Iluka Resources Limited · ASX:ILU
Iluka Resources — H1 2018 Earnings Presentation
34 slides from Iluka Resources's earnings presentation, Aug 16, 2018
Slide 1: 2018 Half Year Results
2018 Half Year Results For personal use only Iluka Resources Limited Tom O’Leary, Managing Director Doug Warden, Chief Financial Officer Matthew Blackwell, Head of Marketing and Procurement 20 18 WWW.ILUKA.COM l ASX:ILU
Slide 2: Disclaimer
Disclaimer For personal use only This presentation has been prepared by Iluka Resources Limited (Iluka). By accessing/attending this presentation you acknowledge that you have read and understood the following statement. Forward Looking Statements This presentation contains certain statements which
Slide 3: Safety and Sustainability
Safety and Sustainability For personal use only 3
Slide 4: Key Features
Key Features For personal use only Positive market conditions Mineral sands revenue up 21% from first half 2017 to $607 million Zircon (premium and standard) prices up 47% on H1 2017 Zircon Q4 2018 Zircon Reference Price increased by US$170 to US$1,580 per tonne Rutile1 prices up 20% on H1 2017, and
Slide 5: Zircon Market
Zircon Market For personal use only Result • First half 2018 zircon sales of 190kt, slightly lower vs H1 2017 • Reflects more evenly weighted sales spread over year vs 2017 • H1 2018 zircon production of 159kt • Iluka continues to release inventory to ease shortage and help balance market Pricing •
Slide 6: 2018 Zircon Market
2018 Zircon Market For personal use only • Price of major zircon substitutes is relatively high, mitigating Iluka’s Approach the incentive to use • Continue to supply zircon to satisfy underlying demand • Price increases have encouraged some sectors to thrift with • Price points will be based on ass
Slide 7: Zircon Sales
Zircon Sales For personal use only Americas EMEAI China East Asia (Europe, Middle East, Africa, India) (excl. China) 122 kt 109 kt 97 kt 57 kt 49 kt 48 kt 33 kt 19 kt 17 kt 7 kt 5 kt 7 kt H1 2017 H2 2017 H1 2018 H1 2017 H2 2017 H1 2018 H1 2017 H2 2017 H1 2018 H1 2017 H2 2017 H1 2018 Demand growing o
Slide 8: High-grade Feedstock Market
High-grade Feedstock Market For personal use only Result • Combined Rutile/SR sales of 249kt comparable with H1 2017 (256kt) • Combined first half 2018 Rutile/SR production of 192kt • Solid demand reflected in inventory draw Pricing • Average price of rutile1 up 20% to US$906 per tonne from H1 2017
Slide 9: 2018 Titanium Feedstock Market
2018 Titanium Feedstock Market For personal use only Rutile prices increasing, historical lag to pigment prices Rutile premium Index Oct 2015 = Pigment up ~55% 100 to May 18 US$/t 160 1,100 150 Rutile up ~44% from 1,000 Q4 16 to H2 18 140 Pigment price bottomed in 900 130 October 2015 2015-16 price
Slide 10: High-grade Feedstock Sales
High-grade Feedstock Sales For personal use only Americas EMEAI Asia (Europe, Middle East, Africa, India) 177 kt 138 kt 93 kt 77 kt 63 kt 93 kt 66 kt 37 kt 13 kt H1 2017 H2 2017 H1 2018 H1 2017 H2 2017 H1 2018 H1 2017 H2 2017 H1 2018 Growth in sales reflects new contractual Demand in Europe remains
Slide 11: Financial Results
Financial Results For personal use only Doug Warden, Chief Financial Officer 20 18 WWW.ILUKA.COM l ASX:ILU
Slide 12: Key Financial Metrics
Key Financial Metrics H1 2018 versus H1 2017 For personal use only Units H1 2018 H1 2017 % Change Z/R/SR Production kt 351.0 453.1 (22.5) ▼ Z/R/SR Sales kt 438.6 453.8 (3.3) ▼ Mineral sands revenue1 $m 606.9 503.6 20.5 ▲ Underlying mineral sands EBITDA2 $m 249.3 123.5 101.9 ▲ MAC EBITDA $m 29.2 31.1
Slide 13: NPAT
NPAT H1 2018 versus H1 2017 For personal use only $m 250 151 2 (3) (1) 200 150 ( 94 ) 100 23 5 17 (3) (2) (0) 126 50 124 2 6 (8) ( 11 ) 0 (82) -50 -100 30 June Price Vol Mix FX Ilm & Unit Idle Rehab Min Sand MAC Corp Impairment Depn Interest Unwind Tax 30 June 2017 Oth COGS Other & other 2018 Key dr
Slide 14: Continued Inventory Draw Down
Continued Inventory Draw Down For personal use only Total Inventory $m 1000 Finished Goods 800 Work in Progress* 600 400 Normalised inventory level $62m 200 $7m 0 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 Jun-17 Dec-17 Jun-18 • Total invent
Slide 15: Net Debt Reduction
For personal use only Net Debt Reduction 15
Slide 16: Balance Sheet Capacity
Balance Sheet Capacity For personal use only Significantly strengthened balance sheet • H1 2018 free cash flow of $226 million • 81% reduction in net debt from 31 December 2017 to $34 million • Gearing1 at 3.5% Net Debt, Gearing and Funding Headroom $m Gearing % 1000 33 Total facilities of $710 mill
Slide 17: Dividend
Dividend For personal use only Dividend Framework Pay a minimum 40% of free cash flow not required for investing or balance sheet activity Distribute maximum practicable available franking credits • 10 cents per share fully franked interim dividend payable 27 September 2018, represents 19% of H1 fre
Slide 18: Mining Area C
Mining Area C For personal use only • Iluka holds a royalty over iron ore produced from specific tenements of BHP Billiton’s Mining Area C (MAC) hub in Western Australia • BHP South Flank Development received Board approval in June 2018 – South Flank expansion will replace production from Yandi (dep
Slide 19: Operations and Projects
Operations and Projects For personal use only 20 18 19 WWW.ILUKA.COM l ASX:ILU
Slide 20: Operations Update
Operations Update For personal use only First half Z/R/SR production of 351kt, 23% lower than first half 2017 • Lower production expected given cessation of HMC processing from Murray Basin Jacinth-Ambrosia • 329kt of HMC produced since mining restarted December 2017 • H1 2018 zircon production at J
Slide 21: Cataby
Cataby For personal use only • Large, chloride-ilmenite rich deposit, 150km north of Perth – Underpins continued synthetic rutile production at Capel – Offtake secured for 85% of SR production for minimum four years – Conventional mineral sands development • All works progressing on-time and on-budg
Slide 22: Sierra Rutile Expansion Profile
Sierra Rutile Expansion Profile For personal use only • Sierra Rutile expansion occurs across three mining fronts • Initial Sembehun development includes infrastructure early works for road and bridge construction • Mine moves from Lanti and Gangama are required to maintain expanded production level
Slide 23: Sierra Rutile – Near Mine Exploration
Sierra Rutile – Near Mine Exploration For personal use only Near Mine Exploration Target1 Sierra Rutile deposits Consolidation and interrogation of historical SRL drilling data highlighted the Pejebu Exploration Target Pejebu Exploration Target is 15 – 20 Mt HM at 0.9% to 1.1% in situ rutile grade P
Slide 24: Sierra Rutile – Sembehun Mineral Resource
Sierra Rutile – Sembehun Mineral Resource For personal use only Sembehun Mineral Resource addition1 Sembehun deposits Additional Mineral Resource based on updated data compilation, geological interpretation and Mineral Resource modelling 0.62 Mt of rutile added to Sembehun Mineral Resource Total Min
Slide 25: Sierra Rutile – Sembehun and MSP Expansion
Sierra Rutile – Sembehun and MSP Expansion For personal use only Sembehun mine development Sierra Rutile operations and deposits New 1,000 -1,200 tph mine northwest of existing operations Definitive feasibility study expected to complete Dec 2018 Planned commissioning 20211 • Original acquisition ca
Slide 26: Updated 2018 Physicals Guidance
Updated 2018 Physicals Guidance For personal use only Aug 2018 Feb 2018 Key Parameters Updated Comments Guidance Guidance Annual production Zircon production is expected to be approximately 30kt higher due to the supply of additional tonnes of zircon in concentrate Zircon kt 300 330 (ZIC) in an atte
Slide 27: Updated 2018 Cost Guidance
Updated 2018 Cost Guidance For personal use only Aug 2018 Feb 2018 Key Parameters Updated Comments Guidance Guidance Cash Costs (A$m) Higher cash production costs due to higher Sierra Rutile costs (US$13 million; US$4 million expected to be recurring in 2019) from increased dredge maintenance costs,
Slide 28: Supplementary Information
Supplementary Information For personal use only 20 18 28 WWW.ILUKA.COM l ASX:ILU
Slide 29: Production and Sales Volumes
Production and Sales Volumes For personal use only H1 H1 % change 2018 2017 Production Zircon kt 158.9 203.7 (22.0) Rutile kt 82.8 149.8 (44.7) Synthetic rutile kt 109.3 99.6 9.7 Total Z/R/SR production kt 351.0 453.1 (22.5) Ilmenite 210.8 228.1 (7.6) Total mineral sands production kt 561.8 681.2 (1
Slide 30: Weighted Average Received Prices
Weighted Average Received Prices For personal use only H1 H2 H1 2017 2017 2018 US$/tonne FOB Zircon Premium and Standard 871 1,053 1,278 Zircon 850 1,037 1,240 (all products, including zircon-in-concentrate)1 Rutile 756 825 906 (excluding HYTI)2 Synthetic rutile Refer Note 3 Refer Note 3 Refer Note
Slide 31: Summary - Group Results
Summary - Group Results For personal use only $m H1 2018 H2 2017 H1 2017 Mineral sands revenue 606.9 513.9 503.6 Underlying mineral sands EBITDA 249.3 177.4 123.5 Mining Area C royalty 29.2 28.5 31.1 Underlying Group EBITDA* 278.5 205.9 154.6 Underlying Group EBITDA margin % 45.9 40.1 30.7 Depreciat
Slide 32: Income Statement
Income Statement For personal use only H1 H1 $ million 2018 2017 % change Z/R/SR revenue 566.6 470.0 20.6 Ilmenite and other revenue 40.3 33.6 19.9 Mineral sands revenue 606.9 503.6 20.5 Cash costs of production (224.9) (200.1) (12.4) Inventory movement - cash costs of production (49.8) (78.6) 36.6
Slide 33: Reconciliation of Non-IFRS Financial Information to Profit before Tax
Reconciliation of Non-IFRS Financial Information to Profit before Tax For personal use only Exploration Mineral Aus US SRL & Other Sands MAC Corp Group Mineral Sands Revenue 507.8 23.0 88.5 (12.4) 606.9 606.9 AASB 15 freight revenue 20.1 1.5 4.1 25.7 25.7 Mineral Sands Expenses (245.8) (27.1) (78.6)
Slide 34: For more information contact
For more information contact: For personal use only Adele Stratton General Manager, Finance, Investor Relations & Corporate Affairs investor.relations@iluka.com www.iluka.com 20 18 WWW.ILUKA.COM l ASX:ILU