MGX Minerals

Developing Canada’s Lithium from Oil Wells

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Overview

MGX Minerals (CSE:XMG) is a diversified Canadian mining and technology company with interests in advanced material and energy assets throughout North America. The company has entered into strategic partnerships to develop extraction technologies for minerals like lithium and magnesium from unconventional sources such as oilfield brines. The purpose of developing these technologies is to make use of mineral extractions to fuel the new energy economy.

MGX Minerals has successfully extracted lithium from heavy oil wastewater and is the first mover of a new technology known as “petrolithium”. The company has also used similar new technology to extract lithium from geothermal brines.

“We believe in investing in technology and innovative processes that disrupt how the energy industry thinks and operates,” stated MGX Minerals President and CEO Jared Lazerson. “Our newest technological advancement offers yet another first-mover opportunity into a large and often stagnant sector hungry for new ideas.”

To date, MGX Minerals has deployed two of three treatment plants and expects to deploy the third plant in the near term. During testing of the first processing plant, the company generated C$30,000 in revenue over the three-week test period, marking the beginning of revenue generation for the technology.

The company has also entered into a partnership with Highbury Energy Inc, an energy company dedicated to developing renewable energy resources through the conversion of biomass. Under the partnership, the companies will work together to develop a thermochemical gasification process aimed at extracting metals such as nickel, vanadium, cobalt and hydrogen from petroleum coke, a carbon material by-product of the oil refining process. Together, the partnership has been able to produce 45 percent vanadium concentrate from petroleum coke ash.

Alongside developing its mineral extraction technologies, MGX Minerals has also formed a subsidiary, PetroLithium Corporation of America, that is actively exploring for lithium brines in the US, starting with the Paradox Basin in Utah. Within this endeavor, MGX Minerals has acquired numerous lithium properties in Canada and the US. The company is also in the process of brine testing properties in Chile on which there is potential for future joint ventures using MGX’s lithium extraction technology.

In 2016 MGX Minerals released a maiden NI 43-101-compliant mineral resource estimate for its British Columbia-based Driftwood Creek magnesium project, which outlined 8 million tonnes grading 43.31 percent magnesium oxide. The company has secured a 20-year mining lease for Driftwood Creek, and has also completed a 100-tonne bulk sample, and has released a preliminary economic assessment with a pre-tax NPV (5 percent) of 529.8 million.

Company Highlights

  • First to recognize petrolithium potential and to develop a business strategy around the new technology
  • Investment in new energy-focused technology companies like PurLucid and Highbury Energy
  • Over 2 million acres of lithium-brine properties acquired to date in North America
  • Proof-of-concept using proprietary, patented design process
  • Partnerships in place with major oil and gas companies to conduct well sampling
  • Two water treatment units have been deployed third to be deployed in the near term
  • Generated C$30,000 in three weeks during testing of first water treatment unit.
  • 100-tonne bulk sample, 20-year mining lease and a maiden NI 43-101 resource estimate, and PEA completed for the Driftwood Creek magnesium project
  • Near-term production with low capital development costs and a straightforward permitting process
  • Magnesium recovery rates of up to 100 percent from lithium brine bulk samples
  • Environmentally friendly operations – magnesium processing results in virtually no tailings.

Petrolithium: Extracting Lithium from Petroleum Brine

Lithium Extraction

Lithium is a material ideal for portable storage applications, most notably lithium-ion batteries used in smartphones and electric vehicles (EVs). As the global EV market continues to experience phenomenal growth, experts predict that the lithium used to make smartphone and EV batteries could be in short supply. Goldman Sachs has projected demand for lithium to triple by 2025 to 570,000 tonnes.

Lithium is found all over the world, in both hard-rock deposits and evaporated brines and the bulk of the world’s lithium brine production comes from salars in the prolific lithium triangle hosted in Bolivia, Chile and Argentina.

The two methods for extracting lithium are solar evaporation and hard-rock mining, two relatively ineffective approaches. In response to this market gap, MGX Minerals appears to have found an alternative within an unlikely source: depleted oil wells. As petroleum in a well gets drilled out, it is replaced by a saltwater brine that is useless to well operators since it contains less than one percent petroleum. The wastewater is sent back down the well, or pumped into storage tanks, at added cost.

PurLucid

Research that began in the 1990s revealed that the brine found in some oil fields contained significant amount of lithium. As the Chemical Institute of Canada explains it, initial attempts to isolate the lithium focused on solar evaporation, with the usual 18-month time frame, but the delay was reduced to just one day thanks to technology developed by Alberta-based PurLucid Treatment Solutions. PurLucid’s technology allows for the recycling or controlled release of oilfield wastewater and eliminates downhole or alternative storage, one of the largest operating costs for the oil and gas industry today.

In what is considered a world first, MGX Minerals formed an acquisition agreement with PurLucid and began buying up mature oil fields from well owners happy to unload their unproductive properties. Many of these lithium-containing wells are in Alberta. According to the Alberta Geological Society, the Leduc and Swan Hill formations contain up to 140 mg/l of lithium-bearing water. MGX Minerals has compiled the historical data and acquired over 60,000 hectares of potential petrolithium brines throughout the province.

“Petrolithium” is produced by separating the oil from the lithium-bearing brine, yielding a precipitate with concentration of lithium carbonate 95 percent or greater. The patented process harvests lithium and other metals from brine that would otherwise be disposed of.

mgx-minerals-map

In July 2017, MGX Minerals and PurLucid were granted exclusive patent rights for the recovery of metals and minerals from produced wastewater brine in the oil and gas sector, providing the company to deliver fully-integrated solutions to operators in the industry.

Adding to its extraction technology portfolio, MGX Minerals announced in November 2017 that PurLucid had developed proprietary high-temperature filtration for the purification of geothermal brines and the associated extraction of lithium and other minerals. Geothermal brines, like oilfield brines, contain concentrated amounts of metals and dissolved salts.

MGX Minerals and PurLucid are currently operating a manufacturing facility in Calgary, Alberta where the company has recently commissioned the commercial-scale, pre-treatment nanoflotation and nanofiltration NFLi5 lithium recovery system. The system is capable of processing 750 barrels of brine per day. The system also utilizes a molecular sieve technology that recovers approximately 99 percent of the lithium in a brine and reduces the cost of extraction by 90 percent when compared to stainless steel or titanium membrane platforms.

To date, MGX Minerals has manufactured three petrolithium and wastewater treatment systems. Two of the systems have been deployed. The first system is operational and generating revenue. MGX Minerals charged C$35 per cubic meter of blowdown wastewater, which generated approximately $30,000 in revenue during a three-week test period in December 2018.

Lithium Property Acquisitions

MGX has also been actively pursuing lithium-bearing brines in the US, through its subsidiary PetroLithium Corporation of America. Initial areas of interest include the Paradox Basin and the Smackover formation that covers Arkansas, Texas and Louisiana.

In February 2017, MGX Minerals acquired 23,000 acres in the Lisbon Valley oilfield of southeastern Utah, near Moab, where historical lithium brine content has been reported as high as 730 ppm. This was followed by additional staking of land packages adjoining the property in April 2017, which was unitized with the initial land, and a further acquisition of 3,455 acres in May 2018,

bringing the total land package to 110,000 acres of combined oil and gas leases. As its first foray into the US, MGX Minerals plans to conduct well sampling in the Lisbon Valley and design multi- zone wells optimized for maximum flow of oil, gas, lithium and magnesium brine, as well as work on the consolidated 80,380-acre Blueberry Unit.

Additionally, in August 2017, MGX Minerals executed a LOI to acquire the entire US petrolithium and spodumene-bearing pegmatite portfolio from its partner, Power Metals Corp. Under the terms of the proposed agreement, MGX acquired 100 percent of Power Metals’ two petrolithium assets and a 30 percent stake in its four hard-rock properties. Within this portfolio, Power Metals has continued its work on the Case Lake property, which has presented new spodumene discoveries, surface sample results of 7.14 percent Li2O and drill results of up to 1.94 percent lithium oxide and 323.75 ppm tantalum over 26 meters, as well as 2.11 percent lithium oxide over 11 meters.

In the 2018 exploration program, MGX Minerals’ and Power Metals intersected 35 meters of high-grade spodumene zones in the West Joe Dyke on the Case Lake property. Highlights from the program include 20.5 meters grading up to 30 percent spodumene and 30 meters grading up to 30 percent spodumene.

 

mgx-minerals-map-4

In July 2018, MGX Minerals acquired an 80 percent interest in the 4,308-hectare Salinitas lithium brine project in the Salar de Salinas Grandes in Argentina. Since acquiring the property, the company has completed a TEM geophysical survey over 26 kilometers and trenching. Currently, a drill program is underway with the intent to test anomalies outlined by the TEM survey. Depending on the outcome of the drilling, MGX Minerals will then conduct a 30-day pump test.

Within the same month, MGX Minerals entered a property option agreement with Belmont Resources (TSXV:BEA) to acquire an initial 25 percent interest in the Kibby Basin lithium brine project in Nevada. Under the terms of the agreement, MGX Minerals will spend up to C$300,000 in exploration for its initial interest in the property and can earn an additional 25 percent by spending another C$300,000 in exploration.

Since the agreement was signed, MGX Minerals has completed a drill program on the property. Assays from the program returned values of up to 580 ppm lithium in the first 125 samples taken from the property. Due to the success of the program, the company is completing an additional 4,800-meters of drilling on the property.

Magnesium Market: Growing Demand for Strategic Metal

MGX Minerals is looking at niche markets for magnesium oxide—a key component in materials used to produce steel, cement and glass—including in waste water treatment and the manufacturing of wallboard. Magnesium oxide is beginning to significantly replace lime as the pH-balancer in the treatment of waste run-off from factories and mines, which is currently the largest use of CCM. Magnesium oxide in wallboard is commonly used in Asia. Exterior and interior wallboards made with magnesium oxide are known to be fire-resistant, mold proof, non-toxic, offer some structural integrity and hold up well in water.

As part of its relationship with PurLucid, MGX Minerals has been developing and optimizing an approach for magnesium extraction. In a reported case in October 2017, pretreatment conducted by the company was able to extract all of the 76,000 mg/L of magnesium from a bulk sample of lithium brine. The magnesium was extracted in the form of magnesium hydroxide, a commonly used industrial mineral with primary use in environmental applications such as municipal wastewater treatment and desulphurization of flue gases from power plants.

“Removal of very high levels of magnesium opens up a large number of global lithium brine sources for consideration that were previously considered too high in magnesium,” said Lazerson. “This represents a triumph of technology over perceived resource quality, in particular, that the magnesium has been extracted in a common form of widely used industrial mineral compound.”

Key Projects: Driftwood Creek Magnesium Project, British Columbia

MGX Minerals’ Driftwood Creek property covers 776 hectares across three mineral tenures in the Driftwood mining district 164 kilometers north of Cranbrook, British Columbia. Currently, there are only two magnesite deposits in production in the US and Canada. The company believes that Driftwood Creek could be one of the best undeveloped magnesite properties in North America.

MGX Minerals has secured a 20-year mining lease for the Driftwood Creek magnesium project. A 100-tonne bulk sample and an NI 43-101 resource estimate have been completed. Results include:

  • Measured and indicated mineral resource totaling 8.028 million tonnes grading 43.31 percent magnesium oxide.
  • Inferred mineral resource totaling 846,000 tonnes grading 43.20 percent magnesium oxide.
  • Bulk of resource is located less than 100 meters from surface, creating opportunities to expand mineral resource along strike and at depth with further drilling.

Assay data from a 16-hole infill drill program will be used to upgrade the resource estimate and provide information for a preliminary economic assessment (PEA).

A positive PEA for the property was published in March 2018 for a mine with a processing plant using conventional crushing, grinding, flotation upgrading, calcination and sintering to produce a saleable dead-burn magnesium oxide product. Highlights from the PEA include:

  • After-tax NPV (5 percent) of $316.7 million
  • After-tax IRR of 19.3 percent with a four-year payback period
  • Initial capital costs of $235.9 million
  • Conventional quarry pit mine with 1,200 tpd process plant
  • Life of mine of 19 years
  • Life of mine average grade of 43.27 percent magnesium oxide
  • Life of mine magnesium oxide recoveries of 90 percent

Moving forward, MXG Minerals will develop a prefeasibility study (PFS) for the property and will continue its exploration efforts with the intent to increase mine life.

Silicon Market: Catching the Solar Wave

As an important ingredient in solar panels, silicon is expected to be in high demand particularly from China which is aggressively pursuing renewable energy as an adjunct to traditional coal-fired power plants. According to Transparency Market Research, the demand for silicon metal is expected to surge at a CAGR of 4.3 percent between 2016 and 2024, worth an estimated US$3.4 billion.

MGX Minerals will be funding a research consortium with the University of British Columbia (UBC) to develop a low-cost and scalable method of producing a silicon-based anode to improve the energy density in lithium-ion batteries. The goal of the program is to replace the graphite anode with silicon and to develop a hybrid variety in the near-term. Ultimately, MGX Minerals wants to develop the next generation of lithium-ion batteries with an energy density of up to 400 Wh/kg for the use in EVs and grid storage.

MGX Minerals plans to capitalize on the lack of silicon producers in western North America as it embarks on a plan to develop three high-grade silicon projects in British Columbia: Longworth, Koot and Wonah. All three properties are located in southeastern BC, where quartzite mineralization is considered high purity and similar to other producing silica mines. They have the potential to be developed into open-pit mines with established beneficiation methods, and are in historical mining districts accessible to roads, railways, labor and electricity. Exploration is ongoing on each property.

Management

Jared Lazerson – President, CEO and Director

Jared Lazerson has worked in the mining and technology industries since 1994 with companies including Osprey Systems (GPS and Digital Mapping), United Helicopters, Copper Island Mines and Manto Resources. He holds a BA in International Relations from the University of Pennsylvania.

Michael Reimann, PhD – CFO and Director

Michael Reimann graduated in Engineering Physics from the Royal Military College of Canada, and obtained a Ph.D. in Physics from the University of British Columbia. He has over 45 years of experience in senior corporate management in both public and private companies. Most recently he served as CFO of Skana Capital Corp and PNG Gold Corp, both TSXV-listed companies.

Randall Keller VP of Business Development

Randall Keller is a highly-accomplished executive with over 35 years of global experience in the energy sector. He is formerly the Director of Business Development, Transmission and Land Assets for Berkshire Hathaway Energy Renewables, a holding company controlled by Berkshire Hathaway Inc. At Berkshire, Keller was responsible for the development of large-scale renewable energy projects within the Berkshire holdings platform in Southern California and managed a large team of engineers, geologists, chemists and scientists, overseeing budgets in excess of $1 billion.

Andris Kikauka, PGeo – VP of Exploration and Director

Andris Kikauka is a geologist with over 30 years of experience. From 1996 to 2012 he was the Project Geologist overseeing exploration programs at Goldrea Resources. Kikauka is Project Geologist for Rio Minerals, a mineral exploration and geotechnical consulting firm, and is a director of American Manganese Inc. (TSXV:AMY), which is focused on mineral properties and commodities used in the steel industry. He was previously a director of Navarre Resources (TSXV:NRV.V) from 1991 to 1996. He holds a B.Sc. in Structural Geology, Mineralogy and Petrology from Brock University.

Christopher Wolfenberg – Director

Christopher Wolfenberg is a Partner with the law firm of Fasken Martineau LLP. Prior to his current position he was a Partner with Norton Rose Fullbright. He provides practical advice to select clients’ active in the mining, technology and energy sectors and has acted as an officer and director of numerous public, private and non-profit entities. He holds a Bachelor of Social Sciences from the University of Ottawa, a Bachelor of Laws from Queen’s University and a Master of Laws from Cornell Law School. He is a member of the Law Society of Alberta.

Lyndon Patrick, LLB – Director

Lyndon Patrick is a Vancouver-based, independently practicing lawyer. He has practiced in British Columbia since 2001 in the areas of litigation and real estate. He holds an LLB from the University of Alberta, and an MA and BA from the University of British Columbia. Patrick is an independent director of the company.

Eric Schnake – South American Management Team

Eric Schnake has over a decade of experience working within the Chilean mining and energy sector. Most recently, he held the title of Chilean Mining Industry Undersecretary, where he was responsible for internal administration within the government body while coordinating with public stakeholders to develop and implement new policies. He has also held roles at numerous law firms throughout Chile. He holds a Master in Public Policies from the Universidad de Chile, a Master in Environmental Law from the University of Sydney and a Diploma in Public Policies from the Harris School of Public Policy, University of Chicago.


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