“A significant amount of work is done and I think a lot more will become apparent in the next 30-60 days.”
“We’ve pretty much seen every up and down” is the way The Howard Group thinks about Argex Titanium since we first invested five years ago and formally began working with the company in early 2012. It should have been one of the darlings on the TSX Exchange. It had all the potential to become a blue sky dream story, but reality dealt investors a harsh hand.
We have experienced the good times, such as when the company announced a key relationship in 2012 with PPG Industries, through the meltdown that occurred in 2015, after the previous management team failed to secure funding for a full scale production facility. The company was on life support and the prognosis was grim.
Following a great deal of behind the scenes work lead by Board member, Mazen Haddad, and with the timely help of some key individuals and relationships, the patient opened its eyes in 2016. While the full extent of the recovery remains to be seen, the company has survived a near death experience.
The team that brought Argex back to life are of the opinion that yes, not only will there be a full recovery, but the patient will be “better than new.”
We know that shareholders (we and many of our relationships) have multiple questions. In a detailed 30 minute interview, Grant Howard, President of the Howard Group recently spoke with Mazen Alnaimi, Argex’s new CEO and Chairman of the Board.
Below we have provided the key topics and some excerpts:
- Details on Mr. Alnaimi’s background: “I started many chemical companies one of which is Chemanol, which I started about 20 years ago as a small investment of one and a half million dollars and have it grown it to a seven hundred million dollar public company.” Click here for more bio details.
- Due diligence leading up to personal investment of $1.2 million: “I actually dedicated six months evaluating Argex and its technology and I was trying to figure out exactly what went wrong. The conclusion was there was enough merit in the company and its technology to invest.”
- Perception of the technology: “The fundamentals associated with the technology are solid and the mistakes that were done before are correctable and having been there, done that, I felt that there is a risk, yes, but the risk can be mitigated and that coupled with the fact that I have a very solid team working with me and they worked with me before the past fifteen years that we felt very confident that we can tackle anything that comes our way from the technical point of view and the implementation point of view.”
- Improvements in the technology: “First of all, we have looked at what has been done before at the lab scale and the pilot plant scale and we have changed a few parameters of the process and that has yielded significant result improvements. We have also applied proper engineering practices and we were able to reduce, by harnessing the energy and converting the energy within the process to improve on the on the cost efficiency and advantage.”
“But based on the improvements we have done at the lab scale and the product we are getting now, I feel very confident that we will be able to produce what is required by PPG and other world class paint manufacturers would require.”
- His financial modelling of the process: “Slight variation but our numbers confirm what the previous management has suggested. But our approach to reach there is different from what they had envisioned… And even better.”
- Status of Relationship with PPG and HELM: “PPG is very much at the table with us. We’re in constant communication with them, and they are very keen on our technology and having us a part of their supply chain. As far as HELM, we have certain agreements in place with HELM. And they’re an international offtaker and they are part of multiple sources where we can offtake our product to many international companies.”
- Performance warrants and the milestones management must achieve to earn them: “First of all, for restarting the company, a certain percentage to be given at that time and restarting the lab activities and achieving the requirement for the company to function as a legal entity meeting its obligation. The second milestone would be to achieve the product consistency at the lab scale and get the gross product approved by prospective buyers and the third one would be to complete the basic engineering package. The fourth one would be to complete the detailed engineering feed package.”
- Timeframe to achieve the milestones: “My expectation is that within the next 45 days we should get the consistency on the product and we should start the basic engineering package by the end of the year and we should start working on the feed package in the second quarter of 2017 and we should complete the other thing by the third quarter of 2017, ready to build the plant.”
- Mr. Alnaimi’s perspective on the issues of getting financed in the past: “We put those milestones and we make it very transparent to the market….what we are trying to achieve now. We’re going to achieve it. So we will not jump two steps forward and go back one step. It’s that we have to make sure that consistency is made at the lab scale and the pilot plant and is also approved by our buyers.”
- Rationale for initially building a 25,000 tonne / year plant: “We wanted to derisk the engineering developmental process. I think 25,000 tonnes is a lot less riskier than going immediately to a 50,000 tonnes. So eventually we will reach 50, 75 and 100,000 tonnes based on building parallel trains based on the success of the first 25,000 tonnes plant. ”
- Response to question on possibility of consolidation of shares: “We don’t see any reason for consolidation at this stage … We have done some financial modeling on that and I think when we look at the net present value of the stock right now based on the future earnings, there is a sizable appreciation if it all goes well.”
- Mr. Alnaimi on the dream of disrupting the Titanium Dioxide industry: “Definitely, definitely, otherwise I wouldn’t have invested in it. I think you’re looking at an industry that is valued around anywhere from 15-18 billion dollars per year. You’re looking at a technology that has been no significant advantage – no significant improvement has been done for the past 30-40 years. The cost is very high and the market needs a new player with a greener technology and I have to be careful when I say greener technology, and also a more cost advantageous structure. And that’s what Argex is promising to deliver. And I think Argex is not looking purely at building a 25,000 tonnes plant or a 50,000 tonnes plant or a 100,000 tonnes plant. We’re looking at expanding the technology to other areas of the world, geographical areas of the world. ”
- In closing: “I would like to assure you again that we have achieved- there was significant achievements in the last couple of months since we took over. We took over about the middle of July and I’d have to say that we are almost 2/3 complete with our technology and we have significant achievement of us satisfying the TSX and getting clearance and approval to continue listing on the TSX exchange. We were able to reduce our payables by 70%, we have reorganized, done our cash flows, budgets, resolved issues with our mining properties and we are now completed a corporate teaser that will go to investors. So a significant amount of work has been done and completed in 60 days and that even astonishes me myself because I didn’t believe that we would be advancing at that stage, at that fast pace and you know we are happy to be able to do what we have been able to do and I think a lot more will become apparent in the next 30-60 days.”
To listen to the full interview, see below or click here.