While best-known in the commodities world for its wide range of agricultural exports such as wheat and barley, Ukraine is also a top 10 producer of titanium dioxide, ranking sixth last year in a market dominated by China, South Africa, and Australia.

Losing Ukraine’s annual output of 470,000 tonnes of titanium dioxide (about 5% of the world market) and its associated 94,000t of zircon, a mineral often found in the same ore bodies, could be the event to spark interest in ASX-listed companies exposed to both materials.

Top of that list is mining heavyweight, Iluka Resources (ASX: ILU), which has risen by 7% since the bombing started, a modest move given that markets for both titanium dioxide and zircon have been trending up for the past 12-months.

Smaller stocks exposed to both materials, including Strandline Resources (ASX: STA) and Base Resources (ASX: BSE), are outperforming Iluka, and if the latest investment bank research is correct they could continue to rise strongly.

Earlier this week, Strandline, which has just reached the halfway mark in building its Coburn project in WA, is up 16% since last week. Base Resources, which operates the Kwale mine in Kenya is up 10%.

Most other titanium and zircon exposed stocks are also moving higher as demand for the material, also known as mineral sands, continues to rise.

Image Resources (ASX: IMA), which has a number of minerals sands projects in WA and is fighting a Chinese attempt to snatch control, is up 8% to $0.26.

Sheffield Resources (ASX: SFX), which is developing the Thunderbird project in WA, has risen by 10% to $0.43, while Sovereign Metals (ASX: SVM) is yet to react, slipping 7% lower despite growing interest in its big Kasiya rutile project in Malawi.

Meanwhile, TNG Ltd (ASX: TNG) is up 3% for the week. While TNG is not a mineral sands miner, the company is advancing development of its flagship Mount Peake project in the Northern Territory where it plans to produce titanium dioxide pigment from mining one of the largest flat-lying, shallow vanadium-titanium deposits in Australia.

TNG has developed an innovative proprietary technology, the TIVAN Process, to process the ore and produce high-purity titanium dioxide pigment, vanadium pentoxide and iron oxide for export markets.

Tightened supplies

The potential loss of Ukraine’s 5% contribution to the global titanium dioxide trade comes less than a year after two other significant supply-related events in the market – a threat by Iluka to close its Sierra Leone Rutile business because of poor productivity, and the closure by Rio Tinto (ASX: RIO) of its Richards Bay project in South Africa after an outbreak of community violence.

Rising prices encouraged Iluka to keep its Sierra Leone business functioning, ahead of a potential spin-off into a new company, and Rio Tinto has restarted its Richards Bay operation after declaring force majeure (can’t deliver because of unforeseeable circumstances).

While the problems in Sierra Leone and Richard Bay have been resolved for now, they could easily resurface given the challenges of operating mines in Africa at a time of rising resource nationalism.

When combined with the potential loss of Ukrainian titanium dioxide, a significant tightening of the market is possible over the next 12-months.

Strandline this week attracted the interest of Morgans, a local stockbroking firm, which lifted its 12-month price target for the stock from $0.50 to $0.52 (48% higher than last sales at $0.35) thanks to the solid construction progress at Coburn.

Morgans reckons the next six months will be crucial for Strandline. Coburn remains on schedule and on budget, with all construction projects in WA feeling the squeeze of labour shortages and rising costs.

“With a published pre-production capital budget of $260 million and with $140 million spent to date, Strandline’s available cash and finance facilities look to comfortably cover the capital commitment plus working capital during ramp up,” Morgans noted.

Given the prospect of further increases in prices for ilmenite (a primary ore of titanium) and zircon Morgans expects Strandline to trade profitably from next year and even pay a modest dividend. In the 2024 financial year net profit should hit $57 million and the dividend rise to $0.05 a share.