Mineral sands miner Iluka says it will cut its annual production of zircon in 2012 because the global economic outlook remains unclear.

Iluka said on Tuesday that sales volumes of zircon in April had improved compared to the prior three months as there was some evidence of improvement in the economies of the United States and China.

However, large countries in the euro zone were showing increased weakness in the face of austerity measures.

“Accordingly, Iluka has decided to reduce its zircon production in 2012, from the previously advised 500 thousand tonnes to 430 thousand tonnes, while maintaining its high-grade titanium dioxide production,” Iluka said in a statement to the Australian Securities Exchange.

“The zircon production adjustment will be achieved mainly via mining lower-grade ore at Iluka’s Jacinth-Ambrosia operation in South Australia and processing less zircon-rich concentrate at its Narngulu and Hamilton mineral separation plants.

“Iluka now forecasts its zircon sales for the full year to be 400 thousand tonnes compared with the previously forecast 450 thousand tonnes.”

Iluka said zircon pricing in the year to date was in line with Iluka’s expectations and previous pricing commentary provided by the company.

As a result of lower zircon production, the cost of production of zircon/rutile/synthetic rutile was expected to rise to $A700 per tonne from $A650 per tonne. Estimated revenue per tonne was about $US2,300 ($A2,262.33).

There was no change to guidance for titanium dioxide production and sales from that issued at the beginning of the year, with market conditions and sales forecasts in line with expectations.

Iluka said capital expenditure was expected to increase from $220 million to about $260 million in 2012, associated with the bringing forward of expenditure related to the Cataby project in Western Australia, and extra expenditure for the Balranald project in NSW.

Shares in Iluka were down $1.94, or 12.16 per cent, at $14.01 on Tuesday.