Iluka Resources Limited · ASX:ILU
Iluka Resources — H1 2020 Earnings Presentation
37 slides from Iluka Resources's earnings presentation, Aug 14, 2020
Slide 1: 2020 Half Year Results Presentation
1 Iluka Resources Limited 2020 Half Year Results Presentation Tom O’Leary, Managing Director Adele Stratton, Chief Financial Officer Christian Barbier, Head of Marketing Capel, Western Australia
Slide 2: Disclaimer and Compliance Statement
Disclaimer and Compliance Statement 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 fina
Slide 3: Iluka's Commitment to Sustainability
Iluka’s Commitment to Sustainability 3 Iluka’s Sustainability Approach Key Pillars 27% Female • Health and Safety Reduction in Serious representation • People Potential Injuries • Social Performance (H1 2020: 29 33% 29% • Environmental Stewardship H1 2019: 40) Exec. Mgt. Board • Economic Responsibil
Slide 4: COVID-19 Update
COVID-19 Update 4 Iluka’s first priority is the safety and wellbeing of its people, their families, and the communities in which the company operates. During this period of uncertainty, the company has maintained operations across all sites and marketing and logistics channels remain open. Approach
Slide 5: First Half 2020 - Key Features
First Half 2020 - Key Features 5 Underlying group EBITDA $225 million despite challenging business conditions, particularly in the zircon market (H1 2019: $274 Solid earnings in challenging market million) NPAT $113 million, down 18% (H1 2019: $137 million) Mineral sands EBITDA margin 39%, down slig
Slide 6: Demerger update
Demerger update 6 Iluka continues to work towards completion of the demerger in H2 2020, with Iluka to retain a 20% stake. The demerger booklet is expected to be provided to shareholders in September. The new royalty business will be called Deterra Royalties. Demerger timing Deterra Royalties Board
Slide 7: Financial Results
-_ Financial Results ILUKA
Slide 8: Key Financial Metrics
Key Financial Metrics 8 Units H1 2020 H1 2019 % Change Z/R/SR Production kt 287.8 323.5 (11.0) ▼ $225m Z/R/SR Sales kt 241.6 301.8 (19.9) ▼ Group EBITDA Mineral sands revenue $m 456.6 545.6 (16.3) ▼ H1 2020 Mineral sands EBITDA $m 177.0 232.7 (23.9) ▼ ($274m H1 2019) Mineral sands EBITDA margin % 38
Slide 9: NPAT – H1 2020 versus H1 2019
NPAT – H1 2020 versus H1 2019 9 $m 160 140 120 14 ( 16 ) 43 7 2 100 9 1 4 (3) 80 137 ( 30 ) ( 48 ) 60 (9) 113 40 20 0 30 June Price Vol Mix FX Unit Idle Min Sand MAC Corp Corp & Int Tax 30 June 2019 COGS Other Idle Depn 2020 Main contributors to H1 2020 results: • Reduced sales volumes due to the im
Slide 10: Net Debt – December 2019 to June 2020
Net Debt – 31 December 2019 to 30 June 2020 10 $m 200 HY 2020 free cash inflow $46 million 42 180 (6) (1) 160 97 140 (39) 120 100 4 80 (50) 5 60 (33) 40 62 20 43 0 Opening net Operating cash MAC royalty Exploration Interest Tax* Capex Other operating Dividends Other financing Closing net debt cash f
Slide 11: Balance Sheet
Balance Sheet 11 Net Debt, Gearing and Funding Headroom • Maintained net cash position while investing $50 million in capital expenditure ‒ net cash of $62.3 million (31 Dec 2019: net cash $43.3 million) • Significant funding headroom of $434 million undrawn facilities $m Gearing % 1000 40 Multi Opt
Slide 12: Mining Area C Royalty
Mining Area C Royalty 12 Mining Area C (MAC) Royalty Terms $48m ~$930m • • Royalty over iron ore from BHP’s Mining Area C in Western Australia Royalty terms: EBITDA EBITDA ‒ 1.232% of Australian denominated revenue from royalty area; and ‒ one-off payment of A$1 million per million tonne increase in
Slide 13: Mineral Sands Markets
Mineral Sands Markets Sierra Leone
Slide 14: Zircon Market Update
Zircon Market Update 14 Key Features H1 2020 Z/R/SR Sales Result Revenue • H1 2020 sales 78kt (H1 2019: 133kt) ‒ Q2 sales of 53 kt (-21% YoY) after Q1 sales of 25kt (-62% YoY) Zircon • Key markets significantly impacted by COVID-19 shutdowns 36% Pricing • H1 2020 weighted average received zircon (pr
Slide 15: Zircon Market Update
Zircon Market Update 15 Key Features Sales by Region Sales by industry • Chinese lockdowns of industry significantly impacted Q1 sales • Significant decline in sales to ceramics industry due to end demand and impact of lockdowns on manufacturers • Sales to China improved in Q2 as restrictions eased
Slide 16: High-Grade Titanium Feedstock Market Update
High-Grade Titanium Feedstock Market Update 16 Key Features H1 2020 Z/R/SR Sales Result Revenue • H1 2020 sales of 163kt (H1 2019: 169kt) • Demand slowdown occurred in 2Q in all end markets due to COVID-19 Synthetic impacts rutile 34% Pricing • First half rutile price of US$1,246/t, up 7% from H2 20
Slide 17: High-Grade Titanium Feedstock Market Update
High-Grade Titanium Feedstock Market Update 17 Key Features Sales by Region Sales by industry • Iluka sales to Europe and Middle East held steady with H1 • Sales to pigment were down slightly due to a May shipment of SR 2019 as pigment plants were running hard in Q1 before not taken as per take-or-p
Slide 18: Mineral Sands Operations
Mineral Sands Operations Gbeni, Sierra Leone
Slide 19: Mineral Sands Operations – Cataby / South West
Mineral Sands Operations – Cataby / South West 19 Full mining rates at Cataby in 1H 2020 and synthetic rutile production at capacity Operations Overview • Large chloride ilmenite rich mine 150km from Perth • Ilmenite to feed synthetic rutile kiln • Synthetic rutile offtake contracts in place H1 2020
Slide 20: Mineral Sands Operations – Jacinth-Ambrosia / Mid West
Mineral Sands Operations – Jacinth-Ambrosia / Mid West 20 Altered mining and processing settings in light of market conditions Operations Overview • World’s largest zircon mine • Iluka’s major source of zircon production • Narngulu mineral separation plant processes Jacinth-Ambrosia material (to pro
Slide 21: Mineral Sands Operations – Sierra Rutile
Mineral Sands Operations – Sierra Rutile 21 Dry mining at Lanti and Gangama operations with processing at the operation’s mineral separation plant Operations Overview • Began operations 1960s • Acquired by Iluka in December 2016 • World’s largest rutile mine H1 2020 Production • Transition to dry mi
Slide 22: Mineral Sands Operations – Inventory Position
Mineral Sands Operations – Inventory Position 22 Inventory increase reflects operational setting changes and market uncertainty due to COVID-19 • Increase in total inventory to $560 million ($425 million at December 2019) • Increase reflects higher work in progress (heavy mineral concentrate), zirco
Slide 23: Eneabba progresses to Phase 2
Eneabba progresses to Phase 2 23 Eneabba Rare Earths Project Rare Earth Elements Eneabba monazite contains high value elements, including Eneabba involves the extraction, processing and marketing of a high neodymium and praseodymium. grade monazite-rich strategic stockpile. Phase 1 is operational an
Slide 24: Projects
Projects Drilling, New South Wales
Slide 25: Project Pipeline Summary
Project Pipeline Summary 25 Iluka develops and gates projects in a disciplined manner towards execution subject to acceptable progress in the following areas: (i) confidence in satisfactory project risk-return attributes, (ii) high level of strategic alignment, and (iii) sequenced to take advantage
Slide 26: Balranald field trial commenced
Balranald field trial commenced 26 Balranald Project Third Technology Trial (T3) The Balranald project comprises the West Balranald and Nepean • A third technology trial (T3) to determine the economic viability of deposits, two large, deep, high grade rutile, zircon and ilmenite rich the technology
Slide 27: Summary and Outlook
Summary and Outlook Rehabilitated land, Murray Basin
Slide 28: Summary and Outlook
Summary and Outlook 28 H1 2020 Key Features • Key markets initially impacted by COVID-19 shutdowns with subsequent restart but at reduced utilisation • Operational settings altered in response to demonstrate discipline in market supply and reduce finished product inventory build • Enacted measures t
Slide 29: Supplementary Information
Supplementary Information Jacinth-Ambrosia, South Australia
Slide 30: Biographies of Deterra Royalties Board and Management
Biographies of Deterra Royalties Board and Management 30 • Over 30 years experience across capital markets, mergers and acquisitions and accounting advisory roles and numerous directorships JENNIFER SEABROOK • Currently a non-executive director of BGC and Australian Rail Track Corporation Independen
Slide 31: Eneabba Phase 2 Project Approval Parameters
Eneabba Phase 2 Project Approval Parameters 31 Eneabba Key Project Parameters Metric (average over project life) Comment Eneabba Mineral Resources and Ore Reserves5 Life of Mine (Phase 1 and Phase 2) Based on reserve and production rates assumed ~10 years below In situ Mineral Assemblage in HM3 Reso
Slide 32: Production and Sales Volumes, Revenue and Cash Costs
Supplementary Information 32 Production and Sales Volumes, Revenue and Cash Costs H1 H1 % change 2020 2019 Production Zircon kt 92.2 159.9 (42.3) Rutile kt 84.0 80.8 4.0 Synthetic rutile kt 111.6 82.8 34.8 Total Z/R/SR production kt 287.8 323.5 (11.0) Ilmenite – saleable and upgradeable kt 215.4 125
Slide 33: Weighted Average Received Prices
Supplementary Information 33 Weighted Average Received Prices 1st half 2nd half 1st half 2019 2019 2020 US$/tonne FOB Zircon Premium and Standard 1,522 1,446 1,354 Zircon 1,465 1,299 1,265 (all products, including zircon in concentrate)1 Rutile 1,108 1,167 1,246 (excluding HYTI)2 Synthetic rutile Re
Slide 34: Summary Group Results
Supplementary Information 34 Summary Group Results $m H1 2020 H1 2019 % change Mineral sands revenue 456.6 545.6 (16.3) Mineral sands EBITDA 177.0 232.7 (23.9) Mineral sands EBITDA margin % 38.8 42.7 3.9pp Mining Area C royalty EBITDA 48.0 41.2 16.5 Underlying group EBITDA* 225.1 273.9 (17.8) Deprec
Slide 35: Income Statement
Supplementary Information 35 Income Statement H1 H1 $ million 2020 2019 % change Z/R/SR revenue 415.9 507.2 (18.0) Ilmenite and other revenue 40.7 38.4 6.0 Mineral Sands Revenue 456.6 545.6 (16.3) Cash costs of production (293.2) (251.8) 16.4 Inventory movement - cash 98.1 36.8 166.6 Restructure and
Slide 36: Reconciliation of non-IFRS financial information to profit before tax
Supplementary Information 36 Reconciliation of non-IFRS financial information to profit before tax Idle Expl & Mineral JA/MW C/SW SRL MAC Corp Group (US/MB) Other Sands Mineral sands revenue 143.2 188.6 17.7 107.1 (0.0) 456.6 - - 456.6 AASB 15 freight revenue 7.2 3.0 1.7 2.5 - 14.4 - - 14.4 Expenses
Slide 37: For more information contact
For more information contact: Melissa Roberts, General Manager – Investor Relations investor.relations@iluka.com +61 (0) 450 398 431 Capel, Western Australia