Tao Commodities collars large-scale US mineral sands project on doorstep of country’s pigment industry

In a diversion from the current global gold rush, Tao Commodities (ASX: TAO) has jumped into the mineral sands space after agreeing to acquire the Titan project which is believed prospective for titanium minerals and zircon.

The project covers 2,100 acres in Tennessee, US and is only 15km from Chemours’ New Johnsonville pigment plant, which is the US’ largest titanium consuming plant.

Titan is also within 1,000km of all other US pigment plants.

This is significant as 90% of all titanium minerals mined are used in the production of titanium dioxide pigment, which is used as opacifier in paint, plastics and other coatings.

According to Tao, major pigment producer DuPont and miner BHP (ASX: BHP) are both previous explorers of the property.

From 1960 and 1990, more than 200 holes were drilled at the project, which also hosted a bulk sample mining operation.

The main deposit at Titan is believed high-grade at 3.6% heavy mineral sands (HMS) with a mineral assemblage of 15% zircon, 5% rutile and 60% high titanium dioxide ilmenite.

Proximity to buyers, workforce and infrastructure

In addition to its proximity to Chemours’ New Johnsonville plant, Titan is also close to the town of Camden in Benton, as well as Henry and Carroll counties.

This gives the project access to a skilled work force, heavy haulage rail, high voltage power, interstate highways and river ports.

Additionally, the US pigment industry is one of the largest global consumers of titanium minerals, but imports 95% of its required titanium.

The US Government has designated titanium and zircon as critical minerals, which will allow potential access to US federal funding programs.

Acquisition strategy

Tao said its strategy behind the acquisition is it provides a “unique opportunity” to re-establish a major US titanium and zircon project ahead of large government infrastructure and military stimulus programs.

These programs are anticipated post COVID-19 to re-energise the economy.

Tao plans to begin exploring the project “immediately”. It will also continue with an “aggressive land consolidation program” in the state.

Commenting on the acquisition, Tao managing director Patrick Glovac said the company was “very excited” to secure such a large-scale project on the doorstep of the US titanium industry – particularly in a country that imports the majority of its titanium requirements.

“Most exciting is the fact that some of our potential customers are only a short truck, barge or rail distance from the project – with the largest titanium consuming plant in the US being only 15km from Titan,” he added.

Deal terms

Under the deal, Tao will acquire Titan’s owner Hyperion and assume responsibility for funding its existing option agreements relating to the project.

Tao will pay a US$25,000 non-refundable option fee. Upon exercise of the option to acquire the project, Tao will issue 26.5 million shares at $0.08 each, plus 5 million unlisted options with a $0.20 exercise price and expiry within five years of issue.

Further performance shares amounting to 44 million will be issued upon meeting certain milestones.

Hyperion co-founder Anastasios Arima will join Tao’s board as an executive director. Mr Arima will then oversee exploration and development of the project. He will be issued 3.5 million unlisted Tao options, which are excisable at $0.25 each and expire 31 December 2023.

Placement

To shore up acquisition and exploration funds for the project, Tao has secured commitment letters for a $2 million placement.

This will involve issuing 25 million shares at $0.08 each.