Argex completes PEA on titanium dioxide project

The economic viability of Argex Mining‘s (RGX-V) La Blache titanium dioxide project in Quebec received validation today with the results of a preliminary economic assessment, the company says.

The La Blache deposit, about 120 km northwest of the city of Baie-Comeau on the north shore of the St. Lawrence River, has a National Instrument 43-101 compliant resource of 30.88 million tonnes grading 18.78% titanium dioxide (TiO2), 63.29% iron (Fe2O3) and 0.45% vanadium pentoxide (V205) in the measured and indicated categories. Inferred resources add 2.87 million tonnes of 18.67% TiO2, 63.06% Fe2O3, and 0.43% V205.

According to the PEA, Argex’s 100%-owned project will have a pre-tax internal rate of return of 32% and a net present value of $2.2 billion at an 8% discount rate. The life-of-mine has been estimated at about 25 years with payback in seven. Capital costs come in at about $801 million and total operating costs (net of by-product credits) will be an average of $586 per tonne of TiO2 over the life of the mine. The model was based on an initial production profile of 15,000 tonnes of TiO2 a year, and will be later scaled up to 195,000 tonnes a year.

The PEA used a three-year trailing average for the price of TiO2 of US$2,846 per tonne. Today titanium dioxide is selling for between US$3,400 and US$4,000 per tonne, says Mark Billings, the company’s co-founder and chief financial officer. “The price should reach US$6,000 per tonne by the time we go into production.”

The Montreal-based junior has proprietary technology that enables it to produce high-purity TiO2 directly from run-of-mine material. The process has been running continuously since February at a mini-plant in Mississauga, Ontario. “The TiO2 pigment produced has achieved brightness results that are in line with or superior to some of the major TiO2 industry producers,” the company noted in a press release.

Enrico Di Cesare, the company’s chief operating officer and vice-president technology said the study “confirms the technological and economic viability of Argex’s proprietary metallurgical process and clears the path towards the next step, the construction of an industrial-sized pilot plant. As a typical PEA is based on laboratory-scale metallurgical testing our study has gone well beyond what is normally expected…This should permit us to fast-track our feasibility-stage studies.”

Co-founder Billings said in an interview from Montreal that the chemical process, invented by metallurgists from India who came to Canada in the 1970s, involves placing the ore in vats of hydrochloric acid at room pressure and temperature and titanium is precipitated out of the slag. The hydrochloric acid is then recycled and reused. “We spent a lot of time and money on the process and low and behold the tests all came back positive,” he says. “No one else to our knowledge has been able to do this…A lot of people told us it was impossible to be done.”

Argex bought the properties in 2009, raised $5 million and drilled about 20,000 metres to validate the historic resource. They published a resource estimate earlier this year in May. Billings say the company will conduct more studies and undertake a feasibility study and that it’s feasible Argex could be shipping titanium dioxide by the end of 2013 or early 2014.

Billings also notes that the single biggest application for titanium dioxide is in paint but it also has a number of other uses including welding and titanium metals for civil and military aviation. “There’s a big demand from the big aircraft companies for more titanium metal,” he says, “and we could use our titanium dioxide as feedstock to produce titanium metal.”

The La Blache property covers three titaniferous magnetite lenses named Hervieux West, Hervieux East and Lac Schmoo. The magnetite lenses are hosted in intrusive lithologies of the La Blache Anorthosite Complex and are aligned over a distance of 6 km. The individual lenses are between 100 metres and 1,150 metres strike length with thickness ranging from 45 metres up to 215 metres. According to Met-Chem Canada, the drill holes completed by Argex indicate that the Hervieux East and West deposits are in large part open at depth.

At presstime Argex was trading at 45¢ per share within a 52-week band of 30¢-92¢. The junior has about 92.14 million shares, fully diluted.