Iluka Resources Limited · ASX:ILU
Iluka Resources — Investor Presentation (May 2015)
81 slides from Iluka Resources's investor presentation, May 22, 2015
Slide 1: Iluka Resources Business Briefing: Marketing, Technology and Development
For personal use only Iluka Resources Business Briefing Marketing, Technology and Development Sydney 22 May 2015 Iluka Resources Limited (ASX: ILU)
Slide 2: Disclaimer, Forward Looking Statements
Disclaimer, Forward Looking Statements For personal use only 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 fut
Slide 3: Mineral Sands – Part of Everyday Life
Mineral Sands – Part of Everyday Life For personal use only 3
Slide 4: Iluka’s Approach
Iluka’s Approach For personal use only Objective: Create and deliver value for shareholders Three key aspects: • flex asset operation in line with market demand • preserve and advance growth opportunities • act counter cyclically where appropriate Organisational capabilities and alignment critical 4
Slide 5: Structure and Purpose of Briefing
Structure and Purpose of Briefing For personal use only • Insight into two areas of Iluka capability – marketing and market development – technology, innovation and sustainability • Value creation via – market development, sales volume and revenue growth – market leadership – e.g. zircon price frame
Slide 6: Success in Mineral Sands
Success in Mineral Sands For personal use only • Success in mineral sands requires ‒ balance sheet strength, industry-specific technical expertise ‒ market knowledge, access and reach • Self-sufficiency a competitive advantage/essential for success • Industry examples of shareholder value destructio
Slide 7: Project Execution and Delivery
Project Execution and Delivery For personal use only Kulwin Mine – October 2009 Echo Mine – April 2010 WRP Mine – May 2012 Jacinth-Ambrosia Mine – October 2009 WRP Mine – May 2012 Tutunup South Mine – June 2011 Eneabba Restart - January 2011 WRP Mine – May 2012 7
Slide 8: Operational Performance
Operational Performance For personal use only • Risk: MUP downtime WCP downtime • Downtime equals inefficiency • Consistently high MUP/WCP availability >95% • Includes maintenance and MUP moves outages White strand • Risk: sudden large orebody grade variations • Focus on in-pit blending for stable W
Slide 9: Marketing and Market Development
Marketing and Market Development For personal use only • Building downstream industry knowledge • Supporting industry research (ZIA) • Focus upon individual customers, value-in-use • Dedicated zircon and titanium dioxide sales teams • Expanded market presence and logistics flexibility • Direct suppl
Slide 10: Briefing Session Presenters
Briefing Session Presenters For personal use only Executive Team Iluka Planning Forum 10
Slide 11: Technology and Development
For personal use only Technology and Development Doug Warden, Head of Resource Development / CFO Elect Rob Hattingh, General Manager Innovation Technology and Sustainability 22 May 2015
Slide 12: Technical Capability Imperative
Minerals Sands Technical Capability Imperative For personal use only • No mineral sands deposits are the same ‒ ore body characteristics can vary substantially ‒ concentration and separation facilities tailored for each ore body ‒ necessity to achieve throughputs, recovery, consistent product qualit
Slide 13: Industry Dynamics
Industry Dynamics For personal use only VHM GRADE / MEDIUM TO LONGER MATURING ORE HIGHER PRICES RISE OF CHINA ASSEMBLAGE TERM SUPPLY BODIES / FRESH REQUIRED TO – SULPHATE AND DECLINE CHALLENGE CAPITAL REQUIRED INCENTIVISE SUPPLY? CHLORIDE PIGMENT • Global decline in VHM • Limited known high quality
Slide 14: Global Grade and Assemblage Challenges
Global Grade and Assemblage Challenges For personal use only HM Grade Mineral assemblage in resources RZ Assemblage 5.0% 15% 13% Trash Sulphate Ilmenite 4.0% 12% Chloride Ilmenite Rutile (and other high grade TiO2) 3.0% 9% 9% Zircon Combined RZ in HM (RHS) 6% 2.0% 6% • Trash component in Heavy Miner
Slide 15: Exploration
Exploration For personal use only • Consistently and well funded exploration programing ~$20 million per annum • Gated approach to exploration expenditure • Mineral sands exploration in Australia − testing new concepts in mature basins • Increasing international focus − Sri Lanka, Kazakhstan, Brazil
Slide 16: Innovation and Technology
Innovation and Technology For personal use only • Means to address resource challenges / marketing development opportunities • Network of site based process specialists supported by central technology group • Dedicated Metallurgical Test Facility (MTF): − mimics mineral sands value chain − supports
Slide 17: Mineral Liberation and Separation
Mineral Liberation and Separation For personal use only • Test new deposits to ensure processes yield maximal recovery of saleable products − mining efficiency, grade control, plant recoveries and utilisation, product separation • Physical processing test work, including crushing and screening • Var
Slide 18: Pyro and Hydro-metallurgy
Pyro and Hydro-metallurgy For personal use only • Enhance and optimise use of synthetic rutile infrastructure − optimise throughputs, ilmenite feed source characteristics, product development • SR process evaluation conducted using a range of kilns and aerators • Activated carbon generation and test
Slide 19: Tailings Management
Tailings Management For personal use only • Establishing cost-effective options aligned with rehabilitation requirements • Clay characterisation to improve pump calculations • Test work to calculate equipment size (thickeners) • Static and dynamic testing to determine reagent consumption for financi
Slide 20: Synthetic Rutile Process Improvements
Synthetic Rutile Process Improvements For personal use only • Significant advancement of SR operational parameters achieved to date • Improving the technical understanding of the process assists in: − improving the reaction kinetics, hence throughput or product quality − minimise production impacts
Slide 21: Chlorination Kinetics
Chlorination Kinetics For personal use only • Convey the attributes of SR versus slag – market penetration opportunity • Work on the comparative chlorination behaviour of SR, natural rutile and slag • Test work verified earlier published work confirming that SR compares well with rutile Minutes Den
Slide 22: Acid Soluble “Synthetic Rutile”
Acid Soluble “Synthetic Rutile” For personal use only • Development of acid soluble SR (high grade sulphate feedstock) well advanced • New sales/revenue opportunity, broadens market offering • Lower environmental impacts compared with lower grade feedstocks • Progressive work over 7 years, building
Slide 23: Flexible Mine Move Capability
Flexible Mine Move Capability For personal use only • Relocation of the Murray Basin Kulwin plant 25 kms to WRP mine location • Plant includes: ‒ pre-concentrator ‒ concentrator ‒ magnetic separation and thickeners • Other areas of mobile mining equipment under evaluation 23
Slide 24: SR Production from Murray Basin Ilmenite
SR Production from Murray Basin Ilmenite For personal use only • Murray Basin ilmenite previously considered unsuitable for SR due to chrome contamination • Further physical processing reduced chrome to SR premium spec • Utilisation of a “waste” product enhances project economics • Potential signifi
Slide 25: Process Innovation – SR Production
Process Innovation – SR Production For personal use only • Kiln modelling predicted performance improvements could be achieved • Volumetric capacity modifications resulted in 16% increase in kiln throughput 25
Slide 26: Tapira, Brazil
Tapira, Brazil For personal use only • Joint venture with Vale Fertilizantes and Vale S.A.1 • Titanium and rare earth mineralisation in overburden of an existing phosphate mine • Minerals include anatase, ilmenite, monazite, crandallite • Phase 1 of Agreement - 2015 - geological, technical evaluatio
Slide 27: Tapira, Brazil: Recent drilling
Tapira, Brazil For personal use only • Recent drilling of in situ mineralisation • Mineralogical and geochemical evaluation under way • Various beneficiation and downstream options under investigation Particle map example of Anatase (green) Anatase replacing Perovskite in Bebedourite host and Goethi
Slide 28: Metalysis, UK
Metalysis, UK For personal use only • Iluka equity holding of 18.3% – right to increase up to 24.9% in event of IPO • May revolutionise metal processing: – cost-effective and simple – transformational products customised TiO2 feedstock capability • Iluka shareholder value potential: – titanium feeds
Slide 29: Metalysis, UK: Process
Metalysis, UK For personal use only • Metalysis process: – low energy requirements – two step process – benign reagents and no toxic by-products – lower greenhouse gas emissions • Current Ti metal products highly energy and resource intense • Metalysis process restricts usage of Ti metal products Vo
Slide 30: Metalysis - Use of Synthetic Rutile
Metalysis - Use of Synthetic Rutile For personal use only • Iluka contribution includes metallurgical capabilities (feedstock customisation) • SR and rutile have been processed to Ti powder at laboratory scale • Developing in-house IP for customised SR as feed to the Ti metal process • Installing la
Slide 31: Metalysis, UK: Scale and Commercialisation
Metalysis, UK For personal use only • Unprecedented scale with revolutionary impact on the Ti market • Based on Aluminium smelter technology • Larger cell size – higher throughput • Enables fast market penetration • Lower opex and exponential growth through • Potential application to a range of lice
Slide 32: Technology and Development Conclusion
Technology and Development Conclusion For personal use only • Future mineral sands’ deposits more challenging • Small industry – must be technically self-sufficient • Application of Iluka’s technical expertise to potentially disruptive projects 32
Slide 33: Marketing and Market Development
For personal use only Marketing and Market Development Matt Blackwell Head of Marketing, Mineral Sands 22 May 2015
Slide 34: Iluka Game Plan
For personal use only Iluka Game Plan 34
Slide 35: Iluka’s Customer Proposition
Iluka’s Customer Proposition For personal use only Reliability of Supply Efficient Operations Product Range Efficient Delivery Product Quality Removed Intermediaries Technical Support Economies in Bundling Competitive Increased Transparency Based on Relative Economic Value Grounded in Analysis 35
Slide 36: Evolution of Iluka Marketing
Evolution of Iluka Marketing For personal use only Australian centered company Mine Market FOB sales model Products based on resources People close to current and future customers Product where customers need it Mine Market Products developed for customers Sales team aligned customer’s businesses In
Slide 37: 2005 – An Australian Centric Model
2005 – An Australian Centric Model For personal use only 37
Slide 38: 2010 – Expanding Presence
2010 – Expanding Presence For personal use only 38
Slide 39: Today – A Global Footprint
Today – A Global Footprint For personal use only Includes market / industry analysis 39
Slide 40: 2005 FOB Sales Model
2005 FOB Sales Model For personal use only Map showing FOB exports ex Australian Ports (Bunbury and Geraldton) 40
Slide 41: 2015 Hub and Spoke Distribution
2015 Hub and Spoke Distribution For personal use only 41
Slide 42: Tangible Benefits
Tangible Benefits For personal use only A$m 40 250 35 Saving 200 30 Saving 25 150 20 100 15 10 50 5 0 0 2004 2010 2014 Distributor Model Actual Customer # Marketing and Selling costs as per Annual Report (2004, 2010, 2014) All costs 2014 dollars. Distributor Model assumes actual volumes for 2010-201
Slide 43: Organised to Understand Customers
Organised to Understand Customers For personal use only • Separate marketing, sales and analytics enables laser focus and deeper insight • Embedded into the organisation experts who understand our customers industries • Sales team speaks our customers language – 10 nationalities and 17 languages IMT
Slide 44: Diversity in Customer Base
Diversity in Customer Base For personal use only COMBINED SALES BY GEOGRAPHIC REGION Asia 12% Americas 24% EMAI 22% China 42% SALES BY SALES BY SECTOR Other SECTOR Refractories 2% 3% Ti Other Sponge 11% 8% Welding 11% Zirconium Chemicals 14% Ceramics 51% Pigment Fused 79% Zirconia 20% 2014 Sales and
Slide 45: Reliability in Product Offering
Reliability in Product Offering For personal use only • Certified as complying with ISO 9001: 2008 • All product shipped in last 12 months in conformance with specification • Offer wide range of TiO2 feedstock grades and Zircon for all applications • 8 new products launched in last 18 months 45
Slide 46: Target Responsible Volume Growth
Target Responsible Volume Growth For personal use only • Disciplined – will not push unneeded material into the market • Focused – on sectors and geographies where Iluka can bring additional value • First mover – will continue to position in markets/segments where we see growth – early in China – no
Slide 47: More Consistent Revenue Growth
More Consistent Revenue Growth For personal use only Price Iluka Zircon Sales and Prices (US$/t) 2500 (3) 2012: Sudden demand drop-off. Competitor auction. 12 2000 11 (2) 2011: 1500 Producers are unable to (4) 2013-14: meet Prices 20-30% higher than 2007-10 13 demand. 1000 14 Scarcity 10 prices. 09
Slide 48: Reset Zircon Pricing Strategy
Reset Zircon Pricing Strategy For personal use only • Undertook rigorous evaluation of pricing dynamics - especially 2009 to 2013 • Engaged foremost global pricing consultants to range of industry sectors • Developed new pricing strategy with following objectives: – reduce price and volume volatilit
Slide 49: Zircon Marketing Approach
For personal use only Zircon Marketing Approach Simon Hay General Manager – Zircon Sales 22 May 2015
Slide 50: Iluka Zircon Marketing Approach
Iluka Zircon Marketing Approach For personal use only Understand customer buying preferences • Understand their businesses and feedstock requirements • Assess downstream industries to give further insight • Develop customer relationships − face-to-face interaction vital in many regions – quarterly m
Slide 51: Marketing Approach – The Long Tail
Marketing Approach – The Long Tail For personal use only • Substantial customer base growth – mostly due to the regional sales model • Many zircon consumers are small enterprises – typical of millers, foundry suppliers, refractory • A regional approach is essential to supply this market • Small cust
Slide 52: Logistics and Supply Arrangements
Logistics and Supply Arrangements For personal use only Availability and Distribution • Strategy is simple – have product available, always • Buying can be lumpy as buyers often return in a rush – stock availability has and continues to win orders • Bulk ship to Asia, Europe and US, bag then distrib
Slide 53: Zircon Product Portfolio
Zircon Product Portfolio For personal use only • Iluka products span the full spectrum of zircon feedstocks • Most competitors unable to match our range CONCENTRATES / PREMIUM UNIVERSAL STANDARD TAILINGS • J-A, MB, US Ops • J-A Operations • J-A, MB Operations • Profitable outlet for by- product stre
Slide 54: Ceramics Market
Ceramics Market For personal use only Ceramics Opacifier and Flour 51% • Market size ~550 ktpy, half of zircon consumption • Zircon sand is fine milled prior to use in ceramics – opacifier: used in tile bodies, engobes and glazes – frit: glass produced from zircon, boron & others – frit used to prod
Slide 55: Ceramics Market: Technology and Conditions
Ceramics Market For personal use only Ceramics Opacifier and Flour 51% • New technology, is changing the way zircon is used – less zircon used in ceramic body as an opacifier – more zircon being used in frits, glazes and colours • Iluka responded to the changes with new products – e.g. Universal Gra
Slide 56: Specialty Chemicals Market
Specialty Chemicals Market For personal use only Zirconium Chemicals 14% • 95% of ZOC production concentrated in China – half in Shandong then Jiangxi and Zhejiang – sales office and warehouse in Shandong to support • Large ZOC players emerging: top 3 hold 45% of market – small producers under press
Slide 57: Specialty Chemicals and Materials
Specialty Chemicals and Materials For personal use only Fused Zirconia 20% • Industrial end uses • Major players have factories in China, US, Europe – Iluka a major supplier across all regions • Domestic Chinese production is growing Chinese FZ Factory – Iluka has a good position with the major prod
Slide 58: Refractory and Foundry Market
Refractory and Foundry Market For personal use only Refractory and Foundry 5% Refractory – steel and glass • Steel refractory linked to health of steel industry • Chinese glass industry suffering from over-capacity • Global smart glass applications are a bright spot Alumina Zirconia Silica (AZS) bri
Slide 59: Zircon Pricing Strategy Details
Zircon Pricing Strategy Details For personal use only Major elements of the new pricing structure • Establish a reference price for zircon – based on most commonly sold Iluka tonnage combination – transparent reference price for customers updated quarterly • Payment terms – flexibility in commercial
Slide 60: Product Development
Product Development For personal use only A push-pull approach to creating zircon sales and new demand COLLABORATION INDUSTRY ANALYSIS TECHNICAL SUPPORT • Collaboration with • Assess end sectors, • Solution-focused Industry bodies and deepen our support for customers universities across understandin
Slide 61: 2014 Ceramic Tile Study
2014 Ceramic Tile Study For personal use only Tile Study • Annual empirical study of zircon loadings in tiles • 2014: expanded number of tiles and regions 2014 results • Confirms substitution / thrifting focus now played out – no impediment to zircon usage in new tile designs – matches feedback from
Slide 62: Ceramic Tile Study: China results and tile mix
Ceramic Tile Study China results and tile mix For personal use only Key results • Shift towards glazed products • Driven by digital printing Increasing market share • Positive for zircon demand Declining market share • New tile types show a ‘floor’ • Difficult to lower zircon loading Glazed porcelai
Slide 63: Differentiated Marketing Approach
Differentiated Marketing Approach For personal use only Key differentiators for Iluka zircon marketing • Highly reliable global supplier in terms of delivery timeliness and quality • Focus on premium products but with full product range (from Ultra Premium to tailings) • Being the biggest supplier h
Slide 64: TiO2 Feedstock Marketing
TiO2 Feedstock Marketing For personal use only Robert Gibney General Manager – TiO2 Sales 22 May 2015
Slide 65: Global TiO2 Market
Global TiO2 Market For personal use only • Annual demand growth tightly correlated with global GDP averaging ~3.2% • Top six TiO2 producers with 57% of global capacity with a mix of both sulfate and chloride – Chemours (formerly DuPont), Huntsman, Cristal, Kronos, Tronox, Henan Billions/Sichuan Lomo
Slide 66: Iluka TiO2 Feedstock Marketing Approach
Iluka TiO2 Feedstock Marketing Approach For personal use only • Focus upon customer needs – “pull vs push” • “Value in Use” marketing approach – demonstrate differentiated value of Iluka feedstocks versus competitor products • Expanded technical collaboration with customers – deepen understanding of
Slide 67: Focus on Customer Needs
Focus on Customer Needs For personal use only • Traditionally the mineral sands industry has focused on the “business” side – Supply Chain - Purchasing - Logistics • The mineral sands industry historically pushed feedstocks into the market • Iluka will “pull” customer needs back to the mine and proc
Slide 68: Pigment Market - Understanding Customer Needs
Pigment Market - Understanding Customer Needs For personal use only • Pigment producers focus considerable attention to feedstocks Chloride Producer Chlorinator Cash Costs Other 16% Energy Ti Ores 12% 33% Labour 10% Chlorine Caustic Process Soda Chemicals Pet Coke 9% 20% Source: Iluka Marketing esti
Slide 69: Chloride Pigment Process
Chloride Pigment Process For personal use only Plant Economics – Value in Use • Majority of chloride pigment plants target a “head grade” between 88% and 92% • Feedstocks have unique characteristics – requiring extensive testing and optimization: – value in use models – waste generation, by products
Slide 70: Customer Value “Common Consideration”
Customer Value “Common Consideration” For personal use only AVAILABILITY / PRODUCT PRODUCT PRICE RELIABILITY QUALITY PERFORMANCE “VALUE IN USE” SUSTAINABILITY • Rule 1: never ever run • Titanium feedstocks are • Enablers or detractors in • Iluka determines prices out not commodities as manufacturing
Slide 71: Customer Value “Common Consideration”
Customer Value “Common Consideration” For personal use only AVAILABILITY / PRODUCT PRODUCT PRICE RELIABILITY QUALITY PERFORMANCE “VALUE IN USE” SUSTAINABILITY • Rule 1: never ever run • Titanium feedstocks are • Enablers or detractors in • Iluka determines prices out not commodities as manufacturing
Slide 72: Technical Marketing Approach
Technical Marketing Approach For personal use only • Regular technical visits to customer production facilities – deepen collaboration • Educate customers on Iluka’s resources, expertise, investment and commitment • Utilise state of the art equipment to optimise Iluka’s products in customer formulas
Slide 73: China TiO2 Market
China TiO2 Market For personal use only • Iluka sales potential substantial • Robust marketing presence in China – conducting in house research – providing real-time insights • China world’s largest producer TiO2 – sulphate still dominates market – chloride technology progressing 73
Slide 74: China TiO2 Market – Changing Landscape
China TiO2 Market – Changing Landscape For personal use only • China has over 61 TiO2 plants (57 sulphate, 4 chloride) – restructuring of Chinese TiO2 industry is via permanent shutdowns - (10 plants with 280ktpa capacity in 2015 according to TZMI) – due to environmental and sub economic conditions
Slide 75: China Government Mandate
China Government Mandate For personal use only • 12th Five Year Plan Guiding Catalogue for Industrial Structure Adjustment 7、水性木器、工业、船舶涂料，高固体分、无溶剂、辐射固 化、功能性 外墙外保温涂料等环境友好、资源节约型涂料生产； 单线产能 3 万吨/ 年及以上、并以二氧化钛含量不小于 90％的富钛 料（人造金红石、天 然金红石、高钛渣）为原料的氯化法钛白粉 生产 7. Production of environmentally friendly, resource
Slide 76: China TiO2 Feedstock Marketing Strategy
China TiO2 Feedstock Marketing Strategy For personal use only 76 • Technical Collaboration – to be viewed as a trusted advisor by Chinese customers • Utilise new China Technical Centre as platform for direct customer interaction – technical and commercial • Iluka committed to developing a suite of p
Slide 77: China Technical Centre (CTC)
China Technical Centre (CTC) For personal use only • Emerging chloride pigment technology in China – demonstrate value of Iluka unique feedstock qualities and benefits − Western producers have decades of experience and knowledge • Platform to engage technically – laboratory to test feedstocks in chl
Slide 78: Ti Metal Market
Ti Metal Market For personal use only • Global titanium metal demand strong with estimated growth of 5.2% CAGR 2013-2018 – driven by aircraft sector - 12,924 commercial aircraft backlog over next eight years – largest ever - new aircraft (787, A380) contain 3x titanium compared to older generation •
Slide 79: Welding Market
Welding Market For personal use only • Global welding market demand growth of 8-9% • Total annual Rutile and HyTi demand 250ktpa: – driven by infrastructure spend in developing countries – China accounts for 2/3 global stick electrodes and 1/3 flux cord wire • Iluka’s natural rutile and HyTi90 are p
Slide 80: Q&A
For personal use only Q&A
Slide 81: Iluka Resources Limited
For personal use only 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