Former PM blamed for Ukraine TiO2 doubts

By Simon Moores
Published: Tuesday, 27 July 2010

Ukraine’s sole miner of titanium dioxide (TiO2) feedstock has blamed the “personal hostility” of former Prime Minister Yulia Timoshenko for the uncertainty over mining licenses it is now facing

Ukraine’s sole miner of titanium dioxide (TiO2) feedstock has blamed the “personal hostility” of former Prime Minister Yulia Timoshenko for the uncertainty over mining licenses it is now facing.

The Ostchem Group, owner of miner Crimea Titan, claims that Timoshenko’s reasons for rescinding the right to mine the Irshansky and Volnogorsky deposits came from personal issues with shareholders of the company.

Last year, Timoshenko effectively shut the ilmenite, rutile, and zircon operations overnight by revoking the mining licence which sparked panic buying from African and Australian sources.

Oleksiy Fedorov of Ostchem told IM: “Discussions concerning legitimacy of the rentÉ had neither economical nor legal basis, but had political character thatÊwas caused by the personal hostility of the former Prime Minister Yulia Timoshenko to shareholders of the Ostchem Group.”

Mining restarted once it was clarified by an independent body that its licence was valid but while Ostchem still battles to clarify its Ukrainian feedstock future, its mines are still in operation.

“Timoshenko’s government repeatedly broke legislative norms in the conflict. However judicial bodies have confirmed the legitimacy of rent and competency of Ostchem’s position,” said Fedorov.

Vienna-based Ostchem owns 50% of Crimea Titan. The problem facing the company is that that the government owns 50% plus one share more, a golden share which gives the necessary sway in a vote on its future.

There is a belief in Ukraine and in the wider TiO2 feedstock industry that the mines will fall into full state control.

“The new [government] has simply endorsed the cancellation of licences and has gone one step further by declaring its intention to fully renationalise the two mines,” said one industry expert.

Ostchem denies any problems between itself, the state and its mining activities and said the two parties are in “useful and effective dialogue” to define the new terms of the lease.

The company expects a “definitive agreement” within two months but stressed its priority to keep the new government out of operational matters.

“At the moment there are no problems between Ostchem and state structures concerning the Irshansky and Volnogorsky mines,” said Fedorov.

“The main [priority] for Ostchem is that present dialogue with Nikolay Azarov’s government does not have any influence onÊworking capacity and development of the mines,” he added.

The search for foreign partners

The two titanium mining regions are in the Zhitomir oblast hosting the Irshansk deposits of ilmenite, rutile and zircon and in Dnepropetrovsk oblast where Volnogorsk ilmenite deposits, is mined.

Ostchem has had control of these since 2004 but revealed to IM it is now searching for partners with more advanced technology to tap into new areas of mineralisation in the Irshansky deposit, in particular the handling of siderite impurities.

“[The technology] would allow us to begin development of new major ore deposits in the Irshansky mine,” said the company, “Éwe are now searching for foreign partners because within Ukraine the technologies do not exist.”

A third region is being developed in the centre of the country near Kirovograd where four areas are being explored.

With the mines operating at full capacity, present domestic mineral production has been hampered by falling mineral grades and a harsh winter which froze water supply lines so heavy mineral concentrate slurries could not be made.

The domestic supply restrictions have hit Ukraine’s two
sulphate TiO2 pigment producers Krymsky Titan and JSC Sumykhimprom which are major consumers of rutile and ilmenite concentrates mined from the country‘s north and centre (see map).

Such is the quality and abundance of Ukraine’s titanium mineral desposits, new projects are looking for investment as outlined by Igor Stelmakh of Ukraine’s Exim Consulting in his presentation in London last month.

Two sand projects, Volchanske and Birzoliviske, require $15m. and $50m. respectively, and the Nosachivoke hard rock deposit needs $600m. to be fully developed.

While all of the permits to start mining have been granted, issues with the investment climate need to be addressed.

Output falls, prices rise

Ukraine exports over half of its titanium concentrate output which has averaged 500,000 tpa over the last five years Ð this has waned in recent times.

Reported figures show ilmenite and rutile concentrate production dropping from 288,440 tonnes in 2008 to 219,070 tonnes in 2009. While these would coincide with and reflect the country’s mining troubles, some have questioned the accuracy of the figures.

“I am uneasy about these figures, they do look rather low,” said one industry expert.

Concentrate production in January 2010 compared with the same month in 2009 depicted a 27% drop in output equating to 6,020 tonnes.

Falling production in the country has resulted in increased enquiries for feedstock in the rest of the world.

“During the past three months we have been inundated with new enquiries from Ukraine, Russia and Eastern Europe for welding grade rutile. We have certainly been receiving interesting offers and matters appear to be intensifying,” one rutile supplier told IM.

Australia’s Iluka Resources Plc also reported increased activity from European buyers.

Feedstock spot prices from Eastern Europe have started to reflect the squeeze in supply.

Ilmenite FOB spot prices from the area are between $85-90/tonne while rutile on an FOB basis now has an asking price in excess of $600/tonne.

With uncertainty in Ukraine and in the wider global feedstock industry, prices are set to either hold at this level or continue to rise. For buyers of titanium minerals, a question mark not only hangs over the country as a consistent source, but also over a steady long-term supply on a global scale.


Ukraine TiO2 by numbers

500,000 tonnes

Average yearly output of ilmenite and rutile concentrates between 2004-2009

130,000 tpa

Capacity of the country’s TiO2 industry through two sulphate producers, Krymsky Titan and JSC Sumykhimprom

10%

Share of the world’s titanium minerals reserves estimated to be over 100m. tonnes

30%

Amount of exported concentrate received last year by Czech Republic, the biggest buyer from Ukraine, equating to 75,000 tonnes

26

Number of explored ilmenite and rutile deposits in the country

$85-90

Spot prices for a tonne of pigment grade ilmenite from east Europe.

$600

Spot prices for a tonne of pigment grade rutile from east Europe.


Ukraine’s titanium minerals and zircon deposits



Source: Igor Stelmakh, Exim Consulting