PERTH (miningweekly.com) – Mineral sands prices would have to be “significantly higher” to warrant support for all but a very limited number of mineral sands projects, the world’s number-one zircon miner, Iluka Resources, said on Tuesday.

In a briefing paper, the Australian company said that the investment in ilmenite upgrading capacity, which it controls along with Anglo-Australian miner Rio Tinto and South Africa’s Exxaro Resources, was not supported at current prices.

Iluka further noted that its analysis indicated that few material new zircon sources were available, with the majority of near-term new production contribution expected to come from existing suppliers.

Further, even with the advent of Iluka’s major Jacinth-Ambrosia project, in South Australia, the relative zircon to titanium dioxide production ratio in the industry remained stable at ~0,2 for the period between 1990 and 2015.

“Given zircon demand growth has been historically greater than titanium dioxide, zircon availability may come under further pressure if projected titanium dioxide volumes do not materialise,” the company warned.

Iluka’s analysis suggests that even in the advent of a 50% price increase from 2008 levels, zircon supply to 2015 would increase only marginally, relative to 2011 levels.

Given that zircon is typically a coproduct in mineral sands developments, higher titanium dioxide prices were also required to realise associated zircon production.

The majority of mooted or planned titanium dioxide projects have low zircon assemblages, Iluka added. As with zircon, the company’s analysis suggested that significant price increases would be required to induce supply.

“Even with a 50% price increase, annual supply growth may not meet historical demand growth.”

Iluka pointed out that energy cost increases in South Africa would likely result in mineral sands production costs rises of over $200/t over the next three years.

The country’s electricity prices would rise by 25% a year over the next three years.

“Any price increase for South African upgraded ilmenite products would be expected to be reflected in comparable titanium dioxide products.”

Despite the forecast, Iluka maintains a positive outlook on the medium-term supply and demand fundamentals, and in particular that the supply conditions for zircon and high-grade titanium dioxide products might well come into balance or move into deficit in the medium-term, in the absence of material new supply sources.

The company noted that demand for the end products for which zircon and titanium dioxide were key components, including ceramic tiles, paints and other coatings, was related to economic development and personal consumption levels, often reflected by per capita gross domestic product.

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