Iluka Resources Limited · ASX:ILU
Iluka Resources — Investor Presentation (June 2015)
29 slides from Iluka Resources's investor presentation, June 2015
Slide 1: Investment Market Presentation June 2015
Iluka Resources Limited Investment Market Presentation June 2015 Dr Robert Porter General Manager, Investor Relations Iluka Resources Limited (ASX: ILU)
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: Objective – create and deliver value for shareholders
Iluka Resources Limited Objective – create and deliver value for shareholders • ~A$3.4bn market capitalisation; 6th ranked Australian resource company • Leading position in international mineral sands industry ‒ largest producer of zircon – one third market share ‒ significant high grade titanium di
Slide 4: Mining Area C Iron Ore Royalty
Mining Area C Iron Ore Royalty • World class, long life, low risk future cash flow stream through “life of resource“ royalty • Royalty over iron ore produced from specific tenements of BHP Billiton’s Mining Area C (MAC) province in Western Australia, consisting of: ‒ 1.25 % of free-on-board sales re
Slide 5: Iluka's Business Approach
Iluka’s Business Approach • Shareholder and financial focus ‒ return on capital as an internal proxy for return on equity ‒ maintain a robust balance sheet ‒ track record of returning excess funds to shareholders ‒ capital efficient project development and growth • Market demand/supply response appr
Slide 6: Mineral Sands Industry Characteristics
Mineral Sands Industry Characteristics • Relatively consolidated industry structure ‒ top 3 producers account for ~2/3rds of production of zircon and titanium • Industry dynamics include the following challenges ‒ medium to longer term supply challenge ‒ significant capital required to sustain produ
Slide 7: Zircon Applications
Zircon Applications Zirconia, Zirconium Chemicals Ceramics Refractory and Foundry and Metal ~50% of demand ~30% of demand ~20% of demand Zircon has many unique properties Zircon is opaque, water, chemical and Zircon is heat resistant and non-reactive Uses include fibre optics, abrasion resistant Use
Slide 8: Titanium Applications
Titanium Applications Pigment Titanium Metal Welding (flux) ~90% of demand ~6% of demand ~4% of demand Nanomaterials Growing market Titanium metal has high strength to Titanium dioxide pigment is opaque weight ratio and is corrosion resistant. Uses include solar cells, water (white), UV resistant an
Slide 9: Favourable Demand Fundamentals
Favourable Demand Fundamentals Urbanisation Consumption based growth Array of applications MINERAL SANDS mid-to-late cycle demand characteristics; consumption / GDP related 9
Slide 10: Iluka Areas of Focus
Iluka Areas of Focus FINANCIAL FOCUS Growth Options / Focus Areas Marketing and Projects Exploration Innovation and Other Growth Market Development Mineral Sands Mineral Sands / Other Technology Options Commodities Potential Acquisitions, Mergers and Joint Ventures Where financial and strategic meri
Slide 11: Balance Sheet
Balance Sheet • Strong and flexible balance sheet - low net debt /low gearing – significant funding capacity • Total facilities of A$925 million, majority maturing 2019 • Bilateral arrangements – common terms, flexibility, “caveat light” – low cost (weighted floating interest rate of 3.1% in 2014) 1
Slide 12: Dividends and Franking
Dividends and Franking • 2014 - 19 cents full year dividend, fully franked • 40% of full year free cash flow • Cumulative 68% free cash flow payout ratio since end of 2010 – $610 million returned to shareholders, 146 cents per share – gearing reduced from 21.8% to 3.9% over the period Distribution M
Slide 13: Production Reflects Market Conditions
Production Reflects Market Conditions • Z/R/SR production adjusted in light of lower demand since 2012 • Production materially lower than ‘high cycle’ levels • Iluka prepared to cede zircon market share in attempt to maintain profitable margins • Iluka has rapid reactivation capacity – recommencemen
Slide 14: Production Cash Costs
Production Cash Costs • Cost reduction focus during period of lower production; total cash costs materially lower, some unit cash cost inefficiencies given fixed cost component • Z/R/SR revenues 2010-14 averaged A$1,200/t vs average unit cash cost of A$690/t • Improving unit cash costs and margins e
Slide 15: Inventory – Cash Flow Potential
Inventory – Cash Flow Potential $m 900 FY Movement 800 700 600 $68.3m 500 400 300 200 $83.4m 100 0 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Work in Progress Finished Goods • Significant inventory build in advance of production reductions – willin
Slide 16: 2014 Results - Key Features
2014 Results - Key Features • Revenue of $724 million (previous 4 year average $977 million) • Net loss of $62.5 million (previous 4 year average $240 million NPAT) – non-cash adjustment of A$86.5 million related to wind down of US operations • Free cash flow generation of $196 million1 (previous 4
Slide 17: 2015 - Potential Financial Characteristics
2015 - Potential Financial Characteristics Based on Iluka’s Key Physical and Financial parameters disclosed 19 February 2015: • Higher production of main products compared with 2014 – Z/R/SR production guided up ~27% compared with 2014 • Z/R/SR sales in aggregate may exceed production – 2014 Z/R/SR
Slide 18: Integrated and Flexible Operations
Integrated and Flexible Operations 18
Slide 19: Marketing and Market Development
Marketing and Market Development • Differentiated marketing and sales capability: – expansive market presence and logistics flexibility – dedicated zircon and titanium dioxide sales teams – market and industry analysis • Commitment to product quality and consistency – all products in 2014 delivered
Slide 20: Projects – Mineral Sands
Projects – Mineral Sands Balranald, Murray Basin Eucla Basin Satellite Deposits, South Australia Cataby, Western Australia Puttalam, Sri Lanka 20
Slide 21: Exploration
Exploration • Consistent investment commitment - ~$20 million per annum • Mineral sands exploration in Australia − large tenement positions in existing and prospective producing basins • Increasing international focus − Sri Lanka, Kazakhstan, Brazil, Denmark, US • Targeting ‘adjacent’ commodities on
Slide 22: Innovation and Technology
Innovation and Technology • Industry specific technical expertise, self-sufficiency critical to success • Ongoing commitment to enhancing Iluka’s technical expertise ‒ processing and production capabilities ‒ enhance and optimise use of synthetic rutile infrastructure ‒ marketing, product developmen
Slide 23: Metalysis – Potentially Disruptive Technology
Metalysis – Potentially Disruptive Technology • Iluka equity holding of 18.3%, acquired in 2014 for $22.5 million – right to increase up to 24.9% in event of IPO • Potential revolutionise metal processing, including Ti metal – cost-effective and simple – transformational products using customised Ti
Slide 24: Metalysis – Benefits to Traditional Process
Metalysis – Benefits to Traditional Process • Low energy requirements – Kroll process requires melting of Ti metal at very high temperatures – benign reagents and no toxic by-products • Lower greenhouse gas emissions Conventional Multi-step Process to Powder (Kroll) Volume usage of high-value metal
Slide 25: Tapira, Brazil
Tapira, Brazil • Joint venture with Vale S.A.1 • Large, high grade titanium dioxide ore mineralisation – potential world scale titanium feedstock operation with significant rare earth elements • Phased approach to evaluation of opportunity and potential commercialisation • Iluka expertise contributi
Slide 26: Potential Acquisition of Kenmare Resources Plc
Potential Acquisition of Kenmare Resources Plc • Revised, non-binding proposal submitted • All-share exchange offer – Kenmare shareholders to receive 0.016 new Iluka shares for each Kenmare share [previous announced offer was 0.036 new Iluka shares] – subject to a number of pre-conditions • Iluka an
Slide 27: Investment Considerations - Iluka
Investment Considerations - Iluka • Shareholder value creation focus and capital discipline • Relatively favorable industry position and industry structure • Sound financial position at “low point” of cycle – +ve margins, cash flow, balance sheet • Margin and cash flow potential from demand recovery
Slide 28: Iluka Resources Limited
Iluka Resources Limited For more information contact: Dr Robert Porter, General Manager Investor Relations [email protected] +61 3 9225 5008 / +61 (0) 407 391 829 www.iluka.com
Slide 29: Potential Acquisition of Kenmare Plc – Important Notices
Potential Acquisition of Kenmare Plc IMPORTANT NOTICES The Directors of Iluka accept responsibility for the information contained in this announcement. To the best of their knowledge and belief (having taken all reasonable care to ensure that such is the case), the information contained in this anno