Picture from the June 2016 bulk sampling program at Driftwood.
Today, MGX Minerals Inc. released the eagerly awaited results of a maiden PEA ("Preliminary Economic Assessment") on its 100% owned Driftwood Magnesium Project in British Columbia, Canada. The independent technical report examines the merits of building a conventional quarry pit mine with a processing and a furnace/kiln combination to produce a saleable DBM (Dead Burned Magnesia) product along with CCM (Caustic-Calcined Magnesia) as a separate salable product. MGX President and CEO, Jared Lazerson, commented:
“We are extremely pleased with results of the PEA, which display Driftwood’s ability to become a high-margin, low-cost producer of magnesium oxide in a politically secure jurisdiction. We believe this significant milestone outlines a clear path forward and provides numerous opportunities to further enhance the economics of the Project with a pre-feasibility study.”
(All prices in Canadian Dollar, unless otherwise stated)
Assuming a DBM sales price of $779 ($600 USD) per tonne with All-in Sustaining Production Costs at $351/t, the PEA calculates an impressive Pre-Tax NPV (at 5%) of nearly $530 million, resulting in a very respectable IRR of 24.5% with a quick 3.5 year paypack period.
With a processing capacity of 1,200 t/day, the annual production is estimated at 169,700 t of magnesium oxide (MgO). During the 19 year mine life, the payable metal production totals around 3.1 million t of MgO, which translates into around $1.1 billion of Pre-Tax Cash Flows (on average $72.6 million of Pre-Tax Cash Flow per year).
These extremely pleasing numbers are realizable for just $236 million of initial capital costs and would make MGX a rare breed of low-cost producers globally enjoying high operational margins in a safe and stable jurisdiction. Total LOM ("Life Of Mine") capital expenditures amount to only $240 million and include $3.9 million for closure costs and a contingency of $40 million.
The highly lucrative and robust PEA is based on a high-grade (43% MgO) and large (7.8 million t) mineable resource at surface, resulting in high recoveries (90% on average) with conventional processing (crushing, grinding, flotation upgrading, calcination, and sintering to produce a saleable DBM product). The DBM product will be bagged and transported to market for sale as a powder with a purity of 94.6% MgO. The quarry-style mine would benefit greatly of not being located within a known environmental protection area.
Today’s disclosed maiden PEA demonstrates that MGX owns a high-grade, world-class magnesium project, which is rare these days not only in North America but on a global scale. In light of only one single magnesium metal producer in the US, and China being responsible for about 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: 99,758,991
Canadian Symbol (CSE): XMG
Current Price: $1.37 CAD (03/06/2018)
Market Capitalization: $137 Million CAD
German Symbol / WKN (Tradegate): 1MG / A12E3P
Current Price: €0.868 EUR (03/06/2018)
Market Capitalization: €87 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 and MGX 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. The reader is advised that the PEA summarized herein is only intended to provide an initial, high-level review of the project. The PEA mine plan and economic model include the use of inferred mineral resources which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves and there is no certainty that the preliminary economic assessment will be realized. The PEA mine plan and economic model include the use of inferred resources which are considered to be too speculative to be used in an economic analysis except as permitted by NI 43-101 for use in PEA´s. There is no guarantee that inferred resources can be converted to indicated or measured resources and, as such, there is no guarantee that the project economics described herein will be achieved. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the mineral resources estimated will be converted into Mineral Reserves. The Lerchs-Grossman (LG) constrained shell economics used a mining cost of US$8.82/t, processing+ g&a costs of US$106/t, and a commodity price of US$600.00/t 95%MgO DBM. Mineral resources are reported within the constrained shell, using a cutoff grade of 42.5% MgO (based on a 20-year LOM) to determine “reasonable prospects for eventual economic extraction. Mineral Resources are reported as undiluted Mineral Resources were developed in accordance with CIM (2010) guidelines Tonnages are reported to the nearest kilotonne (kt), and grades are rounded to the nearest two decimal places Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade, and contained metal.