Iluka Resources Limited · ASX:ILU
Iluka Resources — Global Zircon Conference, Shenzhen, China May 2010
38 slides from Iluka Resources's conference presentation, May 26, 2010
Slide 1: Iluka Resources Limited – Global Zircon Conference, Shenzhen
Iluka Resources Limited Global Zircon Conference, Shenzhen, China May 2010 Robert Porter General Manager, Investor Relations Sydney, 26 May 2010 1 Information herein derived, in part, from TZ Minerals International and Beijing Ruidow International Global Zircon Conference, Shenzhen, China May 2010
Slide 2: Disclaimer – Forward Looking Statements
Disclaimer – Forward Looking Statements This presentation contains forward-looking statements that are subject to risk factors associated with exploring for, developing, mining, processing and sale of minerals. These forward-looking statements are subject to a range of risk factors associated, but n
Slide 3: Structure of Presentation
Structure of Presentation 1. Context of the Global Zircon Conference, Shenzhen, China May 2010 2. Zircon Usage in China 3. Iluka’s Market Presence in China 4. Views on Global Zircon Supply / Demand 3
Slide 4: Context of the Shenzhen Conference
Context of the Shenzhen Conference May 2010 • Annual China Zircon Conference - organised by TZMI and Beijing Ruidow - 220 delegates • Delegates included: - zircon sand consumers, suppliers, project proponents - representatives of major zircon global supplies (with and without facilities in China) -
Slide 5: Zircon Usage in China
Zircon Usage in China 5
Slide 6: Zircon Usage in China
Zircon Usage in China Jiang Dongmin General Manager of Zhengjiang Shenghua Biok Biology Co. Vice-Chairman of China Titanium Zirconium Hafnium Association Speaking at TZMI Mineral Sands Conference (Singapore) October 2009: “Zircon is an important strategic material for China’s modernization and defen
Slide 7: Chinese Zircon Sector
Chinese Zircon Sector Key Features • China is the largest global consumer of zircon sands - ~40% of global consumption - historical demand growth of 17.2% pa (1990-2008) • Predominantly import dependent - less than 10% of supply from Hainan Island - Australia and South Africa constitute 80% of suppl
Slide 8: Zircon End Use: Global vs China
Zircon End Use: Global vs China Chinese zircon consumption is more heavily weighted towards zirconia and zirconium chemical relative to global consumption Global Zircon Segments 2008 China Zircon Segments 2008 TV Glass Zirconia & 3% TV Glass Chemicals 6% 15% Zirconia & Chemicals 27% Foundry/Casting
Slide 9: China Zircon Industry
China Zircon Industry Tianjin Area Qingdao Area Zhangzhou Area Shanghai Area Xiamen Area Huangpu Area 9
Slide 10: Zircon Demand
Zircon Demand Consumption Accelerated by Developing/Urbanising Economies Global Zircon Consumption CAGR since 1990 is 3.4% while China’s CAGR is 17.2% Zircon Consumption Trends Zircon Demand Growth Rest of World vs China Growth • Demand 3.4% CAGR globally Zircon (kt) 1.4 • China demand CAGR of 17.2%
Slide 11: China Zircon Consumption
China Zircon Consumption Ceramics Data 2009 Ceramics 2009 Production Change Exports Change Floor & Wall Tiles 6.72 bn sq m 21.8% 6.8 million sqm 2.5% Sanitary Ware 177 million pieces 12.3% 4.8 million pieces -15.2% Household ceramics 20.4 billion pieces 30.6% 2.4 million -6.6% Features of China cera
Slide 12: Chinese Ceramic Sector
Chinese Ceramic Sector China Industry Participant Observations • “Hot” property market in 2009 • Real estate closely related to ceramics demand • China Government has not changed policy re steady/moderate growth • Industry challenges - world economy - sovereign debt - domestic purchasing power - pro
Slide 13: Chinese Zirconium Chemicals Sector
Chinese Zirconium Chemicals Sector • China the largest global manufacturer of zirconium oxychloride chemicals (ZOC) • Range of applications: ceramics, zirconium products, nuclear grade zirconium material • 2009 production of 110kt (2008: 140kt; 2007: 176kt) • China commissioning additional 2kt capac
Slide 14: Chemicals
Chemicals ZOC - Overview Zirconia has excellent hardness and imparts wear, fracture, impact and corrosion resistance. Zirconium is extremely corrosion resistant at high temperatures. Various other chemical uses. Ceramics 53.4% Gemstones+ Technical Ceramics Chemicals 7.4% Nuclear (Metal) Other Other
Slide 15: Chinese Share of Global Zircon Consumption
Chinese Share of Global Zircon Consumption China has grown from approximately 16% of global zircon consumption in 1998 to more than 40% in 2009 Global and Chinese Zircon Consumption '000 tonnes 1400 45% 1200 40% 35% 1000 30% 800 25% 600 20% 15% 400 10% 200 5% 0 0% 2000 2001 2002 2003 2004 2005 2006
Slide 16: Mineral Sands Market Outlook
Mineral Sands Market Outlook Increasing Importance of China China’s consumption of zircon expected to continue to grow based on a combination of rising per capita income and urbanisation • Chinese Government’s stated goal of quadrupling per capita GDP by 2020 (on 2000 levels) • McKinsey Consultants
Slide 17: China Ceramic Tiles Growth
China Ceramic Tiles Growth • By the end of 2008 China accounted for 40% of global ceramic tile production and close to 35% of consumption • The proportion of production of medium to high quality grade tiles in China continues to increase Chinese Ceramic Tiles million sqm 4000 3500 3000 2500 2000 150
Slide 18: China Tile Production Trends
Ceramics China Tile Production Trends % Chinese Tile Production (RHS) 0.2 40% 0.16 35% China Tile Produ Zircon kg / Tile (%of Total) 0.12 Global Zircon 30% Intensity of Use (LHS) 0.08 25% 0.04 20% 0 15% 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 • China’s new tile production during the 1990s
Slide 19: 2010 China Zircon Imports Comparison
2010 China Zircon Imports Comparison 2010 imports of zircon to China are at record levels Monthly China Import Comparison tonnes 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 07 Cum 08 Cum 09 Cum 10 Cum 19 Source: Iluka
Slide 20: Iluka's Market Presence in China
Iluka’s Market Presence in China 20
Slide 21: Importance of China to Iluka
Importance of China to Iluka • China represented more than 23% of Iluka’s total revenue in 2009: Iluka’s biggest single market • China represents more than 40% of global zircon consumption and will continue to grow more rapidly than other zircon markets. • Iluka now has a zircon market share of more
Slide 22: Iluka's Global Zircon Sales
Iluka’s Global Zircon Sales In 2009 China represented 55% of Iluka’s global zircon sales Iluka Zircon Sales to China % of Iluka Sales mt 600000 60% 500000 50% 400000 40% 300000 30% 200000 20% 100000 10% 0 0% 2004 2005 2006 2007 2008 2009 China Other Iluka Sales % China Sales 22 Source: Iluka data
Slide 23: Iluka Market Share in China
Iluka Market Share in China Iluka’s market share in China averaged ~35% in 2008 and 2009 Iluka China Zircon Market Share 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2004 2005 2006 2007 2008 2009 23 Source: Iluka analysis
Slide 24: Iluka Sales - Zircon
Iluka Sales - Zircon kt Zircon Sales 300 200 100 • Severe reduction in 1H 0 2009 sales, including Asia China Europe Americas Other China -100 1H 2008 2H 2008 1H 2009 2H 2009 Change (2H 2008 to 2H 2009) • China imports recovered in 2H 2009 Change • European market slow to Sales Volumes 1H 2H 1H 2H (2
Slide 25: Iluka's Zircon Production
Iluka’s Zircon Production Declining production from Iluka’s traditional ore bodies will be off-set from new production at Murray and Eucla Basins Most production from new projects: Murray and Eucla Basins Iluka Zircon Production 600 500 400 kt 300 200 100 0 2006 2007 2008 2009 2010 2011 Other MB Euc
Slide 26: Views on Global Zircon Supply / Demand
Views on Global Zircon Supply / Demand 26
Slide 27: 2005 – 2010 Global Supply and Demand
2005 – 2010 Global Supply and Demand • A tight market through to 2008 resulted in escalating zircon prices • Decline in production from major producers and Indonesia resulted in the zircon market falling into short supply through the course of 2008 • The Global Financial Crisis resulted in an over s
Slide 28: China Zircon Market 2010
China Zircon Market 2010 Demand - Jan + Feb ~ 40-50kt/month consumption (normally a very quiet period) - Mar + Apr ~ 40-50kt/month consumption - expect H1, 2010 to be near 250kt consumption - expect H2, 2010 to also be close to 250kt consumption Supply - total supply to end of March ~ 150kt China re
Slide 29: 2010 Supply
2010 Supply The global zircon market in 2010 will be tight: - a very strong end to 2009 - lower than expected production from major new projects - further declines in Indonesia production - limited Hainan production - demand far exceeding expectations at the start of 2010 - Europe and North American
Slide 30: Indonesia Zircon Supply
Indonesia Zircon Supply Indonesia zircon supply remains constrained by resource depletion and increased government control of mining activity Tonnes ('000) Chinese Zircon Imports from Indonesia 16 14 12 10 8 6 4 2 • - Nov Jul Jun Apr Jan Mar Aug Sep Feb Dec Oct May 2007 2008 2009 2010 30 Source: Ilu
Slide 31: Mineral Sands Market Conditions
Mineral Sands Market Conditions Zircon – 2010 • Zircon demand across all main markets rebounded strongly in first quarter − uncontracted bulk shipments to Europe − steady improvement in North American market − continued strong demand in China • Iluka advised customers of 1st of at least 2 price incr
Slide 32: Zircon Supply/Demand
Zircon Supply/Demand TZMI Perspective from Conference - Data not reproduced • Future growth in demand (ceramics and specialty applications) driven by China and emerging economies • No further decline in demand expected from developed economies but recovery expected to be gradual • 2012-2020 CAGR in
Slide 33: Zircon Supply / Demand
Zircon Supply / Demand TZMI Perspective from Conference - Data not reproduced • Zircon prices still have not surpassed real high in 1975 • TZMI view that Q2 price increases of US$20-50/tonnes have been passed through • 2nd half price increase they expect to be a similar magnitude to the high end of
Slide 34: Zircon Supply
Zircon Supply Iluka’s View - Supply Crunch Near Term? Zircon Supply • Few material new zircon sources Induced New Projects at 0%, 25% and 50% Zircon - primary contribution from existing suppliers price rises (on 2008 levels) • Even with advent of Jacinth-Ambrosia, relative 1800 ktpa industry zircon:
Slide 35: Industry Zircon:TiO2 Ratio
Industry Zircon:TiO2 Ratio Despite Advent of Jacinth-Ambrosia, Industry Z:TiO2 Ratio Remains Stable mt of TiO2 or Zircon Ratio t Zircon/t TiO2 7.0 0.35 TiO2 Historical Supply Zircon Historical Supply 6.0 0.3 Zircon/TiO2 Ratio All 5.0 Feedstock Producers 0.25 (including J-A) 4.0 0.2 3.0 0.15 Zircon/T
Slide 36: Iluka Outlook
Iluka Outlook Confluence of Positive Factors • Transition to high quality long life production operations almost complete • Additional high margin zircon and rutile production over the next 3 years • Tight industry supply conditions for high grade titanium dioxide and zircon − Iluka’s inducement ana
Slide 37: Closing Statement
Closing Slide Iluka Resources Limited Closing Statement For further information, contact: Robert Porter, General Manager, Investor Relations [email protected] +61 3 9225 5481 Iluka’s website www.iluka.com
Slide 38: Information has been drawn from the following presentations
Information has been drawn from the following presentations: − Huang Xinhong, Secretary General, China Ceramics Industry Association − Gavin Deiner, Senior Consultant, TZ Minerals International − Philip Murphy, Managing Director, TZ Minerals International − Jian Dongmin, GM Zhejiang Shenghua Biok Bi
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