Tapping the lithium rush, Canadian miner stakes claims in Utah

Pure Energy Minerals

02/03/2018 15:46

By Valerie Volcovici
    WASHINGTON, March 2 (Reuters) - A small Canadian mining
company has staked claim to mineral rights on over a hundred
thousand acres of federal land in Utah since last year, hoping
to tap lithium deposits from spent oil wells to feed America’s
high-tech battery industry.
    The play by Vancouver-based MGX Minerals  MGX.CD  is part of
a global scramble for the super-light metal used in smart
phones, electric vehicles, and storage for power generated by
wind and solar installations. 
    MGX Minerals shares have surged 40 percent this year to
C$1.43  ($1.11). Still, analysts were divided over prospects of
the move. The company said it was encouraged by President Donald
Trump’s administration's move this year to encourage more U.S.
production of lithium and other metals on a list of “critical
minerals” it says are important for national security.
 urn:newsml:reuters.com:*:nL2N1Q61KS
    U.S. officials "understand that the U.S. needs a supply of
lithium and is cognizant of global competition," said MGX CEO
Jared Lazerson in an interview. He called Utah "one of the best
places to start for lithium for North America."
    The United States currently has only one active lithium
operation, owned by Albemarle Corp  ALB.N  in Nevada, and
imports more than half the lithium it consumes. Other companies,
including Westwater Resources  WWR.O , US Lithium Corp  LITH.PK 
and Pure Energy  PE.V , are also trying to develop new lithium
projects in the United States to feed rising demand.
    MGX is focusing its mineral rights claims on southeastern
Utah’s Paradox Basin, a productive oil and gas drilling area.
The company plans to extract lithium from drilling wastewater,
using a proprietary filtration system it has piloted in western
Canada’s oil patch. 
    Much of the world’s lithium is filtered from underground
brines, though relatively little is extracted from petroleum
wastewater, the volumes of which have been increasing in the
United States due to a production boom.  
    "In this fundamental shift we are in between fossil fuels
and renewable energy, we get these hybrid models," Lazerson
said, referring to his company's technology.
    Analysts have given the venture mixed reviews.
    "Think about drilling a hole 2,000 meters long, through
rock, to hit brine in Utah, and coming up with negligible
lithium," said Jon Hykawy, a battery minerals analyst at
Stormcrow Capital. "Wildcatting for water is probably not a
great business model."
    Stephan Bogner, an analyst for Rockstone Research, was more
optimistic: "If MGX can prove commercial viability… a big
rethinking may begin in the United States as to where capital
should be deployed," he said. "It would be a game-changer."
    Despite burgeoning demand for lithium from battery producers
around the world, some analysts believe the market for the metal
is headed for a glut. On Monday, Morgan Stanley sent lithium
stocks tumbling when it forecast a surplus in 2022 that would
drive prices down to half their current level. Some industry
officials took issue with the outlook.  urn:newsml:reuters.com:*:nL2N1QH1MC  urn:newsml:reuters.com:*:nL4N1QG4YG
    Lazerson said he has been told by companies to get them
"anything that has any lithium in it." He did not disclose
details.
    
    "A TOP PRIORITY"
    Lazerson said wastewater brines available in southeastern
Utah are relatively rich in lithium for North America, with
content as high as 730 parts per million. The company hired Utah
land acquisition company Plateau Ventures to stake out claims in
the area and it hopes to start commercial production of lithium
from the holdings within 18 months.
    "You have Tesla and GM bringing electric vehicles on line
with no significant new source of lithium. Everyone is
struggling for feedstock right now," he said. He said he could
not disclose the companies with which MCX is in supply talks.
    An official for electric car maker Tesla Inc  TSLA.O  did
not immediately respond to a request for comment. 
    GM GM.N   spokesman Tony Cervone said the company would not
publicly comment on specific sourcing of commodities.
    The U.S. Geological Survey said in a report last month that
global lithium consumption rose more than 13 percent in 2017 to
41,500 tons - driven by surging electric vehicle production in
China and elsewhere - with prices rising worldwide. 
    In the United States, prices rose more than 60 percent to
$13,900 a metric ton. "Lithium supply security has become a top
priority for technology companies in the United States and
Asia," the report noted.
    Chile and Australia are currently the world’s top lithium
producers, accounting for more than half of global output. 
    MGX’s most advanced projects are in Alberta, where it holds
over a million acres of mineral rights. In January 2017, the
company concentrated lithium from heavy oil waste water in the
province using its rapid filtration process, with results
confirmed by the Saskatchewan Research Council.
    Lazerson said the company’s pilot plant in Calgary is on
track to reach commercial scale early this year. 
($1 = 1.2865 Canadian dollars)

 (Reporting By Valerie Volcovici; Editing by David Gregorio)
 ((valerie.volcovici@thomsonreuters.com; +1)(202)(898 8373;
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