Iluka mulls zircon options as demand exceeds supply

Aug. 26, 2010 - Mineral sands producer Iluka said that demand for zircon had increased by such an extent, that it was currently unable to meet all its customer's requirements.
"In terms of zircon, we are unable, as the largest zircon supplier in the industry, to meet our customer requirements in full. And we know that they are unable to have these requirements met from other sources," Iluka MD David Robb told analyst during a conference call from Perth on Thursday.
He noted that the "significant" shortfall in zircon supply had been driven by an increased market demand past the global economic crisis.
Robb, who has been predicting a shortfall in mineral sands supply for some time now, said that the current constraints had been masked by the global financial crisis as well as the desctocking of the industry during that time.
"But those issues have now resurfaced with a vengeance."
Robb said that in an effort to meet the shortfall, Iluka was currently investigating ways in which to increase its zircon production post 2011/13 levels, which were predicted to be around 500,000 t/y.
He said that Iluka would most likely look towards its Jacinth-Ambrosia project, in South Australia to deliver a higher output, based simply on its margin structure.
"But also, although it is early days yet, that would be supported by additional reserves so that there would be no reduction in the life of the mine."
In its results for the six months ended June, Iluka reported that zircon sales volumes increased nearly four-fold during the first half of the year, relative to the 2009 first half figures.
Zircon sales year-to date of 216,000 t also exceeded production of 163,000 t for the previous year, and led to a drawdown of inventory, as well as the sale of the majority of the final Western Australian mine production.
The sale of the Murray Basin stage 2 product, as well as the Jacinth-Ambrosia production started during the June quarter, as the operations ramped-up and customer acceptance was achieved for the new Eucla basin product.
Meanwhile, rutile sales volumes of 102,000 t for the first six months of 2010 also represented a more than five-fold increase from the 2009 production levels of 113,000 t.
Synthetic rutile sales volumes of 166,000 t were on par with the 2009 figures.
Robb said that both the Jacinth-Ambrosia and Murray Basin stage two projects were now operating at nameplate capacity and were expected to make a more significant contribution to sales volumes and results during the second half of the year.
For the six months to June, Iluke reported a loss of A$6,6-million, reflecting the continued influence of sales from lower margin inventory, prior to the full contribution from the two projects.
The loss compared to a loss of A$43,6-million for the first six months of 2009, reflecting a 94,4% increase in the revenue obtained from mineral sand sales, which reached A$378,6-million in the first half of this year.