JOHANNESBURG (miningweekly.com) – Global shortages and a strong demand upside in China should benefit the future performance of South Australia’s new Mindarie mineral sands mine, as it ramped up production.

ASX-listed Australia Zircon nonexecutive director Michael Kiernan said that the future demand would be influenced by the surging urbanisation of China and India.

“China accounted for more than 30%, or about 410 000 t, of the 2008 total global consumption of zircon of 1,35-million tons,” Kiernan said at the first day of the Paydirt 2009 South Australian Resources & Energy Investment Conference.

“We are now seeing China average about 15% annual growth in zircon imports in recent years, as it only has consumption of 0,2 kg per capita versus 0,8 kg for European consumption, so there is substantial room for demand driven growth. This will be particularly so in China, where only 45% of that country’s population lives in urban areas, but is expected to move to 70% urbanisation by just 2035.”

Kiernan said that future supply-demand dynamics for zircon would be further exacerbated by slowing output in Indonesia and power shortages in Africa, at a time when world production for this calendar year was expected to fall below that of 2008.

“This can only be expected to drive price pressures upwards so we see zircon as very much a growth mineral,” Kiernan said.

As a result, Australian Zircon’s wholly owned new Mindarie mineral sands mine was ramping up production.

It has targeted a throughput rate of 35 000 t/y by next month from a rate of between 5 000 t and 7 000 t on an annualised basis from mine start-up last year.

“Our ramp-up is proving successful – doubling output between October and December last year alone and we are continuing to enhance it - adding additional spirals, installing a larger mobile slurry unit to improve capacity and reliability, and are transitioning from owner operator to contract mining to stabilise costs.”

Kiernan noted that this was critical, as 75% of the Mindarie revenue was derived from zircon, in addition to rutile and ilmenite outputs.

He added that the company also expected the improvements to drive down cash costs from around the $630/t projected for 2009 to near $550/t next year.

Mindarie has a 100% offtake agreement with Australian-based DCM DECOmetal, which holds a 72% interest in Australian Zircon.

The mine has an estimated life-of-mine of 11 years with a 176-million ton mineral resources inventory at 3,2% total heavy minerals, delivering an ore reserve of 58,1-million tons at 4,3% total heavy minerals.