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.
research note, Ubika managing director and lead analyst Vishy Karamadam
said the stock had "compelling long-term investment potential."
Karamadam said it believes the recent acquisition of Canada Titanium's
(CTL) exclusive titanium dioxide extraction process "sets up Argex for a
After acquiring a 50.1 percent interest in
CTL in October 2011, Argex has transitioned to a near term producer of
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
from the current $3,500 per tonne. This would immensely benefit
producers and processors alike, the independent reserach firm said.
demand is highly correlated to GDP growth, future growth of titanium
dioxide would be primarily driven by emerging markets such as China and
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
This would benefit the investors as Argex plans to declare share dividends from the sale proceeds, Ubika's Karamadam said.