We now have a new way to extract a rare 'superfuel'—and it could be the most important energy development since shale oil went commercial. Oh, and it only takes a day.
This 'superfuel' is the foundation of everything that defines our high-tech future—from crazed demand for rechargeable batteries, energy storage systems and electric vehicles, to the millions of consumer electronics we boost demand for daily.
The superfuel is lithium, and the craze is already on.
But we won't have enough—not because we can't find it. Lithium is abundant. It's because demand is skyrocketing and we haven't been able to extract it for a decent cost—until now.
Goldman Sachs Group projects that demand for lithium will triple by 2025 to 570,000 tons.
Credit Suisse forecasts that demand for lithium "will actually outstrip supply as we approach the later part of the decade, with demand potentially as high as 125 percent of total capacity."
As our tech-driven energy future unfolds in front of us and becomes a critical reality, there is nothing more important than diversifying our lithium supply—but the difficulties of extraction make this challenging.
Now we have an answer: It's "petrolithium"—a new process pioneered by a little-known company that has just made one of the biggest leaps in lithium extraction.
That company is MGX Minerals [OTC:MGXMF] [CSE: XMG] [FKT: 1MG], and its "petrolithium" technology represents a game-changer for a commodity that is now threatened by a major supply squeeze.
The best lithium is found in the brine, but it's harder to extract. Until now, we've only had two conventional means of lithium extraction: hard rock mining and solar evaporation. Neither are efficient, and both are costly.
Instead, we've been throwing our most critical commodity away because we couldn't get at it. Lithium from petroleum brine has been treated as waste.
But when you've got a tech-driven energy revolution on your hands that requires massive amounts of lithium and no sign of enough supply to feed it … well, waste not, want not.
MGX's technology changes all that. It separates the lithium carbonate from the brine water as it's being pulled up to the surface.
Here are 5 reasons to keep a close eye on MGX Minerals [OTC:MGXMF] [CSE: XMG] [FKT: 1MG] as we reach lithium fever pitch:
#1 Amazingly Tight Supply Ahead
Already this year, the catalysts have been dramatic. The most notable of these being Tesla's battery gigafactory, which threw its manufacturing doors open in January, and by next year will be producing so much it will DOUBLE the world's battery production capacity.
And that's just Tesla …
German BMZ has launched the first phase of its German battery factory, and LG Chem is planning one in Poland, which is slated to open next year. Samsung also hopes to start making batteries in Hungary beginning in 2018.
And that's just batteries …
And while the mass production of Tesla's Model 3 electric sedan is one of the more exciting and visible drivers of demand—with 370,000 vehicles already ordered—there are other major drivers, such as massive energy storage systems that will push demand exponentially higher.
According to Macquarie Bank (ASX:MQG), the share of lithium demand from electric and hybrid vehicles alone is due to surge from 10 percent in 2015 to 33 percent by 2021.
With Tesla looking to "absorb the entire world's lithium production", in the words of Elon Musk, and seeking "American lithium sources first", the ability to extract lucrative lithium from petroleum brine is a major coup—and a major opportunity for first-in investors.
Just how big is it going to get?
Lithium expert Joe Lowry says demand should double between now and 2020, driven by the massive battery market, producers are in no position to keep up with this in the medium or long term.
#2 A Very Timely Pioneer with a Patent
In this tech-driven energy era, pioneering a new technology to extract a critical commodity when it's facing a major supply squeeze puts small-cap companies on the lucrative cutting edge.
This is what MGX MGX Minerals [OTC:MGXMF] [CSE: XMG] [FKT: 1MG], has done—and the timing couldn't be better for this breakthrough in chemistry and engineering.
In the same way that we purify water, we can now extract lithium with this new technology. Think "reverse osmosis"—but patented.
Petrolithium is ever-present in the wastewater from oil and natural gas production. This is a source of lithium we've never even considered—and it's a massive source because of all the oil and gas produced, all the wells we frack and even Canada's huge oil sands industry.
So, we don't even have to discover new resources—they are there for the taking, with the right technology.
To make this happen, MGX is partnering with two Canadian companies David Bromely Engineering Ltd. and PurLucid Treatment Solutions, Inc., whose past clientele included Shell (NYSE:RDS-A) (NYSE: RDS-B) and Suncor Energy, Inc. (NYSE:SU).
This is how it works:
- 'Nano-flotation' removes oil, colloids and other metals from the lithium-bearing brines
- An advanced form of ultra-filtration is then used (like reverse osmosis) to remove the oil from the waste stream (this oil is why we could never before recover the lithium from the wastewater)
- The resulting liquid is flash frozen and evaporated under reduced pressure
- High concentrations of lithium carbonate come out.
And this is the answer to our struggles with the current methods of extraction that simply aren't efficient or economical…
#3 The NEW Lithium
Without MGX's technology, there are only two ways to extract lithium: solar evaporation and hard-rock mining.
Here's where it goes wrong, and why lithium is selling for a whopping $10,000 a metric ton (around $4.5 per pound):
- Hard-rock mining has a detrimental impact on our ground and surface water, soil, vegetation and wildlife
- Both processes are expensive
- Both process take up to 18 months to develop and another year to get production up to capacity
- Even after 18 months of development and another year of ramping up, they still leave some 50 percent of the lithium in place.
Here's where MGX's 'petrolithium' technology changes the game:
- MGX can recover almost all the lithium from oil and gas wastewater
- The process takes a single day (not 18 months)
- It produces clean water as a by-product, so it's a win-win situation for the environment and industry
- The technology is simple to install in lithium hotspots that are already in operation
- Recently, the process was further advanced to limit evaporation and crystallization and primarily rely on nanofiltration for 90 percent.
#4 Plug-In Profits
There aren't many people in the oil and gas industry who aren't interested in 'plug-in' profits these days.
Technology like this turns already profitable operations into more profitable ones, and oil services giants like Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI) are always eyeing new plug-in profits.
Oil has been stumbling since it crashed in mid-2014, so the upside for operators who could bank on the lithium they've been throwing away could be enormous.
Think of funding fracking while simultaneously producing the most sought-after commodity of our tech-driven energy revolution (yes, lithium). This is exactly where big oil profits from clean tech.
Even if MGX's MGX Minerals [OTC:MGXMF] [CSE: XMG] [FKT: 1MG] new lithium extraction technology cornered only 10 percent of the market, it would still be huge. MGX could end up being the next Osmonics—the small reverse-osmosis water company that GE bought in 2003 for $275 million.
And the momentum is building quickly. In January, MGX successfully extracted lithium from heavy oil wastewater as part of its pilot plant in support of its 487,000-hectare Alberta lithium project. Starting in Alberta, MGX envisions using its patented technology to target the region's 12,000-20,000 bpd of oil production—for lithium.
But that was just the first catalyst, the news flow here has been non-stop.
- In March, MGX acquired 110,000 acres of oil and gas leases in Paradox Basin, Utah. This gave it access to the brine-bearing aquifer systems where they are preparing to permit the Petrolithium #1 borehole.
- In early April, they added additional claims to Paradox Basin.
- In late April, MGX received independent lab-testing results of its technology, demonstrating that it can "rapidly separate lithium and other valuable minerals from the wastewater brine …"
- In the first week of May, MGX finalized the acquisition of PurLucid Treatment Solutions, Inc., rendering it a full-service lithium extraction and water treatment company for oil and gas developers.
- The first real pay day came on 4 May, when MGX signed a lithium extraction demonstration agreement with a major oil and gas operator—this cat isn't yet out of the bag, but when it is released … we're prepared for a major bump.
#5 First Shale, Now Lithium—Next, Two Processes in One
This is where shale and lithium meet, and it's a very lucrative crossroads—especially for a small company that has pioneered the first ever technology to extract lithium from oil and gas wastewater.
The shale revolution that was brought to its knees but has risen again again—even if not to its earlier heights—doesn't need to be in direct opposition to the energy transformation driven by everything battery-powered and stored.
Technology like MGX's is what brings them together. Where there is oil and gas, and waste water, there is lithium. It's also where the two meet up on solid ground with the environment. Desperately needed lithium is extracted from oil wastewater, and what's returned is clean.
As lithium demand heads into dangerous territory for supply, and it's all about efficient extraction processes, a flurry of upcoming news flow from this little-known pioneer is bound to attract attention in all the right places, but for first-in investors, this is the ground floor of it all.
As MGX MGX Minerals [OTC:MGXMF] [CSE: XMG] [FKT: 1MG] CEO Jared Lazerson puts it: "The extraction of lithium from oil production water now ties the future of big oil to the new energy industry."
Honorable mentions:
Orocobre Limited (TSX:ORL): An Australian-based pure-play Lithium miner enjoying a first-mover advantage in the Salar de Olaroz project in Argentina. Next to Lithium, Orocobre produces boron minerals in Argentina.
Eldorado Gold (TSX:ELD): With a market cap of US$2.3 billion, this company didn't benefit from the late-2016 rally because of concerns about production and performance of its operations; but it's on track and the price is nice.
First Majestic Silver (TSX:FR): There's a lot of bullishness around this stock, with earnings growth expected to be high over the next 3-5 years. The optimism is absolutely justified as this Canadian mining company has been operating in Mexico for nearly a decade and has over $770 million in assets including 5 of the most promising locations in the country.
Pretium Resources (TSX:PVG): This impressive Canadian company is engaged in the acquisition, exploration and development of precious metal resource properties in the Americas. Pretium has an impressive portfolio and if you can catch the stock while the price is right, there could be huge opportunity for upside. Additionally, construction and engineering activities at its top location continue to advance, and commercial production is targeted for this year.
Teck Resources (TSX:TECK): Zinc hasn't been Teck's best friend of late, but that looks set to change in the medium term, as supply continue to dwindle and as we hear news that the world's top producer of the metal—Glencore—isn't planning to bring shuttered mines back online. Supply will remain tight. Keep in mind this, though: Teck's Q1 earnings and revenue fell short of expectations because of weaknesses at its zinc unit, sending it shares down about 6% in late April. In particular, there's been a 23% drop in production at its Red Dog mine due to lower grades of zinc.
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