On the 20th of January I was introduced to a new potential advertiser for 321gold and 321energy named MGX Minerals Inc. (XMG:CSE; MGXMF:OTCBB). I was quite impressed with both the President of the company, Jared Lazeson, and his vision for the future of his company.
He reminded me a lot of a fellow I met in the summer of 2011. Back then for hours we discussed the concept of a gold backed banking system. We drove around Colombia visiting a copper/gold explorer south of Medellin. We spent hours trapped in the back of a van chatting about how you could make gold the basis of a banking scheme. His name was Roy Sebag. He ran with his idea after a few modifications and turned it into BitGold that eventually bought GoldMoney. He was all of 25 at the time and easily one of the three smartest guys I have ever met.
He modified his plan over time and in 2015 started BitGold. It's been a giant success since it allows everyone to go on his or her own personal gold standard. He's probably made $100 million in share appreciation. He's all of 31 now and no doubt has a golden future. The money is really no big deal; he made $50 million in well-timed investments by the time he was 25 from an initial start at the age of about 18.
When I talked to Jared Lazeson in January I got the same feeling of dealing with a very bright guy who understood just where he was going to go and how he was going to get there. So he probably would also qualify as being on of the three smartest guys I have ever met and light years ahead of me. But I am just smart enough to recognize a good idea when I see one.
We talked. He wanted to advertise and I wanted some shares based on the conversation. The shares were $0.69 apiece. A giant negative for the company was being based on the C-Exchange but somehow the company had great liquidity in spite of being on a poor exchange.
I made my mind up to buy some shares on the coming Monday. Alas, some rat wrote the company up on the 19th on Streetwise Reports. Over the weekend Streetwise sent the article to hundreds of other sites on their list.
I was willing to pay $0.70 a share for MGX but the shares opened at $0.72 and never looked back. They closed the day at $0.83, up 20% on the day. I reread the article and while it was a nice article, I thought the author missed most of the substance of what I understood to be the direction of MGX. Actually I couldn't figure out from the article exactly what the company was going to do. When I talked to Jared, I though I had a clear idea of where they were headed but reading the article was like looking at a totally different company.
I hate chasing shares higher but after a 20% rocket higher to a close of $0.83, way above my bid of $0.70, the stock gapped higher the next day, opening at $.86 and never looking back. I really wanted some shares so I put in a bid at $0.95 and got filled finally. The shares continued to move up six days in a row going from $0.69 on the 20th of January to an intraday high of $2.75 on the 30th of January. In seven trading days, MGX boomed up by 298%.
I was in a quandary.
For those wise readers who have read my Amazon best seller Nobody Knows Anything, I repeatedly make the point that you have to buy cheap and sell dear. If you don't take a profit when you have it, the only other alternative is to take a loss when you have to.
Let's call the shares cheap on the 19th of January at $0.69. After all, we have the benefit of hindsight and now we know it went almost 300% higher in seven trading days. So again with the benefit of hindsight we know $2.75 was not cheap, it was dear. So I sold. Naturally like most people, I am incapable of picking the very top. I sold for $2.35 for a gross profit ignoring commissions of $1.40 a share in ten days on a $0.95 investment. I missed the top by minutes but made a nice profit. But I still wanted those shares.
Nothing goes straight up and nothing goes straight down. Anything going up six days in a row is unusual so it would be perfectly natural for those shares to make a giant correction. They did, going down five days in a row.
If you have read my book, you will fully understand that I think 85% of investors are as dumb as a rock and all you need to do to profit is figure out what they are doing and do the opposite. So I put in a stink bid of $1.50. On the second day of the decline the price plunged to $1.53 a share, down 25% on the day and very near my price. However, corrections don't end in two days.
That's also pretty irrational so I changed my bid to $1.05 believing those damn fools who wanted to buy at $2.75 a share would be whimpering about a pump and dump and would beg to unload their shares at the bottom. They did and on the fourth day of the decline the shares touched $.92 and I filled my purchase at $1.05.
Are most investors stupid? In a word, yes. They want to invest using their rear view mirror. They buy at tops only to sell at bottoms and it's always someone else's fault. It's like walking into your Porsche dealer and being told that the price of the model you crave for your birthday is $75,000. And you realize the price is out of your league. The dealer whispers in your ear that actually they are overstocked and if you come back in a week you can buy it $10,000 cheaper.
What does the average investor do? He tells the dealer that he doesn't want it cheaper, after all, that means no one wants it probably because there is something wrong with it. The average investor tells the dealer to call him when the price doubles because then it's safe to invest; everyone wants them.
That may sound stupid but that is exactly what most investors do. So you need to figure out if you want to be in the 85% crying in their beer about conspiracies and manipulation or in the 15% laughing on their way to the bank. Take a wild stab at which group my readers are in.
If you notice carefully, I have spent a lot of time talking about human behavior and very little time talking about MGX. Actually the behavior of investors is key. It's more important than the commodity or the management or the location. You have to understand where you are in the trading cycle. To do that, you need to understand sentiment. We hit a 29 year low in expectations for gold in December. That means nothing more than gold was cheap. In January of 2016, we hit a 5000 year low in commodities. That meant commodities in general were cheap. That's the time to buy.
Now on to the boring subject of just what business MGX is really in and why you need to take a close gander at them.
In business and in life there are evolutionary changes and revolutionary changes. Mining lithium is evolutionary. There is plenty of it around but because of the need for electric vehicles and a need to store massive amounts of electricity, the demand for lithium has gone through the roof. And MGX was just another one of those 75 "lithium" next big deals. On the strength of their participation in the lithium space, the shares went from $0.08 in April of 2016 to $0.80 or so in January of 2017.
But MGX and Jared Lazeson are on to something quite revolutionary. You see a lot of lithium comes from brine found in basins. Chile, Argentina and Bolivia are home to a lot of the production of lithium. Basically they drill the basins until they come to the brine. They pump it to the surface and spread it out in giant ponds where the water eventually evaporates and they can collect the solid material containing the salt, magnesium and lithium and then further concentrate the material for sale as a commodity. In these basins, naturally the brine is considered valuable, an asset.
But there is a giant economic activity where brine is considered a liability. That's the oil and gas business. You see when you drill an oil well and the oil flows to the surface or you pump it up, you have something the energy business calls a "Water Cut." You are not only bring up oil, in many fields, you are bringing up brine or simply put, salt water.
In some fields, for every barrel of oil they produce, they may produce 50-100 barrels of brine. That brine contains high values of salt and lithium and magnesium and even silica. The same material that is considered an asset in a basin in South America is thought of as a liability in the oil business. The oil companies have to retrieve the oil from the fluid and pump the waste back down a hole. It's a giant problem getting rid of the water.
Jared Lazeson got together with some of the smartest technical guys in the oil and gas business and they have come up with a process to take the brine that the energy people consider a liability and remove the lithium and magnesium and salt and silica as valuable byproducts. They are turning a liability for the oil business into an asset in a potential profit center. Now that's revolutionary.
MGX is in the process of picking up the company named PurLucid who invented the process and Jared believes in the concept to the point his people have patented the process. The acquisition was announced on September 15th of 2016. It calls for MGX to invest $5 million to obtain 50% of PurLucid over two years and an additional $10 million to buy the remaining 50%. PurLucid is in the final stages of finishing the pilot plant to prove the process and develop working costs and profit potential.
MGX is doing a lot of things beyond my understanding and certainly beyond the understanding of the several people who have written about the company in the past two weeks.
People who know me and have followed my writing over the past 16 years know that I am blunt and to the point. I want everyone reading this to understand something vital. MGX is a work in progress. Until the pilot plant is finished and working no one is going to know that the potential for profit. Of course it's a great idea but great ideas are a dime a dozen. I have met hundreds of people with great ideas that would make a fortune if only someone else would fund it.
So how do you judge a company with a great idea that went from $0.08 a share last April to $2.75 last week to $1.25 today? That's actually quite easy. The company made an announcement on January 30th of some significance. They announced a new Chairman.
Now you may be thinking, "So what, Bob? Every company has a Chairman." And you would be right. But whom they picked up as Chairman means he did the due diligence and now you and I don't have to. The new Chairman of MGX Minerals is named Marc Bruner and he may as well have been the inventor of oil production from shale. His background in oil and gas is second to none.
I'm told Marc Bruner is a billionaire. Billionaires don't fart around with companies with a $100 million dollar market cap potential. He sees the potential in what MGX is now calling "petrolithium." Marc Bruner is not working for a salary. His compensation over the next two years is 17% of the company based on meeting certain goals. You may rest assured that if he sees potential and wants to invest his time, there is a billion dollar payoff down the road not just for him.
I believe that Marc Bruner believes in the process. So I wanted to own shares in the company and I do. There will be a lot of significant news being released over the next little while and I will do my best to keep my readers advised. I think the process works. I think Marc Bruner is a very smart guy and Jared Lazeson is wise enough to hire the smartest people he can hire. That's a recipe for success in my view. The potential for MGX is a game changer and they may well become the swing producer for lithium, magnesium and pure silica.
Readers should know that there is somewhere between 125 and 200 ounces of gold per cubic kilometer of salt water. The issue is not if there are valuable minerals in brine but what the costs in energy are to remove them. If MGX has a cost effective process to remove lithium, magnesium, sodium chloride and silica from what is now nothing but a liability, they will indeed be on to a gold mine.
MGX is an advertiser. I own shares and any time they do a private placement I will probably participate. There is a lot of information on the web about the company and the people. Please do your own due diligence.
XMG-C $1.21 (Feb 10, 2017)
MGXMF-OTCBB 60.8 million shares
MGX Minerals website
Bob and Barb Moriarty brought 321gold.com to the Internet almost 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.
Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.
1) Bob Moriarty: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: MGX Minerals. MGX Minerals is an advertiser on 321 Gold.
2) The following companies mentioned in the article are sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview/article until after it publishes.