There exist hundreds of lithium companies exploring and developing properties globally while investors hope they picked the right one that may one day, after many years, go into production. How many of those lithium companies will go into production in a few weeks from now and still have a market cap below $100 million? Which one has low CAPEX and low OPEX, is capable of scaling up production to actually have an impact on the supply side of the market, and is backed by the government?
While MGX Minerals Inc.´s petrolithium technology nears commercial deployment (see here) and oil prices are on the rise again (see here), the company today announced that work will start shortly at its Paradox Basin Petrolithium Project in Utah (see here). In August, the company reported one of the largest initial oil estimates in US history: Around 6 billion barrels of oil in place across 22 zones, which was estimated independently by one of the most repected reservoir evaluation companies in the industry, Ryder Scott.
Preparations are underway to conduct a seismic survey over the entire 325 km2 Blueberry Unit, which is part of the company´s 445 km2 Paradox Basin Petrolithium Project. As the Ryder Scott estimate confirmed that there is certainty that there is (a lot of) oil, the goal of the seismic survey is to identify subsurface geological formations and structures favorable to the accumumlation of oil and lithium brine deposits. The results of the seismic will assist the company to identify precise targets for the subsequent drilling program. Brine content within the Lisbon Oilfield, which is part of the Blueberry Unit, have been historically reported as high as 730 ppm lithium.
As the pressure gradients are so high in the Paradox Basin, there is no need for fracking. Basically, you just drill down to your target pay zone, make strong casings, and let it flow. Depending on flow rates from a vertical well, you may later decide to go horizontally. In August, management estimated the total cost required to achieve commercial production from the project to be $8 million based on the expectation of completion of 3D seismic survey and one horizontal well being drilled. MGX also estimated that the first date of commercial production is 18 months from the commencement of drilling.
In 2011, USGS noted the Paradox Basin as having one of the largest undeveloped oil and gas fields in the US.There are a lot of companies looking at this area but MGX has secured some of the most prospective properties. Certainly, the question arises why not someone else has gone there before, and done what MGX is doing now. The answer is key to understand what spectacular feat MGX has accomplished: Unitization. Despite a lot of owners still being involved (and now owning 25%), MGX has retained effective control (75%) of the property thanks to successful unitization, which was not the case before. Before there were many leases and now its simply one lease. Therefore, MGX has succeeded what many have tried in the past: To effectively control and thus being capable to start develop one of the largest undeveloped oil and gas (and likely lithium as well!) assets in the US.
The best known zone is CB21 (Cane Creek) with an estimated 736 million barrels of oil in place. Assuming a 10% recovery factor, this zone alone would still add up to around 74 million barrels of oil. Even if deducting a 20% royalty plus tax, this zone alone has the potential to be a multi-billion-dollar pay zone at $50 USD/barrel of oil. If you add up all the other zones as well, it becomes clear that MGX sits on very large unconvential oil pools, not to speak of the lithium potential in combination with its petrolithium technology nearing commercial deployment.
The key to understand is that the "discovery" has already been made. There is certainty that there is oil. What makes this play so unique is that there are so many potential pay zones and that there is sophisticated knowledge about these zones based on many well logs. It´s just not developed yet and considered an unconvential shale play. The zones showing a big number are derived because there is confidence as these are known zones and/or (past) producing zones in the Paradox Basin or nearby.
Shares Issued & Outstanding: 77,609,651
Canadian Symbol (CSE): XMG
Current Price: $0,97 CAD (11/07/2017)
Market Capitalization: $75 Million CAD
German Symbol / WKN (Frankfurt): 1MG / A12E3P
Current Price: €0.68 EUR (11/07/2017)
Market Capitalization: €53 Million EUR
Report #27 “Canadian Government Backs MGX Minerals‘ Petrolithium Cleantech“
Report #26 “MGX Minerals Solves the Magnesium Problem of the Lithium Industry“
Report #25 “Hard-Rock Lithium Exposure for MGX“
Report #24 “One of the Largest Initial Oil Estimates in US History“
Report #23 “MGX starts Petrolithium pilot plant to deliver hard facts for strategic partners“
Report #22 “Time to bet: Sprott takes a position in MGX“
Report #21 “Petrolithium: First Come First Served“
Report #20 “Successful Independent Verification of the MGX Lithium Extraction Technology“
Report #19 “MGX to Drill the World‘s First PetroLithium Well in Utah“
Report #18 “MGX Reports Upgrading of Lithium Brine from 67 to 1600 ppm Lithium“
Report #17 “MGX technology nominated for prestigious Katerva Award, the Nobel Prize of Sustainability“
Report #16 “Unconventional oil play legend Marc Bruner to take MGX and PetroLithium to the next level“
Report #15 “Total Conviction: MGX forms PetroLithium Corp. to expand into the US oilfield brine markets“
Report #14: “MGX Extracts Lithium from Oil Wastewater - Begins Monumental Integration with Big Oil“
Report #13 "MGX Partners with Oil Major on Lithium Brine, New Energy Industry Facing Fundamental Shift“
Report #12 "Game Changing Potential: MGX Minerals‘ Pilot Plant for Rapid Production of Lithium Nears Completion“
Report #11 "MGX assays 34 g/t gold from surface sampling in British Columbia“
Report #10 “Official: MGX owns magnesium worth multi-billions of dollars and starts pilot plant shortly“
Report #9 “One of the world‘s largest lithium resources on the horizon?“
Report #8 “Ready for significant lithium brine work in Alberta“
Report #7 “At the forefront of Alberta‘s lithium brine riches“
Report #6 “Pioneering Lithium in Alberta: MGX Minerals Teams Up“
Report #5 “Time to Put a Lithium Production Process in Place“
Report #4 “MGX Minerals Taps Into Canada‘s Potentially Largest High-Grade Lithium Resources“
Report #3 “MGX Minerals Receives Mining Lease for 20 years (in British Columbia!)“
Report #2 “MGX Minerals Accelerates Towards Production“
Report #1 “MGX Minerals Plans To Enter The Magnesium Market“
Disclaimer: Please read the full disclaimer within the full research report as a PDF (here) as fundamental risks and conflicts of interest exist. The author hold a long position in MGX Minerals Inc. and is being paid a monthly retainer from Zimtu Capital Corp., which company also holds a long position in MGX Minerals Inc. Cover picture: Vantage View Technologies Ltd.
Disclosure: I am/we are long MGX MINERALS INC.