Today, MGX Minerals Inc. announced the acquisition of 3 lithium brine projects in Chile. According to the MOU (Memorandum of Understanding), MGX will acquire 50% of the issued shares of Chilean Lithium Salars SpA (CLS), a private company that holds 100% interest in 3 prospective lithium exploration projects located in Chile: The Francisco Basin, Laguna Brava and Laguna Escondida Lithium Projects. CLS is a wholly owned subsidiary of the private company Chilean Lithium Salars Holdings Ltd. (“CLSH”).
Francisco Basin Lithium Project
The Francisco Basin lithium project (“Francisco Basin”) comprises 12,900 hectares and is located 30 km south of Maricunga salar, 100 km southeast of the regional center of Copiapo and accessible via a regional highway and established tracks.
Historical exploration work on the project was previously limited to hydrology studies. In January 2018, CLSH completed a reconnaissance brine sampling at the project. This sampling confirmed the presence of lithium enrichment in the surface brines. In May 2018, sampling continued and a 2.5 litre sample was taken near the southern shore of the surface Northern Lagoon (see lab results below in Table 1). In April 2018, a geophysical program comprising an electromagnetic survey was completed, which was based on a grid of sections which indicated the presence of high conductivity brines in 2 zones with significant thickness and horizontal coverage. The presence of anomalous lithium levels in the water body area located in the Northern Lagoon, which is potentially underlain by a fault bound, saturated basin of undetermined thickness and the presence of widespread felsic to intermediate volcanic rocks as a lithium source.
The Francisco Basin salar is within a large, fault-bound, alluvium-filled basin to the immediate south of the Copiapo Volcano. The basin is closed, drains a large area and the salar appears to be the lowest point within the drainage. The rocks in the drainage surrounding this salar are dominantly volcanic, ranging in age from Eocene to Miocene, juxtaposed with some older rocks. To the west is a Cretaceous sedimentary sequence separated from the volcanic rocks of the Francisco Basin area by the Cerro Guerrita Fault. To the east, an older Oligocene to Miocene volcanic sequence is overlain by the Copiapo volcanic rocks. The Francisco Basin alluvial basin sits at the junction of 3 catchments. These river systems presumably provide the fill for the basin and are in part, along with the limits of the salar, structurally controlled. The alluvial fill may be covering post-Copiapo aged faulting.
Laguna Brava Lithium Project
The Laguna Brava salar (“Laguna”) is geologically prospective for lithium brine. The catchment is large and dominated by volcanic rocks, many of which have been altered by hydrothermal fluids associated with volcanism. The lake is also fed by active hot springs. Historical sampling of surface brines indicated significant lithium enrichment. Within the vicinity of the Laguna Brava salar, the Project includes additional concessions covering Lagunas del Gilguero and the southern margin of Piedra Parada.
In December 2017, CLSH undertook a 4 hole reconnaissance drilling program at a southern access point of the salar to investigate the deeper aquifer. Prior to the CLSH reconnaissance drilling program in December 2017, no previous work had been undertaken to assess the volume and grade of the subsurface resource. Previous work recommended that the subsurface brines be investigated on the basis of his conclusion that Laguna Brava is geothermally fed. The presence of hot springs being present either at the margins or beneath salars is common within the Chilean Altiplano, other notable locations include the Salar de Coposa in Region I and Salar de Atacama in Region II. The principal origin of lithium in the Salar de Atacama is interpreted to be the lithium-bearing geothermal waters from the El Tatio Geyser Field, located north of the salar. The geothermal fluids enter the northern part of the Salar de Atacama via surface and subsurface flow. It has also been reported that the chemistry of the salar brines is almost identical to the chemistry of the geothermal fluids of El Tatio.
Furthermore, work by Risacher et al. (2003) has shown that subsurface brines contained within the volcanic geology are of a much higher concentration, typically 250,000–350,000 mg/L TDS. Given this hypothesis, CLSH commissioned a reconnaissance drilling program in December 2017 comprising 4 bores; the locations are shown in Figure 6-4. Two bores reached the design depth of 120 m, and the other two bores were abandoned due to collar collapse because of high water flows. The results from this program confirmed the presence of lithium at depth. Results were as follows (Sanchez, 2018):
Full size / Figure 1. Location of Laguna Brava 2018 Reconnaissance Drilling
In February 2018, a geophysical program comprising electromagnetic and gravity surveys was completed by CLSH. The electromagnetic survey based on sections around the periphery of the salar indicated the presence of high conductivity brines exceeding 100 m thickness at the margins of the salar. The survey indicated that drill holes completed prior to the program were in an area with brines of relatively low conductivity.
Laguna Escondida Salar Lithium Project
The Laguna Escondida project (“Laguna Escondida “) is located approximately 200 km east-northeast of the regional capital and is accessible via a provincial highway to within 10-15 km of the project.
The Portfolio of projects are located within the Central Volcanic Zone in the foothills of the Andes mountain range on the eastern side of Chile. All the projects are located at altitudes exceeding 4,000 m. The geology of this region, like the rest of Chile, is dominated by the eastward subduction zone under the entire country generating uplift that has created the Andes Mountains and the Coastal Cordillera (Moreno and Gibbons, 2007). This subduction has intensely deformed the older rocks and generated volcanic activity that spans geological history from the Mesozoic to the present.
Full size / Figure 2. Location of Laguna Brava, Francisco Basin and Laguna Escondida project
Terms of the MOU
To acquire an undivided 50% interest in CLS, MGX has agreed to make Option Payments totaling $1.5 million USD. The first $100,000 portion of the Option Payments are payable in cash at the discretion of CLS while the remainder of Options Payments will be payable in common shares of MGX. MGX has agreed to incur exploration expenditures totaling $2 million USD and also complete an NI 43-101 resource estimate on at least one of the Projects no later than 20 months after the Effective Date of the MOU. MGX will act as project operator and appoint Mr. Aldo Boitano, current project manager for CLS, as project manager to work alongside Kura Minerals. CLSH shall contribute an equal amount of expenditures to maintain its respective interest in CLS. MGX also maintains the right to participate as a service provider of the engineering, construction and/or procurement of a brine processing plant using its rapid lithium extraction technology. Closing of the transaction remains subject to due diligence.
Only 2 weeks after announcing to go global with an acquisition in the Lithium Triangle at Salinas Grandes in Argentina (see here), MGX today made more landmark acquisitions in Chile. As Chile is home to some of the world’s largest and richest lithium brine deposits, only those projects with large size and high grades appear to have a chance for development into a mine as such typically require large and expensive evaporation ponds. For such reasons, smaller projects with lower grades have been neglected.
Sampling assays at Francisco Basin showed grades in excess of 350 ppm and up to 694 ppm lithium with low levels of magnesium and other elements. Reconnaissance drilling at Laguna Brava showed average grades of 185 ppm lithium with elevated magnesium amongst other elements, whereas recent geophysics have revealed much better drill targets with a higher conductivity, thus providing significant upside potential for the next round of drilling. Although both projects would probably not qualify for traditional processing via evaporation ponds (very expensive) at this state of the lithium market, they may very well be a perfect fit for MGX’s rapid lithium extraction technology which is being commercially deployed in Alberta, Canada, where lithium grades are much lower and contaminants much higher.
According to the US Geographical Survey (USGS), Chile hosts half of the world’s most economically extractable lithium reserves. What makes Chile so special is not only that the country hosts very large and exceptionally high-grade lithium brine deposits, averaging 2,700 ppm lithium, at shallow depths, but also that its Atacama Desert is the world’s driest non-polar desert. The arid climate allows for high rates of evaporation due to very low rainfall of just a few millimetres annually. The combination of these favorable circumstances make Chile the world’s lowest cost lithium producer. For lithium production, “Chile is like the gold standard”, says Brian Jaskula, a commodity specialist at the USGS.
However, even in Chile, all that glitters is not gold. Chile has a serious problem: Water. As the Atacama Desert is one of the driest places on earth, lithium production via evaporation ponds has a direct impact on the water reserves in the region. As a consequence, the groundwater table sinks, drying out rives and wetlands. Another side-effect is that lithium production via evaporation ponds can contaminate drinking water.
According to Financial Times:
Eduardo Bitran, the head of the government’s economic development agency CORFO, is in charge of the lease agreements for Chile’s salar. “We, as the owner of the salar, want to make an alliance for the exploitation [of the Atacama] with companies that behave according to the rules and according to international standards in terms of corporate governance, in terms of compliance.” CORFO seems to be doing just that. As the world’s lowest-cost producer of lithium carbonate, Chile could play a role akin to Saudi Arabia in the oil market, a comparison that CORFO’s Bitran says he agrees with. He says the market should understand Chile is willing to produce more, although he doesn’t want to see a collapse in the price of lithium. Chile’s best strategy, he says, “is to keep prices in a reasonable range, keep the market happy with supply . . . give a signal to the automotive industry that we have enough supply and they can count on lithium batteries.”
According to Bloomberg:
While miner SQM believes the lithium business “will go on for a while,” CEO Patricio de Solminihac acknowledges they always need to keep an eye out for the next big development. The nature of disruptive technologies means “they come out of nowhere and develop incredibly fast,” he said. “The Atacama remains Chile’s greatest provider of wealth,” said Sergio Gonzalez, a historian at Tarapaca University, who won the country’s National History Prize in 2014. “There’s always a risk of substitution, but the problem comes when the country doesn’t invest enough in technology to strengthen the industry and generate competitive advantages.” SQM is investing $525 million to almost quadruple output at its Chilean operations by early 2021, and U.S.-based Albemarle Corp. will invest $500 million this year to expand operations in Chile and China and build a new mine in Australia.
Although Chile is home to the world’s largest lithium reserves (52%), in 2017 the country only produced 14,100 tonnes of lithium metal (75,012 tonnes of LCE / Lithium Carbonate Equivalent), for which reason its market share dropped to 32.8% from 37.6% in 2016. Australia has now taken over Chile as the world’s largest lithium producing nation. According to Mining.com, both Chilean authorities and analysts believe the situation is only momentary, as Chile’s development agency CORFO struck a deal with local producer SQM earlier this year, which allows SQM to proceed with its plans to expand production capacity from 48,000 to 70,000 tonnes of LCE this year, then to 120,000 tonnes next year and thereafter to 180,000 tonnes by 2021 (see SQM July 2018 Update).
With Chile expected to significantly increase lithium production in multiples over the next 3 years, the question arises how this may be achieved, and at what price as Chile’s environment already appears exhausted. Environmentalists say that over-exploitation of the Salar de Atacama could cause an environmental catastrophe, whereas Chile’s Government understands very well the power of local communities and environmentalists.
New processing technologies, such as from MGX, could lessen the damage, uproar and make possible ambitious production expansion plans. For such reasons, MGX is on a mission to deploy its award-winning rapid lithium extraction technology head to head with the world’s biggest lithium producers – providing a low-cost, environmentally friendly and sustainable greentech solution to assist companies, and countries such as Chile, to meet the expected high demand in the upcoming years.
With lithium and wastewater treatment projects in the heartland of Canada’s oil and gas patch currently being deployed at several sites, along with a new joint venture project in Nevada, a recent acquisition in Argentina and today’s acquisition in Chile, MGX is expanding in a strategically meaningful fashion. Apparently, MGX is ready, willing and able to make reality of its vision to become the leading technology provider, and operator, in some of most important lithium hubs around the globe. MGX’s technologies could soon become "the gold standard" not only in rapid lithium extraction but also in wastewater treatment, that is to say in an evironmentally friendly and sustainable manner – an increasingly important criteria for lithium producers which should not be underestimated, neither by companies, governments nor investors.
Full size / Planned expansion projects are only partly delivered (modified after Orocobre presentation of May 31, 2017)
Rapid Lithium Brine Extraction Technology
MGX has developed a rapid lithium extraction technology that reduces the capital cost of recovery compared to traditional solar evaporation as it does not require the investment in large, multi-phase, lake sized, lined evaporation ponds, greatly reducing the physical footprint and enhancing the quality of extraction and recovery across a complex range of brines previously considered un-processable due to complexity or geographical location outside of solar evaporation appropriate zones. This includes oil and gas wastewater, natural brine, and other brine sources such as lithium-rich mine and industrial plant wastewater. The technology was recently chosen as winner of the Base and Specialty Metals Industry Leadership Award at the 2018 S&P Global Platts Global Metals Awards, held in London earlier this month (see press release dated May 18, 2018).
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MGX Minerals Inc.
#303 - 1080 Howe Street
Vancouver, BC, Canada V6C 2T1
Phone: +1 604 681 7735
Shares Issued & Outstanding: 122,655,926
Canadian Symbol (CSE): XMG
Current Price: $0.79 CAD (08/07/2018)
Market Capitalization: $97 Million CAD
German Symbol / WKN (Tradegate): 1MG / A12E3P
Current Price: €0.522 EUR (08/07/2018)
Market Capitalization: €64 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.