Few Capital Pool Companies (CPCs) hit the ground running like Argex Silver has done since acquiring 100% of the La Blache Titanium-Vanadium Project in mining friendly Quebec. Tied to this is a proprietary metallurgical process for extracting titanium, vanadium and iron which will first be utilized in a small-scale pilot plant processing facility which Argex’s team is building prior to commercial production. This plant should be operation by this year-end and if it proves out as expected, Argex could be well on its way to becoming the lowest cost titanium and vanadium producer in the world, producing a high quality end product. More than that, after gearing up production, Argex believes that it could ultimately produce as much as 30% of the world’s annual output of titanium. Michael Dehn, Argex’s newly appointed President and CEO will fill us in on the details of his exciting young company.
Resource Intelligence: Argex certainly appears to have the potential to become quite a big player on a large market which few investors know anything about. Can you tell us how your small start-up got here in the first place?
Michael Dehn: Argex Silver Capital Inc. was originally a CPC which entered into an agreement in principle on November 10, 2008 to acquire all of the assets of 7013833 Canada Corp which consisted of a group of 18 claims totalling approximately 995 ha (9.95 km2) in area with showings of iron ore, titanium and vanadium within the vicinity of the Lac La Blache area on the North Shore of the Province of Quebec. Lac La Blache is situated approximately 125 km northwest of the town of Baie-Comeau. Also included in the deal was a group of 185 claims in totalling approximately 9,845 ha (98.45 km2) approximately 350 km north of Baie-Comeau on the North Shore of Quebec and generally referred to as the “Hanna Mining”, “Consolidated Morrison” and “Fortin” Properties. The transaction was completed on Oct. 30, 2009.
RI: So what made these claims so attractive as a qualifying transaction?
MD: Well, La Blache has an historic (non NI 43-101 compliant) 78M tonne resource with grades of 20.5% titanium dioxide, 48% iron ore, and 0.36% vanadium that was first discovered in 1952 and subsequently explored by Bersimis Mining Company, a subsidiary of Price Pulp and Paper. At that time the metallurgy required to process the ore would have been too complicated for the technology then available, so the deposit just sat there. Times have changed, and now we have a very economic deposit which can be mined and processed with new technology which is available today.
RI: Most investors are probably not that familiar with the uses of titanium and vanadium. Can you give us a little background on these metals?
MD: Certainly. Few people realize the fact that there is more titanium in the earth’s crust than there is nickel, zinc, chromium, tin, lead, mercury, and manganese combined! The key difference is that these metals are concentrated in large, easily mined ore bodies, while titanium ores are widely dispersed throughout the earth’s crust. Only about five percent of the titanium mined today is actually used in its pure metal form while the other 95% is used to manufacture titanium dioxide (TiO2), an ingredient in paper, paint, plastics and white food coloring. Titanium weighs 40% less than carbon steels and can be strengthened through alloying with metals such as aluminum and vanadium. Titanium is nonmagnetic, nontoxic, biocompatible, possesses good heat transfer properties and is resistance to acids, making it and its alloys useful in a wide range of chemical, structural, petrochemical, marine and biomaterial applications.
Vanadium is used as an alloy with iron to make carbon steel, high-strength low-alloy steel, full-alloy steel, and tool steel. Auto and machinery manufacturers recognized the toughness and fatigue resistance of vanadium alloys as far back as the early 1900’s and began to incorporate it in alloys used in axles, crankshafts, gears, and other critical components. It’s also used with aluminum to provide the required strength in titanium alloys used in jet engines and high-speed airframes. In an October 2008 article, Discover Magazine called vanadium “The element that could change the world.” It could play a key role in helping to make renewable energy truly successful because it can be used to make highly powerful and efficient batteries which have potential uses in large scale power grids. When combined in lithium-ion batteries, vanadium has also been shown to be effective in significantly improving their performance. So we may also see vanadium in the next generation of hybrid car batteries.
RI: Tell us a little about the processing technology that you now have available to make your deposit economic at this time.
MD: As I said earlier, until recently, there was no economic way to extract the metals from our deposit. We believe that the process we intend to use could be as revolutionary for our industry as heap leaching was for gold mining.
Metallurgists propose a closed-loop process consisting of HCI (for the initial leaching step), which is regenerated and returned to leach fresh ore and a brine matrix (which is inert throughout) and is also recycled to the leaching step. Titanium is removed through a hydrolysis process followed by a screening process which produces the final TiO2. The recuperation rates obtained from initial testing indicates that we should be able to extract between 90% and 95% of the titanium with a purity of 96% to 97% in the final product. Iron, in the form of hematite, with a purity of 66% to 70% is produced by a hydrolysis process on material coming out after the titanium hydrolysis process. The initial tests indicate that we should be able to recover between 95% and 99% of the iron. The proposed process has no emissions of greenhouse gases or toxic residues and high-value end products are created directly from the process.
RI: So where do you go from here?
MD: We are in the process of drilling now at La Blache in order to expand the historic tonnage there and bring it compliant to NI 43-101 standards. The previous drilling was only done to a depth of 20m so this should not be difficult to accomplish. Because the deposit is massive and close to the surface we expect to be able to easily double the historic tonnage by simply drilling to 40m. That, of course, remains to be seen but there doesn’t appear to be any reason why it won’t. We plan to drill several holes to between 150m and 250m. If we are still in economic material at that point, who knows how much tonnage we may have. Concurrent with this we expect to complete a small-scale processing facility by the end of the year where we can demonstrate the effectiveness of the metal extraction technology.
RI: What kind of capital requirements are you going to have in order to get into production?
MD: Our initial pilot plant is expected to cost in the area of $100 million. The beauty of our business model is that these will be modular in nature so we can increase capacity by simply adding more units until we have a planned 10 of these in operation. That will also give us the ability to do routine maintenance or handle production problems on one plant at a time without have to shut down the whole operation.
RI: $100 million is quite a chunk of money for a pilot plant. So ten of these will cost you $1 billion? How are you going to finance that?
MD: Based on the investigations we’ve made and discussions we’ve had, it appears that we should be able to secure debt financing for virtually all of the capital required to get into production. We also expect to be self-financing through cash flow fairly quickly after we begin production. We have $4 million in the bank and will need another $5 million in equity capital this year but that is already in place through the 20 million warrants we have out which we expect to be exercised at $0.40. Once our stock trades above $0.60 for 20 consecutive days we can force the exercise of the warrants.
RI: Can you summarize for investors why you think they should take an interest in Argex?
MD: Certainly. We believe that Argex is in a pretty unique position to capitalize on a market where there is little competition and where we have the opportunity to establish ourselves as one of the major producers in the world at perhaps the lowest production cost in the world. If we are able to do that within our expected timeframe and budget, we should have a very happy group of shareholders.
- Increase our 43-101 compliant resource, hopefully to the 150 million tonne range
- Commission a mini-plant to test out the extraction technology on a small scale
- Start scoping studies - one for the technology and one for mining operations
- Start a pilot plant in 2011
Disclosure: No Postions