mexican mining authorities have issued a notice to Ganfeng’s local subsidiaries indicating nine of its concessions had been canceled, saying it had failed to comply with minimum investment requirements, the company said in an August filing.
“Once we heard from the government about their intentions to undertake these actions, the timetable for development moved,” Peter Secker, head of the Sonora Lithium project, said on Wednesday, adding the miner cannot continue its plans until the issues with the government are resolved, for which there is no clear timeframe.
Construction work for Ganfeng’s $800 million production plant has not started, which had already made a 2023 production start target unreachable even without the government challenge. Lithium, an essential component of electric vehicles, is coveted by rechargeable battery makers worldwide.
Secker said construction on the production plant will take 18 months, and it will begin activity right after, adding the only factor now halting its start is the government move.
Battery production and recycling plants are set to be part of a larger project, which will be built after production starts.
He denied the mining authority’s investment allegation about its lack of investment in the plant to be built in Mexico’s northwestern state of Sonora.
“We have exceeded the minimum spend required,” Secker said, adding the company will use all legal resources available to challenge the move and avoid a cancellation.
Mexico’s government did not immediately reply to a request for comment on the status of the concessions. President Andres Manuel Lopez Obrador, who last year announced a sweeping lithium nationalization, said in September the country’s concessions for the metal were being reviewed.
Secker said the only license clause being questioned by the government is the minimum investment.
Mexico, where much of its lithium reserves are trapped in clay deposits, making extraction difficult, does not currently produce any lithium.
Ganfeng, which acquired the site’s initial developer Bacanora in 2021, has run tests in its Mexico and China pilot plants to ensure its technology to mine the metal works on a commercial scale, Secker said. More than a decade has passed since Bacanora first acquired the Sonora concession.
A Mexican national lithium company created last year by Lopez Obrador could strike private sector partnerships as long as the government holds the majority stake, its newly appointed head Pablo Taddei said at the time.
“If the government is going to invest, there will need to be a valuation,” Secker said when asked about a potential partnership, adding the company is open to it and willing to open its balance sheet, people and technology to move forward on any potential deal.
“It would be silly for the government not to work with Ganfeng to develop a strategy,” he added.
Ganfeng also plans to produce fertilizers using potassium found at the same site during its exploratory works, he said.
Lithium reserves in Mexico’s Sonora state stand at just under 9 million tonnes, enough to sustain over 200 years of mining activity, company data shows.
Even as the Sonora project has stagnated, Ganfeng has tripled its projects in Argentina, Secker noted.
(Reporting by Valentine Hilaire; Editing by Christian Plumb and David Evans)