Iluka Resources Limited · ASX:ILU
Iluka Resources — Merger or Acquisition (August 2016)
32 slides from Iluka Resources's merger presentation, Aug 1, 2016
Slide 1: Acquisition of Sierra Rutile Limited
Iluka Resources Limited Acquisition of Sierra Rutile Limited Information for Iluka Shareholders 1 August 2016 To be read in association with AIM Joint Announcement and Iluka ASX Announcement “Recommended offer for Sierra Rutile Limited by Iluka Resources Limited” (available on Iluka’s website www.il
Slide 2: Important Notice
Important Notice IMPORTANT NOTICES This presentation contains information regarding Sierra Rutile Limited (SRL) and its business, assets and operations (SRL Information) which SRL has provided to Iluka. Whilst steps have been taken to review that information, no warranty, expressed or implied, is ma
Slide 3: Disclaimer
Disclaimer Limitation on information in relation to SRL The SRL Information in this presentation - including in relation to SRL's production, resources and reserves, costs, financial information and life of mine plans - has been sourced from information supplied by SRL and its subsidiaries. Whilst s
Slide 4: Contents
Contents Section Slide Number 1 Sierra Rutile Limited (SRL) Acquisition – Offer Terms 5 2 Strategic Rationale and Financial Merit 8 3 SRL Operational Description 22 4 Transaction Process Information 29 4
Slide 5: 1. SRL Acquisition – Offer Terms
1. SRL Acquisition – Offer Terms 5
Slide 6: Key Features
Key Features • Acquisition of Sierra Rutile Limited’s (SRL) mineral sands operation in Sierra Leone • All cash offer valuing the equity of SRL at £215 million (A$375 million) • Iluka assumes ~US$60 million (~A$80 million) of SRL’s debt under its existing facilities • SRL has a substantial resource b
Slide 7: Offer Terms
Offer Terms • Board recommended acquisition of 100% of the outstanding shares of SRL by Iluka to be implemented by way of Equity Offer a statutory merger under British Virgin Islands (BVI) Companies Act 1 Consideration • All cash consideration to SRL shareholders of £215 million (A$375 million 2, US
Slide 8: 2. Strategic Rationale and Financial Merit
2. Strategic Rationale and Financial Merit 8
Slide 9: Strategic Rationale
Strategic Rationale • Counter-cyclical investment • Gives Iluka access to a long life asset – estimated 20+ years plus mine life 1,2 • Substantially increases Iluka’s rutile resource • SRL is 5% of high grade chloride market3 • Operational improvement opportunities • Identified production growth pot
Slide 10: Consistent with Iluka’s Approach
Consistent with Iluka’s Approach Company objective: create and deliver value for shareholders • Disciplined, diligent and rigorous evaluation of investment opportunities • Willingness to act counter-cyclically where appropriate • Seek to maintain a strong balance sheet – “shadow” investment grade •
Slide 11: Financial Merit
Financial Merit • Earnings per share accretive in first full year (2017) • Potential for unit cash cost improvement – via production efficiencies – via production expansions • December 2015 pro-forma combined debt position – moderate gearing (net debt/ (net debt + equity)) of ~25% – funding headroom
Slide 12: SRL Physicals and Financials
SRL Physicals and Financials Physicals kt CY12A CY13A CY14A CY15A Comment Rutile production 94 120 114 126 Potential to increase Rutile sales volume 81 111 130 118 Financial Performance US$m CY12A CY13A CY14A CY15A Total revenue 179 123 118 106 Operating costs (71) (88) (103) (90) EBITDA 108 35 15 1
Slide 13: Long Life Resource Position
Long Life Resource Position +80% increase in Rutile Resources HM Grade (% of HM) Material Rutile Zircon Ilmenite Rutile Zircon Ilmenite • Note, SRL reports rutile Iluka grade as in-situ, i.e. as a (Mt) (Mt) (Mt) (Mt) (%) (%) (%) percentage of material, Measured 1,050 3.07 7.97 40.32 5% 12% 60% where
Slide 14: Global Production Shares – Iluka & SRL
Global Production Shares – Iluka & SRL Production share (%) High Grade Chloride Production Share 20% 19% 18% 17% 17% 16% 16% 14% 14% 12% 12% 11% 10% 11% 8% 7% 7% 6% 5% 5% 4% 3% 4% 2% 2% 0% 2011 2012 2013 2014 2015 Iluka SRL Combined Source: Iluka Resources The above refers to estimated market shares
Slide 15: Geographical Revenue Sales – 2015
Geographical Revenue Sales – 2015 ILUKA REVENUE SRL REVENUE COMBINED REVENUE By-products By-products 3% Zircon and other cons 1% 3% Ilmenite Zircon and other cons Ilmenite 7% Ilmenite 7% 7% 5% SR SR 17% 20% Revenue by Zircon 46% product Zircon 54% Rutile Note: 16% Rutile Rutile 26% SR – Synthetic Ru
Slide 16: Industry Supply Challenges
Industry Supply Challenges Declining grade and assemblages 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 Mineral
Slide 17: SRL Operational Improvement
SRL Operational Improvement • Iluka’s technical and operating expertise to be applied • Improvement potential identified in a number of operational areas • Historic performance impacted by construction, operational issues and funding constraints • Iluka scoped operational improvements to accelerate
Slide 18: SRL Operational Improvement
SRL Operational Improvement Specific areas of improvement: • Mining and concentrating – increase throughput and wet concentrator plant (WCP) recoveries – lower unit cash costs via revised mining approach – capital cost estimate of ~US$20 million in 2017 • Mineral separation plant (MSP) and general s
Slide 19: Production Expansion
Production Expansion Existing production from: • Lanti dredge: effective capacity 780tph • Lanti DM: nameplate capacity 500tph • Gangama: nameplate capacity 500tph Production expansion options – SRL: • Lanti DM: dry mining, additional 250tph2 – Iluka considering a larger expansion, potentially 500tp
Slide 20: Production and Cash Costs
Production and Cash Costs • In the period 2011 - 2015, rutile production has grown at a CAGR of 17% • Production growth to via the commissioning of Gangama in Q2 2016 and pipeline of expansion opportunities • Unit production cash costs have trended downwards and should continue to do so as operating
Slide 21: Portfolio Flexibility
Portfolio Flexibility Expected combined portfolio flexibility benefits include: • Capacity to invest across a range of mineral sands products, product qualities/specifications, geographies • Flexible timing of Iluka current projects and SRL projects = capital expenditure profile flexibility • Iluka
Slide 22: 3. SRL Operational Description
3. SRL Operational Description 22
Slide 23: SRL Operation
SRL Operation Dry mining and concentrating at Gangama Source: Sierra Rutile Limited 23
Slide 24: SRL Key Assets
SRL Key Assets Source: Sierra Rutile Limited 24
Slide 25: SRL Resources and Mine Planning
SRL Resources and Mine Planning SRL deposits • Mining is currently across three deposits: − dredge mining at Lanti dredge pond - end of life expected in 2018 − dry mining at Gbeni (Lanti Dry) − dry mining at Gangama (recently commissioned) • Sembehun group of deposits next project to be developed •
Slide 26: SRL Infrastructure
SRL Infrastructure Nitti Port Rutile storage at Nitti Port INFRASTRUCTURE TYPE DESCRIPTION Port / Export • Bulk shipment via Nitti Port, ~15km from MSP • Port facilities include heavy fuel oil (HFO) storage facilities, diesel storage facilities, two 15,000t dome sheds for bulk dry product and three
Slide 27: SRL Workforce and Community
SRL Workforce and Community • Total employees ~1,500 – expatriate workforce: ~35 • SRL contributes significantly to the gross domestic product and is the largest employer in Sierra Leone • Language – English – Kreo • Project area is located in Moyamba and Bonthe Districts • Recently SRL supported a
Slide 28: Sierra Leone Country Setting
Sierra Leone Country Setting Sierra Leone County Features • Stable political environment • Government supportive of regional development activities • SRL community and social investment credentials • Encouragement of foreign investment Source: Sierra Rutile Limited 28
Slide 29: 4. Transaction Process Information
4. Transaction Process Information 29
Slide 30: Indicative Transaction Timetable
Indicative Transaction Timetable Subject to completion of conditions : • Details of the Merger (Merger Circular) distributed Before 23 August 2016 • Shareholder meeting During September 2016 • Closing During September 2016 (and before 30 November 2016) 30
Slide 31: Important Information – Resources
Important Information – Resources JORC Reserves and Resources Statements Iluka Reserves and Resources The information in this document relating to Iluka’s Ore Reserves and Mineral Resources is extracted from Iluka’s 2015 Annual Report (the Report), issued to ASX on 19 February 2016, and is available
Slide 32: 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
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