A new lithium extraction process designed to eventually supplant the current methods of solar evaporation, and hard rock mining, appears to be closing in on reality, and from an unorthodox source: North America’s petroleum sector.
The term “petrolithium” is exactly as it sounds, in that it’s lithium derived from the already established system of petroleum production. Through a complex process involving high-tech filtration, and through the addition of chemical reagents, the petrolithium method, currently is being developed by sole patent-holder MGX Minerals [OTC:MGXMF] [CSE: XMG] [FKT: 1MG], and looks to be on deck for commercial production to happen later this year.
As the growth gap between lithium demand and lithium supplies widens, the potential for petrolithium to help suppliers answer the call of such manufacturing consumers as Tesla [NASDAQ: TSLA] and Samsung Electronics meet their own customers’ demands.
How large of an impact could a potential petrolithium opening make?
The initial petrolithium commercial plant being staged in Canada's Alberta oilfield is projected to process 12,000 liters of brine per day, with production beginning before year end. However, the developers are targeting future plants capable of handling over a million liters of brine per day, through modular plant expansion at in 10,000-60,000 barrel per day increments. A 60,000 barrel per day operation is capable of producing 700 tonnes of lithium carbonate equivalent, from 70 mg/l Li concentrations of Alberta brine, bringing back USD$7 million per year, at current $10,000 per tonne current market pricing. In Utah, with grades that are even higher, there's an expected production of 2000 tonnes of lithium carbonate equivalent from 200mg/l Li.
THE PETROLITHIUM ADVANTAGE
In comparison to other lithium production operations, petrolithium is a much faster method than conventional solar evaporation methods, which take up to 18 months to produce lithium. Petrolithium processing drastically reduces that time down to under a day. Excess brine water, extracted along with oil produced from conventional and non-conventional wells across North America will be in play, whenever target concentrations are seen present. MGX Minerals, and their private partners Purlucid Treatment Solutions, have already reduced the required concentration of lithium they need to produce it by half so far this year. Under the direction of Purlucid’s CEO, Dr. Preston McEachern (an established veteran in water treatmet in the oil patch), the team successfully upgraded MGX’s brine samples from 67mg/L Li to 1600mg/L Li earlier this year. Early models of the method were designed to produce with concentrations of 130mg/L Li or more. With the ability to upgrade from concentrations as low as 67mg/L, the capex projections took a pleasant reduction for both the developers, and the potential for the methods more widespread implementation.
While the obvious winners of a new lithium boom would be the technology holders, and large scale lithium consumers (should a supply boost effect the market price), the other beneficiaries stand to be the petroleum producers themselves. In the oil industry, water is a headache. Often times, it’s seen as an added cost to production, and can be costly to treat before safe disposal. With a model of deriving value from salts and minerals saturated throughout the excess brines, the economics of oil production in certain areas of the oil patch could see a long term change. For instance, many of the majors have entire plants and infrastructure devoted to the disposal of water along their lines. Sometimes those facilities are run in-house, other times they’re contracted out to major service providers.
It can be expected that MGX's future plants will be located near a major's water collection and reinjection sites, complete with available infrastructure already in place. Likely, MGX will have to share some of the benefits of such an arrangement with whatever partners that can provide brine on a massive scale. Whether that be major producers such as Imperial Oil [NYSE: IMO] or Encana Corp. [NYSE: ECA], or with major oilfield service providers such as Baker Hughes [NYSE: BHI] or Halliburton [NYSE: HAL] who can install MGX's tech on their sites and facilities.
CURRENT PETROLITHIUM FIELDS IN PLAY
While MGX and Purlucid have been steadily making progress in the development of their petrolithium method, MGX has also been quietly amassing its own large scale lithium mineral rights portfolio. At present, the company controls over 1.2 million acres in Alberta, making it the largest Canadian lithium portfolio. As well, the company has been accruing a sizeable land position in the Paradox Basin, Utah, on its Lisbon Valley petrolithium project, which today was announced to have hit a cumulative total of approximately 118,000 acres. While the Alberta field is expected to have the first commercial petrolithium plant, in Utah will be the company’s first bore hole well. The Blueberry #1 will be the first of its kind, optimized for oil, gas and lithium. MGX has already submitted its part to the Bureau of Land Management (BLM) for the drill permit, and preparations are underway for a 3D seismic shoot.
On two fronts, petrolithium is being advanced, with the drilling of its first well in Utah, and with the first commercial plant in Alberta. The Alberta front proposes a major potential for a resource, as a previous resource on the company’s Sturgeon Lake, Alberta property had a non-compliant resource calculated by the previous owners at 2 million tonnes of lithium. Once the extraction is proven and verified by a third party, MGX will have a solid case to bring that resource into compliance, and begin the process of reaping the benefits of its research and development. However, on the whole, the biggest potential of all, could be the implementation across North America and beyond, of helping to meet the world’s lithium needs, with the water that otherwise would’ve been injected back into the ground.
Joel Chury, Senior Editor