Iluka Resources Reports Better Than Expected Production, Revenue Up By 22%

Iluka Resources has revealed better than expected results for the year ended 31 December 2018. Its full-year 2018 zircon production has massively increased by 12% to 349 thousand tonnes which represent a significant improvement over guided production of 330 thousand tonnes and comparative 2017’s production of 312 thousand tonnes.

The zircon’s production growth underscores the benefits derived by the higher ore grades and improved recoveries at Jacinth-Ambrosia along with the additional release of zircon in concentrate, told Iluka. For the December quarter of 2018, i.e., Q4 2018, the company has posted 93 thousand tonnes of Zircon production and 57 thousand tonnes of Synthetic rutile production compared to previous corresponding year’s production of 59 thousand tonnes and 53 thousand tonnes respectively.

Overall for an entire 2018 year, Iluka has posted record annual production of Synthetic Rutile from its SR2 kiln at Capel, Western Australia. It translates the production of 220 thousand tonnes, highest since commissioning of SR2 kiln in 1997. When compared to the previous year’s production, it presents an improvement of 4.3% on 211 thousand tonnes produced in 2017. This result reflects high kiln operating runtimes achieved throughout the year as ilmenite feedstocks for the kiln were from both internal and external sources, according to the report.

The company further informed that from February 2019, the kiln would undergo a significant maintenance outage for approximately two months before beginning its next four-year campaign and cataby will provide the primary source of ilmenite feedstock for the kiln in 2019.

But on the negative side of the performance, the company’s 2018 rutile production nosedived by 46% to 163 thousand tonnes due to the Sierra Rutile’s disappointing operational performance and interruptions due to strike action. Lower rutile production also reflects the impact of cessation of processing operations at Murray Basin. For December quarter, rutile production has declined to 37 thousand tonnes from 44 thousand tonnes in the previous quarter, i.e., Q3 2018.

Iluka’s revenue for the full year 2018 grew by 22% to $1,244 million, driven by the 41% year on year increase in weighted average zircon price to US$1,351 per tonne and 21% year on year increase in rutile price to US$952 per tonne. But its sales have been down on volumes front resulting in the decline of 7% to 827 thousand tonnes compared to previous year.

In the separate release to ASX, Iluka announced the inaugural Mineral Resource estimate of rutile mineralization at the Pejebu Deposit, located adjacent to its current mining operations in Sierra Leone. The company estimates that Pejebu Deposit Mineral Resource consists of 23.4Mt material at 0.95% in situ rutile, containing 0.22Mt of rutile. Iluka also stated that 80% of the Pejebu Mineral Resource is in the Indicated Mineral Resource category while the remaining 20% is classified as Inferred.

As at 31 December 2018, Iluka has achieved a net cash position of $2 million, reflecting strong free cash flow of $304 million in 2018 while investing $312 million in capital expenditure. With the significant rise in production and revenues, Iluka Resources Limited (ASX:ILU) attracted the interest of bullish investors. The stock price surged up by 9.055% to last trade at $8.190 on 25 January 2019.

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