A week after MGX Minerals Inc. issued a positive PEA ("Preliminary Ecomomic Assessment") for its world-class Driftwood Project in British Columbia, the company today announced a strategic move to create even more value with its 100% owned magnesium project: Becoming a producer and supplier of magnesium metal, instead of DBM (Dead Burned Magnesia; MgO) as outlined in the PEA.
MGX has engaged independent engineering firm Hatch Ltd. to complete a Scoping Study for the purpose of selecting appropriate process and associated economics for the upgrading of magnesium oxide (MgO) to magnesium metal (Mg). The Hatch study will evaluate process routes, and order of magnitude capital and operating cost estimates for an initial 10,000 tonne per year (tpy) magnesium plant as well as address various environmental and engineering topics.
Last week´s PEA was based on the production of 161,000 net tonnes of MgO annually. The current price for DBM (95% MgO) is approximately $600 USD/tonne, whereas the global market price for magnesium metal (99.5% Mg ingot) currently stands at approximately $2,250 USD/tonne – a premium of 275% per tonne for the "advanced material" which falls under the "critical metals" category as recently classified by the US Government. In the US, magnesium metal is estimated to currently sell in excess of $4,000 USD/t.
Contained Mg in MgO is 60.3%, making the process and associated recovery as well as energy use a key focus of Hatch´s Scoping Study. Therefore, approximately 97,083 tonnes of Mg ingots could be produced annually – and sold for approximately $218 million USD at a global price of $2,250 USD/t (or $388 million USD if sold to the US). Compare that to the $97 million USD in annual sales for a DBM product (on average $72.6 million CAD of Pre-Tax Cash Flow per year according to the PEA)
During the 19 year mine life, the PEA calculated that the payable metal production totals around 3.1 million t of MgO, which translates into $1.1 billion CAD of Pre-Tax Cash Flows. Alternatively, 1.9 million t of Mg ingot may be produced in 19 years, which roughly translates into more than $4 billion USD in total sales (at the global market price) or in excess of $7 billion USD if sold into the US market.
Therefore, the Scoping Study offers great potential to further enhance the already positive economics of Driftwood with the addition of Mg metal to proposed MgO production as well as provide diversification into advanced materials.
Long-standing anti-dumping and strategic metal designation has significantly increased the domestic price of Mg metal in the US compared with global markets. A single sole producer of magnesium metal in the US has operated for many years. Of note is the fact that Canada is no longer subject to these US tariffs against foreign magnesium metal imports. Additionally, Driftwood is located in an area of low cost power in southwest British Columbia and proximate by direct rail to even lower cost power in eastern Washington State.
Magnesium metal is considered an advanced material and called "the metal of the future". Magnesium is 33% lighter than aluminum, 60% lighter than titanium and 75% lighter than steel while offering comparable strength ratios. Automobile and aerospace manufacturers are increasingly shifting towards magnesium-alloys to reduce vehicle and aircraft weights and meet growing fuel-efficiency demands, while recent advances in magnesium battery technology represent strong potential for future additional non-structural applications.
In light of only one single magnesium metal producer in the US, and China being responsible for 80% of world’s supply, North America should be the primary target market for MGX, especially when considering that magnesium metal tariffs between Canada and USA have been dropped a few years ago.
Magnesium (Mg) is a multi-purpose light-metal in high demand for today’s modern lifestyle, such as smartphones, automobiles, aircrafts, and other everyday essentials that require magnesium.
Magnesium’s unique characteristics make it 75% lighter than steel and 33% lighter than aluminum while still offering comparable strength-to-weight ratios. Magnesium is the third most used structural metal (behind iron and aluminum) and considered a critical strategic metal by the United States and European Union. China is responsible for approximately 80% of annual worldwide production. US Magnesium is the sole producer of primary magnesium in the US, having used the Great Salt Lake as its resource since 1972.
Magnesium Oxide (MgO) is a widely used industrial mineral with end uses in fertilizer, animal feed, and environmental water treatment as well as industrial applications primarily as a refractory material in the steel industry. The majority of refractory grade MgO used in the US and Canada is imported from China.
MGX Minerals Inc.
#303 - 1080 Howe Street
Vancouver, BC, Canada V6C 2T1
Phone: +1 604 681 7735
Shares Issued & Outstanding: 101,573,656
Canadian Symbol (CSE): XMG
Current Price: $1.09 CAD (03/14/2018)
Market Capitalization: $111 Million CAD
German Symbol / WKN (Tradegate): 1MG / A12E3P
Current Price: €0.699 EUR (03/14/2018)
Market Capitalization: €71 Million EUR
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Disclaimer: This report contains forward-looking information or forward-looking statements (collectively "forward-looking information") within the meaning of applicable securities laws. Forward-looking information is typically identified by words such as: "believe", "expect", "anticipate", "intend", "estimate", "potentially" and similar expressions, or are those, which, by their nature, refer to future events. Rockstone Research and MGX Minerals Inc. cautions investors that any forward-looking information provided herein is not a guarantee of future results or performance, and that actual results may differ materially from those in forward-looking information as a result of various factors. The reader is referred to the MGX´s public filings for a more complete discussion of such risk factors and their potential effects which may be accessed through the MGX´s profile on SEDAR at www.sedar.com. Please read the full disclaimer within the full research report as a PDF (here) as fundamental risks and conflicts of interest exist. The author, Stephan Bogner, holds 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.