An iron ore mining operation near the Pacific port of Lazaro Cardenas, Mexico, March 12, 2014. It was controlled by the Knights Templar until the government confiscated it in November. Eduardo Castillo/AP

The pseudo-religious Knights Templar drug cartel in western Mexico has diversified to the point that drug trafficking doesn't rank among its top sources of income, according to the Mexican government’s special envoy to Michoacán.

The cartel counts illegal mining, logging and extortion as its biggest moneymakers, said Alfredo Castillo, who has been tasked with restoring the rule of law in the state.

Iron ore "is their principle source of income," Castillo told The Associated Press. "They're charging $15 [a metric ton] for the process, from extraction to transport, processing, storage, permits and finally export." The ore itself doesn't go for that price; the cartel skims $15 for every ton arriving in port.

And there are reports that the Knights Templar may be involved in human organ harvesting. Michoacan state Public Safety Secretary Carlos Castellanos Becerra alleged on Monday that the ring would kidnap children and take them to rented homes with medical equipment where their organs were removed.

He said the cases go back several years, but would not give any specific details or discuss evidence because the investigation is still open.

While it's long been known that Mexican cartels engage in other types of criminal activity, including trafficking of people and pirated goods, this is the government's first official acknowledgment that a major organized crime group has moved beyond drugs. The Knights Templar and its predecessor, La Familia, started out as major producers and transporters of methamphetamine.

The implications are enormous, signifying that organized crime in general in Mexico stands to diversify and become even more entrenched.

"It's a criminal organization like the mafia," said Antonio Mazzitelli, the Mexico and Central America representative to the U.N. Office on Drugs and Crime. "La Familia, the Knights Templar and, in part, the new, smaller cartels that have developed, like the New Generation Jalisco, are copying this new typology."

Mexican authorities count at least 12 major cartels, but also talk of an untold number of smaller splinter groups. Federal prosecutors have not seen similar shifts in other cartels, according to an Attorney General's Office official, who insisted on speaking anonymously because he wasn't authorized to speak about the topic.

But experts disagreed. The Zetas cartel, with its strongholds along the U.S.-Mexico border, was among the first to change the business model from merely production and transport of drugs to migrant smuggling and controlling territory through terror. Though drugs still top their list, the Zetas likely make as much from kidnapping and extortion, said Samuel Logan, director of Southern Pulse security consulting firm.

"I've never looked at them as drug-trafficking organizations," Logan said of Mexico's cartels. "They're multinational corporations that will react to market pressures and do what they have to do to stay in business."