mineral sands oversupply unlikely

Iluka confident mineral sands oversupply unlikely

By Kate Emery
November 21st, 2011, 7:13 pm

Amid the hubbub of the AGM season, last week's market update from mineral sands heavyweight Iluka Resources garnered few headlines.

But for anyone interested in where the mineral sands market is going over the next five years, Iluka offered some interesting insight into its expectations.

Iluka has come up with a list of all possible new sources of mineral sands that could be brought into production to cash in on rising prices.

Ranging from those projects at the scoping or feasibility stage to those that are only a glint in a chief executive's eye, Iluka found more than a dozen candidates (which it did not name), most of which were ilmenite-dominated.

The miner then ran three scenarios - first on zircon and then on titanium dioxide - using low, medium and high-demand assumptions.

Only under the low-demand scenario could Iluka see any chance of oversupply in zircon. On Iluka's numbers a zircon price of about $US2000 ($1998) a tonne was needed to induce the volume of zircon that would be required under the medium-demand scenario.

Beyond 2016 the picture gets murkier, although Iluka sees a structural supply deficit.

Iluka ran the same analysis on high-grade titanium dioxide supply and found that the market was likely to remain in deficit. Only if additional production from Iluka's idled synthetic rutile kilns in WA were factored into the low demand scenario was the market likely to be balanced from 2014 and then only for two to three years.

The other point to make is that the nature of mineral sands deposits means they are not easily expandable. Also, of the potential projects identified, Iluka classified 30 per cent of them as "very high technical risk" and said 40 per cent of them were in countries regarded as high or significant risk.

Still, it wasn't all good news, with Iluka flagging a few quarters of softness in the zircon market, thanks largely to macroeconomic woes.

The commentary prompted some analysts to trim their short- term price assumptions.

- Michael Minosora's Atlantic is inching close to D-day and the question of whether it can break the curse on the Windimurra vanadium project.

So far Mineral Resources is one of the few companies that can say it made money out of the project. The mineral services company- turned-miner bought the project off receivers and had planned to develop it along with Atlantic before changing its mind and selling out.

Atlantic says it will be in production by the end of the year, after announcing the hot commissioning of Windimurra's rotary kiln (the kiln roasts the ore to allow vanadium to be extracted through leaching) on Friday.

Atlantic has mined and stockpiled about 240,000t of vanadium-bearing ore over the past few months.

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