MELBOURNE, Australia--Mineral sands producer Iluka Resources Ltd. (ILU.AU) and iron-ore producer Vale SA (VALE) plan to explore and potentially develop a large titanium deposit in Brazil.

Iluka has signed a development pact and intellectual property agreement with Vale for a staged evaluation of the deposit in Minas Gerais state, which could be developed into a large-scale titanium operation, the Australian company said Wednesday.

The first phase of the study will include geological and technical evaluations, a market assessment, and a pilot design for a plant, which is expected to take about 15 months to complete, Iluka said. If that is successful, the companies plan to move on to construct a pilot plant and eventually build a commercial-scale plant.

In terms of funding for the early studies, pilot plant and feasibility studies, Iluka said it has options to participate up to 49% equity in a joint venture with the Brazilian mining company. It also has preferential options on other big titanium-dioxide deposits in Vale's portfolio.

"Iluka's involvement provides the company with the opportunity to participate in the potential commercialization of one of the largest known undeveloped titanium mineral deposits," Managing Director David Robb said.

Write to Robb M. Stewart at robb.stewart@wsj.com

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