Iluka Resources Limited RBC Capital Markets Global Mining & Materials Conference, Toronto

Transcription

1 Iluka Resources Limited RBC Capital Markets Global Mining & Materials Conference, Toronto Chris Cobb, General Manager, Sales and Marketing June

2 Disclaimer Forward Looking Statements This presentation contains forward-looking statements that are subject to risk factors associated with exploring for, developing, mining, processing and sale of minerals. Forward-looking statements include those containing such words as anticipate, estimates, should, will, expects, plans or similar expressions. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a range of variables and changes in underlying assumptions which could cause actual results or trends to differ materially. These include, but are not limited to: price and currency fluctuations, actual supply versus demand, production results, reserve and resource estimates, loss of market, industry competition, environmental risks, physical risks, legislative and regulatory developments, economic and financial market conditions in various countries and regions, political risks, project delay or advancement, approvals and cost estimates. Specific Risks & Sensitivities The information contained in this presentation is subject to, but not exclusively to, the following: - 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 - Environmental or social pressures which impact licence to operate All currency referred to is Australian denominated unless otherwise indicated. 2

3 Contents Section 1 Iluka Overview and Investment Proposition Section 2 Market Disciplines and New Forms of Market Execution Section 3 Current and Evolving Market Conditions Section 4 Current Priorities 3

4 1. Iluka Overview and Investment Proposition 4

5 Iluka Resources Overview and Investment Proposition Market capitalisation ~A$7 billion (418.7 million shares on issue) ASX: ILU Industry Sector Materials (minerals sands exploration, project development, operations and marketing; iron ore royalty deriving from BHP Billiton s Mining Area C, Western Australia Objective To create and deliver shareholder value Recent Deliverables Capital efficient transformation of the asset base - delivery of two new globally significant, high margin production sources - Murray Basin (full production mid 2010) and Jacinth-Ambrosia (full production mid 2010) Marketing and pricing outcomes in zircon and high grade titanium dioxide markets Investment Proposition Higher production / sales of higher value products (rutile and zircon) Higher EBITDA / revenue margin and return on capital Increased contribution from low risk Mining Area C royalty stream Significantly lower capital expenditure Cash flow generation and distribution/reinvestment flexibility 5

6 Iluka Investment Proposition Confluence of Positive Factors 1. New operations commissioned, performing well 2. Positive and sustainable industry supply/demand and pricing dynamics - two product suites with different end applications and customers 3. Growing, low risk Mining Area C (BHP Billiton) iron ore royalty stream 4. Significantly improved financial characteristics 5. Product and technical development commitment 6. Exploration potential 6

7 Key Characteristics of the Mineral Sands Market Overview of Principal Product Streams Sales (Mt) Global Mineral Sands Market Titanium Feedstocks, 2009 = 5.3Mt, 2010 = 6.2Mt Rutile (95% TiO 2 ) Synthetic Rutile (SR) (90-95% TiO 2 ) Chloride market = 3.4Mt Upgraded Chloride Slag (UGS) (95% TiO 2 ) Chloride Slag (80-85% TiO 2 ) Chloride Ilmenite and Leucoxene (60-70% TiO 2 ) Sulfate market = 2.8Mt Zircon 2009 = 0.9Mt 2010=1.4Mt Sulphate Slag and Ilmenite (50-80% TiO 2 ) 20% 80% Typical industry zircon to titanium dioxide units in mineral sands deposits - 20:80 Source: TZMI and Iluka 7

8 Iluka Customer Structure Consolidated Titanium, More Fragmented Zircon Customer Base Iluka Customer Industries Zircon Zircon flour millers (ceramics), 60% Casting material manufacturers (refractories and foundry), 18% Fused zirconia, 10% ZOC chemical manufacturers, 7% Other, 5% Titanium Pigment producers, 90% Titanium sponge producers,5% Welding rod manufacturers, 3% Other, 2% Other ~ 10% Iluka Customer Segmentation Other ~ 55% Top 5 ~ 45% Top 5 ~ 90% Note: Data based on 2008 sales 8

9 Industry Structure and Participants Relative Industry and Geography Supply Consolidation Zircon Titanium Major Producers Including: Indonesia, 6% China, 5% Vietnam, 3% India, 2% Including: China, 12% Norway, 7% Ukraine, 7% India, 4% Vietnam, 4% Major Producing Countries 9 Source: TZMI and Iluka

10 Iluka s Operations Murray Basin, Victoria / NSW Darwin major rutile and zircon production province mineral separation plant - Hamilton economic life to Mid West Perth Western Australia Northern Territory South Australia Queensland New South Wales Brisbane Eucla Basin, South Australia globally significant zircon production source mine life10 years+ Western Australia processing facilities for South Australian heavy mineral concentrate South West Eucla Basin Adelaide Sydney Canberra Victoria Melbourne 4 synthetic rutile kilns (2 idled) Virginia, United States Murray Basin Hobart High quality zircon and ilmenite production serving domestic US market 10

11 Murray Basin Stage 2, Victoria 11

12 Eucla Basin, South Australia Capable of Supplying ~20% of Global Zircon Supply 12

13 Jacinth-Ambrosia, Eucla Basin, South Australia 13

14 Jacinth-Ambrosia, Eucla Basin, South Australia 14

15 Synthetic Rutile (SR) Strategy Iluka ~2/3rds of Global Supply of this High Grade Feedstock Iluka has idled 2 of 4 kilns currently due to inadequate historical EBIT returns 2011 production of SR at ~ 220kt SR capacity of kt per annum Reactivation of idled kilns will only occur if adequate returns can be made Iluka determining appropriate ilmenite feed source arrangements for potential reactivation of capacity Relatively short term, low capital and low risk incremental supply response 15

16 Synthetic Rutile Kiln - Western Australia 16

17 Mining Area C Iron Ore Royalty 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 In perpetuity royalty stream 2010 EBIT $75.9 million BHP Billiton Pilbara Iron Ore Operations BHP has stated intentions to increase total iron ore output from WA to 220mtpa+ by 2015, with future growth options >300mtpa. MAC is expected to be a significant proportion of this total increase Source: BHP 17

18 2. Market Disciplines and New Forms of Market Execution 18

19 Enhanced Logistics & Market Supply Arrangements Warehouse and Small Lot Distribution Facilities Antwerp, Belgium Zircon Premium Qingdao, China Zircon Premium Castellon, Spain Zircon Premium Shanghai, China Zircon Premium Wilmington, Delaware Zircon Premium Xiamen, China Zircon Premium 19

20 Iluka Zircon Customers kt Iluka Global Customer Profile China Customers kt Other Customers Number of Customers Number of Customers Customer numbers have doubled in 4 years 20

21 The China Zircon Market China Zircon Segments Other 7% China ~ 40% of global zircon sand consumption Zirconia & Chemicals 29% Foundry/Casting 5% Refractory 4% Ceramics 55% Ceramics ~ 43% of world ZrO 2 / Chemicals ~ 65% of world Casting ~ 17% of world Refractory ~ 13% of world Other ~ 50% of world Total China Market ~ 600kt zircon 21

22 On Line - Internet Auction Site Key Terms Purchase or auction site as required Minimum purchase 26mt, a full container load Product bagged in 2mt Bulk Bags Payment terms are L/C or T/T No requirement to accept any offer Easily adapted to other products Now offering both zircon and rutile Ilmenite Lead indicator of demand and pricing 22

23 3. Current and Evolving Market Conditions 23

24 Evolution of Iluka s Sales & Marketing 2010 & 2011 Initial uncertainty of demand recovery/continuing global volatility New projects ramp up and sustained performance in 2 nd half of 2010 Commencement of quarterly zircon price increases from May prices increased ~30% in 2010 to exit the year above US$1,000/t Supply concerns vis a vis high grade titanium dioxide This induced a step change in pricing for H up 30-40% for 1 st half 2011 Further enhancements to Iluka s marketing model - additional China resourcing - in-country supply points established in Europe - increased new market penetration activities 24

25 Evolution of Iluka s Sales & Marketing 2011 Recent Pricing Outcomes Zircon 3 rd 2011 Quarter Pricing Outcome Prices up 35-40% from US$1600/t 2 nd quarter weighted average 7 th consecutive quarterly price increase from ~US$780/t at end 2009 High Grade Titanium Dioxide 2 nd half Pricing Outcomes Rutile up 70-75% from 1 st half weighted average price of US$770/t SR up 70-75% from 1 st half weighted average price of US$640/t Relative to 2010 average prices: rutile US$550/t; SR US$440/t 25

26 Zircon Pricing Staircase US $/t 2,400 2,000 1,600 1, Q Q Q Q Q Q Q

27 Pricing Trends Australian Export Prices US$/t Nominal 2,500 2,000 1,500 1, Zircon Rutile SR Source: TZMI and Iluka 27

28 Zircon Demand Risk? 2500 kt Iluka JA Existing Producers Low Demand (China 6% and ROW 0%) Base Demand (China 8%, ROW 0%, 4% CAGR) Assuming China demand growth of 8% & RoW 0%, results in a CAGR of 4% - Should this demand scenario occur an additional 50-60kt of new supply is required to meet the annual demand increase - Equivalent to opening a new mineral sands mine every year - Since 1990 Chinese zircon demand has grown at 18% pa (off a low base) Even in the Low Demand (6% China, RoW 0%) scenario a considerable deficit is forecast Source: Iluka 28

29 Pigment Demand by Region, 1980 to 2009 Developing Countries Pigment Use Growing With GDP 5 Pigment (kg) / person 4 North America Europe 2009 Japan 1 0 China Global 0India 5,000 Asia 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 Real GDP / Capita (US$) Developing countries intensity of pigment use (pigment per person) expected to grow with living standards (rising GDP/capita) Developed countries show an intensity of pigment use ~2-4 kg per person. This level of pigment use in China would be a significant increase from current levels Note: Conversion factor for US$ based on Purchasing Power Parity (PPP). Real 2008 Australian dollars. Source: TZMI and IMF 29

30 4. Current Priorities 30

31 Areas of Focus Market conditions Options to generate greater growth Organic growth opportunities Priorities for deploying cash flow 31

32 Zircon Allow customers lead time to reprice their products Evidence of customers maintaining their profitability Raw material a small percentage of end consumer cost Headroom for further price increases 32

33 Titanium Dioxide Tight supply, especially high grade titanium products Fundamental change in contractual arrangements Iluka contracts for rutile and synthetic rutile 6 months Pigment producers reset prices appreciably higher than historical norm Evidence of maintained or improved profitability for customers 33

34 Zircon Supply Reconfigured mining plan and mining method at Jacinth-Ambrosia Low capital option preferred Tailings stockpiles recovery potential Eneabba restart potential ~25-30 k tonnes p.a. 34

35 High Grade Titanium Supply Reactivation of idled synthetic rutile kilns Key issue ilmenite feed trialling Murray Basin ilmenite Ilmenite sources: Tutunup South, Western Australia reactivation of mining at Eneabba, Mid West potential to accelerate development of Cataby, Western Australia 35

36 Production Response Options Reserve and Resource assessments Based on view of higher zircon, rutile and synthetic rutile pricing Mine development analysis Potential additional resources in the Eucla Basin Atacama Typhoon Tripitaka Aurelian Springs, Virginia, US 36

37 Organic Growth Opportunities Increased exploration expenditure $20 million $30 million p.a. 37

38 Organic Growth Opportunities Product and technical development new products to meet customer needs technical advice to customers customising product offer for particular applications enhanced recoveries ilmenite blending trials acid soluble synthetic rutile value from iron oxide and monazite tailings 38

39 Organic Growth Opportunities Re-focussed marketing shortened traditional pricing horizons more frequent price resets solid in-country presence changed logistics approach focus on the long tail 39

40 The Creation and Delivery of Shareholder Value 40

41 Iluka Resources Limited For further information, contact: Dr Robert Porter - General Manager, Investor Relations ; + 61 (0) robert.porter@iluka.com

42 Speaking Notes Associated with Presentation by Chris Cobb, General Manager, Sales and Marketing, Iluka Resources to the RBC Global Mining & Materials Conference, Toronto, 22 June 2011 Note: not all slides are referred to. Title Slide I am the General Manager Sales & Marketing for Iluka Resources Ltd, a company based in Australia and listed on the Australian Stock Exchange. Iluka Marketing has offices in Shanghai, China and Florida, USA, as well as the corporate head office in Perth, Western Australia. Given Iluka s global customer base I reside in a number of locations during the year; for the last two months Shanghai has been base. My presentation today is in four parts. Slide 3 Section 1 - general background on the Iluka Group; Section 2 - discussion of our Marketing approach in the current mineral sands environment; Section 3 - the evolving mineral sand dynamics and Iluka s marketing strategy; and Section 4 - priorities that are being focused upon across the Group. Slide 5 The market capitalisation of Iluka has grown to around US$7 billion. We are a focused mineral sands company that is complemented by an attractive iron ore income stream. Iluka s objective is a simple one to create and deliver shareholder value. Any one who has had the opportunity of meeting our Managing Director, David Robb, will know how focussed the company is on this objective. In the 2010 we delivered two new mining projects in Victoria and South Australia on time and on budget. Iluka is an investment proposition underpinned by strong fundamentals.

43 Slide 6 Iluka s operations are performing well, coinciding with strong zircon and titanium dioxide market dynamics. Combine this with strong iron ore royalty stream results in the markedly improving financial characteristics. Building off this strengthening platform is the focus on Product and Technical development, Business Development and Exploration areas. Slide 7 Mineral sands operations predominantly produce two minerals - zircon and differing mineral forms of titanium dioxide ( TiO2 ). TiO2 feedstocks comprise products ranging from ilmenite to naturally occurring rutile. The former being upgradeable to a slag or synthetic rutile product. The average the split between these two minerals in the ground is around 20% zircon and 80% TiO2 minerals. Iluka s Jacinth-Ambrosia deposit with its predominance of zircon breaks this norm. The global zircon market is currently around 1.4million tonnes per annum. The global TiO2 market is much larger in size and in excess of 6 million tonnes per annum. The majority of growth in both zircon and TiO2 demand is taking place in China. Slide 8 The customer structure for the two products is very different. TiO2 is dominated by a few major pigment producers based in the West. They have a technological advantage, through the chloride process, over their Chinese competitors. This may be about to change as chloride pigment plants commence production in China. None of the big five chloride pigment producers (DuPont, Cristal, Huntsman, Kronos and Tronox) have pigment facilities in China. Zircon, by comparison, has a diverse customer base. There are only a few large global consumers and these are mostly European based. The fastest growing demand and customers base is in China. Zircon processing capacity is being added continually in China to supply the demand for the production of opacifier, zirconium oxy chloride, and zirconia. Despite the quantities of zircon consumed in the opacifier manufacturing industry in China, almost none is exported as finished product but consumed in the internal ceramic tile industry. Slide 9 Iluka is the largest zircon producer, and second largest TiO2 producer. Iluka has a strong, high grade TiO2 position in both the natural and synthetic rutile markets. Zircon production by Richards Bay Minerals (Rio Tinto and BHP) and Exxaro is from South Africa. Only 6 producers account for approximately 70% of global supply. Rio

44 Tinto is the leading TiO2 producer with production from Richards Bay Minerals, in South Africa, and QIT and QMM in Canada. Slide 10 For those of you not familiar with Australia, the map indicates Iluka s mining and processing facilities. The two new mining operations are in South Australia and Victoria. Final mineral separation takes place at Hamilton (Victoria) and Geraldton (Western Australia). Iluka has four synthetic rutile kilns, two in the South West and two in Mid West of Western Australia. The latest mine to commence operations is Tutunup South in South West Western Australia. It will providing ilmenite to the nearby South West kiln, SR 2, and zircon concentrates to the Geraldton final separation plant. In Virginia we mine high grade zircon and chloride grade ilmenite is produced for the local US market. Slide 11 The Murray Basin is a major rutile-rich mineral sand province but also producing significant ceramic grade premium zircon. Current mining operations are at Kulwin, Victoria. In 2012 mining will commence at similar deposits at Woornack, Rownack and Pirro - known as WRP - all close by. All HMC from these deposits is transported to the Hamilton MSP in the South of the state. Final product is shipped in bulk from the port of Portland or in containers from Port of Melbourne to the east. Slide 12 The map shows the extensive exploration tenements held by Iluka in the Eucla Basin of South Australia and their relativity to the Jacinth Ambrosia mine. The Jacinth-Ambrosia mine is not a strand deposit like Kulwin and is significantly larger in scale and mine life. This deposit is extremely zircon rich, and the HMC produced by the concentrator at the mine is trucked to a port near Ceduna. The concentrate is then shipped to Geraldton in Western Australia, where it is processed in the Narngulu mineral separation plant. Final product is shipped in bulk from Geraldton port or in container from Fremantle, near Perth. Slide 15 Iluka has a total of four synthetic rutile ( SR ) kilns with over 500 thousand tonnes of production capacity, but is only currently operating two kilns. SR kiln 2 in the South West of Western Australia produces 220 thousand tonnes of premium SR. SR kiln 3 in the Mid West of Western Australia is currently a R&D kiln, and is now close to end of life prior to major rebuild. Trials at this kiln are focussed on using lower cost inhouse ilmenite feed sources. As previously stated the idle kilns will only be brought back on line when adequate returns can be foreseen. Slide 17 Mining Area C is a privileged asset, and one that has been of considerable importance to Iluka over the last few years. It is an in-perpetuity royalty stream from BHP Billiton s Mining Area C in the Pibara of Western Australia. BHP has stated it

45 intent to grow iron ore output in Western Australia and the expansion of extraction from Mining Area C is anticipated to be a significant part of this strategy. Slide 19 Iluka has a global network of warehouses and distribution points to provide timely logistics for our customers, located on the East Coast of US, at Antwerp in Northern Europe, Castellan in the Mediterranean, Xaimen in Southern China, and Shanghai and Quingdo in the east. The locations are all close to key customer production facilities. Slide 20 The development of the satellite distribution point has been the key to developing the direct distribution to smaller customers, both zircon and rutile. The slide shows the number of new customers we had added by the end of 2010 and this has grown further in The customers indicated in red are those based in China. This is by far the fastest growing market for our products in the world. Slide 21 China now easily dominates global zircon demand. China constitutes a huge 40% of global zircon consumption. This includes a whopping 65% of all zircon consumption in zirconia and specialty chemical production, and 43% in ceramic tile and sanitary ware sectors. The most noticeable aspect of zircon usage in China is the much larger proportion of zirconia and zirconium chemicals production compared with the rest of the world. Something like 90% of the world s chemical zirconia is now produced in China. Slide 22 As well as warehouses around the world, Iluka now has an internet sales site. We are able to take orders for products based on a delivered price or through an auction/ tender process. Currently only limited tonnages are available for sale or auction on this site due to lack of availability of zircon. There is evidence the site is also being viewed by the industry as a price indicator. For Iluka it provides a window into what is occurring regionally in terms of product pricing in the smaller spot market. Slide 24 As mentioned earlier, the new mining projects ramped up in During that period, in a tight zircon market, Iluka increased prices in the April, July and October quarters. It became clear during 2010 that the high grade TiO2 market was also extremely tight. This provided the opportunity to make a step-change in high grade TiO2 prices in the first half of 2011 a major change from the previous CPI-type annual fixed pricing in previous years. Slide 25 Iluka recently announced Quarter 3 zircon, and second half 2011 high grade TiO2 pricing outcomes.

46 Premium zircon prices for the 3rd Quarter will be approximately US$2,200/tonne (weighted average price). Second half of the year high grade TiO2 prices have again increased, but this time by 70 to 75%. The shortage of natural rutile, which has broader and higher value in use in TiO2 metal and flux core wire, has triggered even higher price rises for this product. Slide 26 This is a graphical presentation of the pricing progress Iluka has achieved since quarter for zircon. Although the quantum of the changes have been increasing to date this reflect Iluka s preferred product pricing approach and current market dynamics and competitive conditions - all of which may vary from period to period. Slide 27 This graph clearly demonstrates the break, from historical pricing norms, that is now taking place in the mineral sands sector. Zircon has taken the lead but the emerging market dynamics in high grade TiO2 is now driving similar price trends for non contracted supply. Slide 28 If you assume under this potential demand scenario - the China zircon market growth is 8%, which is half the average current growth rate of 15% per annum since 1990 and the rest of the world has no growth, again unlikely due to the growing demand in India, Middle East, SE Asia and Central and South America, then the sector requires the equivalent of a new mineral sands mine every year, and nothing likely to commence until 2013 or That represents an additional 50 to 60 thousand per annum. And this assumes that current operations can keep production constant. This will require upgrades to throughput to counter declining grade in the older operations. Zircon is set to be in deficit for some time to come. Slide 29 On the TiO2 side we are seeing a similar picture, as demand outstrips supply for both high and low grade products. High grade TiO2 feedstocks are largely consumed by the Western pigment producers who now have to vie for this feedstock with China s rapidly growing titanium metal sector and the first chloride pigment plants that China is now constructing. The current pigment production in China is via the sulphate process with ilmenite as the primary feedstock, usually a 50 to 60% TiO2 product. Ilmenite has increased in price in line with uncontracted high grade feedstock prices. Sulphate ilmenite is currently priced around US$300/tonne delivered on the spot market in China against US$ /tonne a year ago. This graph clearly demonstrates the headroom in China for pigment usage growth as average wages increase across a massive population base.

47 Slide 31 Current priorities: Market conditions adapting to the changed market dynamics. Options to generate greater revenue growth drive the current business hard. Organic growth opportunities increased production from current assets in the ground. Priorities for deploying cash flow ensure we grow the business whilst rewarding our shareholders. As General Manager of Marketing I would like to think that Iluka has clear grasp of the marketing dynamics playing out in the zircon and TiO2 markets. Iluka s pricing policy reflects the current market dynamics and competitive conditions, which may vary from period to period. Iluka s Product and Technical development team is looking to make a difference through a variety of things including new products and utilising new internal feed sources for the kilns. Our expenditure on both brownfield and greenfield exploration continues to increase. Iluka will continue to consider other opportunities as they present themselves. Market conditions for mineral sands producers look extremely promising as a world strives to source sufficient minerals to fuel the growth in the emerging economies. Years of low returns has lead to low levels of reinvestment in the mineral sands industry as a whole and production has been overtaken by demand. Slide 32 Zircon prices have moved upwards rapidly over the last 18 months. Pleasingly, most of our customers have moved with us in this changing landscape and have improved their profitability at the same time. In many cases the zircon or TiO2 component cost is only a small percentage of the final price of the product. As long as the supply and demand dynamic remains the same it would seem that further increases are likely. Slide 33 Like zircon, TiO2 is also in short supply and has seen pricing improve dramatically over the last 12 months. Historically TiO2 volume and pricing to the pigment sector has been by long term contract or annual agreements. The majority of long term contracts are expiring and in the case of Iluka we only now price TiO2 on a spot or 6 monthly basis. Despite these TiO2 feedstock increases we have seen dramatic improvements in our customers financial performance. During this same period they moved their product pricing upwards to recover feedstock increases and increase profitability. Slide 34 So what are we doing to try and reduce the supply demand gap?

48 We are underway with a full review of all the options to maximise the production from all our current operations over the next few years. At Jacinth-Ambrosia we are seeking a low capital solution to bringing forward additional tonnage. This is especially important due to the high zircon content in the ore body. We will seek ways to reprocess tailings, a low cost source of additional materials. We are also considering the restart of Eneabba mining operation in Western Australia, given the current market dynamics. Slide 35 As mentioned - only 2 of 4 kilns operating currently. A combination of reopened Eneabba mine and Tutunup South mine, which only started commissioning and producing two weeks ago, will provide the ilmenite feed for SR2 and SR3. SR will not reopen until Q1 2012, once the kiln has been through a MMO, a Major Mechanical Overhaul, which is required every four years. Cataby is a major high quality Ilmenite deposit which we are now planning to open earlier than originally contemplated due to market conditions. Slide 36 The internal opportunities, in terms of reserve and resource, are all being reviewed in light of the higher product prices. This process will delineate and prioritise the internal options available for Iluka. It is already clear that both in Australia and the US we have some attractive investment propositions in our portfolio of resources and reserves. We believe that many of our potential internal projects have more attractive returns and lower risk than many of external greenfield projects being promoted. Slide 37 Our exploration commitment and expenditure continues to grow. This increasing from $20m to $30m per annum, as we seek the new resources to feed into our production pipeline. The Eucla Basin is still largely unexplored and this remains the key the focus for Iluka. As they say we know it is elephant country, we found one in the shape of Jacinth-Ambrosia, so given our extensive tenement holdings we continue to seek the next new elephant. However this doesn t mean other provinces in Australia or green field opportunities in other parts of the world are being ignored. Slide 38 The product and technical development team is delivering innovation in new products, and use of historical waste streams to generate additional products. Much of the work is at an early stage, but it will deliver significant value over time. In many cases our customers are working closely with us on this development. The team are currently in extensive trials with SR 3 kiln on new and improved synthetic rutile products. These are targeted for both the current chloride pigment market, and the growing sulphate pigment market in China. Slide 39 Finally we continue to strive to improve our marketing approach.

49 We have moved from long term contracts and annual pricing to quarterly pricing in zircon and half yearly pricing in TiO2, as well as spot pricing of any additional product produced. We back this up with extensive warehousing of product close to customers, as well as Sales and Marketing Regional Offices in the US, China and Australia. A tailored logistics solution is offered to our customers to meet their business needs, be it containerised bagged product to our new smaller long tail customers, through to 10 thousand -20 thousand tonne bulk shipments to the major producers. We do this for one reason to create and delivers shareholder value.