I'm not familiar with mineral sands, but always interested in this kind of thing on the back of long-term growth in places like China...
Investors cash in on mineral sands Found in everything from pacemakers to bathroom tiles, the deposit has led resource company Iluka to see its share price jump five-fold in 17 months
Reuters in Melbourne
Jun 21, 2011
China may have a lock on exotic rare earths that go into mobile phones and stealth fighters, but real money is also being made in the more mundane world of Australian mineral sands that go into bathroom tiles and pacemakers.
Australia's best performing stock this year is the mineral sands miner Iluka Resources, which has seen its shares jump nearly five-fold in the past 17 months, a gain that has some investors saying it might be too late to jump on the mineral sands bandwagon.
Investors who do not hold shares in the A$7.2 billion (HK$59.53 billion) company think the stock may be starting to reflect too much exuberance over how high mineral sands product prices will go and how long they will stay strong.
"Anyone who's looking at the stock longer term would have to be a little more cautious," said Peter Chilton, an analyst at Constellation Capital Management. "I don't think the near-term prices are sustainable."
While Iluka is the world's top producer of zircon, with about a third of the global market, and a leading producer of titanium dioxide products, other companies hold mineral sands resources yet to be developed, which could offer investors a way to tap the boom.
Those closest to getting new projects under way, such as Mineral Deposits, Base Resources and Gunson Resources, stand to benefit from strong prices if the boom lasts as long as analysts now forecast.
"Even using our more conservative numbers, Base, Gunson and Mineral Deposits look attractive," said Chris Brown, an analyst at RBS Morgans.
Mineral Deposits announced a joint venture with French mining group Eramet yesterday to develop the Grand Cote project in Senegal, the world's biggest new mineral sands project in the pipeline.
For investors, Iluka has an advantage over smaller companies building new mines because its development costs were lower. Returns for newer players will not be as fat because they face higher costs.
It is only now, with product prices taking off, that mine developments on the drawing boards are starting to look viable. But it will take at least three years for new mines to start producing. "We do expect to see existing operators like Iluka make stronger margins on stronger prices because they've spent the capital required," said Andrew Pedler, an analyst at broker Wilson HTM.
Iluka's product price rises last week sent its shares up to a record A$17.75 and sparked the latest round of upgrades from analysts, with the most bullish price target on the stock raised to A$24. That would give investors a further 42 per cent gain on Friday's close. The stock has nearly doubled in value so far this year, making it the best performer in a broader market down 3.4 per cent.
Analysts' forecasts have struggled to keep up with price rises over the past year for the key mineral sands products - zircon, ilmenite, rutile and synthetic rutile - that are used in everything from paints, bathroom wares and kitchen tiles to nuclear reactors and cardiac pacemakers.
Producers, led by Iluka, have been able to push through massive price increases as supplies have struggled to keep up with demand.
Steep price increases for zircon are being driven by soaring demand from China, where tiles and bathroom wares are needed to fill cities full of high-rise apartment buildings. http://www.scmp.com/portal/site/SCMP/menuitem.2af62ecb329d3d7733492d9253a0a0a0/?vgnextoid=b1ea808087da0310VgnVCM100000360a0a0aRCRD&ss=World&s=Business