PDAC-Canada's Argex focuses on tech, not mining

Sun Mar 3, 2013 6:59pm EST
 
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* Company developing new process to extract titanium dioxide
    * Plant feasibility study due in the next few months
    * Aiming to commission first plant in mid to late 2014

    By Allison Martell
    TORONTO, March 3 (Reuters) - The TSX Venture Exchange
recently hailed Argex Titanium Inc as one of its
top-performing mining issuers, but the Canadian company is in no
rush to actually build a mine.
    Instead, Argex is preparing to construct a plant where it
can produce titanium dioxide - used to make white paint, among
other things - from ore produced by other companies, using its
new extraction process.
    "Our focus is getting to cash flow as quickly as possible,"
said Chief Executive Roy Bonnell in an interview on the eve of
the Prospectors and Developers Association of Canada convention,
where hundreds of junior miners and explorers strut their stuff
for investors.
    "We're kind of evolving towards being a specialty chemical
company with what I call a hedge against raw material prices, in
the fact that we could develop our own properties, if it makes
economic sense."
    A feasibility study for Argex's first commercial-scale plant
will likely be done in the next few months, Bonnell said. The
company's target is to commission the plant, which would most
likely be built in Quebec, in mid to late 2014.
    Argex touts its process, now running at a pilot plant just
west of Toronto, as environmentally friendly - it says tailings
could be safely used as construction material - and more
flexible than conventional techniques.
    "We can use more sources that the other methods cannot use,"
said Bonnell. "It allows us to essentially source ore bodies
that others reject, and (that) therefore are cheaper."
    To be sure, selling pigment-grade titanium dioxide would put
Argex up against big players - DuPont is a major
producer. But last spring, Argex won some support from another
heavy hitter, paint producer PPG Industries Inc. 
    The two companies agreed to a "technical collaboration
agreement" to make Argex's pigment compatible with PPG's needs.
Terms were not disclosed, but shares jumped as much as 15
percent, to what was then an all-time high. 
    Analysts that cover Argex are positive, with Thomson Reuters
I/B/E/S showing two "strong buy" ratings and one "buy" rating,
and an average target price of C$2.38 ($2.32), well above
Friday's closing price of C$1.28.
    With a market capitalization of about C$150 million, the
stock has more than doubled over the last twelve months.
    
    PROJECT FINANCING
    Financing has become a major challenge for small mining and
exploration companies, as the euphoria that lifted the sector in
recent years recedes. 
    Argex had C$6.7 million in cash and short-term investments
as of Sept 30, according to its last quarterly report. It has
more than enough cash to get through this stage, Bonnell said,
but will need project financing to build a full plant.
    That could mean traditionally equity and debt financing,
Bonnell said, a strategic partnership with a customer, a
supplier, or another processing company, or all of the above. 
    
    CAUTIOUS ON THE TROUGH
    In 2010, Argex completed a resource estimate on its La
Blanche iron, titanium and vanadium property, on the north shore
of the St. Lawrence River in Quebec. It also owns an iron ore
property in the Labrador Trough of Eastern Canada. 
    Big swings in the price of iron ore over the last six
months, paired with uncertainty over how much Quebec's
government will help develop the area, has jeopardized the
viability of projects in the rich iron region. 
    In February, Canadian National Railway Co hit pause
on its plan to build a new rail line through the trough, a
geological formation that extends south-southeast through Quebec
and Labrador.
    While Bonnell sees long-term potential in the region, he is
not rushing into anything.
    "Prices have come back a lot since last year," he said.
"Prices aren't bad, but I think ... interest is still a little
bit weak at this stage."