The weakness in the US housing sector had impacted on the pigment sector, to which the company supplied titanium oxide, Rio Tinto CEO Tom Albanese said last week.

Albanese told journalists visiting the Rio Tinto-QMM mineral sands operation in Madagascar that the global housing sector was an important driver of the pigment business and the weakness in the US housing sector had had an immediate impact on the use of pigment.

“But what we have been detecting up until recently was the growing interest in the pigment markets for Chinese demand,” he said, adding that Rio Tinto was the lowest-cost producer of a third of the world’s titanium-oxide feedstock capacity.

“We cover more than a third of the sector’s cash flows and net incomes, which is consistent with Rio Tinto strategy,” Albanese said.

An important aspect of the Madagascan operation was the high quality of its product.

Paint manufacturers moved up the quality chain by putting more pigment and higher-quality pigment into the paints.

The quality of ilmenite, the mineral mined and the seventh-most-abundant mineral in the earth’s crust, was defined by its titanium-dioxide content, which generally varied from 30% to 60%.

The 60%-plus Madagascar grade was thus “very rare”, and a declining resource.

Madagascar was also “eminently suited” to large-scale dredge mining, which was the “cheapest form of mining for this industry”.

The size of the Madagascan operation was also “expandable”.

Long-term, global demand was such that the world would need a similar size mine to the one being built in Madagascar “every three to four years”.

“We are watching the trends in China for the types of paint that are being demanded and the amounts of pigment in that paint, and whether it is chloride or sulphate based,” he said.

The sulphate process was considerably older than the more modern chloride process. Typically, material mined from hard rock would not be used in the chloride process, which was the process of choice in Madagascar, the first phase of which would produce 750 000 t of ilmenite a year from 2011. In addition, a multiuser port was being built in association with the World Bank.

Seventy per cent of the world’s pigment was consumed in Western Europe, North America and Japan.

China represented about 16%.

Overall, Rio Tinto saw mineral sands as a sector that was “good to be in” since the 1950s, and had, during the course of the 1970s, identified high-value ilmenite sands in Richards Bay, in South Africa, where the company was still active.

“As long as people keep painting houses, it’s a business that’s going to have a market. This is a business we see developing over a period of decades, developing just on high-quality resources and developing for the next several decades,” Albanese said.

Rio Tinto’s Quebec Iron & Titanium (QIT) had for long been the leading producer of titanium-oxide feedstock for the pigment sector, most of the pigment being used in paints and also in plastics.

QIT had come up with a new process for producing feedstock for the pigment sector during the 1950s.

During the 1960s, regulations had forbidden the use of lead in paint and titanium oxide, which was benign to the human body, became the pigment of choice.

QIT established Richards Bay Minerals (RBM) with the then Gencor, the interest of which was held by BHP Billiton, which was currently making a hostile bid for the entire Rio Tinto group.

On possible synergies with the proposed BHP Billiton Corridor Sands project in Mozambique, Albanese said that there were no naturally dredgable sands at Corridor Sands and the nature of the Mozambique areas in that location tended to be laden with “a fair amount of clay”.

Albanese said that a clay-laden operation in Western Australia had not been successful.

“I’m not sure there’s a lot of synergy in BHP assets coming into Rio Tinto, but there is a lot of synergies from Rio Tinto into BHP. “This gets back to what I said in the very beginning: BHP Billiton needs us more than we need them,” Albanese said.

Rio Tinto had its own “very significant” mineral sands resource in Mozambique, which was “very similar” to RBM’s and was dredgable, but Madagascar had preceded it because it was the better choice.

RBM had both the sand-mining process and the ilmenite-smelting process, with the sands at both Richards Bay and Madagascar having strands of black ilmenite particles, which contained iron and titanium in oxide form.

Involved was the melting of the particles of ilmenite, recovery of the iron, reduction of the oxygen and production of a higher-value titanium-dioxide product of between 85% and 95% titanium oxide.

This was sold to the chemicals industry prior to being on-sold to the paint sector.

The ilmenite material used at Richards Bay contained about 46% of titanium dioxide and at QMM in Madagascar about 62% of titanium dioxide.

The higher-quality Madagascar production was particularly sought after as permit conditions limited the residue produced by many of the pigment and paint factories.

“There is a great expansion in use, beyond just the increase in grade,” Albanese said.

Rio Tinto had identified QMM in the 1980s as being an attractive resource, and subsequently developed it slowly over 20 years, as well as the biodiversity science required to operate in Madagascar, a biodiversity-sensitive location, Albanese emphasising that, strategically, biodiversity was poised to become “the future emerging issue in the mining sector”.

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