Slide 1: Iluka Resources Limited 2018 Full Year Results Presentation
1 Iluka Resources Limited 2018 Full Year Results Presentation Tom O’Leary, Managing Director Adele Stratton, Chief Financial Officer Matthew Blackwell, Head of Marketing and Procurement Jacinth-Ambrosia, South Australia, Australia
Slide 2: Disclaimer – Forward Looking Statements
Disclaimer – Forward Looking Statements 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
Slide 3: Sustainability
Sustainability 3 741 2019 Hectares Sustainability rehabilitated Report to be in 2018 released in April Female 3.5 Group 2.8 representation Group 40% 29% South Australian Premier’s Awards TRIFR Exec. Board • Excellence in Diversity TRIFR • Excellence in Innovation - Environmental Management 2017 Mgt.
Slide 4: Key Features
Key Features 4 Key Features Underlying Group EBITDA of $600 million, up 67% year-on-year (2017: $361 million) Financials NPAT of $304 million (2017: loss of $172 million) Operating cash flow of $594 million Strong cash flow Free cash flow of $304 million Net cash position Achieved net cash position
Slide 5: Iluka's Approach
Iluka’s Approach 5 DELIVER SUSTAINABLE VALUE Disciplined capital allocation Preserve and advance growth Creation of a sustainable operating opportunities environment Iluka’s capital allocation framework prioritises funds Iluka’s position within the industry and the wider Exhibit leadership and disci
Slide 6: Financial Management
Financial Management Adele Stratton, Chief Financial Officer Jacinth-Ambrosia, South Australia, Australia
Slide 7: Key Financial Metrics
Key Financial Metrics 7 Units 2018 2017 % Change Z/R/SR Production kt 731.7 825.2 (11.3) ▼ Z/R/SR Sales kt 827.1 889.1 (7.0) ▼ Mineral sands revenue $m 1,244.1 1,017.5 22.3 ▲ Mineral sands EBITDA $m 544.5 300.9 81.0 ▲ Underlying Group EBITDA1 $m 600.1 360.5 66.5 ▲ Profit (loss) for the period (NPAT)
Slide 8: NPAT
NPAT 8 FY 2018 versus FY 2017 $m 500 17 189 400 300 132 ( 142 ) ( 22 ) 200 49 304 265 26 100 16 ( 16 ) ( 40 ) 0 -100 (172) -200 31 Price Vol Mix FX Unit Idle Rehab Impairment Depn Min Sand Impairment Tax 31 December COGS Other / Metalysis December 2017 2018 • Main contributors to strong performance
Slide 9: Production Costs
Production Costs 9 • Full year 2018 Group unit costs higher versus 2017 due to: − restart of Jacinth-Ambrosia operations in December 2017, with no mining and concentrating costs incurred in 2017; and − lower production combined with additional maintenance costs at Sierra Rutile due to operational is
Slide 10: Net Cash Position Achieved
Net Cash Position Achieved 10 $m 550 2018 free cash flow $304 million 56 450 594 (12) (7) (1) (5) 350 250 150 3 (312) (12) 50 2 (108) (2) (11) (50) (150) (183) (250) Opening net Operating MAC royalty Exploration Interest Hedging Tax Capex Asset sales Treasury Dividends Exchange Amortisation Closing
Slide 11: Inventory
Inventory 11 • Continued drawdown of finished goods inventory, particularly from the Murray Basin • Jacinth-Ambrosia HMC production benefited from good grades and recoveries, resulting in increased HMC inventories • Inventory levels now considered to be within normal range 2018 2017 % change Total I
Slide 12: Balance Sheet
Balance Sheet 12 • Strong free cash flow of $304 million (2017: $322 million) − reduction in net debt over 2018 to net cash position Net Debt, Gearing and Funding Headroom • Total debt facilities reduced to $618 million ($568 million undrawn) $m Gearing % Total facilities available Net debt (cash) G
Slide 13: Dividend
Dividend 13 • 19 cents per share final dividend fully franked • Full year dividend 29 cents per share (19 cps final + 10 cps interim) – 40% of full year free cash flow – consistent with stated dividend framework – reflects strong underlying result • $27.9 million franking credit balance as at 31 Dec
Slide 14: Operations and Projects
Operations and Projects Jacinth-Ambrosia, South Australia, Australia
Slide 15: Operations Summary - 2018
15 Operations Summary - 2018 Australian Operations Product Operation 2018 2017 % change • Jacinth-Ambrosia operated continuously following its restart in December 2017 Australia 328 294 − Board approved early move to Ambrosia deposit, smoothing the production profile and supporting average annual zi
Slide 16: Jacinth-Ambrosia
16 Jacinth-Ambrosia Assisting Iluka to meet Group zircon production targets of ~335 thousand tonnes per annum over the next three years • Mining and concentrating restarted in December 2017, and operated at full capacity during 2018 • Ore grades were higher than anticipated and improved recoveries d
Slide 17: Cataby
17 Cataby Project enters commissioning • Core construction activities complete • Wet commissioning commenced late Q4 2018 • Ore is stockpiled in front of the plant in preparation for commissioning 2019- Production Outlook • Production of HMC expected in Q1 20221 Zircon ktpa 60 Rutile ktpa 35 Summary
Slide 18: Sierra Rutile Limited
18 Sierra Rutile Limited Production • FY18 rutile production of 122kt, versus 168kt in 2017 • Full year production affected by a combination of maintenance issues, mechanical failures and unlawful strike actions • Plans are being implemented to drive operational improvement and stability Taskforce u
Slide 19: Sierra Rutile Limited – Projects
Sierra Rutile Limited – Projects 19 Lanti dry and Gangama - Expansion Projects • Project to double capacity to 1,000-1,200 tonnes per hour underway at Lanti dry and Gangama • Construction of second concentrator at Gangama 40% complete with earth-moving fleet delivered with commissioning scheduled mi
Slide 20: Potential IFC Involvement in Sierra Leone
20 Potential IFC Involvement in Sierra Leone • International Finance Corporation (IFC) mobilises funding for private enterprises in developing countries as part of World Bank’s aim to aid economic development and reduce poverty • The World Bank and IFC are active in Sierra Leone • IFC partners with
Slide 21: Other Projects
21 Other Projects Fine Minerals • Zircon and rare earths project Project • PFS commenced in August 2018 with completion of test pit ahead of schedule Murray Basin, • Ore transported for testing and preparation of customer samples Victoria • Industry, competitor and market analysis underway • A drill
Slide 22: Rehabilitation and Tailings Management
22 Rehabilitation and Tailings Management Progressing positive rehabilitation and closure outcomes • 741 hectares of land was rehabilitated in 2018 • 544 hectares of mined areas revegetated at Australian mine sites • Continued research partnerships with universities in Western Australia, South Austr
Slide 23: Mining Area C Royalty
Mining Area C Royalty 23 Iluka holds a royalty in perpetuity over iron ore revenue from BHP’s Mining Area C (MAC) hub in WA • Over $810 million EBITDA contributed to Iluka since mining commenced • Current MAC production ~55Mtpa BHP’s US$3.4bn South Flank development received BHP Board approval in Ju
Slide 24: Mineral Sands Markets
Mineral Sands Markets
Slide 25: Zircon Market
Zircon Market 25 Iluka Zircon Sales by Industry (kt) Result 2018 2017 • Full year zircon sales of 379kt, in line with prior year (2017: 380kt) • Q4 2018 sales seasonally slower as expected • Full year zircon production of 349kt up 12% year on year (2017: 312kt) Pricing Ceramics Zircon Fused Refracto
Slide 26: Zircon Sales
Zircon Sales 26 121 kt 109 kt 97 kt • Ceramic producers adjusting to stringent environmental regulations, with industry expecting larger manufacturers to gain market share at the expense of those unable to adjust. China • The negative effect of trade tensions has been felt less in the zircon chemica
Slide 27: High Grade Titanium Feedstock Market
High Grade Titanium Feedstock Market 27 Result Iluka High Grade Titanium Sales by Industry (kt) • 2018 combined rutile/synthetic rutile sales of 448kt, down 12% YoY (2017:509kt) 2018 2017 • Reflective of production constraints and Iluka having limited inventory to draw from, post cessation of mining
Slide 28: High Grade Titanium Feedstock Sales
High Grade Titanium Feedstock Sales 28 Tight supply conditions unlikely to ease as future feedstock supply under pressure from pending mine closures and lower grades at existing mines • Northern hemisphere winter is seasonally slower, and traditionally a period of 63 kt inventory building among pigm
Slide 29: Summary and Outlook
Summary and Outlook Balranald, New South Wales, Australia
Slide 30: Outlook 2019
Outlook 2019 30 Market conditions Focus on contributing to market stability through sustainable price outcomes Sierra Rutile Achieving operational stability at Sierra Rutile Cataby commissioning Final project delivery on time and budget Expansion projects Delivery of expansion projects at Lanti and
Slide 31: Outlook - Group
Outlook - Group 31 Key Parameters 2017 2018 20191 Comments Annual production Zircon kt 312 349 330 Production includes 40kt of zircon in concentrate Rutile production reflects changed operational Rutile2 kt 302 163 210 settings at Sierra Rutile and processing of Cataby non-magnetic material during s
Slide 32: Outlook - Group
Outlook - Group 32 Key Cost Parameters 2017 2018 2019 1, 2 Comments Cash costs ($m) Cash costs of production (Z/R/SR) 362 444 540 Commencement of Cataby operations Ilmenite concentrate and by-product costs 10 11 10 Restructure and idle costs 73 25 25 Predominantly US and Murray Basin Resource develo
Slide 33: Outlook – Sierra Rutile
Outlook – Sierra Rutile 33 Key Parameters 2017 2018 20191 Comments Annual production Lanti dredge decommissioning in early 2019, Lanti and Rutile kt 168 122 150 Gangama expansions planned commissioning mid-2019. Zircon kt 3 11 5 Two ZIC shipments in 2018, only one planned in 2019. Total Z/R kt 171 1
Slide 34: Supplementary Information
Supplementary Information
Slide 35: Supplementary Information
Supplementary Information 35 Production and Sales Volumes, Revenue and Cash Costs 2018 2017 % change Production Zircon kt 348.6 312.3 11.6 Rutile kt 163.2 302.1 (46.0) Synthetic rutile kt 219.9 210.8 4.3 Total Z/R/SR production kt 731.7 825.2 (11.3) Ilmenite – saleable and upgradeable kt 395.1 448.1
Slide 36: Supplementary Information
Supplementary Information 36 Weighted Average Received Prices H1 H2 Full year Full year 2018 2018 2017 2018 Weighted Average Price US$/tonne FOB Zircon Premium and Standard 1,278 1,434 958 1,351 Zircon 1,240 1,403 940 1,321 (all products including zircon in concentrate)1 Rutile 906 1,022 790 952 (ex
Slide 37: Supplementary Information
Supplementary Information 37 Summary Group Results $m 2018 2017 % change Mineral sands revenue 1,244.1 1,017.5 22.3 Mineral sands EBITDA 544.5 300.9 81.0 Mining Area C royalty EBITDA 55.6 59.6 (6.7) Underlying group EBITDA* 600.1 360.5 66.5 Underlying group EBITDA margin % 48.2 35.4 12.8 ppts Deprec
Slide 38: Supplementary Information
Supplementary Information 38 Income Statement $ million 2018 2017 % change Z/R/SR revenue 1,179.0 959.1 22.9 Ilmenite and other revenue 65.1 58.4 11.5 Mineral sands revenue 1,244.1 1,017.5 22.3 Cash costs of production (455.1) (372.4) 22.2 Inventory movement - cash (68.5) (141.5) (51.6) Restructure
Slide 39: Supplementary Information
Supplementary Information 39 Reconciliation of non-IFRS financial information to profit before tax 2018 Mineral Aus US SRL Expl & Oth MAC Corp Group Sands Mineral sands revenue 1,011.4 39.3 205.7 (12.3) 1,244.1 - - 1,244.1 AASB 15 freight revenue 39.4 3.9 7.0 50.3 - - 50.3 Expenses (447.3) (41.7) (1
Slide 40: 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