Ubika Research starts Argex Mining at "undervalued" with $3.30 price target

Ubika Research has initiated coverage on Argex Mining (CVE:RGX) with an "undervalued" rating and $3.30 price target.
Monday morning, Argex shares were trading at $0.60.
Argex is a junior Canadian resource company that is developing the advanced stage La Blache titaniferous magnetite project, and also owns the Lac Brûlé high grade ilmenite and the Mouchalagane iron ore projects, which are all located on Quebec’s North Shore.

In a research note, Ubika managing director and lead analyst Vishy Karamadam said the stock had "compelling long-term investment potential."

Ubika's Karamadam said it believes the recent acquisition of Canada Titanium's (CTL) exclusive titanium dioxide extraction process "sets up Argex for a calculated take-off".

After acquiring a 50.1 percent interest in CTL in October 2011, Argex has transitioned to a near term producer of titanium dioxide.
Titanium dioxide is an inorganic substance characterized by brightness and very high refractive index, making it an ideal pigment in paints, plastics and paper.

Using CTL's proprietary closed-loop processing technology, Argex plans to advance rapidly towards production of high-purity titanium dioxide along with vanadium oxide and iron oxide as co-products.

The low upfront capital cost of around $100 million to become a producer suggests it is an achievable objective by the end of 2014, Ubika said in its note.

A favorable demand-supply scenario indicates that high-purity titanium dioxide prices could double to $6,000 per tonne by
2015 from the current $3,500 per tonne. This would immensely benefit producers and processors alike, the independent reserach firm said.

As demand is highly correlated to GDP growth, future growth of titanium dioxide would be primarily driven by emerging markets such as China and India.

Ubika Research said that as part of its strategy to focus on titanium dioxide, the company approved the sale of the Mouchalagane iron ore property to Impact Iron Mines, its wholly-owned subsidiary, in November 2011.

This would benefit the investors as Argex plans to declare share dividends from the sale proceeds, Ubika's Karamadam said.