Ubika Research

Argex Mining Inc

March 05, 2012 12:13 ET

INITIATING COVERAGE: Purchase of Proven Technology Transitions Miner Argex as Producer of Sought-After Mineral Titanium Dioxide

TORONTO, ONTARIO--(Marketwire - March 5, 2012) - Ubika Research today initiated coverage on Argex Mining Inc. (TSX VENTURE:RGX) with an Undervalued stock rating and an Ubika Model Price of $3.30 (March 2, 2012 close: 60¢), citing its view of the stock's "compelling long-term investment potential."

"We believe the recent acquisition of CTL's exclusive TiOΓéé extraction process sets up Argex for a calculated take-off," says Vishy Karamadam, Ubika's Managing Director and lead researcher of the initiating coverage report. "The potential for Argex depends upon its ability to successfully scale up its CTL closed-loop extraction process to industrial size production. Current production from the pilot plant has been encouraging so far. The Strategic advantage of Argex is its potential to become the go-to processor for any feed provider with high concentrations of TiO2, that cannot be processed using non-CTL technology.

With the CTL technology, Argex is set to become a near-term producer of high purity titanium dioxide (TiOΓéé) fairly rapidly, along with by-products iron and vanadium, all three highly prized and sought after in fast emerging economies such as China and India. TiOΓéé has a wide range of applications, from paint to sunscreen to food colouring. It is most widely used as white pigment because of its brightness and in fact was used to paint the outside of NASA's Saturn V rocket to give its ejected parts recognisability in space.

In October 2011, Argex acquired a majority interest (50.1%) in privately owned Canadian Titanium Limited (CTL) for a cash consideration of $1 million and the issuance of two million Argex common shares to the selling shareholders of CTL. As part of the deal, CTL granted Argex an exclusive licence to use the technology for the recovery of TiOΓéé in Quebec and a non-exclusive licence for the rest of the world.

The CTL process is a patented metallurgical process that allows for the production of high purity (99.8% pure) pigment grade TiOΓéé product. The company has patents in the U.S., and in Canada and India, and has filed patents in many other countries including China etc.

Ubika's research report argues, "Argex currently trades at a significant discount (~450%) to its NAV [Net Asset Value] of $3.30/sh, providing strong investment opportunity for early stage investors who are not risk averse. We have used a conservative discount rate of 12% in arriving at the NAV to account for the risk in scalability of its CTL extraction process."

The report further adds: "As demand is highly correlated to GDP growth, future growth of TiOΓéé would be primarily driven by emerging markets such as China and India… Demand growth for TiOΓéé in China has kept pace with the country's rapid GDP growth of 9-10%, reaching ~1 million tpy [tonnes per year] from just 200,000 tpy in the last decade. A rapidly growing middle class in India is expected to fund the construction of houses and accelerate automobile purchase and, in turn, increase TiOΓéé consumption."

The company owns 100% of the La Blache and Lac Brule titanium properties on the North Shore of Quebec. Ubika believes that the company will focus more on the Lac Brule property initially because of an ore purity grade of about 30% TiOΓéé and expedite the preparation of an NI 43-101 resource estimate and feasibility study.

In addition to its long-term potential through production scalability and its undervalued stock, Ubika found an additional strength in the company's management and board of directors. Karamadam points out that its managers have "decades of experience in mineral exploration, mine development, mine operations and investment banking, starting with CEO and founder Roy Bonnell, who brings significant capabilities in financial and investment banking."

Ubika's report is available for download at: http://www.smallcappower.com/companies/argex-mining-inc/research-reports.html

Ubika is an investment research and capital market services firm based in Toronto and Vancouver with a proven track record of identifying and launching coverage of high potential small cap stocks at an early stage, thus offering timely market insights. Its specialty is small-cap companies with a market capitalization of <$1 billion.

DISCLAIMER: Ubika Research has received compensation from Argex Mining Inc for providing analyst research coverage. Except for the historical information presented in its reports, matters discussed in these documents contain forward-looking statements that are subject to certain risks and uncertainties. Hence, actual results could differ materially from any future results, performance or achievements expressed or implied in the reports.

Ubika Research and smallcappower.com (are both divisions of Ubika Corporation), and are not registered with any financial or securities regulatory authority, and do not provide nor claim to provide investment advice or recommendations in its reports. Readers are encouraged to talk to their own investment advisor before making specific investment decisions. Our full disclosure is available at http://smallcappower.com/disclosure.aspx

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