azc

Sands producers shifting east

Wednesday, April 13, 2005

A SWITCH in the focus of Australian heavy mineral sands production outside of Western Australia is on the cards with the weight of exploration moving east. By Imelda Cotton

Zircon and titanium-rich mineralisation in the Murray and Eucla basins in South Australia could hold the key to maintaining the country's dominant position in the global supply of minerals sands as production in Western Australia enters a mature phase, according to Perth-based consulting company TZ Minerals International.

While WA will continue to be the Australian industry's long-term production base – with projects such as Gunson Resources' Coburn boasting a reserve of 620 million tonnes and a possible mine-life of 20 years, and Iluka's Eneabba mine delivering until at least 2010 – the hunt is on for new sources of titanium minerals and zircon to meet future demand.

South Australia may play a big part. In a report evaluating the impact of Murray Basin projects on global markets, TZI said although the individual resources defined to date were relatively small, the region's combined resource inventory was large enough to cement the province as a major future source of mineral sands production.

Which would explain why Australia's main players are turning their eyes and their exploration dollars east.

Iluka Resources, the world's second biggest titanium dioxide feedstock producer, has been among the first to discover the heavy minerals riches that lie beyond the Nullarbor and is fast turning these into development projects as its WA operations at Capel and Eneabba start to experience declining reserve size and quality.

While the company remains committed to WA with the addition of the $43 million Gingin and $20 million Wagerup projects to its portfolio this year, it is vigorously pursuing new opportunities, particularly zircon which is accounting for an increasing percentage of Iluka's total revenue.

"We have a massive investment in WA and we will be here for a long time to come. However, it is a fairly mature mining province and there is not a lot new looming on the horizon," Iluka managing director Mike Folwell said.

"We have focused our efforts in the Murray and Eucla basins which we believe will account for a much larger chunk of our revenue over time. The capital requirements of the region are well within our reach and our initial developments will provide additional growth for us in the short to medium-term through increased rutile and zircon production."

Between now and 2008, the company will spend $470 million on the development of mines and processing plants in the Murray Basin, starting with the $270 million Douglas project which is scheduled for first production in late 2005, and follow-on projects such as the zircon and rutile-rich KWR deposits in the Ouyen area which are expected to commence production in 2007.

Based on current market estimates, the Douglas/KWR projects will account for approximately 10% of Iluka's global zircon supply from 2006 onwards, 10% of rutile supply in 2006 and around 20% of rutile supply in 2008.

Export revenue for the first 20 years of production has been estimated at $1.5 billion and when this is paired with its dominance of the zircon market as well as the competitive advantage that its synthetic rutile and natural rutile products continue to enjoy in terms of pushing through further modest price gains even when the market is in oversupply, it is apparent why Folwell and his team are grinning from ear to ear.

"Zircon is in very short supply worldwide – demand is continuing to grow at about 3% a year but the supply from companies other than Iluka is shrinking based on mineralogy," he said.

"We are one of the only producers who have been able to successfully increase our production. We sold everything we made in 2004 and we are fully sold in 2005. We can sell more if our production allows, but that will depend on how quickly we can bring Douglas on stream and ramp up capacity."

Unlike most titanium minerals, prices for zircon have increased in the past two to three years. Indeed, Iluka recently secured another rise of $US100/lb for 2005, however, WA producers have been unable to fully capitalise on this due to movements in the Australian-US dollar exchange rate.

"Exchange rates have the potential to hurt us. Assuming this year's average exchange rate is similar to 2004 (73-74 cents), we will be targeting at least 10% growth in 2005," Folwell said.

Iluka is carrying out technical studies on a new area around Euston in the New South Wales sector of the Murray Basin which contains multiple high-grade mineral strands with low clay content and an attractive rutile and zircon assemblage. And across the border in the Eucla Basin, the company has tenements covering 60,000 square kilometres, including the zircon-rich Jacinth prospect which, with its mineral assemblage of 52% zircon, 7% rutile and 24% ilmenite compared to the halcyon days at Eneabba.

Last month, Iluka and Adelaide Resources, partners in the Colona joint venture in the same area, reported zircon grades at the "top end of the range for Australian mineral sands deposits" at exploration licences 2840 and 2841. The partners have planned follow-up drilling in April to determine continuity and strike extent and to search for higher grade mineralisation.

Bemax Resources expects to make the transition from explorer to producer in 2006 when its Pooncarie project, comprising the Gingko and Snapper deposits in the Murray Basin (both with HM grades of 3-5%), comes on stream. Earlier this month the company executed a project facilities agreement with ABN Amro which will provide up to $108 million for use in the construction and development phase. The company commands a strategic position in the basin, with 61.9mt of heavy mineral resources representing more than 50% of the region's known resources.

Pooncarie will produce titanium dioxide pigment industry feedstock minerals over a 20-year life, with an emphasis on rutile and high TiO2 content leucoxene as well as zircon through a process of dredge mining, wet concentrating and dry mineral separation. The products will be exported to the company's two major clients, Du Pont and Cristal.

"The Murray Basin has a number of advantages over projects awaiting development in other parts of Australia and in other countries, including low political and sovereign risk, and a sophisticated mining environment with well-developed infrastructure," Bemax said.

"If the global economic recovery continues as forecast leading to increased demand for pigment, the position of projected market dynamics indicates a growing deficit in the supply of selected feedstocks in the period 2008-2012 creating opportunities for Murray Basin projects.

"We expect that over the next decade, our interests in the Murray Basin will yield adequate ore resources to support three or four operating mines and generate more than one million tonnes a year of TiO2. It could possibly become the greatest single TiO2 source in the world."

When Bemax acquired the Australian minerals sands assets of Sojitz Corporation and Sons of Gwalia in 2004, it also increased its profile in WA via the Cable Sands Group, which controls a number of minerals sands deposits south of Perth ...






Sands producers shifting east - Part 2

Wednesday, April 13, 2005

When Bemax acquired the Australian minerals sands assets of Sojitz Corporation and Sons of Gwalia in 2004, it also increased its profile in WA via the Cable Sands Group, which controls a number of minerals sands deposits south of Perth with heavy mineral resources of some 13mt containing predominantly sulphate ilmenite.

Included in the portfolio is a dry mining operation at Tutunup (earmarked for closure in 2005), a mineral separation plant at Bunbury, the newly-commissioned Ludlow mine and reserves in the Gwindinup area scheduled for development and start-up this year.

The company continues to explore for new opportunities along the high ilmenite-low rutile-moderate zircon Swan Coastal and Scott Coastal plains in southwest WA – a mature area in terms of exploration potential but one which Bemax believes holds potential for the occurrence of heavy minerals deposits which could be economically treated at Bunbury.

Not everyone is jumping on the Murray Basin bandwagon however, with companies such as junior Gunson Resources and the TiWest joint venture, operated by Ticor Limited and Kerr-McGee, opting to focus on minerals sands operations in WA

"My aim is to turn this company into the premier TiO2 producer," said Ticor managing director Peter Robinson. "To this end, we need to advance our development options at Dongara (acquired in 2004 as part of the Magnetic Minerals takeover) so that we can take full advantage of market opportunities as they arise and we must enhance our reputation in the marketplace to ensure that we are the customer's first choice.

"Our exploration of Magnetic's Gingin tenements is ongoing and we have several promising targets close to the Cooljarloo mine which we will focus on in 2005. Our Dongara reserve is similar in size and value to Iluka's Dongara deposit and it is sufficient to provide about nine years additional life for dry mining at TiWest, taking the total to about 20 years."

Doral Minerals Sands and Gunson Resources have made similar decisions to stay put in WA, with Doral operating its $30 million Dardanup mine and Gunson progressing the development of the zircon-rich Coburn project, near Shark Bay, for first production by end 2006.

"We have up to 15 years life at Dardanup and we are doing simple brownfields exploration in the immediate vicinity and have some mining lease applications pending near us. Over the next few years we'll be looking at progressing those," said Doral operations manager Colin Bwye.

"We are too small to be a greenfields explorer but we will talk to companies with an identified resource that we might be interested in. If that happened to be in the Murray Basin, it would not be an issue."-Australia's Mining Monthly