Iluka Resources Limited · ASX:ILU
Iluka Resources — TZMI Conference November 2011
28 slides from Iluka Resources's conference presentation, Nov 9, 2011
Slide 1: Iluka Resources
Iluka Resources Shareholder Focus High Value Mineral Sands Market Position Production Flexibility TZMI Conference November 2011 1
Slide 2: Disclaimer and Important Notes
Disclaimer and Important Notes Disclaimer The purpose of this presentation is to provide general information about Iluka Resources Limited (Iluka). This presentation does not involve or imply a recommendation or a statement of opinion in respect of whether to buy, sell or hold securities in Iluka. T
Slide 3: Disclaimer and Important Notes: Forward Looking Statements
Disclaimer and Important Notes 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 expenditure and ca
Slide 4: Zircon Industry Structure
Zircon Industry Structure Major Producers (2010) 1.3 million tonnes1 • Iluka largest global producer • 3 participants ~ 70% of the market • Zircon the minor constituent in mineral sands deposits • Zircon historical demand growth higher than titanium demand growth • Minimal new material zircon supply
Slide 5: Titanium Dioxide Industry Structure
Titanium Dioxide Industry Structure Total TiO2 Feedstock Chloride & Sulphate (6.4 Mt) • Iluka’s orientation to high grade TiO2 • Chloride feedstock market - major 3 participants > 70% • In high grade feedstocks (>85% TiO2) 3 participants ~ 80% of market • Chloride pigment dependent on higher High Gr
Slide 6: Iluka's Evolution
Iluka’s Evolution Key features: • prime objective – creation & delivery of shareholder value • higher margin asset transformation and major capital period complete • marketing and supply approach - contributor to Iluka’s pricing outcomes in last 2 years • commitment to sustainable growth in the mine
Slide 7: Higher Margin Integrated Production Base
Higher Margin Integrated Production Base Jacinth-Ambrosia, Eucla Basin, South Australia Murray Basin, Victoria / New South Wales High quality, long life zircon supply source (~300kt per annum) Major rutile production province, over multiple deposits Exploration tenement position of >50,000 sq kms 20
Slide 8: Physical and Sales Profile
Physical and Sales Profile kt Z/R/SR Production and Unit Cash costs per tonne of Z/R/SR $/t Z/R/SR 1200 600 Unit cash costs not the prime 1000 550 differentiator of mineral sands 800 500 profitability 600 450 400 400 200 350 0 300 2006 2007 2008 2009 2010 H1 2011 * Zircon Rutile SR Unit cost kt Sale
Slide 9: Transformed Financial Characteristics
Transformed Financial Characteristics Net Debt (A$m) Gearing (%) 700 50 45 600 40 500 35 30 400 25 300 20 200 15 10 100 5 0 0 2005 2006 2007 2008 2009 2010 H1 11 Net Debt Gearing 9
Slide 10: Marketing and Supply Evolution
Marketing and Supply Evolution • Iluka has grown its presence in growth markets, especially China • Iluka’s high grade titanium customer base has grown from 20 customers in 2007 to 75 customers as at September 2011 10 • Iluka’s zircon customer base has grown from 45 customers in 2007 to 135 customer
Slide 11: Iluka's Production and Product Flexibility
Iluka’s Production and Product Flexibility • Idled two of its 4 synthetic rutile kilns between 2009 & 2010 due to inadequate returns • 1 kiln run as a R&D vehicle in 2010 - to resume normal commercial operation in 2012 • 2009 GFC - Iluka idled ~50% of Australian production base - Eneabba being re-ac
Slide 12: Evolution of Contractual and Pricing Arrangements
Evolution of Contractual and Pricing Arrangements • Iluka zircon contractual and pricing arrangements to 3 month basis • Enhanced logistics, including small lot capabilities to cater for emerging markets and long tail • Internet based sales portal provided a lead indicator on zircon demand and prici
Slide 13: Evolution of Contractual and Pricing Arrangements
Evolution of Contractual and Pricing Arrangements • Iluka has recast its high grade titanium dioxide contractual arrangements • Annual rather than multi-year volume arrangements • Pricing negotiations half yearly • Step change in pricing since Iluka has come off legacy “cap & collar” contracts • Ilm
Slide 14: Key Focus of Iluka's Production Response Options
Key Focus of Iluka’s Production Response Options Alignment with objective: create and deliver value for shareholders Financial metrics - IRR, payback period, unit costs/margins, ROC, NPV and Market approach – assessment of implications for supply/demand under various scenarios Options available: Ext
Slide 15: Enhanced Production Overview
Enhanced Production Overview • Iluka’s production response options extensive - over 30 opportunities identified - 11 subject to detailed evaluation • Focus on zircon and rutile - Doug Warden to comment on ilmenite potential to flow from Z/R opportunities • Further work on technical, regulatory and o
Slide 16: Iluka's Production Optionality
Iluka’s Production Optionality Characterised by: • use of existing infrastructure (even if with some expansion capex) - 3 separation plans, 1 dry plant, available concentrators, established logistics chains • ability for short-medium term activation, as well as longer term opportunities - e.g Eneabb
Slide 17: Conclusion
Conclusion • Progress towards delivery of Iluka’s investment proposition • Key attributes for evolution of company: - production base integration and flexibility - strengthened balance sheet and cash flow - favourable medium term supply / demand characteristics for Iluka’s products - organic product
Slide 18: Iluka Resources Limited
Iluka Resources Limited For further information, contact: Robert Porter, General Manager, Investor Relations robert.porter@iluka.com +61 3 9600 0807 +61 (0) 407 391 829 www.iluka.com
Slide 19: Transformed Financial Characteristics
Transformed Financial Characteristics Iluka’s Strong Margins and Return on Capital Influenced by Product Suite 2006-2008 average pa 2009 2010 H1 2011 Cash cost/t Z/R/SR 560 560 538 550 Revenue/t Z/R/SR (A$/t) 810 760 809 1165 Mineral Sands EBITDA % margin 23.3 13.1 28.6 50.3 Group EBITDA (incl. impa
Slide 20: Key Physical & Financial Parameters: 2011 Physical Trends
Key Physical & Financial Parameters 2011 Physical Trends (July Update) 2010 2011 2011 2011 Commentary Guidance Guidance (February) (July) Production kt Zircon 413 ~500 ~550 Higher production influenced by favourable Murray Basin grades and strong operational performance. Iluka zircon sales volumes c
Slide 21: Key Physical & Financial Parameters: 2011 Financial Trends
Key Physical & Financial Parameters 2011 Financial Trends (July Update) 2010 2011 Updated 2011 Commentary Guidance 2011 Guidance (February) (July) Cash Costs A$m Production costs 544 ~540 ~620 Higher total cash costs (as opposed to unit cash costs) reflect a significant increase in 2011 planned prod
Slide 22: Speaking Notes Associated with TZMI Presentation
Iluka Resources Speaking Notes Associated with TZMI Presentation Delivered by Robert Porter, General Manager, Investor Relations Hong Kong 9 November 2011 Slides 2 & 3 – Disclaimer and important notes Slide 4 Iluka’s product suite is orientated to the main, higher value mineral sands products – zirc
Slide 23: Speaking notes: Slide 6
Slide 6 Iluka has undergone a major transformation over recent years. The prime focus has been the company’s principal objective – the creation and delivery of shareholder value. Iluka’s principal attributes now include: Its ownership of two relatively new mining operations – one zircon dominated
Slide 24: Speaking notes: Slide 8
Slide 8 It is evident that the key influence on the economics of mineral sands deposits on a comparative basis is the assemblage characteristic – the relative proportion of the higher value products, such as of rutile and zircon, to the lowest value product - ilmenite. Cash costs, unlike for most ot
Slide 25: Speaking notes: synthetic rutile kilns idled
Iluka has also idled in 2009 and 2010 two of its 4 synthetic rutile kilns. The rationale was simple and linked to our shareholder value objective – our Managing Director was not prepared to run any asset which did not generate an appropriate return on capital – whether defined as sunk or replacement
Slide 26: Speaking notes: production response criteria
This slide shows the criteria for the exercise we are conducting. Not surprising, everything we do relates to the principal objective and how we measure this in terms of relevant metrics such as IRR, payback period, margins and of course capital efficiency and return on capital. Any decision on addi
Slide 27: Speaking notes: Eneabba reactivation
and in fact a data base of spare equipment from spirals to pumps, which can be utilised or in the case of wet concentrating facilities, expanded with production throughput implications. Iluka also has established logistics capabilities – ports, transportation arrangements etc. All of these factors,
Slide 28: Thank you
Thank you. Disclaimer The purpose of this presentation is to provide general information about Iluka Resources Limited (Iluka). This presentation does not involve or imply a recommendation or a statement of opinion in respect of whether to buy, sell or hold securities in Iluka. This presentation doe