Lithium is all the rage in the electric vehicle space, with analysts hypothesizing about how things will play out on the supply-demand spectrum and if indeed the world is staring down a serious supply conundrum. The thing is, hard rock lithium mining is slow and expensive. Evaporation ponds are less expensive, but still take about a year and a half to produce lithium. Then there’s also the pesky problem of actually having enough mines operating to keep up with anticipated demand underscored by the EV evolution, which actually is driven by much more than just Tesla (TSLA); it’s all the major car manufacturers today that intend to capture market share.
Petrolithium, a term coined only in recent years, is lining up to be a viable solution to rapidly produce lithium – as well other valuable minerals like silicon, magnesium and potassium – while further delivering a solution for 800 billion gallons of wastewater created during oil and gas extraction annually. The name to know in the petrolithium space is MGX Minerals Inc. (XMG:CNX)(MGXMF), a company steadily advancing its technology and properties towards petrolithium operations and sitting at the precipice of a crucial milestone of commercial deployment.
Through its own efforts and a collaboration with engineering partner PurLucid, the Vancouver-based company has developed a rapid recovery process that can concentrate lithium from heavy oil evaporator blowdown wastewater. This is not just theoretical. MGX has constructed a one cubic meter per hour pilot plant in Calgary, Canada and proven the economic viability of the technology that can shave lithium production time to as little as one day, while further separating magnesium from the wastewater.
Additional testing of the system has included lithium-brine-bearing water from 33 projects, including eight North American properties since July. These eight bulk samples represent eight high-priority production and water treatment sites for MGX.
When introduced to the technology, unconventional oil and gas legend Marc Bruner gave up retirement to join MGX as Chairman of the Board. Amongst his list of accomplishments, Bruner served as founding Chairman of Ultra Petroleum and was involved in developing the Pinedale Anticline in Wyoming, now regarded as one of the largest unconventional natural gas fields in the U.S., as Ultra was grown into a $7 billion+ market cap company. He also founded Pennaco Energy, which was sold in 2000 to Marathon Oil (MRO) for $550 million. Throughout his career, Bruner has negotiated and completed deals with leading players in the energy space, including Halliburton (HAL), ExxonMobil (XOM) and Hess (HES), which effectively gives MGX a direct line to potentially strike lucrative deals in the future.
As evident through testing and analyses agreements, major O&G companies across North America have already expressed interest in the MGX process that can help alleviate problems with the process and expense of the wastewater byproduct that typically involves reinjection into the ground.
The 125 barrel/day pilot plant has been running since July. A 750-barrel/day commercial plant has been manufactured with control systems currently being installed while a 7,500 barrel/day system is being fabricated.
In aggregate, the stage is set for deployment of the rapid lithium extraction systems and commercial-scale production of lithium in the first quarter of 2018.
Much More Than Just Lithium
The petrolithium component is just that, a component of MGX’s assets. The company has interests in lithium, magnesium and silicon assets throughout North America, including one of the largest lithium land positions of any single company on the continent at nearly 2 million acres. The company has a particular knack for taking control of the most promising land, including a consolidated land position in Alberta that envelopes 14 of the top 25 historical grade lithium projects as reported by the Alberta Geological Survey.
The common theme of MGX’s resource properties is that are all advanced material new energy commodities that are concurrently being moved forward.
In its lithium portfolio, MXG recently inked a binding letter of intent with Power Metals Corp. The LOI lays out terms for MGX to acquire a 20% interest in the Case Lake Lithium Property in Ontario held by Power in exchange for stock, with an option to acquire another 15% interest via cash payments. Leveraging 3-D modeling, a 5,000-meter drill program is ongoing to test new and known targets within five pegmatite swarm dikes ranging from 10 to 35 meters thick and up to 1,200 meters in strike length. A total of 12 drill holes have been completed so far with all but one intersecting spodumene bearing pegmatite. Drilling to date was highlighted by a cut of 35.22 meters of continuous spodumene pegmatite as part of the Main Dyke with very coarse-grained spodumene crystals up to 10 centimeters long.
At the Driftwood Creek project in British Columbia, three rounds of diamond drilling have been completed, geotechnical drilling is underway, environmental studies are being conducted and a preliminary economic assessment in nearly completed. The company is looking to further delineated and report on the project that currently contains a National Instrument 43-101 Measured plus Indicated mineral resource estimate totaling 8.028 million tonnes grading 43.31% magnesium oxide (MgO) and Inferred mineral resource totaling 846,000 tonnes grading 43.20% MgO.
At the Longworth Silica project, a property deemed by that British Columbia Geological Survey as one of the top silica occurrences in the province, a drill program is ongoing where drilling intersected mineralization near surface and a continuous interval of visually identifiable orthoquartzite with high rock-quality designation over greater than 100 meters. To define continuity of high purity quartzite mineralization, MGX intends to drill additional holes at 50-meter interval in the Snow Zone with the assay data planned for inclusion in a NI 43-101 resource estimate in the future.
Elsewhere, in B.C., 62 soil and 8 rock chip samples collected from across about 4 square kilometers at the REN Niobium-Tantalum-Titanium-REE Mineral Property have been completed. The current exploration work in combination with historic sampling and drilling by Teck Explorations Ltd. and International Bethlehem have helped determine rare earth elements strongly zoned into the handing wall of the carbonatite over a 1.5-kilometer strike length. MXG is planning additional surface sampling to design a drilling program to construct a resource estimate.
Moreover, the company’s 75% working interest in the Paradox Basin spanning San Juan County, Utah and San Miguel County, Colorado. Independent consulting giant Ryder Scott Co. recently completed an independent assessment testing 22 zones at the project demonstrating the prolific potential oil and gas reserves hosted in the ground. At the high end, the firm estimated 8 billion barrels of oil and 7 trillion cubic feet of gas. Moving down to what is called a “best estimate,” which is assessed at a 50% probability, Ryder Scott estimated a prospective resource net to MGX of almost 26.5 million barrels of oil equivalent. At today’s oil prices, that equates to a resource of approximately $1.3 billion.
And that goes without mentioning the fact that every barrel of wastewater created as a byproduct of the oil and gas extraction can be run through MGX’s petrolithium extraction system, further improving commodity yield and reducing costs associated with water handling.
On the Corporate Front…
While it takes all the requisite steps to build value through exploration work across its extensive project list, MGX took a step to improve its transparency by recently uplisting from an OTC Pink company to the OTCQB marketplace of OTC Markets. This move means that the company must maintain a higher level of standards with regards to share price and reporting, amongst other things, giving investors a clearer picture of operations and financials. It also opens the company up to investment by certain higher level investors, such as institutions and funds, that have guidelines forbidding investment in pink sheet-listed companies.
The management team was strengthened last week with the appointment of Ian Graham as Vice President of Operations at MGX. Graham brings over two decades of international mining experience, including executive positions at majors like Rio Tinto (RIO) and London-listed Anglo American, where he became well known for his successes in the diamond sector.
Lastly, an aggressive development plan like that being executed by MGX requires cash. The company took care of this through the issuance of special warrants last month that generated gross proceeds of $5.6 million for corporate coffers.
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