MGX Minerals Inc. (XMG.CSE)

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Company description

MGX Minerals (XMG.CSE) is a diversified Canadian mining company engaged in the development of large-scale industrial mineral portfolios in western Canada. The Company operates magnesium, lithium and silicon projects throughout British Columbia and Alberta. Although the company has a Canadian Stock Exchange (CSE) listing at the moment, it is one of the most liquid stocks over there, and management is currently looking into the possibility of uplisting to the TSX Venture. Management expects this to happen in Q1, 2017. MGX Minerals recently raised C$1.8M, with some very powerful funds/groups of investors participating in it, willing to back the company in future rounds.

The strategy of MGX Minerals is well-thought out by management. It seeks to build long-term shareholder value through development of industrial mineral assets, in specific commodities and mining-friendly jurisdictions. Benefits of this type of assets are relatively low initial capex needs, solid demand and price decks, near term cash flow, very simple quarry-like open pit operations with shovel and scoop mining with no tailings, fixed operating inputs, long -term supply and energy contracts, streamlined permitting as industrial minerals like magnesium and silicon just need quarry permitting. On top of that the company also has partnerships in place or is seeking those, providing financing, engineering expertise and low-cost energy solutions.

This is especially important regarding their lithium brine assets, based on separating lithium brine from oil field wastewater by a proprietary method which could limit recovery time and costs drastically. This method is in line with the methods POSCO and Tenova Bateman among others are developing, and could cause an equilibrium shift in lithium mining and processing if successful. Usually when the word "proprietary" is mentioned, risks increase exponentially, but in this case a first stage pilot plant is almost ready to be commenced for testing, and people like Larry Marks, ex Shell top brass with some of the best networks in energy, got interested enough to link his name to this venture, so there must be something substantial going on in my view.

Core asset with the most tangible value is the Driftwood Creek magnesium project, located in mining friendly British Columbia, Canada. MGX Minerals hasn't only acquired this project, but also managed to buy an extensive package of surrounding claims with former magnesium mines, effectively consolidating the entire area for magnesium production potential. A maiden NI43-101 resource estimate has been completed in September 2016, announcing a Measured and Indicated (M&I) resource of 8M tonnes grading 43.31% magnesium oxide (MgO), and an Inferred resource of 0.85M tonnes grading 43.20%, which is a world class average grade. Most of the mineralization is located less then 100m from surface, indicating a very profitable operation. A Preliminary Economic Assessment (PEA) is on its way, as soon as this is completed in Q4, 2016 or early Q1 2017, management will submit their operating permit applications directly after this. The objective is production in the summer of 2018.