Agex Titanium catapults to developer with positive feasibility study

Argex Titanium (TSE:RGX) has revealed the results of a feasibility study for its plans to industrially produce titanium dioxide, with the company boasting a net present value of almost $1 billion on a pre-tax basis.

The study on the viability of the project, completed by engineering firm Genivar and Ernst & Young, was based on a 50,000 tonnes per year first-module production facility to be located in Salaberry-de-Valleyfield, Quebec, with an estimated life of 25 years.

The Quebec-based company, which recently wrapped up a $10 million financing split between Ressources Québec, a subsidiary of Investissement Québec (IQ), and a U.S. based fund manager, has a proprietary mineral extraction process that allows it to produce high purity, or 99.8 per cent pure, pigment-grade titanium dioxide directly from run-of-mine material at its deposits.

On a pre-tax basis, the net present value for its planned industrial facility was estimated at $954.4 million, or $678.3 million after tax, at a discount rate of 8 per cent. The internal rate of return was projected at 40.1 per cent, or 33.8 per cent after-tax.

The feasibility report also sees a payback period of 4.2 years pre-tax, or 4.5 years after-tax, for total projected capital costs of some $247.6 million, which includes purchase, installation and contingency. Total revenue from the project, including by-products, is seen at a whopping $4.92 billion.

“The Valleyfield project described by the study represents extremely positive news for Argex and its shareholders. The study’s completion is a significant milestone on the pathway to production,” said president and CEO Roy Bonnell, in a statement announcing the figures on Wednesday.

“The results as outlined in this news release make a compelling case for the economic viability of the project.”

Compelling indeed. The feasibility study was an important part of what the company needed to complete before it could finance the industrial plant, and with the positive results now in hand, the company forsees its chances of securing project financing greatly improved.

“We believe that our ability to secure project financing, which is non-dilutive to our public equity, has been greatly enhanced because of the highly positive economics contained in this study, the TiO2 purchase agreement we have signed with PPG industries, and our expectation that Ressources Québec Inc., a subsidiary of Investissement Québec Inc., will be an important partner as we move forward,” said Bonnell in the release.

He added that based on discussions with potential partners, current institutional investors and other financial organizations, the company believes a significant portion of the capital costs required for the first module can be fulfilled at the “project level”, thereby minimizing dilution to Argex’s equity. If all events go as planned, Argex is expecting to commission the plant in the summer of 2015, producing titanium dioxide at industrial scale from the first module, with additional modules to be added easily at the current location thereafter, benefiting from existing infrastructure and cash flow.

The company’s fast progression from a junior explorer — as well as the securing of financing from not only the largest project finance provider in Quebec, but also an arm of the Quebec government — has already led to a supply and collaboration agreement with the biggest customer of titanium dioxide worldwide, PPG Industries (NYSE:PPG), the second largest paint company in the world.

Argex sees even more supply agreements on the horizon, or other similar collaboration deals, as its production technology is one that has quickly become the envy of its peers. The innovation in Argex’s process lies in how the equipment is used and how the solvents and temperatures are properly balanced, with its method for mineral extraction operating at atmospheric pressure, thus eliminating the need to handle chemicals at very high temperatures.

Rather than producing toxic waste, Argex’s low emissions, closed-loop process, which yields minimal inert tailings and uses relatively low levels of hydro chloric acid that are regenerated after use, produces other pure saleable products that can be sold to other industries. This, economically, becomes much more interesting of a scenario.

Titanium dioxide is an inorganic substance characterized by brightness and very high refractive index, making it an ideal pigment in paints, plastics and paper. Each one of the company’s modules at the industrial plant, where permitting is already underway, is expected to have a maximum capacity of 50,000 tonnes per year of titanium dioxide pigment production, mainly geared toward paint, plastic and cosmetics applications.

According to the company’s statement Wednesday, Argex is already working with its consultants and vendors to improve on the “already impressive” results of the feasibility study, with areas that can still be worked upon on a cost-savings basis, such as energy recovery, credits from by-products, and optimization of feedstock supplies

http://www.resourceintelligence.net/agex-titanium-catapults-to-developer-with-positive-feasibility-study/