PERTH (miningweekly.com) – Mineral sands miner Iluka has reported a significant decline in net profit after tax, owing to lower prices.

Net profit for the six months to the end of June dropped to A$11.7-million, compared with the A$34.3-million reported in the previous corresponding period. Revenue from mineral sand sales dropped 10.1% year-on-year to A$343.2-million.

Group earnings before interest, tax, depreciation and amortisation also dropped by 21.6% during the half-year, from A$160.2-million in the first half of 2013, to A$125.6-million.

Iluka told shareholders that the reduced earnings reflected the lower received prices for some of its key products, as well as a lower contribution from the Mining Area C iron-ore royalty.

Combined zircon, rutile and synthetic rutile sales volumes during the first half of the year reached 277 100 t, which was 3.5% lower than the 287 200 t sold in the first half of 2013. Product prices were also 13.8% lower during the interim period, compared with the previous corresponding period, reflecting the materially lower high-grade titanium dioxide prices received period-on-period.

The inventory of finished product also decreased by A$25.8-million to A$376.2-million during the period under review, as mineral sand sales during the period exceeded production by 25 000 t, combined with a A$3.5-million reduction in ilmenite inventory.

Work-in-progress inventory increased by A$47.4-million, as heavy mineral concentrate (HMC) production of 676 300 t exceeded the 480 000 t HMC processed. This was consistent with Iluka’s strategy of maintaining cost-efficient mining operations at Jacinth-Ambrosia and Woornack, Rownack and Pirro, while restricting the production of finished product.

“The company’s low production regime continues, with the inventory of finished goods overall expected to decrease over the course of 2014,” said Iluka MD David Robb.

“This is being achieved while achieving material reductions in overall cash costs, lowering capital expenditure yet continuing necessary investment for the future, generating free cash flow, and maintaining balance sheet strength.”

Robb pointed out that Iluka was also preparing to act counter cyclically, in a disciplined manner, with the company re-acquiring tenements in Sri Lanka and with the work at the Tapira deposit, in Brazil.

Both the project areas were staged, with low capital exposure options to assess the potential commercialisation of large sulphide and chloride ilmenite mineralisations.

“Both are consistent with positioning the company, through both direct supply and through upgrading capacity, to continue to grow the company’s presence in chloride pigment markets long-term, including the emerging China chloride market, and also to be a more meaningful supplier into global sulphide pigment markets, including the large established China production base,” Robb said.