Slide 1: 2011 Full Year Results
For personal use only 2011 Full Year Results Iluka Resources Limited David Robb, Managing Director Alan Tate, Chief Financial Officer 23 February 2012 1
Slide 2: Disclaimer
Disclaimer For personal use only Forward-looking Statements This presentation contains information that is based on projected and/or estimated expectations, assumptions and outcomes. These forward-looking statements are subject to a range of risk factors associated, but not exclusive, with potential
Slide 3: 2011 – Key Features
2011 – Key Features For personal use only • New Iluka = Group EBITDA ~$1.0bn, NPAT and FCF > $0.5bn, ROE > 40% • Balance sheet = net cash • Demonstration of total shareholder return focus via 55 cents final dividend (fully franked) • Excellent production performance within cash cost guidance - integ
Slide 4: Sustainability
Sustainability Safety For personal use only Total Recordable Injury Frequency Rate (TRIFR) Lost Time Injury Frequency Rate (LTIFR) 18 16.9 16 14 15.2 12 Frequency Rate 10 8 6 3.8 4 2 2.9 0 2010 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Year/Month - TRIFR rat
Slide 5: Main Features of Full Year Results
Main Features of Full Year Results For personal use only Mineral Sands Sales Volumes Z/R/SR sales down 4.0%; zircon sales up 7.5%, rutile sales up 10.8% SR sales down 28.9% Mineral Sands Revenue 75.7% - higher prices, higher Z/R volumes partially offset by higher AUD (103.2 vs 92 cents) Unit Cas
Slide 6: Iluka Dividend Payment
Iluka Dividend Payment For personal use only • 55 cents franked final dividend • Represents: - $230 million payment for final dividend - $314 million for full year • Full year dividend of 75 cents - 73.3% franked - full year payout ratio of 53% of free cash flow • Plan to pay out at least 40% of fre
Slide 7: Summary Group Results
Summary Group Results For personal use only $m 1H 2011 2H 2011 2011 2010 % change Mineral sands revenue 570.2 966.5 1,536.7 874.4 75.7 Mining Area C royalty 44.5 44.0 88.5 76.3 16.0 Group EBITDA 319.2 660.1 979.3 305.1 221.0 Depreciation and amortisation (94.6) (130.0) (224.6) (219.0) (2.6) Group EB
Slide 8: Group EBITDA 2011 versus 2010
Group EBITDA 2011 versus 2010 For personal use only ILUKA EBITDA 2011 vs 2010 $m 1,200 736.5 1,100 45.5 4.1 12.2 979.3 1,000 (84.4) (52.1) 13.7 900 800 700 600 500 64.3 400 305.1 300 (38.1) 200 100 0 2010 Mix Volume Price FX Ilm & Oth Unit costs Min Sand MAC Corp 2011 EBITDA Other EBITDA 8
Slide 9: Mineral Sands and Group EBITDA
Mineral Sands and Group EBITDA For personal use only $m 1100 1000 979.3 • Mineral sands EBITDA up 270% 900 800 • Higher-margin Jacinth-Ambrosia and 700 660.1 Murray Basin production 600 500 • Higher zircon and high-grade titanium 925.9 dioxide prices 400 319.2 639.2 305.1 300 200 286.7 250.2 100 0 1
Slide 10: Net Profit After Tax 2011 versus 2010
Net Profit After Tax 2011 versus 2010 For personal use only ILUKA NPAT 2011 vs 2010 $m 900 736.5 800 45.5 16.6 35.6 12.2 4.1 700 (52.1) (13.7) (84.4) (5.6) 600 541.8 500 (215.1) 400 300 200 64.3 100 36.1 (38.1) 0 2010 Mix Volume Price FX Ilm & Oth Unit costs Min Sand D&A Impair MAC Corp Interest Tax
Slide 11: Mining Area C Royalty
Mining Area C Royalty 2011 versus 2010 For personal use only 2011 2010 % change Annual production to 30 June (mdmt) 43.1 42.5 1.4 Sales volumes to 31 December (mdmt) 44.6 43.2 3.2 Royalty income ($m) 87.5 71.3 22.7 Capacity payments ($m) 1.0 5.0 (80.0) Iluka EBIT $m 88.1 75.9 16.1 • Iron ore sales v
Slide 12: Operating Cash Flow
Operating Cash Flow For personal use only $m 706.2 700 • Strengthening cash flow trend - increase in realised prices 600 500 493.5 • $217 million increase in working capital vs Dec 2011 - higher receivables due to higher prices 400 - higher inventory levels due to concentrate build re WRP move and l
Slide 13: Net Debt to Net Cash Movement
Net Debt to Net Cash Movement For personal use only $m ILUKA GROUP NET DEBT - 2011 600 90.3 500 706.2 (23.6) (10.9) 400 (12.5) 3.9 300 (142.5) (21.3) 200 (117.0) (3.3) 156.7 100 0 Opening Net Operating MAC Royalty Exploration Interest Tax Capex Asset sales Share Dividends FX on Debt Closing Net Debt
Slide 14: Sources and Uses of Funds 2002 - 2011
Sources and Uses of Funds 2002 - 2011 For personal use only $m Gearing (%) 800 50 600 38 400 25 200 13 - - (200) (13) (400) (25) (600) (38) (800) (50) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Cash from operations Disposals Equity issued Net debt drawn Net capex Acquisitions Dividends paid N
Slide 15: Z/R/SR Production
Z/R/SR Production Physicals and Unit Cash Cost of Production For personal use only $/t Kt 350 700 300 600 250 500 200 400 150 300 100 200 50 100 0 0 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Zircon Rutile SR Cash cost of production $/t Z/R/SR 15
Slide 16: Mineral Sands Revenue by Location of Customers
Mineral Sands Revenue by Location of Customers For personal use only 2010 2011 2012 (budget) Other Other Other China Asia China China Asia Asia North North America Europe North Europe America Europe America Regional % 2010 2011 2012 (budget) China 25 28 22 North America 25 21 27 Europe 20 29 27 Asia
Slide 17: Zircon Market Conditions
Zircon Market Conditions For personal use only • Strong first nine-months of zircon sales, but lower Q4 demand due to - global economic conditions and low confidence levels - credit availability issues - Chinese government policies (impact in sentiment-driven market) • Average zircon prices increase
Slide 18: Zircon Demand - Linked to GDP Growth and Urbanisation
Zircon Demand - Linked to GDP Growth and Urbanisation For personal use only “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 19: China Urbanisation
China Urbanisation For personal use only China’s tiered City Structure: 2005 - 2025 • Number of tier 1 – 3 cities increase from 45 to 147 • 352 million people relocate to urban areas • Equivalent to the total population of: – Australia x 16 times – UK x 6 times – US 19 Source: McKinsey & Company (20
Slide 20: China Total Floor Space
China Total Floor Space For personal use only • By 2025, total urban residential floor space may be double that of 2010 level • Social housing is expected to account for 32% of the total floor space completed between 2011 to 2015 20 Source: Global Insight (2011), BHP (2011), RBS (2012)
Slide 21: China Urban Floor Space per Capita
China Urban Floor Space per Capita For personal use only US 2010: 73sqm/urban capita • Although total urban residential floor space may double by 2025, China urban residential floor Taiwan 2008: 43sqm/urban capita space per capita will still be low • By 2025, China urban residential floor space per
Slide 22: Ceramic Floor Tile Share of Floor Coverings
Ceramic Floor Tile Share of Floor Coverings For personal use only % Usage of Ceramics as Flooring Type vs other Flooring Types by Geography 74% 52% 49% 40% 33% 27% 16% 17% 11% 10% 7% World Germany Western Eastern US North Central Japan China Asia Africa Avg Europe Europe America & Sth Pacific Middle
Slide 23: China Tile Consumption
China Tile Consumption For personal use only Extrapolation based on historical CAGRs •2000 – 2010 China Tile Consumption CAGR = 10% •2000 – 2010 World Tile Consumption CAGR = 7% • China’s tile consumption has grown at a CAGR of 10% in the past decade, from 27% of global consumption in 2000 to 37% in
Slide 24: Tile Consumption - Dominated by Developing Economies
Tile Consumption - Dominated by Developing Economies For personal use only Global GDP Growth Rate (Real) Top Tile Consumers 5.0% (CAGR per annum) 2010 Total = 9.4 billion sqm tile 4.5% Oceania 0% Other Europe 23% 4.0% Africa 5% 6% 3.5% 5% 5% EU Other 3.0% 9% North 10% America Asia Vietnam 2.5% 4% 65
Slide 25: High Grade Titanium Dioxide Market Conditions
High Grade Titanium Dioxide Market Conditions For personal use only • Demand for high-grade titanium dioxide feedstocks robust in 2011 - slight seasonal moderation in Q4 and lower China demand for imported pigment - some slowing in welding sector at year end • Iluka contracted majority of 2012 high-
Slide 26: Pigment Demand Intensity - Linked to GDP Growth
Pigment Demand Intensity - Linked to GDP Growth For personal use only Kgs per Capita Pigment: 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) USA (19
Slide 27: Mineral Sands Market Approach
Mineral Sands Market Approach For personal use only • Favourable medium-term supply/demand characteristics for both zircon and high-grade TiO2 • Few high-quality, capital-efficient, quick-response industry supply options - most projects in early feasibility phase rather than commitment stage - typic
Slide 28: Enhanced Production Project
Enhanced Production Project For personal use only • Iluka’s production enhancement options are extensive and, in aggregate, significant - 11 subject to detailed evaluation • Production options subject to funding and internal evaluation - project management group resources increased - project managem
Slide 29: Zircon Production Scenarios
Zircon Production Scenarios For personal use only • 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, exploration success or technological imp
Slide 30: Rutile Production Scenarios
Rutile Production Scenarios For personal use only • 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, exploration success or technological imp
Slide 31: Key Physical & Financial Parameters: 2012 Physical Trends
Key Physical & Financial Parameters 2012 Physical Trends For personal use only 2011 2012 Commentary Guidance Production (kt) Zircon 601 ~500 Lower 2012 production reflects Iluka’s decision to flex production in light of potentially lower short term demand. A rapid production increase capability exis
Slide 32: Key Physical & Financial Parameters: 2012 Financial Trends
Key Physical & Financial Parameters 2012 Financial Trends For personal use only 2011 2012 Commentary Guidance Cash Costs A$m Production 629 ~670 Reflects cost inflation, recommencement of mining at Eneabba), higher transportation costs for Murray rd costs Basin and expenditure associated with 3 kiln
Slide 33: 2012 Areas of Focus
2012 Areas of Focus For personal use only • Operate safely and in a sustainable manner • Navigate short-term market volatility • Pursue capital-efficient, cost-competitive and disciplined supply enhancement options - in the context of favourable medium-term market dynamics • Continue to evolve marke
Slide 34: Supplementary Slides
For personal use only Supplementary Slides
Slide 35: Reconciliation of Non-IFRS Financial Information to Profit before Tax
Reconciliation of Non-IFRS Financial Information to Profit before Tax For personal use only Non-IFRS financial measures of Mineral sands EBITDA, Mineral sands EBIT, Group EBITDA and Group EBIT are highlighted in the table below, together with profit before tax. Exploration Mineral E/PB MB US & Other
Slide 36: NPAT and ROE Historical trend 2000 to 2011
NPAT and ROE Historical trend 2000 to 2011 For personal use only A$m % 600 60 500 50 400 40 300 30 200 20 100 10 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 -100 -10 -200 -20 NPAT ROE 36
Slide 37: Mineral Sands Results
Mineral Sands Results For personal use only $m 1H 2011 2H 2011 2011 2010 % change Mineral sands revenue 570.2 966.5 1,536.7 874.4 75.7 Eucla / Perth Basin 151.6 348.1 499.7 119.8 317.1 Murray Basin 118.9 289.3 408.2 113.9 258.5 US operation 34.2 17.7 51.9 40.2 29.2 Exploration and other (18.0) (15.9
Slide 38: 2011 Cash Flow and Net Debt
2011 Cash Flow and Net Debt For personal use only $m 1H 2011 2H 2011 2011 2010 % change Opening net debt (312.6) (171.0) (312.6) (382.1) 18.2 Operating cash flow 212.7 493.5 706.2 163.6 331.7 MAC royalty 42.8 47.5 90.3 63.9 41.3 Exploration (8.9) (14.7) (23.6) (17.9) (31.8) Net interest (10.4) (0.5)
Slide 39: Capital and Exploration Expenditure (cash)
Capital and Exploration Expenditure (cash) For personal use only $m 2011 2010 % change Capital expenditure (142.5) (117.2) (21.6) Exploration (23.6) (17.9) (31.8) Total (166.1) (135.1) 22.9 39
Slide 40: Ore Reserves 2011
Ore Reserves 2011 For personal use only Summary Ore Reserves In Situ Heavy Mineral Tonnes (millions) Opening reserves 2011 27.00 Production/depletions (3.40) New ore reserves/ddjustments 6.84 Closing ore reserves – end 2011 30.44 Ore reserves net change 3.44 Refer Iluka ASX Release 23 February for d
Slide 41: Mineral Resources 2011
Mineral Resources 2011 For personal use only Min eral Reso urces In Situ Heavy Mineral T onnes (millions) Opening resou rces 2011 114.06 Production/depletions (3.40) New mineral resources/adjustments 10.14 Closing mineral resources – end 2011 120.80 Mineral resources net change 6.74 Refer Iluka ASX
Slide 42: 2011 Production Volumes
2011 Production Volumes For personal use only (kt) 2011 2010 % change Zircon 601.5 412.9 45.7 Rutile 281.3 250.1 12.5 Synthetic rutile 285.7 347.5 (17.8) Ilmenite - saleable 459.7 469.0 (2.0) Ilmenite - upgradeable 201.9 215.9 (6.5) 42
Slide 43: Unit Cash Costs & Revenue/tonne
Unit Cash Costs & Revenue/tonne 2011 versus 2010 For personal use only 2011 2010 % change Zircon / rutile / synthetic rutile production (kt) 1,168.5 1,010.5 15.6 Saleable ilmenite (kt) 459.7 469.0 (2.0) Final product produced (kt) 1,628.2 1,479.5 10.1 Total cash cost ($m) 628.9 543.8 15.6 Cash cost
Slide 44: Eucla / Perth Basins
Eucla / Perth Basins 2011 versus 2010 For personal use only $m 2011 2010 % change Sales revenue $m 829.2 468.6 76.9 Total cash production costs $m (334.7) (306.6) (9.2) Depreciation and amortisation $m (64.0) (86.1) 25.7 Inventory movements $m 27.7 (9.5) 391.6 Cost of goods sold $m (371.0) (402.2) 7
Slide 45: Murray Basin
Murray Basin 2011 versus 2010 For personal use only 2011 2010 % change Sales revenue $m 571.6 281.5 103.1 Total cash production costs $m (239.8) (183.9) (30.4) Depreciation and amortisation $m (147.4) (113.0) (30.4) Inventory movements $m 112.7 32.3 248.9 Cost of goods sold $m (274.5) (264.6) (3.7)
Slide 46: US Operations
US Operations 2011 versus 2010 For personal use only 2011 2010 % change Sales revenue $m 135.9 124.3 9.4 Total cash production costs $m (54.4) (53.3) (2.1) Depreciation and amortisation $m (10.4) (17.0) 38.8 Inventory movements $m 7.3 (25.7) 128.4 Cost of goods sold $m (57.5) (96.0) 40.1 Other costs
Slide 47: China Zircon Imports
China Zircon Imports Iluka Analysis of Chinese Import Data – to end December 2011 For personal use only • Iluka estimates 2011 total China imports of zircon-sand equivalent material was • ~ 673 thousand tonnes • This compares with 2010 total imports estimated of 595 thousand tonnes (sand-equivalent)
Slide 48: Iluka Resources Limited contact
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