Mineral sands prices are rising and ilmenite is the hot new kid on the block
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The mineral sands industry is booming right now.
The rebound in the titanium feedstock market since late 2020 has continued and with the closure of Rio Tinto’s (ASX:RIO) Richards Bay mine in South Africa and the impending suspension of Iluka’s (ASX:ILU) Sierra Rutile mine in November (pending any potential return to profitability) the supply side is looking tight.
Iluka said in its June quarterly that the potential suspension plus violence at a major feedstock producer in South Africa has created additional concern around future supply of feedstocks heading into the second half and beyond.
As a result, pigment producers are seeking additional volumes ahead of any potential disruptions to supply- and this has resulted in nice bump in prices.
Zircon is at three-year highs of around US$1,630 per tonne (a 14% increase since 31 March 2021) and rutile prices are looking just as good at around US$1,753 per tonne – a 40% increase since October 2020.
But it’s ilmenite that’s really going gangbusters.
At the end of June Image Resources (ASX: IMA) reported the titanium feedstock hit US$340 per tonne – a increase of 66% since October 2020.
But Sheffield Resources (ASX:SFX) executive chairman Bruce Griffin says the price is more like US$400 a tonne.
“Zircon gets all the headlines – but it’s ilmenite prices that have actually been quite spectacular over the last 18 months,” he said.
“The main stock that people follow in Australia is Iluka, which is much more of a zircon and high-grade feedstock story, but ilmenite is the only commodity I know of where 2020 had a higher global demand than 2019.
“The bounce back in the second half was so strong that you almost can’t see COVID on the graph – which is remarkable.
“As a result with pricing, we’re close to historical highs for ilmenite delivered into the of Northeast of China, of circa $400 a tonne.”
Check out these handy graphs from established African player Base Resources (ASX:BSE).
Diatreme Resources’ (ASX:RDX) CEO Neil McIntyre said because zircon is linked to economic activity, the price increase is related to post-COVID recovery programs around the world.
“There’s a shortage of supply, Richard Bay has shut down, and we’re seeing a lack of new mines coming on stream to fill the gaps,” he said.
“There’s a structural deficit going back a number of years, and that that hasn’t really been addressed; in fact, it’s worsened somewhat so that’s adding to the pressure driving prices upward.”
Tronox recently increased its premium zircon price to US$1,640 per tonne and the premium grade zircon price in China increased to US$1,775 per tonne.
Image reckons these higher prices and the fact that the price of rutile is higher than the current Iluka premium zircon price, strongly suggests its benchmark zircon price (Iluka’s premium grade price) is likely to increase again in the near future.
Griffin is a bit more restrained in his optimism.
“You always hear about people doing the odd trade at $1700 or $1800 but I think the bulk of the volume is probably still being done in the sort of $1400 mark,” he said.
“There’s a reasonable expectation that the big producers will be able to push more price increases through this year – so it feels like prices are heading back up around $1500.
“I think with the zircon story really the midterm is probably particularly relevant for Sheffield.
“Midterm forecasts suggest up to a couple 100,000 tonnes of supply deficit by late this decade, and even with all the projects that are out there at the moment that have significant amounts of zircon – it’s only just enough to plug that gap at best.”
It looks like Sheffield’s Thunderbird project in WA could be a significant supplier of both zircon and ilmenite.
The company’s original plan was to produce a magnetic concentrate (usually further processed into ilmenite) and final zircon products but in order to reduce market risk without increasing the capital they’ve changed the concept to producing zircon concentrate and final ilmenite product.
Plus, the company is already 100% contracted for its ilmenite product.
“Yansteel have a life of mine offtake for ilmenite from stage one and a right to any other ilmenite we produce,” Griffin said.
“Our plan now is to release a definitive feasibility study towards the end of the year, and that would put us in the position to make a final investment decision in late 2021 – and then start construction around April next year.”
Diatreme is in a similar situation except with two different projects – namely the Cyclone project in WA which McIntyre says is zircon dominant and not dissimilar to Iluka’s Jacinth-Ambrosia operations.
The company also has a finger in the silica sands pie with its Galalar project in Queensland where it hopes to get into production by late 2022.
IMARC Group estimates the global silica sands market could grow from US$8 billion in 2019 to US$20 billion in 2024 and the solar photovoltaic panels market (which uses high-purity silica) could reach US$48.2 billion by 2025.
“When you compare heavy mineral versus silica sands, from a developer’s perspective, silica projects are much lower capex, much lower cost projects to get to production, less intensive on capital, and fairly straightforward mining procedures,” McIntyre said.
Rutile player Sovereign Metals is already working on the scoping study for its Kasiya project in Malawi.
The company is also ramping up with a multi-rig core drilling program targeting high-grade rutile corridors for conversion to the indicated category to feed into the study.
The scoping study is expected to be completed in late 2021.
Industrial Minerals (ASX:IND)
The new kid on the block has had a good run since listing, currently trading ~$0.30, up from its initial listing price of $0.20.
It could be because the company just announced it had secured the Stockyard silica sands project – just south of VRX Silica’s Arrowsmith project – in a proven high purity region.
“Through the diversity of the location of the projects and potential finished silica sand product characteristics, the company has the potential to capitalise on multiple infrastructure pathways and end user markets,” executive chair Ashley Pattison said.
The company has produced high grade ilmenite and zircon products from heavy mineral concentrate (HMC) at its Governor Broom project in WA and plans to complete a scoping stusy.
“Particularly pleasing is the recovery of clean, sulphate-grade ilmenite (51% TiO2), chloride-grade ilmenite (61% TiO2) and premium grade zircon (66% ZrO2) products from the heavy mineral concentrate,” chairman Jacob Khouri said.
“Assessment of the potential products by TZMI concluded that the ilmenite and zircon products compare favourably with competing products, meaning that these products will be readily absorbed by the market.”
Earlier this month, Astron proposed a demerger of its China-based downstream processing and sales business to focus on developing its mineral sands projects.
If approved, the company will retain ownership of the ‘Donald’ mineral sands project in Victoria, Australia and the ‘Niafarang’ mineral sands project in Senegal.
“If this project proceeds as planned by the company, it will represent Astron’s first, major upstream mining, concentrating and processing operation, producing mineral sands products of zircon and titania, as well as rare earth elements,” chairman Gerald King said.
The company is ramping up construction at its Coburn mineral sands project in WA, with the first ore to processing plant scheduled for Q4 2022.
And the company has signed its final offtake contract, with 100% of the project’s forecast revenue wrapped up under binding sales contracts – estimate to average around US$140 million per annum. (~A$200 million).
“Our forecast revenue is fully-underwritten by binding sales contracts and we are perfectly placed to capitalise on increasing demand and falling supply of zircon and titanium minerals following years of under-investment in the sector,” managing director Luke Graham said.
The company holds a 100% interest in the Titan project, covering nearly 6,000 acres of titanium, rare earth minerals, high grade silica sand and zircon rich mineral sands properties in Tennessee, USA.
In a unique niche, Hyperion has secured options for the exclusive licence to produce low carbon titanium metal and spherical powers using HAMR & GSD technologies.
And the company has signed an MOU with Energy Fuels that aims to build an integrated, all-American rare earths supply chain.
At Stockhead, we tell it like it is. While Baser Resources, Sovereign Metals, and Strandline are Stockhead advertisers, they did not sponsor this article.