One of the key points that Sierra Rutile (LON:SRX) was keen to get across in the site visit it recently hosted was just how different natural rutile is.
Analysts visited the company’s long-standing operation in Sierra Leone, in what was widely viewed as a successful visit.
And a principal reason for that upbeat response was the position in which Sierra Rutile sits relative to others in a similar space.
Because times are hard in mineral sands at the moment, as a quick glance at the share price graphs of one-time industry stalwarts like Iluka (ASX:ILU) and Kenmare (LON:KMR) will show.
But not all mineral sands are alike, and equally neither are mineral sands companies.
It’s been the collapse in the zircon price that’s really done for Iluka and Kenmare.
But Sierra Rutile is different.
It’s the only company out there that bases its investment decisions solely on what’s happening in the natural rutile market.
And the outlook for natural rutile is a great deal more favourable than that for zircon at the moment.
The key constituent in natural rutile is titanium, and the fundamentals of titanium demand for both pigment and metal remain intact.
The primary reason for this is that titanium is ubiquitous – in paints, plastics and metals, and also irreplaceable.
Products built with titanium last longer and are stronger and lighter. Its strength to weight ratio is unmatched for aerospace, automotive, medical and military applications.
All of which makes titanium consumption closely tied into global economic growth.
And although there are bouts of uncertainty and unease, the world economy remains firmly on a growth trajectory, as the IMF’s latest 3.1% prediction underlines.
Zircon’s use in ceramics by contrast is far more specialised and niche.
In spite of all that though, Sierra Rutile has faced its fair share of challenges in recent years as it operates what’s well established as the world’s largest rutile deposit.
The long-standing method of extraction was by dredge mining, but this has had glitches in recent years, and the company is now moving to more of a focus on dry mining.
That transition may put some upward pressure on operating costs, but it also beds down a projected 65 year mine life at current output rates, based on a JORC resource of 900 million tonnes grading 0.94% rutile.
In 2015 the company is forecast to produce between 125,000 and 130,000 tonnes of rutile, although the mineral separation plant on site has recently been upgraded to handle over 200,000 tonnes per year.
At the same time the company is also bearing down on costs, which should come in at between US$595 and US$615 per tonne this year.
That’s all led to a situation where the company is able to support growth through cash flow, and manage its relatively small debt pile without too much trouble.
All of this will be spelled out to delegates at the TZMI Mineral Sands Congress which opens in Shanghai this week.
Sierra Rutile chief John Sisay will be presenting there, and also gauging the mood of the industry – both those in zircon and otherwise.
It should be an interesting event.