Iluka Resources Limited · ASX:ILU
Iluka Resources — UBS 10th Annual Australian Resources and Energy Conference 2012
26 slides from Iluka Resources's conference presentation, Jun 13, 2012
Slide 1: Iluka Resources Limited
Iluka Resources Limited UBS 10th Annual Australian Resources and Energy Conference Victor Hugo, General Manager – Product and Technical Development 13 June 2012 1
Slide 2: Disclaimer
Disclaimer 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 changes in: • exchang
Slide 3: Investment Proposition
Investment Proposition • Earnings growth - 2011 $541 million - “consensus” and higher revenue/tonne – suggests appreciably higher in 2012 • Balanced geographic and product mix • Disciplined approach to production response in light of prevailing market conditions • Increased distributions - attractiv
Slide 4: Key Features of 2011 Results
Key Features of 2011 Results EBITDA Margin Increased to 65% Net Profit After Tax 1400% to $541.8 million Operating Cash Flow 330% to $706 million Free Cash Flow 870% to $589.6 million Return on Capital 54.9% versus 5.0% Return on Equity 42.5% versus 3.2% Net Cash/Net Debt $156.7 millio
Slide 5: Volume and Margin Trend
Volume and Margin Trend Production Kt $/t 350 2,100 300 1,800 250 1,500 200 1,200 150 900 100 600 50 300 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 Sales $/t Z/R/SR • 2011 EBITDA margin 65% • 2011 unit revenue of $1
Slide 6: Balanced Product Revenue Mix
Balanced Product Revenue Mix Zircon vs High Grade TiO2 Revenues 2010 2011 2012 (guidance) 36% 36% ~55% ~45% 64% 64% Zircon High-grade TiO2 / R / SR • Based on received 2010 and 2011 prices, 2012 sales guidance • Assumes 2012 beginning prices for full year 2012 • Excludes revenue from ilmenite, by-pr
Slide 7: Balanced Geographic Revenue Mix
Balanced Geographic Revenue Mix 2010 2011 2012 (guidance) Other Other Asia China Asia Other (other) China (other) China Asia (other) North North Europe Europe America Europe North America America Regional % 2010 2011 2012 Guidance China 25 28 22 North America 25 21 27 Europe 20 29 27 Asia (other) 19
Slide 8: Zircon Market Conditions
Zircon Market Conditions • Soft demand period - evidence of demand recovery across markets - Europe remains subdued but customer sand stocks almost exhausted • Iluka has flexed production in line with demand and will hold inventory as needed - inventory held close to customers • Pricing outcomes - e
Slide 9: Zircon - Favourable Long Term Dynamics
Zircon - Favourable Long Term Dynamics 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 tile by Geography Oceania 0% 74% Other Europe 23% Africa
Slide 10: China Urbanisation
China Urbanisation 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 Source: McKinsey & Company (2010), and CIA (2011) 10
Slide 11: China Total Floor Space
China Total Floor Space • By 2025, total urban residential floor space may double that of 2010 level • Social housing is expected to account for 32% of the total floor space completed between 2011 to 2015 Source: Global Insight (2011), BHP (2011), RBS (2012) 11
Slide 12: Zircon Sales
Zircon Sales kt 600 ∆ ∆ ∆ 7% ∆ 34% 115 515 ?% 500 481 % 479 ? ∆ ∆ -22% 400 400 378 384 387 -7% 369 359 327 316 300 ∆ -54% 223 200 100 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: TZMI, Iluka. Iluka sales exclude CRL. 12
Slide 13: Titanium Dioxide Market Conditions
Titanium Dioxide Market Conditions • Evidence of sustained feedstock cost flow through - next challenge further downstream (e.g. paint manufacturers/retailers) - painting season impact in 2Q/3Q 2012 of importance to pigment demand • First half prices ~US$2400/tonne for rutile, ~US$2050/tonne for syn
Slide 14: Pigment Demand Intensity - Linked to GDP Growth
Pigment Demand Intensity - Linked to GDP Growth Kgs per Capita 7.0 USA 6.0 5.0 4.0 Europe 3.0 2.0 1.0 China 0.0 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 GDP per Capita (US$; real 1990 terms; at PPP) Europe (1993-2010) China (1993-2010) USA (1993-2010) • Developing countries’ intensity of pi
Slide 15: Mineral Sands – Principal Product Streams
Mineral Sands – Principal Product Streams Iluka opportunity to supply into sulphate feedstock market Global Mineral Sands Market Demand (Mt) Titanium Feedstocks 1 2011 = 6.7Mt 1.00 100% Rutile (95% TiO2) 0.90 90% Synthetic Rutile (SR) (90 - 95% TiO2) 0.80 80% Upgraded Chloride Slag (UGS) (95% TiO2)
Slide 16: Mineral Sands Market Characteristics
Mineral Sands Market Characteristics • Favourable medium-term supply/demand characteristics for both zircon and TiO2 • Market characteristics not immune to global macro-economic factors - economic growth, consumer spending, business confidence, credit availability • Physically small, volatile, direc
Slide 17: Exploration Commitment
Exploration Commitment • Increased exploration expenditure commitment 50% to >$35 million • International exploration programme • Ore Reserves 13% after 2011 depletions • Mineral Resources 6% after depletions and adjustments 17
Slide 18: Product and Technical Development
Product and Technical Development • 40 people within the team • Senior 10 members have over 185 years of mineral sands experience • Oversee technical development from exploration success to new products • Fully integrated in-house pilot plant facilities 18
Slide 19: Repositioned Ilmenites used in the Becher Process
Repositioned Ilmenites used in the Becher Process •1 Production of lower grade chloride SR (SR85) from Murray Basin ilmenite •2 Use of finer grained ilmenites in premium prade or SREP SR •3 Production of acid-soluble SR from Murray Basin ilmenite Low TiO2 High TiO2 Ilmenite Bubble Size = Contained I
Slide 20: Adding Value from Murray Basin Ilmenites
Adding Value from Murray Basin Ilmenites Until mid 2011 ~ HMC Non-mags Concentrate Wet Magnetic Rutile/Zircon MB Mining Heavy Mineral Separation To MSP Quartz Mine Ilmenite Tailings Tailings 2012 onwards HMC Non-mags Concentrate Wet Magnetic Rutile/Zircon MB Mining Heavy Minerals Separation To MSP I
Slide 21: TiO2 Product Development – Plan
TiO2 Product Development – Plan Use Virginia Ilmenite to expand product range Address markets where high purity (low U, Th, Al, Mg) is required SR3 plant trial in 2012 High end SR3 Ultra SR Coals VA ilmenite Chloride SREP (95% TiO2) Market Enhance quality to pull through low value ilmenites into SR
Slide 22: Enhanced Production Project
Enhanced Production Project • Multiple organic production enhancement options - extensive and, in aggregate, significant - predominantly brownfield opportunities - all located in Australia or United States • Several large projects in PFS/DFS progressing - Balranald (NSW), Cataby (WA), Aurelian (US)
Slide 23: Implications for Ilmenite Production and Kiln Operation
Implications for Ilmenite Production and Kiln Operation • Subject to the economics of zircon/rutile expansion options, Iluka has the potential to produce sufficient ilmenite to support 4 kiln operation • Additional chloride ilmenite available for expansion of upgrading capacity and sulphate ilmenite
Slide 24: Ilmenite Upgrading Development
Ilmenite Upgrading Development If Iluka were to consider a 5th upgrading plant what technology would we select? Development Path • Comparison between upgrading technologies • Support case for which technology would be most appropriate • Less constrained by ilmenite source – transport cost low in rel
Slide 25: Conclusions
Conclusions • Strong medium-term market fundamentals for TiO2 and zircon • Iluka maximising opportunities this brings through: - Exploration spend - Array of internal growth projects (EPP) - Capital efficiency and speed of implementation - Maximising production flexibility - Product and technical de
Slide 26: Iluka Resources Limited
Iluka Resources Limited For further information, please contact: Robert Porter General Manager, Investor Relations [email protected] +61 3 9600 0807 / +61 (0) 407 391 829 www.iluka.com
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