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September 26, 2011

Tronox Will Merge With Ore Supplier

Inorganics: Company says deal will create world largest integrated titanium dioxide maker

Alex Tullo

Tronox
A view of the Tiwest titanium dioxide plant in Australia.
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In a bid to vertically integrate its business in the white pigment titanium dioxide, Tronox will acquire the mineral sands operations of South African mining conglomerate Exxaro Resources, the world's third-largest supplier of TiO2 ores.

Tronox, which calls itself the fifth largest global producer of TiO2, will get a 74% interest in two South African operations--KZN Sands and Manakwa Sands--that mine TiO2-rich minerals such as ilmenite and rutile. The mines also produce synthetic rutile and a TiO2-rich smelting co-product called slag. All the minerals are feedstocks for the chloride route to TiO2. The process uses chlorine gas to convert TiO2 into chlorine tetrachloride, which is separated from impurities and then oxidized back into finished titanium dioxide.

Also included in the deal is Exxaro's 50% interest in the Tiwest joint venture between the two companies in Australia. This partnership has 150,000 metric tons per year of TiO2 capacity and is back-integrated into mineral sands operations.

In exchange, Exxaro will receive a 38.5% stake in Tronox, which is planning to list on a major stock exchange after completion of the deal in the first half of 2012. Tronox delisted from the New York Stock Exchange in 2008 just before declaring bankruptcy due to liabilities it inherited from its former parent, Kerr-McGee. It emerged from bankruptcy in 2010.

On the basis of recent Tronox share prices, the deal is worth about $1.3 billion. The combined firm would have had before-tax profits of $495 million on sales of nearly $2 billion in the 12-month period ending on June 30.

The key to the deal for Tronox is securing raw material supply. In a Sept. 26 conference call, Tronox CEO Dennis L. Wanlass told investors that limited TiO2 ore supplies are preventing pigment producers from keeping up with demand. "Because of the assurance of ore supply, we believe we will be uniquely positioned to take advantage of future expansion and profitable growth opportunities," he said. The company is already considering a new TiO2 plant in South Africa as well as expansions of the mineral sands operations.

Tronox says the acquisition will make it the largest back-integrated producer of TiO2. Larger competitors such as DuPont and Saudi Arabia's Cristal also have some mineral sands operations.

Chemical & Engineering News
ISSN 0009-2347
Copyright © 2011 American Chemical Society
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