Iluka Resources Limited · ASX:ILU
Iluka Resources — Merger or Acquisition (December 2016)
28 slides from Iluka Resources's merger presentation, Dec 9, 2016
Slide 1: Sierra Rutile Acquisition
Iluka Resources Limited Sierra Rutile Acquisition 9 December 2016
Slide 2: Overview
Overview Tom O’Leary, Managing Director and CEO 2
Slide 3: Important Notices
Important Notices This presentation contains information regarding Sierra Rutile Limited (SRL) and its business, assets and operations (SRL Information) which SRL has provided to Iluka. Whilst steps have been taken to review that information, no warranty, expressed or implied, is made as to its fair
Slide 4: Overview
Overview 4
Slide 5: Sierra Rutile Limited Acquisition
Sierra Rutile Limited Acquisition • Final consideration for SRL equity of A$375 million (£215 million) • Iluka assumed SRL’s net debt of A$80 million (US$59 million) • Transaction costs of A$18 million, including foreign exchange forward1 • Combined pro-forma gearing ~32 per cent (net debt / net deb
Slide 6: Strategic and Financial Rationale
Strategic and Financial Rationale • Counter cyclical investment • Large, long life asset – 20 year mine life modelled • Enhances high grade titanium feedstock position, complements existing zircon position • Operational improvement and production expansion options are expected to materially improve
Slide 7: Sierra Leone
Sierra Leone Capital Freetown Population 6.4 million Government Presidential republic Politics Two main political parties. Free democratic elections. Next election early 2018. Language English (official), Krio (lingua franca) Economy GDP US$4.5 billion (2015) GDP per capita US$696 (2015) Main Agricu
Slide 8: SRL Resources, as at September 2015
SRL Resources, as at September 2015 Mineral Resource Material In-situ Grade Contained Tonnes1 Category2 Tonnes (% of material) (kt) (mt)3 Rutile Ilmenite1 Zircon1 Rutile Ilmenite1 Zircon1 (%) (%) (%) (kt) (kt) (kt) Measured 64.8 1.00 0.23 0.07 646.9 95.5 46.6 Indicated 668.1 0.92 0.24 0.08 6,166.2 1
Slide 9: Tailings Dams
Tailings Dams • Issues identified – ASX Release 29 November Lanti Containments and Dams 2016 – leakage from Gangama dam wall – insufficient freeboard at Lanti Dry dams • Analysis & external geotechnical assessment undertaken – ASX release 7 December 2016 • Confimed that, subject to the lowering of t
Slide 10: Integration Priorities
Integration Priorities • Engagement of SRL employees • Smooth transition of control with continuation of current operations • Introduce Iluka’s safety and risk mitigation frameworks and code of conduct • Maintain constructive relationships with Government of Sierra Leone and local communities • Key
Slide 11: Key Financials
Key Financials Doug Warden, Chief Financial Officer, Head of Strategy and Planning 11
Slide 12: Key Financials
Key Financials • Expected earnings per share accretive in 2017 • Total transaction value of A$455 million, comprised of: – SRL equity A$375 million (£215 million) – assumed debt of A$80 million (US$59 million) • In addition, transaction costs of A$18 million1 - to be expensed in 2016 • Combined pro-
Slide 13: Sierra Rutile Capital Expenditure
Sierra Rutile Capital Expenditure • Safety and operational improvements (detailed on slide 20) – ~US$60 million over next 2 years - ~US$20 million associated with mining and concentrating - ~US$40 million on mineral separation plant and general site works • 3 expansion projects to progress to detail
Slide 14: Physical & Financial Parameters
1 Physical & Financial Parameters 2014 2015 2016 2017-2020 (SRL Guidance) Iluka Commentary Total production costs in 2017-2019 expected to average ~US$75 – Production Cash Costs (total)2 73 77 n.a. $85m p.a. Post Sembehun, cash costs expected to be ~US$110 – (US$m) $120m. Refer capex requirements be
Slide 15: Fiscal Regime
Fiscal Regime • Main features of fiscal regime: – 4 per cent royalty on export sales – Corporate income tax is payable at the higher of 3.5 per cent of turnover and the prevailing corporate income tax rate on taxable profits post utilisation of tax losses – Prevailing corporate income tax rate is 30
Slide 16: Operational Performance & Expansions
Operational Performance & Expansions Dan McGrath, General Manager, Eastern Operations 16
Slide 17: Sierra Rutile Operations
Sierra Rutile Operations Source: SRL 17
Slide 18: Sierra Rutile Operations
Sierra Rutile Operations Dredge mining – Lanti Floating electric bucket line dredge (effective capacity of 780 tonnes per hour of ore or 5.5 million tonnes per annum) feeding floating wet concentrator plant. Front-end loaders and 30-tonne dump trucks move the heavy mineral concentrate from the d
Slide 19: Sierra Rutile Workforce and Infrastructure
Sierra Rutile Workforce and Infrastructure Site Access • Mine located on the south west coast. Access via 190km bituminised and 80km gravel road from Freetown. Workforce • More than 1,600 employees (~40-45 expatriate employees, more than 95 per cent of workforce is Sierra Leonean). Port • Bulk shipm
Slide 20: Safety and Operational Improvements
Safety and Operational Improvements • Mining and concentrating: – revised mining method to reduce haulage, stockpiling and reclaim involving in-pit mining units and slurry pumping to the wet concentrator plant – increase throughput at Lanti dry mining – revised beneficiation plant design for current
Slide 21: Production Expansion Options
Production Expansion Options Current Capacity Planned Expansion • SRL planned for additional 250 tph Lanti dry mine Nameplate: 500 tph • Iluka considering additional 500 tph • SRL planned for additional 250 tph Gangama dry mine Nameplate: 500 tph • Iluka considering additional 500 tph Sembehun mine
Slide 22: Rutile Production and Cash Costs
Rutile Production and Cash Costs • In the period 2011 - 2015, rutile production has grown at average rate of 17% per annum • Unit production cash costs downward trend expected to continue with improvements and expansions 140 800 Production Cash Cost (US$/t rutile) 120 700 Annual Rutile Production (k
Slide 23: Concluding Remarks
Concluding Remarks Tom O’Leary, Managing Director and CEO 23
Slide 24: Next Steps
Next Steps • Safety of current and new (ex-SRL) Iluka employees is a key focus • Early integration priorities: – move key Iluka personnel to minesite to lead operations (complete) – implement safety and operational improvements (commenced) – maintain positive relationships with government and commun
Slide 25: Iluka Business Priorities
Iluka Business Priorities • Completion of the SRL merger and commencement of an effective integration process • Completion of the five year corporate planning and 2017 budgetary process • Detailed review of the existing production portfolio and projects, including assets, configurations and operatin
Slide 26: Iluka Resources Limited
Iluka Resources Limited For more information contact: Dr Robert Porter, General Manager Investor Relations robert.porter@iluka.com +61 3 9225 5008 / +61 (0) 407 391 829 www.iluka.com 26
Slide 27: Appendix - SRL Physicals and Financials
Appendix - SRL Physicals and Financials Physicals kt CY12A CY13A CY14A CY15A Rutile production 94 120 114 126 Rutile sales volume 81 111 130 118 Financial Performance US$m CY12A CY13A CY14A CY15A Total revenue 179 123 118 106 Operating costs (71) (88) (103) (90) EBITDA 108 35 15 16 EBIT 92 17 (6) (5
Slide 28: Important Information – Resources
Important Information – Resources JORC Reserves and Resources Statements Iluka Reserves and Resources The information in this document relating to Iluka’s Ore Reserves and Mineral Resources is extracted from Iluka’s 2015 Annual Report (the Report), issued to ASX on 19 February 2016, and is available
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