Iluka Resources Limited · ASX:ILU
Iluka Resources — FY2005 Earnings Presentation
49 slides from Iluka Resources's earnings presentation, Feb 21, 2006
Slide 1: 2005 Full Year Results
2005 Full Year Results Iluka Resources Limited 21 February 2006 Mike Folwell – Chief Executive Officer David Grant – Chief Financial Officer Bill Bisset – Executive General Manager, Operations Victor Hugo – Executive General Manager, Sales & Marketing
Slide 2: Financial & Operational Overview
Mike Folwell Financial & Operational Overview
Slide 3: 2005 Summary of Key Financials
2005 Summary of Key Financials 2005 2004 % Change Sales Revenue $m 921.0 819.6 12.4 Reported (Loss) Profit $m (85.9) 94.8 n/a NPAT (after minority interests), 131.9 94.8 39.1 pre one-off charges $m1 One-off charges (pre-tax)1 (295.2) - - Operating Cash Flow $m2 227.0 227.9 - Return on Equity % (12.5
Slide 4: Portfolio Management & Impairment Write-downs
Portfolio Management & Impairment Write-downs § Total write-downs of $217.8m after tax § Florida/Georgia closure triggers $88.9m (after tax) write-down and provisions - $21.7m cash expenditure provision § Mid West, Western Australia, carrying value write-down - $67.3m (after tax) – non cash charge §
Slide 5: Overview of Iluka Production
Overview of Iluka Production Production K tonnes 2005 2004 % Change Rutile 174.1 149.3 16.6 § Significant price increases for Synthetic Rutile 529.6 495.9 6.8 zircon in 2005 & 2006 Ilmenite 1,592.2 1,402.3 13.5 § Moderate price increases for high Zircon 418.2 428.5 (2.4) TiO2 content products Coal 1
Slide 6: Operational Highlights
Operational Highlights New Developments § Mining operations commenced at Gingin (Mid West, WA) & Wagerup (South West, WA) § Douglas operations (Victoria) – 550k tonnes of HM ore mined & stockpiled; Wet Concentrator Plant being commissioned; Mineral Separation Plant expected to be completed & operati
Slide 7: Operational Highlights Cont'd
Operational Highlights Cont’d New Growth Opportunities § Tripitaka (JV) discovery & initial resource delineation of Jacinth & Ambrosia discoveries confirms major zircon province – Eucla Basin, South Australia § 7.9m tonnes of HM indicated resources for Jacinth & Ambrosia § zircon assemblages range f
Slide 8: Financial Performance
David Grant Financial Performance
Slide 9: Key Financials
Key Financials Consolidated $m 2005 2004 % Change Sales Revenue 921.0 819.6 12.4 EBITDA (pre one-off charges) 341.8 286.3 19.4 EBIT (pre one-off charges) 216.4 164.3 31.7 EBIT (after one-off charges) (78.8) 164.3 n/a NPAT (pre one-off charges) 131.9 94.8 39.1 Net (Loss) Profit After Tax (85.9) 94.8
Slide 10: Florida/Georgia One-Off Charges
Florida/Georgia One-Off Charges Write-down Components § Asset write-downs § Redundancy provisions A$111.1m § Accelerated rehabilitation costs § Consulting and other Tax credit on write-down A$22.2m (~20% tax rate) Net write-down after tax A$88.9m 10
Slide 11: Mid West, WA One-Off Charges
Mid West, WA One- Off Charges Pre write-down non-current assets $401.1m (Fair value acquisition accounting component - $105.3m) Impairment write-down amount: $96.1m pre-tax $67.3 after tax Post write-down non-current assets $305.0m Major Factors: § Increased mining and operating costs § Exclusion of
Slide 12: Murray Basin One-Off Charges
Murray Basin One- Off Charges Pre write-down non-current assets $537.2m (Fair value acquisition accounting component - $58.0m - RGC) Impairment write-down amount: $88.0m pre-tax $61.6 after tax Post write-down non-current assets $449.2m Major Factors: § Revised mine plan & higher operational costs §
Slide 13: Profit & Loss Summary
Profit & Loss Summary $m 2005 2004 Change Revenue 1 921.0 819.6 101.4 EBIT (before one-off charges) § Mineral Sands 101.7 103.9 (2.2) § Hedging 50.5 50.7 (0.2) § Narama Coal 15.4 11.3 4.1 § Iron Ore 23.1 8.7 14.4 § Asset Sales 38.1 1.2 36.9 § Other Earnings 10.4 7.6 2.8 § Unrecovered Corporate (22.8
Slide 14: Profit & Loss – Financing Costs Reconciliation
Profit & Loss – Financing Costs Reconciliation $m 2005 2004 Gross interest expense on debt 32.9 27.0 § Amortisation of deferred borrowing 0.5 0.3 costs § Less capitalisation of interest (13.1) (3.6) Net interest expense 20.3 23.7 Revaluation of 2003 - 8.8 Private Placement Notes1 Rehabilitation Cost
Slide 15: Year-on-Year Earnings Variance – 2005 vs 2004
15 10 30 50 70 90 -110 -90 -70 -50 -30 -10 110 130 150 170 190 210 A$M 2004 Net Profit 94.8 54.9 Selling Prices Asset Sales 28.6 US Notes 10.9 Mining Area C Net Profit After Tax 10.1 S. West Transition 9.5 FL/G Operating Perf. 20.4 FX on Sales 9.5 Tax Consolidation 5.4 Grade, Ass. & Other 41.6 NPAT
Slide 16: Operating Cash Flow
Operating Cash Flow $m 2005 2004 Opening Net Debt (404.4) (378.9) Operating Cash Flow 227.0 227.9 Capital Expenditure (341.9) (205.5) Proceeds 41.9 4.5 Dividends Paid (58.1) (52.1) Exchange Revaluation of Foreign Denominated (12.7) (0.3) Borrowings Debt Securitisation & Other (6.0) 0.0 (Increase) in
Slide 17: Segment Financial Information
Segment Financial Information 17
Slide 18: Operational Segment Information – WA Operations
Operational Segment Information – WA Operations % 2005 2004 Change Total Sales (kt) Rutile 69.6 70.2 (0.9) Ilmenite 341.6 343.0 (0.4) Synthetic Rutile 522.8 480.6 8.8 Zircon 269.0 281.2 (4.3) Other 33.2 39.9 17.1 Sales Revenue $m 621.7 574.4 8.2 EBIT before one-off charges (pre-hedging) 84.5 94.3 (1
Slide 19: WA Operations - Outlook
WA Operations - Outlook Revenue § Higher zircon production, mainly in Mid West (Adamson commencement and full year of Kelsey Jig’s tailings recovery) § Stable production of other main products, lower SR production § Higher zircon pricing § ~$12 million lower EBIT contribution from hedging year-on-ye
Slide 20: Operational Segment Information - CRL
Operational Segment Information - CRL 2005 2004 % Change Total Sales (kt) Rutile 72.7 58.6 24.1 Ilmenite 194.0 106.0 83.0 Zircon 53.2 39.9 33.3 Sales Revenue $m 118.8 80.9 46.6 EBIT (pre-hedging) 26.5 0.1 EBIT (post-hedging) 37.8 11.8 220.3 Asset Sales 2.4 (0.1) Total EBIT 40.2 11.7 243.6 Depreciati
Slide 21: CRL Operations - Outlook
CRL Operations - Outlook § Stable to moderate production growth (mainly ilmenite, rutile) § Higher zircon pricing § ~$7 million lower EBIT contribution from hedging year-on-year (at 76 cents) 21
Slide 22: Operational Segment Information – Florida/Georgia
Operational Segment Information – Florida/Georgia % 2005 2004 Change Total Sales (kt) Rutile 27.9 22.2 25.7 Ilmenite 32.4 33.6 (3.6) Zircon 29.6 27.8 6.5 Other – Leucoxene 33.9 30.1 12.6 Sales Revenue A$m 51.4 42.4 21.2 EBIT (excluding one-off charge) (37.7) (18.3) (106.0) EBIT (including one-off ch
Slide 23: USA Operations Review – Florida/Georgia
USA Operations Review – Florida/Georgia 2006 Outlook § Lower production profile § 2006 EBIT – US$11-13m loss § Estimated land sale proceeds of US$7-10m 23
Slide 24: Operational Segment Information – Virginia
Operational Segment Information – Virginia % 2005 2004 Change Total Sales (kt) Ilmenite 225.6 262.5 (14.1) Zircon 70.0 74.4 (5.9) Sales Revenue A$m 88.9 87.7 1.4 EBIT 28.4 27.9 1.8 Depreciation & Amortisation (9.0) (9.6) 6.2 Capital Expenditure1 (7.1) (5.3) (34.0) EBITDA/Sales (%) 42.1 42.8 (1.6) No
Slide 25: USA Operations Review - Virginia
USA Operations Review - Virginia 2006 Outlook § Production profile stable § Higher zircon pricing § Stable earnings contribution 25
Slide 26: 2006 Earnings Forecast
2006 Earnings Forecast $115m - $125m NPAT on a continuing business basis. § Assumes 76 cents A$/US$ § Excludes Florida/Georgia estimated loss US$11-13m § Excludes Florida/Georgia asset sales ~US$7-10m § Assumes 3rd quarter commencement of Douglas § Assumes minimal proceeds from asset sales (ex Flori
Slide 27: New Developments
Mike Folwell New Developments
Slide 28: Project Pipeline 2005 - 2009
Project Pipeline 2005 - 2009 Resources as at Expected 1st Jan 06 Mine Life Location Project Production Capex $m Mt of HM (years) In Production 2005 WA Wagerup (SW) Q2 2005 16 1.3 3 Gingin (MW) Q2 2005 39 2.0 3 Execution VIC Douglas 2H 2006 2831 17 10+ 2 Feasibility WA Adamson (MW) Q2 2006 7 0.4 3 Wa
Slide 29: Murray Basin – Douglas Project
Murray Basin – Douglas Project Operations § 12 months of contracted mining operations completed § Mining commenced at Bondi East deposit – move from Bondi Main § Wet Concentrator Plant commissioning – HM Concentrate produced § 2,000 tonnes § Mineral Separation Plant – under construction § Port of Po
Slide 30: Northern Murray Basin Development
Northern Murray Basin Development § Identified Northern Murray basin mineral deposits: § Ouyen (northwest Victoria) – Kulwin, Woornack, Rownack, Rainlover, Pirro (aka KWR) § Euston (southwest NSW) – Castaway, Kerribbe, Earl, Dispersion, Koolaman § Scoping studies completed on deposits in both areas
Slide 31: Northern Murray Basin Development
Northern Murray Basin Development § Kulwin deposit, Victoria to be the first developed mine § Highest rated NPV deposit § Test pit mine at Kulwin successfully demonstrated dewatering to allow dry mining below water table: § ~50% of Ouyen and Euston deposits below water table § Kulwin moving to DFS:
Slide 32: Eucla Basin
Eucla Basin Major Emerging Zircon Province § Jacinth and Ambrosia discoveries delineated indicated resource of 7.9m tonnes of HM § zircon assemblage of up to 55% § Tripitaka discovery with Adelaide Resources Ltd (2005) § lower grade but excellent zircon assemblages 65% to 68% § Zircon: titanium mine
Slide 33: Eucla Basin Key Planning Considerations
Eucla Basin Key Planning Considerations Pre-feasibility study underway – expected completion 2nd half of 2006 Key Planning Considerations § Multiple mine developments over potentially many years (15+) § Project economics – scoping based on range of scenarios: § production commencement and ramp-up §
Slide 34: Market Review and Outlook
Market Review and Outlook Victor Hugo
Slide 35: Market Review and Outlook - TiO2 Feedstocks
Market Review and Outlook - TiO2 Feedstocks § TiO2 pigment - major market (93% consumption) § Pigment production increased by modest 1% in 2005 § Largely driven by increased production in China (up 20%) § North America (largest market) down 6% § Western Europe was flat, but growth in E. Europe § Asi
Slide 36: Other TiO2 Feedstocks Markets
Other TiO2 Feedstocks Markets § Titanium metal market very strong in 2005 § Strong demand for Titanium sponge: § strategic inventories have been sold down § Strong growth in aerospace and industrial demand § New sponge capacity coming on stream in 2007 § Welding industries also strong, driven by glo
Slide 37: TiO2 Feedstock Outlook
TiO2 Feedstock Outlook § Iluka has concluded all its negotiations for 2006 § Remain fully sold for all high grade TiO2 feedstocks § Achieved price increases in 2006 (up 2–5 %) § TiO2 feedstocks will move to oversupply position in 2006 § New project start-up in Sierra Leone, Murray Basin § Increased
Slide 38: Market Review and Outlook - Zircon
Market Review and Outlook - Zircon § Market demand remains very strong from all sectors and regions § Demand largely driven by China and rest of Asia § Supply remains very tight due to delay of some projects and flat/declining output from existing producers § Iluka’s higher production in 2006 will a
Slide 39: Outlook
Outlook § Continued favourable market dynamics § Continued challenge with grade decline/higher operational costs in Western Australia: § Redoubled “continuous improvement” effort § Partial mitigation from new mine developments § Improved contribution in 06 from US operations as Florida/Georgia close
Slide 40: Supplementary Information
Supplementary Information 40
Slide 41: Production & Sales 2005 vs 2004
Production & Sales 2005 vs 2004 2005 2004 Rutile production 174.1 149.3 Rutile sales 170.1 150.9 SR production 529.6 495.9 SR sales 522.8 480.6 Ilmenite production 1,592.2 1,402.3 Ilmenite sales 793.7 745.0 Zircon production 418.2 428.5 Zircon sales 421.8 423.6 Leucoxene/Hyti production 58.4 60.4 Le
Slide 42: Profit from Asset Sales (2005)
Profit from Asset Sales (2005) Segment $m EBIT NPAT Allocation Mundijong WA (2nd Half) 12.3 11.9 WA Other WA Properties 4.0 2.9 WA Pinkenba QLD (2nd Half) 2.4 0.8 CRL Snapper VIC (1st Half) 3.1 3.0 WA Nardell NSW (2nd Half) 14.8 9.7 NSW Other 1.5 1.5 WA 38.1 29.8 In addition to the above, Iluka rece
Slide 43: Capital Expenditure & Investments
Capital Expenditure & Investments $m 2005 2004 Western Australia 93.2 69.3 Murray Basin Stage 1 190.1 78.0 Northern Murray Basin 10.3 2.8 USA 22.8 23.9 CRL 7.4 22.3 Eucla Basin 3.2 - Coal 7.0 4.2 Other 7.9 5.0 Total1 341.9 205.5 2006 capital expenditure is estimated at $290m Note 1: These amounts va
Slide 44: Exploration Expenditure
Exploration Expenditure $m 2005 2004 Gross Expenditure 21.6 14.0 Amortisation of previously 1.0 1.3 Capitalised Expenditure Capitalised (14.2) (8.4) Reclassified to cost of goods sold (0.1) (0.6) Expensed Expenditure 8.3 6.3 44
Slide 45: Hedging Profile
Hedging Profile 2006 2007 2008 Iluka Hedged $US 67.0 71.0 Average Cash Rate 0.5779 0.5804 CRL Hedged $US 42.0 18.5 6.5 Average Cash Rate 0.7006 0.7018 0.6494 Total Hedged Group 109.0 89.5 6.5 Group Average Cash Rate 0.6197 0.6019 0.6494 2006 sensitivity to +1 cent movement in $ vs US$ = ~+$5m at NPA
Slide 46: Lending Facilities as at 31 December 2005
Lending Facilities as at 31 December 2005 Facility Drawn Rate % Iluka US$m 1996 Private Placement 105.0 105.0 7.5 2003 Private Placement 100.0 100.0 5.1 Multilateral Bank Facility 130.0 85.4 6.1 Bilateral Bank Facilities 80.0 59.7 6.1 Receivables Acquisition Facility 60.0 31.4 4.6 Iluka A$m Trade Fi
Slide 47: Iluka 2006 Calendar of Events
Iluka 2006 Calendar of Events 20 April 2006 - Full year dividend payment (Record date 6 April 2006) 20 April 2006 - Quarterly Production & Exploration Report 11 May 2006 - Annual General Meeting (Sydney) 20 July 2006 - Quarterly Production & Exploration Report 24 August 2006 - Half year results anno
Slide 48: For further details, please contact
For further details, please contact: Dr Robert Porter General Manager Investor Relations Tel: 61 8 9360 4751 Fax: 61 8 9360 4336 Email: [email protected] Website: [email protected] 48
Slide 49: Disclaimer and Important Notice
Disclaimer and Important Notice This presentation contains forward-looking statements that are subject to risk factors associated with the mining, processing and sale of minerals. Forward- looking statements include those containing such words as anticipate, estimates, should, will, expects, plans o