We likely take for granted the vibrant colours in our lives, and probably don’t give much thought as to how they are created. What few people know, though, is that titanium dioxide (TiO2) is responsible for so much of the colour in our world in products such as paint, cosmetics, and is even added to some foods to make them more appealing to the shopper’s eye. While very little TiO2 is used in food, it represents about 20% of the cost of a can of paint.
TiO2 is a white, opaque and naturally-occurring mineral and is one of the top 50 chemicals produced worldwide. It is odourless and absorbent.
“It’s the light that’s reflecting off the TiO2 that is creating opacity and masking whatever is behind the paint,” Argex Titanium Inc. (TSX: RGX) President and CEO Roy Bonnell told SmallCapPower.com.
Argex expects to change the way TiO2 is produced. The Company’s proprietary technology uses solvent extraction to make the high quality TiO2 pigment from raw titanium ore. It is a significant change from the two existing processes: chloride and sulphate, which are not environmentally friendly. Argex’s proprietary process, on the other hand, is significantly greener making it more difficult for scientists to come up with an alternative.
Mr. Bonnell believes the Argex method is better in two distinct ways. First, it is likely to be the lowest-cost production technique in the industry. Argex’s process utilizes lower quality, low cost Ilmenite titanium dioxide as raw material and coverts it to a high purity TiO2 product, allowing Argex to capture the greater margins compared to its competitors. Second, it is able to utilize a greater variety of ore bodies as compared with the other methods.
“Argex’s process allows the other metals in the ore it receives to be extracted as pure, saleable by-products, and thus allows the company to produce a pure titanium dioxide,” he explained. These by-products drive down the production cost per TiO2 tonne to under $1000 / tonne. This offers a high margin with TiO2 selling at approximately $3,400/tonne at today’s prices.
Argex’s technology has received a thumbs-up from PPG Industries (NYSE: PPG), the world’s largest paint manufacturer, which signed both an offtake agreement and a services sharing agreement with company. This includes a technical collaboration agreement intended to make Argex’s TiO2 pigment compatible with various end-use applications for PPG; the offtake agreement will make PPG will be Argex’s first customer for TiO2 pigment suitable for use in its architectural paint production. PPG previously manufactured titanium dioxide using the chloride process at one of its chemicals plants.
In addition, on August 26, 2014, Argex announced an exclusive long-term marketing and supply agreement with HELM U.S. for the distribution of TiO2 in the United States and Canada. Under this agreement, HELM U.S. will exclusively market and distribute 50%, up to 25,000 metric tons per year, of TiO2 produced from Argex’s first industrial-sized plant to be located in Salaberry-de-Valleyfied, Québec. The agreement is for a period of seven years beginning when the plant reaches a certain capacity, expected to take place in the first quarter of 2017.
“This is a significant step for Argex. It demonstrates confidence in the scalability of our technology and in our ability to partner with world-class leaders in the industry,” Mr. Bonnell said in the release.
Argex Titanium is currently raising the capital necessary for construction of its first 50,000 tonne per year industrial production module. Once that financing is complete, the company expects to begin production within 18 to 24 months.
“We think we’re going to get it right very quickly, based on our experience with our pilot plant,” Mr. Bonnell added.
Argex has about 137 million shares outstanding and it currently trading near its 52-week low of $0.58 a share.
