Slide 1: 2017 Full Year Results
2017 Full Year Results Tom O’Leary, Managing Director Doug Warden, Chief Financial Officer 27 February 2018 Jacinth-Ambrosia, South Australia
Slide 2: Disclaimer – Forward Looking Statements
Disclaimer – Forward Looking Statements 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 2018 fi
Slide 3: Safety and Sustainability
Safety and Sustainability * * excludes Sierra Rutile, which had a TRIFR of 2.2 for 2017 3
Slide 4: 2017 Key Features
2017 Key Features Return to positive conditions • Fourth quarter zircon price up 40% from start of 2017 Favourable market conditions • Second half rutile price up 13% from start of 2017 • Z/R/SR sales volumes up 27% (up 11% excluding Sierra Rutile volumes) Mineral sands revenue up 40% to $1,018 mill
Slide 5: Zircon Market
Zircon Market 2017 zircon sales up 12% to 380kt Zircon Prices* US$/t Weighted average price up 18% year on year 1,500 Favourable demand and supply conditions Pricing 1,000 • 2017 weighted average premium and standard price up 18%, year on year − Fourth quarter price of US$1,128/t, up 40% from start
Slide 6: Zircon Market
Zircon Market EMEAI China East Asia Sales by Sector (Europe, Middle East, Africa, India) (excl. China) 2017 2016 118 kt 122 kt 97 kt Ceramics 49 kt 48 kt 32 kt 33 kt Zircon chemicals 25 kt 19 kt H2 2016 H1 2017 H2 2017 H2 2016 H1 2017 H2 2017 H2 2016 H1 2017 H2 2017 Fused zirconia • Europe - improve
Slide 7: High Grade Feedstock Market
High Grade Feedstock Market Rutile and SR sales volumes up 42% to 509kt (Sierra Rutile contributed 133kt of rutile sales) Rutile and US Pigment Export Prices Average 2017 rutile price up 8% Pigment Rutile US$/t US$/t Strong support for feedstock demand 4,000 3000 Pricing 3,500 2500 • 2017 weighted a
Slide 8: High Grade Feedstock Market
High Grade Feedstock Market Americas EMEAI Asia (Europe, Middle East, Africa, India) (including China) 178 kt 137 kt 123 kt 77 kt 62 kt 66 kt 38 kt 11 kt 12 kt H2 2016 H1 2017 H2 2017 H2 2016 H1 2017 H2 2017 H2 2016 H1 2017 H2 2017 • North American chloride pigment • Production disruptions coupled w
Slide 9: Chinese Environmental Controls Impacts
Chinese Environmental Controls Impacts Increased environmental controls have resulted in temporary and permanent plant closures across China • Iluka estimates closure of 250-300kt of sulphate pigment capacity • Zircon millers and tile manufacturers also affected Zircon Industry Impacts • Iluka’s Chi
Slide 10: Financial Management
Financial Management Doug Warden, Chief Financial Officer Jacinth-Ambrosia, South Australia
Slide 11: Key Financial Metrics
Key Financial Metrics 2017 versus 2016 Units 2017 2016 % Change Z/R/SR Production kt 825.2 675.6 22.1 ▲ Z/R/SR Sales kt 889.1 697.7 27.4 ▲ Mineral sands revenue $m 1,017.5 726.3 40.1 ▲ Underlying mineral sands EBITDA1 $m 300.9 103.0 192.1 ▲ MAC EBITDA $m 59.6 47.5 25.5 ▲ Underlying Group EBITDA1 $m
Slide 12: Adjustments
Adjustments 2017 2016 Reported loss for the period (NPAT) (171.6) (224.0) Adjustments (post tax): Rehabilitation of closed sites 125.0 42.1 Impairments 138.9 140.7 Sierra Rutile Ltd transaction costs - 14.1 Share of Metalysis Ltd’s losses 3.3 3.3 Underlying profit (loss) (NPAT) 95.6 (23.8) • Rehabil
Slide 13: Underlying Group EBITDA
Underlying Group EBITDA 2017 versus 2016 $m 400 7 12 350 54 361 81 15 300 ( 13 ) (3) (4) ( 24 ) 250 86 200 150 100 151 50 0 31 December Price Vol Mix FX Ilm & Unit Idle Min Sand MAC Corp 31 December 2016 Oth COGS (Cash) Other 2017 • Improved revenue (both price and volume) • Strengthening of AUD (FY
Slide 14: Continued Inventory Draw Down
Continued Inventory Draw Down • Continued to process intermediate material and sell down finished goods inventory - 2017 heavy mineral concentrate processed of 1,280kt exceeded production of 612kt • Planned inventory reduction to normal level over 2018 Total Inventory $m 1000 Finished Goods 800 Work
Slide 15: Net Debt Reduction
Net Debt Reduction 2017 versus 2016 $m 2017 free cash flow $322 million 0 60 (13) (100) 392 (15) (3) (10) 4 29 (200) (3) (93) (183) (25) (300) (400) (500) (506) (600) Opening net Operating MAC royalty Exploration Interest Hedging Tax Capex Asset sales Dividends Exchange Amortisation Closing net cash
Slide 16: Balance Sheet
Balance Sheet Net Debt, Gearing and Funding Headroom $m Gearing % • Strong free cash flow 1050 35 – 2017: $322 million (2016: $47 million) 900 28 • 64% reduction in net debt reduction over 2017 750 21 600 – from $506 million to $183 million 450 14 – closing 2017 gearing* at 17.1% 300 7 • Total debt
Slide 17: 2017 Final Dividend
2017 Final Dividend • 25 cents per share final dividend fully franked • Full year dividend 31 cents per share (25 cps Distribution Metrics final + 6 cps interim) 2017 free cash flow pay out ratio 40% – 40% of full year free cash flow 2010 – 31 December 2017 cumulative payout ratio 60% – consistent w
Slide 18: Hedging
Hedging • Extension of hedging arrangements to manage currency risks • FX collar hedges for US$271 million of USD revenue over 2018-2022 − period corresponds with long term sales contracts but not full value of expected sales • Weighted average call options at 80.2 cents and put options at 70.0 cent
Slide 19: Production Costs
Production Costs Production, Unit Costs and Unit Revenue • Group unit costs higher in 2017 due to inclusion of Sierra Rutile operations kt and A$/tonne ‒ operational improvements and expansions 1,600 expected to reduce Sierra Rutile unit costs ‒ Australian operations cost structure changing in 2018-
Slide 20: Sierra Rutile Cash Cost Performance
Sierra Rutile Cash Cost Performance Sierra Rutile 2017 Production and Unit Cash Costs US$/t kt 700 50 40 650 30 20 600 10 550 - Q1 Q2 Q3 Q4 Z/R production (RHS) Cumulative unit cash costs of production (US$/t) • Operational improvements delivered higher rutile production and lower unit costs • Quart
Slide 21: Mining Area C Royalty
Mining Area C Royalty Iluka holds a royalty over iron ore produced from 2017 2016 % change specific tenements of BHP’s Mining Area C (MAC) mine in Western Australia Sales volumes mdmt 56.2 52.2 8% Implied price A$/t 86.1 73.9 16% Royalty EBITDA increased by 25% to $60 million on higher price and vol
Slide 22: Operations and Projects
Operations and Projects Gangama, Sierra Leone
Slide 23: 2017 Operations Summary
2017 Operations Summary Australian Operations Product Operation 2017 2016 % change • Tutunup South mine continued to produce ilmenite for SR kiln kt kt − mining planned to complete in Q1 2018 Australia 294 347 (15%) • SR kiln operated at full capacity US* 16 - n/a Zircon • Narngulu (Western Australi
Slide 24: Jacinth-Ambrosia Restart
Jacinth-Ambrosia Restart • Mining and concentrating restarted in December 2017 following 20 month suspension • Full production reached rapidly • Heavy mineral concentrate will continue to be processed at Narngulu mineral separation plant • Restart costs of ~$7 million • 80 employees and 95 contracto
Slide 25: Cataby Development
Cataby Development • Board approval December 2017 • Provides ilmenite feedstock for continued production of synthetic rutile • Offtake agreements secured for 85% of synthetic rutile production for minimum 4 years – underpins financial returns of the project • Construction period of ~18 months • Prog
Slide 26: Sierra Rutile Operational Improvements
Sierra Rutile Operational Improvements • 168kt rutile production in 2017 • Higher throughput and runtimes at Lanti dry and Gangama mines • Higher recoveries from adjusted concentrator and mineral separation plant settings • Lanti in-pit mining unit commissioning commenced – debottlenecks ore feed pr
Slide 27: Sierra Rutile Projects
Sierra Rutile Projects Lanti dry and Gangama mine expansions Mineral Separation Plant and Port Upgrade Doubling of capacity at Lanti dry and Gangama mines to Upgrade MSP capacity from ~175ktpa to ~300ktpa rutile and 1,000-1,200tph modernise plant Lanti dry expansion: construction of second in-pit mi
Slide 28: Sierra Rutile Projects
Sierra Rutile Projects Sierra Rutile operations and deposits Sembehun dry mine development New 1,000-1,200tph mine at group of deposits northwest of existing operations Pre-feasibility engineering study completed Planning for definitive feasibility study and early works Expected commissioning deferr
Slide 29: Balranald and Puttalam Project
Balranald and Puttalam Project Balranald Project , Murray Basin Puttalam (PQ) Project, Sri Lanka Large, deep, high grade rutile-rich deposit Large sulphate ilmenite deposit Industry significant source of rutile, ilmenite, zircon Currently mined for limestone below mineral sands ore layer Progressing
Slide 30: Summary & Outlook
Summary & Outlook Jacinth-Ambrosia, South Australia Jacinth-Ambrosia, South Australia
Slide 31: Iluka’s Approach
Iluka’s Approach Create and deliver value for shareholders Disciplined Preserve and Flex assets in Act counter capital allocation advance growth line with market cyclically where opportunities conditions appropriate Iluka applies a capital allocation Cataby project development Operational settings r
Slide 32: 2018 Outlook
2018 Outlook Entering 2018 with positive dynamics in zircon and high grade titanium markets Strong market conditions Remain committed to sustainable price outcomes Jacinth-Ambrosia operating Mining and concentrating activities continuing following restart in December 2017 Cataby development Focus on
Slide 33: Outlook - Group
Outlook - Group Key Parameters 2016 2017 20181 Comments Annual production Zircon kt 347 312 300 2018 Z/R/SR sales are expected to exceed production in 2018 as finished good inventories Rutile2 kt 118 302 200 are drawn down to normal levels. Normal inventory for the Group is considered to be $350- Sy
Slide 34: Outlook – Group Continued
Outlook – Group Continued Key Cost Parameters 2016 2017 2018 1, 2 Comments Cash costs ($m) Increased cash costs of production predominantly reflect restart of mining and concentrating at Jacinth- Cash costs of production (Z/R/SR) 252 362 405 Ambrosia partially offset by consolidation of mineral sepa
Slide 35: Outlook - Sierra Rutile
Outlook - Sierra Rutile Key Parameters 2017 20181 Comments Annual production Rutile kt 168 160 Lanti dredge operations are expected to produce throughout 2018, resulting in comparable production levels to 2017. Zircon kt 3 5 Production of all products will step-up in 2019, following the dry mine exp
Slide 36: Outlook - Notes
Outlook - Notes Cash costs of production include the following: Mining and concentrating costs; transport of heavy mineral concentrate; mineral separation; synthetic rutile production and costs for externally purchased ilmenite and production overheads. This category excludes Australian State Govern
Slide 37: Cost of Goods Sold and Inventory Methodology
Cost of Goods Sold and Inventory Methodology Cost of Goods Sold (COGS) Mineral sands earnings reflect the difference between revenue and COGS, rather than the cash costs of production and depreciation incurred in a period. COGS is the inventory value of each tonne of finished product sold. All produ
Slide 38: Supplementary Information
Supplementary Information Eneabba, Western Australia
Slide 39: Production and Sales Volumes, Revenue and Cash Costs
Production and Sales Volumes, Revenue and Cash Costs 2017 2016 % change Production Zircon kt 312.3 347.1 (10.0) Rutile kt 302.1 117.6 156.9 Synthetic rutile kt 210.8 210.9 (0.0) Total Z/R/SR production kt 825.2 675.6 22.1 Ilmenite – saleable and upgradeable kt 448.1 329.4 36.0 Total production volum
Slide 40: Weighted Average Received Prices
Weighted Average Received Prices 2016 2017 H1 2017 H2 2017 Full Year Full Year Weighted Average Price US$/tonne FOB Zircon Premium and Standard 810 871 1,053 958 Zircon 773 850 1,037 940 (all products including zircon in concentrate)1 Rutile 731 756 825 790 (excluding HYTI)2 Refer Note Refer Note Re
Slide 41: Summary Group Results
Summary Group Results $m 2017 2016 % change Mineral sands revenue 1,017.5 726.3 40.1 Mineral sands EBITDA 300.9 103.0 192.1 Mining Area C royalty EBITDA 59.6 47.5 25.5 Underlying group EBITDA* 360.5 150.5 139.5 Underlying group EBITDA margin % 35.4 20.7 71.0 Depreciation and amortisation (111.0) (79
Slide 42: Income Statement
Income Statement $ million 2017 2016 % change Z/R/SR revenue 959.1 696.8 37.6 Ilmenite and other revenue 58.4 29.5 98.0 Mineral sands revenue 1,017.5 726.3 40.1 Cash costs of production (372.4) (260.6) 42.9 Inventory movement - cash (141.5) (107.6) 31.5 Restructure and idle capacity charges (73.3) (
Slide 43: Reconciliation of non-IFRS financial information to profit before tax
Reconciliation of non-IFRS financial information to profit before tax Exploration & Mineral 2017 Aus US SRL Other Sands MAC Corp Group Mineral sands revenue 833.7 40.0 145.9 (2.1) 1,017.5 - - 1,017.5 Mineral sands expenses (474.6) (44.9) (115.1) (34.7) (669.3) - (0.8) (670.1) Mining Area C - - - - -
Slide 44: For more information contact
For more information contact: Adele Stratton, General Manager Finance, Investor Relations and Corporate Affairs adele.stratton@iluka.com +61 8 9360 4631 / +61 (0) 415 999 005 www.iluka.com Synthetic rutile kiln, Western Australia