Mineral sands isn’t sexy, but here’s why the sector still has appeal
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It doesn’t grab headlines the way that lithium, nickel and gold do, but mineral sands are used in countless everyday products that you may not even think twice about.
The high value component, zircon, has a high melting point and is processed into zirconium compounds, intermediate products and zirconium metal for use in engines, electronics, spacecraft and ceramics.
Titanium dioxide from rutile and ilmenite is processed into titanium-based products for ultra-white pigments that are used in paints, fabrics, plastics, paper, sunscreen, food and cosmetics.
It also used to produce titanium metal for use in aircraft, spacecraft, motor vehicles and medical implants.
With such a wide range of applications, it is little wonder that the market for mineral sands remains fairly robust.
Minerals sands giant lluka Resources (ASX:ILU) has flagged that while there is short-term weakness in zircon demand due to the ongoing trade tensions between China and the US, long-term fundamentals are solid due to urbanisation and the growing middle class in Africa and Asia over the next 10 years.
On the other hand, it expects the titanium market to have positive dynamics due to a combination of long-term demand that is underpinned by growth in the pigment market and rising living standards, coupled with declining supply from existing producers.
MRG Metals (ASX:MRQ) chairman Andrew Van Der Zwan told Stockhead there was certainly positive supply-demand dynamics for mineral sands right now.
“All the components — being rutile, ilmenite and zircon — are growing and there is really not a lot coming on stream,” he said.
“Obviously if Savannah and Rio Tinto proceed with their Mutamba mineral sands project in Mozambique, then that would come on stream. But even at 20 million tonnes per annum production, it is hardly going to dent the supply curve.”
He added that titanium dioxide was a product used in consumables and would grow along with the population.
“It is a pretty reliable 1.5 per cent to 2 per cent growth per annum type of mineral,” he said.
Image Resources (ASX:IMA), which joined the ranks of minerals sands producers in December last year, has also had little trouble finding buyers for the zircon-rich heavy minerals concentrate (HMC) from its Boonanarring project just 80km north of Perth.
Earlier this month, it secured sales agreements from its Chinese offtake partners Natfort and Hainan Wensheng for 65,000 tonnes of HMC for the December quarter 2019.
And that came with no reduction in zircon pricing despite the benchmark price for premium grade zircon dipping 2.5 per cent to $US1580 ($2,328) to $US1590 ($2,343) per tonne in November.
Despite this, the market has not been kind to companies with minerals sands exposure, with just three companies on our little list showing gains over the past year.
Here’s a list of some ASX stocks with mineral sands exposure:
Swipe or scroll to reveal the full table. Click headings to sort
So just what have some of the junior mineral sands companies being doing recently?
MRG has been progressing its auger drilling program at its wholly owned Koko Massava heavy minerals sands project in Mozambique.
Its latest results have all returned grades of more than 5 per cent total heavy minerals from surface to the end of hole while confirming that mineralisation remains open in all directions.
MRG said the drilling underpinned an expansion of the project’s high-grade footprint beyond 20sqkm, and underscored the potential for the discovery of high-grade, large tonnage heavy mineral sand mineralisation.
Meanwhile, Strandline Resources (ASX:STA) is in the midst of securing funding from the Australian government’s Northern Australia Infrastructure Facility, which has completed its strategic funding assessment of the company’s Coburn mineral sands project in Western Australia and moved into detailed due diligence.
Securing the funding will boost the project’s ability to attract the remaining cash needed and proceed into the construction phase.