Bank of America Merrill Lynch Conference Iluka Resources Limited. Alan Tate, Chief Financial Officer New York September 2010

Transcription

1 Bank of America Merrill Lynch Conference Iluka Resources Limited Alan Tate, Chief Financial Officer New York September 2010

2 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: exchange rate assumptions product pricing assumptions mine plans and/or resources equipment life or capability current or new technical challenges market conditions management decisions While Iluka has prepared this information based on its current knowledge and understanding and in good faith, there are risks and uncertainties involved which could cause results to differ from projections. Iluka shall not be liable for the correctness and/or accuracy of the information nor any differences between the information provided and actual outcomes, and furthermore reserves the right to change its projections from time to time. All currency referred to is Australian denominated unless otherwise indicated. 2

3 Iluka Investment Proposition Focus Creation and delivery of shareholder value: 1. Transition to high quality long life production operations 2. Favorable short and medium term market dynamics - supply discipline - pricing direction - market growth 3. Growing contribution from low risk BHP Billiton Mining Area C iron ore royalty - ensure value appropriately attributed 4. Deliver significantly improved financial performance from

4 Iluka s Position in Mineral Sands Relatively Well Consolidated Industry Structure #1 global producer of zircon #2 global producer of titanium dioxide Significant market share position in the high value titanium dioxide products - rutile (34%), synthetic rutile (62%) and chloride ilmenite (42%) Major Zircon and Titanium Dioxide Feedstock Producers Zircon Titanium Dioxide Feedstock Iluka (2) 34% Exxaro (3) 15% Rio Tinto (1) 9% BHP Billiton 9% Bemax 4% DuPont 3% Tiwest JV 2% Other 24% Rio Tinto (1) 22% Iluka (2) 18% Exxaro (3) 7% BHP Billiton 6% Bemax 4% Tinfos 3% Tiwest JV 2% DuPont 1% Other 37% Source: Iluka supply estimates. Based on 2008 financial year; supply responses in 2009 during the global economic crisis distorted annual market shares (1) Titanium slag products of Rio Tinto and BHP Billiton are currently marketed by Rio Tinto (2) Iluka s 2008 market share Includes 100% of CRL output. Iluka sold its interest in CRL in May 2009 (represented~4% of global zircon volumes and ~3% of titanium dioxide volumes. Iluka markets on CRL s volumes on behalf of the new owner, Unimin. (3) Exxaro has a 50% interest in the Tiwest JV 4

5 Murray Basin Stage 2 Major Rutile and Zircon Production Province 5

6 Eucla Basin Jacinth-Ambrosia World Class Zircon Development 6 Source: Iluka

7 Transformed Portfolio Characteristics Competitive Revenue:Cash Cost Position Ratio Jacinth- Ambrosia Murray Basin Industry Revenue to Cash Cost Ratio* First Quartile Second Quartile Third Quartile Fourth Quartile Iluka US Iluka WA Iluka Other Iluka Avg = 1.8 Iluka Avg = % TiO2 + Zr (kt) Revenue to cash cost ratio (cash margin) is key measure of competitiveness in mineral sands Iluka well positioned in new projects due to high zircon and rutile assemblages (highest value products) Jacinth-Ambrosia and Murray Basin will constitute ~90% of Iluka s zircon and rutile production from 2011 A significant number of existing operations forecast to have negative cash margin positions * Based on constant exchange rates; Iluka pricing, production and industry cost forecasts 7

8 Portfolio Transformation Complete Project delivery and asset reconfiguration finalised New operations ramped up - market acceptance of products achieved Period of project execution and balance sheet risk behind the company Capital expenditure and net debt peak Encouraging 1 st half indications - demand recovery across zircon and high grade titanium dioxide products - significantly improved EBITDA 8

9 Rebound in Iluka Sales - Zircon Zircon Sales Strong recovery in sales China = pre GEC levels Sound recovery in Europe and North America Iluka not able to meet all customer requirements in full Inventories at historically low levels 2 price increases YTD Market conditions support further price increases kt Asia China Europe Americas Other 1H H H H H 2010 Change (1H 2009 to 1H 2010) Sales Volumes (kt) 1H H H H H 2010 Change (1H 2009 to 1H 2010) Asia (ex. China) China Europe Americas Other Total Excludes CRL

10 China Zircon Imports China Imports Above Pre GEC Levels Cumulative Year To Date kt 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Other Indonesia South Africa Australia

11 Zircon Supply Crunch? Few material new zircon sources - primary contribution from existing suppliers Even with advent of Jacinth-Ambrosia, industry zircon:tio 2 production ratio remains at ~0.2 Majority of mooted / planned TiO 2 projects have low zircon assemblage Given zircon typically a co-product in mineral sands developments, higher TiO 2 prices also required to realise associated zircon production Given zircon demand growth historically greater than TiO 2, zircon availability may come under further pressure if projected TiO 2 volumes do not materialise Even with a 50% price increase, zircon supply to 2015 increases only marginally relative to 2011 levels Significantly higher pricing required to support new supply Zircon Supply Induced New Projects at 0%, 25% and 50% Zircon price rises (on 2008 levels) ktpa Current Producers No price rise 25% price rise 50% price rise Iluka s analysis of mineral sands supply is based on inducement analysis of known projects, at varying zircon and TiO 2 prices, with a risk weighting applied based on: sovereign, environmental, regulatory approval, funding and technical risks. Source: 2010 Iluka analysis of company announcements 11

12 Iluka Sales Rutile and Synthetic Rutile Demand recovery Iluka expects end 2010 with minimal SR and Rutile stocks Emerging industry issue of insufficient high quality supply Final year of Iluka cap and collar contractual arrangements kt Rutile and Synthetic Rutile Sales Asia China Europe Americas Other 1H H H H H 2010 Change (1H 2009 to 1H 2010) Iluka sold small volumes of spot SR at prices materially above contract prices Iluka considering contractual arrangements for SR and Rutile sales from 2010 Sales Volumes (kt) 1H H H H H 2010 Change (1H 2009 to 1H 2010) Asia (ex. China) China Europe Americas Other (39) Total Exc ludes CRL

13 High Grade Titanium Dioxide Supply Crunch? Significantly higher prices required to induce new supply Even with 50% price increase annual supply growth may not meet historical demand growth (~3.5% p.a.) Energy cost increases in South Africa likely to result in slag TiO 2 production cost rises of over US$200/t (>50% of current price level) over next three years Any price increase as a result of South African situation should be reflected in comparable TiO 2 products (including rutile and synthetic rutile) High Grade Titanium Dioxide Supply Induced New Projects at 0%, 25% and 50% Rutile price rises (on 2008 levels) ktpa Current Producers No price rise 25% price rise 50% price rise High grade = rutile, synthetic rutile, chloride slag and upgraded slag. Iluka s analysis of mineral sands supply is based on inducement analysis of known projects, at varying zircon and TiO 2 prices, with a risk weighting applied based on: sovereign, environmental, regulatory approval, funding and technical risks.. Source: 2010 Iluka analysis of company announcements 13

14 Global Zircon Demand Underpinned by Developing Economy Demand Global Zircon Demand Scenarios ( ) Demand Scenarios Based on modest Chinese demand growth from 2011 of 6% p.a. (~ one third of recent levels) and flat rest of world demand, global demand growth equates to ~3% (equal to average). If China demand is two thirds of recent growth (~10%) global demand growth would exceed historical global demand levels Average Annual Growth Total = 3% China = 18% RoW = 1% It is difficult to envisage a demand scenario where near term zircon demand is lower than historical levels, given the major influence of developing and urbanising economies. Source: Iluka 14

15 Tile Consumption Developing Economies Constitute Major Demand Source: Ceramic World Review Source: IMF China, Brazil, India, Iran and Indonesia consume over half of the world s tiles Zircon intensity of use in these economies remains well below developed economies These economies were relatively immune from 2009 GEC impacts Consumption dynamics for zircon and geographical usage indicates possible resilience of demand even if further global economic slowdown 15

16 Titanium Pigment Trends Model for Developing Nations Infrastructure Based Growth Urbanisation 2007 Population distribution in bands of income levels** Average Wealth per capita in PPP terms Inflection Point for growth phase Source Rio Tinto, TZMI Conference Singapore 16

17 Pigment and Tile Consumption Developing Economy Demand & Low Intensity of Use Pigment (kg) / capita Pigment and GDP per Capita (2008) Tiles and GDP per Capita (2008) Finland Singapore 6 5 Tile sqm / capita Saudi Arabia Spain UAE = India China 0 10,000 20,000 30,000 40,000 50,000 60,000 Note: GDP based on PPP Source: TZMI and IMF Germany Japan US GDP / capita (US$) India China Iran Brazil 0 10,000 20,000 30,000 40,000 50,000 Note: GDP based on PPP Source: Ceramic World Review and IMF Germany Japan US GDP / capita (US$) Pigment and zircon product related consumption per capita linked to economic growth and increases in disposable income Developing economies typically display low intensity of use (although influenced by cultural and climatic factors) Countries displaying high population growth rates, urbanisation trends and rapidly increasing per capita GDP typically have lower intensity of use of pigment (titanium dioxide feedstock) and tiles (zircon) feedstock Late cycle demand factors at work with titanium dioxide and zircon possibly different dynamic from infrastructure inputs 17

18 China and India Exemplars of Developing Economy Demand Pigment and GDP per Capita ( ) Tiles and GDP per Capita (1997^ ) 0.9 Pigment (kg) / capita 2.5 Tile sqm / capita India China GEC impact India China ,000 2,000 3,000 4,000 5,000 6,000 7, ,000 2,000 3,000 4,000 5,000 6,000 7,000 GDP / capita (US$) GDP / capita (US$) Note: GDP based on PPP Source: TZMI and IMF ^Note: Indian tile data only available from 2002, GDP based on PPP Source: Ceramic World Review and IMF Pigment and tile consumption increasing in China and India associated with GDP / capita growth - India per capita usage masked by population growth 3x that of China Intensity of use still significantly lower than developed economies Higher intensity of use and wealth effect (higher value product usage) may create turbo charged demand 18

19 China and India Urbanisation Floor Space Linked to Tile Usage Annual Urban Floor Space Construction Required 2010 to 2030 Urban Population Source: McKinsey Consultants Source: McKinsey Consultants China will require around 1.8 billion square meters of new urban floor space each year for next 20 years. India will require around 800 million square metres, and Other developing economies South America, Asia, Middle East and Eastern Europe will generate significant demand A major growth dynamic for zircon and titanium dioxide products 19

20 Mining Area C Iron Ore Royalty High Quality, Long Life Iron Ore Exposure Background Mining Area C (MAC) covers a part of BHP BIlliton s iron ore mining operations in WA s Pilbara region, operated by BHP (85%) under a JV with Itochu and Mistui Long resource life royalty stream Outlook BHP has stated intentions to increase total iron ore output from WA to 350mtpa past MAC production at end of 2000 was ~40 million tonnes and is expected to be a significant proportion of this total increase Potential sharing of facilities under proposed Rio Tinto JV also raises the likelihood of production increases from the region BHP and Rio Tinto Pilbara Iron Ore Operations Source: BHP Source: BHP BHP forecasts demand for seaborne iron ore to rise to over 1200mt by 2015 and over 1800mt by

21 Iluka s Transformation Well Advanced Current & Prospective Recovery Demand recovery continued global volatility possible End of major project capex outflows Project ramp up in 1 st Half and sustained performance at target in 2 nd Half New Iluka Zircon and high TiO2 markets tight Higher margins and stronger free cash flows Lower debt re-emergence of capital management options First instalment of objective create and deliver value for shareholders New Industry Demand based on more broadly based global growth Supply an acknowledged problem contractual flexibility New growth horizons for shareholders 21

22 First Instalment in Shareholder Value Delivery Growth cycle mineral sands linked to both infrastructure and urbanisation BRIC s and other developing economies now significant proportion of demand Historically low investment in industry limiting supply potential Supply crunch - medium term fundamentals very positive Leading to: Significantly improved financial performance from 2011, reflected in - robust margin structure - stronger cash flow - rapid debt reduction - capital management options 22

23 Iluka Resources Limited For further information, contact: Robert Porter General Manager, Investor Relations / +61 (0)