After rereading the article It might be time to have a closer look at the goings on at AZC. I'll post it in its entirety as I can get a link to it. Appologies for its length. It does offer a link at the end to more about a company thay are tipping but I cant get it to open.
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Why The Fossil Beaches of the
North Perth Basin Could be
Australia’s Next Big Mineral Winner
Dear Reader,
Picture Australia 39 million years ago. Your favourite beach isn’t where you find it today. In fact, your favourite beach today doesn’t even exist yet. It’s deep underwater off the coast of a country that’s shaped much differently than today’s Australia.
But on this ancient Australia’s beaches and near the mouths of its rivers, you’ll find the waves crashing into the shore in the same methodical way they do every day. Look closely and you’re likely to witness the formation of a future investment opportunity.
Like a slow natural washing machine, the waves wear down and erode the lighter sand from the beach. What’s left has what geologists call a high “specific gravity.” It doesn’t float on water. It sinks. Later, when the water recedes, wind blows away the remaining light sand away, concentrating the heavy minerals even more.
This process takes place over many years. All the weathering and erosion and waves produces long lines of heavy sands laden with minerals. These lines - geologists call them “strandlines” - can stretch for nearly 50 kilometers in length. They are dense with three minerals that play key vital roles in the urbanisation of the modern world.
Millions of years later these minerals are being unearthed. You will find some still on the beach in places like Byron Bay and Kangaroo Island. Others will be as much as 40 kilometers inland. They are called ‘fossil beaches’ as many of them are no longer on the surface. But you can still find them near of the mouth of the Murray River in New South Wales and Victoria or in the Eucla Basin in South and Western Australia.
These ‘fossil beaches’ may be next in line for another resource boom. What lies in them already allows Australia to supply as much as 40% of growing world markets. Yet there are only on a handful of publicly traded companies competing for a piece of the action.
Mineral Sands Next in the Resource Chain of Demand
For the last forty years, Australia’s mineral sands industry has been dominated by a few foreign and domestic companies concentrated near Perth. Sound familiar? Two firms control production of a mineral resource for years. A global bull market in commodities raises demand for that mineral. Huge opportunities open up for smaller, newer producers to step in and profit.
Mineral sands were actually first mined (dredged) in Australia in the 1930s at Byron Bay in New South Wales. By the 1940s, mining had moved north to the beaches in Queensland. And by 1960, like so much of Australia’s resource boom, mining had moved to Western Australia, near Bunbury.
Though you still find heavy mineral sands occurrences all over Australia’s East Coast, actual mineral sands mining over the last four decades has been dominated by mines in Western Australia. One reason for that is that many of the East Coast beaches are national parks or are otherwise protected from development. Another is that WA’s mineral sands deposits were not protected and also close to existing rail and port infrastructure that had been built for other businesses in WA.
The whole industry is changing today. Demand for what comes from mineral sands - rutile, ilmenite, zircon, and titanium dioxide - is growing. It’s the newest result of Asia’s massive demand for Australia’s mineral resources. It also represents an evolution in that demand from base metals toward rarer metals and mineral sands that are used in a wider variety of consumer and industrial products.
The first wave of demand for Aussie base metals and metal ores has benefited copper, zinc, nickel, and iron ore. These are the metals you need to build the skeleton of an industrial economy. It’s the iron frame on which everything else hangs.
This next wave of demand for less famous mineral sands and rare earths tells you where the growing economies of Asia are headed: more consumer goods and more urban living quarters. Titanium dioxide is the most in-demand element extracted from mineral sands. It’s a key ingredient in the fabrication of paint, plastics, and paper. Zircon is used to make ceramics and flatware - the things that go on all the dinner tables in all the shiny white kitchens in all those new high rises etching the skylines of so many growing Asian cities.
Each of the minerals you extract from mineral sands - zircon, rutile, and ilmenite - play role in Asian urbanisation. I’ll show you exactly how they’re used in a moment. But the problem is simple - there are no new major producers of mineral sands in Australia today. Demand is growing, yet Australian supply is not (at least not yet).
Like any economic problem, the solution usually presents an investment opportunity. There are many companies that would love to be Australia’s next big mineral sands producer. But most of the new entrants in the business are spending their time and resources to develop projects that are far away from current infrastructure in Western Australia. This strategy may work. But there is also a much more direct way for small cap investors to invest.
(ilmenite sources from hard rock) and India.
There is plenty of ilmenite in the Murray Basin, an area that includes Victoria, New South Wales, and South Australia. That’s why there’s already one mine there. The good news about the mineral sands in the Murray Basin is that they are high grade and generally easy to mine. The bad news is they are far away from ports and infrastructure.
The Murray Basin mineral sands are what you’d call ‘placer sands.’ These types of mineral deposit are found in river beds and the mouths of rivers are formed similarly to the process I described earlier. Because rutile, ilmenite, and zircon are dense (they have a high specific gravity) they sink to the bottom of water and resist weathering. This is what forms the ‘fossil’ shorelines you find in the Eucla and Murray Basins. There more conventional ‘beach sands’ are the basis of Western Australia’s existing mines.
But perhaps I should back up a second. What are rutile, ilmenite, and zircon and why are they useful, in demand, and growing in price?
The Three Ps, Plus… Dark Glass
Rutile and ilmenite are the main raw materials for all global production of titanium dioxide (TiO2). Titanium dioxide is one of the whitest, brightest substances know to man. But before you start thinking of the Terminator machines and shiny metal robots, let me clarify what titanium dioxide is actually used for.
Titanium dioxide is a pigment used to color paint and plastics and paper. It’s a whitener. Titanium dioxide is not toxic, like lead. You can actually eat it, though I don’t recommend it. You will also find titanium dioxide in ink, rubber, textiles, cosmetics, sunscreens (it provides protection from ultra violet light), and even food colouring.
Rutile is pure titanium dioxide but can have some iron impurities that have to be removed at the processing stage. As an ore for titanium dioxide, it’s the highest grade. Ilmenite generally has between 45% and 65% titanium dioxide content and must also be processed to produce purer titanium dioxide pigment. For this reason rutile is sometimes referred to as “synthetic rutile”.
Australia has a titanium dioxide industry that includes both mines for rutile and ilmenite and processing facilities that create titanium dioxide pigment. The biggest operation is called the TiWest Joint Venture. It is 50% owned by Tronox Incorporated and 50% by South Africa Exxaro. It operates a synthetic rutile plant at Chandala.
At Geraldton, north of Perth, Iluka (ASX:ILU) operates another synthetic rutile plant. The TiWest JV produces titanium dioxide pigment at its plant in Kwinana while Millennium Chemicals (a subsidiary of privately-owned Lyondell) operates a pigment plant at Kemerton, north east of Bunbury. We’ll get to the mines - the ones that are open and the ones that might be coming - in a moment.
No Terminator Industry Yet
You can extract the titanium from rutile and ilmenite to make titanium metal. It involves a method called the Kroll process where “titanium sponge” is first produced,” then ingots, then a metal. The properties of that metal - it’s lightweight, extremely strong, has a high melting point and is rust resistant - make it ideal for aerospace applications.
That’s why the world’s largest titanium metal producers are in Russia, China, and the United States. It’s an important “strategic metal.” Next month we’ll talk about other rare and strategic elements produced by Australian companies.
But Australia does not yet produce titanium metals, although it’s considering the possibility. In March of this year, ABARE published a report called, “Research and development in titanium: implications for a titanium metal industry in Australia.” It does make sense to consider becoming a titanium metals producer. Why?
There is more money in producing titanium metal than in the raw materials for titanium. This was never true of steel making. Australia has plenty of iron ore and coking coal - the main raw materials for steel. But you probably wouldn’t make much money producing heavy steel here in Australia and then paying to ship it to Asia. It wouldn’t be economic. This is one reason why Australia doesn’t have an internationally competitive steel company.
Profit margins in titanium production would probably be higher than steel. The market for finished titanium alloys would be more exclusive as well, which generally leads to higher prices. But for now, about 90% of the world’s titanium mineral production is used in the manufacture of white titanium dioxide pigment and not for making metal. That doesn’t look set to change any time soon. And it itself, represents a great opportunity for small cap investors.
Prices, Production, Prospects
Another element you get from mineral sands is zircon. The zircon market, like that of so many other commodities, is being driven by the construction booms in India and China. Why? It’s both heavy duty and kitchen ready!
A fused form of zircon is used to line the ladles that hold molten steel in steel foundries. Zircon is also used to line furnaces. Its melting point is very high, at over 2,500 degrees Celsius, making it ideal for many heavy industrial applications. Zircon is also the source of zirconium, which is a corrosion resistant metal used in the construction of nuclear reactors.
It’s not all industrial heavy lifting and heat resisting for zircon. It is used widely in the ceramics industry and as a specialty glaze. Specifically, zircon is used as an opacifier. It basically darkens glass or makes it hard to see through.
As you can see from the charts to the right, while the general price trend for ilmenite, rutile, and zircon has been up, none of them exactly look like coal, copper, gold, or iron ore. That’s a good thing, too.
It means the great wave of Asian demand has not yet swept up these minerals into a massive bull market. I believe that may happen this year, which makes it a great time to identify small cap Aussie mineral sands shares.
As I mentioned at the outset, the field of actual producers of mineral sands isn’t that crowded. But there are many firms queuing up to be the next cab off the production rank. Who will be first or win the most? The answer to that comes from the real estate industry: location, location, location.
Murray Basin, Eucla Basin, Perth Basin
Future mineral sands producers in Australia have a choice to make. Where do you set up shop? Stranded fossil beaches have been found in both Victoria (the Murray Basin) and South Australia (the Eucla Basin). Yet the majority of the infrastructure for the mineral sands business remains in Western Australia, in the south west region.
It’s a question of “brownfields” (accumulating tenements in areas where you already know there are mineral sands and infrastructure) versus “greenfields” (finding potentially larger mineral sands deposits elsewhere, but further away from infrastructure and port facilities).
Take a look at the table below. You’ll find a list of the companies vying for the title of Australia’s next great mineral sands producer. We’ll focus on Western Australia, where you’ll find at least three companies already producing: Iluka Resources (ASX:ILU), Gunson Resources (ASX: GUN), and Bemax Cable Sands (ASX:BMX).
Most of the other companies on the list have chosen to focus their efforts on the Murray and Eucla basins, respectively. Good luck to them.
Investigation Reveals Australia's Next Big Mineral Winner
You may have heard of the company we're tipping this month. The share is now coming off a 52-week low and for the reasons I outline below, I’m tipping it to be Australia’s big mineral sands winner in 2008. Its mineral sands business has a lot going for it, as it aims to prove this year.
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