Iluka Resources Limited · ASX:ILU
Iluka Resources — FY2006 Earnings Presentation
62 slides from Iluka Resources's earnings presentation, Feb 22, 2007
Slide 1: 2006 Full Year Results
yl 2006 Full Year Results Iluka Resources Limited David Robb Managing Director David McMahon — Chief Financial Officer 22 February 2007 @ ILUKA
Slide 2: Disclaimer — Forward Looking Statements
Disclaimer — Forward Looking Statements ILUKA This presentation contains forward looking statements and estimates. Such statements and estimates are subject to variation based on changes in economic conditions, changes in mine plans and other factors, such as input costs, project execution delays an
Slide 3: Contents
Contents 4. Financial Performance Summary 2. Direction and Priorities 3. 2007 Outlook 4. Supplementary Information Product Pricing Segment Information Financing Costs Reconciliation Exploration Expenditure Hedging Profile Lending Facilities Key Operational Parameters
Slide 4: 1. Financial Performance Summary
1. Financial Performance Summary
Slide 5: Performance Summary
Performance Summary ILUKA * Sales revenue of $1,003.2 million — up 8.9% * Reported NPAT (including significant items) of $21.0 million * Net significant items totalling $(95.9) million * NPAT (excluding significant items) of $116.9 million — down 14.2% * Final dividend of 12 cents, full year dividen
Slide 6: Group Reported Performance
Group Reported Performance (including significant items) $m 2006 2005 % Change Sales Revenue 1,003.2 921.0 8.9 EBITDA 199.2 46.6 327.5 Depreciation and Amortisation (112.7) (125.4) 10.1 EBIT 86.5 {78.8) NIA Net interest Expense and Financing Costs (40.8) (34.0) {20.0} Profit Before Tax and Minority
Slide 7: EBIT
EBIT (excluding Florida/Georgia and significant items) $m 2006 2005 % Change Revenue 974.3 869.6 12.0 EBIT (excludes Florida/Georgia) Mineral Sands 161.9 139.4 16.1 Hedging 28.9 50.5 (42.8) Narama Coal 13.9 15.4 (9.7) Mining Area C 18.7 23.1 (19.0) Other Earnings 1.4 15.1 (90.7) Unrecovered Corporat
Slide 8: Significant Items
Significant Items $m 2006 2005 Florida/Georgia Trading Results (25.4) (87.7) Florida/Georgia Closure Provisions (39.9) (111.1) Profit on Sale of Brunswick (US) Property 29.9 0.0 Mid West Impairment 0.0 (96.1) South West Impairment (60.0) 0.0 Murray Basin Impairment 0.0 (88.0) Iron Oxide Provisioning
Slide 9: Regional Mineral Sands EBIT
Regional Mineral Sands EBIT (excluding Florida/Georgia and significant items) $m 2006 2005 % Change Revenue 933.2 829.2 12.5 EBIT (excludes Florida/Georgia) Western Australia (before hedging and asset sales)’ 105.3 84.5 24.6 Virginia 279 28.4 (1.8) CRL (before hedging and asset sales)” 28.6 26.5 7.9
Slide 10: Net Profit After Tax — Reported Earnings
Net Profit After Tax — Reported Earnings © ILUKA (excluding Florida/Georgia and significant items) Year-on-Year Earnings Variance ~ 2006 vs 2005 ASM 210 136.3 A A A A A A A 2005 Selling Min.Sands Hedging Other Interest Eneabba Other 2006 10 Prices Vokime Earnings Expense HMC
Slide 11: Capital Expenditure and Investments
Capital Expenditure and Investments Sm 2006 2005 Western Australia 78.4 93.2 Murray Basin 39.9 190.1 Northern Murray Basin 12.4 10.3 USA 3.7 22.8 CRL 16.5 74 Eucla Basin 11.7 3.2 Coal 3.5 7.0 Other 6.6 7.9 Total 172.7 341.9 2007 Estimate: $230m 11
Slide 12: Debt
Debt $m 2006 2005 Opening Net Debt 554.2 404.4 Operating Cash Flow 142.2 227.0 Capital Expenditure (172.7) (341.9) Proceedsfrom disposals 419 41.9 Dividends Paid (61.2) (58.1) Exchange Revaluation of Foreign Denominated Borrowings 79 (12.7) Other (0.4) (6.0) Increase in Net Debt 42.3 149.8 Gosing Ne
Slide 13: 2. Direction and Priorities
2. Direction and Priorities 13
Slide 14: Direction & Priorities
Direction & Priorities ILUKA Objective: to create and deliver value for shareholders Business Model: mineral sands — exploration, project development, operations and marketing may evolve consistent with Objective Value Drivers: Profitability, Sustainability and Growth (PSG) Priorities: - align organ
Slide 15: Value Drivers
Value Drivers * Profitability ®» Strong ROC focus leading to strong cash flows » Managing productivity, costs and margins ~ continuous improvement » Project returns above a risk weighted investment hurdle rate + Sustainability » High levels of environmental, health and safety performance ®» Sound pl
Slide 16: Align Organisation to Shareholder Objective
© ILUKA Align Organisation to Shareholder Objective —— Reset Objective Focus on relevant performance targets » Group: NPAT, ROE, TSR ® Regional: EBIT ROC (EBiT/Capital Employed) >» Project evaluation: IRR > risk weighted investment hurdle, other metrics Structure Regions as distinct businesses » Acc
Slide 17: Priority — Legacy Issues
Priority — Legacy Issues Reshape Western Australian operations ®» Review South West carrying value » Plan for shorter mine lives » Reduce overheads and sustaining capex » Define and implement new South West business model Conclude US restructuring » Increase Florida/Georgia closure provisions ®» Rev
Slide 18: Priority — Deliver on Value Drivers: Profitability
Priority — Deliver on Value Drivers Profitability » Establish self-sufficient Regional businesses « Move towards minimalist corporate office activity « Review marketing strategy based on » Updated product margins » Optimisation of production versus sales objectives > lluka project development opport
Slide 19: Priority — Deliver on Value Drivers: Sustainability
Priority — Deliver on Value Drivers Sustainability * Improve EH&S performance * Implement co-ordinated land management program » Focus on value generation end-to-end » South West landholdings - 6,600 ha » Current South West land value estimate ~370 million >» Based on rural use » Scope to generate i
Slide 20: Priority — Deliver on Value Drivers: Growth
Priority — Deliver on Value Drivers Growth Increase analytical capability and commercial rigour Create Commercial Team ®» Planning, financial evaluation, business development e Finalise Murray Basin development pathway » Commission and ramp up Hamilton Mineral Separation Plant >» Complete northern M
Slide 21: Priority — Deliver on Value Drivers: Growth
Priority — Deliver on Value Drivers Growth * Explore non mineral sands potential » Targeted spend to assess potential in Eucla Basin tenements » $2m spend over period late 2007 and 2008 >» Uranium focus ¢ Alliance and rationalisation opportunities 21
Slide 22: New Project Development
New Project Development LUKA * Pursue low capital, flexible development pathways * Optimise use of existing group assets - maximum utilsation of installed capacity ~ e.g. mineral separation plants - re-location of existing plant where appropriate * Focus on low unit cash cost objective * Flexible pr
Slide 23: Northern Murray Basin
Northern Murray Basin LuKA * Co-comitment to Douglas development (Detailed Feasibility Study mid 2004) * Second Wet Concentrator Plant assumed * Single WCP options have been considered and rejected * Robust economic case exists for 2" concentrator in northern Murray Basin >» “Fit for purpose” WCP to
Slide 24: Northern Murray Basin
Northern Murray Basin Current project parameters * Subject to pre-feasibility completion & DFS confirmation ®» Implementation 2008 » Capex ~$180 million, including Hamilton MSP expansion >» Murray Basin total annual production ~ average ~300 - 330 ktpa — 2009 — 2013 - estimated 55%-60% rutile, 40%-4
Slide 25: Eucla Basin
Eucla Basin Greenfield development pathway determined * Current economic evaluation initial capex estimate of ~$600 million + Material reduction in capital expenditure versus earlier options * Identification of borefield water supply close to the site * Indicative first production mid 2010 * Improve
Slide 26: Eucla Basin
Eucla Basin Brownfield development pathway Processing using existing MSP facilities * Subject to integration study completion, commercial & DFS confirmation * Current economic evaluation initial capex estimate of ~$400 million * Potentially earlier start up * Lower development risk, more flexible pr
Slide 27: Priority — Capital Efficiency and Balance Sheet Management
Priority — Deliver on Value Drivers Capital Efficiency and Balance Sheet Management * Reduce sustaining capital expenditure >» Line by line scrutiny > Rigorous capital spend review process implemented >» Recycling existing assets * Find lower capital solutions for mining projects » Staged developmen
Slide 28: Summary
Summary Main Initiatives to Date Defined business direction & priorities improved organisational alignment to shareholder objective ®» Incentive plans focus on ROC, ROE and TSR Established new regional structure >» Accountable for profitability, sustainability and growth Established land management
Slide 29: Summary — Key Work Streams 2007
Summary © Key Work Streams - 2007 LUKA First Half Complete bottom up 5 year regional business plans Approve and commence northern Murray Basin DFS Complete Eucla Basin Integration Study Redefine appropriate levels of corporate overheads Implement DRP, progress Narama cola divestment Build up commerc
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Slide 31: Production Volumes 2005 - 2007
Production Volumes 2005 - 2007 2005 2006 2007 Estimates k tonnes k tonnes k tonnes Rutile production 474 473 ~210 SR production 530 507 ~510 Hmenite production 4,592 1,687 ~1680 Leucoxene/Hyti production 58 Ad ~20 Zircon production 420 446 ~450 Coal production 4,232 1,246 ~1,200 31
Slide 32: Sales Volumes and Prices
Sales Volumes and Prices Sales Volumes Prices rec'd 2007 (k tonnes) USS$/t average Pricing Mineral Sands Product 2005 2006 2005 2006 Trend Rutile 170 170 470-490 485-500 up 3-5% Synthetic Rutile 503 523 470-490 410-425 up 3-5% Ilmenite 922 794 75-125 75-125 up 3-5% Other 45 67 N/A NIA N/A Zircon 438
Slide 33: Outlook — 2007 Full Year
Outlook — 2007 Full Year * 2007 NPAT guidance of $90 million to $100 million * Guidance based on: VV WW Ww 75 cents average S$A/SUS spot exchange rate currency sensitivity: + 1¢ equals ~$8 million NPAT 2007 tax rate of 27% meeting December shipment schedules - ~9% of 2006 revenue in last week of yea
Slide 34: 5. Supplementary Information
5. Supplementary Information 34
Slide 35: Regional Destination of Sales by Revenue - 2006
© Regional Destination of Sales by Revenue - 2006 iuka Zircon Asia Australia OlEurope OAmericas Michina AJapan Titanium Products 11% 4% @ Asia @ Australia O Europe O Americas @ China @ Japan 23% 24% 35
Slide 36: Product Pricing — Rutile
Product Pricing — Rutile ILUKA Industry Norninal Prices ussit ASit 1000 , + 1000 800 + ~ 800 600 | - 600 400 ie oe 400 200 + ~ 200 0 t t t t t t t t t t 0 96 98 00 02 04 06 Source: TZMI —s— US $it —o A$it 36
Slide 37: Product Pricing — Synthetic Rutile
Product Pricing — Synthetic Rutile LUKA lluka 10 year nominal prices US$it AGIt 1000 — + 1000 800 + + 800 600 | pee ae | 600 400 + o_o ee + 400 200 + + 200 0 t t t t t t t t t t 0 96 98 00 02 04 06 —s—USSit —e— ASit Source: TZME 37
Slide 38: Product Pricing — Chloride Ilmenite
Product Pricing — Chloride Ilmenite LUKA Industry Nominal Prices US$/t ASIt 200 — + 200 160 — + 160 120 — + 120 80 — —. ey + 80 40 — + 40 0 f f f f ; f f f f ; 0 96 98 00 02 04 06 —a— USS/t —e ASit Source: TZMI 38
Slide 39: Product Pricing — Sulphate Ilmenite
Product Pricing — Sulphate limenite LUKA Industry Nominal Prices uSs$it ASit 200 ~ ~ 200 160 — ~ 160 120 — ~ 120 80 - #~e ig 80 40 — ~ 40 0 t t t t t t t t t t 0 96 98 00 02 04 06 —s— USS/t —o— Afit Source: TZMI 39
Slide 40: Product Pricing — Zircon
Product Pricing — Zircon ILUKA Industry Nominal Prices US$i/t ASit 1000 + + 1000 800 — + 800 600 — + 600 400 -- + 400 200 — + 200 0 f f f f f f f f f f 0 96 98 00 02 04 06 —s— USSit —o—ASit Source: TZMI 40
Slide 41: Segment Information — Western Australia
Segment Information — Western Australia LY] ILUKA er 2006 2005 % Change Production Volumes (kt) Rutile 89.9 74.3 21.0 Synthetic Rutile 506.8 529.6 (4.3) limenite 1,254.8 4,126.3 11.4 Other — Hyti (kt) 23.5 24.5 (4.1) Zircon 309.7 268.5 15.3 Total 2,184.5 2,023.2 80 Total Sales Volumes (kt) Rutile 79
Slide 42: Segment Information — Western Australia
Segment Information — Western Australia Pre Impairment 2006 2005 % Change Sales Revenue’ (pre-hedging) $m 671.4 582.5 15.3 Total Production Costs $m 517.4 480.1 (7.8) Stock Movements $m (3.5) (22.7) (84.6) Cost of Goods Sold? Sm 513.9 457.4 (12.3) Non-production related overheads $m 52.2 40.6 (28.5)
Slide 43: Segment Information — CRL
Segment Information — CRL 2006 2005 % Change Production Volumes (kt) Rutile 72.2 715 1.0 limenite 176.8 160.5 10.2 Zircon 53.0 53.4 (0.8) Total 302.0 285.4 5.8 Total Sales Volumes (kt) Rutile 78.0 72.7 7.3 limenite 178.2 194.1 (8.2) Zircon 51.3 53.2 (3.6) 43
Slide 44: Segment Information — CRL
Segment Information — CRL 2006 2005 % Change Sales Revenue (pre-hedging) Sm 121.7 107.2 13.5 Cost of Production $m 80.5 77 (3.7) Stock Movements $m 24 (3.4) NIA Cost of Goods Sold $m 83.0 74.3 (11.7) Non-production related overheads $m 10.1 64 (57.9) EBIT (pre-hedging and asset sales) $m 28.6 26.5 7
Slide 45: Segment Information — Virginia
Segment Information — Virginia 2006 2005 % Change Production Volumes (kt) limenite 245.1 269.6 (9.1) Zircon 67.6 69.2 (2.2) Total 312.7 338.8 (7.7) Total Sales Volumes (kt) limenite 284.8 225.6 26.2 Zircon 65.1 70.0 (7.1) 45
Slide 46: Segment Information — Virginia
Segment Information — Virginia 2006 2005 % Change Sales Revenue $m 111.2 88.9 25.1 Cost of Production $m 82.3 71.0 (15.9) Stock Movements $m {2.4) (10.5) (77.2) Cost of Goods Soild $m 79.9 60.5 (32.1) Non-Production Related Overheads $m 34 0.0 N/A Other Revenue $m 0.0 0.0 NiA EBIT $m 27.9 28.4 (1.8)
Slide 47: Segment Information — Florida/Georgia
Segment Information — Florida/Georgia 2006 2005 % Change Production Volumes (kt) Rutile 10.6 28.2 limenite 10.7 35.8 Other - Leucoxene 17.4 33.9 Zircon 15.4 29.6 Total 54.1 127.5 Total Sales Volume (kt) Rutile 12.3 27.9 limenite 14.8 32.4 Other - Leucoxene 17.5 33.9 Zircon 15.3 29.6
Slide 48: Segment Information — Florida/Georgia
Segment Information — Florida/Georgia © : ege . ILUKA (pre-land sales and other significant items) eC via 2006 2005 % Change Sales Revenue $m 28.9 51.4 (43.8) Cost of Production $m 50.3 89.3 43.7 Stock Movements $m 3.2 (0.2) NIA Cost of Goods Sold $m 53.5 89.1 40.0 Non-production related overheads $
Slide 49: Financing Costs Reconciliation
Financing Costs Reconciliation $m 2006 2005 Gross interest expense on debt 42.4 32.9 Amortisation of deferred borrowing costs 0.4 05 Less capitalisation of interest (13.5) (13.1) Net interest expense 29.0 20.3 Rehabilitation Costs & other borrowing costs unwind! 13.4 14.7 Total Financing Costs 42.4
Slide 50: Exploration Expenditure
Exploration Expenditure LUKA $m 2006 2005 Gross Expenditure Western Australia 5.9 66 Murray Basin 3.7 45 Eucla Basin 3.0 5 United States 3.2 44 Other 1.6 1.0 Total Gross Expenditure 19.4 21.6 Previously Capitalised Exploration Expenditure Written Off 0.7 41.0 Capitalised (7.0) (14.2) Reclassified to
Slide 51: Principal Exploration Activities - 2006
Principal Exploration Activities - 2006 LuKaA Gulliver's Prospect discovered, Eucla Basin * Upgrade to Ambrosia resource, Eucla Basin * Tripitaka resource estimate, Eucla Basin * Intersection of anomalous HM sands north of Ambrosia and east of Jacinth * Resource extension, Adamson, Mid West * Cataby
Slide 52: Hedging Position
Hedging Position LUKA During 2006 Iluka closed out its currency hedging arrangements. The value of hedges terminated in 2006 to be recognised as income in 2007 is $27.4 million. CRL retains the following currency hedging position (at 0.75 cents US/Aud exchange rate: 2007 2008 $2.1 million $1.5 milli
Slide 53: Lending Facilities — as at December 2006
Lending Facilities — as at 31 December 2006 uu Facility Drawn ‘* Rate lluka US$m 1996 Privaie Placement US$m 60.0 60.0 78 2003 Private Placement US$m 100.0 100.0 5.1 Multilateral Bank Facility USSm 130.0 80.6 7.0 Bilateral Bank Facilities US$m 80.0 79.9 6.8 Receivables Acquisition Facility USSm 60.0
Slide 54: Key Operational Parameters
Key Operational Parameters The following provides information on the key operational parameters for lluka’s main operations is designed to provide information on the resource, production and cost base of the business. Medium term forecasts for the businesses will be subject to detailed review during
Slide 55: Key Operational Parameters - Mid West
Key Operational Parameters - Mid West Assemblage 34 December 2006 HM tonnes HM grade {lm Rutile Zircon (000) % % % % Reserves 10.8 8.7 5.2 7 43 Resources AT2 5.4 54 6 4 Ore Grade and Assemblage EEE Ore grade y Ore Grade % md) «Zircon assemblage HM Assemblage = <= = limenite assemblage % ee Rutile as
Slide 56: Key Operational Parameters — Mid West
Key Operational Parameters — Mid West 2005 2006 Production {kt} Rutile TA3 89.9 Syn Rutile 252.4 217.9 Hmenite 466.6 577.9 Zircon 203.8 245.1 Cash Production Costs $m 219.4 257.7 Non Cash Production Costs $m 47.9 ALT Other Costs $m 22.9 30.5 Total Costs $m 290.1 329.9 Cash Production Costs 2006 16%
Slide 57: Key Operational Parameters — South West
Key Operational Parameters — South West © ILUKA Assemblage HM tonnes HM grade lim Rutile Zircon (000) % % % % Reserves TA 9.2 79 1 7 Resources ALT 8.3 78 1 8 Ore Grade and Assemblage Ore Grade EEE re grade HM % ep » Zircon assemblage Assemblage a = == -Iimenite assemblage ”% 20% Leucoxene assemblage
Slide 58: Key Operational Parameters — South West
Key Operational Parameters — South West © ILUKA 2005 2006 Production {kt} Syn Rutile 277.2 288.7 Hmenite 659.7 676.9 Zircon 64.6 64.6 Other 24.5 23.5 Cash Production Costs $m 172.8 188.2 Non Cash Production Costs $m 40.0 29.8 Non-production Related Costs $m 17.8 24.7 Total Costs $m 230.6 239.7 Cash
Slide 59: Key Operational Parameters - Virginia
Key Operational Parameters - Virginia Assemblage HM tonnes HM grade lim Rutile Zircon (000) % % % % Reserves 1.9 8.7 70 ~ 16 Resources 3.4 7.0 68 - 16 Ore Grade and Assemblage Factors influencing Grade and Assemblage [Or grado . Grades decline in the Old Hickory ore body in 2007 and 2008 Ore Grade %
Slide 60: Key Operational Parameters - Virginia
Key Operational Parameters - Virginia ILUKA Le 2005 2006 Production {kt} Hmenite 269.6 245.1 Zircon 69.2 67.6 Cash Production Costs $m 62.0 68.7 Non Cash ProductionCosts $m 9. 13.5 Non-production Related Costs $m ~ 3.4 Total Costs $m 71.0 85.7 Cash Production Costs 2006 11% @ Mining Concentrating 31
Slide 61: Key Operational Parameters - Murray Basin
Key Operational Parameters - Murray Basin nue Assemblage HM tonnes HM grade lim Rutile Zircon (000) % % % % Reserves 5.6 16.5 45 13 14 Resources 43.8 11.6 48 13 10 Factors influencing Grade and Assemblage * Zircon assemblages high during 2006 due to mining zircon- rich Bondi East deposit . Zircon as
Slide 62: 2006 Full Year Results
2006 Full Year Results lluka Resources Limited For further information, visit luka’s website www. iluka.com An audio recording of the teleconference as well as a transcript will be available on the website @ ILUKA