[miningmx.com] — BHP BILLITON is to sell its 37% stake in titanium
producer Richards Bay Minerals (RBM) for an undisclosed sum to partner Rio Tinto
through a put option, and will exit the titanium minerals industry.
The group is selling out just as conditions in the titanium and heavy mineral sands
businesses are picking up after a decade of underperformance – a view shared by
RBC Capital Markets analyst Des Kilalea in a research report published in November.
“We remain bullish on the mineral sands sector over the medium and long term,” he
said.
“While a slowdown in Chinese growth and concerns over the global economy may
weigh on the sector in the short term, the fundamentals of excess demand over
supply and Chinese growth underpin our positive view.”
Exxaro Resources last year opted to keep its KZN Sands mining and smelting
operations near Richards Bay going because of the recovery in the sector. It is in the
process of merging its titanium operations with United States pigment company
Tronox, in which it will become the largest shareholder.
The obvious question is whether the disposal by BHP Billiton represents a further
divestment by the group from South Africa, following the sale of a string of coal
assets over the past few years.
Said a BHP spokesperson: “BHP Billiton’s strategy is to focus on large, long-life assets
that the company operates. RBM is the sole mineral sands asset currently
held … and is not operated by the company.
“The titanium minerals industry is also one of the smallest markets in which BHP
Billiton participates, and is unlikely to make a significant contribution to the
company’s future profitability.
“We had attempted to grow in the industry through the Corridor Sands project in
Mozambique. However, this project was halted in 2009 when studies failed to identify
a value adding development alternative.
“There are few other known, quality, large-scale resources and it is unlikely that BHP
Billiton could build a material position in this industry.
“Given the non-core nature and non-operating position in RBM, the relatively low
earnings contribution the asset makes to the group and the low probability of
developing a material position in this sector, BHP Billiton has elected to sell its
interest in RBM.
“South Africa remains an important country for BHP Billiton and the company
continues to own and operate significant energy coal, manganese and aluminium
assets in the country.”
Asked about the price of the transaction with Rio Tinto, the spokesperson said “the
put option follows a process agreed when RBM was restructured in 2008, whereby
value is determined by two experts appointed by each of BHP Billiton and Rio Tinto.
“The results of this process will be communicated when the transaction closes.’
BHP Billiton acquired the Corridor Sands project when it took over the former Western
Mining Corporation (WMC) in 2005.
WMC had bought Corridor Sands from entrepreneur Rob Still’s Southern Mining
company in 2003.
WMC’s stated plans were to build a plant that would initially produce 375,000 t/year
of titanium slag, rising eventually to 1 Mt/year, which would have put Corridor Sands
on a par with RBM.
