Iluka Resources Limited · ASX:ILU
Iluka Resources — Sierra Rutile — FY2015 Earnings Presentation
42 slides from Iluka Resources's earnings presentation, Mar 31, 2016
Slide 1: 2015 Preliminary Results Presentation
2015 PRELIMINARY RESULTS PRESENTATION 31 MARCH, 2016
Slide 2: Disclaimer
DISCLAIMER Forward-Looking Information This document may contain forward-looking statements. These forward-looking statements are made as of the date of this document and Sierra Rutile Limited (the “Company”) does not intend, and does not assume any obligation, to update these forward-looking statem
Slide 3: The Sierra Rutile Team
THE SIERRA RUTILE TEAM Experienced, committed and innovative Robert Edwards John Bonoh Sisay Matthew Hird Wayne Venter Derek Folmer Neil Gawthorpe Chairman Chief Executive Officer Chief Financial Officer Chief Operating Officer Chief Marketing Officer Marketing Director •Over 20 years experience •Si
Slide 4: FY 2015 Highlights
FY 2015 HIGHLIGHTS Record production(1), guidance achieved and strong financial results in 2015 Operational Performance > Annual rutile production 126Kt – 10% increase YoY (2) > Strong cost controls – 5% reduction in Production Cash Cost YoY > Gangama Dry Mine project on-track and on-budget Financia
Slide 5: Production Profile and Cash Costs
PRODUCTION PROFILE AND CASH COSTS Production from Gangama Dry Mine raises production capacity in H2 2016 160,000 800 140,000 700 120,000 Production Cash Cost ($/tonne rutile) 600 Annual Rutile Production (tonnes) 100,000 500 80,000 400 60,000 300 40,000 200 20,000 - 100 2011 2012 2013 2014 2015 2016
Slide 6: The Sierra Rutile Story
THE SIERRA RUTILE STORY Company Highlights Geographic Segmentation(3) PLANT CAPACITY 5 YR PRODUCTION High INFRASTRUCTURE TO PRODUCE CAGR grade 200Kt 13% 94% Titanium feedstock 2ND BIGGEST RUTILE NUMBER OF STAFF 5 YR PRODUCTION CASH COST(2) 95% FROM SIERRA LEONE RESOURCE WORLDWIDE CAGR 8.2Mt 1,481 In
Slide 7: 2015 Preliminary Results: Operations and Gangama Project
2015 PRELIMINARY RESULTS OPERATIONS AND GANGAMA PROJECT WAYNE VENTER
Slide 8: Operational Performance
OPERATIONAL PERFORMANCE Achieved upper end of production targets in 2015 2015 Highlights % change Actual 2015 2014 > Record production and guidance achieved / bps > Solid performance from all mining units Ore mined (Kt) 7,984 7,584 5.3 – Dredge produced 155kt HMC Average grade (%) 1.60 1.69 (0.09) –
Slide 9: Health & Safety
HEALTH & SAFETY Continued strong commitment to improved health & safety performance across the organization and community 2015 Highlights (1) > LTIFR YoY reduction of 26% > Re-launched HSE program across the organisation YoY reduction 2015A > Completed safety re-induction of all employees and in LTI
Slide 10: Community
COMMUNITY Significant contribution made in 2015 to the local community 2015 Highlights > Significant contribution > Constructed a primary school for the local community > Significant ongoing support towards Sierra Leone’s efforts pre and post Ebola > Local technical college, sponsored by Sierra Ruti
Slide 11: Gangama Construction Update
GANGAMA CONSTRUCTION UPDATE Gangama project progressing on time and on-budget > Gangama Dry Mine construction remains on-schedule and on-budget: – As of March 28, 2016, $26m of project expenditure incurred with 88% of construction complete > Significant project milestones achieved to date, include:
Slide 12: 2015 Preliminary Results: Sales and Marketing Update
2015 PRELIMINARY RESULTS SALES AND MARKETING UPDATE NEIL GAWTHORPE
Slide 13: Sales Performance
SALES PERFORMANCE Deep customer relationships with value placed on premium product 2015 2016 Outlook – Record production volumes sold to long- – In excess of 90% of 2016 maximum targeted standing customers volumes committed – Average realised price YoY decrease of 3% – Supply chain destocking in bot
Slide 14: Market Update
MARKET UPDATE Deep customer relationships with value placed on premium product Geographic Sales Breakdown(1) Demand Outlook for Sierra Rutile’s Product – Sierra Rutile provides a premium product which it believes enables the company to withstand the challenging market conditions – Sierra Rutile supp
Slide 15: 2015 Preliminary Results: Financial Update
2015 PRELIMINARY RESULTS FINANCIAL UPDATE MATTHEW HIRD
Slide 16: Financial Highlights
FINANCIAL HIGHLIGHTS Resilient financial performance > EBITDA margin increased to 15.2% % change KPI’s 2015 2014 / bps > Strong FCF generation demonstrates cash conversion ability Revenue $m 105.8 117.8 (10.2) > Lower sales volumes to protect margins EBITDA(1) $m 16.1 14.8 8.8 > Successful cost cont
Slide 17: Revenue to EBITDA
REVENUE TO EBITDA Generated EBITDA of $16.1 million despite lower prices and sales volumes Rutile sales volumes of 118 Kt, a 9% decrease YoY Sales volumes: 118 Kt Production volumes: 126 Kt Realised price of $775/t, a 3% decrease YoY 120,000 5,058 On a per unit basis Production Cash Cost(1): $614/t
Slide 18: Production Cash Costs
PRODUCTION CASH COSTS Reduction in costs remains key focus 800 750 Production Cash Costs 2015(1) 59 48 700 Support and 44 67 infrastructure 650 18 31% Mining 50% $/t - - 51% 600 Fixed 550 643 50% 500 614 Variable 450 Processing 18% 400 2014 Higher ore Contract mining Fuel price Increase rutile Other
Slide 19: EBITDA to Free Cash Flow to Movement in Net Debt
EBITDA TO FREE CASH FLOW TO MOVEMENT IN NET DEBT Cash flow conversion increased through robust working capital management 30,000 6,762 (978) (4,580) 20,000 (2,795) (26,058) 10,000 16,103 17,307 $‘000 0 (1,005) (12,551) (10,000) (2,795) (20,000) (12,551) (1,005) (30,000) (1) (2) EBITDA Working Capita
Slide 20: 2016 Financial Outlook
2016 FINANCIAL OUTLOOK Low-cost base and improved financing arrangements create a platform for growth Costs: Capex: Financing: > Production cash costs(1): > Stay-in-business: $5m to $7m > Gangama Senior Loan Facility $540/t to $590/t – First quarterly repayment in > Expansionary: $20m to $22m – Bene
Slide 21: 2015 Preliminary Results: Growth Plans
2015 PRELIMINARY RESULTS GROWTH PLANS JOHN SISAY / WAYNE VENTER
Slide 22: Market-Led Flexibility
MARKET-LED FLEXIBILITY Long-term mine plan with flexibility to adapt to customer demand Positioning the Business Into 2016 Market-Led Production Forecast(1) 250,000 > Sierra Rutile expects to become world’s largest primary producer of natural rutile in 2016 200,000 Rutile (tonnes) 150,000 > Market-l
Slide 23: Optimised Long-Term Mine Plan
OPTIMISED LONG-TERM MINE PLAN Refinement of expansion projects delivering enhanced returns and greater flexibility Gangama Dry Mine Production Forecast(1) > Previously planned second 500tph unit replaced with a 250tph 250,000 bolt-on brownfield plant expansion – Would generate production capacity of
Slide 24: Gangama Dry Mine and Lanti Dry Mine
GANGAMA DRY MINE AND LANTI DRY MINE Bolt-on expansions provide throughput flexibility and allow for staged capital Revised Near-Term Dry Mining Expansion Plans Gangama + Lanti Bolt-On Expansions vs. Original Gangama > Internal feasibility studies completed New(1) Old(2) % change > Two 250tph bolt-on
Slide 25: Sembehun Dry Mine
SEMBEHUN DRY MINE Significant improvement of the Sembehun project > Finalised third party PFS by DRA projects (Pty) Sembehun Dry Mine – PFS vs. Scoping Study(1) PFS Scoping % change > Improved flexibility, enabling operation at 500tph or 1,000tph Study(1) depending on market dynamics 1,000tph Throug
Slide 26: 2015 Preliminary Results: Guidance and Outlook
2015 PRELIMINARY RESULTS GUIDANCE AND OUTLOOK JOHN SISAY
Slide 27: A Strong Track Record of Delivery
A STRONG TRACK RECORD OF DELIVERY Sierra Rutile has continued to deliver and develop the business despite broader market challenges Deliverable Status When Lanti dry mine constructed on time and on budget Q3 2012 Mineral Separation Plant capacity increased to 200ktpa 2014 Gangama Dry Mine financ
Slide 28: Guidance and Outlook
GUIDANCE AND OUTLOOK Gangama Dry Mine production start in Q2 2016 to provide for an inflection point for Sierra Rutile 2016 Guidance Outlook > Market-led business model > Optimisation of brownfield expansion projects - Focusing on maximising profitability of sales - 250 tph bolt-on expansion at Gang
Slide 29: Additional Information
ADDITIONAL INFORMATION
Slide 30: Investor Highlights
INVESTOR HIGHLIGHTS > Tier I natural rutile deposit supporting established mining operations > Low cost producer generating healthy cash flows > Transitioning to a highly flexible and capital-efficient operation through dry mining expansions > Unlocking value through the construction of Gang
Slide 31: Sembehun Dry Mine Pre-Feasibility Study
SEMBEHUN DRY MINE PRE-FEASIBILITY STUDY Sembehun Dry Mine will have throughput flexibility and staged capital Pre Feasibility Study (PFS) Results Key Project Highlights > PFS conducted by DRA Projects (Pty) Sembehun Dry Mine Summary 1,000tph 500tph > 1,000tph open pit, dry mining operation to be dev
Slide 32: Operational Overview
OPERATIONAL OVERVIEW Mining and Initial Processing Wet Mining Unit Bucket ladder Single Plant Lanti Dredge Dredge designed to dig at a rate of 1,000 Mineral Separation Plant tonnes per hour separates the heavy mineral concentrate into our final products: rutile, ilmenite and zircon concentrate. Inst
Slide 33: Why Rutile?
WHY RUTILE? Unmatched Quality Chloride Consumption > Highest grade feedstock at 94% TiO2 14 13 times less > Low contaminants and material consistency 12 chloride consumption indexed to natural rutile Chloride consumption 10 > Promotes high value-in-use, essential to the manufacture of 8 than ilmenit
Slide 34: Deposit and Peer Comparison
DEPOSIT AND PEER COMPARISON Large, High-Quality Deposit Well-Positioned Against Peers(2) Bubble Size: In-situ Contained Rutile Resource > One of the world’s largest natural rutile deposit 1.20% — Mining leases over a land area of 560km Sierra Rutile, 8.2 Mt — JORC-compliant resource of approximately
Slide 35: Revenue Contribution and Peer Comparison
REVENUE CONTRIBUTION AND PEER COMPARISON Unmatched Quality SRL Revenue Split > “SRL’s high quality rutile product places the company at the forefront to benefit from any demand-led recovery in the TiO2 sector. SRL has the greatest exposure to rutile amongst the mineral sands peers.” > “SRL benefits
Slide 36: End Markets
END MARKETS Natural rutile is the preferred feedstock for titanium pigment and metal Titanium Pigment (TiO2) Titanium Metal > TiO2 creates the purest, brightest and most durable form of > Titanium is valued for its light weight, chemical inertness white pigment available for the production of paints
Slide 37: Summary Income Statement
SUMMARY INCOME STATEMENT Income Statement ($’000) 2015 2014 Gross revenue 105,760 117,759 Gross revenue ($’000) 2015 2014 Rutile 91,165 103,576 Rutile 91,165 103,576 By-products & freight costs 14,595 14,183 Ilmenite 5,236 6,781 Zircon and other concentrates 6,807 3,436 Cost of sales (99,890) (112,7
Slide 38: Reconciliation of Cash Costs
RECONCILIATION OF CASH COSTS Production Cash Costs - Reconciliation All-in Cash Costs - Reconciliation 650 750 21 4 600 700 98 49 550 $/t rutile sold 650 $/t rutile produced 500 537 614 600 450 667 720 400 550 Q4 2015 Change in Re-mapping of 2015 Preliminary (1) Production Report methodology certain
Slide 39: Summary Cash Flow Statement
SUMMARY CASH FLOW STATEMENT Summarised Cash Flow ($’000) 2015 2014 EBITDA 1 (refer to slide 37) 16,103 14,791 Working capital movements: (Increase)/decrease in inventories (8,728) 11,240 (Increase)/decrease in trade and other receivables 11,141 (15,260) Increase/(decrease) in trade and other payable
Slide 40: Summary Balance Sheet
SUMMARY BALANCE SHEET Assets ($’000) 2015 2014 Non-current assets ($’000) 2015 2014 Intangible assets 11,494 11,624 Non-current assets 188,449 175,827 Tangible assets 171,825 159,276 Cash and cash equivalents 5,017 6,564 Investment in joint venture 5,130 - Other current assets 62,440 70,235 Biologic
Slide 41: Debt Management
DEBT MANAGEMENT Net Debt Movement in Gross Debt 10,000 60,000 0 2,439 50,000 1,700 5,017 9,194 (10,000) Government Loan 40,000 $'000 (20,000) $’000 30,000 51,455 (30,000) Working Capital Facility 43,000 20,000 (40,000) Senior Loan 10,000 Facility (46,438) (50,000) (51,455) 0 Opening debt Gangama Exc
Slide 42: Sierra Rutile
SIERRA RUTILE Sierra Rutile Limited 30 Siaka Stevens Street 2nd Floor, Access Bank Building Freetown Sierra Leone www.sierra-rutile.com