Iluka Resources Limited

Transcription

1 Iluka Resources Limited CEDA WA Trustee Luncheon David Robb, Managing Director and CEO 19 March 2015

2 Disclaimer Forward Looking Statements Forward Looking Statements This presentation contains certain statements which constitute forward-looking statements. These statements include, without limitation, estimates of future production and production potential; estimates of future capital expenditure and cash costs; estimates of future product supply, demand and consumption; statements regarding future product prices; and statements regarding the expectation of future Mineral Resources and Ore Reserves. Where Iluka expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and on a reasonable basis. No representation or warranty, express or implied, is made by Iluka that the matters stated in this presentation will in fact be achieved or prove to be correct. Forward-looking statements are only predictions and are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements. Such risks and factors include, but are not limited to: changes in exchange rate assumptions; changes in product pricing assumptions; major changes in mine plans and/or resources; changes in equipment life or capability; emergence of previously underestimated technical challenges; and environmental or social factors which may affect a licence to operate. Except for statutory liability which cannot be excluded, Iluka, its officers, employees and advisers expressly disclaim any responsibility for the accuracy or completeness of the material contained in this presentation and exclude all liability whatsoever (including in negligence) for any loss or damage which may be suffered by any person as a consequence of any information in this presentation or any error or omission there from. Iluka does not undertake any obligation to release publicly any revisions to any forward-looking statement to reflect events or circumstances after the date of this presentation, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws. Non-IFRS Financial Information This presentation uses non-ifrs financial information including mineral sands EBITDA, mineral sands EBIT, Group EBITDA and Group EBIT which are used to measure both group and operational performance. A reconciliation of non-ifrs financial information to profit before tax is included in the supplementary slides. Non- IFRS measures have not been subject to audit or review. 2

3 Company Overview Largest producer of zircon around one third of the global market Significant high grade titanium dioxide minerals producer: - Rutile - Synthetic rutile (4 ilmenite upgrading kilns - SR2 re-starting April 2015) Production operations in 5 locations (predominantly in Australia) Global marketing capability and extensive points of presence Ongoing commitment to exploration: - Currently ~10 years reserve life; resources 1 ~ 5 times reserves Multiple internal production options at advanced stages of evaluation Focused on investment in innovation and technology Royalty from BHP Billiton's Mining Area C in WA Notes: 1 Net of reserves 3

4 Iluka Activities 4

5 Iluka Approach Focus on shareholder returns through the cycle Flex asset operation in line with market demand Continue market development through the cycle Preserve/advance mineral sands growth opportunities Maintain a strong balance sheet Continue to evaluate/pursue corporate growth opportunities Act counter-cyclically where appropriate 5

6 Areas of Focus FINANCIAL FOCUS Growth Options / Focus Areas Marketing and Market Development Projects Mineral Sands Exploration Mineral Sands / Other Commodities Innovation and Technology Other Growth Options Potential Acquisitions, Mergers and Joint Ventures Which demonstrate financial merit and strategic rationale 6

7 Frequency Rate Strong Safety and Environmental Performance Total Recordable Injury Frequency Rate (TRIFR) Lost Time Injury Frequency Rate (LTIFR) Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 76% reduction in TRIFR since 2011 (commencement of Safe Production Leadership) 71% reduction in LTIFR since 2011 Level 3 5 environmental incidents decreased in 2014 relative to 2013 (zero Level 5) South Australian Premier s Award for Environmental Excellence Jacinth-Ambrosia rehabilitation 7

8 Zircon Attributes and Applications Ceramics Opacity (whiteness) Water, chemical & abrasion resistant Refractory and Foundry Heat resistant Non-reactive Floor and wall tiles Sanitary ware Table ware Steel & glass manufacturing Precision metal casting Zirconium Metal Low thermal neutron absorption Corrosion resistant Zirconia & Zirconium Chemicals Many unique properties Nuclear reactor cores & fuel rods Heat exchangers Electronics Catalysts Fibre optics Catalytic converters 8

9 China Zircon Consumption China is the world s largest consumer of zircon: ~45% of global consumption; ~8% CAGR Global Zircon Consumption by End Use 2013 = 1.0mt Foundries 11% (China 21%) Refractories 17% (China 42%) Chemicals 21% (China 66%) Ceramics 49% (China 45%) China percentages refer to China s share of each zircon end-use Source: Iluka and TZMI 9

10 Titanium Dioxide Attributes and Applications Pigment Opacity (whiteness) UV resistant Non-toxic and inert Titanium Metal High strength to weight ratio Corrosion resistant Welding Flux Agent Corrosion resistant Paints and coatings Paper Inks Packaging Aircraft engines and frames Defence armourments Chemical & desalination plants Medical applications Sporting equipment Steel construction Ship building Nanomaterials Many unique properties Dye-sensitised solar cells Water purification Cancer treatments Noise absorption 10

11 China TiO 2 Consumption China is the world s largest consumer of TiO 2 feedstocks: ~20% CAGR TiO 2 Pigment Demand (2013: 5.3mt) China Pigment Production Capacity Source: TZMI Source: CM Group, commissioned proprietary research by Iluka 11

12 Robust China Demand Long Term Urbanisation Consumption based growth Array of applications ZIRCON ceramics, range of chemical and consumer applications TITANIUM DIOXIDE pigment paint, plastics coatings MINERAL SANDS Mid-to-late cycle demand characteristics; consumption/gdp related 12

13 World Average Western Europe Eastern Europe North America Central and South America China Asia Pacific 1. China 2. Brazil 3. India 4. Iran 5. Vietnam 6. Indonesia 7. Saudi Arabia 8. US 9. Russia 10. Mexico China Tile Demand 80% Tile use (% of all floor coverings) Urban population (million) Top ten tile consumers* and urbanisation Tile Consumption (% change) % 60% % 40% % % 20% % 0% 50 15% 0 0% Urban population increase (LHS) % change in tile consumption (RHS) Tile preference based on culture & climate Strong tile preference in developing countries Rising living standards lift use of floor coverings Future tile demand also linked to urbanisation * Based on 2011 data Source: Ceramic World Review, UN 13

14 Urbanisation CHINA FLOOR SPACE STARTED CHINA URBAN RESIDENTIAL FLOOR SPACE Largest demographic movement in history Massive increases required in built floor space equivalent to 85% of today s building stocks by Billion sqm Source: McKinsey Global Institute June 2012 Source: CEIC Source: Global Insight (2011), BHP (2011), RBS (2012) 14

15 Hukou Urbanisation vs. Urbanisation Urban population consists of non hukou urban residents (most commonly known as migrant workers) and hukou urban residents Headline urbanisation quoted in Five Year Plans (FYPs) is a simple ratio between urban population and total population Migrant urbanisation ( Hukou urbanisation ) shifts the focus from quantity to residence status 2012 China Population Breakdown (million persons) % 60% 53% Urbanisation 50% Rural population, 642 Source: UBS Urban Population 712 Urban hukou resident, 478 Urban non hukou resident, % 30% 20% 10% 0% Urbanisation 35% Hukou urbanisation 15

16 Implications for Home Ownership Typical Non Hukou Urban Resident Typical Hukou Urban Resident Chinese Dream home purchase: ~0.7% home purchase: 60-80% Lower paid job Saves ~50% of income Small economic participation No entitlement to social housing in the adopted city Limited social benefits No incentive to purchase a home in the adopted city why do I want to buy a home in a place where I am treated as part of an underclass? Higher paid job Saves less, spends more Large economic participation Entitlement to social housing Full social benefits Like to own properties, either home or/and investment property Home decoration I want the best I can afford Source: NBS, South China Post, Ruidow 16

17 China s Economic Re-balancing China GDP growth rate breakdown Source: Citibank China s economic growth is re-balancing from investment-led to consumption-led Moving to a more sustainable and disciplined phase still high by other countries standards - less pollution, better capital allocation decisions, reduced corruption These changes are positive for mineral sands demand: - continued focus on growth and stability - increased urbanisation, rising affluence and standards of living - consumerism 17

18 Consumption Led Growth Demand for many consumables linked to GDP via an S Curve relationship e.g. vehicles, white goods Growing wealth of Chinese consumers will drive end demand for mineral sands TiO 2 Pigment Intensity of Use Motor Vehicles per capita Period 2010/ Average Source: Iluka, TZMI, IHS Connect 18

19 TiO 2 Demand Rio Tinto s View Infrastructure Based Growth Urbanisation 2007 Population distribution in bands of income levels** Average Wealth per capita in PPP terms Inflection Point for growth phase Typically mid to late cycle demand characteristics. Urbanisation and increased GDP per capita are strong indicators of demand growth. Source Rio Tinto,

20 Rise of China Chloride Pigment Sulphate Pigment Large Installed Base Emergent Chloride Pigment Industry SITUATION Largest pigment producer globally - sulphate Reliant on imported feed stocks ~40% of requirements Environmental performance often poor SITUATION Minimal existing in-country chloride production China dependent almost exclusively on imports Chloride plants commissioning and under construction INFLUENCES Installed sulphate base will be retained in the main Less efficient component rationalised Need for high quality ilmenite / upgraded feed stocks INFLUENCES Acquisition of best technology China Government imperative Need for high grade imported feedstocks ELEMENTS OF ILUKA S APPROACH Sulphate ilmenite sales Acid soluble high grade product (ASSR) Sri Lanka sulphate resource ELEMENTS OF ILUKA S APPROACH Develop relationships, establish CTC in 2015 Focus on current and potential new producers Rutile and synthetic rutile trial supply 20

21 Rise of China Chloride Pigment China s end 2014 chloride capacity - built and under construction - of 380kt Additional potential capacity of ~1.4mt by Source: CM Group, commissioned proprietary research by Iluka 1 Based on Iluka s commissioned research 21

22 Iluka in China: Positioning people and product closer to customers Pre 2008: Sales via Agent 2008: Representative Office established; 1 expat + 2 local staff 2010: Zhenjiang Warehouse established 2011: Qingdao Warehouse established 2012: WFOE established 2013: Qingdao office established 2014: Sales in RMB commenced; 3 expat + 8 local staff Value of Iluka s China exports doubled from 2007 to 2014 (12% CAGR) 22

23 Market Development Expansion of global offices / logistics 9 warehouses outside Australia 9 marketing offices Dedicated zircon and TiO 2 sales teams Improving market analysis: deeper understanding of customer needs advancing technical development work Expanded customer base Long tail capability 23

24 Opening 2015: Iluka China Technical Centre Capability to service both TiO 2 and Zircon customers Full-service laboratory with chlorinator Chinese and international experts Located near Shanghai Opening

25 Summary Iluka is confident about China s long term economic growth outlook Robust long term mineral sands demand outlook supported by: economic re-balancing more sustainable and better quality growth mineral sands mid-to-late cycle demand characteristics Iluka has been a leader in capitalising on China s rapid mineral sands demand growth: brand and reputation marketing presence warehousing and distribution in-country analysis market and product development China Technical Centre opening in

26 Iluka Resources Limited For more information contact: 2014 Half Year Results Dr Robert Porter, General Manager Investor Relations David Robb, 5008 Managing / +61 (0) 407 Director Alan Tate, Chief Financial Officer 22 August 2014