 Playing the Indium Card
Bob Moriarty
Archives
Mar 18, 2008
Mining, as in every other enterprise,
requires some sort of competitive advantage to make business
sense. You need either the highest grade or largest tonnage or
be working in the most favorable economic environment to have
any advantage over all the other 2999 junior mining companies
competing for scarce investment dollars.
I returned recently from a
10-day trip to South America where I saw some incredible
projects that I wrote
about. Those shares have barely budged. But they will, they
were great stories.
There are times my job brings
great joy. I ventured down to Southern Argentina, deep in Patagonia,
to see the Pinguino Project owned by Argentex Mining.
(AGXM-OTCBB) It's your bog standard, silver- lead- zinc- gold-
copper story. They have 58 kilometers of known vein structure
exposed at the surface with lots of up to $400 rock that could
be mined and milled for $10 a ton or so. Boring?
But then, they do have the
indium card
to play. And that's a good card to have as a hole card.
Indium is one of the unusual
metals that those of us who did not take chemistry in high school
or college often confuse with Pluto. Is it an element or is it
another planet on the fringes of the Solar System?
It's an element and a metal
near zinc in the periodic table. Some three times as common in
the earth's crust as silver, it's recovered mostly as a tiny
byproduct of zinc and lead smelting. It's not really rare but
it's also rarely found in economic quantities to mine. The metal
was first discovered in 1863. As late as 1924 there was less
than 1 gram of pure indium in the world.
The primary use of indium is
in high-tech applications, for LCD and LED, plasma flat screen
displays and in leading edge thin film solar-cell technology.
With the increase in demand for flat screen displays the price
of indium has jumped from about $94 a kilo in 2002 to over $1000
a kilo now. One gram of indium is worth $1. [Corrected, thanks to Andre for pointing
out that $1000/kilo = $1/gram not $10/gram as originally stated]
Argentex has some intersections
of 177 gpt.
The project is a lot more interesting
than I have really indicated, indium aside. It's in a district
with a rich mining history of 4 mines in production and 9 more
in advanced stages. Argentex has already outlined almost 60 km
of veins outcropping at the surface, only 5% of which has been
drill tested. Actually, we had a number of pretty bright people
on the tour. Everyone sort of agreed that while Argentex had
done an excellent job of definition of the areas they had drilled,
they needed to be doing some deeper holes and a lot more step-out
holes.
For all they know, the entire
60 km might be mineralized. Since I was there, they have completed
some 250-meter deep holes and rather then stepping out at 40
meters, they are stepping out 100 meters. The project has world-scale
potential and management is willing to listen.
The project has had 10,000
meters of drilling completed; they are in the process of doing
another 10,000 meters of drilling with assays pending. There
will be news and results on a regular basis, which is very good.
Argentex expects to have a 43-101 resource completed by the third
quarter of this year. Basically they are going to keep the drills
turning. The deposit is open along strike in both directions
and at depth. Truly, it's barely been scratched.
Argentex paid $450,000 cash
for the property over five years for a 100% interest. There is
a 2% NSR that they can buy back for $1 million a point.
I personally don't like OTCBB
stocks. I won't participate in any more private placements in
any OTCBB shares; the money is tied up for far too long. The
company has applied for and been accepted on the TSX Venture.
It should be complete in the next two weeks. That's a giant step
forward and I'm going to be a big buyer when that's complete.
I spoke at some length with
President and CEO of Argentex, Ken Hicks, on the site tour. It's
my view that he needs to play the indium card. With the production
of LCD screens consuming over 50% of indium, the demand far outweighs
supply.
Until 2006, a mine in Japan,
the Tohoya mine, produced the highest-grade indium in the world.
The mine has been shut down. Some of the holes at Pinguino had
a higher-grade indium than the Tohoya mine. Pinguino has the
potential for being the swing producer for indium in the world.
That means they get to set the price. Indications are that the
average grade could be in the 100+ Gpt range.
The Japanese make the most
LCD screens today and have a vested interest in controlling a
safe stable supply of indium. I believe some Japanese company
will make a major investment in Argentex just to secure a reliable
supply. Mining companies deal in numbers that major manufacturers
consider chump change. Argentex has a $37 million dollar market
cap right now. That's probably a day's production of LCD screens
for a good-sized producer. Someone is going to be breathing real
hard to do an off take agreement with Ken very soon and at a
big premium to the market.
Indium aside, there are gold-silver
rich veins as well as zinc-lead-silver-copper-gold rich veins.
Argentex has a wide range of alternatives in mining and processing
depending on the value of the different minerals at the time
of processing. Mine planning is going to be critical and it's
going to be important to set up a very flexible mill to process
all the different variations of ore. It's going to be a challenge
but it means they will be mining when prices shut a lot of mines
down.
When I go on a site visit,
there are a lot of small and subtle elements I use to determine
what I think about the company and the project. It's axiomatic
that good companies invite good people. The higher the caliber
of people on the tour, the higher the caliber of the project.
Dumb management invites dumb writers in the hopes of pulling
the wool over their eyes and it works. We had a great tour with
high-class visitors. (With the sole exception of myself).
Ken and his team did a brilliant
job of communicating the very real progress and value of Pinguino.
In many cases, management uses information to confuse. All of
the briefing material we were provided was germane, short and
sweet. We weren't buried in details but we had all the information
we needed.
Argentina and the province
of Santa Cruz in particular are very mining friendly, unlike
other areas of the country. The province has strong infrastructure,
power, roads, ports and labor. Interestingly enough, the wind
was howling while we were on the site. Wind power is not the
magic bullet many greens would have you believe but it is some
help. When a prior junior was doing cost projections, they dismissed
wind power as being too expensive. But oil costs 4 times as much
now as it did then and I suspect putting in some wind units may
well make sense down the road. The wind is pretty constant and
is well above 15 knots. We had to park into the wind or risk
having a door close on your leg or knock you over.
Drill results, obviously will
be important and will be released on a regular basis. The 43-101
resource will be a key milestone and I think will result in a
valuation 2-4 times higher than today. The company is very, very
cheap.
The management is as strong
as any I have seen in the last year or so. They have built a
great team on the ground and unlike most juniors, have put together
a team of real directors, not just a bunch of guys holding a
rubber stamp. Ken Hicks knows he has a world-class project and
he's building the production team that can put together a world-class
company.
I don't own shares; I'm not
buying until I can buy Canadian shares, that will be shortly;
within a few weeks. Without a 43-101 resource it's simply not
possible for an investor to come up with a number they can hang
a hook on. The drill results are great, the project is in a mining
friendly country and area of Argentina but we need some numbers.
It will be higher than most investors think and will put a base
under the price of the shares.
Argentex will probably advertise,
they are at the area where they need name recognition and we
provide that. I am biased because I have some potential interest.
We don't share in your profits so do some research yourself;
it's your money.
I really like the management
and the project. They have a bunch more of assets in Southern
Argentina but all they do is confuse me. This is the money tree
and anyone buying shares at these prices will be rewarded down
the way.
Argentex
Mining Corp
AGXM-OTCBB $1.32 (Mar 17, 2008)
28.3 million shares
Argentex Mining Corp website
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Mar 18, 2008
Bob Moriarty
President: 321gold
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321gold Ltd
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