Iluka Resources Limited · ASX:ILU
Iluka Resources — Investor Day (November 2017)
100 slides from Iluka Resources's investor day presentation, Nov 10, 2017
Slide 1: 2017 Investor Day
2017 Investor Day 10 November 2017
Slide 2: Disclaimer – Forward Looking Statements
Disclaimer – Forward Looking Statements This presentation has been prepared by Iluka Resources Limited (Iluka). By accessing/attending this presentation you acknowledge that you have read and understood the following statement. Forward Looking Statements This presentation contains certain statements
Slide 3: Compliance Statement
Compliance Statement Mineral Resources and Ore Reserves Estimates As an Australian company with securities listed on the Australian Securities Exchange (ASX), Iluka is subject to Australian disclosure requirements and standards, including the requirements of the Corporations Act and the ASX. Investo
Slide 4: Agenda
Agenda Time Topic Presenter 8.30am Session 1 – Industry and Markets Introduction and Company Approach Tom O’Leary Industry Settings Doug Warden Zircon and Titanium Markets Matt Blackwell Questions and Answers Panel discussion 10.15am Break 10.30am Session 2 – Operations and Projects Jacinth-Ambrosia
Slide 5: Iluka Executive and Presenters / Panelists
Iluka Executive and Presenters / Panelists Executive Other presenters Tom O’Leary Doug Warden Matt Blackwell Rob Hattingh Simon Hay Hamish Little Christian Barbier Managing Director CFO, Head of Head of Marketing CEO Sierra Rutile Head of Resource Operations Manager GM Zircon Strategy & Planning Dev
Slide 6: Overview
Overview Market Conditions • Supply constraints • Moderate demand • Prices increasing Strong Asset Base • Sierra Rutile improvements and expansions • Jacinth-Ambrosia restart and expansion • Cataby project • Balranald project • Mining Area C royalty expanding Financial Capacity • Well positioned • D
Slide 7: Iluka's Mineral Sands Portfolio
Iluka’s Mineral Sands Portfolio PERTH BASIN EUCLA BASIN MURRAY BASIN SIERRA RUTILE VIRGINIA SRI LANKA Western Australia South Australia Victoria / New South Sierra Leone USA Wales Tutunup South mine Jacinth-Ambrosia mine Balranald project Gangama dry mine Mining concluded 2016 Puttalam project Synth
Slide 8: Sustainability
Sustainability * * Excludes Sierra Rutile, acquired in December 2016 8
Slide 9: Iluka's Approach
Iluka’s Approach Create and deliver value for shareholders Flex assets in Preserve and Act counter Disciplined line with market advance growth cyclically where capital allocation conditions opportunities appropriate Jacinth-Ambrosia restart Cataby project Sierra Rutile acquisition Strict financial c
Slide 10: Shareholder Returns and Performance
Shareholder Returns and Performance ROC performance disappointing… …10 year TSR satisfactory Iluka needs to deliver sustainable returns to shareholders over the long term. Iluka’s 10 year Return on Capital Comparables Total Shareholder Return* (Annualised) % 1 year 2 year 5 year 10 year 60 Anglo Ame
Slide 11: Sustainable Business Review
Sustainable Business Review Comprehensive review of business and improvements implemented • 2017 non-production costs down $70 million from 2016 − reduced exploration − rationalised research and development − lower corporate overheads • Detailed review of existing production portfolio and projects −
Slide 12: Sustaining and Growing Iluka's Business
Sustaining and Growing Iluka’s Business 1. Delivery of projects 2. Organic growth options 3. M&A Jacinth-Ambrosia restart, Balranald unconventional mining Key criterion: Create and deliver expansion and production options Fine minerals processing, to value for shareholders Sierra Rutile improvements
Slide 13: Industry Dynamics and Challenges
Industry Dynamics and Challenges HIGHER PRICES REQUIRED TO INCENTIVISE NEW ZIRCON VALUABLE IMPORTANCE SUPPLY HEAVY OF CHINA MINERAL MARKET AND GRADE AND POLICY ASSEMBLAGE SETTINGS DECLINE MATURING ORE BODIES AND FRESH CAPITAL MEDIUM TO REQUIREMENT LONGER TERM ZIRCON AND RUTILE SUPPLY CHALLENGE 13
Slide 14: Valuable Heavy Mineral Decline
Valuable Heavy Mineral Decline Global Mineral Sands Resources Assemblage HM Grade RZ Assemblage 5% 15% Iluka’s assessment of industry ore bodies • Trash component in heavy mineral suite increasing 4% 12% • Rutile and zircon assemblage falling 3% 9% Industry challenge 2% 6% • Need technical solutions
Slide 15: Capital Required to Sustain Industry Production
Capital Required to Sustain Industry Production Capital Spend, Prices, US$/t FOB, US$m, nominal nominal 1,500 2,500 Estimated industry capex of ~US$1-1.5b* or US$500-750m p.a. over 1,200 2,000 2018-19 to sustain current production 900 1,500 600 1,000 300 500 0 0 Capital Spend (LHS) 2005-16 Average C
Slide 16: Chinese Policy and Pigment Market Setting
Chinese Policy and Pigment Market Setting Chloride Pigment Plant Growth Stricter Environmental Controls Chinese government encourages expansion of chloride route Chinese government introduced tighter emission standards in pigment plants in 12th Five Year Plan October 2016 with stricter enforcement N
Slide 17: Industry Dynamics
Industry Dynamics
Slide 18: Global Mineral Sands Production
Global Mineral Sands Production Mineral Sands Mineral Sands Mineral Sands by Volume by Volume by Value as Mined as Finished Product as Finished Product* (2016 ~7.6mt) (2016 ~7.6mt) Rutile Rutile Rutile Chloride ilmenite Chloride ilmenite Chloride ilmenite Upgraded Chloride Slag (UGS) Chloride Upgrad
Slide 19: Global Mineral Sands Producers
Global Mineral Sands Producers Global Zircon Producers High Grade Chloride Titanium Feedstock1 (2016 Total Production ~1.2mt) (2016 Total Production ~2.5mt TiO2) Others Iluka TiZir 13% 17% Others 3% 23% Iluka 29% Base 3% Cristal 4% TiZir 4% China 9% Cristal 6% Rio Tinto Kenmare Rio Tinto 33% 6% 15%
Slide 20: China TiO2 Industry Overview
China TiO2 Industry Overview China Sulfate Feedstock Production Current China Pigment Industry TiO2 kt 3,000 Sulfate slag Sulfate ilmenite • ~30% of global pigment production – 100kt chloride, 1,800kt sulfate pigment (2017f) 2,000 • ~40% of global pigment capacity 1,000 – 230kt chloride, 2,600kt sul
Slide 21: Global Zircon Supply - Demand
Global Zircon Supply - Demand • Zircon from existing producers declining due to depletion and grade/assemblage decline • Inventory largely depleted • Varying demand estimates − Iluka estimates demand based on industry supply and inventory movements − TZMI’s demand differs from Iluka’s view • From 20
Slide 22: New Project Supply Challenges
New Project Supply Challenges Unconventional deposits requiring technical solutions (eg. fine minerals, depth, product quality) Zircon and rutile typically induced as by-products of ilmenite projects Iluka evaluates many projects and will remain disciplined in Limited high zircon and rutile assembla
Slide 23: Mineral Sands Industry Potential Projects
Mineral Sands Industry Potential Projects Owner and Project Location Stage of Potential Production Evaluation Start Date Rio Tinto – Zulti South South Africa Advanced Unknown 320kt TiO2; 90ktpa zircon Major producers Cristal – Atlas / Campaspe Australia Pre-execute Unknown 125kt TiO2; 35ktpa zircon
Slide 24: High Grade Titanium Dioxide Supply/Demand
High Grade Titanium Dioxide Supply/Demand • Market broadly balanced in 2017/18 based on Iluka estimates • Very high grade market considerably tighter as pigment producers maximise production • Other major industry producers have demonstrated supply discipline in recent years High Grade Titanium Supp
Slide 25: High Grade Titanium Dioxide Supply/Demand
High Grade Titanium Dioxide Supply/Demand • Supply-demand overlaid with upgrading capacity not requiring additional mine investment • This capacity has remained idle for some time • Additional idle upgrading capacity (not shown) requires investment in ilmenite mines • Highlights importance of Iluka’
Slide 26: Zircon Market
Zircon Market Jacinth-Ambrosia, South Australia
Slide 27: Zircon Applications
Zircon Applications Ceramics Refractory and Foundry Zirconia, Zirconium Chemicals ~50% of demand ~30% of demand and Metal ~20% of demand Zircon is opaque, water, chemical and Zircon is heat/abrasion/chemical resistant Zircon does not absorb neutrons; and is abrasion resistant and non-reactive non-co
Slide 28: Current Supply Demand Fundamentals Positive
Current Supply Demand Fundamentals Positive Zircon market tightness has arrived Recovery in prices Reduction in producer-held since 2H 2016 inventories Downstream restocking Limited capacity for buyers to movement increase stock Iluka balances supply when Some customers slow some miners reduce to re
Slide 29: Zircon Market 2017
Zircon Market 2017 Zircon Prices* Pricing US$/t • H1 2017 weighted average premium and standard 1,400 received price up 7% relative to H1 2016 • Increase to Reference Price of US$130/t to 1,200 Opening 1 Jan 16* US$1,100/t from 1 July 2017 announced 1,000 • Further price increase of US$130/t to US$1
Slide 30: Zircon Substitution
Zircon Substitution Although substitutes exist, zircon is the better product Zircon attributes • Opacity – whiteness • Hardness Alumina • Low thermal expansion Feldspar • High melting point Kaolin • Low thermal conductivity Chromite • Chemically inert Synthetic Mullite • Low neutron absorp
Slide 31: Substitution Landscape
Substitution Landscape Market Application % of zircon Major Substitute Adoption Mitigation market (est) Hurdle Body 16 Calcined alumina; Medium Alumina content in tile formulation white clays; white Final product attributes (e.g. porosity, dimensions) feldspar; kaolinite Declining availability and q
Slide 32: Tile Production Costs
Tile Production Costs Final product Zircon-containing selling price, input , as % of US$/t2 100% production cost3 89% 100% 80% 60% 40% 1.2% 20% Cost of zircon in end-use 0.9% 0% products Zircon Opacifier Polished porcelain Digitally-pirinted China glazed porcelain Polished porcelain 1.2% Final produ
Slide 33: Ceramics Zircon Intensity
Ceramics Zircon Intensity Substitution of zircon appears to have reached technical limit and rise of digital printing is supporting zircon intensity in tiles Zircon intensity (grams per sqm); Global zircon in ceramics China % of world tile production (%); (kt) Digital printers installed (hundred uni
Slide 34: Tile category trends
Tile category trends Digital Glazed Porcelain Glazed Ceramic Gres Porcelain Zircon intensity floor Digital printing New products Better glazes and designs Greater design options HD marble imitations High growth category Stable demand Whiter bodies Zircon intensity of tiles, indexed Latest Tile Forma
Slide 35: Titanium Market
Titanium Market Jacinth-Ambrosia, South Australia
Slide 36: Titanium Applications
Titanium Applications Pigment Titanium Metal Welding (flux) ~90% of demand ~6% of demand ~4% of demand Titanium dioxide pigment is opaque, Titanium metal has high strength to Facilitates arc ignition, good slag UV resistant and inert weight ratio, biocompatible and is removal and reduces splatter co
Slide 37: Pigment Use Grows with Income
Pigment Use Grows with Income • Pigment demand growth per capita follows typical ‘s-curve’ pattern • Further per capita growth to come in China and other developing economies Pigment use per capita follows S-curve commodity demand path with GDP per capita1 Pigment per capita (kg) 3.0 North America W
Slide 38: Market Position Strongest in Very High Grade
Market Position Strongest in Very High Grade Total TiO2 Feedstock High Grade Chloride Very High Grade Chloride Chloride & Sulphate Chloride Feedstock (80%+ TiO2) Feedstocks (90%+ TiO2) Feedstocks (2016 ~6.4 Mt) (2016 ~3.3 Mt) (2016 ~2.5 Mt) (2016 ~1.3 Mt) Iluka Iluka Iluka 7% 14% 17% Iluka Kwale Oth
Slide 39: High Grade TiO2 Feedstock Advantage
High Grade TiO2 Feedstock Advantage • Natural and synthetic rutile have a higher titanium grade than most slag feedstocks • Advantages in pigment production: – lower ore tonnes required; – lower chlorine input cost; and – lower waste generation (environmental and cost benefits). • High ‘value in use
Slide 40: Chinese Environmental Controls
Chinese Environmental Controls Background: China’s ilmenite reserves and processing Chinese government introduced tighter emissions standards in Oct 2016 with stricter enforcement Further controls from Feb 2017 curbing pollution. Regions with significant pigment and ilmenite processing plant capacit
Slide 41: China Pigment and Feedstock Markets
China Pigment and Feedstock Markets • Pigment demand at 8-10% CAGR • Pigment supply impacted by environmental crackdowns – direct and indirect enforcement – 250 to 300ktpa permanent shutdowns – mainly smaller sulfate production facilities • Chloride route technology gaining momentum – ~200kt of inst
Slide 42: High Grade Feedstock Market
High Grade Feedstock Market Pricing Pigment Rutile • H1 2017 rutile prices up 4% relative to H1 2016 US$/t US$/t 4,000 3,000 – 40% of SRL’s 2017 rutile production volumes (~60kt) contracted at fixed prices for 2017 • Successful implementation of US$70-100/t increase effective 1 July on uncontracted
Slide 43: Pigment Industry Technology Waves
Pigment Industry Technology Waves Net pigment capacity change Approved before new (kt) Chinese legislation 300 200 Iluka’s key feedstock markets Well positioned for demand 100 growth - Future announced chloride capacity increases in China (100) Europe/Mdl East Sulfate Asia-Pacific Sulfate (200) Amer
Slide 44: Marketing Model for Value Creation
Marketing Model for Value Creation Jacinth-Ambrosia, South Australia
Slide 45: Sales Model
Sales Model Hub and Spoke Distribution Direct Engagement • Strong focus on optimisation of logistics costs • Direct engagement with customers enables (particularly zircon) insights beyond the published view • Provides a service to customers which is valued • Market intelligence feeds into supply-dem
Slide 46: Footprint
Footprint People and products aligned with markets Europe 32% China 35% Americas Middle East 9% Asia 9% 15% % of total 2016 mineral sands sales revenue 46
Slide 47: Long Term Trends Support Our Industry
Long Term Trends Support Our Industry Improved health and safety Reduce petrochemical exhaust Stronger, lighter, more Water purification efficient transportations Cleaner air Enable technology solutions Medical applications Transform construction 47
Slide 48: Questions
G Questions ILUKA
Slide 49: Jacinth-Ambrosia
Jacinth-Ambrosia Jacinth-Ambrosia, South Australia
Slide 50: Jacinth-Ambrosia Overview
Jacinth-Ambrosia Overview Project History • Discovered by Iluka in 2004 • Mining commenced in 2009 • Idled from April 2016 • Restart in December 2017 Operations • Minimal overburden – strip ratio 0.5:1 • Average ore thickness 20 metres • In-pit mobile mining unit – 1,250 tph capacity • Slurry pumped
Slide 51: Jacinth-Ambrosia Restart
Jacinth-Ambrosia Restart • J-A restart decision reflects: – continued tightening zircon market – substantial drawdown of heavy mineral concentrate (HMC) inventory • Rapid return to full production • 40 employees and 60 contractors recruited for restart • Restart expected to be complete in mid-Decemb
Slide 52: Jacinth-Ambrosia Production Cash Costs
Jacinth-Ambrosia Production Cash Costs J-A Cash Cost of Production1 By stage of production By cost element 2015 total = $154m 2015 total = $154m Energy 10% Other 21% Downstream Labour processing Mining and 16% 35% concentrating 42% Maintenance and consumables 12% Mining services 13% HMC transport Mi
Slide 53: Jacinth-Ambrosia Mining & Finished Products
Jacinth-Ambrosia Mining & Finished Products Ore Mined and Grade Heavy Mineral Concentrate mt kt Ore mined (LHS) HM Grade (RHS) HMC Produced HMC Processed 12 12% 900 800 10 10% 700 8 8% 600 500 6 6% 400 4 4% 300 200 2 2% 100 0 0% 0 2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Slide 54: Jacinth-Ambrosia Heavy Mineral Distribution
Jacinth-Ambrosia Heavy Mineral Distribution • Current mine plan is Jacinth South, then sequentially Jacinth North and Ambrosia HG zone ~20mt @ 5.5% HM • Concentrator upgrade planned for H1 2019 of ~300tph Ambrosia to ~1,300tph (rougher head feed) to maintain zircon production with grade decline • Up
Slide 55: Jacinth-Ambrosia Upgrade
Jacinth-Ambrosia Upgrade Project Objectives • Increase J-A plant throughput by ~30% to offset declining ore grades Project Scope • Wet concentrator plant expansion • 2nd mining unit to handle additional ore • Accommodation camp capacity increase • Project cost ~$40 million • Project completion Q2 20
Slide 56: Jacinth-Ambrosia - Outlook
Jacinth-Ambrosia - Outlook Key Parameters 2014 20151 2018-20202 Comments Average annual production 275-160 Zircon (including ZIC) kt 212 250 Includes concentrator upgrade and auxiliary mining unit (av. 225) from 2019. Alternative mine scheduling options also available to Rutile (HYTI90)3 kt 30 31 35
Slide 57: Sierra Rutile
Sierra Rutile Jacinth-Ambrosia, South Australia
Slide 58: Sierra Rutile Overview
Sierra Rutile Overview Project History • Began operations 1960s • Acquired by Iluka in December 2016 • World’s largest rutile mine Operations • Large, long life operations (~20 years) • One dredge (Lanti dredge) and two dry mining operations (Lanti dry and Gangama) • Heavy mineral concentrate trucke
Slide 59: Sierra Rutile Improvements Achieved
Sierra Rutile Improvements Achieved • Align safety practice with international standards • General improvement in operating practices • Implementation of Iluka mine planning approach • Improved standard of tailings dam construction and management • Investment in maintenance, increasing life of asset
Slide 60: Sierra Rutile Improvements Achieved
Sierra Rutile Improvements Achieved • Adjustments to plant settings at dry mines and establishment of standard operating practice has: – debottlenecked concentrator throughput and increased runtimes; and – improved rutile recovery and increased heavy mineral concentrate grades. • These adjustments h
Slide 61: Sierra Rutile Production Cash Costs
Sierra Rutile Production Cash Costs Sierra Rutile 2017 Cash Costs of Production By stage of production By cost element Total US$97m Total US$97m Support and Support other 14% 9% Transport Contracted Labour 4% services 32% 14% Mineral separation 18% Mining and concentrating 64% Fuel 23% Consumables 2
Slide 62: Sierra Rutile Deposit Locations
Sierra Rutile Deposit Locations Sembehun deposits Proposed mine development Port Gangama Truck and shovel mining, fixed dry mining unit. DM2 mining 500-600tph ore. Mineral Separation Plant Commissioned 2016. Nameplate ~175ktpa rutile, expanding to up to 300ktpa Lanti Dry Lanti Dredge Truck and shove
Slide 63: Sierra Rutile Mine Schedule
Sierra Rutile Mine Schedule Plant Unit1 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 D1 Lanti dredge 780tph DM1 Lanti dry 500-600tph Lanti dry 1,000-1,200tph Sembehun 1,000-1,200tph DM2 2 Gangama 500-600tph Gangama 1,000-1,200tph Sembehun 1,000-1,200tph DM3 Sembehun 1,000-1,200tph Note: Mi
Slide 64: Sierra Rutile Operational Improvements
Sierra Rutile Operational Improvements Lanti Dry Mobile Mining Unit Installation of new mobile mining unit and associated infrastructure Commissioning end of 2017 • Replaces existing truck and shovel operation • Mining unit that moves with face of mine, similar to that at Jacinth-Ambrosia • Increase
Slide 65: Sierra Rutile Lanti Dry Expansion Project
Sierra Rutile Lanti Dry Expansion Project Lanti Dry Expansion Lanti dry expanding from 500-600 tph of ore to 1,000-1,200 tph DFS underway, expected commissioning 2019 • Construction of a second in pit mining unit and additional concentrator capacity • Increased concentrator capacity by either re-usi
Slide 66: Sierra Rutile Gangama Expansion Project
Sierra Rutile Gangama Expansion Project Gangama Expansion Capacity of Gangama mine expanding from 500-600 tph of ore to 1,000-1,200 tph DFS underway, expected commissioning 2019 • Construction of second concentrator based on current DM2 blue print • Truck and shovel operation • Detailed engineering
Slide 67: Sierra Rutile Sembehun Project
Sierra Rutile Sembehun Project Sembehun Mine Development Initial 1,000-1,200 tph mine at group of deposits (including the Sembehun Group and Other Deposits as shown on slide 72) Capacity increases as existing equipment relocated • As published in 2016 Updated Mineral Resource and Ore Reserve Stateme
Slide 68: Sierra Rutile Mineral Separation Plant
Sierra Rutile Mineral Separation Plant Mineral Separation Plant Upgrade Expansion from ~175ktpa to up to 300ktpa rutile to accommodate planned mine expansions and safety improvements and provide production flexibility Feasibility study and detailed engineering underway, project completion mid-2019 •
Slide 69: Sierra Rutile Port
Sierra Rutile Port Port Upgrade Scoping study underway for upgrade of existing port facilities: • increased product storage in line with expansion projects • improved product loading rates and barge cycle times • upgrade of overall port infrastructure Upgrading of existing fleet: • purchased a secon
Slide 70: Sierra Rutile - Outlook
Sierra Rutile - Outlook Key Parameters 2017 2018-20201 Comments Average annual production 160-275 Production range reflects dry mining expansions and Sembehun Rutile kt 160-165 (av. 200) development from 2020. Zircon kt 4 5 Production of all products will step-up in 2019 from 2017 levels, with dry m
Slide 71: Reconciliation to Dec 16 Sierra Rutile Outlook
Reconciliation to Dec 16 Sierra Rutile Outlook 2017-2019 2020 Key Parameters Comments Dec 16 Nov 17 Dec 16 Nov 17 Average annual production Av. 160 - 200 Operational improvements leading to Rutile kt >240 250-275 160-175 (av. 175) improved production Average annual financial measures 97-105 Higher o
Slide 72: Sierra Rutile Resources and Reserves
Sierra Rutile Resources and Reserves Resource Material Insitu Rutile Ore Reserve Ore Insitu Rutile Mineral Resource and Ore Reserves at 31 December 2016 Category kt % kt Category kt % kt Gangama Measured 13,132 2.00 263 Proved 10,668 1.97 210 Indicated 32,100 1.30 417 Probable 20,958 1.40 293 Inferr
Slide 73: Projects and Resource Development
Projects and Resource Development Jacinth-Ambrosia, South Australia
Slide 74: Cataby Development Plan and Ore Reserve
Cataby Development Plan and Ore Reserve Deposit • 8.5 year mine life based on development plan which is underpinned by 86% Proved Ore Reserve and 14% Probable Ore Reserve. • Two in-pit mobile mining units • 1,100 tph feed rate to wet concentrator plant • Mine life could increase beyond 8.5 years – b
Slide 75: Cataby Project Update
Cataby Project Update Schedule 2017 2018 2019 Newman Wet Concentrator Plant (Eneabba) Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Engineering Award contracts Construction Pre-strip Commissioning SR Production Note – Timing assumes Q4 2017 Board approval • Major environmental approvals obtained Capital Cost $ million
Slide 76: Cataby Product Logistics
Cataby Product Logistics Annual Volumes 250km • Located 150km north of Perth, Western Australia 350km • Sustains ~200 ktpa of synthetic rutile (SR) production in South West WA • Average annual production (ktpa, thousand tonnes per annum) – ~200 ktpa SR (annual feed ~330 ktpa chloride ilmenite) – ~50
Slide 77: Cataby - Outlook
Cataby - Outlook Key Parameters 2019-20221 2023-20261 Comments Average annual production Zircon kt 60 40 Higher grade pits mined first Rutile kt 35 25 Steady at capacity. Average includes ~10% lower production Synthetic Rutile kt 200 200 during years of major maintenance and kiln reline (2019 and 20
Slide 78: Balranald Project
Balranald Project Project Overview • Large, deep, high grade rutile-rich deposit near Balranald, New South Wales • Industry significant source of rutile, ilmenite and zircon • Definitive feasibility study based on conventional mining method completed • Progressing separate technology study using und
Slide 79: Balranald Test Program
Balranald Test Program Trial phases Completed Comment Proof of Concept Trial Feb 2015 1,700 tonnes of high grade ore mined and mobilised to surface as proof of concept Proof of Commerciality Trial Aug 2016 6,400 tonnes of high grade ore mined at commercially targeted rates and life of mine stope len
Slide 80: Balranald Way Forward
Balranald Way Forward • Continue staged de-risking in 2018 with third production trial – current estimate ~$25 million • Staged approach to production start up in 2021 – requires approvals (modification of consent) – new mining equipment and plant modifications Commerciality Trial Activity Status Co
Slide 81: Iluka WIM Deposits
Iluka WIM Deposits • Underlying challenges with these deposits – recovery of fine sized heavy minerals – zircon product eligibility for ceramic market – monetizing rare earth co-products • $3 million technical development work program 2016-17 – concluding December 2017 – culminating in PFS 2018 subj
Slide 82: Sri Lanka PQ Deposit
Sri Lanka PQ Deposit Location and History • Located ~130km north of Colombo • 1990’s – PQ deposit explored – ceased work due to civil conflict • 2012 – Iluka returned to Sri Lanka • 2015 – Scoping study conducted • 2017 – Pre-feasibility phase progressed Deposit • Homogeneous deposit with ore up to
Slide 83: Sri Lanka PQ Latest Developments
Sri Lanka PQ Latest Developments Progressing formal discussions with Government of Sri Lanka on a Development Agreement • essential to provide certainty required for Iluka to develop project further Work on MoU to secure long-term land access agreement with SLCC* (land owner) and Siam City Cement •
Slide 84: Exploration Kazakhstan
Exploration Kazakhstan Overview • Greenfields exploration in northern Kazakhstan - potential new zircon province • Iluka began activities in 2015 • 66,000km2 available for exploration under GIN* with Kazgeology (SOE) • First major drill program commenced in 2017 • 307 drill holes completed for 9,109
Slide 85: Exploration Foothills Project, Quebec
Exploration Foothills Project, Quebec Overview • Greenfields exploration targeting large rutile–ilmenite deposit • Hard rock (rather than sedimentary) setting • Iluka farming-in with Vior Inc. − 51% earned after C$0.5 million spend in year 1 − 90% earn in at further C$2.1 million spend before 2019 •
Slide 86: Mining Area C
Mining Area C Y ILUKA Source: BHP
Slide 87: Mining Area C Royalty Asset
Mining Area C Royalty Asset • Iluka holds royalty stream over BHP’s Mining Area C iron ore mine • Iluka income royalty stream paid as: − 1.232% of Australian denominated revenue from royalty area; and − one-off payment of A$1 million per million tonne increase in annual capacity • Total contribution
Slide 88: Mining Area C South Flank
Mining Area C South Flank • South Flank is BHP’s preferred replacement Mining Area C and South Flank, Western Australia for Yandi production − Yandi depleted in 5-10 years • Yandi currently produces 80 Mtpa • BHP South Flank contained within the Mining Area C royalty area • Future Mining Area C hub
Slide 89: Mining Area C Potential with South Flank
Mining Area C Potential with South Flank Mining Area C Potential Sales Volume and EBIT with South Flank A$m, Mt 150 BHP stated 130 extraction rate ~150Mt 110 90 70 50 BHP stated 30 start up 10 -10 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 202
Slide 90: Finance
Finance Rehabilitation activities, Western Australia
Slide 91: Balance Sheet
Balance Sheet Net Debt, Gearing and Funding Headroom $m Gearing % 1050 35 • Sierra Rutile acquisition cost of A$469 million 900 30 funded by debt in December 2016 750 25 • Strong free cash flow of $180 million in H1 600 20 2017 used to strengthen balance sheet 450 15 • Inventory being reduced to ‘no
Slide 92: Balance Sheet
Balance Sheet Iluka targets credit metrics broadly consistent with investment grade credit profile, whilst balancing the impacts of commodity pricing and investment factors through the cycle. Net Debt (A$m) Historical Net Debt & Leverage Ratio Net Debt/EBITDA (x) 600 4.0 450 3.0 300 2.0 150 1.0 0 0.
Slide 93: Inventory Movement
Inventory Movement Total Inventory $m 1000 800 600 400 Normal inventory level, 200 $300-400 million 0 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Finished Goods Work in Progress* • Total inventory reduced by $116 milli
Slide 94: Dividends framework
Dividends framework Iluka’s dividend framework • pay a minimum 40% of free cash flow not required for investing or balance sheet activity • distribute maximum practicable available franking credits $m Free cash flow Dividends paid 600 500 2016 dividend payout ratio 400 lower than framework minimum,
Slide 95: Foreign Currency Hedging
Foreign Currency Hedging • Long term contracts (predominantly synthetic rutile) hedge against commodity price risk Hedging Profile • Fixing one leg (i.e. USD product price) of the AUD revenue equation creates foreign currency risk US$m AUD:USD 25 0.85 − exposes Iluka to a contraction in margins shou
Slide 96: Outlook and Closing
Outlook and Closing Jacinth-Ambrosia, South Australia
Slide 97: Iluka Investment Proposition
Iluka Investment Proposition • Leading player in the minerals sands industry – largest producer of zircon – third largest producer of titanium dioxide feedstocks • Distinct positive turn in zircon and titanium dioxide markets with strongest conditions in five years • Sierra Rutile enhances market po
Slide 98: Outlook - Group
Outlook - Group Key Parameters 2015 2016 2017 2018-20201 Comments Average annual production 260-315 Zircon kt 389 347 310 (av. 290) 2018 Z/R/SR sales are expected to 200-310 exceed production in 2018 as finished Rutile kt 136 118 280 (av. 260) good inventories are drawn down to normal levels. 175-20
Slide 99: Questions
Questions Jacinth-Ambrosia, South Australia Jacinth-Ambrosia, South Australia
Slide 100: 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