Iluka Resources Limited · ASX:ILU
Iluka Resources — FY2016 Earnings Presentation
34 slides from Iluka Resources's earnings presentation, Feb 23, 2017
Slide 1: Iluka Resources Limited 2016 Full Year Results
Iluka Resources Limited 2016 Full Year Results Tom O’Leary, Managing Director and Chief Executive Officer Doug Warden, Chief Financial Officer and Head of Strategy and Planning Matthew Blackwell, Head of Marketing, Mineral Sands 23 February 2017
Slide 2: Disclaimer – Forward Looking Statements
Disclaimer – Forward Looking Statements Forward Looking Statements This presentation contains certain statements which constitute “forward-looking statements”. These statements include, without limitation, estimates of future production and production potential; estimates of future capital expenditu
Slide 3: Main Features of Full Year Results
Main Features of Full Year Results Cash costs of production 33.6% - lower production settings Unit cash costs of production (excl. by-products) $373/t Z/R/SR (2015: $558/t Z/R/SR) Unit costs of goods sold $700/t Z/R/SR (2015: 780/t Z/R/SR) Unit revenue 12.1% to $999/t Z/R/SR – lower zircon p
Slide 4: Business Review and Key Initiatives
Business Review and Key Initiatives • Iluka business review progressed; key components – commencement of effective integration of Sierra Rutile – review of non-production costs to ensure sustainable cost structure; ~$20 million reduction 2017 – detailed review of existing production portfolio and pr
Slide 5: Summary Group Results
Summary Group Results $m 2016 2015 Mineral sands revenue 726.3 819.8 Underlying mineral sands EBITDA1 103.0 231.8 Mining Area C EBITDA 47.5 61.6 Underlying Group EBITDA1 150.5 293.4 Underlying Group EBITDA margin %1 19.5 33.3 SRL transaction costs (14.1) - Depreciation and amortisation (79.9) (132.4
Slide 6: Key Factors Influencing Result
Key Factors Influencing Result 2016 versus 2015 • Zircon / rutile / synthetic rutile (Z/R/SR) sales up by 7.2% (697.7 thousand tonnes) • Z/R/SR revenue down 5.8% to $696.8 million, average zircon price 19.6% lower • Production costs reduced by 33.6% – cessation of US operations from December 2015 –
Slide 7: Mining Area C Royalty
Mining Area C Royalty 2016 versus 2015 2016 2015 % change Sales volumes mdmt 52.3 53.5 (2.2) Implied price A$/t 73.9 71.7 3.1 Net royalty income $m 47.1 48.2 (2.3) Annual capacity payments $m - 3.0 n/a Agreement modification one-off receipt $m - 10.4 n/a Mining Area C royalty EBIT $m 47.1 61.2 (23.0
Slide 8: Net Debt Movement
Net Debt Movement 2016 versus 2015 2016 free cash inflow $47.3 million $m 200 44 137 (25) (14) (14) 100 1 (64) (19) 6 0 (92) (100) (200) (300) (400) (375) (500) (80) (10) (3) (506) (600) Opening Operating MAC royalty Exploration Interest Tax Capex Purchase of Asset 2015 final SRL SRL FX Amortised Cl
Slide 9: Inventory Drawdown
Inventory Drawdown1 Half Yearly Inventory Value $m 1000 Finished Goods Work in Progress 800 600 400 200 0 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 • Total inventory at 31 December 2016 of $694 million (2015: $812 million)
Slide 10: Iluka Dividend Payments
Iluka Dividend Payments • Directors have determined no final dividend will be declared for 2016, in the context of the company’s potential investment opportunities, including Cataby and Sierra Rutile expansion options • Interim 2016 dividend of 3.0 cents per share • Lower than 40% free cash flow pay
Slide 11: Zircon Market
Zircon Market 2016 Overview • Producer inventory levels normalised over 2016 • 2016 demand variable across sectors and regions • Iluka weighted average price 20% lower to US$773/tonne due to: – 15% decline in first half induced by competitors – product mix changes with increased sales of zircon conc
Slide 12: Titanium Feedstock Market
Titanium Feedstock Market • Pigment market enters 2017 with continued favourable set of factors: – historically low pigment inventories – industry wide pigment plant utilisation rates increasing – recent, multiple, pigment price increases • Iluka rutile price rises of up to 4% in first half of 2017
Slide 13: Cataby Project
Cataby Project • Large chloride ilmenite deposit with significant associated zircon and rutile production – ilmenite production to underpin continuation of synthetic rutile kiln 2 in South West Key Project Features • Located 150km north of Perth, Western Australia • Estimated life of ~8.5 years • An
Slide 14: Sierra Rutile Update
Sierra Rutile Update • Iluka merged with Sierra Rutile Limited on 7 December 2016 • Integration on track and progressing well • Focus over two months since taking control has included: – addressing the most urgent safety aspects – maintaining production – implement Iluka standards in, for example, t
Slide 15: Sierra Rutile Update
Sierra Rutile Update Operational Improvements • Mobile mining unit – planned for deployment in Gbeni (feeding Lanti wet concentrator plant) – replace the existing truck and shovel mining operation – mining unit will comprise in-pit mineral sizer and ex-pit scrubber, ore to be pumped to concentrator
Slide 16: Balranald Project Update
Balranald Project Update • Balranald is a large, deep, high grade rutile-rich deposit in Murray Basin, NSW • Definitive feasibility study on a conventional mining approach completed • Separate DFS using unconventional, underground mining method in progress Underground mining of mineral sands • Propr
Slide 17: 2017: Key Activities and Outlook
2017: Key Activities and Outlook • Sierra Rutile – integration, operational improvements and evaluation of expansion projects • Cataby project progression • Phased evaluation of Balranald • Mineral sands market conditions improving – positive high grade titanium feedstock dynamics – zircon price rec
Slide 18: Iluka Resources Limited
Iluka Resources Limited For more information contact: Dr Robert Porter, General Manager Investor Relations robert.porter@iluka.com +61 3 9225 5008 / +61 (0) 407 391 829 www.iluka.com
Slide 19: Supplementary Slides
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Slide 20: Non-recurring items in 2016 Financials
Non-recurring items in 2016 Financials Asset Impairments The non-cash impairment charge of $201.0 million pre-tax related to the following assets: • idle and surplus equipment in the Murray Basin of $156 million pre-tax, including the Douglas wet concentrator, mining unit and other equipment, as wel
Slide 21: Reconciliation of Non-IFRS Financial Information to Profit before Tax
Reconciliation of Non-IFRS Financial Information to Profit before Tax 31 December 2016 Exploration & Mineral AUS US SRL Other1 Corp sands MAC Group Mineral sands revenue 690.2 18.3 17.8 726.3 726.3 Mineral sands expenses (408.6) (53.7) (16.7) (95.4) (574.4) (574.4) Mining Area C 47.5 47.5 Foreign ex
Slide 22: Net Loss After Tax Movement
Net Loss After Tax Movement 2016 versus 2015 $m 100 50 54 0 14 7 15 (2) ( 85 ) ( 15 ) -50 ( 31 ) -100 (224) ( 67 ) ( 14 ) -150 ( 15 ) -200 87 -250 -300 31 7 -350 ( 201 ) (3) (4) -400 2015 Price Vol Mix FX Ilm & Unit Idle Min Sand MAC Corp Impairment Depn Metalysis Interest Unwind Tax 2016 Oth COGS O
Slide 23: Production Volumes
Production Volumes kt 20161 2015 % change Zircon 347.1 388.6 (10.7) Rutile 117.6 136.5 (13.8) Synthetic rutile 210.9 164.9 27.9 Total Z/R/SR production 675.6 690.0 (2.1) Ilmenite – saleable and upgradeable 329.4 466.1 (29.3) Total production volume 1,005.0 1,156.1 (13.1) Heavy mineral concentrate pr
Slide 24: 2016-17 Production Settings
2016-17 Production Settings 2016 2017 Jacinth-Ambrosia mining Mining and concentrating suspended from April 2016 Mining and concentrating idle. for 18-24 months. South Australia Concentrate processed at Hamilton and/or Narngulu Concentrate processed at Hamilton and Narngulu mineral separation plants
Slide 25: Sales Volumes
Sales Volumes kt 20161 2015 % change Zircon 338.8 346.2 (2.1) Rutile 172.1 133.6 28.8 Synthetic rutile 186.8 171.2 9.1 Total Z/R/SR 697.7 651.0 7.2 Ilmenite 17.7 299.8 (94.1) Total sales volumes 715.4 950.8 (24.8) 1 Includes 2016 Sierra Rutile sales of: 18.1kt rutile. 25
Slide 26: Mineral Sands Results
Mineral Sands Results Underlying $ million Mineral Sands Revenue EBITDA1 Group EBIT 2016 2015 2016 2015 2016 2015 Australia 690.2 770.5 281.6 366.8 (52.7) 246.8 United States 18.3 49.3 (35.4) (6.9) (76.3) (34.5) Sierra Rutile Limited 17.8 - 1.1 - (0.9) - Resource development and support costs - - (1
Slide 27: Unit Cash Costs and Revenue per tonne
Unit Cash Costs and Revenue per tonne 2016 2015 % change Total Z/R/SR production kt 675.6 690.0 (2.1) Ilmenite – saleable and upgradeable kt 329.4 466.1 (29.3) Total production kt 1,005.0 1,156.1 (13.1) Total cash costs of production, incl. by-products $m 260.6 392.5 (33.6) Unit cash costs per tonne
Slide 28: Balance Sheet – 31 December 2016
Balance Sheet – 31 December 2016 Net Debt, Gearing and Funding Headroom $m Gearing % 1,200 60 1,000 50 800 40 600 30 400 20 200 10 0 0 -200 -10 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Total facilities Net debt (cash) Gearing • Net debt increa
Slide 29: Capital and Exploration Expenditure (cash)
Capital and Exploration Expenditure (cash) $m 2016 2015 % change Capital expenditure 63.5 62.3 1.9 Metalysis 19.0 4.1 363.4 Exploration 24.7 27.7 (10.8) Total 107.2 94.1 13.9 29
Slide 30: Australian Operations
Australian Operations 2016 2015 % change Production volumes Zircon kt 347.0 351.3 (1.2) Rutile kt 108.8 136.5 (20.3) Synthetic rutile kt 210.9 164.9 27.9 Total Z/R/SR production kt 666.7 652.7 2.1 Ilmenite kt 326.2 320.9 1.7 Total production volume kt 992.9 973.6 2.0 HMC produced kt 371 890 (58.3) H
Slide 31: US Operations
US Operations 2016 2015 % change Production volumes Zircon kt - 37.3 n/a Ilmenite kt - 145.1 n/a Total saleable production volume kt - 182.4 n/a HMC produced kt - 247 n/a HMC processed kt - 257 n/a Unit cash cost of production - saleable product1 $/t - 484 n/a Mineral sands revenue $m 18.3 49.3 (62.
Slide 32: Sierra Leone Operations
Sierra Leone Operations 2016 2015 % change Production volumes Zircon kt 0.1 - n/a Rutile kt 8.8 - n/a Ilmenite kt 3.2 - n/a Total saleable production volume kt 12.1 - n/a HMC produced kt 23.3 - n/a HMC processed kt 24.6 - n/a Unit cash cost of production - saleable product1 $/t 777.0 - n/a Mineral s
Slide 33: Zircon Sales
Zircon Sales • 2016: 338.8 thousand tonnes (2015: 346.2 thousand tonnes) Americas EMEAI China / Asia Sales by Sector Ceramics 260 257 kt kt Zircon Chemicals Fused Zirconia Refractories 70 kt 2016 61 kt 2015 25 kt 14 kt Foundry 2015 2016 2015 2016 2015 2016 Specialty NOTE: EMEAI – Europe, Middle East
Slide 34: High Grade Feedstock Sales
High Grade Feedstock Sales • 2016: 358.9 thousand tonnes (2015: 304.8 thousand tonnes) Americas EMEAI Asia/China1 Sales by Sector Pigment 225 kt 142 kt 121 Welding 2016 kt 95 kt 2015 42 kt 39 kt Ti Sponge / Other 2015 2016 2015 2016 2015 2016 Note: HGO (high grade ore) refers to titanium feedstocks