ilu/bmx...mineral sands

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BRW Daily
A titanium struggle
By Brian Fisher, executive director Australian Bureau of Agricultural and Resource Economics
Wednesday, December 18, 2002

Heavy-minerals exploration and development activity in Australia's Murray Basin, and on the African east and Indian south coasts, raises questions about the future of the global industry, already beset by over-capacity and soft commodity prices. It also poses the question, where will Australia fit into the global mineral-sands industry?

Few people know much about the use of so-called heavy minerals (mineral sands such as ilmenite, rutile, leucoxene and zircon) in everyday products.

The global titanium dioxide pigment industry, which supplies makers of paints, plastics and paper, accounts for 93% of world consumption of titanium minerals (mainly ilmenite, rutile and leucoxene). The remaining consumption is in titanium metal production and smaller industrial applications such as electrode fluxes for welding. The global market for zircon comprises makers of ceramics, foundry products, refractories, zirconium chemicals and television and computer monitor glass.

The biggest cause of demand in almost all of these markets is economic growth. China has the potential to contribute greatly to growth in consumer markets for products derived from titanium minerals and zircon. The continuing expansion over the next decade and beyond of China's economy, in particular the development of its domestic manufacturing sector, is likely to support a sustained increase in demand for these basic minerals.

There is much speculation in the minerals processing and metallurgical engineering sectors about the emergence, over the longer term, of a considerable world market for titanium metal.

Titanium's relatively light weight, strength and superior resistance to corrosion and heat make it well suited to various industrial and consumer applications, for example, chemical processing plants, aerospace and automotive parts and components, marine vessels, medical and biological devices and sporting equipment. However, demand for titanium metal continues to be severely limited by its cost.

With the likelihood of steady growth in demand in the medium term and the possibility of new flow-on consumer markets emerging, Australia is in a rather enviable position. It is the world's leading producer of titanium minerals and zircon and there are world-class deposits in the Murray Basin region that, in the decades ahead, would replace established operations on the south-west coast of Western Australia and on the Queensland and New South Wales coasts.

New ventures in the basin include BeMax Resources' Ginkgo and Snapper projects, Iluka Resources' Douglas project, Southern Titanium's Mindarie project and Murray Basin Titanium's Prungle project.

Possible developments overseas could threaten Australia's market share. South Africa, the second largest source of mineral sands after Australia, contributed 21% of titanium minerals production and 32% of zircon production in 2001. South African producers are either expanding operations or capable of doing so. This is expected to lift South Africa's share of global production in the short term.

Over the medium to longer term, emerging mineral sands regions elsewhere in Africa and in India could attract considerable investment. Notable projects proposed in Mozambique, Kenya, Madagascar, Sierra Leone and India will compete for investment with the proposed Murray Basin developments.

A factor working in favor of the Murray Basin projects is the increasing trend by exploration and development capital to seek safe destinations. Concerns about social and political problems affecting governments across Africa, the Middle East and parts of Asia, and serious governance and health problems in several African countries, are encouraging mining companies to seek investments in regions where project risk is minimised.

In the short term, because of prevailing low commodity prices in the titanium minerals sector, producer profitability is expected to be under increasing pressure. This will lead to more stringent evaluation of project investment and the possibility of more industry rationalisation.

With most big companies in the mineral sands industry having interests in proposed Murray Basin projects, the sands of time bode well for Australian producers in an expanding market.

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good trades