DECODER: Titanium dioxide is a naturally occurring substance, mined in countries including Australia, South Africa and Canada. Titanium dioxide pigments are used in paper, paints and plastics.
Saudi industrial conglomerate Tasnee has signed an option agreement to sell a 90 percent stake in its titanium smelter in the south western city of Jazan to US-based Tronox.
The deal comes as a merger agreement between Tronox and Tasnee-subsidiary Cristal remains mired in regulatory turmoil.
Under the terms of the option agreement, signed between Tronox and Tasnee subsidiary AMIC (co-owned by Cristal), the US-based chemicals giant will acquire 90 percent of the Jazan-based titanium slag smelter facility, which has the capacity to supply up to 500 thousand tons (kt) of titanium dioxide slag and 220kt of pig iron.
The option agreement follows a technical services agreement between the parties, which will see Tronox provide technical assistance to AMIC to facilitate the startup of the smelter. Upon reaching the sustained operations of the facility, Tronox shall exercise its option to acquire the stake.
As part of the option agreement, AMIC will create a Saudi-incorporated SPV and contribute its ownership interest along with $322 million of debt currently held by AMIC. Tronox has agreed to lend AMIC and the SPV up to $125 million for capital expenditures and operational expenses — which may be drawn down on a quarterly basis as needed — to facilitate the start-up of the facility.
“By combining slagger operations expertise of Tronox with that of AMIC under the Technical Services Agreement, we will work together to ensure the successful commissioning and ramp-up of this world-class smelter in Jazan,” said Tasnee CEO Mutlaq Al-Morished in a statement.
The smelter agreement occurs against the backdrop of Tronox’s drawn-out bid to acquire Tasnee subsidiary Cristal, first announced in February 2017. Regulators in the US and Europe have opposed the acquisition — which would make Tronox the largest titanium pigment producer in the world — fearing the move would reduce competition in the market.
Tronox announced an extension to the acquisition agreement in March, and aims to complete the transaction by end-June.