Mineral Deposits lands big African deal with Eramet ? Matt...

Mineral Deposits lands big African deal with Eramet
? Matt Chambers
? From: The Australian
? June 20, 2011 12:00AM
MINERAL sands miner Mineral Deposits is planning to announce a $1 billion-plus joint venture with French major Eramet to mine on the coast of the West African nation of Senegal and process minerals in Norway.
The Melbourne miner, run by former New Hamptons Goldfields boss Nic Limb, is understood to have signed an early stage agreement to vend its 90 per cent stake in the $500 million Grand Cote mineral sands project into a 50-50 joint venture with Eramet. The latter will put its Tyssedal titanium slag and high-purity pig iron plant in Norway into the new company and pay Mineral Deposits $US30m ($28.25m), according to an initial agreement signed by the two companies.
The Senegal government owns the other 10 per cent of Grand Cote, which Mineral Deposits says is the world's largest undeveloped zircon and ilmenite-rutile-leucoxene deposit.
A formal agreement is targeted for next month, with plans to form the joint venture by the end of September.
After remaining quiet in the pre-financial crisis boom, mineral sands prices have soared in the past year as supply has failed to keep pace with growing demand from China.
Zircon is used in ceramics such as tiles and toilets and titanium dioxide (made from the other mineral sands that will be mined) is used as white pigment.
If Mineral Deposits can get Grand Cote into production, it will become the world's fourth-biggest mineral sands producer, behind Iluka, the Richards Bay joint venture controlled by BHP Billiton, Rio Tinto and South Africa's Exarro.
The project is expected to deliver 85,000 tonnes of zircon and 330,000 tonnes of titanium dioxide feedstock minerals a year.
Construction of the mine, expected to cost $500m, is planned to start in the September quarter, with first production targeted for the third quarter of 2013.
The deal with Eramet, 26 per cent owned by French nuclear giant Areva, reduces the development outlay for Mineral Deposits and gives it a smelter through which to process its stock.
Some might argue that this complicates the business when smelters are crying out for stock and miners have the upper hand in negotiations, but Mineral Deposits is assuming boom conditions won't last forever. The deal will mean lower quality Grand Cote production will have a buyer over its more than 20-year mine life without being squeezed for price when the balance shifts in talks between miners and smelters.
Mineral Deposits, which started in 2003 with assets acquired from BHP, has flown under many radars, despite the mineral sands boom and despite having spun off its 120,000 ounce a year Sabodala goldmine into Toronto-listed Teranga Gold, whose market value is $616m. Mineral Deposits shares have risen 48 per cent since the Teranga spin-off, but this looks stagnant compared with Iluka, which is up 122 per cent in the same period.