Iluka Resources Limited (ASX:ILU) Edged Down Post Quarterly Review Update

For the September 2018 quarter, Iluka Resources Limited (ASX:ILU) stated that market conditions remained strong for zircon and high-grade titanium dioxide with sales volumes being limited by production. Zircon sales for the third quarter showed 9% increase up to 108 thousand tonnes with year to date sales amounting to 298 thousand tonnes. Zircon production guidance was increased on account of releasing additional product into the market in the form of zircon in concentrate (ZIC). The Ambrosia mine has finally received Board approval, and with the mine move is scheduled to be completed by October 2019, and the steady group Zircon production levels are expected to extend which is the production levels of 335ktpa out to and including 2021. The Jacinth-Ambrosia mine in South Australia produced 491 thousand tonnes of heavy mineral concentrate during first three quarters of 2018. Iluka is rigorously working on doubling of capacity of both the Gangama and Lanti dry operations from 500-600 tonne per hour to 1,000-1,200 tonne per hour. The first major delivery of structural steel and equipment is expected to arrive on site by November 2018, with commissioning of Gangama and Lanti expansions by mid of 2019. Puttalam is assessed continuously for potential development of the mineral sands deposit known as the Puttalam Quarry. Cataby mine development continues as scheduled and within budget. [optin-monster-shortcode id=”swikrbu1d9j9aq0o4cko”]

Key take away from the quarterly reviews are as under:

  • Revenue was up 19% year-to-date from the prior corresponding period to $872 million for Zircon/rutile/synthetic rutile (Z/R/SR) largely driven by increase in prices. Weighted average prices during Q3 were 11% higher for rutile, and 10% higher for zircon from the first half average prices. Reference price of Zircon increased to US$170 per tonne (12%) effective 1 October 2018 to US$1,580 per tonne delivered.
  • Group Z/R/SR production showed an increment of 14% amounting to 194 thousand tonnes in Q3 as compared to Q2.
  • Q3 2018 zircon production recorded 25% rise to 97 thousand tonnes, which was almost double relative to same period last year.
  • Rutile production showed a slight increment in Q3 from Q2, however it was 10 thousand tonnes below management’s expectations for the quarter reflecting ongoing runtime he rutile price in Q3 of $1,007 per tonne was impacted by a 9 thousand tonne rutile sale made during Q2 prices due to port congestion in late June, with the vessel sailing in early July
  • With Synthetic rutile production well in line with Q2, production guidance was increased to 210-215 thousand tonnes from 205 thousand tonnes reflecting strong run rates
  • As a result of unlawful strike action at Sierra Rutile, mining operations are temporarily put on halt.
  • The weighted average achieved price Year to date for zircon premium and standard showed 36% increase from 2017 to US$1,307 per tonne.
  • Expenditure on exploration and evaluation recorded for September quarter 2018 amounts to $4.1 million with year to date expenditure of $8.7 million

Capital expenditure is expected to be $35 million with deferred capital of $20 million to be spent across 2020 and 2021.

ILU stock edged down to $ 8.540 on October 24, 2018 (3:00 PM AEST).


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