Iluka Flags Tougher Market Condition for Short-Term; While Sandfire Clinches on DeGrussa Performance

  • Feb 21, 2020
  • Team Kalkine
Iluka Flags Tougher Market Condition for Short-Term; While Sandfire Clinches on DeGrussa Performance

Resource sector, the backbone of the economy has been on an uptrend and is closely tracking S&P/ASX 200 Index gains. The strong performance demonstrated by the resource sector during the decade gone by can be largely attributable to the performance of resource companies such as Iluka Resources Limited (ASX:ILU), Sandfire Resources Limited(ASX:SFR), and many other resource companies.

The end of December 2019 has marked the end of reporting period for all resources and other sectors. The reporting season is closely tracked by the market participants.

While resource companies like Lynas Corporation Limited (ASX:LYC), Mount Gibson Iron Limited (ASX:MGX), and many others are reporting strong figures; the time has reached for Iluka Resources Limited (ASX:ILU) and Sandfire Resources Limited (ASX:SFR) to report their respective period, which ended on 31 December 2019.

To Track ASX Companies Earning Release date visit: REPORTING CALENDAR

At Kalkine, we have covered an extensive range of periodic earnings for many resource and other companies, some of which such as Rio, PRU, AWX, S32, FMG, could be found on the provided link below.

Do Read: Quarterly Bells Ring For Lynas and Mount Gibson; While Sandfire Receives Strong Expansion Results

Iluka Resources Limited (ASX:ILU)

  • Financial Highlights


ILU reported its annual results at the end of December 2019, which marks the completion of the financial year 2019 for the miner.

The Company generated Mineral sands revenue of $1,193.1 million, down by 4.1 per cent against previous corresponding period, while the Mineral sands EBITDA fell by 2.5 per cent against pcp to stand at $530.9 million. However, the underlying Group EBITDA increased by 2.6 per cent to stand at $616.0 million.

The underlying NPAT fell by 7.3 per cent against pcp to stand at $278.7 million. ILU generated 31.3 per cent lower cash from operating activities against pcp, while free cash decline by 54.1 per cent.

The snippet of the performance is as below:

Source: Company’s Report

  • Performance Review


The decline in mineral sand revenue was primarily due to the mixed market conditions, with a 17 per cent increase in revenue per tonne partially offsetting the 18 per cent fall in mineral sands (zircon/rutile/ synthetic rutile) sales volume, suggesting that the fall was largely due to the lower production as compared to the industry demand and price, which remained robust.

ILU witnessed an increase of 10 per cent and 20 per cent against pcp in the average realised price of zircon and rutile, respectively.

As per the company, it responded to short term softness in the zircon market with an enhanced loyalty rewards program and augmented zircon product mix and suggested that the conditions remained tight across the high-grade feedstock market and sales volumes exceeded production.

The net loss post-tax of $300 million, was majorly due to the $414 million write-down of the carrying value of Sierra Rutile assets.

ILU also adjusted the associated tax losses available to Sierra Rutile due to the revised outlook, which would remain in use in the future; however, resulted in an increased tax charge of $162 million (non-cash).

The Mining Area C royalty payment surged by 53 per cent against pcp to stand at $85 million amid a strong rally in iron ore prices during the second half of the year 2019.

The free cash flow declined primarily due to the $198 million investments in capital projects to sustain production, including the completion of the new Cataby operations, a transition of mine to Ambrosia, a kiln reline and refurbishment and expansions at the Lanti and Gangama mines in Sierra Leone.

The company retained net cash of $43 million (as on 31 December 2019) and declared a fully franked final dividend of 8 cents a share, which took the full-year dividend to 13 cents a share, representing 40 per cent of the free cash flow.

  • Future Outlook


ILU anticipates the mixed market conditions to persist ahead at the beginning of the year 2020 amid uncertainty in China due to the coronavirus outbreak. The outbreak, along with lingering trade and political tensions, is expected to weigh down the business sentiment over the short-run.

However, ILU also believes the supply tightness and solid underlying conditions for high-grade titanium feedstocks to support the Company ahead.

The Company estimates the 2020 production to stand at 280k tonnes of zircon, 230k of rutile, and 225k tonnes of synthetic rutile. Also, the capital expenditure is estimated to be in the range of $135 million, reflecting deferred mine development work at Cataby, which would cost $25 million, and Ambrosia, which would cost $10 million.

The project work at Sembehun is estimated to absorb $30 million, while the study cost for growth projects would cost $20 million. Eneabba Mineral Sands Recovery project capital to stand at $5 million, and the third field trial at Balranald will also occur in 2020, with costs expensed ($35 million), and so is not included in the guided capital expenditure.

The stock of the company last traded $9.635 (as on 21 February 2020, 01:39 PM AEDT), down by 3.93 per cent against its previous close on ASX.

Sandfire Resources Limited (ASX:SFR)

The SFR reported a revenue of $313.05 million, which remained 15 per cent up against the previous corresponding period (or pcp) of 1HFY18.

However, despite a strong growth, the profit from ordinary activities (post tax) fell by 31 per cent against pcp to stand at $34.21 million.

The earnings from DeGrussa Operations (post tax) fell by 10.12 per cent to stand at $91.4 million, which included the depreciation and amortisation charges of $90.1 million, up by 46.26 per cent against pcp.

The total revenue during the period was supported by payable metal sales, which stood at 33,616 tonnes of contained copper and 18,252 ounces of contained gold.

The results for the period included production from the new satellite Monty Copper-Gold Mine, which further increased the amortisation expense to $34.2 million, driven by the amortisation of the Monty Copper Gold Mine purchase price, post the acquisition of a 30 per cent interest in the project of Talisman Mining.

The exploration and evaluation expenditure also increased to stand at $6.2 million, including exploration at Tshukudu Project in Botswana, which the Company acquired from MOD Resources Limited (ASX:MOD).

  • DeGrussa Operations Performance


The DeGrussa Operations delivered strong operational performance with a production of 34,988 tonnes of contained copper, slightly up against pcp, and 19,370 ounces of contained gold, reflecting a path towards the full-year guidance of 70-72k tonnes of contained copper and 38-40k ounces of gold.

The DeGrussa Operations delivered an earning before net finance and income tax expense of $91.4 million, which remained slightly down against pcp amid a charge of $90.1 million related to the depreciation and amortisation.

Production and Sales Snippet of DeGrussa Operations (Source: Company’s Report)

The stock of the company last traded $5.060 (as on 21 February 2020, 01:39 PM AEDT), down by 3.25 per cent against its previous close on ASX.

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