Finds itself at the threshold of a promising chapter

By Dr. T K Mukherjee, Chairman & Managing Director, Indian Rare Earths Ltd.

Indian Rare Earths (IRE) suffered a severe setback due to serious problems plaguing the OSCOM unit for more than a decade, and stagnated. However, it finds itself at the threshold of a promising chapter in its life, albeit full of new challenges and opportunities.

Established as a rare earths company, beach sands minerals business has continued to be the mainstay of IRE, and is expected to remain so. Although IRE has been a relatively small player in the global minerals industry, given the prevailing resources position, demand - supply dynamic, and likely growth, it aims to garner almost 80% of the incremental ilmenite and associated minerals business, and double its turnover over a period of five years. It would be achieved through expansion and new projects at Chavara, MK and OSCOM, without surrendering its identity; and an SRP joint venture at OSCOM and Chavara. However, IRE is likely to face major competition from the global players setting up plants in India, in the near future.

As regards rare earths business, given the certainty of Chinese domination, technological edge of the French, Canadian, and Japanese manufacturers, and the raw material resource handicap, IRE wishes to become a formidable marketer in India and a leading producer of certain value-added products. It may also forge an international alliance for revitalising the troubled monazite processing plant at Alwaye.

To fulfil its aspirations, IRE would need to gain access to raw material at Chavara and restructure its balance sheet on a war footing; develop healthy relationship with the state governments; win KMML over, give thrust to training, R&D, and community affairs; create a culture of trust and sharing; build an environment that nurtures professionalism, learning, and knowledge transfer; realign its unit and corporate level management by creating temporary organisation to address specific performance improvement issues while making the structure for managing day-to-day operations much leaner and responsive; strengthen corporate marketing; seek best partner for Rare Earths Division; leverage and integrate information technology, including internet/e-business, with the strategic intent intelligently; finance projects prudently, and execute them without time and cost over-runs. Funds mobilisation, skills up gradation and behavioural change management would perhaps be the most serious challenges faced by IRE in the near future, and would have a profound bearing on implementation of the corporate plan.

SITUATION ANALYSIS
Introduction

• Beach sands largely comprise ilmenite, rutile, zircon, garnet and sillimanite. Ilmenite is the major component. The exact percentage of individual minerals varies from deposit to deposit.
• The peculiar nature of beach sands leaves the producers with little flexibility with regard to the product-mix; all these minerals have to be mined and separated simultaneously.
• The titanium mineral value chain is as shown :

Titanium Metal
* About 95% of titanium minerals is used in making TiO2 pigments and the balance 5% is converted into Titanium metal. Thus demand for ilmenite is driven, to a large extent, bygrowth in demand for TiO2 pigments.
* Titanium metal is mainly used in the aircraft industry; other uses are in golf-equipment,watches, submarines, missiles, ships and desalination plants.
* The US consumed 24,000 MT of Titanium metal in 1998; 50% was accounted for by Boeing - the largest aircraft manufacturer in the world - and 10% by golf-equipment manufacturers.
* The profitability of this industry is closely linked to the fortunes of the aircraft industry. Demand for Titanium was low during 1989-1994 on account of a slump in the aircraft business. This period also saw a number of lay-offs and hence there is a dearth of skilled labour currently.
* Major Titanium metal manufacturers are located in the US - Timet, OREMET, RMI Titanium and Titanium Industries Inc.
* Of late, there have been slight supply problems the gap is being met by enhanced production from Russia and Kazakhstan. Aerospace companies are increasingly looking towards Russian companies, for example VSMPO, to meet their demands.
TiO2 pigment
* TiO2 pigment is mainly used in the Paints & Coatings (59%), Plastics (20%) and Paper (13%)industries.
* Trends like increased use of bright glossy finishes in paints, higher demand for light paper, increased paper recycling, and substitution of traditional materials with plastics, on substantial scale, correlate to a growing demand for TiO2 pigment in these application areas.
* In the absence of any known, cost-effective substitute for TiO2 pigment, its demand is expected to grow at a rate of 3% per annum for next several years.
* The present world pigment manufacturing capacity is 4,000,000 MT and approximately 75% of the world production is located in the USA and Europe. Only a handful of companies control the majority of TiO2 production world-wide.
* The trend in this industry, over the past few years, has been towards consolidation of ownership.
* Even major titanium feedstock producers in Australia and South Africa account for a minuscule TiO2 pigment production for want of requisite technology, known only to a few manufacturers in the USA and Europe.
* Total demand for TiO2 pigments, in India, is approximately 60,000 MTPA and domestic manufacturers are able to meet only 60% of this demand.
* TiO2 pigment manufacturers in India are handicapped by non-economic plant sizes (viable size for use of proven technology is about 40,000 MTPA), which is the main reason for their relatively high cost of production. Lack of technological capability (ability to produce only a few grades, as against a few hundred of Du Pont) is also a major weakness of Indian TiO2 pigment producers.
* Import duty on TiO2 pigments has steadily come down (135% a few years back to 45% in 1998 to 40% in 1999),making imports cheaper and thereby compounding problems for the domestic producers.
* The world-wide trend in TiO2 pigment production is towards setting up plants based on chloride route due to lower cost of production and lesser environmental pollution. This indicates an increase in demand for high-grade feedstock suitable for the chloride route pigment production (high-grade ilmenite, rutile and slag). Titanium slag has advantage over synthetic rutile, mainly on account of lower cost of production, economies of scale and production of pig-iron (having a good market) as a by-product.
* Key drivers of the industry are closely guarded proprietary technology, consolidation and capacity expansions to gain from economies of scale. This has resulted in concentration of capacities in the hands of 4-5 key players.

Consolidation & Capacity Expansions
* NL Industries Limited has sold its specialty chemicals business and has announced that net proceeds from the sale would be used for acquiring additional TiO2 capacity.
* In 1998, Kerr-McGee acquired plants in Germany and Belgium, increasing net production capacity by 55% and consolidating its position in the European markets. The company plans to focus on growth through incremental plant expansions while looking for additional acquisition opportunities. Company has planned 20% expansion of its Hamilton facility in US, which would come on stream in 1999.
* Millennium acquired two TiO2 manufacturing facilities in Europe, formerly owned by Rhone-Poulenc and operated by Thann et Mulhouse, thereby increasing its production capacity by 138,000 MTPA. The company also plans to expand its existing capacity at Stallingborough plant in the UK, by 40%.

Proprietary Technology
* There are two production processes for manufacturing TiO2, namely Chloride route and Sulphate route. The recent trend in the industry is a shift towards the environment friendly chloride route, which was developed by Du Pont in 1950.
* There are only four companies in the world that own proprietary chloride technology. In US, 90% of TiO2 is manufactured by the Chloride route.
* Recent acquisitions allowed US-based manufacturers access to Sulphate route plants. But these companies do not have any immediate plans to convert these plants to Chloride technology. Combination of two technologies would enable these companies to supply to all segments of the Titanium Dioxide market.

Region	Capacity(Sulphate)	Capacity(Chloride)	Capacity(MTPA)
USA	98,000	1,393,000	1,491,000
Europe	1,012,000	430,000	1,442,000
Japan	276,000	50,000	326,000
Canada	66,000	25,000	91,000
Others	390,000	260,000	650,000
Total	1,842,000	2,158,000	4,000,000

* The chloride process is gradually replacing the sulphate process - more so in the US than in Europe and third world countries. Also, slag constitutes more than half of the TiO2 pigment feedstock.
TiO2 feedstock
* As could be seen from the value chain, ilmenite is either used in its raw form or converted to value-added materials, to produce pigments. Hence it is not surprising to note that global consumption of ilmenite as feed-stock for TiO2 pigment has been stagnant over the last decade despite growth in TiO2 pigment demand @ 3%. This is a clear indication towards preference for feed-stocks other than ilmenite, (namely, titanium slag and synthetic rutile).Thus, ilmenite producers would be required to target manufacturers of slag and synthetic rutile.
* Titanium slag (chlorinatable + sulphatable) as TiO2 feed stock supplies 50% of the world demand. Titanium slag is produced in South Africa, Canada and Norway, largely on account of availability of cheap power.
* Synthetic rutile prices have been declining as the swing from sulphate to chloride plants has been slower than predicted and through competition from low cost chloride-grade rutile slag producers. This results in declining prices for ilmenite and synthetic rutile. Thus producers are finding that lower grade of ilmenite could not be economically converted to synthetic rutile.This has forced many Australian producers to export low grade ilmenite to the sulphate based TiO2 plants and electric arc slagging plants.
* Closure of beach sand mines (temporary or permanent) has an adverse effect on the global demand-supply equation, thereby affecting prices. For example, there has been a decrease in natural rutile production since 1995 due to closure of plants in Sierra Leone, the largest producer of natural rutile, due to civil strife.
* As a titanium feedstock, rutile finds only a limited use mainly on account of lack of availability, and relative abundance of alternate feedstock; large demand is from alternate applications - welding electrodes.
* Consolidation in TiO2 pigments sector has encouraged similar moves in feedstock industry also. Recently RGC Ltd. announced its merger with Westralian Sands Ltd. The amalgamation of two Australian majors could create one of the world's key titanium mineral production and processing companies providing around 32% of the feedstock for the global TiO2 pigments industry.
* Rio Tinto through its subsidiaries, Richard Bay Minerals and QIT would still hold the position of leading TiO2 feedstock producer and would keep influencing the prices.
* The new Indo-Sri Lankan trade pact may lead to the flooding of Indian markets with cheap rutile from Sri Lanka.

Feedstock	Major Suppliers
Ilmenite	Australia, Norway, Ukraine, India
Rutile (SR/NR)	[Sierra Leone], Australia, South Africa
Titanium Slag	Canada, South Africa, Norway

* Major TiO2 feedstock suppliers are QIT and Richard Bay Minerals, RGC and CRL and Westralian accounting for more than 60% of world supply of titanium feedstock.
* Except Tinfos,titanium slag manufacturers obtain their ilmenite requirement from their captive mines; hence it is difficult for other ilmenite producers, like IRE, to target these potential customers.

Other Beach Sand Minerals
* Present world production of zircon is approximately 1 million metric tonnes; about 40% of this production is contributed by Australia while South Africa accounts for about 30%. In view of the fact that South Africa's share rose from 15% to 30% while Australia's share dipped from 50% to 40%, over the last decade, South Africa is expected to replace Australia as the world's largest source of zircon.
* The major end-use for zircon is in ceramic glazes, which account for 47% of total zircon consumption. Apart from this, zircon finds uses in refractories, foundries, TV glass and abrasives.
* Demand for zircon in the traditional markets of refractories and foundry sands has declined, but zircon consumption has found stimulus from standardisation of TV faceplate glass composition and increasingly stringent standards on the control of X-ray emissions from TVs. Also, increasing demand for zirconia would be met more from zircon than from baddeleyite (alternate source) as production of baddeleyite is expected to remain stagnant for the next few years.
* New projects for titanium feedstock production would contribute little or no co-product zircon. This would have an important bearing on the long-term supply of zircon.
* USA accounts for nearly 35% of global garnet consumption.
* International forecasts indicate a 7% growth in world demand for garnet over the next 10 years. Key demand drivers are markets for blasting media and water jet cutting.
* Reduced use of silica to avoid health risks in blast cleaning would also create significant market opportunities for garnet manufacturers.
* Sillimanite demand might be sluggish on account of lower acceptability (granular sillimanite produced by IRE against demand for lumpy sillimanite) and easy availability of close substitutes of the mullite family, namely, andalusite and kyanite.
* India produces granular sillimanite while the major demand is for andulasite and kyanite.

Rare Earths
* The Rare Earths Oxide (REO) industry has developed into a two-tiered industry : the mixed REOs (the rare earth concertrates used without separation of individual rare earth materials), which constitute the bulk of the business, show stagnant demand, while purified, separated individual Rare Earths show promising prospects. In the 1980s demand shifted from mixed rare earths products, such as mischmetal and mixed compounds, to higher value individual high-purity products.
* Markets for Rare Earths (RE) products include catalyst, metallurgical, glass and ceramic applications. In the US - the largest consumer of RE products - the distribution by end was: automotive catalytic converters, 48%; petroleum refining catalysts, 17%; glass polishing and ceramics, 14%; permanent magnets, 12%; metallurgical additives and alloys, 7%;phosphorous, 1%; and miscellaneous applications, less than 1%.
* Maximum growth for Rare Earths would originate from its application in pigments, glass, magnets, and batteries.
* The lower end of the market, mixed REOs, (ores, beneficiation, concentration) is dominated by China on account of large availability of better quality reserves - bastnasite, widespread production base, and sizeable domestic consumption (16,000 MT). The upper end of the market (purification and separation, finition) is dominated by France, USA, Japan and Canada.
* Although there are eleven countries with the ability to produce significant quantities of rare earth minerals,majority of world's rare earth mineral production is concentrated in two countries. Prior to mid 1980s US accounted for 40% or more of world REO supply. Since mid-1980s, the world REO supply shifted to China. China is the biggest player in the rare earths market - accounting for nearly 45% of the world rare earths reserves (110,000,000 MT) and 75% of the world rare earths production (66,500 MT). Chinese exports are expected to continue to dominate international markets for the foreseeable future.
* Additional supplies from the CIS countries may impact the demand supply scenario in the next few years. There is no fundamental supply problem in the industry, as proven reserves are ample for years to come.
* Demand for Rare Earths products is in the developed nations. The United States, Western Europe, Japan, China and the CIS account for more than 80% of world production and about 75% of world consumption.
* The United States is the largest consumer of rare earths, whereas China is the second-largest consumer. China's largest market is metallurgical, followed by catalysts, glass and ceramics, and the magnets, phosphorous and other new materials market. All of these Chinese markets are growing faster than comparable markets in US, Western Europe and Japan.
* Western Europe is a major centre for processing of rare earth minerals into products, with France being the dominant processor. Almost half of the rare earths used goes into catalysts;glass is the second largest market.
* Japan has no domestic sources of rare earth minerals; all supplies are imported. Unlikeother industrialised nations, the Japanese use only small amounts of rare earths to make catalysts. Japan, however, is the largest producers of rare earths based permanent magnets.
* India's share in the world reserves is a minuscule 1% whereas it accounts for 2-3% share of the world production.India's presence (that is the Rare Earths Division of IRE) is mainly at the lower end of the rare earths value chain.
* India's share in the rare earths market is marginal due to presence of radioactive elements in monazite (the only ore found in India), technology gap, and narrow (one plant) production base.

TiO2 Pigment Market - 2005-06
* TiO2 production is expected to increase at 3% per annum.
* The current trend in pigment production technology indicates that this increase would be primarily through the chloride route. The sulphate route might actually suffer a negative growth if some of the existing manufacturers shift over to the chloride route. Currently, however, there appears to be no such shift in production technology.
* The effective growth rate of pigment production through the chloride route works out to @ 5% per annum.
Growth in TiO2 Pigment and Feedstock Market
The compounded annual growth rate of synthetic rutile is high at 5% while that of titanium slag and ilmenite 'as-is' (directly converted to TiO2) is lower at 2% and 3%, respectively. This is because growth in TiO2 production is expected to be through the chloride route only and whereas ilmenite 'as-is' and titanium slag could be used in chloride and sulphate routes, synthetic rutile is generally not used in the sulphate route.
Rare Earths
* China is the biggest player in the rare earths market - accounting for nearly 45% of the world rare earths reserves (110,000,000 MT) and 75% of the world rare earths production (66,500 MT).
* The lower end of the market (ores, beneficiation, concentration) is dominated by China on account of large availability of better quality reserves - bastnasite, widespread production base, and sizeable domestic consumption (16,000 MT). The upper end of the market(purification and separation, finition) is dominated by France, USA, Japan and could.
* Maximum growth for rare earths would originate from its application in pigments, glass, magnets, and batteries.
* India's share in the world reserves is a minuscule 1% whereas it accounts for 2-3% share of the world production. India's presence (that is Rare Earths Division of IRE) is mainly at the lower end of the rare earths value chain.
* India's share in the rare earths market is marginal due to presence of radioactive elements in monazite (the only ore found in India), technology gap, and narrow (one plant) production base.
* The Rare Earths Division merits separate attention of the top management as the nature of business is different from beach sands minerals.
* There is an urgent need to address the immediate problem of thorium storage and should be dealt with as a managerial issue rather than a technical one. The top management needs to take a definite stand on the strategic importance of thorium and dispose of the bottleneck accordingly. In this regard IRE should not expect any assistance from DAE as the DAE's involvement in IRE is expected to decline slowly but surely.
* It should also be noted that on account of radioactivity problems, monazite processing is expected to be completely stopped in the next 10-15 years; this is obvious from the closure of a number of monazite processing plants globally. Accordingly IRE should not consider increasing the capacity of RED and restrict itself to 3,600 - 4,200 MTPA.

MISSION AND VISION
Mission
* To harness beach sands in an environmentally and socially responsible manner for efficiently producing minerals and their traditional and innovative value-added products of world-class quality, that are used to make increasingly superior/novel products required by customers.
* To play a dominant role in developing domestic rare earths market by producing and/or marketing the quality value-added products to realise maximum potential of rare earths in a range of applications.
* To build a professional, creative, and committed workforce and nurture an environment that fosters learning, sharing, and development.

Vision
* To be a leading supplier of beach sand minerals from Asia by supplying 10% of the world demand for beach sand minerals over the next 7-10 years. It would be achieved by maximum utilisation of existing capacities, new capacity addition, capturing major portion of the incremental growth in the global TiO2 feedstock demand, and by developing competitive value-added rutile, zircon, sillimanite, and garnet products that make handsome contribution to revenue and profits.
* To become the preferred rare earths products supplier (producer and/or marketer) for domestic customers to ensure long-term sustenance and profitability of rare earths business, and to achieve adequate efficiency in monazite processing as long as it is necessary/worthwhile.

STRATEGY DEVELOPMENT
Options for IRE – Minerals
 

Selling                         To

Illmenite-----------------> Pigment manufactures Illmenite-----------------> SR manufactures Illmenite-----------------> Slag manufactures SR----------------------> Pigment manufactures

Slag------------------> Pigment manufactures Pigment---------------> End-users low productivity

* Pigment and slag manufacturing are high-risk, high-investment businesses; easy access to production technology is another major constraint. In addition to this, in order to be cost-effective, titanium slag requires reliable and cheap power supply.

* On account of these restricting factors, IRE's modest net worth and fund raising abilities,the company's experience and expertise, and its easy access to quality resources, IRE should not venture into these businesses; instead the company should consolidate its position in the titanium feedstock business (Ilmenite and synthetic rutile) and develop into a formidable player of international repute.

 
Strategic Positioning - Minerals
* As has been indicated earlier, IRE produces different grades of ilmenite, suited for different categories of consumers. Hence the expected growth in the TiO2 pigment and feedstock businesses provides immense opportunities for IRE.
* IRE should try to target at least 80% of the increase in global demand for ilmenite by pigment (direct users) and synthetic rutile manufacturers subject to production capabilities.
* Although most titanium slag manufacturers use ilmenite from their captive mines, IRE could target Tinfos (Norway) as the company is currently facing supply problems on account of closure of Beenup - its chief supplier. IRE should try to capture at least 50% of Tinfos'ilmenite requirement. Further, OSCOM should supply ilmenite to the Saraf-Ishihara SRP.
* In addition to being a competitive supplier of ilmenite, IRE should endeavour to cash in on the expected growth in the synthetic rutile market.
* Ilmenite production rusults in production of associated minerals, namely rutile,sillimanite,zircon and garnet, of which rutile fetches a high price. IRE should initiate value-addition projects for these minerals, wherever possible. These value-additions may be in the form of separate products like microzir and zirflor (in case of zircon) to minor modifications (like different grain size, etc.) to meet customer requirements. The  value-addition projects should, however, be strictly considered on the basis of cost-benefit analysis (and realistic demand estimates) and not on the mere urge to forward integrate.

Strategic Positioning - Rare Earths
* To address the Chinese threat IRE needs to focus on 6-7 key products - like RE Chloride, Lanthanum, Cerium, Praseodymium, Neodymium, Samarium, Gadolinium and Yttrium - and make concerted efforts to match its competitors on cost and quality fronts. RED should take special efforts, in consultation with marketing department, to ascertain specific customer requirements and try to meet the same. Further, IRE should concentrate on building a solid customer base for the rare earths in the domestic market, and fully capitalise on its five-decades long presence in India. As IRE may be unable to sustain rare earths manufacturing beyond five-seven year period, it should leverage its product-market understanding to emerge as a leading marketer of rare earths in India.
* Having decided on the products to be developed would not be necessarily followed by consistent sales of those products; it only ensures building of capabilities to serve the  market as and when the requirement arises. Thus, the ecision to develop certain products and continue their production should not be based on financial returns only.
* In order to overcome the radioactivity problems, IRE should consider the following options:

• Shift from monazite to radioactivity-free bastnesite
• Import mixed RE Chloride from China and develop downstream products
• Strategic alliance with Rhodia, who are the pioneers in monazite processing technology

* Changing its raw material from monazite to bastnesite (partially or fully) would definitely solve RED's radioactivity problems but the following issues need to be clearly understood and  addressed :

• Compatibility of new raw material with existing technology
• The Chinese position vis-a-vis India and IRE - this would have a direct bearing on consistent supplies from China which, in turn, would affect IRE's ability to meet its commitments to its customers
• The company would have to forego revenue accruing from sale of Tri-sodium phosphate  (TSP)
• Outflow of foreign exchange
• Monazite storage at MK

* Similar issues would arise if IRE decides to stop monazite processing and import and process RE chloride.The advantage in this case is that RED could better focus on value-addition projects and be rid of the problem of monazite processing and thorium disposal; raw material compatibility ceases to be an issue in this case. However, an additional factor to be  considered in this option is the cost-effectiveness of processing RE chloride as the prices  are as high as $1,000 / tonne (without duties).
* The third option for RED is to form a strategic alliance with Rhodia and continue with monazite processing. This option insulates IRE from the changing strategic stance adopted by China vis-a-vis India, which is a major consideration in the earlier options; it additionally eliminates the raw material compatibility and outflow of foreign exchange   issues.

* The strategic alliance also has the following advantages for IRE:

• Since Rhodia is the pioneer in monazite processing technology and have perfected the same, it could help reduce radioactivity content of RED products and thereby ensure survival of RED
• Rhodia might be interested in developing usage of RE products in India and hence help RED diversify into downstream products
• Inceased offtake of RE Chloride by Rhodia

* Rhodia is planning a new venture in China in addition to its existing facilities and may not  want to further increase its stake in the country; it would be more open to pursue its   growth options in other countries. In this scenario, a strategic alliance with IRE would be the perfect option for Rhodia.
* In order to ensure survival of RED, IRE would have to quickly decide on these options and deal with the workforce at RED accordingly. Although a detalied analysis of each option ismandatory before arriving at any conclusion, the option of a strategic alliance with Rhodia,  prima facie, seems to have greater merit. While considering this option, it should beunderstood that day-to-day management and operations of the unit might have to be passed on Rhodia; the company may have a major say in important decisions like choice of technology and product mix.This would affect IRE's identity and the top management has to be prepared for it. Unless the top management understands, appreciates and prepares for such an eventuality, it would diffcult to convince the officers and workers about the need for such action, which could place the alliance in jeopardy even before it takes off.
* In addition to deciding on the future of RED, IRE would have to initiate steps to increase the usage of RE products in India.
* IRE should also carry out a detalied feasibility study for setting up a major value-addition project, for example, Nd-Fe-Bo magnet.

Strategic Objectives

• Defend and Extend Core - 1998-99 onwards

* IRE should concentrate on maximizing capacity utilisation from 78% to 100%.
* The OSCOM unit has reached production levels of 170,000 MTPA and so the unit should try to achieve the name plate capacity production of 220,000 MTPA by the end of year 2001-02. The company has earmarked funds for increasing capacity utilisation to 100%. In additioninvestments should be done to sustain this production level for a longer period
* The Chavara unit should acquire sufficient land immediately and revive MRP I thereby enhancing production to 154,000 MTPA in the next two years. Anomalies in the incentivescheme have restricted production to 120,000 MTPA and this issue should be addressed immediately. It should not be a hindrance to achieving name-plate capacity production.
* The MK unit should maintain production to 75,000 MTPA level and increase saleability byproper quality improvements.
* IRE should decide on the appropriate course of action for RED (Strategic
  alliance/bastnesite/RE chloride). The thorium storage problem should be resolved at theearliest.
* IRE should vigorously develop the market for rare earths in India.

• Emerging Businesses - 2001-02 onwards

* IRE should increase its capacity from 464,000 MTPA to 895,000 MTPA.
* The OSCOM unit should set up a new MSP of 200,000 MTPA to increase its total capacity to 420,000 MTPA by 2001-02.
* The Chavara unit should set up MRP III to increase its total capacity to 275,000 MTPA by2002-03. By 2003-04 this unit should also set up a new MSP of 200,000 MTPA, and an SRP of 100,000 MTPA through JV route.
* By this time IRE should decide on commercially attractive value-addition projects for otherbeach sand minerals as well as on the Nd-Fe-Bo magnet project at RED.
* IRE's survival depends on access to beach sand resources. The company should try to acquirenew deposits in a proactive manner. To this end IRE should try to develop the Thuttoor and Kudraimozhi sites. The Thuttoor site is definitely required to ensure survival of MK as theexisting reserves would not last for more than 10 years (production @ 90,000 MTPA) and thattoo only if IRE manages to obtain and mine every square inch of land, which is not practically possible.

• Long Term Strategic Options - 2005-06 onwards

* By this time IRE's short and medium term plans would have taken shape and started providing returns to the company. Changes in the external environment would also be more pronounced - in terms of the future of the pigment, slag and synthetic rutile markets. IRE would be in a better position to decide on the next round of growth-oriented actions which would essentially mean forward integration i.e. manufacturing titanium slag and TiO2 pigment.
* It would not be necessary for IRE to set up a new titanium slag facility on its own; the company could use its, by then, long-term association with Tinfos to acquire a reasonable stake in the company. This acquisition process could be initiated early in this phase. By the time this investment is 2-3 years old, IRE should decide on setting up a new TiO2 pigment plant. The modalities of this venture would depend on the prevailing market conditions and IRE's bargaining capacity.
* IRE should also explore beach sand mining options in other countries to graduate to becoming a truly global player.

ACTION PLAN
Top Management Action Plan

• The top management of IRE should accord top priority to the implementation and monitoring of the corporate plan.

* Prepare a leaflet and/orvideo on mission, vision, strategic objectives, and change agenda for IRE to be distributed/shown to all employees of the company for communicating the rationale and need for change. Seek feedback.
* Visit all the units and offices and hold open sessions with employees to discuss the message in the leaflet/video.
* Create a sense of urgency and purpose, by sensitising employees about the challenges ahead.
* Explain the need to preserve corporate identity.
* Create a culture of trust and sharing, and encourage exchange of ideas and information by rewarding employees for collaboration and team-work.
* Develop strategy for holding transparent discussions with the unions and ensure that the unions appreciate the change imperative. Involve the unit management in the process.
* Select Special Team for spearheading the corporate plan implementation and performance improvement initiative, through the temporary organisation. The Special Team should report to the CMD.
* Make budgetary provision for supporting improvement initiative through the temporary organisation.
* Change organisation structure gradually, to facilitate achievement of vision and objective.
* Evolve a Community Participation policy that facilitates understanding of local issues and integration with broader business framework.
* Develop a positive and mutually beneficial relationship with KMML and the state government.
* Strive to obtain mining rights for blocks I, III, V, and VII at Chavara by convincing KMML that IRE continuing to mine and separate beach sand minerals is in the interest of KMML too. As beach sand mining would remain the mainstay of IRE, it should vigorously try to realise maximum potential of Chavara resources.
* Gain access to resources at Chavara at the earliest, and achieve maximum capacity utilisation.
* Strengthen the corporate marketing organisation to take on the challenges of the expanding market, and train extensively.
* Hold extensive discussions with the DAE and the Ministry of Finance, for evolving a pragmatic solution to the outstanding loan and interest burden in respect of OSCOM, on a war footing. Efforts should be made to impress upon the concerned authorities that delay in financial restructuring would only seriously weaken IRE's position and future prospects. Conversely, revamped balance sheet would be mutually advantageous.
* Maintain excellent relationship with the Orissa state government and protect the mining rights.
* Streamline and improve the project evaluation and execution processes, so that changing market requirements either do not make the project irrelevant or entail high opportunity cost.
* Accord top priority to delivering focussed training to build capability and improve performance.
* Acquire/develop expertise for funds mobilisation for the green field/expansion projects.
* Acquire/develop expertise for efficiently managing the green field/expansion projects. Appoint professional turn-key project managing company to execute projects without time and cost over-runs.
* Initiate dialogue with companies such as Rhodia for improving the performance of Rare Earths Division (RED). It would be important to judge the level of interest/dependence that Rhodia apparently has/would have on RED, and negotiate terms of association accordingly.