Within the market sensitive junior mining sector, the companies that stand out are the ones seeking opportunities through new resources based on current and forecasted demand. These companies strategically use their exploration, development and mining expertise to invest in high potential resources that will lead to economies of scale in the long term.
One of the most discussed resources in recent months has been lithium – a mineral with a variety of end consumer uses, the most intriguing of which is its use in batteries. As noted in an article published in the January edition of The Economist, lithium is a vital component of batteries that power everything from cars to smartphones, laptops and power tools. With demand for such high-density energy storage set to surge as vehicles become greener and electricity becomes cleaner, Goldman Sachs, an investment bank, calls lithium “the new gasoline”. (The Economist, 2016).
Fox-Davies provides us with a projected demand forecast for lithium applications ranging between 2011 and 2025:
Source: Fox Davies, 2013
With demand for lithium expected to increase steadily, North American governments and corporations will be seeking stable, domestic supply options to ensure they have easy access to the resource. This presents a major opportunity for North American junior mining companies, as the top 5 producers of lithium in 2015 included Australia, Chile, Argentina, China and Zimbabwe (Investing News Network, 2016). You’ll note that Canada, Mexico and the United States are absent from this list of major players.
One junior mining company that will help Canada solve this supply side dilemma is MGX Minerals Inc. (“MGX” or the “Company”) (CSE: XMG). MGX is a diversified Canadian mining company engaged in the acquisition and development of industrial mineral deposits that offer near-term production potential, minimal barriers to entry and low initial capital expenditures. The Company operates lithium, magnesium and silicon projects throughout British Columbia and Alberta. These provinces have traditionally been mining friendly districts, and the Company has a track record of engaging stakeholders that include local governments and Aboriginal communities. MGX’s diversified industrial mineral properties allow it the flexibility to pivot its activities and investments based on the market, focusing on the resource that will likely generate the most revenue and improve share value. This is the type of strategic planning that stimulates success for junior mining companies.
MGX’s stock is currently trading at $0.18, which we believe is undervalued given the strategic activities that the Company has undertaken. With the initiatives MGX has undertaken in the past few weeks along with the announcements the Company will be making throughout the summer, it can be expected that MGX’s stock will steadily rise.
MGX focuses primarily on its magnesium and lithium properties, which together offer near term and long term profitability.
The Company is positioning itself uniquely in the lithium market, as it has developed a new process design for cultivating lithium. Traditionally, there have been two predominant production methods for lithium development: hard rock lithium mining and solar evaporation of lithium brines. MGX’s proprietary process involves “producing lithium from past-producing Albertan oil fields, from the brine that comes up with the faint amount of oil still being produced from uneconomic wellheads across the province” (Yahoo Finance, 2016). The company engaged technical consultant Cementation AG to develop the process design, and the outcomes of the new process are remarkable. MGX states that the new process reduces the production time of lithium carbonate from 18 months to just 1 day. The design process effectively serves to create energy diversification for the province of Alberta; an initiative that is highly supported by the provincial and federal governments. With the Company controlling over 243,000 hectares of high-grade lithium brine properties in through its Alberta Lithium Project, it is clear that the potential for profitability are massive. Specifically, MGX’s recently prepared N.I. 43-101 Technical Report showed that the lithium-brine properties house lithium values ranging between 76 mg/L – 140 mg/L.
|Property||Lithium Values (mg/L)||Hectares|
|Upper Smokey River||94||9,216|
|Lesser Slave Lake||98||9,216|
|Lower Smokey River||115||8,741.76|
|Fox Creek East||130||34,438.32|
|Fox Creek West||118||17,021.1|
Source: MGX Minerals Inc. – Corporate Website
Though still in the relatively early stages of development, if the application of MGX’s process design is successful, “a series of plants could start feasibly springing up in multiple regions of the province, processing all types of valuable materials which play off of each other to increase profitability of each well” (Yahoo Finance, 2016). Announced on July 11th, MGX is mobilizing field crews to conduct a detailed water geochemical sampling program on 22 high-priority wells at its Alberta Lithium project. The stated goal of the Sampling program is to confirm historically reported localized brine levels, compile sufficient data to complete a maid N.I. 43-101 mineral resource estimate and provide for potential immediate sources of lithium brine feedstock.
The Company is again demonstrating its capacity to develop strategies that can pivot with the market. MGX has stated that the process design, protected as intellectual property, can produce multiple end market products including lithium carbonate, sodium chloride and calcium chloride with potential for addition of boron and bromide production. Recently, MGX announced a partnership with ChemCognition LLC, a company with significant experience in the chemical industry, to provide strategic marketing and product development services for its Alberta lithium properties. Over the coming months as ChemCognition LLC develops and implements a marketing plan, we expect that MGX’s stock price will increase as key players become more aware of the Company’s proprietary process and the major potential that it has to become a lithium producer.
Having focused primarily on its lithium properties over the past several months, it is important to note that MGX’s workhorse property remains a vital part of the Company’s diverse resources strategy. MGX’s Driftwood Creek Magnesium Deposit has served as the cornerstone of the Company’s operations for over a year. Magnesium is the third most used structural metal behind only iron and aluminum and is experiencing a steadily growing demand from consumers at a compound annual growth rate of 6% (Berry, 2015). The Company has secured a 20-year Mining lease for this project and recently completed a 100-tonne bulk sample, which favors near term growth potential for the Company’s stock.
Source: MGX Minerals Inc. – Corporate Website
The Company expects to have its N.I. 43-101 compliant mineral resource estimate completed within the next two months, which will enable it to move forward to the permitting and mine planning phase. With minimal obstacles foreseen by the MGX’s CEO Jaren Lazerson, it is expected that the mine will see some level of production within the year. Further, the Company recently secured an advantageous agreement to acquire the Cranbrook Mill Site from Tembec Inc in a “try before you buy” arrangement. This mill is a fully serviced industrial site that provides a centralized location to process mineralized material from MGX’s numerous operations throughout the region. With the acquisition of the mill, MGX gains the capability of moving forward on the supply chain to process the industrial minerals, including magnesite and lithium, it extracts from its properties in the southern British Columbia region.
Source: MGX Minerals Inc. – Corporate Website
MGX Minerals Inc. (CSE: XMG) is an innovative junior mining company that has demonstrated strong strategic planning capabilities through its diversified property holdings. The Company’s lithium brine process design represents long-term growth potential, as lithium will become an important energy resource over the next 10 years and MGX will have the capacity to be one of Canada’s efficient suppliers. The Driftwood Creek Project promises to present exciting announcements over the next three months, as the N.I. 43-101 results are published and the Company moves into the production phase with its Cranbrook Mill. At a price of just $0.18, MGX’s stock is fundamentally undervalued for an innovative and diversified company that is applying the crucial strategy of pivoting its resource developments based on current and future demand.
Kal Kotecha PhD
“8 Top Lithium-producing Countries.” Investing News Network. N.p., 04 July 2016. Web. 10 July 2016
“An Increasingly Precious Metal.” The Economist. The Economist Newspaper, 16 Jan. 2016. Web. 10 July 2016.
Berry, C. (2015). A Closer Look at Magnesium. The Disruptive Discoveries Journal, 1-15.
MGX Minerals Inc. ( XMG ). July 10, 2016.
“Petrolithium: How MGX Mineral’s New Lithium production 3.0 Method Could Revolutionize Albertan Oil Plays.” Yahoo Finance Canada. 6 July 2016. Web. 10 July 2016.
“The Lithium Market.” Fox Davies – Resource Specialists (2013): 1-15. Web. 10 July 2016.
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