By James West
MGX Minerals (CNSX:XMG) (OTCMKTS:MGXMF) (FRA:1MG) has successfully employed the technology of its partner PurLucid Inc to extract lithium from oil well production water – in this case from oil sands operations. The implications are significant for the company, and CEO Jared Lazerson joins us to tell explain.

Midas-Letter-financial-radio-podcast-thumbListen to the podcast interview with Jared Lazerson: Audio Player



James West:    Jared, thanks for joining us today.

Jared Lazerson: Thank you, James.

James West:    Jared, let’s talk a bit about the recent press releases outlining the recovery of lithium from some disposal water in oilfield brines. Can you give us just a quick overview and description of exactly what you got and how you got it?

Jared Lazerson: Sure. This recovery of lithium from, in this case, oilsands waste water, was a result of our patent pending process design in partnership with PurLucid Water Treatment Solutions, a highly experienced group of wastewater treatment experts. So we applied our process design in the laboratory and were able to recovery approximately 40 percent of the lithium from, in this case, oilsands wastewater.

James West:    And so does the 40 percent recovery rate mesh with your longer-term plans to produce commercial volumes of lithium from hydrocarbon disposal wells?

Jared Lazerson: I will say that the recovery rate at 40 percent, we have reasonable expectation, simply based on the remaining lithium within the brine – so, after the processing testing was done, there remains approximately 20 percent in the brine – we believe this to be easily recoverable on a second pass. You have to remember, this was early stage testing of the process; we’re now in optimization phase, so the low hanging fruit in terms of recovery is the 21 percent that was remaining in the brine. In a second pass, like I said, or optimized, we expect to immediately increase to approximately 60 percent.

And then, as a result of some recent testing, we’re seeing that there’s much improved recovery for removal of loss. So essentially, there was significant loss of material in the pre-treatment or filtration phase. So the brine, because it comes from an oilfield, so in this case, oilsands, so heavy oil brine, needs to be removed so that the oil does not remain in the brine when the minerals are extracted. You can imagine that we can’t sell lithium that is coated in oil. So we need to remove the oil and in the case of the heavy oil, it caused a significant lithium loss – around 20 percent. Our recent testing with oil production water from our Sturgeon Lake project, which is regular oil, light oil, resulted in very small losses, and we expected this to crystallize in results upcoming at the end of this month or at the beginning of February.

So we’d expect to see almost doubling of that recovery, fairly shortly here.

James West:    Okay. So the bulk – so you’ve got half a million acres of disposal wells in Alberta. What percentage of those are oilsands well versus conventional light oil wells?

Jared Lazerson: We do not directly own any oilsands production on mineral rights covering oilsands; all of those areas, the half million acres, the better part of 2,000 square miles, or 1.2 million standard acres, covers producing oil areas, a lot of past producing oil areas, with stripper wells and nominal current production. So very low volume oil and high volume water. So, a diverse holding covering producing wells. Oilsands is, in and of itself, often a mineral right issued by the province, so it would be a conflict to acquire mineral rights within oilsands.

Our interest and our involvement with oilsands comes primarily from our water treatment partner, PurLucid Water Treatment. They have agreements and testing agreements in place with some of the major oilsands producers, primarily from the environmental side. But what was interesting, as we began to look at these agreements and where the future of that environmental, which is a very strong business, as the government has legislated cleanup based on ongoing production, so if you’re continuing to produce in oilsands, you’d need to clean up on, I believe it’s a one to one basis for wastewater production. So a lot of wastewater, a lot of wastewater being produced, and it turns out that this wastewater, in a more concentrated form after it goes through the SAGD plants, or as an output of the SAGD plant, I should say, has high concentrations, or mid-level concentrations of lithium. Some of the higher concentrations, actually, overall in the province.

So an excellent source of environmental revenue, and a potentially large source of lithium; these are agreements that will come into place with the oilsands operators themselves, primarily through the environmental angle.

James West:    Okay. So at its most basic, the recovery of lithium proves that PurLucid’s filtration process is a viable path towards creating commercial quantities of lithium from disposal wells?

Jared Lazerson: That’s correct. I wouldn’t use the term disposal wells; disposal wells, ultimately that’s where the water currently goes down the hole generally, or, I guess, even in centralized environmental locations, eventually it goes down hole. The way we really quantify it is in terms of oil wells and then the collection point would be the water batteries in front of the disposal wells, which is a fairly easy place for us to technically connect.

But the point really being yes, you’re absolutely correct: this is a dual operation, or a dual really, I think ‘sector’ might be a broad word for it, but really, there’s a dual path here. And one is the environmental path, in terms of acquisition of lithium-bearing brine and other minerals, and as well, in oilsands you have potential of significant metals: vanadium and a number of other metals that we’re looking at. And then there’s just that straight production water that is coming off the oil wells, and we’re not particular; we continue to move down both paths. But PurLucid has opened up this environmental arena to us, and it all fits quite well together. You have environmental revenue, you have mineral revenue, and it allows, just like oil water cut with oil wells, it allows flexibility in terms of the revenue stream and what actually leads to the formal deployment.

James West:    Sure. So it sounds to me like you’re going to have an opportunity where oilfield operators are actually going to pay you to clean their water, which will result in a revenue stream from lithium and other valuable minerals?

Jared Lazerson: Absolutely. With oilsands 100 percent; in other areas we may use that as an offset against royalty or costs. We know at this price level of oil, the oilfield operators are highly focused on reducing cost. Pumping of large volumes of water and disposal of large volumes of water, the environmental implications as well as any onus the government puts on oilfield operators, is a major cost. So anything to offset that environmental component, I think, will significantly resonate with oilfield operators, at least at this oil price level.

James West:    All right, Jared. Let’s leave it there for now. That’s another enlightening bit of information. We’ll come back to you shortly; thank you for your time today.

Jared Lazerson: Thank you so much, James.

Disclosure: MGX Minerals is a Midas Letter portfolio holding.


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