What Is Next For Argex Titanium ? good read
What Is Next For Argex Titanium (TSXV: RGX)?
Every year the TSX Venture 50 awards the top ten companies listed on the TSX Venture Exchange in each of five major industry sectors: Oil and Gas, Mining, Technology & Life Sciences, Diversified Industries and Clean Technology. This year Argex Titanium (TSXV: RGX) was added in the mining category. Ubika Research initiated research coverage on March 5, 2012 when the stock was trading at $0.60 cents. The stock has had a good run and closed at $1.26 on Feb 27, 2013 up 110% in a year’s time.
Argex Titanium (through its subsidiary Canadian Titanium Ltd) owns the patented process technology for production of a high purity TiO2 pigment (called the “CTL Process”). High purity TiO2 is an ingredient in a wide variety of commonly used day-to-day things such as paint, plastics, and paper. TiO2 is a complex product, which needs to meet a variety of quality standards such as color, brightness, refractory index, and morphology (form and structure). As such it undergoes rigorous testing before end customers will buy this product.
RGX understood this challenge and in April 2012, signed a technical collaboration agreement with PPG Industries (the 2nd largest paint company in the world). This was a good win as it boosted its credibility as a serious player in the industry. This agreement has resulted in RGX acquiring a motivated partner/future customer who is ready to work and help RGX perfect its process to meet the rigorous standards for paints where TiO2 quality can determine the end quality and satisfaction of paint customers and hence paint manufacturers are rightfully very demanding on the quality of TiO2. The price of TiO2 has been rising over many years suggesting robust demand and this means if RGX were to meet the quality standards, finding buyers won’t be a problem particularly since CTL process is expected to be highly cost competitive.
The CTL Process is a proprietary, solvent extraction chemical process developed by metallurgists who had previously earned their stripes perfecting the uranium and nickel extraction processes. Argex owns 50.1% of Canadian Titanium Ltd the company which developed the CTL process. The CTL Process uses off-the-shelf equipment currently used in the nickel, uranium, copper and rare earth extraction processes reducing any possible procurement, installation and assembly risk in a scale up scenario.
Argex started producing the high purity TiO2 in their Mississauga (Ontario) pilot plant in Feb 2011 and an expansion project was completed in Sept 2012. Since the expansion the company has been producing 10kg/day of high purity TiO2.
Questions for investors include: what is next for RGX? And is there more to Argex? Or has the stock run its course? At Ubika Research, we believe there are several positive developments yet to be reflected in the current stock price. There are several catalysts for investors in the months ahead for the company. Argex is working on a feasibility study for its CTL process to scale up to a full scale production scenario. A favorable feasibility study will lead Argex to tie up project financing to get to full production. Given that this is a low temperature, closed loop solved extraction process (used in other industries and hence not a path breaking process) using off-the shelf equipment, the step to get into production should be possible to achieve with relatively lower scale up risks. RGX has been adding to its management team to drive towards this outcome.
Additionally, PPG and other possible buyers are testing the pilot plant TiO2 production. If the pilot plant performs as per expectations, an off take agreement with PPG or other buyers is a likely outcome as well. The modular nature of production means we anticipate to get to production for RGX with a 25,000-50,000 tonne/year high purity TiO2, one module facility could cost $100 million to $200 million. The feasibility study will provide definitive clarity on the cost and economics of a full scale production using the CTL process. Nevertheless, so far all indications suggest that the project financing to get to production given its current market capitalization of $150 million and the PPG relationship should be an achievable objective. Therefore, we believe patient investors are likely to see more developments that are positive in the coming months.
https://www.smallcappower.com/posts/argex-titanium-tsxv-rgx-commentary-28-2-2013