Company Description

Overview

Iluka Resources Limited is an Australian Securities Exchange listed resources company (ASX code: ILU). It is a major participant in the global mineral sands sector, involved in the sales and marketing of titanium based products (rutile, ilmenite, leucoxene and synthetic rutile) and zircon.

The company’s business model involves mineral sands exploration, project development, operations and marketing.

Iluka’s key value drivers are: profitability, sustainability and growth (PSG).

Profitability requires a strong return on capital (ROC) focus leading to strong cash flows.

Sustainability requires high levels of environmental, health and safety performance plus sound planning, control and risk management systems.

Growth requires rigorous, timely evaluation of opportunities and effective project management.

In 2009, the company held a 29 per cent market share in the global supply of zircon, making it the largest participant in this sector. Iluka also had a 14 per cent market share in the supply of titanium dioxide feedstock, making it the second largest participant in this sector. Iluka is the largest global of high value titanium dioxide products of rutile and synthetic rutile (upgraded ilmenite).
(Source: Iluka estimates 2010)

Iluka is committed to operating in a sustainable manner. The company believes that targeting high levels of performance and pursuing best practice in the areas of environment, health and safety reflects Iluka's values of Commitment, Integrity and Responsibility.

Iluka works closely with its neighbours, employees, indigenous groups and stakeholders to add value to the communities in which the company operates.

Iluka also recognises that its future success depends on excellent customer relationships.

Iluka’s exploration, mining and processing operations follow strict processes that are designed to generate profitability, sustainability and growth. The key components of the Profitability, Sustainability and Growth (PSG) framework include:

Profitability:

• strong return on capital focus leading to strong cash flows;
• managing key business drivers of business performance – productivity, costs and margins;
• project returns above a risk weighted hurdle rate.

Sustainability:

• high levels of environmental, health and safety performance;
• sound planning, control and risk management systems;
• stakeholder relationships which, over time, are mutually beneficial;

Growth:

• identification and rigorous evaluation of opportunities;
• effective and timely decision making and project management;
• innovation and prudent risk taking.

Group Mineral Sands Production – 2009

The mineral sands industry consists of two core product streams: titanium minerals (also referred to as titanium feedstocks or TiO₂ feedstocks) and zircon. Titanium minerals (ilmenite, leucoxene and rutile) are generally far more prevalent in mineral sand ore bodies than zircon. The TiO₂ content of the various titanium minerals varies markedly (from less than 50% to over 95%) and it is the titanium dioxide content which mainly determines the value of the various products. Synthetic rutile (SR) and titanium slag are beneficiated products derived from ilmenite.

The indicative TiO₂ content of the main titanium products is shown below:

• Ilmenite (naturally occurring) 35-65%
• Leucoxene 65-91%
• Rutile (naturally occurring) 92-96%
• Synthetic rutile 87-95%
• Titanium slag 75-85%
• Upgraded slag 91-95%

Iluka is not involved in the production of titanium slag or upgraded slag.

Titanium

In 2009, the global titanium minerals market was estimated at approximately 5.4 million tonnes of TiO₂ units. Pigment is by far the largest consumer of titanium minerals with an estimated total world pigment production of approximately 4.4 million tonnes of TiO₂ units. (Source: TZMI)

Historically, demand for titanium minerals and zircon has displayed generally steady, GDP-related, growth characteristics. Increasing demand for mineral sand products from developing countries has also become increasingly evident over recent years. Titanium minerals and zircon constitute a relatively secure input source to a range of industrial and end-consumer applications, with relatively low threats from substitutes.

Titanium minerals - rutile, ilmenite, leucoxene and synthetic rutile - are the principal feedstock for pigment production. Pigment is produced by one of two processes:

• sulphate process, which involves the digestion of TiO₂ feedstocks in sulphuric acid and then a process of clarification, hydrolysis, filtration and calcination; and the
• chloride process: chlorination of TiO₂ feedstock and then a process of purification and oxidation.

Approximately 60% of pigment is now produced by the chloride process and 40% by the sulphate process.

The chloride process typically produces a higher grade pigment, with higher grade TiO₂ feedstocks required for the chloride process. Despite sulphate capacity reductions in the western world, China continues to expand sulphate capacity very rapidly.

Titanium pigments are pure white, highly refractive, ultra-violet-absorbing, non-toxic and inert. They are used in a wide and growing range of products: protective coatings, such as house, car paints and sunscreens, as well as in plastics, paper and textiles. Titanium pigments are also increasingly used in a range of foodstuffs and cosmetics.

Titanium minerals also act as a fluxing agent in welding electrodes that are used extensively in shipbuilding and construction. Titanium minerals are also used for the production of titanium sponge, used in the manufacture of titanium metal. The combination of strength and lightness of titanium metal makes it an ideal material for advanced engineering applications, particularly in the aerospace industry, and in a range of other applications, including sports equipment and jewellery.

Zircon

Global zircon consumption in 2009 was an estimated 1.0 million tonnes of zircon product. Over 50 per cent of zircon is used in the production of ceramics, including tiles, sanitary ware and tableware. Zircon is also used in refractories and foundry applications, such as for the casting of jet turbine blades.

In addition, it is the source material for zirconia and a wide range of zirconium-based chemicals. These products are used in a multitude of high-tech industrial applications, including autocatalysts, fuel cell technology, electronics and abrasives.

Zirconium metal is used in nuclear fuel rods and in specialised metal alloys, due to its high melting point and chemical resistance. A small amount of zirconia is converted into the synthetic gem stone, cubic zirconia, which is used in jewellery.

Company History

Overview

Originally established in 1954, Westralian Sands Limited commissioned its first ilmenite mine and processing plant in 1959. In 1998, Westralian Sands Limited acquired the diversified mining company RGC Limited and its extensive titanium mineral and zircon deposits in Australia and the United States. The acquisition included a controlling interest in CRL and a 50% share of a number of coal interests, including the Narama Coal joint venture in New South Wales, Australia.

The company was renamed Iluka Resources Limited (from Westralian Sands Limited) in 1999 which in Aboriginal language terms means 'by the sea'. It subsequently divested or closed several assets, including the RGC Thalanga Pty Ltd copper interest (1999), Westlime (WA) Limited (2001), PT Koba Tin (2002) and a 50% interest in the Narama coal mine in New South Wales (2008).

In 2002, the company acquired Basin Minerals Limited and its Murray Basin mineral sands assets in Victoria and New South Wales. In 2004, Iluka discovered the first of a number of zircon-rich ore bodies in the Eucla Basin in South Australia.

During 2009, the company completed its two major growth development projects, Murray Basin Stage 2 (Victoria) and Jacinth-Ambrosia (South Australia).

Company Milestones