Vancouver company extracts valuable mineral from wastewater in oil production

As the world demand for electric batteries, particularly for vehicles, increases, demand will surge for the mineral lithium.

Lithium is a key component of batteries for electronic products. A Goldman Sachs study estimates supply of lithium will be 27 per cent less than demand in seven years. Lithium prices should be strong and lithium exploration will surge.

Current lithium production comes from two sources: mining of salt flats and evaporation of the salts or from hard rock mines. Mining salt flats disturbs the environment while expensive hard rock mines take a long time to permit and build.

Enter MGX Minerals of Vancouver with a less expensive technology that converts wastewater into clean water while extracting lithium and other minerals from the water.

The company’s PurLucid process extracts lithium from wastewater produced by the oil industry in one day. As well as lithium, the process extracts calcium, boron, salt, potassium, magnesium and sulphur. The North American oil industry produces 80 million to 100 million barrels of briny water a day. To date, MGX has two million acres of oil patch signed in for the process with 1.7 million in Alberta and some in Utah.

The patent is pending for the successfully tested PertoLithium process. The first 750 barrel per day commercial plant is in development.

MGX has two other divisions. The Zinc/NYX division acquired last year, uses a zinc-air fuel cell for storage of energy from wind power and solar energy systems. A 20-kilowatt system is under development in this highly competitive field.

Other sectors involve lithium brine property in Utah, an advanced magnesium mine property in B.C., an interest in an Ontario hard rock lithium property and silica mine properties in B.C.

At 57 cents a share with a year high of $1.96 and a low of 49.5 cents, this stock is volatile.

The technology needs profitable commercial production to prove the process for investors. Directors currently own 12.8 per cent of the 125 million shares.

Two red flags: management fees for the first nine months of the company year were $3.4 million compared with $960,000 in the previous period. Promotion and advertising costs for the first nine months of the year were $1.96 million compared with $429,000 last year.

MGX is an interesting company in a field with tremendous profit potential but several factors such as high promotion costs and management fees make the company questionable even as a speculative investment.

The five-year-old company has lost $36.3 million pursuing the plans. Just over half that loss was in the last year as facilities ramp up.

The only viable way to raise more money is placement of shares to investors. Current investors’ stake is diluted every time new shares are sold.

That explains the $1.96 million promotion and advertising expense to try and keep the share price up. But is it the best use of investors’ money?

This is a company to watch closely.

CAUTION: Remember when investing, consult your adviser and do your homework before buying any security. Bizworld does not recommend investments.

Ron Walter can be reached at ronjoy@sasktel.net