Iluka Resources Limited · ASX:ILU
Iluka Resources — TZMI Conference November 2011
21 slides from Iluka Resources's conference presentation, Nov 9, 2011
Slide 1: Iluka Resources Shareholder Focus
For personal use only Iluka Resources Shareholder Focus High Value Mineral Sands Market Position Production Flexibility TZMI Conference November 2011 1
Slide 2: Disclaimer and Important Notes
Disclaimer and Important Notes For personal use only Disclaimer The purpose of this presentation is to provide general information about Iluka Resources Limited (Iluka). This presentation does not involve or imply a recommendation or a statement of opinion in respect of whether to buy, sell or hold
Slide 3: Forward Looking Statements
Disclaimer and Important Notes 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 future capi
Slide 4: Zircon Industry Structure
Zircon Industry Structure For personal use only Major Producers (2010) 1.3 million tonnes1 • Iluka largest global producer • 3 participants ~ 70% of the market • Zircon the minor constituent in mineral sands deposits • Zircon historical demand growth higher than titanium demand growth • Minimal new
Slide 5: Titanium Dioxide Industry Structure
Titanium Dioxide Industry Structure For personal use only Total TiO2 Feedstock Chloride & Sulphate (6.4 Mt) • Iluka’s orientation to high grade TiO2 • Chloride feedstock market - major 3 participants > 70% • In high grade feedstocks (>85% TiO2) 3 participants ~ 80% of market • Chloride pigment depen
Slide 6: Iluka's Evolution
Iluka’s Evolution For personal use only Key features: • prime objective – creation & delivery of shareholder value • higher margin asset transformation and major capital period complete • marketing and supply approach - contributor to Iluka’s pricing outcomes in last 2 years • commitment to sustaina
Slide 7: Higher Margin Integrated Production Base
Higher Margin Integrated Production Base For personal use only Jacinth-Ambrosia, Eucla Basin, South Australia Murray Basin, Victoria / New South Wales High quality, long life zircon supply source (~300kt per annum) Major rutile production province, over multiple deposits Exploration tenement positio
Slide 8: Physical and Sales Profile
Physical and Sales Profile For personal use only kt Z/R/SR Production and Unit Cash costs per tonne of Z/R/SR $/t Z/R/SR 1200 600 Unit cash costs not the prime 1000 550 differentiator of mineral sands 800 500 profitability 600 450 400 400 200 350 0 300 2006 2007 2008 2009 2010 H1 2011 * Zircon Rutil
Slide 9: Transformed Financial Characteristics
Transformed Financial Characteristics For personal use only Net Debt (A$m) Gearing (%) 700 50 45 600 40 500 35 30 400 25 300 20 200 15 10 100 5 0 0 2005 2006 2007 2008 2009 2010 H1 11 Net Debt Gearing 9
Slide 10: Marketing and Supply Evolution
Marketing and Supply Evolution For personal use only • Iluka has grown its presence in growth markets, especially China • Iluka’s high grade titanium customer base has grown from 20 customers in 2007 to 75 customers as at September 2011 10 • Iluka’s zircon customer base has grown from 45 customers i
Slide 11: Iluka's Production and Product Flexibility
Iluka’s Production and Product Flexibility For personal use only • Idled two of its 4 synthetic rutile kilns between 2009 & 2010 due to inadequate returns • 1 kiln run as a R&D vehicle in 2010 - to resume normal commercial operation in 2012 • 2009 GFC - Iluka idled ~50% of Australian production base
Slide 12: Evolution of Contractual and Pricing Arrangements
Evolution of Contractual and Pricing Arrangements For personal use only • Iluka zircon contractual and pricing arrangements to 3 month basis • Enhanced logistics, including small lot capabilities to cater for emerging markets and long tail • Internet based sales portal provided a lead indicator on z
Slide 13: Evolution of Contractual and Pricing Arrangements
Evolution of Contractual and Pricing Arrangements For personal use only • Iluka has recast its high grade titanium dioxide contractual arrangements • Annual rather than multi-year volume arrangements • Pricing negotiations half yearly • Step change in pricing since Iluka has come off legacy “cap & c
Slide 14: Key Focus of Iluka's Production Response Options
Key Focus of Iluka’s Production Response Options For personal use only Alignment with objective: create and deliver value for shareholders Financial metrics - IRR, payback period, unit costs/margins, ROC, NPV and Market approach – assessment of implications for supply/demand under various scenarios
Slide 15: Enhanced Production Overview
Enhanced Production Overview For personal use only • Iluka’s production response options extensive - over 30 opportunities identified - 11 subject to detailed evaluation • Focus on zircon and rutile - Doug Warden to comment on ilmenite potential to flow from Z/R opportunities • Further work on techn
Slide 16: Iluka's Production Optionality
Iluka’s Production Optionality For personal use only Characterised by: • use of existing infrastructure (even if with some expansion capex) - 3 separation plans, 1 dry plant, available concentrators, established logistics chains • ability for short-medium term activation, as well as longer term oppo
Slide 17: Conclusion
Conclusion For personal use only • Progress towards delivery of Iluka’s investment proposition • Key attributes for evolution of company: - production base integration and flexibility - strengthened balance sheet and cash flow - favourable medium term supply / demand characteristics for Iluka’s prod
Slide 18: Iluka Resources Limited
For personal use only Iluka Resources Limited For further information, contact: Robert Porter, General Manager, Investor Relations robert.porter@iluka.com +61 3 9600 0807 +61 (0) 407 391 829 www.iluka.com
Slide 19: Transformed Financial Characteristics
Transformed Financial Characteristics Iluka’s Strong Margins and Return on Capital Influenced by Product Suite For personal use only 2006-2008 average pa 2009 2010 H1 2011 Cash cost/t Z/R/SR 560 560 538 550 Revenue/t Z/R/SR (A$/t) 810 760 809 1165 Mineral Sands EBITDA % margin 23.3 13.1 28.6 50.3 Gr
Slide 20: Key Physical & Financial Parameters: 2011 Physical Trends
Key Physical & Financial Parameters 2011 Physical Trends (July Update) For personal use only 2010 2011 2011 2011 Commentary Guidance Guidance (February) (July) Production kt Zircon 413 ~500 ~550 Higher production influenced by favourable Murray Basin grades and strong operational performance. Iluka
Slide 21: Key Physical & Financial Parameters: 2011 Financial Trends
Key Physical & Financial Parameters 2011 Financial Trends (July Update) For personal use only 2010 2011 Updated 2011 Commentary Guidance 2011 Guidance (February) (July) Cash Costs A$m Production costs 544 ~540 ~620 Higher total cash costs (as opposed to unit cash costs) reflect a significant increas