Iluka Resources Limited · ASX:ILU
Iluka Resources — Macquarie Western Australian Forum (October 2014)
29 slides from Iluka Resources's conference presentation, Oct 14, 2014
Slide 1: Iluka Resources Limited
Iluka Resources Limited Macquarie Western Australian Forum David Robb, Managing Director and CEO 14 October 2014
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 expenditu
Slide 3: Company Overview
Company Overview • Large producer of zircon - around one third of the global market • Significant high grade titanium dioxide producer: • Rutile • Synthetic rutile (ilmenite upgrading capacity currently idled) • Producing operations in 5 locations globally (predominantly Australia) • Extensive globa
Slide 4: Iluka Activities
Iluka Activities Rio de Janelroe ILUKA we @Aingda0 ‘Shanghai Dubai rhe : Oxanen go Chi Minh City Sti Lanka ® Py Matyi Indonesia Minis A Perth Basin ‘icla asin ih femme
Slide 5: Iluka Approach
Iluka Approach • Focus on shareholder returns through the cycle • Flex asset operation in line with market demand • Continue market development through the cycle • Maintain strong balance sheet • Preserve/advance mineral sands growth opportunities • Continue to evaluate/pursue corporate growth oppor
Slide 6: 2014 Half Year – Key Features
2014 Half Year – Key Features • Flexibility, unit costs, capex, FCF, balance sheet, sustainability • Earnings reflect low product pricing • Free cash flow $63.9 million • 6 cents dividend per share fully franked • Net debt / net debt + equity (gearing ratio) reduced to 9.2% • Cash costs of productio
Slide 7: Mining Area C Royalty
Mining Area C Royalty 1H 2014 versus 1H 2013 1H 2014 vs 1H 2013 1H 2014 1H 2013 % change Sales volumes mdmt 25.9 26.6 (2.6) Implied price A$/t 114.3 125.1 (8.6) Net Royalty income $m 37.0 41.4 (11.1) Annual capacity payments $m 1.0 4.0 (75) Iluka EBIT $m 38.0 45.4 (16.3) (mdmt = million dry metric t
Slide 8: Sustainability: Frequency Rate
Sustainability Lost Time Injury Frequency Rate (LTIFR) Total Recordable Injury Frequency Rate (TRIFR) 16.0 15.1 • Safety performance 14.0 improvement 12.0 10.5 maintained 10.0 • Strong safety culture, Frequency Rate 8.0 despite business 4.6 reconfiguration 6.0 4.5 4.0 3.1 1.9 2.0 0.6 0.3 0.0 2011 20
Slide 9: Balance Sheet
Balance Sheet A$m Gearing % 1000 35 800 28 600 21 400 14 200 7 0 0 1H 09 2H 09 1H 10 2H 10 1H 11 2H 11 1H 12 2H 12 1H 13 2H 13 1H 14 -200 -7 Total facilities Net debt (cash) Gearing • Gearing of 9.2% (30 June 2014) • Available debt facilities increased by $50 million in the half • Total facilities A
Slide 10: China Zircon Imports
China Zircon Imports • Year-to-date China zircon imports in line with previous years. 10
Slide 11: Lead Indicators – USA Housing
Lead Indicators – USA Housing • US property indicators remain positive y-o-y, supporting the sector’s cyclical upturn • July data: housing starts increased by 15.7% in July while permits issued rose ~8% (indicating strong starts in coming months) YoY Change (%) YoY change US New Homes Started Season
Slide 12: Industry Context - Robust Demand Long Term
Industry Context - Robust Demand Long Term 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: Increasing Array of Applications
Increasing Array of Applications Zircon Applications Titanium Dioxide Applications Catalytic converters 3D printing applications Nuclear fuel rods Desalination plants Oxygen and pressure sensors Offshore oil and gas components Fibre optics Power plant cooling systems Electrical motherboards and capa
Slide 14: Industry Context and Dynamics
Industry Context and Dynamics Higher prices VHM Grade / Medium to longer Maturing ore Rise of China – required to Assemblage term supply bodies / fresh sulphate and incentivise decline challenge capital required chloride pigment supply? • Global decline in • Limited known high • Major players • Natu
Slide 15: Mineral Sands - Major Deposit Discoveries
Mineral Sands - Major Deposit Discoveries • Major players operating within mature ore bodies. Tellnes (Kronos –Titania) discovered 1954 Vilnohirsk Irshansky discovered 1951 Rio Tinto (QIT) Lac Tio discovered 1946 Iluka Virginia 1990s Sierra Rutile 1990s Kenmare 2001 CRL North Stradbroke 1970s Rio Ti
Slide 16: Industry Grade and Assemblage Challenges
Industry Grade and Assemblage Challenges Mineral assemblage in resources RZ Assemblage HM Grade 5.0% 15% Trash 13% Sulphate Ilmenite Chloride Ilmenite 4.0% 12% Rutile (and other high grade TiO ) 2 Zircon 9% Combined RZ in HM (RHS) 3.0% 9% 6% • Trash component in Heavy Mineral grade increasing 2.0% 6
Slide 17: Increasing Supply Chain Risk and Cost
Increasing Supply Chain Risk and Cost TiO2 units produced (2020 Forecast) Norway 5% Canada 9% Ukraine USA 6% China India 15% Sierra Leone 8% Vietnam Sri Lanka Kalimantan Kenya Mozambique South 7% Africa Australia IHS Political / operational risk Insignificant / low 13% 19% Medium High / extreme Afri
Slide 18: Industry Dynamics – China Influence
Industry Dynamics – China Influence Chloride Process Projects in China • Jan 2011, MIIT* published “Cleaner Production Technology Implementation Scheme for Five Industries Including Titanium Dioxide”, stating: by 2014, it is anticipated that TiO2 production capacity using the chloride process will r
Slide 19: Areas of Focus
Areas of Focus NEW RESOURCES AND RESOURCE TO RESERVE CONVERSION Exploration Innovation and Technology Market Development • Internal expertise • Production efficiencies / recoveries / • Market representation product quality • Consistent expenditure ~ $20m p.a. • Facilitate potential demand drivers •
Slide 20: Areas of Focus
Areas of Focus • Maintain multiple options • Five internal mineral sands projects at advanced evaluation • Two at earlier stage evaluation (Tapira, Sri Lanka) • Focus on capital efficiency / returns e.g. kiln reactivation • Timeframe for all options dependent on: – timely and satisfactory completion
Slide 21: Mineral Sands Project Development
Mineral Sands Project Development Project Location Characteristics Pre-execute Hickory Virginia, USA • Chloride ilmenite with associated zircon • Utilisation of existing mineral separation plant (MSP) Definitive Feasibility Study Balranald Murray Basin, NSW • High grade rutile, zircon and ilmenite •
Slide 22: Tapira, Brazil
Tapira, Brazil • Tapira complex – host to large volumes of titanium bearing minerals – ~ 6 x 8 kms; area of ~ 35 square kms – In-situ and stockpiled materials1 • Vale and Iluka teams formed under Phase 1 • Phase 1 evaluation involves – geological, technical evaluation – market assessment – pilot pla
Slide 23: Sri Lanka
Sri Lanka Puttalam Project • Large scaleable sulphate ilmenite deposits • 56 million tonnes of in situ HM Mineral Resource1 – HM grade 8.2% – ilmenite 67%, zircon 3%, rutile 4% of HM assemblage • Discussions with Government to determine legislative framework: – mineral policy – legal and investment
Slide 24: Metalysis
Metalysis • Iluka payment of $18.6 million for 18.3% equity • Completion of Commercial Framework Agreement • Metalysis hired new process engineers and metallurgists – drive scale-up of proposed UK based reference plant • Joint collaboration on feedstock development research – focusing on synthetic a
Slide 25: Market Development
Market Development • Expansion of global offices / logistics – 13 warehouses – 8 marketing offices • Dedicated zircon and TiO2 sales teams • Improving market analysis: – deepening understanding of customer needs – advancing technical development work • Expanded customer base • ‘Long tail’ capability
Slide 26: Market Development – China Pigment
Market Development – China Pigment Sulphate Pigment Large Installed Base Emergent Chloride Pigment Industry SITUATION SITUATION • Largest pigment producer globally - sulphate • Minimal existing in-country chloride production • Reliant on imported feed stocks ~1/3rd of requirements • China dependent
Slide 27: Industry is Changing
Industry is Changing • Pigment – ownership, geography, technology shifts – China factor • Feedstock – quality diminishing, pipeline emptying, risk increasing – supply cost and availability challenge • Zircon – assemblage decline, tile manufacturing transformations – intensity of use additive to dema
Slide 28: Iluka Approach
Iluka Approach • Focus on shareholder returns through the cycle • Flex asset operation in line with market demand • Continue market development through the cycle • Maintain strong balance sheet • Preserve/advance mineral sands growth opportunities • Continue to evaluate/pursue corporate growth oppor
Slide 29: Iluka Resources Limited 2014 Half Year Results
Iluka Resources Limited For more information contact: 2014 Half Year Results Dr Robert Porter, General Manager Investor Relations robert.porter@iluka.com +61 3 9225 David Robb,5008Managing / +61 (0) 407Director 391 829 Alan Tate, Chief Financial Officer www.iluka.com 22 August 2014
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