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Contents

FromTheChairman

InsideCover

FromTheManagingDirector

2

2008ProductionOverview

4

GroupSummary Financials

5

OreReservesAndMineralResources

9

Exploration

11

MajorProjects

13

MarketingAndSales

16

Operations

18

SustainableDevelopment

22

Boaw´Wgs

27

FiveYear FinancialPerformance

28

Corporate Information

29

Explanation of Structure of Annual Report Documents

TheAnnualShareholderReview provides shareholderswith a summary of Iluka’s 2008financial year.More detailed information in relation

to thefinancial statements,Directors’Report (including remuneration report), ore reserves andmineral resources and sustainable

development sections can be obtained by reference to the 2008AnnualReport.This is available on Iluka

’swebsitewww.iluka.com

Australian currency is shown in this report unless otherwise indicated.

Notice of Annual General Meeting

The 54thAnnualGeneralMeeting ofShareholdersof IlukaResources Limitedwill be held at theArgyleBallroom at theParmelia

HiltonHotel, 14MillStreet,Perth,WesternAustralia onThursday 28May 2009, commencing at 9:30am (WST).

A separateNoticeofMeeting andProxy Form have been sent to registered shareholders.TheNotice ofMeeting is available on Iluka’swebsite.

IlukaResources Limited

ABN 34 008 675018

Level 23, 140StGeorge’sTerrace,PerthWA 6000

GPOBoxU1988, PerthWA 6845Australia

Telephone

+61 8 9360 4700

Facsimile

+61 8 9360 4777

Website

www.iluka.com

Iluka Resources Limited

is an Australian Securities Exchange listed resources company (ASX code: ILU).

It is amajor participant in the globalmineral sands sector, involved in the sales andmarketing

of titanium based products (rutile, ilmenite, leucoxene and synthetic rutile) and zircon.

Main Features of 2009

Health&Safety

EnvironmentalPerformance

MarketConditions

PortfolioRecognition

Project Execution

BalanceSheetManagement

Exploration

MiningAreaC

Marketing Focus

2009Summary Financials

Production andSalesSummary

Resources andReserves

Jacinth-Ambrosia

MurrayBasin

SustainableDevelopment

ILUKA

Resources Limited

8

7

Shareholder Review 2009

“Despite the uncertainty as to the longevity of the

global economic crisis, Iluka remains confident in

relation to the medium term demand for its product”

The focus onhealth, safety and environment performancewas

maintained.Safety performance, asmeasured by our prime

indicator, the all injury frequency rate, improved although

the lost time injury frequency rate increased over the period.

Environmental performance improved, asmeasured by an

appreciably lower level of reportable environmental incidents.

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/Australian dollar exchange rate and improved pricing

outcomes for our products.Thefirst half of the yearwas difficult

and challenging,with the company affected by the high prevailing

exchange rate and by the significant adversefinancialeffect

of theWesternAustralian gas supply disruption in June.

Iluka’s recapitalisation in the second quarter of 2008, including

the extension ofbank debt facilities and the capital raising

through the issuance of new shares, has provided a solid basis

to fund our capital expenditure through2008 and 2009.

TheBoard committed to twomajor new projects in 2008which

will provide Ilukawithhighquality and long life production

sources:MurrayBasinStage 2 and the Jacinth-Ambrosia

projects.Both are significant in terms of the company’s

next stage of growth.They are also important in terms of

industry supply.Management is focused on project execution

and I am pleased to be able to report to shareholders

that both projects are on schedulewith the announced

completion dates ofmid 2009 andmid 2010 respectively

and, at this stage, capital expenditure iswithin budget.

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 the

first 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 their products, and a logical desire to draw

down existing inventories before committing to new product

shipments.Sales volumes and, as a result revenue and earnings,

are expected to be significantly second halfweighted.

The effortsmade bymanagement over the last two years

have placed the company in amore robust position, but

consideration continues to be given to strategies tomitigate

the impact of the severe economic conditions on Iluka and

to bestmatch Iluka’s production tomarket demand.

Despite the uncertainty as to the longevity of the global economic

crisis, Iluka remains confident in relation to themedium

term demand for its products, especially from developing

and urbanising economies.Supply constraints of high quality

mineral 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 during 2008: formerChairman, Ian

Mackenzie,MsValerieDavies andGrahameCampbell.Your

Directorswere pleased towelcomeMs JennySeabrook as a

non-executiveDirector. Iwould also like to thankmy other fellow

Directors for their contribution inwhat has been a challenging

year and toacknowledgeDavidRobb and hismanagement

team for their hardwork and achievements during the year.

Finally, Iwould like to thank Iluka shareholders for their

ongoing support of the company as it undertakes 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

Chairman’s Letter

iluka

annual shareholder review 2009

Murray Basin

PhysicalCharacteristics -MurrayBasin

Mineral

Resources

47.8million tonnes of heavymineral

OreReserves

8.7million tonnes of heavymineral

AverageOre

ReserveHM

Grade

20.6%

AverageHM

Assemblage

15% rutile

11% zircon

PlannedMining

andProduction

Commencement

FromStage 2 - second quarter of 2009

Expected

Mine Life

Current economic life for

MurrayBasin: at least 2023

ProductionProfile

(2010-2013)

~180 thousand tonnes of rutile per

annum (average)

~150 thousand tonnes of zircon per

annum (average)

No commercial value currently ascribed

to

ilmenite production stream.

Mining and

Processing

Procedure

WaterSource

Conventional dryminingmethodswith

temporary dewatering.A relocatable

wet concentrator.Heavymineral

concentrate to be trucked (or possibly

railed) toHamilton (approximately 360

kilometres) for processing. Final product

shipped throughPort ofPortland,

with some volumes to be railed to

Geelong for containerised shipment.

Saline groundwater and reverse

osmosis for freshwater requirements.

Employment

Approximately 250during

construction and 160, including

contractors, during operation.

TheMurrayBasinStage 2 development, involving an estimated

$209million of capital expenditure,was approved by the

IlukaBoard in February 2008. It represents the initial step in

accessing approximately two-thirds of the currently defined

totalmineral resource base in the north of theMurrayBasin.

The estimated economic life of Iluka’smining and processing

operations in theMurrayBasin is at least 15 years, and

probably longer in the event of further exploration success.

Stage 2 buildson theexistingMurrayBasin operationsby

accessing thefirst of severalmineral sands deposits in the

northernpart of theMurrayBasin. It involves the development

of theKulwin deposit before progressing to theWoornack,

Rownack andPirro group of deposits.The development and

mining of these deposits is planned to be undertaken over

the period 2009 to 2014.Other deposits in bothVictoria

andNewSouthWales are then planned to be progressively

developed.The table providesa summary of the physical

characteristics of the combinedMurrayBasin developments.

Production from the northern depositswillgenerate 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.TheMSPwas

commissioned during 2007 and has been processingHMC sourced

from theDouglasmining operations, located approximately 80

kilometres to the northofHamilton.TheMSP’s capacitywill

beupgraded from 55 tonnes per hour to 80 tonnes per hour.

All regulatory approvals,whilst delayed, have been

received.At

the time of the preparation of this document, onsite construction

waswell advanced,with initialworks commencing inDecember

2008.Themining unitplantwas 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 quarterof 2009.

Development of theMurrayBasin provincewill provide

significant social andfinancial benefits to the region in terms

of employment, jobdiversification 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,with associated exploration potential.

Caption description

9

Shareholder Review 2009

ILUKA

Resources Limited

10

ILUKA

Resources Limited

12

11

Shareholder Review 2009

During 2008, Iluka completed the definitive feasibility study

for themajor Jacinth-Ambrosiamineral sands project

in the EuclaBasin ofSouthAustralia.The IlukaBoard

approved thedevelopment of the project inMay 2008,

with a capital expenditure budget of up to$420million.

The Jacinth-Ambrosia project represents Iluka’sfirst development

commitment to themajor, high qualityand long life zircon province

in the EuclaBasin ofSouthAustralia andWesternAustralia.

Jacinth-Ambrosia, discovered in2004, is themost significant

new global zircon development in recent decades,with key

resource and project details provided in the table below.

Metallurgical testwork indicates that a premium grade

zircon can beproduced from Jacinth-Ambrosia.The Jacinth-

Ambrosia zircon is expected to have opacifier qualities

comparable to Eneabba andMurrayBasin zircons and be

suitable for the ceramicsmarket aswell as othermarkets

suchas casting, zirconia and foundry applications.The rutile

from Jacinth-Ambrosia is low in sulphur and phosphorous

and iswell suited for use inwelding applications.

The ilmenite is chloride grade andwillmost

likely be sold as afinal product.

The proposeddevelopment plans have been subject to

public review through aMining LeaseApplication process.

This has included the preparation of detailed analysis and

environment assessments, encompassing:water, fauna

andflora, airquality, noise, heritageand socio-economic

impacts.Heritage clearances for construction of the Jacinth-

Ambrosiamine site and infrastructure are now complete.

During 2008, the company received keySouthAustralian

Government regulatory approvals,which has allowed site and

infrastructurework to commence.Thiswork has included the

constructionof access roads, the installation of temporary

accommodation facilities, and the commencement of the bore

field and pipeline infrastructure.All key contracts, including

that for an on-site power facility have been awarded. In

addition, awet concentrator plant has been relocated

from Iluka’sUnitedStates’ operationsand is inWhyalla

for refurbishment, prior tobeing relocated to site.

InWesternAustralia, theMineralSands (Eneabba)

AgreementActwas amended so Iluka could import Jacinth-

Ambrosia heavymineral concentrate forfinal product

processingat theNarngulu processing facility.Work has

commenced on the upgrading of theNarngulu processing

facilities to handle concentrate fromSouthAustralia.

The Jacinth-Ambrosia project remains on

schedule andwithin budget.

Virginia

Iluka is undertaking the development of theBrink

mineral sands deposit, associatedwith the company’s

Virginia operations in theUnitedStates.

TheBrinkmine developmentwas approved inDecember 2007 for

US$27.5million.The development of theBrink deposit is expected

to produce approximately 790 thousand tonnes of ilmenite and

approximately 160 thousand tonnes of zircon and extend the

economic lifeof theVirginia operations to 2015. It represents

a relatively low risk, high valuebrownfield replacement for

mining operations at theOldHickory deposits inVirginia and

involves the relocation of theOldHickory concentrator to the

Brink ore body.TheConcord concentrator, locatedat theOld

Hickory orebody,will continue to operate through tomid 2013.

The project is on schedule for commissioning inApril 2009.

Metallurgical testwork indicates that a premium grade

zircon can be produced from Jacinth-Ambrosia.The Jacinth-

Ambrosia zircon is expected to have opacifier qualities

comparable to Eneabba andMurrayBasin zircons and be

suitable for the ceramicsmarket aswell asothermarkets

such as casting, zirconia and foundry applications.The rutile

from Jacinth-Ambrosia is low in sulphur and phosphorous

and iswell suited foruse inwelding applications.

The ilmenite is chloride gradeandwillmost

likely be sold as afinal product.

The proposed development plans have been subject to

public review through aMining LeaseApplication process.

This has included the preparation of detailedanalysis and

environment assessments, encompassing:water, fauna

andflora, air quality, noise, heritage and socio-economic

impacts.Heritage clearances for construction of the Jacinth-

Ambrosiamine site and infrastructure are now complete.

During 2008, Iluka completed the definitive feasibility study

for themajor Jacinth-Ambrosiamineral sands project

in the EuclaBasin ofSouthAustralia.The IlukaBoard

approved the development of the project inMay 2008,

with a capital expenditure budget of up to $420million.

Conventional dryminingmethods andwet concentration.Heavy

mineral concentrate to be trucked to thePort ofThevenard, near

Ceduna; shipped toPort ofGeraldton,WesternAustralia for

final processing at Iluka’sNarngulumineral processing facility.

Jacinth Ambrosia

PhysicalCharacteristics - Jacinth -Ambrosia, EuclaBasin

MineralResources 9.5million tonnes of heavymineral

OreReserves

6.4million tonnes of heavymineral

AverageOre

ReserveHMGrade

6.5%

AverageHM

Assemblage

50% zircon

5% rutile

PlannedMining and

Production

Commencement

First half 2010

ExpectedMine Life Ten years plus

ProductionProfile

(2011-2013)

~300 thousand tonnes of zircon per

annum

~30 thousand tonnesof rutileper annum

~150 thousand tonnes of

ilmenite tonnes per annum

Mining and

Processing

Procedure

WaterSource

Conventional dryminingmethods and

wet concentration.Heavymineral

concentrate to be trucked to the

Port ofThevenard, nearCeduna;

shipped toPort ofGeraldton,Western

Australia forfinal processing at Iluka’s

Narngulumineralprocessing facility.

Hyper salinewater resource sourced

from a paleochannel, located

approximately 32 kilometres from the

mining and processing operations.

Employment

Approximately 250 during construction

and 120,

including contractors, during operation.

Fly in /fly out

Caption description