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Is This The Start Of A Magnesium Boom?

Is This The Start Of A Magnesium Boom?

The days of dominance for the lithium-ion battery may be coming to an end in the near future.

A newer, possibly cheaper, and more efficient battery is rapidly gaining interest, as development of magnesium batteries comes closer to a commercial reality.

However, other uses for magnesium may take precedence, and draw away the metal for other industrial uses prior to a magnesium-battery boom.

Magnesium’s lightweight nature (75 percent lighter than steel and 33 percent lighter than aluminum), is pushing the metal’s demand upward in the manufacturing sector, especially with its beneficial uses for automotive and aeronautics manufacturers.

Since 80 percent of the world’s magnesium is produced in China, demand from international firms is precariously dependent on Chinese suppliers. This has led to many countries, including those in North America, to classify magnesium as a strategic metal, much like lithium and cobalt.

This has given rise to a demand for more domestically secure supplies within North America. The game may be changing sooner than expected, as a major magnesium resource was recently announced in Canada’s favourable mining province of British Columbia.

With an estimated 8 million tonnes at 43.31 percent magnesium oxide (MgO), Canadian company MGX Minerals (CSE: XGM) (Frankfurt: 1MG) broke major news over the Labour Day long weekend, announcing their latest 43-101 compliant resource estimate on the company’s Driftwood Creek Magnesium Project.

Magnesite deposits of this size and grade are extremely rare. Hence the market reaction to an announcement from an otherwise small-cap sized company.

What this means for North America’s magnesium production supply is still too early to tell, but the demand is definitely rising for the metal, thanks to its unique properties. For the British Columbian mining sector, MGX’s property alone could result in an injection of nearly $7 billion USD, thanks to rising magnesium oxide, and pure magnesium prices.

Magnesium’s Energy Potential

Back in July, the Helmholtz Institute Ulm (HIU) and Ulm Electrochemical Talks (UECT) hosted the world’s first symposium on magnesium batteries.

With over 100 international researchers, the German-hosted event formally looked at the current state of research in the field, and hypothesized multiple future scenarios for magnesium.

Given the metal’s ability to release and absorb two electrons, it has piqued the interest of energy storage researchers the world over, as this attribute is unique when compared against lithium.

This has drawn the interest (and more importantly investment and research) of major automobile manufacturers, including engineers from Toyota’s Research Institute of North America (TRINA).

So far, magnesium batteries lead the race in terms of being the most often researched candidates as lithium-free high-voltage battery alternatives. The lightweight metal is cheaper to produce than lithium because of its lower reactivity to air.

Often found in large quantities in the form of rock dolomite, magnesium is often found at lower prices.

However, secure sources of magnesium are in question, as the metal’s production (much like many other strategic minerals) is mostly produced under a Chinese monopoly.

Export quotas and duties on Chinese metals acts as an ongoing threat to supply for manufacturers looking to utilize magnesium long term.

U.S. firms are already looking for a more secure source of magnesium to incorporate into their manufacturing, including inside of North America.

Progress on domestic production, such as MGX’s plans on its Driftwood Magnesium Property look to bridge the gap.

The Lightest Useful Metal

While batteries were most recently the focus in Germany, magnesium holds huge potential in the transportation industry—most notably for its lightweight properties.

Its lesser reactivity may give magnesium a large advantage over lithium, and this will certainly be held to be important by electric vehicle (EV) producers, but its value as an industrial fabric may prove even more valuable.

Magnesium is commonly called “the lightest useful metal,” due to it being 75 percent lighter than steel, and even 33 percent lighter than aluminum.

Manufacturers in the transportation industry are constantly pressed to reduce the mass of their vehicles to improve energy consumption efficiency. When the finished product is the sum of thousands of individual parts, every minor weight reduction matters.

For instance, almost all aerospace and automotive manufacturers would stand to benefit, should a magnesium alloy overtake steel or aluminum in something as simple as doors.

Just last year, the Society of Automotive Engineers published a key change to aviation standards that permits the use of magnesium alloys for components in airplane interiors.

For an aviation giant such as Seattle-based Boeing [NYSE:BA], which manufactures 8 of the top 10 most commonly sold jets to airlines, the prospect of replacing aluminum seats with magnesium seats could be a major game changer. For example, the world’s most popular airplane, the Boeing 747 holds 416 passengers. Reducing all of those 416 seats by 33 percent would make a huge impact on fuel consumption in flight.

But a large scale overhaul in materials used would require security of supply. Even so much as a hiccup from China could present a threat to the assembly lines.

Ultimately, magnesium development within North America would greatly benefit this push for magnesium as a lithium, steel, and aluminum replacement.

North American Development

With majors such as Boeing and Toyota soon to possibly be seeking magnesium in large quantities, investment interest within North America should grow.

While still a lesser talked about metal, magnesium’s domestic activity is well under way.

When MGX Minerals completed its 100-tonne Bulk sample last June, it was expected that there would be a significant resource coming. With the announcement of an 8 million tonne resource with 43.31 percent MgO, MGX delivered, and delivered big.

The Driftwood Creek Magnesium Project also has some significant advantages, which might usher it into production quite quickly.

At a depth of less than 100m from surface, and a timeline of Winter 2016-17 targeted for the Mine Plan and Operating Permit Application, MGX may be in production much sooner than most mining operations.

Unlike current Asian magnesium operations, MGX’s Driftwood Creek has a major advantage in that production won’t result in any tailings. Due to its environmental advantages, MGX management believes that it’s possible to be in production by the end of the year.

The market for magnesium is on the rise, and is paying decently well. Case in point, how 95 percent-pure MgO is commanding over $400 USD/t on the market. At that value, MGX’s resource would have an in-situ value of over $1.3 billion USD.

For a company that as of the last trading day was sitting at a market cap of less than $8 million, this resource represents a significant breakthrough.

That resource value goes up significantly if the company can capitalize on processing the MgO into pure magnesium metal (Mg). The lightweight pure metal currently sells for $4,000 USD/t in the U.S. (global market price is about half that).

According to a report on the resource by Rockstone Research Driftwood’s 8 million tons MgO could potentially net MGX a produceable 1.7 million tonnes of Mg.

The potential top-end for Driftwood, with pure magnesium production, moves up from $1.3 billion to approximately $6.8 billion USD if sold in the USA.

To be clear, the report is going off of mineral resources, and not mineral reserves (resources that have proven economic viability). However, two factors in the report do look promising for that resource conversion in the future: shallow depth (under 100m from surface); and grade (nearly half of the rock is magnesium at 43.31 percent).

In order to finance the project, as well as the company’s lithium assets, MGX is in the midst of a rights offering to its existing shareholders at a fixed discounted price of $0.18 per share. Already, the stock has surged since the announcement, with shares in the German markets going up 50 percent in the first trading day.

The Next Big Thing

Researchers and developers are making major discoveries pertaining to magnesium that will lead toward lighter airplanes, trucks, cars, trains, ships, computers, and even home appliances.

Just as importantly, magnesium could hold breakthroughs for energy production, including for hydrogen, wind turbines, and C02 capture.

As interest in the lightweight/low-reactive metal grows, magnesium’s uses and subsequent demand will expand.

Investors looking to capitalize on the potential magnesium boom have just been given a significant exposure through MGX’s latest resource announcement. The magnesium boom may just be beginning.

By Joel Chury for Oilprice.com

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