Further rationalisation could be afoot in Australia’s $1.2 billion per year mineral sands industry, with Melbourne-based Ticor pro-actively sniffing around for a meaty acquisition.

“We’ve been busily evaluating opportunities (in minerals sands) for a year or more,” said Pat Quinn, Ticor’s managing director. “We have a substantial cashflow from operations and our debts are now under control. So we’re evaluating everything that is known to man.”

If Ticor does actually uncover something worth opening its cheque book for, an acquisition could refocus attention on a sector that is often overlooked by investors. Last year’s merger of Westralian Sands and RGC to form the giant Iluka Resources was a rare highlight. And BHP’s closure earlier this year of its failed Beenup mine in Western Australia was one of the lowlights.

The Tiwest pigment plant at Kwinana .. the pigment product is the major revenue generator for Ticor.

 

Up to now, Ticor has probably sat somewhere in the middle of those extremes. The company has not set the world on fire, but its 50%-owned Tiwest integrated mineral sands and titanium pigment operations in WA have grown steadily and are making money.

Fresh from a $15.2 million net surplus in the first half of calendar 1999 and with expectations of 40% profit growth in the year 2000, Ticor is primed for an addition to its mineral sands portfolio and has been on a worldwide hunt for that asset.

“There are prospects available in the US, Canada, the Ukraine, India and Africa,” Quinn told Australia’s Mining Monthly. “We’re just doing our homework at present. There is no pressure on us to make a decision, though I wouldn’t rule out an acquisition in the near-term.”

At one stage, the company was looking to buy a South African operation owned by its 39% shareholder, Iscor, but that deal seems to have been shelved.

Ticor is also searching for opportunities in Australia, though they appear limited due to green tape and the mature state of the industry. “There are still possibilities there (on the west coast of Australia), but for environmental reasons it becomes increasingly difficult to get things moving.”

Meanwhile, the company is watching developments closely in the Murray Basin straddling New South Wales and Victoria. “Certainly there is a lot of mineralisation there. It is a question of whether it can be mined economically,” Quinn said.

The scale of acquisition may well be dictated by how much cash Ticor can extract from the sale of its east coast coal and sodium cyanide assets. Their book values are estimated at around $140 million and $45 million respectively. If Ticor is able to realise those values, the company would be well placed to enter the mineral sands big league with a major acquisition.

In coal, Ticor owns 20% of Warkworth Associates in New South Wales and 26% of German Creek in Queensland. The company has been a long term partner in both operations, but has made no secret of the fact that it regards them as non-core. It was a question of finding the right time to sell, and that time may be fast approaching.

In August this year, Royal Dutch-Shell announced it would be quitting its Australian coal assets, including a controlling stake in German Creek. The Shell coal sell-off, expected to be finalised in the first half of 2000, has provided Ticor with a window of opportunity to offload its own German Creek stake.

“There are probably six companies around the world that are looking at the Shell assets, and clearly we’ll see if that is an opportunity for us to exit (German Creek) at the same time,” Quinn said. “If there is a lot of interest in coal caused by the Shell sale, that just might enable
people to become more aware of us and that opportunity.”

Investors would welcome the move towards a pure mineral sands play. At the moment, Ticor is regarded as a bit “messy” because of its spread of interests