In a recent report from Vertus Equity Research, MGX Minerals (CSE:XMG) was highlighted as a key player in the North American magnesium market.
The trick to investing profitably in this market is to know how to avoid the pitfalls while capturing the value. Finding a company to buy on the cheap is easy—the question is, should you? MGX Minerals (CSE.XMG) offers an excellent example of what we look for in value investing. MGX is developing a number of low-‐cost industrial assets in western Canada. The company’s flagship project is Driftwood Creek, a magnesium oxide (magnesia) deposit located in British Columbia.
The Driftwood Creek property has a historic non NI43-‐101 compliant resource of 28m tonnes representing decades of potential supply. Because the company plans to take the property into production (rather than dress it up for a sale) primary efforts have been directed to advancing the Driftwood Creek project through the various hurdles necessary to reach commencement of production. In May 2015, MGX announced agreements with Eaton Corp. and Highbury Energy, providing for engineering, construction and finance assistance in building out the company’s proposed processing facility. The company is awaiting results of pilot plant testing to determine final specifications to optimize the design and construction parameters of industrial-‐sized kilns to process mineralized material from Driftwood Creek. If all goes as expected, we expect to see construction and assembly of the processing plant by Summer 2016 and commencement of mining operations by Fall 2016.
At a current share price of $0.54 the company has a current market capitalization of approximately $16 million. For an advanced-‐stage development company pursuing near term production, MGX Minerals presents a compelling case and we would expect the market to re-‐rate the company as the milestones above our achieved. A proposed financing was announced (see news release dated August 31, 2015) for the issuance of up to 1-‐million units (share plus warrant) at $0.50 per unit. A portion of this proposed financing remains unallocated. Further financing will be required in order to capitalize construction of the proposed processing plant.