Our Business

Introduction

Iluka is a major participant in the global mineral sands industry. It is involved in the exploration, project development, operation and marketing of mineral sands products. Its main assets and operations are located in Australia, with a mining and processing operation in Virginia, USA.

Iluka is the largest producer of zircon in the world, with an approximate market share of one third, and is the second largest producer of titanium dioxide minerals (rutile, ilmenite and leucoxene and an upgraded form of ilmenite, synthetic rutile). (Source: Iluka estimates 2010)

Outside the core mineral sands business, Iluka has a royalty over iron ore produced from specific tenements of BHP Billiton's Mining Area C (MAC) province in the north west of Western Australia.

The company employs approximately 1,000 people. Its head office is located in Perth, Western Australia. Iluka is listed on the ASX (ASX code: ILU) and has 418.7 million shares on issue.

Major Areas of Company Focus

• Create and deliver value for shareholders by a focus on Profitability, Sustainability, and Growth;
• Base the company on large, high quality, long life operations;
• Invest in exploration to add to the resource and reserve base;
• Execute well - plan projects with efficiency, quality and reliability;
• Achieve strong zircon and rutile sales growth;
• Build a stronger position in growth markets;
• Invest in people, product and market development;
• Maintain mutually beneficial, long-term customer relationships.

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.