It’s been a busy last couple months for MGX Minerals Inc. (XMG:CNX), as the Vancouver-based company executes on a business model utilizing technology to address two areas in need of innovation: oil and gas wastewater treatment and lithium production. MGX is taking a novel approach, bolting together two technologies to create a single solution, as part of a concept now known as “petrolithium.” The premise is to separate and collect the valuable minerals trapped in brine water during natural gas and oil extraction, including lithium and possibly other minerals.
So, the wastewater gets a cleaning for recycling and MGX gets lithium, a mineral notoriously inefficient to mine, but in great demand due to rising demand for rechargeable batteries, namely for electric vehicle applications.
Right now, the only two ways to produce the lithium needed for Li-ion batteries are conventional hard rock mining and solar evaporation. Both are time-intensive and costly, problems that are best exemplified by the fact that there is only one lithium carbonate-producing mine in North America, despite increasing prices at the hands of a growing need for supply.
Expanding Lithium Properties
MGX has built a formidable portfolio of properties across Alberta and British Columbia, Canada and Utah, USA, including 15 lithium exploration properties and seven other exploration properties with silicon and magnesium mineralization. MGX’s most recent acquisition was 94,082 acres in Utah, bringing its total claims to approximately 118,000 acres across its Lisbon Valley oilfield project on the edge of the Paradox Basin. Now controlling the majority of oil, gas and mineral rights in the area, MGX is working on consolidation through unitization of the oil and gas leases, the most efficient means to develop the underlying resources.
The acquisition bolsters MGX’s total North American lithium brine claims to more than 1.7 million acres.
Completion of PurLucid Acquisition
Earlier this month, the company finalized an agreement laying out the investment schedule for MGX to take a full ownership of water and wastewater treatment technology company PurLucid Treatment Solutions Inc. The agreement builds on an original agreement from September 2016, where MGX acquired an 34.1% stake in PurLucid for $1 million in cash and 1.5 million in stock.
MGX has fully integrated its lithium brine extraction technology with PurLucid’s water purification process to become a full-service water treatment option for oil and gas exploration companies. MGX is in an enviable position with its technology as oil prices have remained stubbornly low, causing O&G companies to seek cost-effective solutions to improve margins and manage wastewater, one of the biggest operating costs for producers.
MGX’s modular, scalable system incorporates PurLucid’s patented technology, which uses nanoflotation and membrane filtration to remove heavy metals, oil and colloids before sending the mineral-rich byproduct through a rapid evaporation process. Using thermal energy and chemical reagents to crystalize minerals, MGX can cut lithium carbonate production down to as little as only one day, compared to 18 months for solar evaporation and about 18-30 months for hard rock mining. Obviously, there’s no real comparison in production costs either, with MGX’s technology significantly less expensive in cost per tonne.
Validation of Lithium Extraction Technology
According to independent lab tests from the Saskatchewan Research Council, MGX’s patent-pending technology was successful in recovering up to 83.7% lithium and concentrating 461 ppm lithium from a 71 ppm representative sample of formation brine originating from the company’s Sturgeon Lake oilfield property in Alberta, Canada. What’s more, additional testing with new designs has dramatically increased lithium yields by more than 25-fold and reduced impurities, which will help with downstream production of lithium solids. A technical report on the technology is available at Sedar.com.
The bottom line is that higher lithium concentrations during the first phase of mineral recovery from the brine translates to lower production costs on a volume basis and a higher-quality lithium product following rapid evaporation.
The process has caught the attention of an unnamed “major oil and gas operator” in the U.S. A new collaboration agreement between the two parties outlines two initial test sites to evaluate lowering wastewater costs, while simultaneously extracting minerals. The operator’s production sites currently use disposal wells for the wastewater, which costs average more than $10 per barrel. With producing wells across the country, this one customer alone could put MGX on the energy map as a first mover and attract more partners.
Positioned to Execute
In an interview with the Midas Letter, MGX CEO Jared Lazerson explained his goal to reach production 15,000 tonnes of lithium carbonate daily from about one million barrels of oil equivalent. The company has successfully raised millions of dollars to continue moving forward towards the milestone. The plan is to efficiently use the funds for small scale production and use cash flow to steadily ramp, with commercial production expected as early as next month, and a target to reach the 15,000-tonne goal sometime in 2018.
MGX is unquestionably a leader in lithium extraction from salt brine, setting the benchmark and potentially turning the industry on its head by taking a resource previously viewed only as expensive waste and making it valuable with a process that could shave production time for battery-grade lithium by 99 percent. Moreover, it does so by delivering an efficient solution for wastewater for O&G operators, an impressive proposition on its own.
With oil and gas activity once again getting its legs under it and Morningstar analysts saying that the world’s staring down a 100,000-tonne lithium supply shortfall by 2025, MGX’s advancements couldn’t be coming at a more appropriate time.
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