High inventories, lacklustre
demand, intermittent power supply, unfavourable exchange rates
and falling prices; these are the issues that have plagued the
mineral sands industry over the last few years.
Despite this, titanium dioxide
(TiO2) smaller feedstock producers and those
developing projects remain upbeat about the future, with those
interviewed by IM saying that there were some
positive signs emerging for the next quarter.
However, information released by
some of those producing indicated that this was not case and
that demand continued to be low.
At the end of Q1 2014, a picture
was emerging of an industry seeking to cut costs where ever
possible and keep plans of expansion conservative.
Current producers down tools
In May 2011, Rio Tinto, one of the
worlds largest producers of TiO2 feedstocks
via its Fer et Titane (RTFT) subsidiary, announced that it
would be extending the life of its operations in a project
named TiO2050. This project would see the Lac Tio mine life
extended to 2050 and also the upgrading of equipment and
systems at Sorel-Tracey to improve efficiency.
This plan of action was expected to
cost RTFT $818m.
The company later announced that it
would build a $4bn feedstock production plant in Quebec, under
a plan named TiO4 which also encompassed
a pre-feasibility study for an additional mine in
Two years down the line and, with
prices sagging towards the bottom of the trough, Rio Tinto CEO
Sam Walsh announced that the company would cancel its feedstock
expansion plans. In South Africa, where Rio Tinto is part owner
of Richard Bay Minerals, the company said it would put its
zircon and rutile processing operations on a care and
maintenance footing. The Quebec chloride slag production
facility was taken offline and the pre-feasibility study was
The move comes in response to
weak demand and to reduce operating costs, the company
Iluka Resources also downed tools
in order to wait for market conditions to improve.
In 2013 the company cut its
operating capacity to around 40% and idled its Eneabba mining
operations in Western Australia (WA), which produces ilmenite,
zircon and rutile. It also idled its second synthetic rutile
kiln in Capel, WA and the Tutunup South ilmenite mine. Outputs
at the companys mineral separation plants were
Pigment plant yields, which were as
high as 90% in 2011, declined to the mid 70% level and, in some
cases, to as low as 65% by early 2013.
Production of zircon, synthetic
rutile and rutile, slipped 42% in 2013 when compared to 2012,
consistent with Ilukas preferred approach to a
period of low market demand, the company said.
For 2014, the company said that it
would run its Hamilton mineral separation plant on a month
on/month off basis.
We expect to run the mineral
separation plant over the course of the year, at lower
utilisation rates, as was the case in 2013, as demand
progressively recovers. The exact configuration, whether one
month on, one month off, is a matter for operational
determination, an Iluka spokesman said.
In its Q1 2014 results, Iluka
revealed that total mineral sands production fell 18.6%
year-on-year (y-o-y) as the company continues to operate at
below full production rates.
Rutile production was 33,200
tonnes, an increase quarter-on-quarter (q-o-q) of 50%, and a
y-o-y increase of 29%, reflecting a return to normal mining
operations in the Murray Basin.
Synthetic rutile was once again not
produced, bringing total mineral sands production figures
Shipments from existing inventory
are scheduled to recommence for synthetic rutile in Q2
Ilmenite production also saw a
substantial decline over the quarter compared with the same
period last year, with only 110,200 tonnes produced, compared
with 160,900 previously. Production declined q-o-q by 5.3% from
116,400 tonnes at the end of last year.
New producers Sierra Rutile react
For new feedstock producers, or
those looking to expand, the slip in the market and the fact
that established producers had downed tools and reassessed
their operations, was a warning shot.
For a company like Sierra Rutile,
it meant reassessing its costs in relation to its Gangama Dry
The company completed its first
expansion project, Lanti Dry Mining in 2012, which is now,
fully up and running and working to nameplate
capacity, according to CEO John Sisay.
The next stage of growth for Sierra
Rutile will be the Gangama dry mining project.
Here the company recently completed
a value-optimisation and re-costing exercise for its
feasibility study, which resulted in more than a 17% decrease
in the capital cost, to a total of $85m from the $103m
anticipated in the pre-feasibility study.
Subsequent refinement has
reduced this cost further to $81m, a 21% reduction from the
original estimate. Of this amount, 77% is at fixed prices which
are not subject to increase, Sisay told
As well as looking at how costs
could be cut, Sierra Rutile also optimised the mine plan for
its Gangama deposit, including the incorporation of the current
processing recoveries into the plan.
This optimisation resulted in a
greater than 11% increase in the average rutile production over
the life of the deposit to 93,100 tpa, from 83,400 tpa, which
was outlined in the pre-feasibility study. Peak production in
the first year of operation is expected to be over 100,000
tonnes of rutile.
Market conditions remain a
significant driver in our decision to develop the Gangama dry
mining project, Sisay told IM.
In this regard, although we
are confident of the merits of the Gangama project and pleased
with recent positive market developments, we wish to ensure
that the current market recovery is fully embedded before
implementing this project. We will continue to re-assess this
decision in light of on-going market developments, he
Is there still a market for
projects in the pipeline?
Despite the fact that current
producers are tightening their purse strings and keeping an eye
on the balance sheet, those developing projects, or ramping up
new projects, remain upbeat about the opportunities in the
market. Also, by mid April, paint companys Q1 results
were indicating that the tide was starting to turn and that
demand was on the up. Both AkzoNobel and PPG posted positive
results and Kenmare Resources, which is ramping up its Moma
ilmenite and zircon mine in Madagascar, said that it had seen
increased demand for its products over Q1 2014.
For Base Resources - which brought
its Kwale mineral sands project online in Q2 2014 - sending its
first shipment of ilmenite, and a further shipment of rutile
and zircon in April, to offtake partners in China, its low
overheads show that it is still profitable even with the market
where it is.
The company shipped the rutile from
the Likoni Port facility and the first containers of zircon via
the Mombasa Port container facility. Kwale is profitable
even at these currently soft prices. We do believe the tide
will turn as the long term fundamentals remain robust, however,
I anticipate these low levels to remain for the next couple of
quarters, managing director Tim Carstens told
Despite the projects lower
overheads, Carstens told IM that Base
Resources will be keeping a close eye on the project during the
ramp up and commissioning stage to ensure throughputs and
recoveries are where they should be.
The things we have learned
from this project are many and we are now particularly well
equipped to tackle the next project, Carstens added.
Base Resources expects to achieve
capacity for rutile and ilmenite by the end of June 2014 and
the company expects to reach capacity for zircon by the end of
For Image Resources, which is
developing the Boonanarring project in the North Perth Basin,
the slackening TiO2 market means that the company is
keen to underline the other resources found in the Boonanarring
reserves, specifically the zircon reserves.
The feedstock revenue is
probably less critical to Image than it would be for other
mineral sands operations. Given the unusually high zircon grade
in the Boonanarring reserves (24.5% zircon in the HM, or 1.6%
in-situ zircon grade) in the first two to three years of
operation, zircon and rutile will bring in 75% of the net
revenue from the NPB project, managing director Peter
Davies told IM.
We will also produce around
100,000 tpa of high quality ilmenite with high TiO2
content and low U+Th, which we would expect to be an attractive
blending feedstock for a number of different
applications, he added.
There are well-documented issues
with bringing a project online in Australia. Firstly, energy
costs are higher than projects being developed elsewhere (in
Africa, for example), as are labour costs, and there is the
added complication of the carbon tax question.
In fact, Australias Senate
has repealed the governments plans to implement an
Exploration Development Incentive (EDI) to give tax breaks to
junior exploration companies.
The EDI, originally announced in
September 2013, is expected to focus on incentives for
greenfield minerals exploration activity, allowing an investor
in a mining company to receive a tax deduction as a result of
the companys underlying expenditure on a flow through
The coalition government said the
benefit will be capped to A$100m ($91m*) over 2015 to 2017.
For Image, this alleviates some of
the risk associated with bringing a project online in Australia
as well as there being many positives to such project
Of more importance are the
positive contributions to the project economics derived from
its location, Davies explained.
With an experienced local
residential workforce, Image is not confronted by the usual
costs associated with Fly-in, Fly-out (FIFO) operations, nor do
we have to pay remote area premiums on salaries and
wages.Ê In addition the capital cost of the project has
been significantly reduced through the existence of a main
heavy haulage road, power lines, gas pipelines and our own
water bore all within 500 metres of the planned plant
site, he added.
For Reed Resources, which is
developing a vanadium-titanium-iron mineral deposit in the
Murchison region of WA, the associated costs which come from
working in the country have to be accepted, but as the company
believes it has a low-cost operation, it believes it can offset
the higher associated overheads.
The operating costs were
estimated for processing run-of-mine ore, not higher grade
concentrates, and used conservative estimates for Australian
labour, energy and reagents costs and accounted for only the
vanadium by-product (using flat at a price of $5/lb
V2O5) which came in at $1,214/tonne of
TiO2, Chris Reed, CEO, told
I think one would categorise
that as so far down the cost curve as to be disruptive to
existing technologies/producers, he added.
The company does not yet have an
offtake partner, but Reed said that it was keen to
demonstrate the process on a continuous scale, obtain a
meaningful amount of end product, reach out to those who we
think can benefit the most from having a secure supply of the
cheapest high-purity titanium feedstock and ask them if
theyd like to share the benefits.
I wouldnt ask them to
fund the upstream mine and expect not to be asked to fund the
down streaming plant, Reed added.
A market for
While the market has flagged over
the last year, developing projects have remained upbeat, yet
cautious, about their assets.
Below is a table of other
developing projects which look set to come online in the near
term, or which are already online but are ramping up