Argex Titanium Inc. ARGEF

Internal cash flow funding expansion

[MolyMadeMeRich]

Funding Capital Expenditures

By the year 2020, the aggregate capital agent should be in the order of $3 Billion. While this may

seem a daunting proposition for a company with a market capitalization of $35 Million (1% of the

total), the project is to be built in modular form with each unit capable of producing 15,000 tonnes

of TiO2. The cost of each unit is estimated at $75 million. Once the first unit is operational, the

remainder could be fully funded from internal cash flow.

While external funding will be required to build the initial 15,000 tonne per annum plant, Argex may be

able to raise some of the equity portion of the $75 million from non-conventional sources such as:

¦ the Government of Quebec;

¦ direct investment in the first plant by private equity interests;

¦ JV with a paint manufacturer;

¦ off-take agreements with customers;

¦ pre-payment by customers;

¦ equipment leasing.

The latter four possible sources are more likely to come after the industrial-scale process has been proven,

but it seems unlikely that Argex will need external funding for its expansion once the process is commercial.

La Blache as a Source for Refactory Linings

There is a market for the La Blache ore as the raw material for linings of blast furnaces and the like.

While this is just a thought at the moment, as a worst case scenario, it could also be an excellent

source of cash flow in the early years of production at the CTL facility. There is interest in 50,000

tonnes of direct shipping ore per month. As this would be direct shipping ore, production at La

Blache could start almost immediately as a simple quarrying operation that could be handled on

a contract basis by locals at a cost (including shipping to port) of approximately $50 per tonne.

Ore prices are approaching $200 per tonne, which

would result in an after-tax NPV of a 10-year operation

at a 20% discount rate of $2.98 per share, some 7.5

times the current share price of
.37. At $150 per

tonne, the NPV with the same discount rate would be

$1.98 per share, five times the current share price.

Selling Price Per Tonne $ 100 $ 150 $ 200

After Tax NPV

Discount @10% $ 1.45 $ 2.91 $ 4.36

Discount @15% $ 1.19 $ 2.38 $ 3.56

Discount @20% $ 1.02 $ 1.98 $ 2.98

Figure 7.