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Iluka declares dividend, sees growth on price increases

27th February 2018

By: Megan van Wyngaardt

Creamer Media Contributing Editor Online

     

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JOHANNESBURG (miningweekly.com) - ASX-listed Iluka Resources has recorded a 140% increase in its underlying earnings before interest, taxes, depreciation and amortisation to $361-million for the year ended December 2017, with strengthened mineral sands markets throughout 2017 underpinning strong free cash flow of $322-million, up from $47-million in the prior year.

This strong cash flow enabled Iluka to reduce its net debt by 64% to $183-million and support a final dividend of 25c a share, fully franked.

However when accounting for charges, Iluka reported a net loss after tax of $172-million.

Overall mineral sands revenue was up 40% for the year to $1.01-billion, with sales volumes of high-value products zircon, rutile and synthetic rutile up 27% to 889 000 t.

The minerals miner successfully implemented three price increases for zircon throughout the year, increasing the weighted average realised price by 40% to $1 128/t for zircon standard and premium in the fourth quarter.

The zircon reference price is set at $1 230/t to the end of March. From April 1, Iluka is implementing a zircon reference price increase to $1 410/t for a period of six months.

High-grade titanium dioxide sales also experienced a stronger price environment, reflecting conditions in the main end-use market of pigment. Rutile prices achieved in the second half of $825/t were 13% higher than at the start of the year.

A further price increase of 8% has been implemented for contracted rutile sales in the first half of 2018.

Mineral sands markets are expected to remain positive in 2018. The dynamics that resulted in zircon and rutile price growth over 2017, including moderate demand growth and tight supply conditions, were anticipated to continue.

Iluka would, in the year ahead, focus on building on improvements achieved at its Sierra Rutile operations in Sierra Leone, progressing its expansion project, continue mining at Jacinth-Ambrosia, in South Australia, at capacity and advancing plans for mine optimisation, and deliver the project works at Cataby, in Western Australia, on time and on budget.

Iluka is expecting 2018 production of 705 000 t, down from 825 000 t in 2017, reflecting the completion of processing heavy mineral concentrate from the Murray basin.

Cash costs of production are expected to increase from $362-million to $405-million owing to mining and concentrating costs being incurred at the restarted Jacinth-Ambrosia mine, following almost two years of producing final products from intermediate heavy mineral concentrate inventory, which has now been significantly drawn down.

Significant capital expenditure is expected in 2018, with guidance of $410-million, mainly reflecting the Cataby development and Gangama and Lanti Dry expansion projects at Sierra Rutile.

The operational improvements at Sierra Rutile have delivered rutile production above that assumed at the time of acquisition, reducing the reliance on expansions for higher production and lower unit costs.

Iluka has now taken the decision to defer the Sembehun development at Sierra Rutile for one year. Early works are expected to start in 2019 after a detailed feasibility study (DFS) is undertaken.

The DFS will enable the company to develop reasonable estimates of project costs before final approval. Commissioning is targeted for 2021. This decision also allows Iluka to target a smoother production profile and focus on delivery of the expansion projects at Gangama and Lanti Dry this year.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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