Eight mineral sands projects are either under construction or consideration as the sector finally enjoys some pricing relief.
Stronger pricing for mineral sands due to a reduced supply from depleted, older mines has created a window of opportunity for up to eight projects in Western Australia worth around $1 billion.
Prices for zircon, for example, have risen about 40 per cent in the past two years, according to Iluka Resources, giving a major boost to a sector that had been languishing, in WA at least, for half a decade.
The price for another sand product, rutile, used in manufacture of titanium dioxide for pigments, has risen about 8 per cent during that period.
Two projects have got under way in recent months, led by Iluka and Image Resources respectively.
Iluka, which is the world’s biggest zircon producer, gave the green light to the Cataby project in the Perth Basin at the end of 2017.
The $275 million investment will support production of about 200,000 tonnes annually of synthetic rutile and 50,000t of zircon for 8.5 years.
Production is expected to start in the first half of 2019.
Managing director Tom O'Leary told shareholders at Iluka’s recent annual general meeting that zircon markets looked strong.
“The company is of the view that there is a structural deficit in zircon supply when compared with genuine demand, and that this deficit will likely widen as demand grows and grades drop at various mines across the industry, resulting in less production,” Mr O'Leary said.
More broadly, commodity cycles have hit mineral sands players hard.
Only two years ago, Iluka put its Jacinth-Ambrosia mine in South Australia under care and maintenance to draw down existing inventory because demand was so low.
Mr O'Leary said the industry needed to reflect on what had happened in the past decade, after prices rose rapidly in 2011 and 2012 – to the extent that 200,000 tonnes of demand was permanently knocked out of the market.
When prices fell, the problem was the opposite.
“Few in the industry were making even a cash margin, let alone a profit,” Mr O'Leary said.
In March, West Perth-based Image got construction under way at the $52 million Boonanarring project, with first production due by the end of 2018.
Image also has the potential Atlas project, located in reasonably close proximity to Boonanarring, with production there forecast for start in 2023.
At least one other project is likely (see list, page 15), with Sheffield Resources having hit some major milestones for the Thunderbird heavy mineral sands development on the Dampier peninsula.
Offtake agreements have been secured for about 60 per cent of the $348 million project’s production, while a native title hearing is scheduled for mid May and finalisation of a debt facility is well advanced.
GR Engineering was appointed preferred engineering, procurement and construction contractor.
US company Tronox has two potential projects on the horizon, at West Cooljarloo and Dongara, worth a combined $220 million.
Tronox has operated the existing Cooljarloo mine, inland from Cervantes, since 1989.
That mine has low-grade ore, offset by economies of scale, low-cost dredging and good processing characteristics of the sands, according to Tronox.
Nearly three decades of activity has produced 18 million tonnes of mineral concentrate, while remaining heavy mineral reserves are about 5.8mt.
Just over 5mt of reserves are available at West Cooljarloo and Dongara together, with Tronox calculating it would have enough feedstock between the three mines to last at least 20 years.
Demonstrating the poor climate for mineral sands projects in recent years, West Cooljarloo was actually given environmental approval in 2013, yet little progress was made for some time.
The state government announced last October that it had agreed to vary the state agreement with Tronox to facilitate the two projects, although Business News understands both are are still on hold.
Strandline Resources is working to develop the Coburn heavy mineral sands project in parallel with a project in Tanzania, with managing director Luke Graham telling Business News his optimistic target was to have a decision made in early 2019.
Mr Graham said he was positive that prices would keep improving in the coming financial year, with mine depletion prompting the market to seek new supply options.
“There were some quite big (price) uplifts through 2017 and they have continued,” he said.
“There’s a supply gap forecast for 2018 … and that’s coming through.”
Mr Graham said the big producers were reporting stronger sales prices.
“It’s a really good time to be a producer in mineral sands,” he said.
“Everyone is looking for the next capital projects that are going to be developed to fill the supply gap.”
The Coburn asset is one that had got close to entering production under previous owner Gunson Resources, Mr Graham said, although that business hit a wall when funding partner, South Korean business Posco, pulled out.
Market dynamics had changed for the better in the six years since, he said.
“Coburn creates a good zircon product, and it creates a chloride-grade ilmenite and rutile,” Mr Graham said.
“Coburn’s products are in really high demand in China and (elsewhere in) Asia.”
China was moving away from sulphate ilmenites and towards chloride products for environmental reasons, he said.
Resources consultancy TZMI noted that trend in a January 2018 industry update, arguing that pricing momentum was building for high-grade chloride feedstocks, while demand had declined for sulfate-grade feedstocks in 2017.
Mr Graham said Strandline’s focus this year would be on optimisation work, including using improved technology in flowsheets to reduce cost.
A recent forecast for capital spending on Coburn was $180 million, although Mr Graham said he was confident that could be reduced.
Brisbane-based Diatreme Resources is working on the Cyclone zircon project, located near the South Australian border.
Chief executive Neil McIntyre told Business News that China ENFI Engineering was working on a definitive feasibility study for Cyclone, due in around July.
Finding offtake partners and financing was happening concurrently, Mr McIntyre said, with a construction start targeted for early 2019.
Capital costs have previously been estimated at $160 million, although he said he was confident that would be reduced.
“We’ve got a pretty small balance sheet so we’re looking to attract partners during this process as well,” Mr McIntyre said.
“We’ve met with a number of potential parties looking at supporting us ... there are some very large companies showing interest.
“Sometimes you can get your timing right, in terms of trying to develop a project, if the wind is in your sails, so to speak.
“Mineral sands is enjoying that period, it’s been overdue for a while, but we’re seeing sustained commodity price increases.”
A research note by Blue Ocean Equities last year said zircon supply would be expected to drop roughly 350,000tpa, or 30 per cent, by 2025 without new sources.
That would be driven by mine closures in North Stradbroke (Queensland, closing 2019), Mataraca (Brazil), Murray Basin (Victoria), Eneabba, Capel (WA) and Old Hickory (Virginia).
Grades would decline at Kwale (Kenya) and Namakwa (South Africa), among other locations.
One challenge would be in South Africa, which is the second biggest zicron producer after Australia (50 per cent market share).
The country recently raised taxes and increased restrictions on mine ownership based on race, Blue Ocean said.
