Iluka Resources Limited · ASX:ILU
Iluka Resources — H1 2019 Earnings Presentation
33 slides from Iluka Resources's earnings presentation, Aug 21, 2019
Slide 1: 2019 Half Year Results Presentation
1 Iluka Resources Limited 2019 Half Year Results Presentation Tom O’Leary, Managing Director Adele Stratton, Chief Financial Officer Christian Barbier, Head of Marketing Cataby, Western Australia
Slide 2: Disclaimer and Compliance Statement
Disclaimer and Compliance Statement 2 This presentation has been prepared by Iluka Resources Limited (Iluka). By accessing this presentation you acknowledge that you have read and understood the following statement. This document provides an indicative outlook for the Iluka business in the 2019 fina
Slide 3: H1 2019 Sustainability Highlights
H1 2019 Sustainability Highlights 3 Member of TRIFR1 Down 80% Reduction in Level 3+ environmental 3.2 H1 2019 3.5 2018 incidents Mid West Chamber of Commerce and Industry Iluka’s Sustainability Approach Business Excellence Award for Aboriginal 490 hectares Key pillars of approach: people, health and
Slide 4: First Half 2019 - Key Features
First Half 2019 - Key Features 4 Underlying group EBITDA $274 million, down 2% (H1 2018: $278 million) Solid earnings NPAT $137 million, up 9% (H1 2018: $126 million) Strong margins Mineral sands EBITDA margin 43%, up from 41% in H1 2018 Interim dividend of 5 cents per share, fully franked Dividend
Slide 5: Key Features
Deliver Key Sustainable Value Features 5 Strong Market Quality Mineral Sands Project Pipeline Fundamentals Assets Mineral sands demand linked to Australia and Sierra Leone operations Sustaining and growth projects in urbanisation, rising living standards, Product mix weighted to premium Australia an
Slide 6: Financial Results
Financial Results Adele Stratton, Chief Financial Officer North Capel, Western Australia
Slide 7: Key Financial Metrics
Key Financial Metrics 7 Units H1 2019 H1 2018 % Change Z/R/SR Production kt 323.5 351.0 (7.8) ▼ $274m Z/R/SR Sales kt 301.8 438.6 (31.2) ▼ Group EBITDA Mineral sands revenue $m 545.6 606.9 (10.1) ▼ H1 2019 Mineral sands EBITDA $m 232.7 249.3 (6.7) ▼ ($278m H1 2018) Mineral sands EBITDA margin % 42.7
Slide 8: NPAT – H1 2019 versus H1 2018
NPAT – H1 2019 versus H1 2018 8 $m 300 250 119 200 52 150 12 4 137 1 ( 47 ) (1) ( 112 ) (3) ( 12 ) 100 126 137 50 0 30 June 2018 Price Vol Mix FX Unit Idle Min Sand MAC Other Tax 30 June 2019 COGS Other Main contributors to H1 2019 results: • Higher prices largely offset by lower sale volumes • Lowe
Slide 9: Net Debt – 31 December 2018 to 30 June 2019
Net Debt – 31 December 2018 to 30 June 2019 9 $m 250 H1 2019 free cash outflow $65 million 30 200 (5) 180 (3) 150 100 50 (144) 2 0 (50) 29 2 (4) (5) (145) (100) 2 (142) (150) (79) (0) (200) Opening net Operating MAC royalty Exploration Interest Tax Capex IFC proceeds AASB 16 Asset sales Treasury Div
Slide 10: Balance Sheet
Balance Sheet 10 Net Debt, Gearing and Funding Headroom • Net debt of $141.5 million (31 Dec 2018: net cash $1.8 million) Multi Option Facility Agreement (MOFA) ‒ 10.7% gearing ratio* • Completed refinancing of MOFA in July • Significant funding headroom remains • Total facilities reduced to $519 mi
Slide 11: Mining Area C Royalty
Mining Area C Royalty 11 Mining Area C (MAC) Royalty Terms • Royalty over iron ore from BHP’s Mining Area C in $41m ~$850m Western Australia • Royalty terms: EBITDA EBITDA ‒ 1.232% of Australian denominated revenue from royalty area; and H1 2019 Since MAC mining ‒ one-off payment of A$1 million per
Slide 12: Mining Area C Royalty Growth
Mining Area C Royalty Growth 12 Historical Royalty EBITDA and Sales Volumes Indicative Royalty Sales Volumes with South Flank Development 150 First South Flank production targeted by BHP 2021 2019 and 2020 Expanded MAC 100 hub potential assumed in line with recent sales volumes ~135mtpa (DMT)# 50 0
Slide 13: Mineral Sands Markets
Mineral Sands Markets Geraldton, Western Australia
Slide 14: Zircon Market Update
Zircon Market Update 14 Key Features Result • H1 2019 sales of 133kt (H1 2018: 190kt) • Reflects normal seasonal pattern in Q1 and business sentiment impacting purchasing in Q2 • Some demand shifting from Premium to Standard Zircon with higher market availability of Standard Zircon Pricing • First h
Slide 15: High-grade Titanium Feedstock Market Update
High-grade Titanium Feedstock Market Update 15 Key Features Result • H1 2019 sales of 169kt (H1 2018: 249kt) • Sales constrained by production in H1 • Market conditions remain strong ‒ pigment inventories returned to seasonal norms and higher utilisation rates being recorded by most major producers
Slide 16: Mineral Sands Operations
Mineral Sands Operations Cataby, Western Australia
Slide 17: Mineral Sands Operations Update
Mineral Sands Operations Update 17 Key Features Cataby / South West Jacinth-Ambrosia / Mid West Sierra Leone • Commissioned H1 with focus on stable operations • Strong production in H1 - good grades and recoveries • Planned closure of Lanti dredge completed Q1 2019 • Synthetic rutile kiln returned t
Slide 18: Mineral Sands Operations Summary – H1 2019
Mineral Sands Operations Summary – H1 2019 18 Product Operation H1 2019 H1 2018 % change Jacinth-Ambrosia / Mid West WA 137.2 142.6 (3.8) Zircon Cataby / South West WA 18.6 6.7 177.6 (kt) Sierra Leone 4.1 5.1 (19.6) Idle operations (US / Australia) - 4.5 n/a Zircon Total 159.9 158.9 0.6 Jacinth-Ambr
Slide 19: Projects
Projects Ambrosia, South Australia
Slide 20: H1 2019 Projects Delivered
H1 2019 Projects Delivered 20 Key Features Cataby, Kiln Major Maintenance Outage, Gangama Expansion, Western Australia Western Australia Sierra Leone $270m Capex Completed within budget ~$35m Capex Delivered on schedule and on schedule Completed on budget, ahead Commissioning and ramp up on schedule
Slide 21: Pipeline of Growth Projects
Pipeline of Growth Projects 21 Key Features Ambrosia, Wimmera, Atacama, Eneabba Mineral Sands South Australia Victoria South Australia Recovery, Western Australia Other Mine move to Ambrosia Zircon and rare earth project Satellite deposit to existing J-A Zr accelerated to 2019 to smooth zircon produ
Slide 22: Eneabba Mineral Sands Recovery Project
Eneabba Mineral Sands Recovery Project 22 Project Overview • Extraction, processing and sale of historical monazite rich stockpile • ~98% recoveries expected due to minimal processing • Monazite and zircon concentrate product in line with assemblage • Feasibility study completed in Q2 2019 Mineral R
Slide 23: Wimmera Project
Wimmera Project 23 Rare Earth Elements Project Overview • Conventional open pit mine, focus on WIM100 deposit WIM100 contains high value elements, including neodymium, dysprosium, praseodymium and terbium. • Mine life of WIM100 ~20 years Key end use applications of these elements is in permanent • I
Slide 24: Balranald Final Field Trial
Balranald Final Field Trial 24 Project Overview • Large, deep, high grade rutile-rich deposit • Significant source of rutile, zircon and ilmenite Final Field Trial (T3) • To prove underground mining and backfilling technology as a system • Approved by Board in August 2019, trial costs of ~$40m • Tri
Slide 25: Summary and Outlook
Summary and Outlook
Slide 26: Outlook - Group
Outlook - Group 26 2019 outlook 2019 outlook Key Parameters 2017 2018 Comments as at February as at July1 Annual production Zircon kt 312 349 330 330 Rutile2 kt 302 163 210 210 Synthetic Rutile kt 211 220 180 180 Total Z/R/SR kt 825 732 720 720 Average annual unit costs A$/t Unit cash costs of produ
Slide 27: Supplementary Information
Supplementary Information Narngulu, Western Australia
Slide 28: Production and Sales Volumes, Revenue and Cash Costs
Supplementary Information 28 Production and Sales Volumes, Revenue and Cash Costs H1 H1 % change 2019 2018 Production Zircon kt 159.9 158.9 0.6 Rutile kt 80.8 82.8 (2.4) Synthetic rutile kt 82.8 109.3 (24.2) Total Z/R/SR production kt 323.5 351.0 (7.8) Ilmenite – saleable and upgradeable kt 125.0 21
Slide 29: Weighted Average Received Prices
Supplementary Information 29 Weighted Average Received Prices H1 H2 H1 2018 2018 2019 Weighted Average Price US$/tonne FOB Zircon Premium and Standard 1,278 1,434 1,522 Zircon 1,240 1,403 1,465 (all products including zircon in concentrate)1 Rutile 906 1,022 1,107 (excluding HYTI) 2 Synthetic rutile
Slide 30: Summary Group Results
Supplementary Information 30 Summary Group Results $m H1 2019 H1 2018 % change Mineral sands revenue 545.6 606.9 (10.1) Mineral sands EBITDA 232.7 249.3 (6.7) Mineral sands EBITDA margin % 42.7 41.1 3.8 Mining Area C royalty EBITDA 41.2 29.2 41.1 Underlying group EBITDA* 273.9 278.5 (1.7) Depreciati
Slide 31: Income Statement
Supplementary Information 31 Income Statement H1 H1 $ million 2019 2018 % change Z/R/SR revenue 507.5 566.6 (10.4) Ilmenite and other revenue 38.1 40.3 (5.5) Mineral sands revenue 545.6 606.9 (10.1) Cash costs of production (251.8) (224.9) (12.0) Inventory movement - cash 36.8 (49.8) n/a Restructure
Slide 32: Reconciliation of non-IFRS financial information to profit before tax
Supplementary Information 32 Reconciliation of non-IFRS financial information to profit before tax Expl & Mineral JA/MW C/SW Idle SRL MAC Corp Group Other Sands Mineral sands revenue 242.4 167.0 24.4 111.8 - 545.6 - - 545.6 AASB 15 freight revenue 10.9 3.3 1.5 6.1 - 21.8 - - 21.8 Expenses (81.7) (81
Slide 33: For more information contact
For more information contact: Melissa Roberts, General Manager – Investor Relations and Commercial Mineral Sands Operations investor.relations@iluka.com +61 (0) 450 398 431 Ambrosia, South Australia