Iluka Resources Limited · ASX:ILU
Iluka Resources — Bank of America Merrill Lynch Conference, Barcelona 2015
26 slides from Iluka Resources's conference presentation, May 14, 2015
Slide 1: Iluka's Approach
2015 Bank of America Merrill Lynch Conference, Barcelona www.iluka.com l ASX: ILU Iluka’s Approach David Robb, Managing Director 14 May 2015 1
Slide 2: Disclaimer, Forward Looking Statements
Disclaimer, Forward Looking Statements 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 capital expenditur
Slide 3: Mineral Sands – Part of Everyday Life
Mineral Sands – Part of Everyday Life Titanium dioxide and zircon used in an increasing array of applications - home, workplace, medical, lifestyle and industrial uses Roof / Home / Bathroom / Kitchen / Automotive Sporting Health care / Aircraft / Building / Office Lifestyle Utilities goods / Medici
Slide 4: Iluka's Approach
Iluka’s Approach Objective: Create and deliver value for shareholders Three key aspects: • flex asset operation in line with market demand • preserve and advance growth opportunities • act counter cyclically where appropriate 4
Slide 5: Culture – Employee Engagement
Culture – Employee Engagement 2006 2008 2010 2012 2014 28% 49% 59% 63% 69% Categories Iluka Total 2014 (727) HIGH PERFORMING BENCHMARK 58% AUSTRALIAN MINING & QUARRYING AVERAGE 48% AUSTRALIAN AVERAGE 34% LOW PERFORMING BENCHMARK Total Categories only include benchmarkable items. SUSTAINABILITY EMPLO
Slide 6: Flex Asset Operation
Flex Asset Operation • Flex asset operation in line with market demand – seek to maintain attractive margin structure at low point of cycle – idle capacity but retain rapid reactivation capacity – accept inventory build and subsequent monetisation – focus on unit cost efficiency preservation • Refle
Slide 7: Asset Operation Flex – Results
Asset Operation Flex – Results • 2014 conditions challenging, but Iluka maintained: – free cash flow generation – balance sheet strength – inventory monetisation potential – production reactivation capability (at low / appropriate capital cost) − e.g. recent SR kiln reactivation − market development
Slide 8: Production Reflects Market Conditions
Production Reflects Market Conditions • Total 2014 Z/R/SR production lower than ‘high cycle’ levels – higher Z/R/SR production expected in 2015 • Total sales Z/R/SR increased in 2014 and expected to be higher than production in 2015 • Sales ‘match’ production over the cycle 8
Slide 9: Production Cash Costs
Production Cash Costs • Cost reduction focus during period of lower production • Solid margins maintained (Group EBITDA margins of >30% during low cycle) • Improving unit cash costs and margins expected as volumes grow (scale efficiencies) 9
Slide 10: Balance Sheet Strength
Balance Sheet Strength • Strong balance sheet – low gearing / low net debt – significant funding headroom • Total facilities of A$926 million with majority not maturing until 2019 • Bilateral arrangements with 11 banks – common terms, flexibility, “caveat light”, low cost 10
Slide 11: Industry Feedstock Dynamics
Industry Feedstock Dynamics VHM GRADE / MEDIUM TO LONGER MATURING ORE HIGHER PRICES RISE OF CHINA ASSEMBLAGE TERM SUPPLY BODIES / FRESH REQUIRED TO – SULPHATE AND DECLINE CHALLENGE CAPITAL REQUIRED INCENTIVISE SUPPLY? CHLORIDE PIGMENT • Global decline in VHM • Limited known high quality • Major play
Slide 12: Robust Demand Fundamentals
Robust Demand Fundamentals Urbanisation Consumption based growth Array of applications ZIRCON ceramics, range of chemical and consumer applications TITANIUM DIOXIDE pigment paint, plastics coatings MINERAL SANDS mid-to-late cycle demand characteristics; consumption / GDP related 12
Slide 13: Preserve / Advance Growth Opportunities
Preserve / Advance Growth Opportunities • View on industry fundamentals influences approach to maintaining multiple options – organic and inorganic • Driven by medium term view of supply and demand, not short term • Consistent areas of focus are: EXPLORATION INTERNAL PROJECTS MARKET DEVELOPMENT INNO
Slide 14: Exploration
Exploration • Modest investment - $20 million per annum • Mineral sands exploration in Australia − large tenement positions in existing producing basins • Increasing international focus − Sri Lanka, Kazakhstan, Brazil • Targeting some ‘adjacent’ commodity opportunities • Capturing opportunities when
Slide 15: Internal Projects
Internal Projects • Multiple mineral sands projects at different stages of evaluation • Includes two material sources of potential global supply • Current technical and financial analyses for these two options – support view that financial returns likely to be above risk weighted hurdle rate • Evalu
Slide 16: Internal Projects
Internal Projects CATABY, PERTH BASIN, WESTERN AUSTRALIA BALRANALD, MURRAY BASIN, VICTORIA • High quality chloride ilmenite deposit • High grade deposit / rich assemblage, but deep ‒ material zircon / rutile co-product credits • Material source of global rutile and zircon supply • DFS completed ‒ la
Slide 17: Customer Service and Market Development
Customer Service and Market Development • Continued focus upon customer needs • Expanded market presence and logistics flexibility • Dedicated zircon and titanium dioxide sales teams • Commitment to product quality and consistency – all products in 2014 delivered to defined specifications • Product
Slide 18: Innovation and Technology
Innovation and Technology • Industry specific technical expertise, self-sufficiency critical to success • Ongoing commitment to enhancing Iluka’s technical expertise – metallurgical knowledge and sophisticated processing capabilities – product development • Current areas of innovation focus and inve
Slide 19: Willingness to Act Counter Cyclically
Willingness to Act Counter Cyclically • Iluka is prepared to: – act counter cyclically and take a medium term view about options – invest where financial merit and strategic rationale exist – create options using balance sheet to ‘place small bets’ • All opportunities are evaluated within a discipli
Slide 20: Metalysis, UK
Metalysis, UK • Iluka equity holding of 18.3% – right to increase up to 24.9% in event of IPO • Potentially disruptive technology • Relatively low investment for size of potential shareholder value creation • Iluka provide important expertise (“more than a cheque book”) – customisation of titanium f
Slide 21: Metalysis, UK
Metalysis, UK Conventional Multi-step Process to Powder (Ti – Kroll process) Titanium Ore TiCL4 Kroll Sponge Ingot Billet Mill Products Ti Powder Metalysis Process (directly to Powder) Molten salt-based electrolysis process in a reactor with metal oxide cathode and Metalysis Ti Spherical Titanium Or
Slide 22: Tapira, Brazil
Tapira, Brazil • Large mineralisation associated with long established phosphate operation – operated by Vale S.A. • High grade titanium dioxide ore, significant rare earth elements • Potential world scale titanium feedstocks and rare earth element operation • Phased approach to evaluation of opport
Slide 23: Potential Acquisition of Kenmare Plc
Potential Acquisition of Kenmare Plc • Revised, non-binding proposal • All-share exchange offer – Kenmare shareholders to receive 0.016 new Iluka shares for each Kenmare share – subject to a number of pre-conditions • Iluka and Kenmare have agreed steps and deadlines towards satisfying pre-condition
Slide 24: Create and Deliver Value for Shareholders
Create and Deliver Value for Shareholders • Capable of generating high shareholder returns and cash distribution • Through ‘low cycle’ conditions, Iluka has maintained – attractive margins – free cash flow generation – balance sheet strength • Iluka’s current position – financial health of the compa
Slide 25: Potential Acquisition of Kenmare Plc
Potential Acquisition of Kenmare Plc IMPORTANT NOTICES The Directors of Iluka accept responsibility for the information contained in this announcement. To the best of their knowledge and belief (having taken all reasonable care to ensure that such is the case), the information contained in this anno
Slide 26: Contact for more information
2015 Bank of America Merrill Lynch Conference, Barcelona www.iluka.com l ASX: ILU Contact for more information Iluka Resources Limited Dr Robert Porter, General Manager Investor Relations robert.porter@iluka.com +61 3 9225 5008 / +61 (0) 407 391 829 www.iluka.com 26
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