Iluka to Halt Production at World's Biggest Zircon Operation

  • Production to shut for as long as 24 months, co. says
  • Mine in Australia can supply about 30 percent of global demand

Iluka Resources Ltd. will suspend output at its Jacinth-Ambrosia project, the world’s largest zircon operation, after prices fell.

Production at the mine in South Australia will be curbed for between 18 to 24 months from April 16, depending on market conditions for zircon, used in products from wall tiles to nuclear reactor cores, the company said Tuesday in a statement. Its average price for zircon products declined 6 percent in 2015 to $961 a metric ton, Iluka said last month.

“The decision now to suspend mining and concentrating activities at Jacinth-Ambrosia will increase the company’s free cash flow at a time of low industry returns,” Chief Executive Officer David Robb said in the statement. The producer will accelerate drawdown of its inventory, potentially reducing perceptions of a supply overhang, he said. “Iluka believes its contribution to a reduction in global inventory will impact those dynamics positively.”

Demand Drag

Weakness in China’s construction and industrial sectors in particular is acting as a drag on demand for commodities, Rio Tinto Group, which produces zircon in South Africa, said last week. Commodity producers including Glencore Plc and South32 Ltd. are curbing output of materials in response to faltering demand driven by slower growth in China, the largest consumer.

Zircon demand began slowing the final quarter of 2015 with earlier than usual winter plant closures and as sales in Europe remained at lower levels than historical rates, Iluka said last month in a filing. The company ceased mining at operations in Virginia last year, ending its production of premium zircon and chloride ilmenite in the U.S.

The suspension of output in South Australia will deliver a cash cost benefit of about A$75 million ($54 million) over two years and result in the loss of about 33 staff from a direct workforce of 79, Iluka said. The mine can meet as much as 30 percent of global demand.

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