Rio Tinto sees tough 2010 for Madagascar project
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By Richard Lough of Reuters
FORT DAUPHIN, Madagascar - A subsidiary of Rio Tinto mining Madagascar's ilmenite reserves said the outlook for 2010 would be challenging but there were signs of an upturn in demand from 2011.
Ny Fanja Rakotomalala, president of QIT Madagascar Minerals (QMM), told Reuters he expects the firm will be close to meeting client demand next year - the mine's second year of production.
"We won't be very far from clients' requirements. I think roughly we are on the same track as planned but we have challenges this year and next to increase our capacity," he said.
Rakotomalala declined to reveal how much raw material would be exported this year.
The firm, which began production in January, has invested some $940 million in the ilmenite project. Rakotomalala said QMM remained on the curve to reach its export target of 750,000 tonnes per year by 2012.
The global downturn has seen demand for the slag and pigment from ilmenite fall by around 20 per cent in 2009.
"It was significant. It was not a very good year," he said, adding that ilmenite prices on the international market had fluctuated between $60-$90, depending on quality.
Madagascar ilmenite is 60 per cent titanium dioxide making it higher quality than most other global sources, according to QMM. Ilmenite is used in the manufacture of white pigment for the paint and plastics industries.
Government stake
Rio Tinto Iron & Titanium, part of the world's fourth-largest diversified mining group, owns 80 per cent of the QMM mineral sands operation in Madagascar's southeastern corner.
The Indian Ocean island's government owns the rest, with the option to pull-out, and is expected to begin financing its capital ratio once the full investment is realised.
Rakotomalala said negotiations would likely begin next year.
Madagascar has in recent years opened its doors to major foreign companies including Sherritt International , Exxon Mobil and Tullow to exploit its vast oil and mineral reserves.
But a violent political crisis on the world's fourth largest island since early 2009 has alarmed investors at a time when low commodity prices have forced some to review their businesses.
President Andry Rajoelina, 35, who spearheaded a coup in March, has previously signaled his intent to revise existing hydrocarbon and mineral contracts.
"It was positive to see the politicians reach an agreement," Rakotomalala said in reference to a power-sharing deal signed by Madagascar's political rivals in Addis Ababa earlier this month.
QMM plans to mine three sites around Fort Dauphin totaling 6,000 hectares over the next 40-50 years.
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