A Micro Cap Turning Mega Cap –Top Long Term Play

 

Back in August I wrote about MGX Mineral Inc. (Symbol CSE: XMG). There has been some great progress with this company and things continue to look even better.

Technical analysis and trading is my passion and getting involved in new companies which have a quality product, proven management, and have the right timing for entering a market which is close to starting a new bull market is one of the most exciting types of long term investments to watch unfold.

Don’t get me wrong, investments are just that… long term, and take years to unfold, but if you are positioned with the right company at the right time returns can be life changing 3-5 years down the road.

Long story short MGX Mineral’s has what myself and many others believe to be a world class open-pit mine for Magnesite. It’s high-grade mineral, location and potentially lowest processing and shipping costs position this company at the top of my investment list. This is not a 2-3 year mine that will be out of material like most gold and silver mines, this a 100+ year operation in the infancy stage.

This is new company which means two things:

  1. It’s still unknown and share price is still cheap.
  2. Share price has been trading at all-time highs which means no overhead sellers/resistance.

Looking at the chart below we can see share price is rising with a bullish pattern. At this point the chart is indicating the next rally should reach 92.5 cents per share up 50%.

MGX-Chart

To be honest, I have never had the opportunity to find and be involved with a company that has this much potential long term. Jared the CEO and myself both see this being a billion dollar company way down the road and know that makes this company an incredible value at this price.

My partner Kal Kotecha who helps me find and research these micro cap stock plays for our long term portfolio just release his update which I have added below for you. Check it out!

 

 

Kal Kotecha’s Recent MGX Mineral Inc. Report

Early in August, we wrote an article detailing MGX Minerals Inc. (“MGX” or the “Company”) (CSE: XMG), a mining company engaged in the acquisition and development of industrial mineral deposits in Western Canada. MGX is unique in that it is carving a niche within the junior mining field by directing efforts toward high grade magnesite (MgCO3) extraction through their Driftwood Creek mining deposit located in southern British Columbia, Canada.
MGX’s stated strategic objectives include constructing a quarry mine and processing plant to produce magnesium oxide at Driftwood Creek. The Company owns the majority of significant magnesite properties in the Province of British Columbia, as reported by the British Columbia Geological Service, and is making the most of its assets by moving forward in extraction and processing of available resources.
Image
Driftwood Mining District
British Columbia offers a premier landscape for mining operations, with advanced infrastructure surrounding key mining regions developed over the 19th and 20th century when the industry as a whole boomed. As noted by The British Columbia Technical and Research Committee on Reclamation, “the province encompasses the largest part of the Canadian Cordillera, a mountain belt rich in minerals and coal. British Columbia is an important producer and exporter of copper, gold, silver, lead, zinc, molybdenum, coal and industrial minerals” (BC TRCR, 2015). These industrial minerals include magnesite, and MGX intends to explore this area to extract the financial bevy it represents.

MGX Minerals Inc. – Analysis

In our last article, we analyzed several factors of the Company that demonstrated its potential for success, including:
  • Steadily growing demand for high grade magnesite at a compound annual growth rate of 6% (Berry, 2015)
  • MGX’s strategic partnerships with Eaton Corporation (NYSE: ETN) and Highbury Energy to secure long-term financing support and low-cost energy solutions
  • Strong value chain management capabilities derived from the location and geology of Driftwood Creek
  •  The company’s demonstration of advanced business planning with Driftwood Creek’s near-term cash flow combined with low initial capital expenditures, producing limited investment risk
As a resource, magnesite is a highly valuable product utilized as a component in production processes across several industries. Magnesite serves as a feedstock for the production of Magnesium Oxide (“MgO”), which is a widely used industrial mineral. Uses of MgO include abrasives, animal feed supplements, chemicals, coatings, construction, electrical, fertilizers, foundries, glass manufacture, insulation, lubricating oils, pharmaceuticals, plastics manufacture, refractory and ceramics, rubber compounding, steel industry, sugar refining, sulfite wood pulping, and wastewater treatment. MGX is focused on supplying its extracted magnesite to the refractory and steel industries; a lucrative proposition given the fluctuating steel market and the demand for stable material supply by producers.
Image
Magnesite (Minerology Database)
Since the time of our August article’s publication, MGX has been very active in its Driftwood Creek project, beginning drilling operations, securing agreements to acquire essential industrial infrastructure, and conducting resource estimates and environmental studies of the site.

Drilling Operations

On August 30, 2015, MGX commenced its Phase II drilling program at Driftwood Creek, and over the next month completed nearly twelve drill holes. The drill program is targeting extensions of magnesite mineralization along strike in the Western Zone of Driftwood Creek, which as of October 5, 2015, has been delineated across 0.5 kilometers. The results of the program suggest high levels of magnesite in the mine, with management viewing the profit potential as significant.
The following chart defines the results from the first four drill holes of Driftwood Creek:

DDH

From (m)

To (m)

Interval (m)

MgO%

CaO%

Fe203%

SiO2%

LOI%

2015-1

6.0

63.0

57.0

43.07

1.30

1.49

4.47

48.50

2015-1

81.0

121.92

40.92

43.87

0.50

1.46

6.76

45.35

2015-2

2.74

45.0

42.26

42.60

0.67

1.43

7.56

46.32

2015-2

54.0

91.44

37.44

41.55

0.31

1.43

11.46

42.49

2015-3

0.61

65.53

64.92

40.71

0.92

1.48

13.13

40.97

2015-4

30.0

128.02

98.02

44.28

0.97

1.51

3.4

48.55
The figures represent the clear potential of the property to yield magnesite that can be extracted efficiently through open pit, quarry mining processes. This is beneficial for MGX and its investors because open pit mining is safer for the organization’s workforce and reduces the environmental impact of tailings, helping to limit possible negative perceptions from the community.
MGX plans to compile the drill results from its Phase I and II drilling projects to establish a National Instrument (N.I.) 43-101 compliant mineral resource estimate for the Eastern and Western Zones of the property. The Company is also contracting VAST Resource Solutions to prepare environmental baseline and engineering studies of Driftwood Creek, focusing on surface and ground hydrology. These commissioned studies demonstrate MGX’s commitment to the Driftwood Creek project, and investors should match the Company’s confidence by delivering financing for the operation to continue to move forward.
This interview with MGX’s CEO, Jared Lazerson, conducted at the Vancouver Resource Investment Conferences highlights the Company’s approach to mining industrial minerals, and offers a unique value proposition relative to competitors in the junior mining space:

Infrastructure Development

We appreciate organizations that recognize the value of strategically advancing themselves on their supply chain in order to maintain control of their extracted resource and ensure that it is being processed effectively for future sale. MGX personifies this strategy, having partially selected southern British Columbia as a location for property purchase because of the easily accessible and inexpensive natural gas from Alberta, along with the fact that Driftwood Creek is surrounded by rail, road, highly skilled labour, electricity and currently existing industrial facilities. MGX took action on the last facet of its southern British Columbia location by entering into Definitive Agreement with Tembec Inc. (Tembec) to acquire the Cranbrook mill site near Cranbrook, British Columbia.
Image
Cranbrook, British Columbia (Focus Corporation, 2013).
The Cranbrook mill complex spans 38-hectares (98 acres) located within the Cranbrook industrial park. The mill site has remained in and out of operation over the past twenty years, and major infrastructure including buildings and a finger joint plant remain on site. MGX’s CEO has noted that the acquisition of the Cranbrook mill site is an ideal fit for MGX because it provides a centralized location to process ore from its industrial mineral properties in the region. With the purchase of the mill, MGX gains the capability of moving forward on the supply chain to process the industrial minerals, including magnesite, it extracts from its properties in the Southern British Columbia region.
This kind of direct action to achieve pillars of a strategic plan is what investors should be looking for in the junior mining space. MGX has moved beyond the point of extraction and is thinking bigger in terms of how it can improve its position as a company, and the financial position of its investors.

Investment Opportunity

MGX’s stock value experienced its peak price in late August, reaching just over $0.70. The stock’s price has decreased gradually since that point to its current rate of $0.53, but the true value of the stock has never been greater. Phase II of Driftwood Creek’s drilling program delivered excellent results, with the holes dug producing evidence of expansive magnesite mineralized across the strike zones. With the Company’s recent acquisition of Tembec’s mill site, MGX will be able to extract and process the magnesite available within the Driftwood Creek property, and will apply the same capabilities to their other mining assets within the region. MGX Minerals Inc. (CSE: XMG) is continually preparing to move forward in monetizing the magnesite in Driftwood Creek, and with a relatively low share price available, we can’t think of a better time to invest in such a high potential company.

Works Cited

Berry, C. (2015). A Closer Look at Magnesium. The Disruptive Discoveries Journal, 1-15.
Cranbrook, British Columbia, (n.d.) Retrieved October 16, 2015
Lazerson, J. (2015, July 29). [Online interview].
Magnesite Image, (n.d.) Retrieved October 16, 2015
McDonald, J. (n.d.). Mining in BC. Retrieved October 16, 2015, from http://www.trcr.bc.ca/mining-in-bc/
MGX Minerals Inc. ( XMG ). (2015, August 4). Retrieved October 16, 2015.
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