Slide 1: 2012 Half Year Results
For personal use only 2012 Half Year Results David Robb, Managing Director 23 August 2012
Slide 2: Disclaimer – Forward Looking Statements
Disclaimer – Forward Looking Statements For personal use only 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 fu
Slide 3: Sustainability
Sustainability For personal use only • TRIFR decreased by 7% (June 2011 – June 2012) • LTIFR decreased by 60% 3
Slide 4: 2012 Half Year – Key Features
2012 Half Year – Key Features For personal use only • Solid financial results in difficult economic and market conditions - higher revenues, margins, earnings, ROC - small net debt at 30 June; net cash position at end July • Global economic uncertainty, weak business confidence - materially lower sa
Slide 5: Main Features of 1H 2012 versus 1H 2011
Main Features of 1H 2012 versus 1H 2011 For personal use only Mineral Sands Sales Volumes Z/R/SR sales down 45.1% Mineral Sands Revenue 16.2% - higher prices partially offset by lower sales volumes Cash Costs of Production 0.9% - $314.7 million vs $311.8 million – solid operating outcome Unit Ca
Slide 6: Interim Dividend
Interim Dividend For personal use only • 25.0 cents per share, fully franked (2011: 20 cents, unfranked) • Consistent with dividend framework - minimum 40% of FCF - distribution of franking credits • Final 2010 to interim 2012 dividends - 108 cents paid - $450 million returned - balance sheet streng
Slide 7: Historic Cash Flow Deployment: 2010 – 1H 2012
Historic Cash Flow Deployment: 2010 – 1H 2012 For personal use only Aggregate Free FCF and Dividends Cash Flow Usage Year CPS Total $m FCF $m Final 2010 8 33 60 Interim 2011 20 84 167 Final 2011 55 229 422 ~25% Interim 2012 25 105 (45) 108 451 604 ~75% Distributions Cash retained 7
Slide 8: Factors Influencing Free Cash Flow
Factors Influencing Free Cash Flow 1H 2012 versus 1H 2011 For personal use only 1H 2012 vs $m 1H 2012 1H 2011 1H 2011 Operating cash flow 207.2 212.7 (5.5) MAC royalty 36.8 42.8 (6.0) Exploration (14.9) (8.9) (6.0) Interest 4.2 (10.4) 14.6 Tax (156.1) (5.0) (151.1) Capital expenditure (122.5) (48.7)
Slide 9: Summary Group Results
Summary Group Results For personal use only 1H 2012 vs 1H 2011 $m 1H 2012 2H 2011 1H 2011 % change Mineral sands revenue 662.8 966.5 570.2 16.2 Mining Area C royalty 41.6 43.8 44.3 (6.1) Group EBITDA 505.0 660.1 319.2 58.2 Depreciation and amortisation (105.0) (130.0) (94.6) (11.0) Group EBIT 400.0
Slide 10: EBITDA 1H 2012 versus 1H 2011
EBITDA 1 H 2012 versus 1 H 2011 For personal use only 10
Slide 11: Mining Area C Royalty 1H 2012 versus 1H 2011
Mining Area C Royalty 1 H 2012 versus 1 H 2011 For personal use only 1H 2012 1H 2011 % change Annual production 30 June mdmt 44.1 43.1 2.3 Sales volumes to 30 June mdmt 23.6 21.8 8.3 Royalty income $m 38.8 43.5 (10.8) Capacity payments $m 3.0 1.0 200.0 Iluka EBIT $m 41.6 44.3 (6.1) (mdmt = million d
Slide 12: Net Profit After Tax 1H 2012 versus 1H 2011
Net Profit After Tax 1 H 2012 versus 1 H 2011 For personal use only 12
Slide 13: Operating Cash Flow
Operating Cash Flow For personal use only • Operating cash flow influenced by: - sales volume in period - timing of sales (30 June receivables increase $52.5 m vs 2011: $1.1 m increase) Note: excludes MAC royalty, exploration, net interest and tax 13
Slide 14: Net Debt Movement
Net Debt Movement 1H 2012 (1 January to 30 June) For personal use only 14
Slide 15: Zircon Market Conditions – 1H 2012
Zircon Market Conditions – 1H 2012 For personal use only • Zircon demand globally remained soft through 2Q • Subdued customer confidence and ordering patterns in China - government policy constraining property sector - high ceramic finished goods inventories - thrifting and adoption of modern tile m
Slide 16: Historical Global Zircon Consumption
Historical Global Zircon Consumption For personal use only 2012 consumption influenced by: - global economic conditions (2011) - customer sentiment/business confidence - ceramics inventory (China) - thrifting & adoption of modern tile making technology (mainly China) Compound Average Growth Rate % %
Slide 17: Global Zircon Consumption and Iluka Market Share
Global Zircon Consumption and Iluka Market Share For personal use only kt 500 385 400 300 258 200 100 81 69 46 42 34 32 36 11 14 30 16 21 13 Source: TZMI, Iluka 0 -2 -26 -100 -92 -200 -174 YOY Change in Iluka Zircon Sales -300 -260 YOY Change in Global Zircon Consumption -400 2002 2003 2004 2005 200
Slide 18: Inventory in the Ceramics Chain
Inventory in the Ceramics Chain For personal use only Mining HMC High – Iluka willing to hold concentrate stocks Mineral separation plant Zircon sand….. High – Iluka willing to carry inventory Miller Opacifier….. Very low Ceramics manufacturer Tiles….. High Wholesalers/retailers Tiles….. Difficult t
Slide 19: Iluka's Production Response
Iluka’s Production Response For personal use only • Consistent with Iluka’s preferred approach and capacity to flex production • Able to increase production rapidly as demand recovers • Emphasis on zircon production flexibility • Appropriate rutile and SR adjustments • Higher unit cash costs not mat
Slide 20: Z/R/SR Production
Z/R/SR Production Physicals, Unit Cash Cost & Unit Revenue For personal use only • 1H 2012 cash cost per tonne of Z/R/SR produced - $709 (2011: $542) • 1H 2012 revenue per tonne of Z/R/SR sold - $2255 (2011:$1087) - based on weighted average prices of: Z ~US$2500, R ~US$2400, SR ~US$1900 20
Slide 21: Zircon Production Response
Zircon Production Response For personal use only • Mine in low grade sections of J-A deposits Jacinth-Ambrosia mine paths • Sustainable until at least 2014 • Stockpile HMC at site • Campaign HMC at Narngulu, WA • No J-A HMC at Hamilton, Victoria • Expected Group 2H 2012 production of ~120 kt (full y
Slide 22: High Grade Titanium Dioxide Market Conditions
High Grade Titanium Dioxide Market Conditions 1H 2012 For personal use only • Strong high grade feedstock demand in 1Q; softened in 2Q - Iluka’s volumes matched contractual arrangements in 1H • Pigment producers now concerned about pigment inventories • Some switching to lower grade feedstocks to re
Slide 23: Chloride Pigment Industry Utilisation
Chloride Pigment Industry Utilisation 1990 – 2010 For personal use only Source: TZMI, Global Insight • Pigment plant utilisation expected to have increased in 2011/1H 2012 • Reduction in plant utilisation (and changes in feedstock blends) occurring now in context of higher pigment inventories/softer
Slide 24: Titanium Dioxide Production Response
Titanium Dioxide Production Response For personal use only • Reduction in feed rates at SR kiln 2 - utilise for new product trial work • Defer reactivation of SR kiln 1 (originally planned for 4Q 2012) • Reactivation of additional 1 to 2 kilns, when required: - ~4 months lead time for SR1 given curr
Slide 25: Cash Costs and Capital Expenditure
Cash Costs and Capital Expenditure For personal use only 2H 2012 Full Year Guidance1 1H 2012 Actual Estimate Estimate Total cash costs $m ~670 315 ~300 ~615 Unit cash costs Z/R/SR $/t ~700 709 ~790 ~750 Unit revenue Z/R/SR $/t not guided 2255 not guided not guided Capital expenditure $m ~260 123 ~60
Slide 26: Zircon – Intensity of Use Increases
Zircon – Intensity of Use Increases Dominated by Developing Economies For personal use only Developing Economies >80% of Tile Market Developing Economies Higher Usage (Intensity) of Tiles Top Tile Consumers % Usage of Ceramics as Flooring Type vs other Flooring Types 2010 Total = 9.4 billion sqm til
Slide 27: Zircon Market Development
Zircon Market Development For personal use only • Iluka progressing with customers the creation an industry association • Supporting traditional uses and seeking new applications for zircon - unique physical and chemical properties of zircon and zirconium chemicals • Focus on developing new zircon p
Slide 28: Pigment Per Capita Consumption by Region 2011
Pigment Per Capita Consumption by Region 2011 For personal use only Source: TZMI, Global Insight 28
Slide 29: Titanium Product Development
Titanium Product Development For personal use only • New pigment feedstock products - high grade sulphate - sulphate ilmenite ex Murray Basin - SR Ultra • Enhanced product offerings for niche markets - welding - ferro-titanium • Ilmenite upgrading technologies 29
Slide 30: Exploration
Exploration For personal use only • Objective: discover and develop tier 1 and tier 2 deposits • Well funded and technically capable exploration programme - 35 geologists; >200 years mineral sands experience - ownership of extensive tenements and resources - annual exploration spend of ~$35m (up fro
Slide 31: Enhanced Production Potential
Enhanced Production Potential For personal use only • 12 internal production options being assessed • 4 additional projects at feasibility stage - 14 projects located in Australia - 2 projects located in USA • Typical development characteristics - can be integrated with existing infrastructure - low
Slide 32: Areas of Focus
Areas of Focus For personal use only • Manage business for optimum mix of efficiency and flexibility • Position company to benefit from increased sales volumes as demand recovers - as in 2009 – 2011 • Progress longer term growth options, including: - exploration - project studies - product and techn
Slide 33: Supplementary Slides
For personal use only Supplementary Slides
Slide 34: Reconciliation of Non-IFRS Financial Information to Profit before Tax
Reconciliation of Non-IFRS Financial Information to Profit before Tax For personal use only Non-IFRS financial measures of Mineral sands EBITDA, Mineral sands EBIT, Group EBITDA and Group EBIT are highlighted in the table below, together with profit before tax. Exploration Mineral AUS US & Other San
Slide 35: Mineral Sands Results
Mineral Sands Results For personal use only $m 1H 2012 1H 2011 % change Mineral sands revenue 662.8 570.2 16.2 Australia 469.9 270.5 73.7 United States 30.4 34.2 (11.1) Exploration and other (20.1) (18.0) (11.7) Total mineral sands EBITDA 480.2 286.7 67.5 Depreciation and amortisation (105.0) (94.6)
Slide 36: 1H 2012 Cash Flow and Net Debt
1H 2012 Cash Flow and Net Debt For personal use only 1H 2012 vs 1H 2011 $m 1H 2012 1H 2011 2H 2011 % change Opening net debt 156.7 (312.6) (171.0) 150.1 Operating cash flow 207.2 212.7 493.5 (2.6) MAC royalty 36.8 42.8 47.5 (14.0) Exploration (14.9) (8.9) (14.7) (67.4) Net interest 4.2 (10.4) (0.5)
Slide 37: Unit Cash Costs and Revenue/tonne
Unit Cash Costs and Revenue/tonne For personal use only 1H 2012 1H 2011 % change Total Z/R/SR production kt 443.8 575.5 (22.9) Ilmenite – saleable kt 214.7 228.9 (6.2) Total saleable production kt 658.5 804.4 (18.1) Total cash costs of production $m 314.7 311.8 (0.9) Unit cash cost per tonne of Z/R/
Slide 38: Capital and Exploration Expenditure (cash)
Capital and Exploration Expenditure (cash) For personal use only $m 1H 2012 1H 2011 % change Capital expenditure 122.5 48.7 151.5 Exploration 14.9 8.9 67.4 Total 137.4 57.6 138.5 38
Slide 39: Production Volumes
Production Volumes For personal use only kt 1H 2012 1H 2011 % change Zircon 209.0 285.7 (26.8) Rutile 103.6 136.8 (24.3) Synthetic rutile 131.2 153.0 (14.2) Total Z/R/SR production 443.8 575.5 (22.9) Ilmenite – saleable 214.7 228.9 (6.2) Total saleable production volume 658.5 804.4 (18.1) Ilmenite –
Slide 40: Sales Volumes
Sales Volumes For personal use only kt 1H 2012 1H 2011 % change Zircon 87.4 252.5 (65.4) Rutile 85.4 107.8 (20.8) Synthetic rutile 101.1 138.3 (26.9) Total Z/R/SR 273.9 498.6 (45.1) Ilmenite – saleable 218.9 261.1 (16.2) Total sales volumes 492.8 759.7 (35.1) 40
Slide 41: Segment Results
Segment Results For personal use only The Australian Operations are managed as an integrated business. As such, for statutory reporting purposes, Murray Basin, Eucla/Perth Basin are reported as a single entity. For the purposes of providing some insight into the features of the individual Basins (Pe
Slide 42: Australian Operations
Australian Operations For personal use only 1H 2012 1H 2011 % change Production volumes Zircon kt 181.4 258.3 (29.8) Rutile kt 103.6 136.8 (24.3) Synthetic rutile kt 131.2 153.0 (14.2) Ilmenite – saleable kt 119.6 82.5 45.0 Total saleable production kt 535.8 630.6 (15.0) Ilmenite – upgradeable to sy
Slide 43: Eucla / Perth Basin
Eucla / Perth Basin For personal use only 1H 2012 1H 2011 % change Production volumes Zircon kt 110.1 157.1 (29.9) Rutile kt 30.9 21.5 43.7 Synthetic rutile kt 131.2 153.0 (14.2) Ilmenite – saleable kt 67.1 82.5 (18.7) Total saleable production kt 339.3 414.1 (18.1) Ilmenite – upgradeable to synthet
Slide 44: Murray Basin
Murray Basin For personal use only 1H 2012 1H 2011 % change Production volumes Zircon kt 71.3 101.2 (29.5) Rutile kt 72.7 115.3 (36.9) Ilmenite – saleable kt 52.5 - n/a Total saleable production kt 196.5 216.5 (9.2) Ilmenite – upgradeable to synthetic rutile kt 30.4 52.2 (41.8) HMC produced kt 157.9
Slide 45: US Operations
US Operations For personal use only 1H 2012 1H 2011 % change Production volumes Zircon kt 27.6 27.4 0.7 Ilmenite – saleable kt 95.1 146.4 (35.0) Total saleable production kt 122.7 173.8 (29.4) Ilmenite – upgradeable to synthetic rutile kt 12.2 - n/a HMC produced kt 156.1 253.5 (38.4) Unit cash cost
Slide 46: Iluka Resources Limited
For personal use only Iluka Resources Limited For further information, please contact: Robert Porter General Manager, Investor Relations robert.porter@iluka.com +61 3 9600 0807 / +61 (0) 407 391 829 www.iluka.com