Former Rio Tinto executive Mal Randall said the iron ore spot pricing model has "been a disaster" and the major producers should consider returning to long-term benchmark contracts.

Mr Randall, who spent more than 25 years at Rio Tinto and now chairs a mineral sands company, said former BHP Billiton boss Marius Kloppers should never have pushed to reform iron ore pricing in 2010.

"It was orchestrated and brought in by a guy that has no responsibility now, Kloppers who used to run BHP," Mr Randall said. "It's great to make these changes and then he's gone."

Mr Kloppers' bid to reform the system generated billions of dollars for miners globally during price highs but has left the sector more exposed to slumping prices.

The previous benchmark system, in place for more than 40 years, was based on annual contracts negotiated by miners and steelmakers.

When it encountered problems during the Global Financial Crisis, Mr Kloppers took a key role in convincing Chinese steelmakers to drop it in favour of daily pricing in 2010, making iron ore a more liquid and volatile market. In 2011, iron ore peaked at $US185.60 a tonne.

Mr Randall said reverting to the benchmark model would benefit the beleaguered industry.

"Iron ore pricing now is, to a large extent, in the hands of the traders who can wheel and deal," Mr Randall, who founded the Kerry Stokes-controlled Iron Ore Holdings before it was taken over by BC Iron, said.

"Sometimes it bears no relation to the actual iron ore price, it's just deals and deals within deals. If they want to push the price up or down somewhere out of Qingdao they will and they'll do it on one or two ships.

"So when the price drops, how well does that represent some of the longer-term tonnages that have been put out by the big guys? It's a bit of a mess."

Mr Randall also criticised the major miners' expansion plans, arguing they are damaging the industry and need to have their practices reviewed by the Australian Competition and Consumer Commission.

But as the iron ore sector languishes at the bottom of the price cycle, Mr Randall has positioned himself in mineral sands, which is preparing for a recovery.

Mr Randall chairs MZI Resources, which kicked off construction at its Keysbrook project 70 kilometres from Perth last week.

"The market is tipped to improve and companies like Iluka are starting to turn projects in the state back on; our timing couldn't be better in that sense, with construction starting and production expected for the December quarter," Mr Randall said.

It has been a challenging run for the company, which Mr Randall said has experienced "everything that could possibly happen to a company".

"At one point I had one leg hanging in the canyon of insolvency and the other leg on the edge but fortunately the wind blew in the right direction," he said.

MZI has cinched $US110 million from RMB Australia Holdings and Resource Capital Fund to finance the development of the 4.5 million tonne a year operation, expected to have an operating cost of $331 a tonne, which would generate a healthy margin even at today's mineral sands prices.

The world's largest zircon producer, Iluka Resources painted a positive picture for demand in its full-year results last week and MZI managing director Trevor Matthews said he believes Keysbrook will be well placed to capitalise on the better conditions.

"Mineral sands is a pretty good space to be now in terms of the future picture," he said. "The market became oversupplied a few years ago and that's what has caused the downturn but all that oversupply has been worked out the system now with a bit of production discipline from the major producers so it's coming back into balance and we're right there ready."