Iluka Resources Limited · ASX:ILU
Iluka Resources — Bank of America Merrill Lynch Global Metals, Mining and Steel Conference 2012
37 slides from Iluka Resources's conference presentation, May 16, 2012
Slide 1: Iluka Resources Limited – BAML Global Metals, Mining and Steel Conference
For personal use only Iluka Resources Limited Bank of America Merrill Lynch Global Metals, Mining and Steel Conference David Robb – Managing Director and CEO 16 May 2012 1
Slide 2: Disclaimer
Disclaimer For personal use only Forward-looking Statements This presentation contains information that is based on projected and/or estimated expectations, assumptions and outcomes. These forward-looking statements are subject to a range of risk factors associated, but not exclusive, with potential
Slide 3: 2011 – Key Features
2011 – Key Features For personal use only • Group EBITDA ~$1.0bn, NPAT and FCF > $0.5bn, ROE > 40% • Balance sheet = net cash • 55 cents final dividend (fully franked); 75 cents for full year - pay out 53% of FCF vs target minimum of 40% • Excellent production performance within cash cost guidance -
Slide 4: Zircon: Attributes and Applications
Zircon: Attributes and Applications For personal use only Opacity (whiteness) Opacifier in ceramics high refractive index (zircon refracts/reflects white light well) floor & wall tiles | sanitary ware Resistant table ware water, chemical & abrasion resistance of glazes due to hardness of zircon Temp
Slide 5: Titanium Dioxide: Attributes and Applications
Titanium Dioxide: Attributes and Applications For personal use only Opaque, white and bright Pigment high refractive index (refracts & reflects white light) paints & coatings UV protection plastics | paper absorbs UV light energy (transfers to heat) – prevents fading, peeling, Non toxic safe for use
Slide 6: Balanced Product Revenue Mix
Balanced Product Revenue Mix For personal use only 2010 2011 2012 Guidance 36% 36% ~45% 64% 64% ~55% Zircon High-grade TiO2 • Based on received 2010 and 2011 prices, 2012 sales guidance • Assumes 2012 beginning prices for full year 2012 • Excludes revenue from ilmenite, by-products and Mining Area C
Slide 7: MAC Iron Ore Royalty
MAC Iron Ore Royalty For personal use only Background Outlook • Mining Area C (MAC) covers part of • BHP has stated intentions to increase total iron ore BHP BIlliton’s iron ore mining output from its WA Iron Ore Pilbara system to operations in WA’s Pilbara region, 450mtpa operated by BHP (85%) unde
Slide 8: Iluka Game Plan
For personal use only Iluka Game Plan 8
Slide 9: Sustainability
Sustainability Safety For personal use only - LTIFR reduced by ~65% - Severity reduced by ~70% 9
Slide 10: Volume and Margin Trend
Volume and Margin Trend For personal use only Production Kt $/t 350 2,100 300 1,800 250 1,500 200 1,200 150 900 100 600 50 300 0 0 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Zircon Rutile SR Cash cost of production $/t Z/R/SR Sales $/t Z/R/SR • 2011 EBITDA margin 65% • 2
Slide 11: Mineral Sands and Group EBITDA
Mineral Sands and Group EBITDA For personal use only $m 1100 1000 979.3 900 • Higher-margin Jacinth-Ambrosia and 800 Murray Basin production 700 660.1 600 • Higher zircon and high-grade titanium 500 dioxide prices 925.9 400 319.2 639.2 305.1 • Second half weighted 300 200 286.7 250.2 100 0 1H 2011 2
Slide 12: Operating Cash Flow
Operating Cash Flow For personal use only $m 706.2 700 • Strengthening cash flow trend 600 - increase in realised prices 493.5 500 • $217 million increase in working capital vs Dec 2010 - higher receivables due to higher prices 400 - higher inventory levels - just-in-time supply strategy 300 212.7 2
Slide 13: Net Debt to Net Cash Movement
Net Debt to Net Cash Movement For personal use only $m ILUKA GROUP NET DEBT - 2011 600 90.3 500 706.2 (23.6) (10.9) 400 (12.5) 3.9 300 (142.5) (21.3) 200 (117.0) (3.3) 156.7 100 0 Opening Net Operating MAC Royalty Exploration Interest Tax Capex Asset sales Share Dividends FX on Debt Closing Net Debt
Slide 14: Mineral Sands Market Characteristics
Mineral Sands Market Characteristics For personal use only • Favourable medium-term supply/demand characteristics for both zircon and high-grade TiO2 • Market characteristics not immune to global macro-economic factors - economic growth, consumer spending, business confidence, credit availability •
Slide 15: Marketing and Supply Evolution
Marketing and Supply Evolution For personal use only Qingdao, China Antwerp, Belgium Zircon Premium Zircon - Premium Castellon, Spain Zircon Premium Shanghai, China Zircon Premium Rutile Malaysia Wilmington, Warehouse/ Delaware distribution hub Zircon Premium Xiamen, China Zircon Premium 15
Slide 16: Balanced Geographic Revenue Mix
Balanced Geographic Revenue Mix For personal use only 2010 2011 2012 (Guidance) Other Other Other China Asia China China Asia Asia North North America Europe North Europe America Europe America Regional % 2010 2011 2012 Guidance China 25 28 22 North America 25 21 27 Europe 20 29 27 Asia (other) 19 2
Slide 17: Iluka Zircon Customers - 2011
Iluka Zircon Customers - 2011 For personal use only China Customers Other Customers kt 40 kt 5 4 30 3 2 20 1 0 31 36 41 46 51 56 61 66 71 76 81 86 91 96 101 106 111 116 121 126 131 10 0 1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96 101 106 111 116 121 126 131 Number of Customers 17
Slide 18: India and Middle East Zircon Sales
India and Middle East Zircon Sales For personal use only Tonnes 60,000 50,000 40,000 30,000 20,000 10,000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 18
Slide 19: Jacinth-Ambrosia Ore Reserve Changes
Jacinth-Ambrosia Ore Reserve Changes For personal use only HM Jacinth‐Ambrosia Ore Reserve History ‐ HM Mt 7.00 6.50 0.05 0 6.00 0.68 0.72 0.77 0.75 5.50 6.42 6.37 6.40 6.38 5.00 4.50 4.00 '09 '09 '09 '10 '10 '10 '11 '11 '11 31 Dec '11 Ore Mining Ore Ore Mining Ore Ore Mining Ore Ore Reserve Depleti
Slide 20: Zircon Market Conditions
Zircon Market Conditions For personal use only • Soft demand period - evidence of demand recovery across markets - Europe remains subdued but customer sand stocks almost exhausted • Iluka has flexed production in line with demand and will hold inventory as needed - inventory held close to customers
Slide 21: Zircon - Favourable Long Term Dynamics
Zircon - Favourable Long Term Dynamics For personal use only Developing Economies >80% of Tile Market Developing Economies Higher Usage (Intensity) of Tiles Top Tile Consumers % Usage of Ceramics as Flooring Type vs other Flooring Types 2010 Total = 9.4 billion sqm tile by Geography Oceania 0% 74% O
Slide 22: China Urbanisation
China Urbanisation For personal use only China’s tiered City Structure: 2005 - 2025 • Number of tier 1 – 3 cities increase from 45 to 147 • 352 million people relocate to urban areas • Equivalent to the total population of: – Australia x 16 times – UK x 6 times – US Source: McKinsey & Company (2010)
Slide 23: China Total Floor Space
China Total Floor Space For personal use only • By 2025, total urban residential floor space may be double that of 2010 level • Social housing is expected to account for 32% of the total floor space completed between 2011 to 2015 Source: Global Insight (2011), BHP (2011), RBS (2012) 23
Slide 24: China Urban Floor Space per Capita
China Urban Floor Space per Capita For personal use only US 2010: 73sqm/urban capita • Although total urban residential floor space may double by 2025, China urban residential floor Taiwan 2008: 43sqm/urban capita space per capita will still be low • By 2025, China urban residential floor space per
Slide 25: Short Term Cycles versus Long Term Trend
Short Term Cycles versus Long Term Trend For personal use only China Grow th % GDP and Industrial Production Other Zircon Consuming Countries Real GDP Growth 25 Grow th % 8 20 7 6 15 5 4 10 3 2 1 5 - 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Slide 26: Global Zircon Consumption
Global Zircon Consumption For personal use only Source: TZMI, Iluka 26
Slide 27: Zircon Sales
Zircon Sales For personal use only kt 600 ∆ ∆ ∆ 7% ∆ 34% 115% 515 ?% 500 481 479 ? ∆ ∆ -22% -7% 400 400 378 384 387 369 359 327 316 300 ∆ -54% 223 200 100 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: TZMI, Iluka. Iluka sales exclude CRL. 27
Slide 28: Pigment Demand Intensity - Linked to GDP Growth
Pigment Demand Intensity - Linked to GDP Growth For personal use only Kgs per Capita 7.0 USA 6.0 5.0 4.0 Europe 3.0 2.0 1.0 China 0.0 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 GDP per Capita (US$; real 1990 terms; at PPP) Europe (1993-2010) China (1993-2010) USA (1993-2010) • Developing coun
Slide 29: Titanium Dioxide Market Conditions
Titanium Dioxide Market Conditions For personal use only • Evidence of sustained feedstock cost flow through - next challenge further downstream (e.g. paint manufacturers/retailers) - painting season impact in 2Q/3Q 2012 • First half prices ~US$2400/tonne for rutile, ~US$2050/tonne for synthetic rut
Slide 30: Mineral Sands – Principal Product Streams
Mineral Sands – Principal Product Streams For personal use only Global Mineral Sands Market Demand (Mt) Titanium Feedstocks 1 2011 = 6.7Mt 1.00 100% Rutile (95% TiO2) 0.90 90% Synthetic Rutile (SR) (90 - 95% TiO2) 0.80 80% Upgraded Chloride Slag (UGS) (95% TiO2) Chloride Market 0.70 70% =3.6Mt Chlor
Slide 31: Enhanced Production Project
Enhanced Production Project For personal use only • Multiple organic production enhancement options - extensive and, in aggregate, significant - predominantly brownfield opportunities - all located in Australia or United States • Several large projects in PFS/DFS progressing well - Balranald, Cataby
Slide 32: Enhanced Production Potential
Enhanced Production Potential For personal use only • Potential to increase production and/or extend current production levels significantly Subject to caveats and disclaimers detailed on slide 2 and in November 2011 Mineral Sands presentation * Production potential is predominantly based on a combi
Slide 33: Murray Basin Mine Move
Murray Basin Mine Move For personal use only • Concentrate produced ahead of schedule, cost in line with budget • Rutile dominant deposit; ilmenite stream expected to be commercialised 33
Slide 34: Exploration Expenditure
Exploration Expenditure For personal use only A$m 40 35 30 25 20 15 10 5 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 34
Slide 35: Exploration Focus Areas – South Australia
Exploration Focus Areas – South Australia For personal use only 2011 areas of drilling 2012 areas of drilling 35
Slide 36: 2012 Areas of Focus
2012 Areas of Focus For personal use only • Operate safely and in a sustainable manner • Navigate short-term market volatility - defend margins, capture opportunities • Pursue capital-efficient, cost-competitive and disciplined supply enhancement options - in the context of favourable medium-term ma
Slide 37: Iluka Resources Limited – Contact
For personal use only Iluka Resources Limited For further information, please contact: Robert Porter General Manager, Investor Relations robert.porter@iluka.com +61 3 9600 0807 / +61 (0) 407 391 829 www.iluka.com