Iluka Resources Limited · ASX:ILU
Iluka Resources — UBS Resources & Energy Conference 2010
27 slides from Iluka Resources's conference presentation, June 2010
Slide 1: Iluka Resources Limited
Iluka Resources Limited UBS Resources & Energy Conference, Sydney June 2010 Robert Porter General Manager, Investor Relations 1
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: Iluka Resources (ASX: ILU) Overview & Investment Proposition
Iluka Resources (ASX: ILU) Overview & Investment Proposition Market Cap ~A$2.0 billion (418 million shares on issue) Industry Sector Materials - mineral sands exploration, project development, operations and marketing - iron ore royalty from BHP Billiton’s Mining Area C, Western Australia Objective
Slide 4: Murray Basin Stage 2, Victoria
Murray Basin Stage 2, Victoria Long Life Rutile & Associated Zircon Production 4
Slide 5: Jacinth-Ambrosia, South Australia
Jacinth-Ambrosia, South Australia Major Zircon Production Operation 5
Slide 6: Portfolio Characteristics
Portfolio Characteristics Improved Margin Structure from Two Main Assets • Murray Basin and Jacinth-Ambrosia will contribute most of Iluka’s production from 2011 - 80-90% of zircon and rutile production • Higher cash margin structure than historical assets Indicative Asset Characteristics Jacinth-Am
Slide 7: Competitive Revenue:Cash Cost Position
Competitive Revenue:Cash Cost Position Industry Revenue to Cash Cost Ratio* 2011 -2013 First Quartile Second Quartile Third Quartile Fourth Quartile Ambrosia Jacinth- Murray Basin Iluka Other Iluka US Iluka WA Iluka Avg 2011-13 = 1.8 Ratio Iluka Avg 2006-08 = 1.3 0 25 50 75 100 % TiO2 + Zr (kt) • Re
Slide 8: Iluka Physical and Financial Trends
Iluka Physical and Financial Trends 2011-2013 vs 2006-2008 Physical Trends 2006 - 2008 2011 – 2013f % change from average p.a. average p.a. 2006-2008 Production (kt) Zircon 410 500 22 Rutile 125 250 100 Synthetic Rutile 500 290 (42) Total 1,035 1,040 8
Slide 9: Iluka Physical and Financial Trends
Iluka Physical and Financial Trends 2011-2013 vs 2006-2008 Financial Trends 2006 - 2008 2011 - 2013 average p.a. average p.a. Cash prod costs ($m) 585 510 Non cash costs 127 175 (D&A) Operating cash flow ($m) 120 ↑ Net debt ($m) 468 ↓ Gearing (x) 35.9 ↓ 9
Slide 10: Capital Expenditure, Cash Flow and Debt Profile
Capital Expenditure, Cash Flow and Debt Profile High Level Summary 2006 - 2008 2011 - 2013 $m 2009 (annual average) (annual average) Capital Expenditure 155 521 ~75 Operating Cash Flow 133 77 Ç Net Debt 471 382 È Gearing 35.7 25.9 È (net debt/debt+equity) % Ç = increase relative to 2006 - 2008 È = d
Slide 11: Mining Area C Iron Ore Royalty
Mining Area C Iron Ore Royalty Background Outlook • Mining Area C (MAC) covers a part of BHP • BHP has stated intentions to increase total iron ore output from WA BIlliton’s iron ore mining operations in WA’s to 350mtpa past 2015. MAC production at end of 2000 was ~40 Pilbara region, operated by BHP
Slide 12: Mining Area C Royalty
Mining Area C Royalty High Quality Iron Ore Exposure 2008 2009 % change Annual Production to 30 June MDMT 29.3 37.8 29.0 Sales Volume to 31 December MDMT 36.8 40.3 9.5 Royalty Income $m 50.8 42.6 (16.1) Capacity Payments $m 6.0 8.0 33.3 Iluka EBIT $m 56.4 50.2 (11.0) • 1.25% of A$ FOB revenue from A
Slide 13: Mineral Sands Supply
Mineral Sands Supply Main Characteristics Inducement of New Supply • Inducement analysis of all known mineral sands Project Ranking – Illustrative Inducement Analysis projects • Prices would need to be significantly higher to warrant support for all but a very limited number of Rutile Price (% Chang
Slide 14: Zircon Supply
Zircon Supply 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:Ti02 production
Slide 15: 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 16: Zircon Supply/Demand
Zircon Supply/Demand TZMI Perspective from Shenzhen Conference, May 2010 - 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 •
Slide 17: Zircon Supply / Demand
Zircon Supply / Demand TZMI Perspective from Shenzhen Conference, May 2010 • 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 thi
Slide 18: Mineral Sands Market Conditions
Mineral Sands Market Conditions Iluka Perspective 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
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: 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 21: 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 21 Source: Iluka data
Slide 22: 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 23: High Grade Titanium Dioxide Supply
High Grade Titanium Dioxide Supply Supply Crunch Near Term? High Grade Titanium Dioxide Supply Induced New Projects at 0%, 25% and 50% Rutile price rises (on 2008 levels) • Significant price increases required to induce ktpa supply 3500 Current Producers No price rise • Even with 50% price increase
Slide 24: Mineral Sands Market Conditions
Mineral Sands Market Conditions High Grade Titanium Dioxide – 2010 • Rutile and synthetic rutile demand increased during the first quarter − buoyant demand from the US and Europe for high grade feedstocks • Iluka expects high grade titanium dioxide sales to remain constrained by production • Evident
Slide 25: Pigment Demand
Pigment Demand Intensity of Use is GDP-linked China’s pigment consumption CAGR since China Pigment Intensity of Use (per capita cf USA) 1990 is 18.9% compared to the rest of world China’s pigment use per person is 20% of US levels of 1.8% 100% Rest of World vs China Pigment Demand Pigment (mt) 80% 6
Slide 26: Iluka Investment Proposition
Iluka Investment Proposition Confluence of Positive Factors 1. Transition to high quality long life production operations almost complete - 1st full year of contribution from 2011 2. Higher margin zircon and rutile production over the next 3 years+ - ability to bring back idled capacity if incentivi
Slide 27: Closing Slide
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
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