(1) Its 100%-owned La Blachetitanium dioxide property situated approximately 120 kilometres from the
coastal city of Baie-Comeau, and
(2) Its patented process through its
50.1% ownership in private company Canada Titanium Ltd. (CTL) to
produce high-purity pigment-grade titanium dioxide (TiO2) from the La
Blache ore through one environmentally friendly process, which if
successful on a commercial scale will enable Argex to forgo the costly
intermediary steps required with methods currently employed within the
industry.
According to a Preliminary Economic Assessment (PEA) Study on the La
Blache project, which is based on processing the ore into pigment-grade
TiO2 using the Company’s proprietary extraction process, Argex’s
operating cost net of by-product credits is estimated to average C$586
per tonne over the 25-year life project. This represents an estimated
one-third that of conventional methods and approximately 14% of the
current price of TiO2 pigment (Bulk volume, CIF U.S.A.).
Argex’s La Blache ore has been successfully processed into high-purity
TiO2 in a pilot plant in Mississauga, Ontario since February 2011.
According to the Company, Argex’s TiO2 pigment has achieved both
purity and whiteness (or clarity) consistent with that of major TiO2
industry producers. The Company is beginning to speak with industry
end-users regarding potential strategic agreements (such as off-take
agreements) and is now turning its focus to fine-tuning the coating of the
TiO2 (to prove durability under various weather conditions as well as
aging).
RECENT EVENTS:
_ October 26, 2011 - Argex announced that it received the results of
the PEA on its 100%-owned La Blache project, which was conducted
by BBA Inc. of Montreal, Quebec with the collaboration of Met-Chem
Canada Inc. and Genivar. According to the study, the project is
estimated to have a pre-tax IRR of 32%, an NPV (8%) of C$2.2 billion
versus capex of C$801 million, and a seven-year payback period
(based on the assumption of a staged, modular plant construction)
The study is based on a TiO2 price of US$2,846 per tonne.
_ October 18, 2011 – Argex announced that it completed the
acquisition of a 50.1% ownership interest in CTL in exchange for
C$1 million in cash and issuance of 2 million Argex common shares
at the closing of the transaction. Under the terms of the agreement,
CTL granted Argex an exclusive license in the Province of Québec
and a non-exclusive license for the rest of the world to use the
licensed technology for the recovery of TiO2. CTL will provide Argex
with all the information applicable to the technology and Argex will
pay CTL a 2% royalty on its production of TiO2.
_ July 20, 2011 - Argex announced preliminary brightness and colour
results from samples of its La Blache ilmenite TiO2 ore which was
processed using CTL’s proprietary technology. The test results,
which were performed on Argex’s uncoated TiO2 pigment, were
reported to have compared favourably with results obtained on
standard products made by leading TiO2 producers. According to
Argex, the brightness and colour figures obtained on the Company’s
products indicate that the CTL process is completely capable of
producing high purity TiO2 base products.
KEY PROJECT:
The Resource - La Blache Titanium/Iron/Vanadium Project, Quebec
(100% ownership)
_ Argex’s flagship property is situated in the Manicouagan region on
Quebec’s north shore and encompasses 40.4 square-kilometres and
is comprised of 73 contiguous claims. According to an NI 43-101-
compliant resource report prepared by Met-Chem Canada Inc., the
property contains 30.9 million tonnes of measured and indicated
resources grading 18.8% TiO2 and 63.3% iron oxide (Fe2O3), and
13.0 million tonnes of inferred resources grading 18.7% TiO2 and
63.1% Fe2O3. The property is located approximately 120 kilometres
from Baie-Comeau, which has a port facility and is home to an Alcoa
aluminium refinery.
_ In 2010, Argex completed an exploration program on Hervieux West
and Hervieux East consisting of more than 20,000 metres of
diamond drilling. Based on the drilling results, Met-Chem Canada
Inc. completed an initial NI 43-101-compliant mineral resource
estimate for both Hervieux West and Hervieux East deposits in May
2011. Met-Chem reported that the drill holes completed by Argex
show that the Hervieux East and Hervieux West deposits are in large
part open at depth.
The Process: Ore from the Mine to High-Purity TiO2 Pigment
_ The potential economic benefits of Argex’s project are obvious given
current TiO2 prices and the results of the PEA discussed above. But
Argex’s project represents a new source of high purity TiO2 in an
already tight global pigment market, and prices are poised to rally
given there is a possible 25% increase in TiO2 nameplate capacity
coupled with limited potential for meaningful feedstock (ore)
expansions. However, Argex’s process is expected to have
advantages over existing processes that we believe could extend far
beyond the La Blache project, which include a more environmentally
friendly alternative to existing technologies and a potentially higherquality
pigment.
HIGH-PURITY TIO2 PIGMENT FEEDSTOCK: PRICES POISED FOR FURTHER
INCREASES
_ What is TiO2?: TiO2 is a leading white pigment that is virtually an
essential ingredient in the manufacturing of anything white: Paint and
pigment coatings (approximately 62% of the end market); Plastics
(approximately 14% of the end market); and Paper and coatings
(approximately 14% of the end market). The global market was
approximately 5.015 million tonnes in 2010. Based on a current
average pigment grade price according to Industrial Minerals, this
represents a global market of ~US$17.5 billion. TiO2, has a historical
annual growth rate of approximately 3%-to-4%, and it is the
undisputed leading material for white coloured products because of
its exceptional brightness and whiteness.
_ Highly Correlated to Global GDP Growth – A large portion of TiO2
consumption is directly tied to the global residential and commercial
construction industries, given its primary end use in paints and
plastics. The World Bank’s most recent forecasts for global GDP
growth is 3.2% in 2011 and 3.6% in both 2012 and 2013. Leading
TiO2 consumer China’s economic growth is pegged at 9.3%, 8.7%
and 8.8% for 2011-2013. TiO2 demand in Asia is forecasted to be
41% higher in 2015, according to industry consultant TZMI.
_ Supply/Demand Imbalance has Begun – TZMI has also predicted
a supply/demand imbalance in the TiO2 market, and does not expect
this shortfall to be rectified in the short to medium-term, until
additional capacity is brought online through either new greenfield
projects or expansions to existing mineral sands projects. Artikol has
forecasted 2015 pigment consumption of 6.23mt, over one million
tonnes higher from the 2010 figure of 5.015mt. In the feedstock
market, global demand has just begun to outstrip supply, with
industry forecasts for this gap to widen considerably through to 2020.
_ Increasing Prices for Both Feedstock and Pigments – TiO2 prices
have been increasing along with stronger global demand, as
feedstock consumers (pigment producers) have been forced to
negotiate supply contracts in a market now faced with increasing
supply deficits, leading to steeper (and more frequent) price hikes.
For example, leading feedstock producer Iluka Resources recently
announced H2/11 price hikes between 50% and 75%. Pigment
producers have been forced to follow suit, with recent price
increases ranging between U$250 and $500/tonne reported so far
this year.
POTENTIAL CATALYSTS:
_ December 2012 – Release of the Preliminary Feasibility Study on the
La Blache Project.
_ 2012 – Possible agreements with industry end users of TiO2.