Mining Trio Outline Expansion Plans
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New investment and expansion plans were revealed yesterday by three Australian miners in beach minerals, lithium and zinc.
The trio of plans provide further confirmation that while the mining investment boom might have faded it is still smouldering.
The latest trio of projects and deals are on top of as the near $2 billion plus spending on new and existing copper mines in South Australia by BHP and OZ Minerals.
as well as the hundreds of millions being spend on lithium projects in WA, plus brownfields expansion projects in the Pilbara iron ore province worth up to $6 billion.
Yesterday mineral sands giant, Iluka Resources joined the low key rush with a $US275 million new project, also in WA, to the north of Perth.
Iluka said it had approved the development of the Cataby mineral sands deposit after it had entered into take-or-pay offtake agreements for a minimum of 175,000 of synthetic rutile a year. That’s around 85% of the production capacity from Iluka’s Synthetic Rutile kiln 2 (SR2).
Cataby is a large chloride ilmenite deposit located approximately 150 kilometres north of Perth. Ilmenite from the development will underpin the continued production of 200,000 a year of synthetic rutile from SR2 at Capel, in the south west of Western Australia.
Iluka’s Managing Director Tom O’Leary said in a statement “Iluka has worked closely with customers to secure offtake agreements for a significant proportion of the synthetic rutile production associated with the Cataby project.”
He said that entering into these agreements serves to underpin returns from the project and is consistent with Iluka’s disciplined approach to the allocation of capital and our objective to create and deliver shareholder value.
"The project ensures that our customers will have continuity of synthetic rutile supply; and also delivers significant economic benefits to two separate regions in Western Australia – Dandaragan and Capel.
"The construction period – with works estimated to cost between $250 million to $275 million – will employ up to 250 workers at its peak. Once in operation, the project will sustain a workforce of approximately 160 people.”
Pre-execute contracts have been awarded and tendering for the balance of construction contracts is well advanced. First production from Cataby is expected by June 2019.
In yesterday’s statement, Iluka said that rutile from Cataby is suitable for both the pigment and welding markets and is expected to be sold to customers which previously purchased Iluka’s premium MB95 material.
"Zircon from Cataby is a relatively coarse material, making it highly desirable for the foundry and refractory markets. It also has superior opacifying qualities making it suitable for the premium end of the ceramics and sanitary-ware markets.”
The company said as well as this deal in WA, it had also "entered into a 5 year take or pay contract with a synthetic rutile customer for the supply of the majority of ilmenite and HYTI90 (a lower quality titanium feedstock) sourced from Iluka’s Jacinth Ambrosia mine in South Australia. Pricing will be adjusted half yearly and capped.”
Iluka shares eased half a per cent to $9.44.
And more spending from Pilbara Minerals on its Pilgangoora project 120 kilometres south of Port Hedland.
The company told the ASX yesterday that the updated capex cost of $274 million of the first stage of the project had risen $50 million due to contract acceleration charges, plant changes “and further investment to add value to the final concentrate quality”.
The increase includes $4.5 million for road improvements to support larger truck.
“Additional investments are also being made in support of the stage two expansion, primarily relating to the required earthworks,” Pilbara said.
The extra investment is expected to be funded from existing sources including project contingency, management reserve and previously raised equity capital.
The company also told the ASX that it would begin producing a direct shipping ore product (DSO) from April next year ahead of plans for lithium concentrate production.
Managing director and chief executive Ken Brinsden said the additional capital was an investment both in the near-term benefits to be generated by
DSO sales and the longer-term benefits of a tier-1 spodumene concentrate operation with the ability to rapidly scale-up to meet demand.
“Demand for DSO products reflects the current shortage of lithium units in China,” he said.
“We are in a position to meet this demand in the near term through a DSO program which will facilitate further investment in downstream processing capacity in China, that will ultimately benefit our longer-term spodumene concentrate business.
“It’s important that we differentiate our product quality from our peers and I am confident that we have designed and are now delivering the plant that can achieve these goals.”
Pilbara owns 100% of the Pilgangoora Lithium - Tantalum project in the Pilbara which it says is among the largest Spodumene (Lithium Aluminium Silicate) projects in the world. Pilgangoora is also one of the largest pegmatite ho sted Tantalite resources in the world and Pilbara proposes to produce Tantalite as a by - product of its Spodumene production. Pilbara shares rose 2.1% to 96 cents yesterday.
And still in mining and media reports yesterday suggest that Glencore has had a change of heart on the future of its Australian zinc production - it wants more, not less.
Just over two years Glencore cut 500 jobs from its zinc, silver and lead mines across Queensland and the Northern Territory.
But now the company says it will restart production from the Lady Loretta mine near Mt Isa would in the first half of 2018.
Operations at Lady Loretta were suspended in October 2015 thanks to weak prices for zinc, while production was also cutback at the George Fisher mine and McArthur River mines as part of a plan to reduce Glencore’s global zinc output by 500,000 tonnes per year.
The surplus overhang has largely disappeared, zinc prices have risen sharply this year and Glencore plans to restart production in Queensland, even though it has forecast a 15,000 tonne fall in its global output of the metal next year.
That fall though is due to the sale of some of its zinc mines in Africa which will allow production from the Lady Loretta mine.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.