Unit of France's Eramet to start zircon output in April in Senegal

DAKAR, Jan 16 (Reuters) - Grande Cote Operation (GCO), part-owned by France's Eramet , will start production of zircon in April at a $650 million project in Senegal that it says will be the third largest in the world, its chairman said on Friday.

GCO Chairman Bruno Delanoue told Reuters the Diogo mine, some 150 km (94 miles) north of the Senegalese capital Dakar, will eventually represent some 7 percent of global output of zircon, a mineral used in the ceramics industry.

It will also produce ilmenite, an ore often mined to extract titanium dioxide, used in the production of paints, plastics and paper.

"For our first year of production, we will reach 80,000 tonnes of zircon and 600,000 tons of ilmenite," Delanoue said. He said GCO had invested $650 million in the project in the past two years, making it the largest private investor in the West African state.

GCO is 90 percent controlled by British-registered company TiZir, a 50-50 joint venture between Australian Mineral Deposit Limited and Eramet. It has a concession of 25 years for the mine, in which the Senegalese state owns the remaining 10 percent.

The company has agreed to pay 5 percent royalties tax instead of the 3 percent stated in the mining code and also has a production sharing agreement with the state, also not required by the mining code, Delanoue said.

The concession stretches over 106 kmalong the West African coastline. The company has built 28 km of railroad to join Senegal's existing rail infrastructure and fully rehabilitated 110 km running to the port of Dakar, where GCO has 30,000 square meters of warehouses.

Production will be carried out via a floating dredge on artificial lakes that does not use chemical products for processing the minerals and has almost no major environmental impact, Delanoue said.

(Reporting By Diadie Ba; Editing by Daniel Flynn/Mark Heinrich)

((diadie.ba@thomsonreuters.com)(+221 33 864 5076))

Keywords: SENEGAL FRANCE/ZIRCON