LONDON, December 19, 2016 /PRNewswire/ --
OilPrice.com Market Commentary: Advancements in the province of Alberta's ground-breaking 'petrolithium' dream surged ahead this week, as proprietor MGX Minerals completed three major milestones. Energy companies included in today's commentary:Canadian Natural Resources Limited (NYSE: CNQ), Imperial Oil Limited (NYSE: IMO), Encana Corporation (NYSE: ECA), Baker Hughes Incorporated (BHI) and Halliburton Company (NYSE: HAL)
All within a week's time, MGX and their project added a major oil producer to the mix, they added more land to become the largest Canadian lithium brine holder, and bulk sampling commenced on the Sturgeon Lake Lithium Project, of which construction of the pilot plant is over half complete.
In turn, the feasibility of producing valuable lithium carbonate from the brine that accompanies oil brought to the surface by the petroleum industry just got a major boost towards becoming reality.
Long known to contain valuable minerals, petroleum brine is plentiful, yet is currently treated as a by-product only to be sent back downhole after the oil is separated at the wellhead.
Late last week, MGX Minerals Inc. [MGXMF] [XMG.CN] [FKT: 1MG] announced an exploration agreement with major oil and gas producer, Canadian Natural Resources ('CNRL') [NYSE: CNQ] [CNQ.TO] to tie-in water processing on the major's Sturgeon Lake properties, and take a strategic advantage of the significant infrastructure CNRL already has in place.
The deal covers brine sampling at both the wellhead, and at centralized collection points, leaving MGX with several options for the location of their processing plants.
Prior to the agreement, MGX had steadily began amassing what is now Canada's largest lithium brine portfolio.
Today MGX announced that it has acquired an additional 11 Metallic and Industrial Minerals Permits that cover the Redwater and Swan Hills oilfields. The new permits were selected based on a compilation of historic exploration for lithium, oil and gas well brine production data, as well as known geology.
MGX now holds 15 contiguous mineral permits early 133,000 hectares (over 328,000 acres) covering the Sturgeon Lake Lithium Project, and an overall portfolio of nearly 487,000 hectares of lithium brine land at its disposal.
While they've been loading up on land, MGX has maintained that they expect to begin lithium production in 2017 with initial bench scale production of lithium from oilfield brine now underway with the announcement of the commencement of bulk sampling at Sturgeon Lake.
Once production is achieved, the company would begin the sequence of unlocking a previously calculated resource of over 2 million tonnes of lithium carbonate, that at present lithium prices would be valued at over $20 billion in the ground.
Now with the new permits, MGX holds permits covering in aggregate over one million barrels per day of brine production by various oil field operators throughout Alberta. Among the brine in play, there have already been demonstrations of highly concentrated lithium bearing brines, some of which with up to 140mg/L of lithium carbonate, as reported in the Industrial Minerals database.
STURGEON LAKE LITHIUM PROJECT
By aligning with CNRL, the major operator in the region, MGX has begun ascendency to legitimacy as the first official "petrolithium" producer.
Brokering a deal with a major is a feat unto itself, for while the Sturgeon Lake project is designed to draw revenue, the inroad of having contacts with an industry giant sets in motion the potential of future joint development together.
Essentially, the petrolithium concept is designed to retain as much value from what's brought to the wellhead as possible. These wells are already producing enough water to warrant a collection and injection site, so for MGX to set up its operation at a collection location is quite a benefit indeed. The access, power, pipelines are already built.
What's in play is the brine that is known to be mixed in with the Sturgeon Lake oilfield, which has been producing hydrocarbons for over 60 years from the Devonian Leduc Formation. But it wasn't until the 1990s that studies started to report that the brines involved contained anomalous values of lithium (greater than 75 mg/L and up to 140 mg/L lithium).
Since then, the studies have piled up some compelling data, with the most interesting being that of Lithium Exploration Group done in 2011. Through an analysis of brine from 60 separate wells within the Sturgeon Lake oilfield (all within MGX's current boundaries), it was determined that aquifers contained within were significantly enriched in Lithium.
The Leduc Formation brine in particular contained:
- 83.7 mg/L (average 67 mg/L lithium)
- 6,470 mg/L potassium (average 4,641 mg/L potassium);
- 137 mg/L boron (average 114 mg/L boron); and
- 394 mg/L bromine (average 394 mg/L bromine)
This series of studies led to the calculation of a lithium carbonate resource estimate of approximately 2 million tonnes.
What's key is that this was initially accepted as NI-43101 compliant, but was later rescinded into non-compliance under a caveat.
What regulators wanted to see what a feasible commercial method of extraction that could unlock these resources and make them viable for production.
MGX went on to acquire the lands that Lithium Exploration Group's resource were calculated on (along with surrounding contiguous parcels).
WHERE IS THE PROCESS CURRENTLY AT?
Now that MGX has a major oil producer in the form of CNRL involved in the proof-of-concept, and a potential line on business going forward for brine water treatment prior to disposal, all that is left is for the pilot facility to be completed and begin operations.
Testing on the Sturgeon Lake Lithium Project has now commenced, and testing is expected to conclude by week's end. The centralized water battery testing is for the purpose of bulk sampling of 400L of brine. The brine will then be run through pre-treatment and mineral extraction processes developed by MGX and its partner PurLucid Treatment Solutions.
As partners, Purlucid brings a lot to the table, including expertise, and several major clients already in their portfolio. MGX has also enlisted the aid of the top research and development firm in neighbouring province, Saskatchewan.
Going forward, the company will look to expand out its production capabilities from their initial pilot plant's 12,000 liters of brine per day, to a future plant capable of handling over a million liters per day. It's now more certain that the larger future plant will be located near the major partner's water collection and reinjection site.
At concentrations of 50mg/L, being able to process over a million liters per day would potentially produce upwards of 14,000 tonnes of lithium carbonate per year. At today's conservative pricing of $12,000 per tonne, the potential from one plant would be revenues of nearly $170 million per year.
Likely, MGX will have to share some of the benefits of such a deal with whatever partners they align with. Whether that be with other major producers of CNRL's calibre, such as Imperial Oil [NYSE: IMO] [IMO.TO] or Encana Corp. [NYSE: ECA] [ECA.TO], or with major oilfield service providers such as Baker Hughes [NYSE: BHI] or Halliburton [NYSE: HAL] who can install MGX's tech on their sites and facilities.
MGX holds the exclusive legal rights to this process, and at present it appears that once they unlock the process on one operation, the sky's the limit on petrolithium as a whole.
The market is taking notice, as MGX's stock has tripled in the last month, and time is ticking down to when the company expects revenue-generating production to commence.
With petrolithium as a concept, MGX has created a unique opportunity for investors to profit from both petroleum and green energy. As the clock winds down on all the prep work, the time for a MGXMF breakout is near. This may be the last chance for investors to buy in on petrolithium before it sets sail on a sea of revenue-generating brines.
By. Joel Chury for Oilprice.com
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