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4

I LUKA Re s ou r c e s

2009

annual shareholder

review

insightCommunication&design

2009 progress

table of contents

shareholder review

From The Chairman

inside Cover

From The Managing director

2

2008 production overview

4

group summary Financials

5

ore reserves and Mineral resources

9

exploration

11

Major projects

13

Marketing and sales

16

operations

18

sustainable development

22

Board of directors

24

leadership Team

26

statement of shareholdings

27

Five Year Financial performance

28

Corporate information

29

explanation of structure of

annual report documents

Theannualshareholderreview

provides shareholderswitha summary

of iluka’s 2008financial year.More

detailed information in relation to the

financial statements,directors’report

(including remuneration report), ore

reservesandmineral resources and

sustainabledevelopment sections

can beobtained by reference to the

2008annualreport.This is available

on iluka

’swebsitewww.iluka.com

australian currency is shown in this

reportunless otherwise indicated.

notice of annual

general Meeting

The54thannualgeneralMeetingof

shareholders of ilukaresources limited

willbe held at theargyleBallroom at

theparmeliahiltonhotel, 14Millstreet,

perth,westernaustralia onThursday 28

May 2009, commencing at 9:30am (wsT).

a separatenoticeofMeeting andproxy

Formhavebeen sent to registered

shareholders.Thenotice ofMeeting

isavailable on iluka’swebsite.

ilukaresources limited

aBn34 008675 018

level 23, 140stgeorge’sTerrace,perth

wa6000

gpoBoxu1988, perthwa6845australia

Telephon

e+618 93604700

Facsimile

+618 93604777

website

www.iluka.com

healTh & saFeTY

organisationalalignment to the creation

anddeliveryof shareholder value

50-70% ofmanagement short

term incentive targets linked to

return on capital, eBiT,npaT

long term incentives linked to

return on equityand relative

total shareholder returns

for a shareholderwho participated

in the 4 for7 renounceable share

offerof $2.55 per new share, the

value of their investment in iluka

increased by 20.4% for the year

this compareswith a40.1%

decline in thes&pasX 100 and

42.1% decline in thes&pasX200

materials indexover the year

employee shareownership increased

from 75% to 88% of eligibleemployees

environMenTal

perForManCe (reFerenCe

To projeCT eXeCuTion)

all injury frequency rate (“aiFr”)of

25.4, a6% reduction from 2007

regrettably the loss time injury

frequency rate (“lTiFr”)of 2.8was

up 65% from 2007.This equated to 15

lTis in 2008 compared to9 in 2007

(last twomonths of2008 lTi free).

MarkeT CondiTions

$20.8million expenditure

2008ore reserve levelwhich equates

to 10 times 2008 depletions

focusonprospective tenement holdings

in theMurrayBasin and euclaBasin

discovery ofmultiplehM

occurrences in the euclaBasin

encouraging preliminary non

mineral sandsexploration

results (gold and uranium)

BalanCe sheeT ManageMenT

a$500million debt facilities agreement

executedon 12March 2008

predominantmaturity profile5 years

witha reduction toa$345million on

the fourth anniversary (excluding

a$55millionworking capital facility)

$339million in newequity funds

raised through 4 for 7 rights issue

private placement notes ofus$130million

no2008 dividend paymentsgiven

group capital requirements to

develop jacinth-ambrosia andMurray

Basinstage 2,available franking

credits anduncertainty associated

with global economic conditions

netdebtat yearend of $215.7

million;gearing (net debt/net

debt+ equity) of17.4%

eBiTda/interest coverageof 12.7 times

eXploraTion

MurrayBasinstage 2,victoria– approved

capital expenditure of $209million

jacinth-ambrosia,south

australia– approved capital

expenditure of$420million

Brink project,virginia– capital

expenditure ofup tous$27.5million

key regulatory approvals received

for bothaustralianprojects

all projectson schedule andwithinbudget

Mining area C desCripTion

improved position in growthmarkets–

zircon sales intoChina almost doubled

to approximately 200 thousand tonnes

focus onextending customer base

improved small lot sales capacity

and logistics–warehousing,

containerisation, bagging

MarkeTing FoCus

sales revenue before hedging $1,018.1

million (2007: $863.9million), up17.8%

reportedgroupnpaT of$77.5million

(2007: $51.1million), up 51.7%

cashflow from operating activities of

$223.0million (2007: $95.5million)

10

shareholder review 2009

20

annual

shareholder

review

insightCommunication&design

from the chairman

The reported net profit after tax of

$77.5million exceeded the company’s

initial expectations,with a strong

second half contribution duemainly

to a dramatic change in theunited

states/australiandollar exchange rate

and improved pricing outcomes for

our products.Thefirst half of the year

was difficult and challenging,with the

company affected by the high prevailing

exchange rate and by the significant

adversefinancial effect of thewestern

australian gas supply disruption in june.

The reported net profit after tax of

$77.5million exceeded the company’s

initial expectations,with a strong

second half contribution duemainly

to a dramatic change in theunited

states/australiandollar exchange rate

and improved pricing outcomes for

our products.Thefirst half of the year

was difficult and challenging,with the

company affected by the high prevailing

exchange rate and by the significant

adversefinancial effect of thewestern

australian gas supply disruption in june.

iluka’s recapitalisation in the second

quarter of 2008, including the extension of

bankdebt facilities and the capital raising

through the issuanceof new shares, has

provided a solid basis to fund our capital

expenditure through 2008 and 2009.

There is no doubt that 2009will be a

highly challenging year in light of the

global economic crisis.despite the

initial encouragement in securing higher

contracted prices on a proportion of

2009 sales volumes across themain

products of zircon and the high value

titanium dioxide products of rutile

and synthetic rutile, sales volumes in

thefirst part of the year have been

slow, aswas expected.aswith other

commodity sectors, it is very difficult to

determine the demand picture for 2009.

as the company advised in its full

year results announcement, themajor

uncertainty in 2009 relates to short

term demand for its products through

a combination of customer uncertainty

associatedwith current demand for

theirproducts, and a logicaldesire to

draw down existing inventoriesbefore

committing to new product shipments.

sales volumes and, as a result revenue

and earnings, areexpected to be

significantly second halfweighted.

despite the uncertainty as to the

longevity of the global economic crisis,

iluka remains confident in relation to the

medium term demand for its products,

especially fromdeveloping and urbanising

economies.supply constraints ofhigh

qualitymineral sands productsmay

continue in themineral sands industry.

iluka iswell placed, both in terms of its

strongmarket position and access to

high quality and long life resources.

i acknowledge the long and valuable

contributionmade by thedirectorswho

retired during2008: formerChairman,

ianMackenzie,Msvaleriedavies and

grahameCampbell.Yourdirectors

were pleased towelcomeMs jenny

seabrookas a non-executivedirector.

iwould also like to thankmy other

fellowdirectors for their contribution

inwhat has been a challenging year

and toacknowledgedavidrobb and his

management team for their hardwork

and achievementsduring the year.

Finally, iwould like to thank iluka

shareholders for their ongoing support

of the company as itundertakes

its transition to new, high quality

and long life sources of production

and to its goal of the creation and

delivery of shareholder value.

drBob every

Chairman

iluka remains

confident in relation

to the medium term demand

for its products, especially

from developing and

urbanising economies.

dr bob every

The FoCus on healTh,

saFeTY and environMenT

perForManCe was MainTained.

environMenTal perForManCe

iMproved, as Measured BY an

appreCiaBlY lower level oF

reporTaBle environMenTal

inCidenTs.

11

iluka resources limited

12

shareholder review 2009

industry & company

information

17

iluka resources limited

The reporTed neT proFiT aFTer TaX oF $77.5 Million

exceeded the

company’s initial expectations, with a strong second half contribution due

mainly to a dramatic change in the united states/australian dollar exchange

rate and improved pricing outcomes for our products.

stage 2 builds on the existingMurray

Basin operations by accessing thefirst

of severalmineral sands deposits in

the northern partof theMurrayBasin.

it involves the development of the

kulwin deposit before progressing

to thewoornack,rownack andpirro

group of deposits.The development

andmining of these deposits is planned

to be undertaken over the period

2009 to 2014.other deposits in both

victoria andnewsouthwales are then

planned to be progressively developed.

The table provides a summary of the

physical characteristics of the combined

MurrayBasin developments.

production from the northerndeposits

will generate a second heavymineral

concentrate (“hMC”) stream to be

processed at the existing ilukamineral

separation plant (“Msp”) located near

hamilton.ThisMspwas constructedwith

capacity exceeding the requirements

of thedouglasmining operations.The

Mspwas commissioned during 2007

and has been processinghMC sourced

from thedouglasmining operations,

located approximately 80 kilometres

to the north ofhamilton.TheMsp’s

capacitywill be upgraded from 55

tonnesper hour to 80 tonnesper hour.

all regulatory approvals,whilst

delayed, have been

received.at

the time of the preparation of this

document, onsite constructionwas

well advanced,with initialworks

commencing indecember 2008.

Themining unit plantwas transported

to site inMarch 2009,while thewet

concentrator plant has been assembled

offsite,withpre-commissioning

commencing in February.

First production remains on schedule

for the second quarter of 2009.

development of theMurrayBasin

provincewill provide significant

social andfinancial benefits to the

region in terms of employment, job

diversification and community support.

TheMurrayBasin is an important

component of global rutile production

and is expected to provide a high quality

and long life new production source,

withassociated exploration potential.

stage 2 buildson theexistingMurray

Basin operations by accessing thefirst

of severalmineral sands deposits in

the northern part of theMurrayBasin.

it involves the development of the

kulwin deposit before progressing

to thewoornack,rownack andpirro

group of deposits.Thedevelopment

andmining of these deposits is planned

to be undertaken over theperiod

2009 to 2014.other deposits in both

victoria andnewsouthwales are then

planned to be progressively developed.

The table provides a summary of the

physical characteristics of the combined

MurrayBasin developments.

production from the northerndeposits

willgeneratea secondheavymineral

concentrate (“hMC”) stream to be

processed at theexisting ilukamineral

separation plant (“Msp”) locatednear

hamilton.ThisMspwas constructedwith

capacity exceeding the requirements

of thedouglasmining operations.The

Mspwas commissioned during 2007

andhasbeenprocessinghMC sourced

from thedouglasmining operations,

locatedapproximately 80 kilometres

to the north ofhamilton.TheMsp’s

capacitywill beupgraded from 55

tonnesper hour to 80 tonnes per hour.

all regulatory approvals,whilst delayed,

have been

received.at

the time of the

preparation of thisdocument,onsite

constructionwaswell advanced,

with initialworks commencing in

december 2008.Theminingunitplant

was transported to site inMarch2009,

while thewet concentratorplant has

beenassembled offsite,withpre-

commissioning commencing in February.

Firstproduction remains on schedule

for the secondquarter of 2009.

developmentof theMurrayBasin

provincewillprovide significant

socialandfinancial benefits to the

region in terms ofemployment, job

diversification and community support.

TheMurrayBasin isan important

componentof global rutile production

and isexpected to provide ahighquality

and long life newproduction source,

with associated exploration potential.

stage 2buildson the existingMurray

Basin operations by accessing thefirst

of severalmineral sandsdeposits in

the northernpartof theMurrayBasin.

it involves thedevelopment of the

kulwin depositbeforeprogressing

to thewoornack,rownackandpirro

groupofdeposits.Thedevelopmentand

miningof thesedeposits isplanned to

beundertaken over the period 2009 to

2014.other deposits inbothvictoria

andnewsouthwales are thenplanned

to beprogressivelydeveloped.

development of the

Murray Basin province

will provide significant social

and financial benefits to the

region in terms of employment,

job diversification and

community support.

18

shareholder review 2009