Featured Company / MGX Minerals Inc.

Wastewater is a major cost and environmental problem for oil and gas producers, with over 800 billion gallons produced each year, according to the Environmental Defense Fund.  Oil and gas companies are mandated to properly manage this wastewater that is laden with salt and tens of thousands of chemicals.  Still, a study by the Groundwater Protection Council in 2011 found that about 70% of the 400 case studies of groundwater contamination were the result of “spills” where the wastewater returned to the surface after being injected into the ground.  More alarming was an Associated Press report showing that over 180 million gallons of oil and gas wastewater was spilled between 2009 and 2014.

Vancouver’s MGX Minerals Inc. (CSE:XMG) (OTCPK:MGXMF) thinks it has a solution for millions and millions of barrels of that wastewater, an environmentally friendly solution like nothing seen before in fact.  Coining the term “petrolithium,” MGX says that its technology, currently protected under a provisional patent, can extract the lithium and other valuable minerals out of the brine wastewater byproduct of oil and gas wells, therefore cleaning the water and economically creating lithium that is expected to be in high demand going forward due to the electric vehicle revolution.

The MGX technology, currently protected under a provisional patent as the company evaluates the best strategy for safeguarding its intellectual property, uses a series of processing involving nano-flotation, rapid filtration and chemical reagents.  As it moves forward in the patent process, the company could lock down 20 years of exclusivity for producing lithium from oil and gas wastewater through a low-energy, rapid-extraction process.

This isn’t just a dream; in January 2017 MGX successfully concentrated lithium from heavy oil evaporator blowdown wastewater using its rapid recovery process, concentrations that were independently confirmed by the Saskatchewan Research Council.  To make this happen, MGX has integrated its technology with partner PurLucid to build the first pilot plant in Calgary to demonstrate the scientific and economics of extracting lithium (and magnesium) from oil and gas wastewater.

The technology is intriguing enough that it caused Marc Bruner, a living legend in the oil and gas discovery business, to come out of retirement to sit as Chairman of the MGX Minerals’ Board of Directors.  Bruner made a name for himself with overseeing blockbuster discoveries and developments, such as the Pinedale Anticline in Wyoming that is now recognized as one of the largest unconventional natural gas fields in the U.S. during his time as founding Chairman of Ultra Petroleum (NASDAQ:UPL) and work at the Powder River Basin in Wyoming and Montana after founding Pennaco Energy.  Pennaco was eventually sold to Marathon Oil (NYSE:MRO) for $550 million in 2000.

Along with the rest of the seasoned exploration vets at MGX, Bruner is at it again, unitizing leases and taking a 75% working interest in a project in the Paradox Basin in San Juan County, Utah and San Miguel County, Colorado for the intents and purpose of lithium production along with a portfolio of projects for other minerals, such as silicon and magnesium in British Columbia and Alberta, Canada.  Through its focused efforts, the company is now Canada’s largest holder of lithium brine assets in North America, with approximately two million acres under its umbrella.

Most recently, MGX acquired all of the petrolithium brine assets in the Paradox Basin and the Coyote Project in Lisbon Valley, Utah in an all-stock deal, adding over 16,000 acres of highly prospective land to the portfolio.

For brevity’s sake and because MGX could quickly move into lithium production, we’re keeping our focus in this report, but take note that a nine-hole drill program commenced in July at the company’s Longworth Silica Project in B.C. targeting near surface mineralization in the Snow Zone.  The property is considered one of the top silica occurrences in the province.

Six billion barrels.  And that’s just the oil, as Ryder Scott doesn’t conduct analysis on lithium and other minerals.  Historic lithium brine content at Lisbon Valley was reported by Superior Oil at ranges up to 730 parts per million lithium.  According to Bruner, lithium levels have been recorded in the Paradox Basin as high as 1,700 parts per million, which rival concentrations in the so-called “lithium triangle” in South America (Bolivia, Argentina and Chile), where the majority of the world’s lithium reserves are concentrated.

MGX management forecasts it can reach commercial production in 18 months from commencement of drilling with only $8 million and based on the expectation of completion of 3D seismic survey and one horizontal well being drilled.  To continue to move towards drilling, the company has recently completed a capital raise grossing about $5.6 million.

Moreover, because of high pressure gradient in the Paradox Basin, the oil can be pumped from the earth without using controversial – and expensive – fracking methods.

The real kicker here is lithium production time and cost.  Hard rock mining, such as what goes on it Australia, is very expensive and slow.  Evaporation ponds, which utilize the sun’s energy to evaporate the water, leaving the lithium concentrate behind, are much more cost effective, yet still relatively slow considering it takes about 18 months for the moisture to be evaporated.

MGX eliminates the 18 months of waiting, saying it can produce the lithium through its process in as little as one day.

The plan is to avoid a capital trap by starting small, processing about 100,000 barrels of wastewater per day, so that each step of growth can be funded by the previous.  With that in mind, MGX President and CEO Jared Lazerson sees 2018 as a milestone year during which the highly scalable process could reach processing one million barrels of wastewater per day.

MGX has already entered into testing and analyses agreements with multiple major oil and gas companies and completed bulk sample testing at more than 25 locations across North America. The company is creating a pipeline of high priority lithium and environmental water handling projects, which it plans to deploy commercial-scale systems for in Q1 2018. Each of these skid-mounted mobile systems will have the capability to process up to 7,500 barrels per day.

Although there is never a guarantee that resources will be realized or that MGX could one-day help overcome the anticipated shortfall in lithium supply at the hands of surging rechargeable battery demand, overall, what we see here is one very promising company with a technology that could command incredible value.  If it was just an oil and gas play, we’d see a tremendous opportunity in and amongst itself.  The lithium component does a compelling job at effectively de-risking the company, making MGX a company to keep an eye on as 2017 winds down, with 2018 potentially being a revolutionary year for lithium production and oil wastewater management alike.