Slide 1: 2008 Half Year Results
For personal use only 2008 Half Year Results Iluka Resources Limited David Robb Managing Director Alan Tate Chief Financial Officer 21 August 2008
Slide 2: Disclaimer – Forward Looking Statements
For personal use only Disclaimer – Forward Looking Statements This presentation contains forward-looking statements that are subject to risk factors associated with exploring for, developing, mining, processing and sale of minerals. Forward-looking statements include those containing such words as a
Slide 3: 1st Half 2008 – Main Features
For personal use only 1st Half 2008 – Main Features David Robb 3
Slide 4: Overview Comments on 1st Half 2008
For personal use only Overview Comments on 1st Half 2008 • NPAT $15.6 million • Positive industry dynamics captured by Iluka marketing approach: ¾ Strong sales volumes ¾ Increased 2nd Half zircon prices ¾ Price increases expected (TiO2 and zircon) in 2009 ¾ Significant increase in zircon sales into
Slide 5: Main features of Half Year Results
Main features of Half Year Results For personal use only Comparison with 1st Half 2007 Mineral Sands Production Ø 8.7% - WA gas disruption, SR maintenance, grades Mineral Sands Sales Volumes × 18.0% - strong demand especially zircon Overall USD Product Pricing × Moderate increase: higher TiO2, lower
Slide 6: Financial Results
For personal use only Financial Results Alan Tate 6
Slide 7: 1st Half 2008 Group Results
For personal use only 1st Half 2008 Group Results $m 1H 2007 1H 2008 % change Revenue (pre hedging) 400.9 445.5 11.1 EBITDA 148.3 80.8 (45.5) Depreciation and Amortisation (65.2) (80.7) (23.7) EBIT 83.1 0.1 (99.9) Net Interest and Financing Costs (28.8) (21.4) (25.7) Profit Before Tax 54.3 (21.3) (1
Slide 8: Net Profit After Tax Waterfall 1st Half 2008 vs 1st Half 2007
Net Profit After Tax For personal use only Waterfall 1st Half 2008 vs 1st Half 2007 A$M 59.8 100 (3.1) 80 (11.3) 60 2.7 42.0 40 (7.1) 12.3 4.6 25.7 15.6 20 (2.9) 0 (76.4) NPAT 07 Price Hedge Volume Cash Cost D&A Inventory MAC Other &Interest Exchange Narama NPAT 08 tax (30.7) (20) 8
Slide 9: 1st Half 2008 Mineral Sands Results
For personal use only 1st Half 2008 Mineral Sands Results $m 1H 2007 1H 2008 % change Revenue (pre hedging) 400.9 445.5 11.1 EBITDA Western Australia 80.1 21.6 (73.0) Murray Basin 15.7 13.4 (14.6) Virginia 15.1 13.0 (13.9) Florida/Georgia 2.5 2.9 16.0 CRL 16.7 12.8 (23.3) Exploration & Technical cos
Slide 10: 1st Half 2008 Group Results
For personal use only 1st Half 2008 Group Results $m 1H 2007 1H 2008 % change Revenue (pre hedging) 400.9 445.5 11.1 EBITDA Mineral Sands 125.0 56.0 (55.2) Hedging 21.8 12.6 (42.2) Mining Area C 10.2 27.8 172.5 Other Earnings 2.0 0.1 (95.0) Corporate, Other and debtor revaluation (10.5) (15.5) (47.6
Slide 11: Cash Costs of Final Products Produced
For personal use only Cash Costs of Final Products Produced 12 months ending 2005 2006 2007 Jun-08 1H 2008 1 Z/R/SR Production tonnes 1,182,794 1,165,918 1,282,090 1,194,635 541,819 Saleable Ilmenite tonnes 849,228 901,100 842,814 838,747 412,686 Final Product Produced 2,032,022 2,067,018 2,124,904
Slide 12: Implications of Western Australian Gas Supply Disruption
For personal use only Implications of Western Australian Gas Supply Disruption Estimated Western Australian Gas Impact Full Year Gas Production k tonnes 1H 2007 1H 2008 June 2008 Impact Zircon 139 89 (15) (20) Rutile 40 40 (5) (6) Synthetic Rutile 261 198 (41) (44) Ilmenite 631 524 (31) (58) Other 1
Slide 13: Mining Area C Royalty
For personal use only Mining Area C Royalty 1H 2007 1H 2008 % change Annual Production to 30 June MDMT 23.9 29.3 22.6 Sales volume MDMT 10.7 17.8 66.3 Royalty Income $m 8.2 21.8 165.8 Capacity Payments $m 2.0 6.0 200.0 Iluka EBIT A$m 10.0 27.6 176.0 • Significant pricing increases applicable 1 April
Slide 14: Capital Expenditure
For personal use only Capital Expenditure $m 1H 2007 1H 2008 Western Australia 51.6 25.5 Murray Basin 11.8 6.6 Virginia 2.1 3.6 CRL 2.7 4.1 Murray Basin Stage 2 2.1 24.9 Eucla Basin (Jacinth-Ambrosia) 2.8 20.8 Other 3.5 1.0 Total 76.6 86.5 14
Slide 15: 1st Half Cash Flow and Net Debt
For personal use only 1st Half Cash Flow and Net Debt $m 1H 2007 1H 2008 Opening Net Debt (596.5) (598.1) Operating Cash Flow 95.0 88.3 Interest, tax, exploration, MAC and coal compensation (34.0) (24.2) Payments for Property, Plant & Equipment (76.6) (68.0) Proceeds from Disposals 0.4 57.6 Dividend
Slide 16: Currency Hedging Arrangements (Group)
For personal use only Currency Hedging Arrangements (Group) Face Value Average Average Period Instrument Type US$m Cap2 Floor Rate July – December 2008 Collar options1 128.0 0.9000 0.7984 - Forward FX 131.9 - - 0.8722 Contracts2 January – December 2009 Collar options1 176.0 0.8500 0.8072 - Forward F
Slide 17: Mineral Sands Market and Growth Project Update
For personal use only Mineral Sands Market and Growth Project Update David Robb 17
Slide 18: Mineral Sands Market Dynamics – Supply
Mineral Sands Market Dynamics For personal use only Supply Tightening of supply in both TiO2 and zircon markets, due to: • Lower than forecast production from existing producers • Slower ramp up of new production in Africa and Australia • Power constraints and production outages in Africa • Gas supp
Slide 19: Mineral Sands Market Dynamics – Demand
Mineral Sands Market Dynamics For personal use only Demand • Global TiO2 pigment demand growing despite US housing slowdown • Continued strong demand for titanium metal and welding feedstocks • Developing economy demand remains strong • Zircon demand growth in China and other emerging markets - comm
Slide 20: Iluka's Marketing Focus
For personal use only Iluka’s Marketing Focus • Improve position in growth markets (China, Asia, Middle East) • Extend customer base – access the “long tail” • Improve small lot sales capacity and logistics - containerisation - warehousing in China - directly negotiated terms with shipping lines - c
Slide 21: China Success
For personal use only China Success Approach: • Establish sales office • Recognise ‘small lot’ characteristics of Chinese buyers • Warehouse zircon in China to facilitate incremental sales • Enhance market presence / intelligence • Combination of direct Iluka and agent sales 1st Half Outcomes: • Shi
Slide 22: China Sales Growth
For personal use only China Sales Growth Zircon Sales into China Iluka Sales Profile Revenue by Geographical Region Tonnes ('000) Zircon Revenue - 2006 250 Asia Australasia 3% Japan 5% 9% 200 Europe China 47% 150 16% 100 Americas 20% 50 Zircon Revenue - June 2008 YTD Asia Australasia 0 5% 2% May-07
Slide 23: Improved Pricing Dynamics
For personal use only Improved Pricing Dynamics • 2008 zircon pricing upgraded from initial US$680/t to ~US$750/t1 • Iluka achieved 1st Half zircon prices above initial market estimates • Iluka left major portion of 2nd Half zircon sales uncontracted • 2nd Half zircon price increases achieved on all
Slide 24: Broker Zircon Pricing Forecasts
Broker Zircon Pricing Forecasts For personal use only June 08 vs Sep 07 Forecasts 2008 2009 2010 US$ Sep-07 Jun-08 Sep-07 Jun-08 Sep-07 Jun-08 Low 659 720 605 700 500 6751 High 786 783 767 900 725 900 Average 725 756 650 800 625 766 1 This estimate subject to review by broking firm concerned 24
Slide 25: Murray Basin Stage 2 Project – Regulatory Approvals
For personal use only Murray Basin Stage 2 Project Regulatory Approvals • Approvals running behind Iluka’s original schedule • Panel Hearings for EES completed late July (initial expectation – May) • Panel report released expected 3rd quarter (initial expectation – June) • Ministerial approval expec
Slide 26: Murray Basin Stage 2 Project – Fabrication and Procurement
For personal use only Murray Basin Stage 2 Project Fabrication and Procurement • Offsite fabrication of modular processing plants on schedule • WCP re-using equipment from WA operations to lower procurement risk • Modular form processing plants pre-commissioned offsite • Offsite modular fabrication
Slide 27: Murray Basin Stage 2 – Side Tracks for Mounted Mining Unit Plant
Murray Basin Stage 2 For personal use only Side Tracks for Mounted Mining Unit Plant (1 of 3) 27
Slide 28: Jacinth-Ambrosia Development Status
Jacinth-Ambrosia Development Status For personal use only Regulatory Approvals • Mineral Lease Application and MPLs granted • Early Works Mining and Rehabilitation Plan approved Site Works • Commenced August • Initial construction and earth works include: - airstrip - accommodation village - borefie
Slide 29: Jacinth-Ambrosia Project
Jacinth-Ambrosia Project For personal use only Fabrication and Procurement • Manufacture of approx. 32 kms of 600mm pipe complete • WCP refurbishment in progress • Construction works packages being awarded Capital Expenditure • Expenditure to date (end June) - $15 million • Forecast at completion ≤
Slide 30: Jacinth-Ambrosia Project – Construction Camp
Jacinth-Ambrosia Project For personal use only Construction Camp 30
Slide 31: Jacinth-Ambrosia Project – Rig Mobilisation
Jacinth-Ambrosia Project For personal use only Rig Mobilisation 31
Slide 32: Jacinth-Ambrosia Project – Water Drilling
Jacinth-Ambrosia Project For personal use only Water Drilling 32
Slide 33: Outlook for Second Half 2008
Outlook for Second Half 2008 For personal use only Main Factors • Increased production profile • Continued strong sales • Inventory management considerations moving into 2009 • Higher zircon pricing • Increased capital spend - Murray Basin Stage 2, Jacinth-Ambrosia Around $20 million full year earni
Slide 34: Priorities
For personal use only Priorities • Project delivery • Marketing strategy and market development activities • Unit cash costs of production • Capital efficiency • Iluka and industry asset configuration in Western Australia • Value liberation from landholdings • Industry developments • 1st phase evalu
Slide 35: Indicative Financial Trends
Indicative Financial Trends For personal use only Update on August 2007 Information Free Cash Flow Average Capex NPAT Trend Trend1 $m pa Transitional Period Flat X Negative 9 ~325 Ø Decline 08 vs 07 due to Due to lower 07 capex higher FX ~ $250m Phase 1 Growth 2009 – 2010 Strong Increase 9 Positive
Slide 36: 2008 Half Year Results
For personal use only 2008 Half Year Results Iluka Resources Limited For further information, visit Iluka’s website www.iluka.com Supplementary information on operations available in the 4D