There are some announcements that just send ripples across a newswire. MGX Mineral’s (XMG:CNX)(MGXMF) recent release of its prospective resource report for their Paradox Basin Project caused a wave of excitement. The independent assessment was done by independent consulting giant Ryder Scott Company and showed a project with reserves that could potentially prove to be enormously lucrative.
The 22 zones tested by Ryder Scott at Paradox Basin—which spans through San Juan County, Utah and San Miguel County, Colorado—demonstrate enormous upside, with P10 estimates of as much as 8 billion barrels of oil and 7 trillion cubic feet of gas.
As BayStreet notes, the numbers are just as impressive even when applying a more conservative metric:
While the 9 billion barrels number is at the very upper limit of Ryder Scott’s Paradox Basin assessment, even walking back the numbers to their realistic potential is still impressive for MGX’s future.
The best estimate total (assessed with 50% probability) comes to nearly 6 billion barrels of oil, and 6.8 billion barrels of oil equivalent.
Of the three tables shown in the company’s latest press release regarding the assessment, the best estimate prospective resource net to MGX is nearly 26.5 million barrels of oil equivalent (BOE). At the current price of $50/bbl, the gross value for that kind of resource is upwards of $1.32 billion.
One of the most exciting zones includes Cane Creek (CB21) that contains 736 million barrels of oil in place. This zone alone holds extraordinary value for MGX and represents a huge discovery for the company. In addition, Paradox Basin and the tested zones contain many clastics—rocks composed of fragments or particles of older rocks—and is highly pressurized. Consequently, the estimates for this cost are $8 million with one horizontal drill being made along with addition 3D seismic survey. A five-year timeline has been projected with commercial production beginning 18 months after drilling has commenced
Using Petrolithium Extraction to Make Profits Go Farther
Furthermore, MGX stands to increase profits at Paradox Basin by employing their patented petrolithium extraction process. The petrolithium technology treats tainted water used in oil and gas drilling extracting the valuable commodities from within the brine, specifically lithium, which is seeing unparalleled demand.
In late June, MGX announced that its large-scale petrolithium extraction system, which incorporates PurLucid Treatment Solutions’ patented nanoflotation technology, completed initial tests and would soon be used to begin testing bulk water samples from MGX’s petrolithium projects like this one at Paradox Basin and Sturgeon Lake in Alberta, as well customers and partners before commercial use. These test runs processed 10L per day, producing concentrated lithium chloride samples, but the focus has now shifted to the more advanced system that can process 1,000L of oil field brine per day. PurLucid, which MGX acquired 100% of in May, is busy constructing a pilot plant expected to be completed next month. When all complete, the extraction process could yield lithium in days rather than the usual months or years required for conventional methods.
MGX Continues to Make Bold Moves
This valuable land and its resources at Paradox Basin have not been a secret, but MGX has consolidated many claims into one area through unitization and now has effective control with 75%. The consolidated area, totaling more than 80,000 acres, is a combination of Federal, State and private property, but due to the high percentage of committed oil and gas leases MGX has been able to secure operating control in the unitized area. The move effectively provides MGX a base of operations for its petrolithium process in a region that is full of opportunity, which this recent N.I. 51-101 strongly confirms.
In related news, MGX also announced in August a partnership with American Potash where MGX will use its petrolithium extraction technology to explore and develop the company’s lithium brines totaling 13,520 acres of prime ground in the Paradox Basin.
“We are extremely excited to now be working with MGX to move the company’s petrolithium project forward,” commented American Potash’s CEO Rudy de Jonge at the time of the announcement. “We believe that MGX is not only a well-capitalized company but also the unquestionable leader in the petrolithium space.”
Similarly, MGX struck an LOI with Power Metals Corp. for the company’s remaining petrolithium assets – American Potash and Power Metals had a joint venture in the Paradox Basin – which includes the Coyote project and its 3,000 acres that adjoins with the historic Lisbon Valley oil and gas field, where historic lithium brine content has been reported as high as 730 parts per million lithium. The agreement with Power Metals also includes hard rock properties. Here is a breakdown of those that were noted in the deal:
- Case Lake – located 49 miles east of Cochrane, northeastern Ontario. Power Metals summer 2017 exploration program on the Case Lake Property will consist of ~6000 m of drilling of approximately 30 drill holes. The drilling will target the North and Main Dykes to define the pegmatite and lithium mineralization and to extend the dykes to the east and west along strike and down dip.
- Paterson Lake – located 46 miles north of Kenora, northwestern Ontario.
- Gull Wing – Tot Lake – positioned 18 miles northeast of Dryden, northwestern Ontario in Webb and Drope townships. The site is composed of 10 mining claims, 103 claim units totaling 4072 acres and is roughly 6 miles by 0.9 miles in size.
- Brazil Lake – a core drilling series of 28 holes in 2011 at Brazil Lake encountered extensive Li2O mineralization
“We are pleased to have signed this deal with MGX Minerals, unquestionably the leader in the petrolithium space,” stated Johnathan More, Chairman of Power Metals, in the company release. “Aligning ourselves to participate in the evolution of the new energy industry, our shareholders will be best served with our asset package being shepherded by MGX. At the technical forefront of the lithium industry, MGX’s drive and domain expertise have the potential to drive value for related participants.
MGX Minerals not only has the respect of the industry, but it now has its full attention. The recent power moves by the company are putting their cutting-edge technology on the map. And combined with the recent report out of Paradox Basin, MGX is sitting on a historically large area of oil and gas resources, which single-handedly could be a game-changer for the company, that they can couple with their petrolithium technology essentially turning a profit off of their own waste.
The leadership at MGX continues to demonstrate its forward-thinking about the future of energy while steadily knocking down new milestones towards full-scale petrolithium production. This recent report out of Paradox Basin puts MGX in excellent position for the future cementing the company as a important player in the industry with an impressive, wide-ranging and valuable portfolio.
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