Iluka Resources Limited Company and Mineral Sands Sector Overview. November / December 2010

Transcription

1 Iluka Resources Limited Company and Mineral Sands Sector Overview November / December

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 Industry Overview Section 3 Supply / Demand - Market Conditions Appendix 1 st Half Financial 2010 Results Summary 3

4 1. Iluka Overview and Investment Proposition 4

5 Iluka Resources Overview and Investment Proposition Market capitalisation Industry Sector ~A$3.2 billion (418.7 million shares on issue) 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 Key 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) Supply discipline through global economic crisis - especially as market leader in zircon marketing and pricing outcomes in zircon and high grade titanium dioxide markets Investment Proposition: Improved Financial Characteristics ( vs ) Significantly lower capital expenditure cash flow generation and balance sheet flexibility 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 5

6 Shareholder Alignment Consistent internal articulation of objective: creation and delivery of shareholder value Key internal focus: profitability; sustainability and growth Financial performance and incentives linked to shareholder value creation - return on capital the internal proxy for return on equity Short term incentives - linked to ROC, EBIT and profitability (60%); sustainability measures (10%) and defined growth objectives (30%) - any awards 50% in cash and 50% in share rights (full entitlement deferred for 2 years) - any share rights lapse if individual leaves the company Long term Incentives - linked to relative TSR against two comparator groups and ROE (10% threshold and 14% target) $1,000 share grant to employees (twice) not eligible for short or long term incentives 6

7 Iluka Investment Proposition Confluence of Positive Factors 1. Transition to high quality long life production operations 2. Higher margin zircon and rutile production over the next 3 years+ 3. Positive pricing dynamic playing out in both main product suites 4. Growing contribution from low risk Mining Are C (BHP Billiton) iron ore royalty stream 5. Significantly improved financial characteristics expected from

8 Iluka s Evolution Following Appointment of David Robb as CEO in late Alignment Performance management objectives aligned to shareholder objectives Short and long term incentives aligned to shareholder value creation Integrated business planning and decision making processes Growth Commitments Balance sheet recapitalisation debt and equity Commitment to new growth projects in capital-efficient manner Re-focussed marketing / pricing disciplines 2009 Global Economic Crisis Business re-configuration accelerated Projects kept on track Zircon supply response to protect pricing outcomes Further balance sheet funding headroom initiatives 8

9 Iluka s Evolution Current and Prospective Phase Recovery Demand recovery continued global volatility likely End of major project capex outflows Project ramp up in 1H and sustained performance at target in 2H Zircon prices increase ~30% Uncontracted titanium dioxide products sell >20% above contract prices New Iluka First year of unconstrained titanium dioxide prices/contracts Higher margins and stronger free cash flows Zircon and high titanium dioxide markets tight First instalment of objective create and deliver value for shareholders New Industry Demand based on more broadly based global growth Supply an acknowledged problem contractual flexibility New growth horizons for shareholders, employees and customers 9

10 Iluka Physical and Financial Trends vs Physical Trends average p.a f average p.a. % change from Production (kt) Zircon Rutile Synthetic Rutile (42) Total 1,035 1,040 While indicative and subject to change, Iluka expects to deliver: higher contribution of higher margin production relative to synthetic rutile production levels dependent on Iluka decision on idling of kilns or otherwise 10

11 Iluka Physical and Financial Trends vs Financial Trends average p.a average p.a. Cash prod costs ($m) Non cash costs (D&A) Operating cash flow ($m) 120 Net debt ($m) 468 Gearing (x) 35.9 While indicative and subject to change, Iluka expects to deliver: lower unit cash cost of production in compared with , from new asset base stronger free cash flow generation lower debt, greater balance sheet flexibility 11

12 Iluka Capital Expenditure, Cash Flow and Debt Profile Capital Expenditure A$m ~ (average) Operating Cash Flow Net Debt Gearing (net debt / debt+equity) % Increase versus Decrease versus Operating cash flow, pre cash flows from investing activities and financing activities 12

13 Portfolio Characteristics Improved Margin Structure from Two Main Assets Murray Basin and Jacinth-Ambrosia will contribute most of Iluka s production from % of zircon and rutile production Higher cash margin structure than historical assets Indicative Asset Characteristics average p.a. Production kt Jacinth-Ambrosia South Australia Murray Basin Victoria Zircon ~300 ~130 Rutile ~45 ~180 Ilmenite ~175 ~130 Indicative EBITDA Margin % based on 2009 average prices 90 cents 80 cents ~40 ~50 ~30 ~40 13

14 Competitive Revenue:Cash Cost Position Ratio Jacinth- Ambrosia Murray Basin Industry Revenue to Cash Cost Ratio* First Quartile Second Quartile Third Quartile Fourth Quartile Iluka US Iluka WA Iluka Other Iluka Avg = 1.8 Iluka Avg = % TiO2 + Zr (kt) Revenue to cash cost ratio is key measure of competitiveness Ratio highly dependent on product price relativities Iluka well placed - Jacinth-Ambrosia and Murray Basin operations forecast to be in first quartile A significant number of existing operations forecast to have negative cash margin positions * Based on constant exchange rates; Iluka pricing, production and industry cost forecasts 14

15 Jacinth-Ambrosia Capable of Supplying ~25% of Global Zircon Demand 15 Source: Iluka

16 Jacinth-Ambrosia, South Australia Name plate production reached July

17 Murray Basin Stage 2, Victoria Major Rutile and Zircon Production Province 17

18 Murray Basin Stage 2, Victoria Long Life Rutile and Associated Zircon Production 18

19 Mining Area C Iron Ore Royalty In-perpetuity Tier 1 Iron Ore Exposure 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 Royalty based on: 1.25% of FOB sales less export duties and taxes; and $1m one-off payment per 1Mt increase in annual production Outlook BHP has stated intentions to increase total iron ore output from WA to 350Mtpa past MAC production at end of 2000 was ~40 million tonnes and is expected to be a significant proportion of this total increase Potential sharing of facilities under proposed Rio Tinto JV also raises the likelihood of production increases from the region BHP and Rio Tinto Pilbara Iron Ore Operations Source: BHP Source: BHP BHP forecasts demand for seaborne iron ore to rise to over 1,200Mt by 2015 and over 1,800Mt by

20 MAC Cost Curve Position Seaborne Iron Ore Fines Cost Curve 2010 (Business Cost USc/dmtu) MAC CRU regards MAC as one of the world s lowest cost iron ore mine operations located near multiple infrastructure operations and with a large resource base 20 Source: CRU Report April 2010

21 2. Industry Overview 21

22 Key Characteristics of the Mineral Sands Market Overview of Principal Product Streams Sales (Mt) 2008 Global Mineral Sands Market * Titanium Feedstocks, 2008 = 6.0Mt (2009 = 5.2Mt) Rutile (95% TiO 2 ) Synthetic Rutile (SR) (90-96% TiO 2 ) Upgraded Chloride Slag (UGS) (95% TiO 2 ) Chloride Ilmenite and Leucoxene (60-70% TiO 2 ) Chloride Slag (80-85% TiO 2 ) Zircon 2008 = 1.2Mt (2009 = 0.9Mt) Sulphate Slag and Ilmenite (50-80% TiO 2 ) 20% 80% Typical industry zircon to titanium dioxide units in mineral sands deposits - 20:80 * 2008 Global Sands Mineral market is more representative than 2009 due to GEC impact in 2009 Source: TZMI and Iluka 22

23 Main Product Usages and Applications Predominant End Consumer Applications Zircon Other, 5% Zirconia & Chemicals, 18% Average Annual Growth (8%) 11% Titanium Average Annual Growth 11% 14% Refractories, 11% 0% Foundry, 11% 0% 2% Ceramics, 55% 4% Main Attributes: Opacity, whiteness, abrasion resistance, temperature resistance and inertness Potential Substitutes: White clays, kaolin and feldspar (in ceramics) Value in Final Product Tiles ~5% to 10% (dependent on tile type, quality and colour) Source: TZMI and Iluka Main Attributes: Opacity, whiteness, UV absorption (pigments) Strong, lightweight, corrosion resistant (metals) Substitutes: No major substitutes Value in Final Product 23 Paint ~5% (dependent on paint application, quality and colour)

24 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 24 Source: TZMI and Iluka

25 Iluka Customer Structure Consolidated Titanium, More Fragmented Zircon 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 25

26 Key Characteristics of the Mineral Sands Market Overview of Principal Product Streams Global Mineral Sands Market Characteristics Zircon Sulphate Slag and Ilmenite (50-80% TiO2) Chloride Ilmenite and Leucoxene (60-70% TiO2) Synthetic Rutile (SR) (90-96% TiO2) Titanium Size of market (2008) 1.2Mt 6.0Mt Historical demand growth, % p.a. 3.0% p.a. Major markets China (40%) Europe (20%) Asia ex. China (20%) Pricing (approx.) Start of 2010 End of 2010 ~ US$800/t > US$1,000/t Europe (30%) North America (25%) China (20%) Other (25%) Rutile: ~ US$550/t SR: ~ US$450/t UGS: ~ US$550/t Chl. Ilmenite: ~ US$100/t Chl. Slag: ~ US$400/t Note: Titanium product pricing constrained by cap and collar contractual arrangements in Source: TZMI and Iluka

27 Zircon Demand End Use Demand and Regional Tile Consumption / Production Source: Iluka, TZMI and Ceramic World Review 27

28 Tile Consumption Developing Economies Constitute Major Demand Source: Ceramic World Review Source: IMF China, Brazil, India, Iran and Indonesia consume over half of the world s tiles Zircon intensity of use in these economies remains well below developed economies These economies were relatively immune from 2009 GEC impacts Resilient demand indicated even if further global economic slowdown 28

29 China and India Exemplars of Developing Economy Demand Pigment (kg) / capita Pigment and GDP per Capita ( ) Tiles and GDP per Capita (1997^ ) India China GEC impact Tile sqm / capita India China ,000 2,000 3,000 4,000 5,000 6,000 7,000 Note: GDP based on PPP Source: TZMI and IMF GDP / capita (US$) 0 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 ^Note: Indian tile data only available from 2002, GDP based on PPP Source: Ceramic World Review and IMF GDP / capita (US$) Pigment and tile consumption increasing in China and India associated with GDP/capita growth - India per capita usage masked by population growth 3x that of China Intensity of use still significantly lower than developed economies Higher intensity of use and wealth effect (higher value product usage) may create turbo charged demand 29

30 Titanium Dioxide End Use Demand Titanium Market Segments ~6,050kt (2008) Metal, 4% Other, 6% Pigment, 90% Source: Iluka and TZMI 30 30

31 Titanium Dioxide Demand Rio s Mid Cycle View Similar Characteristics Apply to Zircon Demand 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 capital strong indicators to demand growth Source: Rio Tinto TZMI Conference Singapore 31

32 3. Supply / Demand Market Conditions 32

33 Zircon Demand Overview Historically zircon demand dominated by European ceramics industry Key trend in zircon market over last 20 years is the emergence of China and other developing countries China now accounts for ~40% of zircon demand, up from 3% in 1990 in 2008 China produced ~40% of global tiles zircon intensity of use in ceramics still low in developing countries Strong demand growth recently in zirconium and zircon chemicals market (10% CAGR ) China accounts for ~65% of global zircon demand in chemicals market end uses include: pigments, abrasives, paper coatings, anti-perspirants, nuclear and industrial metals, fuel cells, cubic zirconia and many others Current demand (kt) Zircon Market Characteristics ~1,150kt ( average) Historical demand CAGR 3% p.a. ( ) Historical Price CAGR 8% p.a. ( ) 33

34 Global Zircon Demand Underpinned by Developing Economy Demand Global Zircon Demand Scenarios ( ) Demand Scenarios Based on modest Chinese demand growth from 2011 of 6% p.a. (~ one third of recent levels) and flat rest of world (RoW) demand, global demand growth equates to ~3% (equal to average) If China demand growth is 8% (less than half historical average) and RoW 0%, global zircon demand growth would exceed historical levels Average Annual Growth Total = 3% China = 18% RoW = 1% Difficult to envisage a demand scenario where near term zircon demand is lower than historical levels, given the major influence of developing and urbanising economies Source: Iluka 34

35 Zircon Supply and Demand Scenarios 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% and 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 - since 1990 Chinese zircon demand has grown at 18% p.a. (off a low base) Even in the Low Demand (6% China, RoW 0%) scenario a considerable deficit is forecast Source: Iluka 35

36 Indicative Zircon Long Term Supply Curve Higher Prices Required to Rationally Induce Greenfield Projects Iluka analysis of prospective projects shows that significant industry price rises needed to induce new supply This chart illustrates potential production from new or mooted projects and the zircon price required to induce new projects 2015 Zircon Cost Curve 2015 demand, assuming 4% CAGR from ,250 2,000 1,750 1,500 1,250 1, Zircon (US$/t) 0 Existing Inducement Curve - flat rutile prices Inducement Curve ~30% higher high grade titanium prices 1,000 1,250 1,500 1,750 2,000 Horizontal axis represents zircon tonnes (thousands) produced by existing producers and potential or mooted projects Analysis assumes concurrent significant rise in rutile prices. Additional zircon price growth would be required under lower rutile prices The above illustrates potential, sustained price increases required to meet demand, if lead times for new supply can be overcome Iluka has capacity to increase production ahead of mooted projects Actual prices may vary from indicated levels refer disclaimer statement at commencement of presentation 36 Zircon (kt)

37 Industry Zircon:TiO 2 Ratio Despite Advent of Jacinth-Ambrosia, Industry Z:TiO 2 Ratio Remains Stable mt of TiO2 or Zircon TiO2 Historical Supply Zircon Historical Supply Ratio t Zircon/t TiO Zircon/TiO2 Ratio All Feedstock Producers (including J-A) Zircon/TiO2 Ratio Excluding Iluka F Decline in zircon:tio 2 ratio forecast from existing producers (excluding Iluka) Despite Jacinth-Ambrosia (largest new supply source in 30 years) industry Z:TiO 2 ratio stable Given zircon demand growth historically > TiO 2, zircon availability may come under further pressure if projected TiO 2 volumes do not materialise Source: TZMI and Iluka analysis 37

38 Zircon Substitution Risk Overview Zircon typically = represents a low percentage of final products pricing Few substitutes provide equivalent value in use Lack of availability a potential cause of reduction in some lower value applications of zircon Ceramics Glazed and Porcellanato tiles (80% of global production), zircon = 5-10% of final product cost depending on tile type, quality and colour) TZMI study - low iron clays and feldspar cannot provide equivalent value in use Foundries & Refractories Some evidence of substitution from chromite sand, cerabeads and kerphalite Specialty Chemicals Fused zirconia: zircon increased from 25% to 60% costs ( 03-07) yet no substitution Chemical zirconia: zircon increased from 25% to 50% costs (since late 90s) = switch to lower quality zircon Source: TZMI and Iluka research 38

39 Zircon Market Summary Market demand exceeded zircon supply in 2010 Strong China and emerging economy demand expected to increase deficit over coming years Paucity of material new supply at a stage of advanced evaluation / funding Material price increases required to induce new supply even then a lead time Substitution a low risk - zircon a small percentage of final consumer costs Iluka investigating opportunities to fill some part of the supply deficit 39

40 Titanium Demand Overview Pigment is largest end use market of titanium feedstocks Historically, pigment per capita demand increases with living standards, measured by GDP per capita Impact of China has accelerated global pigment demand growth China 2 nd largest global pigment market China has domestic titanium sources but is reliant on imports for high grade pigment, which accounts for ~30% of Chinese demand high grade pigments needed for automotive, whitegoods and other specialty applications China imports pigment from North America, Taiwan, Australia and Europe Titanium metal market displays favourable dynamics with applications in aeronautics and other specialty manufactured goods titanium metal properties include strong and lightweight Titanium Market Characteristics End use industries Pigment (91%), Metal (4%), Other (5%) (2009) Current demand (kt) ~5,900kt ( average) Historical demand CAGR 3% p.a. ( ) - China 15% p.a., Rest of World 2% p.a. Forecast pigment demand CAGR DuPont (Sep09) = 5 to 10% (over ) TZMI (Jun10) = 5.1% (over ) Historical Price CAGR (%) 3.8% ( ) (average Chl. Ilm., Rutile, SR, Chl. Slag) 40

41 Titanium Demand Pigment Demand Forecasts Global GDP per Capita and Pigment per Capita Global Pigment Demand 1.2 Pigment (kg) / Capita 8000 Pigment kt GDP / Capita (US$) % CAGR % CAGR Historically, pigment per capita demand increases with living standards, measured by GDP per capita Impact of China has accelerated global pigment demand growth Industry Pigment Forecasts Period CAGR DuPont (September 2009) to 10% TZMI (June 2010) % 41 Source: IMF, DuPont, TZMI and Iluka

42 Pigment Demand by Region, 1980 to 2009 Developing countries pigment use growing with GDP 5 Pigment (kg) / person 4 North America Europe Japan 1 China Global 0 India Asia 0 5,000 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 42

43 Chloride Titanium Supply and Demand Demand % CAGR Pigment producers typically require blend of feedstocks Higher titanium feedstocks (e.g. rutile and synthetic rutile) typically provide greater production efficiencies, less waste Substitutability between products not straightforward limit to technical switching to lower TiO 2 feedstocks Iluka advantaged vis a vis rutile and synthetic rutile position both products in tight supply Source: Iluka 43

44 Titanium Market Summary Titanium feedstock demand and supply factors more complex - influenced by raw material feedstock requirements of pigment plants - supply availability of specific products globally Iluka has idled synthetic rutile capacity given inadequate returns Most upgrading capacity committed or idled - industry economics would not support investment in additional upgrading capacity The high grade titanium market has tightened significantly in 2010 Evident tightness of some products Favourable factors for higher than historical titanium prices - tight market supply conditions - recovery in pigment demand - China demand for imported chloride pigment - recovery in niche markets (including titanium sponge / metal) - unconstrained pricing environment 44

45 Current Market Conditions Zircon Strong recovery in demand from Q China consumption above pre GFC levels US market remains buoyant esp. foundry sector Additional China milling capacity installed in 2010 Some plants idled due to no feedstock Tight market conditions expected to continue Customers globally on minimal stocks Demand from customers in excess of supply 45

46 Current Market Conditions Zircon Pricing and Contractual Arrangements Zircon volume arrangements essentially on a spot basis No contractual arrangements in excess of 3 months Logistics chain (ex warehouse, small lot) developed to cater for China market Warehouses operating already in Europe and planned for South America Iluka has achieved 3 substantial price increases in 2010 Price rises advised to customers approx. 1 month in advance Iluka seeking to allow customers to pass on price increases Significant opacifier price increases reported globally 46

47 Current Market Conditions Zircon Pricing and Contractual Arrangements Average zircon price reflects quality differentials Price to exit 2010 at greater than US$1000/t FOB Continued tight supply conditions expected Further upward price momentum in to 2011 Internet Online Sales site now auction or sale Currently both zircon and rutile auction on site 47

48 Physical Iluka Sales Flows September YTD Importance of China and Developing Economies Europe Z 90kt R 47kt SR 70kt China Z 131kt R 3kt SR -kt Americas Z 57kt R 71kt SR 52kt Mdl. East Z 8kt R 1kt SR 16kt Asia Z 44kt R 28kt SR 116kt Notes: Data based on sales to September Asia includes Australia and Japan but excludes China. 48

49 Enhanced Logistics and 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 Rutile Wilmington, Delaware Zircon Premium Xiamen, China Zircon Premium 49

50 Current Market Conditions Titanium Dioxide High grade feedstock market tight in 2H 2010 Anticipated it will remain so going into 2011 Idled Iluka kiln capacity is impacting high grade feedstock availability 2010 saw disruption of production from Eastern Europe Iluka in 2010 still had products under long term contractual arrangements Small amount of additional un contracted synthetic rutile (SR) production sold at higher prices Anticipated low stock position for all high grade feedstock at the end of 2010 Customers are very concerned over availability of high grade feedstocks Significant pigment price increases reported globally Reported rationing of supply occurring due to shortage of pigment 50

51 Synthetic Rutile (SR) Strategy 2 of 4 kilns idled over 2008 / 2009, reducing SR capacity by ~300k tonnes Inadequate EBIT returns led to decision to idle Iluka indicated intention to idle SR3 (Mid West, WA) from mid 2010 Higher spot product prices have enabled the kiln to run to end of 2010 Iluka s intent is to run SR3 as R&D kiln until mechanical failure SR3 will require a major rebuild (circa A$15m plus) to commence a new campaign Murray Basin and Jacinth-Ambrosia Ilmenite blends to be trialed Technical success potentially provides a low cost ilmenite feed source 1 kiln operation in ~ 200kt of SR production Re-activation of an additional kiln in 2012 is under consideration 51

52 Emerging Market Conditions End of Cap and Collar Contractual Arrangements Most of Iluka s legacy titanium contracts have had cap and collar pricing Volume commitments with pricing increases / decreases constrained Increases linked to CPI or low percentage increases typically low single digits All rutile legacy cap and collar contracts conclude in December 2010 Only 1 legacy SR contract remains until December 2011 This residual cap and collar SR contract considered immaterial to influence pricing It is believed RBM titanium (slag) cap and collar contracts may extend beyond 2011 Exxaro reportedly has 80% of 2011 slag sales not subject to price caps 52

53 Approach to Titanium Dioxide Contracting Iluka has insufficient feedstock to meet all its customers requirements in 2011 Major customers have been offered a proportion of their requirements Volume commitments on all products in 2011 to be for a maximum of 1 year Iluka does not intend to contract all planned production in pricing negotiations are underway All prices on initial 3 to 6 month volume basis only A small residual volume held back and available for spot sales Rutile has greater value in use than titanium slag to maximize output High TiO 2 offsets lower grade feedstocks i.e. 86% to 87% TiO 2 53

54 Warehouse Alternative - Internet Sales and 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 54

55 China Zircon Market China Zircon Segments 2009 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 ~ 400kt zircon 55

56 China Zircon Market Over 70% of zircon sales are direct between Iluka and end users Customer Profile - some large SOEs - mostly small to medium sized private enterprises Sales Options - bulk bags ex China warehouse (4 strategically located warehouses) - bulk shipments direct to nominated port - container shipments direct to nominated port (loose or in bags) Sales Contracts - price and quantity range from spot through to quarterly fixtures - flexible but secure payment options - sales transactions range from 20 tonnes through to 10,000 tonnes 56

57 China Zircon Market Over 90% of zircon consumed in China is imported 600,000 tonnes Monthly China Import Comparison 500, , , , ,000 - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 07 Cum 08 Cum 09 Cum 10 Cum Total Chinese Zircon Consumption: kt kt kt kt (supply constrained) 57

58 China Zircon Market mt Iluka Zircon Sales to China % of Iluka Sales 60% 50% 40% 30% 20% 10% 0% During Q3, 2010 Iluka YTD 2010 sales exceeded FY 2009 China % China Sales Iluka sales in China reached 180kt in 2008 (excl. CRL zircon sales) 58

59 China Titanium Minerals Market China TiO2 Segments 2009 Ti Metal 14% Welding and Other 11% China ~ 24% of global titanium feedstock consumption (in TiO 2 units) Pigment ~ 20% of world Ti Sponge ~ 30% of world Welding / Other ~ 40% of world Pigment 75% Current Est. Annual Iluka Sales to China Total China Market : Mt TiO 2 units Ilmenite ~ 260kt (incl. CRL) Rutile ~ 10-15kt (incl. CRL) >1Mt as sulphate ilmenite used directly or in domestic slag The rest as imported slag and domestic and imported rutile and synthetic rutile Total ~ 13% of China consumption 59

60 China Titanium Minerals Market: Pigment '000 tonnes 1200 Chinese Pigment Demand Pigment production and consumption likely to resume sharp upward trend in coming years Major producers predicting 2010 Chinese consumption to far exceed 1Mt perhaps even as much as 1.5Mt Pigment Production Net Imports Apparent Consumption Imports of high grade pigment (250kt-300kt in 2007 and 2008) set to continue growth fuelling production outside China Chinese pigment production almost 100% sulphate technology (requiring low grade / low value, mainly domestic, feedstock) BUT Major new chloride pigment projects are under construction (requiring high grade, mainly imported, feedstock) 60

61 China Titanium Minerals Market: Outlook Chinese production in all sectors to grow rapidly based on solid domestic demand growth and increasing acceptance in foreign markets Solid growth opportunities for Iluka high value feedstock in: - chloride pigment - new generation titanium sponge - flux cored wire welding Strong upside potential from new opportunities in existing and new Chinese operations stemming from Iluka s Product and Technical Development 61

62 Mineral Sands Price Relativities Historical Prices to US$ / tonne Zircon SR Chloride Ilmenite Rutile Source: TZMI

63 For further information, contact: Dr Robert Porter General Manager, Investor Relations ; + 61 (0) robert.porter@iluka.com 63

64 Appendix - 1 st Half Financial 2010 Results Summary 64

65 1 st Half Overview 30 June 2010 Demand recovery across zircon and high grade titanium dioxide products Significantly improved EBITDA Reported earnings better than initial 2010 expectation New operations ramped up; but 1 st half impacted by residual issues - sales contribution from lower margin - unit cost inefficiencies during ramp up - contractual price constraints in TiO 2 Capital expenditure and net debt peak Price increases achieved for zircon Supply crunch both for zircon and high grade titanium dioxide markets 65

66 Group Results $m 1H H 2010 % change Mineral Sands Revenue (pre hedging) EBITDA Depreciation and Amortisation (83.5) (101.5) (21.6) EBIT (23.9) Net Interest and Financing Costs (8.4) (25.6) (204.8) Significant non-cash items (67.6) - N/A Profit / (Loss) Before Tax (99.9) (11.7) 88.3 Tax Benefit (84.7) Profit from discontinued operation N/A Net Profit / (Loss) After Tax (43.6) (6.6) 84.9 Average A$:US$ exchange rate (25.5) Financial Ratios EPS cents per share (11.0) (1.6) 85.5 Return on Equity % (annualised) (3.8) (0.6) 84.2 Interest cover (EBITDA / net interest expense) times (30.0) Gearing / net debt (net debt + equity)% (34.0) 66

67 Mineral Sands Results $m 1H H 2010 % change Mineral Sands Revenue (pre hedging) EBITDA Eucla / Perth Basins Murray Basin US Operations Exploration and Other (7.4) (10.1) (36.5) Total Mineral Sands EBITDA (pre hedging) Depreciation and Amortisation (83.5) (101.5) (21.6) Mineral Sands EBIT (pre hedging) (17.2) (6.2)

68 Mining Area C Royalty 1H H 2010 % change Annual Production to 30 June MDMT Sales Volume to 30 June MDMT Royalty Income $m Capacity Payments $m (37.5) Iluka EBIT $m Comments Higher iron ore sales volumes Average AUD realised price increased by 23 per cent from pcp - 60 per cent higher 2Q 2010 versus 1Q reflects greater proportion of spot sales $5.0 million of annual capacity payments to 30 June (2009: $8.0 million) 68

69 1 st Half 2010 Cash Flow and Net Debt $m 1H 2009 FY H 2010 % change pcp Opening Net Debt (215.7) (215.7) (382.1) (77.1) Operating Cash Flow (94.4) N/A MAC Royalty (29.8) Other Exploration (10.2) (20.0) (7.6) 25.5 Net Interest (6.0) (12.5) (12.3) (105.0) Tax (6.8) (4.4) (1.5) 77.9 Capital Expenditure (234.3) (521.6) (94.9) 59.5 Asset Sales (93.8) Share Issues Net of Costs N/A Dividends Paid to CRL Minorities (1.8) (1.8) - N/A CRL Net Debt Eliminated on Sale N/A Exchange Revaluation of Net US Debt (9.6) N/A (Increase) / Decrease in Net Debt (93.7) (166.4) (56.9) 39.3 Closing Net Debt (309.4) (382.1) (439.0) (41.9) 69