JOHANNESBURG (miningweekly.com) – Mineral sands miner Iluka Resources plunged to a net loss of $20.9-milllion in the first half of 2016, compared with a profit of $20.4-million a year earlier, owing to lower revenue growth.

Mineral sands revenue dipped from $349.6-million in the six months ended June 30, 2015, to $338.4-million in period under review, the ASX-listed company reported on Thursday.

“The poor half-year financial results reflect a lack of overall revenue growth, despite 15% higher zircon/rutile/synthetic rutile sales volumes. Lower prices prevailed, especially for zircon, as Iluka responded to competitor price positioning, but gross margins were protected through reductions in unit costs of goods sold,” commented MD David Robb.

Zircon/rutile/synthetic rutile production increased by 20.8% year-on-year to 334.4-million tonnes, while ilmenite production decreased by 15.9% to 164.1-million tonnes, putting total mineral sands production at 498.5-million tonnes, compared with 472-million tonnes in the first half of 2015.

Zircon/rutile/synthetic rutile sales increased from 275.9-million tonnes to 316.4-million tonnes, generating revenue of $321.1-million. Ilmenite sales fell to 17.7-million tonnes, from 159.5-million tonnes, generating revenue of $17.3-million. 

Sales mix factors, including a higher proportion of synthetic rutile and zircon concentrate sales, also influenced revenue outcomes, as did a lower Mining area C iron-ore royalty contribution.

“Earnings and free cash flow generation were adversely affected, influenced in part by the timing of sales towards the end of the half and, therefore, lower collections occurring within the half,” he said, adding that free cash flow was expected to be second-half weighted.

Robb detailed Iluka’s approach to adverse market conditions, pointing out that the company had constrained its production to match demand and that it continued to focus on operational efficiency and unit cash cost improvements, reporting a reduction in unit cash costs of production of 34.7% and a 12.7% reduction in the unit cost of goods sold.

The group also continued to focus on investing in its future, he said, stating that it invested in trialing an innovative mineral sands mining technique, together with continued support for other research and development work in mineral sands mining and processing.

Iluka aimed to take advantage of opportunities by investing in a counter-cyclical manner, Robb said, pointing to the offer for Sierra Rutile as one such example.

“Investing counter-cyclically, by nature, involves investing at a time when current cash flows are depressed. To do otherwise is to fall into the resources industry trap of investing pro-cyclically. The timing of investment, as well as the nature of investment, is central to the creation of value in mineral resources, as is a through-the-cycle commitment to exploration, innovation and technology.”