Western Magnesium (CVE:WMG) Advanced Technology to Produce Low-cost, Green Magnesium Metal
Western Magnesium Corporation (CVE:WMG) CEO Sam Ataya joins Midas Letter to discuss the company’s recent $5 million raise in a non-brokered private placement. Such an investment is rare within the junior mining sector and was made at a premium to the current market price, showing the magnitude of confidence the U.S. investment firm has in Western Magnesium’s business plan. Western Magnesium view themselves as a technology corporation, enabling the eventually production of magnesium metal at reduced labour and energy costs relative to alternative methods. The company is also focused on being environmentally friendly – producing green magnesium with zero waste and close to zero toxicity to meet EPA standards.
James West: I’m joined now by Sam Ataya. He’s the CEO of Western Magnesium Corp. Sam, welcome.
Sam Ataya: Thank you. Good afternoon.
James West: Hey, Sam, I noticed that you recently raised $5 million in a non-brokered private placement. You don’t see that happening too much these days in the junior mining space, especially not in the magnesium space. What is it about Western Magnesium that attracted this company to your project, and what’s your project all about?
Sam Ataya: Thank you for that. To start with, you know, people have viewed us as a mining corporation and really, in fact, we’re a technology corporation. We view ourselves as a technology corporation, and it’s our technology that’s enabling us to eventually produce magnesium metal.
James West: I see.
Sam Ataya: So I think what the company is seeing, and what investors are seeing nowadays, is that this isn’t a mining play; it’s a technology play that happens to be associated with mining. Obviously, for our purposes in extracting magnesium metal, we’re extracting it from dolomite, and hence the idea that we’re a mining company. But really, we’re very much a technology company.
James West: Okay, so tell me about the process and the technology that is your main differentiator, then.
Sam Ataya: I think there are three aspects to the technology. When we started out nine years ago, it was an issue of, we needed to meet three conditions that we felt were very, very important for us to really produce magnesium metal in North America, because it’s been lost over the years.
So those three conditions were, first of all, we had to be economically viable: can we compete with other producers, especially China? In the world today, there’s only 1 million metric tonnes of magnesium metal being produced; 85 to 87 percent of that is being produced by China. So they’re the major world supplier at the moment. So we have to be able to compete economically with them in North America, and go toe to toe.
Number two, the technology had to be scalable, because today, the process of producing magnesium metal is labour-intensive and still toxic, and so we had to be able to scale the technology so we can put it in cities, small towns…we didn’t just have to build big behemoth plants all the time.
And thirdly, really the focus of zero waste and close to zero toxicity in building the plant, and to meet EPA standards, and to meet environmental concerns all over the world, we really felt that, in producing magnesium metal, we could not go back to the old formula and just produce it in toxic ways.
So those were the three conditions that the process had to resolve, and we did. We’re quite proud of that.
James West: Okay, so then, how do you monetize this technology?
Sam Ataya: In what sense? How do we monetize it, are you thinking –
James West: Well, if the company’s not a mining company, you’re producing magnesium through a technology, how are you – are you actually selling magnesium, then, as a finished product?
Sam Ataya: That is correct. So we can sell it in ingot form, bar form, or molten form. Really, we don’t have to even mine dolomite; dolomite is the seventh most abundant material in the world. It’s cheap, and we don’t need a dolomite pit every time we open up a plant. In fact, we can ship the dolomite to the plant anywhere in the United States, and by the way, that is our focus. Our focus is just the United States. We’re dealing with US customers and big clients like the auto industry, aerospace industry, construction, even government and US military.
So our focus is very much the United States, and in regards to dolomite, we can either mine it, if we have a spot or a plant that’s next to it, or we can bring it in and extract the magnesium metal from it.
James West: I see that the projects where you source, I guess, your dolomite, I’m looking at the Tami Mosi project right now – is that a dolomite project that contains 12 percent magnesium, and is that typical of dolomite?
Sam Ataya: Dolomite has varying percentages of magnesium; it could be 9 percent up to 14 percent. Depends on the dolomite, and in the case of the Tami Mosi, it’s a site that we control. It’s in Nevada, it’s a very large site, it’s about an 8-mile stretch; and we’ve had an independent 43-101 done on the site, or on a certain part of the site, and there’s an inferred 111 billion pounds of magnesium in there. And that is a site that we have kept, and that we keep under control, and at this point, our philosophy isn’t necessarily to develop that site, but to keep that as a control of supply chain. Meaning that, in case we could not get dolomite from anywhere else, in case the world market all of a sudden became too expensive, we have our own supply, and it keeps things in check.
And one day, by the way, one day we might move ahead and definitely develop that site.
James West: Sure. Okay, so then, how do the economics of your business work presently? What is your cost per unit of production, and what is your sale price per unit of production? Gross margin, and net income?
Sam Ataya: Those are all very good questions. We’re still coming to terms with that. Obviously, our biggest priority right now is to build the first commercialized, we call it, the Reactor, that will be producing with our new continuous process, the magnesium metal. So all those factors are still being outlined and not yet ready to release to the public, but based on the testing that we’ve done, based on the nine years of work that we’ve done, we feel that we will be very competitive.
However, giving you a price right now, all of those are changing as we build the process, as we build the technology and we start producing. Those factors will continuously change.
James West: Sure. So on what basis did you achieve a $5 million investment from a private US firm? I’m just curious, like, you must have pretty good data for these guys to step up and write a big cheque like that.
Sam Ataya: Yeah, absolutely. I think it’s actually, when you look at it, it’s in the magnesium world, there are not a lot of producers that are out there. So magnesium metal has become a very strategic metal, and a very important metal, for its light weight. It is 80 percent lighter than steel, 33 percent lighter than aluminum, and whether it’s the auto industry, airplane, airline industry, whether it’s aerospace, you name it – even military – the need for lightweight materials is more important than ever.
US government just signed an executive order, 3817, which put it on the 32 most critical metals list. And they did that because competition around the world, you know, if you’re producing cars, airplanes, missiles, whatever you’re producing, if they have lightweight materials, they’re certainly going to outpace what we’re producing here in the United States. So what investors are seeing is, they know that this has become a big issue; they know that lightweight material has become a big issue, and they’re looking at who is in a position to get to the finish line faster.
We’ve set up, over the last nine years, and have a good structure, and it’s that structure that they’re responding to. The team that we have in place, the executives that we have in place, and the expertise that we have in place to produce the metal, is what’s giving confidence to the market.
James West: Can you tell me, is the supply and demand metrics of the magnesium market, are they balanced? Is supply outstripping demand or vice-versa, and do the prices reflect that for magnesium right now?
Sam Ataya: Oh, I think that the demand is extremely high. In fact, the biggest problem is, has been and continues to be, supply. As I mentioned before, the world production is 1 million metric tonnes, however, if you take the auto industry for GM, Chrysler, just for cars made in the United States, they would require 10 times that amount. They would require about 10 million metric tonnes per year to produce that amount of cars. There simply is not enough being produced, and the bigger problem is that there are not enough plants, and even if we started today, we could not address all the needs for auto industry, aerospace, so forth and so on.
So this is a long-term buildout that will require real capital investment, but it is needed. They need it, and if the supply was there, most certainly, they’d be using it. So the issues are supply. The issue is purely supply.
James West: Okay. And so finally, how will Western Magnesium, what’s the timeline until you’re able to, you know, participate and supply a big chunk of that missing piece?
Sam Ataya: Well, our goal is to start building plants across the United States. That rollout is going to be over a ten to fifteen-year period. I think that you will see us starting to produce magnesium in about a 24-month period. The planning is right now, we’re identifying different sites where we’re going to put our technologies and start producing magnesium.
Of course, you have to go through all the necessary regulatory checks to allow you to start producing, and so that’s what the delay is. But in 24 months, we feel that we will be producing magnesium metal, and from there, it’s building out plants as we go along.
And I have to tell you, the demand will continue to outpace the development for quite a while, and that is simply going to happen because most plants produce a maximum of about 100,000 metric tonnes per year, so us having to build really big plants to begin with to start producing anywhere from 100,000 to 500,000 metric tonnes, that is not an easy thing to do. But we will get there, it’s just a rollout that we have to have in place.
James West: Okay. Great, Sam. We’re going to leave it there for now. We’ll come back to you in due course. I wish you the best of luck, and I can’t wait to see your process in action.
Sam Ataya: Thank you so much. Thank you for the opportunity today.
James West: You bet.
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