Iluka releases quarterly review to 30 September 2020

2020-10-17

Oct. 17, 2020 - Iluka Resources releases the quarterly review to September 30.

KEY FEATURES 

• Total zircon, rutile, synthetic rutile (Z/R/SR) production in the September quarter was 135 thousand tonnes, in line with June quarter Z/R/SR production (135 thousand tonnes). - Zircon production in the September quarter was 32 thousand tonnes, down 24% from the June quarter largely due to deferral into October of zircon-in concentrate (ZIC) shipments, the production of which is recognised upon sale. - Third quarter rutile production of 48 thousand tonnes increased 38% from the previous quarter reflecting modest improvement in SRL production rates and increased production of Cataby rutile which was being campaigned during the quarter. - The synthetic rutile kiln feed rate was lowered in the quarter for production of 55 thousand tonnes (Q2 2020: 58 thousand tonnes). 

• Zircon sales continued to improve in the third quarter to 63 thousand tonnes, up 18% from June quarter and up 22% from September quarter 2019. Customers’ plant operating rates remain lower than previous years across various end use industries however there are indications of modest improvement across key markets. 

• Rutile sales were 34 thousand tonnes in September quarter, up 23% from the June quarter.

• Synthetic rutile sales of 12 thousand tonnes in September quarter were down 68% from June quarter reflecting a contractual dispute and reduced offtake by synthetic rutile customers as previously disclosed. 

• Zircon prices continued to remain relatively stable with the weighted average zircon (premium and standard) price in September quarter of US$1,311 per tonne, down a modest 3% from the first half 2020. 

• Rutile pricing has remained steady in 2020, with Q3 weighted average rutile prices US$1,195 per tonne. 

• The demerger of Iluka’s royalty business, with Iluka retaining a 20% stake, remains on track and an Extraordinary General Meeting (EGM) for shareholders to vote on the demerger of Deterra Royalties is being held on 16 October. Subject to shareholder approval, Deterra Royalty shares are expected to commence trading on a deferred settlement basis on the ASX on 23 October 2020.

PRODUCTION 

Australian Operations 

At Iluka’s Jacinth-Ambrosia mine in South Australia, 77 thousand tonnes of heavy mineral concentrate (HMC) was produced, down from 109 thousand tonnes in the previous quarter, due to mining of lower grades at Jacinth North. Mining occurred at the Ambrosia deposit for the first portion of the quarter before returning to the Jacinth deposit at the start of August. The return to Jacinth was previously announced as part of the company’s response to the COVID-19 pandemic, with estimated costs savings over 2020-2022 of $30 million. 

In Western Australia, the Cataby operation produced 139 thousand tonnes of HMC, marginally lower than the 148 thousand tonnes produced in the previous quarter. This included 92 thousand tonnes of magnetic material (for use as synthetic rutile feed) and 47 thousand tonnes of non-magnetic material (for zircon and rutile production). 

The Narngulu mineral separation plant (MSP) processed 89 thousand tonnes of HMC during the quarter, up from 73 thousand in the previous quarter. As noted previously, production settings at the MSP were altered earlier in the year to reduce zircon production in response to the impact of COVID-19 on zircon markets. The plant retains full flexibility to return quickly to higher production settings.

Production at the synthetic rutile kiln 2 at Capel was 55 thousand tonnes of synthetic rutile, which was a reduction from 58 thousand tonnes in the previous quarter. The ilmenite feed rate to the kiln was lowered in response to the contractual dispute with one of Iluka’s major synthetic rutile customers, Chemours. Iluka continues to monitor its production settings against inventory levels and customer demand and maintains its ability to adjust these settings if required. 

Iluka’s Eneabba project in Western Australia continued operations, with a further 21 thousand tonnes of monazite-zircon concentrate being shipped from Geraldton during the quarter. 

Sierra Leone Operations 

Rutile production in the September quarter was 31 thousand tonnes, up from 26 thousand tonnes in the preceding quarter. While rutile production improved, operations continued to be hampered by several downtime events occurring during the period leading to lower throughputs. Seasonal weather also impacted operations in the quarter. 

Early in October, post the reporting period, a minor fire occurred in the secondary rutile recovery (or scavenger) circuit of Sierra Rutile’s MSP. The fire was quickly brought under control. One person required first aid treatment at Sierra Rutile’s medical clinic for minor burns to his hands. The scavenger circuit represents a relatively minor part of the plant’s operations and is in a separate building. Production activities have recommenced in the MSP and at this stage there is no material impact to production expected. 

MINERAL SANDS MARKET CONDITIONS 

Zircon Markets 

Third quarter sales of 63 thousand tonnes were 22% higher than the same quarter last year (52 thousand tonnes) reflecting the continued modest recovery from the impacts of COVID-19 in key markets and regions. 

In China the ceramic industry activity continued to operate at an estimated 60% of 2019 operating rates, with lower quality tile producers facing intense competition from medium to higher quality tile makers and some production units having shut-down. Chinese tile exports remain impacted by trade restrictions and large producers are focusing on the domestic market with higher quality products to increase differentiation while maintaining the trend to reduce production costs. In Europe, India, and South America, the tile industry ramped-up production during Q3 and is now operating at an estimated 80-90% of last year’s operating rate, supported by exports and renovation activities in some markets. 

Outside ceramics, the foundry application has been the most affected by the economic downturn, despite some slight improvements in China and the US it is still operating at an estimated 60-70% of 2019 rates. The refractory market remained stable during the quarter although faced increased price pressure from downstream customers; similarly, the fused zirconia segment remained stable but with increased competition among producers. Some zirconium chemical producers implemented temporary shut-downs to reduce finished goods inventory following lower exports in the quarter. 

September quarter sales volumes do not include two ZIC shipments that moved into October due to the late arrival of the vessel at the loading port. The higher proportion of ZIC will likely affect the weighted average zircon price in Q4, which together with Q1 are typically the lower demand periods of the year. 

Zircon prices continue to remain relatively stable with the weighted average zircon sand (premium and standard) price in Q3 of US$1,311 per tonne down 3% from the first half 2020.