Mexico Nationalizes its Lithium Industry; Adds to Growing List of Positive Fundamentals for the Commodity

Most attractive and long-lasting investment themes, including individual stocks or commodities, are characterized by lengthy periods of positive fundamentals that are briefly interrupted by less constructive news. The current 17-month lithium bull market has clearly been defined by the former characteristic, but any appreciable negative developments have been difficult to ascertain. Lithium is perhaps the most indispensable metal used in electric vehicle (EV) batteries.

Note some of the following data points over the last few weeks:

On April 18-19, Mexico’s President Manuel Lopez Obrador, a leftwing leader who seemingly seeks to undo years of economic reforms accomplished by previous Mexican leaders, pushed through the country’s congress a bill to nationalize its lithium industry. A “decentralized” agency that will oversee the development of lithium will be established — whatever that means.

This nationalization action represents a follow-on to a similar decision made by a socialist leader in Bolivia who was elected in October 2020 and a planned lithium nationalization by new Chilean President Gabriel Boric; the progressive Mr. Boric took office in mid-March 2022.

The great risk in such sweeping initiatives, which generally result in lower quantities produced and less efficient mining operations (thereby leading to higher prices), is that Latin America contains the world’s largest lithium reserves. Note in particular how Chile’s reserves dwarf those of the U.S.

Countries with the largest lithium reserves worldwide as of 2021

The extent of Mexico’s economically extractible lithium is open to debate. Most of the country’s lithium is deposited in clays. Virtually all the lithium produced in the world today is found in brines or rocks.

Having said this, Contemporary Amperex Resources Limited (CATL), the world’s biggest EV battery manufacturer, apparently believes that extraction of lithium from clay is quite feasible. On April 20, it won a bidding war for the exploration rights to a lithium clay project in Jiangxi, a southeastern Chinese province. CATL paid nearly US$135 million just for these rights — all development spending would be on top of this figure. The project contains an estimated 2.66 million tons of lithium metal oxide.

Tesla’s (NASDAQ: TSLA) Elon Musk certainly understands the powerful lithium fundamentals. On Tesla’s 1Q 2022 earnings call, he said “I encourage entrepreneurs out there who are looking for opportunities to get into the lithium business. …. Lithium margins right now are practically software margins.”

The price of lithium has soared nearly tenfold since year-end 2020, and has more than doubled just over the last four months.

The price of lithium carbonate, in Chinese yuan per tonne. Source: Trading Economics.

Information for this briefing was found via Edgar and the sources mentioned. The author has no securities or affiliations related to this organization. Views expressed within are solely that of the author. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Video Articles

2026 Could Be Gold’s Biggest Year Yet!? | Ryan King – Equinox Gold

Gold Is Screaming Higher While Currencies Burn | Simon Ridgway – Rackla Metals

We Have the Highest-Grade Antimony Deposit in North America!? | Jim Atkinson -Antimony Resources

Recommended

Canadian Copper Secures $8 Million Lead Order From Ocean Partners As Part Of Larger Funding Round

Northern Superior Expands Philibert With 350 Metre Step Out Testing 1.10 g/t Gold Over 25.5 Metres

Related News

Noram Ventures Intersects 1124 PPM Lithium Over 82.3 Metres At Zeus Project

Noram Ventures (TSXV: NRM) this morning released further assay results from its ongoing drill program...

Thursday, February 18, 2021, 08:07:03 AM

Mexican Tequila Industry Faces Glut, Trade Threats as Demand Slows

Mexico’s tequila industry confronts mounting inventories and potential US tariffs as demand cools following years...

Wednesday, January 1, 2025, 07:47:00 AM

Is Mexico Moving Away From An Open-Pit Mining Ban Under New President?

As Claudia Sheinbaum assumes her role as Mexico’s first female president, one of the most...

Thursday, October 10, 2024, 02:56:00 PM

Sigma Lithium: Constructive PEA on Brazil Lithium Project; Production Could Begin in Just Over a Year

On June 2, Sigma Lithium Resources (TSXV: SGMA) released a constructive preliminary economic assessment (PEA)...

Sunday, June 6, 2021, 09:00:00 AM

Is Big Oil Moving To Big Lithium?

Major US oil companies are shifting their focus to lithium, a crucial component in electric...

Wednesday, July 26, 2023, 03:40:00 PM