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MGX Minerals (CSE:XMG) has largely been focused on California, but this week, the Canadian junior expanded its horizons. The company announced on Thursday that it had acquired the Needles magnesite deposit in California, and that it is now planning to build the first magnesium oxide (MgO) wallboard plant in the US.
MGX has entered into a mine lease agreement for up to 100 years for Needles, with renewal options every 10 years and annual lease payments of $12,000, $24,000 and $36,000 for years 1-3 continuing at $36,000 per year after that.
Additionally, during the first three years of its lease, MGX must spend a minimum of $350,000 on exploration and development at the property. The company must also pay $5,000 within 30 days and must issue $10,000 in common shares.
The Needles project has been explored historically, with work by the California Geological Survey pointing to magnesite potential at the property.
For Jared Lazerson, president and CEO of MGX, the move is an important one. “We’re expanding into the US,” he said. “With industrial minerals, location is very important.”
As Lazerson explained, MGX is looking at the Needles project for magnesium oxide wallboard production, largely due to a lack of availability of the product in the United States. “The overwhelming majority of this stuff is now imported from China,” he said.
According to MGX’s release, magnesium oxide wallboard is fireproof, non-toxic, and stronger and lighter than traditional wallboard.
Lazerson stated that magnesium oxide wallboard is used extensively in construction in Europe and Asia. However, the added cost of freight from China means that the product is too expensive to compete with more conventional gypsum-based sheet rock in the US, according to Lazerson
“There is no plant in the US,” he said. “If there was a [magnesium oxide] plant in the US it would probably be used very heavily as it is in Europe and Asia.” On that point, MGX has started to put a few feelers out, and has found that at least a few end users in North America are using magnesium oxide wallboard. Lazerson pointed out that Needles is located in Southern California near the border of Nevada and Arizona, stating, “that would be one of the largest construction markets in North America.”
There’s still plenty of work to do at the Needles deposit, but MGX has already commenced preliminary planning to build a wallboard production plant at the project, targeting 10 million sheets per year of initial production. Magnesite ore from Needles would be calcinated into caustic calcine magnesia (CCM) to be used as feedstock for the plant.
As for what’s next, Lazerson said that MGX will commence scoping studies for mining at Needles and production from the wallboard plant, and will begin drilling at the property in coming months. Needles is located on patented (private) land claims, allowing for permitting to progress more quickly.
Certainly, industrial metals investors will be keeping an eye out to see how things progress at the Needles project.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: MGX Minerals is a client of the Investing News Network. This article is not paid-for content.
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