Lithium and a simplistic and political reform to the Mining Law

A failed constitutional reform for the electricity industry that was going to generate legal uncertainty in Mexico was not approved on Sunday, April 17th, 2022 in our Congress due to the collective and organized action of the political forces opposed to Morena, and this apparently caused the anger of our president López Obrador, who in his daily morning press conferences on Monday, April 18th, 2022, called on the congresswomen and congressmen, and the Senators of the ruling party and allies to "protect Lithium" and begin to structure a "company”, such as the CFE (state electricity company) that would handle all matters related to the lithium, with the support of research centers throughout the country and the experience of other countries.

After the aforementioned presidential order, the Morena political party and allies in both chambers, even, according to some members of the opposition political parties, in clear violation of the legislative process regulated by the Mexican Constitution itself and by the Organic Law of the Congress, without prior discussion in committees, approved both in the Congress and in the Chamber of Senators, and published in the Official Gazette of the Federation, on April 20th, 2022, the “Decree that amends and adds various provisions of the Mining Law”, which was going to enter into force the following business day, that is, on April 21st, 2022; It is worth mentioning that our Mining Law had entered into force originally on June 26th, 1992, and had already been amended four times, in 1996, 2005, 2006 and lastly on 2014, so this was its fifth reform, but never before, it had been amended without technical analysis, without debate and much less, in just two business days.

According to the publication in the Official Gazette, articles 1; 9, first paragraph; 10, first paragraph; and an article 5 Bis, and a third paragraph are added, scrolling, and moving the current third and fourth paragraphs, to the article 10 of the Mining Law

In article 1 of the new mining law, it is stated that everything related to the exploration, exploitation, beneficiation and use of lithium, will be in charge of a new decentralized public body (company) referred to later in article 10 of this new Law.

Article 5 Bis declares lithium to be of “public utility”, preparing the legal basis to allow Federal Government to "expropriate" the surface of the places or areas where the Mexican Geological Service (hereinafter SGM) could find said mineral, assuming that in the medium or long future they could do so, in addition, it is established that no concessions will be granted to individuals on lithium, which is redundant, given that the current administration maintains a public policy of not granting mining concessions and it was not necessary to amend the Mining Law for this purpose; and continuing with an almost poetic tone, it is established that: "it is recognized that lithium is the heritage of the Nation and its exploration, exploitation, benefit and usage is reserved in favor of the people of Mexico"; absolutely unnecessary and redundant wording since we all know the content of Article 27 of the Constitution. Additionally, it is provided in said article 5 Bis that it will be the SGM, at this moment under the direction of Flor de María Harp, the body in charge of assisting the decentralized public body in charge of exploring, exploiting, benefiting and take advantage of lithium, guaranteeing the health of Mexicans, the environment and the rights of native peoples, indigenous and Afro-American communities; quite a complex task for the SGM.

I believe that Dr. Harp is a prepared, competent, and objective person, prior to the reform of the Mining Law, in the last International Mining Convention of Acapulco, organized by the Association of Mining Engineers, Metallurgists and Geologists of Mexico, last August 2021, she presented and has presented in several forums a presentation called "Generalities of Lithium", in which she has very professionally combated several "myths" about lithium, for example, she has mentioned that at least at in 2018, it was projected that by 2035 the main lithium producers in the world would be Australia, Chile, China, Argentina and the United States (Mexico does not enter at this moment into the equation); as well as that there are already certain studies on possible substitutes for Lithium, such as Sodium, a mineral whose presence is much more abundant and with a greater atomic radius; and where she transparently described that in 2021, the SGM explored 52 locations in the country, and that in 2022 they expected to explore another 30, with an exploration team of 17 brigades, with 26 geologists and 3 supervisors, announcing that there would be up to 22 brigades for October of last year with an investment close to 56 million pesos (around 2.8 USD million); that is at this moment the size and the budget of the team of people that has the heavy burden of the future of Mexican lithium on their shoulders.

In a more recent forum before the Mexican Geological Society at the end of March 2022, Ms. Harp herself confirmed that the SGM had already evaluated 66 geographic areas out of the 82 that had been included in the lithium exploration plan of the Federal Government and that they had been added another 73 for evaluation, having identified, at least until February 2022, 8 areas where there "could" be Lithium, 3 in Puebla, 3 in Jalisco and 2 in San Luis Potosí, also confirming that they had already been protected two areas requesting as “mining assignments” called: Amonitas and San Sebastián.

In the serious and responsible mining industry, costs and risks must be analyzed, and that is what exploration stage is for, since locating a deposit does not mean that it is economically viable to extract it. If we consider that Lithium (Li) is present both in pegmatites, brines, oil wells, clays, among others, and that in Mexico, we will mainly find it in clays, we must also consider the cost of extraction and processing; and here Ms. Harp of the SGM has already recognized that a route for the lithium extraction would have to be studied metallurgically, since the cost to extract lithium from clay is very high and also accepted that Mexico does not have the necessary technology for these works; technology and resources that, by the way, Bacanora Lithium has (one of the 8 private companies that currently have a valid concession and permits to exploit lithium in our country); this is where you have to be sensitive to the convenience of alliances and collaboration between the private initiative and the Federal Government.

To provide another example, Ms. Harp clarified before the Mexican Geological Society that the term to conclude a serious lithium exploration process in Mexico would take between 10 and 15 years, however, once a truly worthwhile deposit is located, be affordable and comply with environmental regulations and respect indigenous peoples and communities; the construction of a processing plant of a reasonable capacity without going into many technical details, would take another 3-4 years, and the cost of such a plant would be several billion dollars (which Mexican taxpayers will pay with taxes, being in my personal opinion unnecessary for the any government to operate companies since that is not the main purpose of any State, in the case of Mexico, it is enough to analyze the financial situation of “PEMEX”, of the extinct “Luz y Fuerza” or of the “CFE” itself); we are talking that in the most optimistic of the scenarios, and after a very expensive investment in exploration, development and of course exploitation processes by taxpayers, Mexico could have a lithium exploitation mine between 2035-2040 and in a more realistic scenario by the year 2042 or 2050, make calculations, dear readers, how old will you be when this happens, because that is what mining is like, a serious industry, a long term investment industry with a long-term vision.

Finally, and what worries me the most about the reform, is the amendment to article 10 of the Mining Law when it says the following: “With the exception of lithium, and other minerals declared strategic by the State, in terms of articles 27 and 28 constitutional provisions, the exploration and exploitation of the minerals or substances referred to in article 4 (...) may only be carried out by natural persons of Mexican nationality, ejidos and agrarian communities, indigenous peoples and communities referred to in article 2. constitutional (...)”; I am going to repeat that worrying phrase, “and other minerals declared strategic by the State”. Imagine that tomorrow our president wakes up with the wrong foot and through a decree says that gold, silver and copper are also strategic for our country, we are talking about that kind of risk.

I had previously expressed, in previous opinions, that the legislative process must be serious, the law in Mexico must be general, abstract, impersonal, permanent, fair and clear and these types of phrases do not create legal certainty, but instead, they generate uncertainty. The irresponsible legislators who approved the amendment to the Mining Law in a simplistic way, by a political order of their leader, forgot who they legislate for, and above all forgot that the spirit of the law goes and must go beyond personal and authoritarian whims. In recent days I have heard legislators from Morena in various forums calling Lithium the new "white gold", or the "oil of the 21st century", or that with Lithium the Mexican Government "will pay the external debt" or that the Lithium is the “mineral of the future” or that is “the mineral most used in Smartphones and Tesla batteries” and I have seen them applauding its simplistic and redundant reform and I must tell you congresswomen and congressmen, clearly and emphatically, that you are wrong, very wrong, and that mining is not an industry that to be used for jokes, nor simplicities.

An average Smartphone cell contains minerals such as copper, gold, silver, iron, nickel, zinc, silver, rhodium, palladium, beryllium, magnesium, most of them extracted in Mexico. In a Tesla car, we find minerals such as copper, bauxite, titanium, steel, iron, boron, coal, copper, nickel, aluminum, cobalt, lithium, and small amounts of gold and silver, most of those metals are also mined in Mexico.

Not everything is Lithium in the electric and sustainable future (in fact, Lithium in Mexico, at the time of writing this article, seems to be scarce, expensive to extract and extremely difficult to find), congresswomen and congressmen from Morena and allies, I don't know why you celebrate that Mexico “keeps” the Lithium cake (which by the way it already had with the article 27 of the Constitution) if the cake doesn't even exist yet; but even more serious, with your simplistic legislative and political reforms, you are causing Mexico to lose credibility before the world, you are causing that close to 24 billion dollars that could be invested in Mexico in the next six years in responsible mining, that actually creates jobs, that actually pays taxes and actually respects the environment, are now faltering, and you are causing that three million of direct and indirect jobs that represent practically 8.5% of the Industrial GDP and 2.5% of the national GDP to be threatened just because you received an authoritarian order to amend without thinking the Mining Law, which regulates one of the most serious and noblest industries in the country.

Sometimes our politicians and legislators forget that just like Lithium, before they arrived at their temporary power position and after they retire, the sovereign power of us as citizens is also protected in the Constitution, since the article 39 clearly cites: “national sovereignty resides essentially and originally in the people, all public power emanates from the people and is instituted for their benefit”. Even the lectern from which President López Obrador ordered to amend the Mining Law is borrowed, and he will have to return it on October 1st, 2024, less and less days to go every day.

To conclude, my personal predictions for the matters of lithium in Mexico by the year 2030 assuming two scenarios, with and without political transition in the Presidency:

1. Without political transition.- If Morena continues to govern from 2024 to 2030, we will continue in the exploration stage, even without having a lithium mine in operation, but perhaps the current text of the Mining Law will be maintained due to the high influence that AMLO can have in the next person who occupies the presidency, the company that operates the exploration and exploitation of lithium will be in the red numbers and in debt, it will cost the Mexican taxpayers a lot of money and the Mexican people will not be seeing any benefit.

2. With political transition.- If there is alternation in power and Morena no longer governs from 2024 to 2030, I would expect the Mining Law to be reformed for the sixth time and all the deficiencies described above that create legal uncertainty to be corrected, that is to allow the exploration, exploitation and co-investment between the private investors and the federal government, allowing to develop with a long-term vision, a responsible, sustainable lithium mining, respectful of the environment, of the human rights of the indigenous communities and indigenous peoples; we will still continue to be in the exploration stage, even without having a lithium mine, but by far, on a much better path.