Iluka Resources Limited · ASX:ILU
Iluka Resources — Investor Presentation (November 2011)
71 slides from Iluka Resources's investor presentation, Nov 17, 2011
Slide 1: Mineral Sands Briefing Session
For personal use only Iluka Resources Mineral Sands Briefing Session Sydney & Melbourne, 17-18 November 2011
Slide 2: Disclaimer and Important Notes
For personal use only 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
Slide 3: Forward Looking Statements
For personal use only 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 capi
Slide 4: Competent Person's Statement
For personal use only Disclaimer and Important Notes Competent Person’s Statement The information in this presentation that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Greg Jones and Chris Lee who are Members of the Australasian Institute of
Slide 5: Presentation Structure
For personal use only Presentation Structure 1 Introduction and Scope of Presentation David Robb, Managing Director 2 Mineral Sands Market – Structure, Supply/Demand and Inducement Alan Tate, Chief Financial Officer 3 Iluka’s Enhanced Production Options Peter Benjamin, General Manager, Enhanced Prod
Slide 6: Introduction and Scope of Presentation
For personal use only 1 Introduction and Scope of Presentation David Robb, Managing Director 6
Slide 7: Key Components of Iluka's Physical and Financial Flexibility
For personal use only Key Components of Iluka’s Physical and Financial Flexibility • New, higher margin and more integrated production base established • High capital expenditure period over • Leadership role in influencing industry dynamics • Idled production capacity • Encouraging product and tech
Slide 8: Mineral Sands Market Characteristics
For personal use only Mineral Sands Market Characteristics • Favourable medium to longer term supply/demand characteristics of zircon and high grade TiO2 • Both of Iluka’s main markets facing supply pressures • Few high quality, capital efficient, quick response options projects at early feasibili
Slide 9: Mineral Sands Market Conditions
For personal use only Mineral Sands Market Conditions • Many customers have experienced improved profitability in 2011 despite raw material price increases • Customers concerned about risks to that position – via demand reduction (e.g. thrifting) or supply increase • Implications globally of a crisi
Slide 10: Key Physical Parameters 2012 – 2014
For personal use only Key Physical Parameters 2012 – 2014 2011 2012-2014 2010 Actual Guidance 2012-2014 Commentary average p.a. (July) Production (kt) Sales level dependent on market conditions and inventory position. Zircon 413 ~550 ~550 2012 production expected to be lower (~20%) than 3 year avera
Slide 11: Key Financial Parameters 2012 – 2014
For personal use only Key Financial Parameters 2012 – 2014 2011 2012-2014 2010 Actual Guidance 2012-2014 Commentary average p.a. (July) Cash Costs $m Production Costs 544 ~620 ~780 Higher total reflecting higher production, expected cost inflation and reactivation of 3rd SR kiln in 2013. Actual cash
Slide 12: Iluka's Production Approach
For personal use only Iluka’s Production Approach 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: Ex
Slide 13: Key Takeaways and Caveats
For personal use only Key Takeaways and Caveats • Iluka’s production options are extensive over 30 opportunities identified as basis of current evaluation from the EPP more than 10 opportunities to be subject to detailed evaluation • Further work on technical, regulatory and other delivery risk
Slide 14: Mineral Sands Market – Structure, Supply/Demand and Inducement
For personal use only 2 Mineral Sands Market – Structure, Supply/Demand and Inducement Alan Tate, Chief Financial Officer 14
Slide 15: Overview of Zircon and High Grade Titanium Sectors
For personal use only Overview of Zircon and High Grade Titanium Sectors 15
Slide 16: Mineral Sands - Principal Product Streams
For personal use only Mineral Sands - Principal Product Streams Global Mineral Sands Market Sales (Mt) Titanium Feedstocks 2009 = 5.3Mt, 2010 = 6.4Mt 100% Rutile (95% TiO2) 90% Synthetic Rutile (SR) (90-95% TiO2) 80% Upgraded Chloride Slag (UGS) (95% TiO2) 70% Chloride market Chloride Slag (80-90% T
Slide 17: Zircon Industry Structure and Participants
For personal use only Zircon Industry Structure and Participants Major Producers (2010) Major Producing Countries (2010) 1.4 Mt Other Others 20% 22% Iluka Kenmare Indonesia Australia 32% 2% 3% 41% India USA 2% 7% BeMaX 4% Rio Tinto South Africa Exxaro 18% 29% 17% Indonesia 3% • 3 largest participant
Slide 18: Zircon - Usage and Consumption by Region
For personal use only Zircon - Usage and Consumption by Region End Use Segments (2010) Consumption by Region (2010) 2000 – 2010 Average Annual Growth Rest of World North America 8% 8% Other, 4% -6% Zirconia and Zirconium 11% Chemicals, 18% Europe Foundry, 10% 24% -2% China Refractories, 43% 1% 1% Ta
Slide 19: Tile Consumption - Dominated by Developing Economies
For personal use only Tile Consumption - Dominated by Developing Economies 5.0% Global GDP Growth Rate (Real) Top Tile Consumers (CAGR per annum) 2010 Total = 9.4 billion sqm tile 4.5% Oceania 4.0% 0% 23% Other Europe Africa 5% 6% 3.5% 5% 5% 3.0% EU 9% Other North 10% 2.5% Vietnam America Asia 2.0%
Slide 20: Zircon Demand - Linked to GDP Growth and Urbanisation
For personal use only Zircon Demand - Linked to GDP Growth and Urbanisation “The goal of the Chinese regulators is for China to become a moderately prosperous country by 2020. Its goal is to achieve a $US10,000 per capita GDP by the year 2020…Urbanization rate will reach 51.5% by 2015” – China’s 12t
Slide 21: Zircon Demand
For personal use only Zircon Demand Asia Pacific (Excl China & Japan) Rest of the World Real GDP Growth Real GDP Growth China zircon consumption trends (previous slide) indicate possible zircon growth of ~9% 2010 – 2020 CAGR GDP Growth of 6.1% 2010 – 2020 CAGR GDP Growth of 2.8% expected expected Zi
Slide 22: Titanium Feedstock Demand - Usage and Regions of Purchase
For personal use only Titanium Feedstock Demand - Usage and Regions of Purchase End Use Segments Pigment End Use 2000 – 2010 Average Annual Growth Food & Pigment End Use by Region Specialities & pharma Other, 4% Other, 6% 9% Fibres 1% Metal, 4% 10% 2% Inks 3% North America China 18% Paper 22% 9% Cen
Slide 23: Titanium Dioxide Industry Structure and Participants
For personal use only Titanium Dioxide Industry Structure and Participants Total TiO2 Feedstock Chloride Feedstock Chloride & Sulphate (3.4 Mt) (6.4 Mt) Kenmare Iluka 3% • 3 largest chloride feedstock producers > 70% Others Others 13% India 12% Iluka 22% 4% 23% BeMaX • High grade feedstocks - 3 larg
Slide 24: Iluka's Market Position in High Grade Feedstocks
For personal use only Iluka’s Market Position in High Grade (80%+) Feedstocks Waste Production at Different Pigment Feedstock Blends Iluka’s Market Share in 2010 (Reduced waste generation as feedstock blend increases) Increasing value in use for pigment plants Waste Generation Index (95% =100) 1000
Slide 25: Feedstock Mix for Chloride Pigment Plants
For personal use only Feedstock Mix for Chloride Pigment Plants Feedstock Mix for Major Pigment Producers 2010 100% • Pivotal role of high grade titanium feedstocks 90% • Pigment plants are large and sophisticated, where operational efficiency is highly dependent on 80% specifications of feedstock b
Slide 26: Pigment Demand Intensity - Linked to GDP growth
For personal use only Pigment Demand Intensity - Linked to GDP growth Kgs per Capita TiO2 Feedstocks: Intensity of Use 7.0 USA 6.0 5.0 4.0 Europe 3.0 2.0 1.0 China 0.0 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 GDP per Capita (US$; real 1990 terms; at PPP) Europe (1993-2010) China (1993-2010)
Slide 27: Chloride Pigment - End Demand Influenced by Developing Economies
For personal use only Chloride Pigment - End Demand Influenced by Developing Economies Global Chloride Pigment Production North American Pigment Exports ~50% of North America’s Belgium Note: Belgium is only used as Others 24% Asia-Pacific production is exported an intermediate hub to finish 27% 19%
Slide 28: Supply/Demand and Inducement
For personal use only Supply/Demand and Inducement 28
Slide 29: Global Zircon Demand Scenarios
For personal use only Global Zircon Demand Scenarios ktpa Demand Scenarios 3,000 High: China 9%, Other Asia-Pacific (excl Japan) 6%, ROW 3%, 7% CAGR(2010 -'20) • Three possible demand scenarios illustrated Base: China 8%, Other Asia-Pacific (excl Japan) 5%, ROW 1%, 5% CAGR(2010 -'20) • Difficult to
Slide 30: Zircon Supply Inducement - Potential Supply
For personal use only Zircon Supply Inducement - Potential Supply Announced and mooted projects included in inducement evaluation Potential Project Country Current Stage of Evaluation Birzulivske Ukraine In construction Grand Cote Senegal Feasibility/near commitment Total Announced/Estimated Product
Slide 31: Zircon Supply/Demand - Assuming Projects Induced
For personal use only Zircon Supply/Demand - Assuming Projects Induced Zircon Supply and Demand (including induced projects) ‘000 tonnes Zircon 3,000 • Persistent supply shortage likely in base 2,500 demand case 2,000 • Only under low case demand scenario (3% pa demand) would the market be in ~10% o
Slide 32: Indicative Zircon Inducement Pricing
For personal use only Indicative Zircon Inducement Pricing • Iluka’s analysis of prospective projects shows that Inducement Price Required to fill Supply Shortage in 2016 sustained higher pricing required to rationally induce new supply US$ Inducement Price Theoretical Required • To meet a 5% CAGR d
Slide 33: High Grade Titanium Dioxide Supply/Demand
For personal use only High Grade Titanium Dioxide Supply/Demand ‘000 TiO2 units 6,000 • High grade feedstocks expected to remain in tight or short supply into the foreseeable future 5,000 • New high grade feedstock sources will in most instances require large capital outlays for 4,000 upgrading faci
Slide 34: Summary Comments
For personal use only Summary Comments • China urbanisation and GDP per capita growth expected to underpin zircon demand notwithstanding potential periods of market softness • Other developing economies provide further demand growth potential • Zircon pricing supported in the medium term due to st
Slide 35: Iluka's Enhanced Production Options
For personal use only 3 Iluka’s Enhanced Production Options Peter Benjamin, General Manager, Enhanced Production Project Victor Hugo, General Manager Product & Technical Development Steve Wickham, General Manager, Australian Operations 35
Slide 36: Enhanced Production Project (EPP)
For personal use only Enhanced Production Project (EPP) • Prime objective to evaluate internal mineral sands development opportunities • Rank and choose optimum project development and production profiles • Methodology based on higher long term pricing expectations overlayed by utilisation or expa
Slide 37: Production Potential Options
For personal use only Production Potential Options Material Type (Mt HM) JORC 2010* Ore Reserves* 27 Production Potential 64 Mineral Resources* 114 - expansion of existing production - new deposits 114 - sequencing of mine plans 64 27 *Reported in accordance with the ‘Australasian Code for Reporting
Slide 38: Production Potential
For personal use only Production Potential Old Aurelian Options in Potential Hickory Springs (US) (US) Mineralisation Pro n d tio ure Tec uct & pl ora ndit pe De v h ni Ex p.a. ex Eneabba Nepean Atacama Typhoon elop cal m+ deposits (MB) (EB) (EB) ~ $1 me n ~$ 30 as i n 0m+ t u c la B asin Options in
Slide 39: Enhanced Production Project – Sample Scenarios
For personal use only Enhanced Production Project – Sample Scenarios • Market Driven – maintain and/or target zircon and rutile market share based on Iluka’s current long term market analysis – target zircon and rutile production to meet potentially lower demand curves • Production Driven – target z
Slide 40: Ore Reserve Increases Announced
For personal use only Ore Reserve Increases Announced • Ore Reserve for Jacinth-Ambrosia* is 6.82 Mt HM, a net increase of Jacinth-Ambrosia, 0.42 Mt HM or 7% from 6.40 Mt HM Eucla Basin South Australia Refer ASX Release dated 16 November 2011 • Ore Reserve for Cataby is 7.45 Mt HM, an increase of 1.
Slide 41: Jacinth-Ambrosia Ore Reserve Changes, Project to Date
For personal use only Jacinth-Ambrosia Ore Reserve Changes, Project to Date 41 Refer ASX release dated 16 November 2011 and other ASX releases and investor presentations on www.iluka.com
Slide 42: Zircon Production Scenarios
For personal use only Zircon Production Scenarios • Potential to increase production in response to demand growth, or • Potential to extend current production levels significantly • No account of enhancements due to utilisation of starting period inventories, Mineral Resources or Ore Reserves acquis
Slide 43: Rutile Production Scenarios
For personal use only Rutile Production Scenarios • Potential to increase production in response to demand growth, or • Potential to extend current production levels significantly • No account of enhancements due to utilisation of starting period inventories, Mineral Resources or Ore Reserves acquis
Slide 44: Implications for Ilmenite Production and Kiln Operation
For personal use only Implications for Ilmenite Production and Kiln Operation • Subject to the economics of zircon/rutile expansion options, Iluka has the potential to produce sufficient ilmenite to support 4 kiln operation • Additional chloride ilmenite available for expansion of upgrading capacity
Slide 45: Product & Technical Development
For personal use only Victor Hugo, General Manager, Product & Technical Development 45
Slide 46: Repositioned Ilmenites used in the Becher Process
For personal use only Repositioned Ilmenites used in the Becher Process •1 Production of lower grade Chloride SR (SR85) from Murray Basin Ilmenite •2 Use of finer grained ilmenites in Premium Grade or SREP SR •3 Production of Acid Soluble SR from Murray Basin Ilmenite Low TiO2 High TiO2 Ilmenite Bub
Slide 47: Synthetic Rutile Developments
For personal use only Synthetic Rutile Developments • Utilise idle synthetic rutile capacity (SR1) using Murray Basin ilmenite • Based on plant trials conducted during 2010 and 2011 • The matrix of development opportunities is shown on following slide • Products chosen will depend on: highest cash
Slide 48: TiO2 Product Development
For personal use only TiO2 Product Development Use waste or low value feedstock to utilise spare SR kiln capacity for value creation with minimum capital expenditure Developing products with different coal types Coal 1 Hamilton LG Chloride Chloride SR3 or SR1 Coal 2 PDC Ilmenite SR (85% TiO2) Market
Slide 49: Steve Wickham, General Manager, Australian Operations
For personal use only Steve Wickham, General Manager, Australian Operations 49
Slide 50: Murray Basin Mining
For personal use only Murray Basin Mining Kulwin Heavy Mineral Douglas Re-Optimisation Concentrate (HMC) Production 60,000 50,000 HMC tonnes 40,000 Zone 18 30,000 Interburden Zone 19 20,000 10,000 0 0 0 1 1 0 0 1 1 0 1 0 1 0 0 0 0 1 0 1 0 1 b-1 r-1 b-1 r-1 y-1 y-1 l-1 l-1 n-1 n-1 t-1 n-1 n-1 p-1 v-1
Slide 51: Hamilton Mineral Processing Plant
For personal use only Tonnes Per Hour - O ct 10 20 30 40 50 60 70 80 90 100 -0 9 • • D ec % Recovery -0 9 Ap 70 75 80 85 90 95 100 r- 0 9 Fe A b- ug 10 -0 9 D ec -0 9 A pr -1 A 0 pr -1 0 Au g- Ju 10 n- 10 De c- 10 A Ap ug -1 r- 1 0 1 Rutile Recovery A ug -1 1 O ct D -1 ec 0 -1 1 Consistent feed from
Slide 52: Jacinth - Ambrosia Mine (J-A)
For personal use only Jacinth - Ambrosia Mine (J-A) Jacinth-Ambrosia Mining Method 180 HMC Production 160 140 HMC Tonnes Per Hour 120 100 80 60 40 HMC tph 20 HMC tph design - 9 0 10 11 0 1 0 1 0 1 0 1 -0 -1 -1 -1 -1 -1 -1 -1 l-1 l-1 n- n- ov ov ar ep ar ep ay ay Ju Ju Ja Ja M M N N M M S S 100% Conc
Slide 53: Narngulu Mineral Separation Plant
For personal use only Narngulu Mineral Separation Plant 1200 Premium Zircon Production 100% Zircon Recovery 95% 1000 90% 85% 800 Zircon Tonnes Per Day 80% 600 75% 70% 400 65% 60% 200 300ktpa Rate Monthly Rolling Avg. Monthly Rolling Avg. 55% 0 50% 0 0 0 11 1 1 1 0 10 11 1 11 10 10 0 10 11 11 1 10 l-
Slide 54: Synthetic Rutile Production, Western Australia
For personal use only Synthetic Rutile Production, Western Australia South West SR2 Kiln Performance Kiln Campaigns 1600 850 Ilmenite Feed Kiln Utilisation Kiln tpoh Days 400 kt 45 750 100% 1400 SR Kt 650 1200 350 kt 90% 40 Total Days 550 SR Kt 1000 450 300 kt 80% 35 800 350 250 kt 70% 30 600 250 61
Slide 55: Western Australia Mining
For personal use only Western Australia Mining Tutunup South Mine • Commissioned 14 days ahead of schedule on 9 June 2011 • First HMC processed at North Capel for SR2 Kiln on 20 June 2011 • Project completed 3% under budget Tutunup South Mine Eneabba Mine Restart • On track for commissioning late Q4
Slide 56: Operational Capability, Flexibility and Adaptability
For personal use only Operational Capability, Flexibility and Adaptability • 480 Iluka leaders have attended 5 day leadership programme since 2009 • Current Operational team managed the 2009 re-engineering of WA, commissioning of Murray Basin 2 and J-A • Strong project management capabilities • SR a
Slide 57: Production Flexibility Example: Hamilton MSP Capacity
For personal use only Production Flexibility Example: Hamilton MSP Capacity Cross section of Jacinth mine for illustration purpose Hamilton MSP Capacity 800 700 Rutile capacity 600 J-A Supplemental feed 500 K t pa 400 300 Move to a single MB 200 concentrator Balranald move 100 0 2011 2012 2013 2014
Slide 58: Australian Operations Well Placed to Deliver
For personal use only Australian Operations Well Placed to Deliver JA Mine Jacinth-Ambrosia Mine • Continued consistent production and unit cost performance • Implement opportunities created by: Product & Technical Development Enhanced Production Project and • Ability to adapt production to chan
Slide 59: Concluding Remarks
For personal use only Concluding Remarks David Robb 59
Slide 60: Iluka's Enhanced Production Potential
For personal use only Iluka’s Enhanced Production Potential • Iluka’s production options are extensive over 30 opportunities identified as basis of current evaluation from the EPP more than 10 opportunities to be subject to detailed evaluation • Further work on technical, regulatory and other de
Slide 61: Potential Cash Cost and Cash Margin Implications
For personal use only Potential Cash Cost and Cash Margin Implications • Cash cost and margin implications not yet determined with sufficient level of confidence for disclosure purposes • Cash cost determination subject to detailed technical and economic assessment by project • Initial indications a
Slide 62: Indicative Capital Expenditure
For personal use only Indicative Capital Expenditure 2012 – 2016 indicative average p.a. Total capital expenditure estimate (includes Corporate Plan & Enhanced ~$250m Production Potential options) This capital estimate relates to production options outlined on slides 42 - 43 Potential capital expend
Slide 63: Iluka Resourcing and Execution Considerations
For personal use only Iluka Resourcing and Execution Considerations • Multiple project development options to be run in parallel • Adherence to prime objective and focus on key financial parameters • Challenges for internal resourcing and skills base in key areas: experienced operational and techn
Slide 64: Iluka's Evolution - Current and Prospective Phases
For personal use only Iluka’s Evolution - Current and Prospective Phases 2011 - New Iluka • Zircon and high grade titanium dioxide markets tight • Substantial zircon and TiO2 price increases • Higher margins and stronger free cash flows • Global uncertainties, volatile markets, but medium term indus
Slide 65: Iluka Resources Limited
For personal use only 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 66: Explanatory Comments for Slide
For personal use only Explanatory Comments for Slide 27 • A major proportion of US pigment is exported to developing economies • China is ~95% import dependent for chloride pigment • China’s chloride: sulphate pigment consumption is ~1:3 • Chloride pigment utilised in China for automobile coatings,
Slide 67: Zircon Supply Inducement – Comments Related to Slides
For personal use only Zircon Supply Inducement – Comments Related to Slides 29 - 32 Evaluation of Potential Supply – Explanatory Comments • Iluka undertakes inducement analysis of all known potential new mineral sands projects (concept to feasibility stage) • This analysis includes all identified “p
Slide 68: Appendix: Mineral Resource and Ore Reserve Statement
For personal use only Appendix 1 Iluka Resources Limited Mineral Resource and Ore Reserve Statement as at 31 December 2010 68
Slide 69: Ore Reserves at December 2010
For personal use only Ore Reserves at December 2010 ILUKA ORE RESERVE BREAKDOWN BY COUNTRY, REGION AND JORC CATEGORY AT DECEMBER 31 2010 Summary of Ore Reserves(1 ,2 ,3 ) for Iluka HM Assemblage( 4 ) Ore In Situ HM HM Ilmenite Zircon Rutile Change Ore Reserve Country Region Tonnes Tonnes Grade Grade
Slide 70: Mineral Resources at December 2010
For personal use only Mineral Resources at December 2010 ILUKA MINERAL RESOURCE BREAKDOWN BY COUNTRY, REGION AND JORC CATEGORY AT DECEMBER 31 2010 Summary of Mineral Resources(1 ,2 ,3 ) for Iluka HM Assemblage(4 ) Mineral Material In Situ HM HM Ilmenite Zircon Rutile Change Country Region Resource T
Slide 71: Ore Reserves Mined and Adjusted at December 2010
For personal use only Ore Reserves Mined and Adjusted at December 2010 ILUKA ORE RESERVES MINED AND ADJUSTED BY COUNTRY AND REGION AT DECEMBER 31 2010 Summary of Ore Reserve Depletion(1) In Situ In Situ In Situ In Situ In Situ (2) (3) HM Tonnes HM Tonnes HM Tonnes HM Tonnes HM Tonnes Country Region
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