Iluka mulls Sri Lanka return a decade after exit

Iluka Resources Ltd, one of the world’s biggest producers of mineral sands, is considering a return to Sri Lanka, a decade after exiting the South Asia island as a civil war intensified.

The move underscores how global mining companies are taking a new look at countries previously deemed too risky, as a few large resource discoveries are made in traditional production hubs like Australia and Canada and mining costs rise sharply.

Mineral sands demand is closely linked to the health of housing markets in major economies. The basket of commodities includes zircon and titanium oxide, which are key ingredients in manufacturing ceramic tiles and paint, respectively.

Demand for mineral sands is likely to improve as the U.S. economy recovers and urbanization in China and India accelerates. Iluka is focusing more on new investments outside of Australia, which has included “early stage country risk analysis within a number of international regions, including Sri Lanka,” the company said in a statement to The Wall Street Journal.

“While Iluka will continue to explore in Australia, the Perth, Eucla and Murray Basins are increasingly mature mineral sands provinces, resulting in the need to accelerate exploration activities in new areas elsewhere in Australia and internationally,” Iluka said.

Sri Lanka is offering tax incentives and liberal regulations to lure investors to its mining sector as the country overhauls its infrastructure and opens up to foreign business after nearly three decades of civil war, the country's Minister of Environment and Renewable Energy Susil Premajayantha said in an interview last week.

While it has only modest reserves of precious and industrial metals such as gold and copper, Sri Lanka is home to large deposits of mineral sands. Iluka was previously involved in exploring Sri Lanka between 1997 and 2001. It relinquished its exploration leases there in 2003 because the quality of the resource was poor, the Perth-based company said at the time.

The management also cited “accessibility” issues for its departure, without elaborating.

(Courtesy Dow Jones)