Iluka issued its half year results today.

Attached are links to the ASX Release, 4D financials and the slide pack to be associated with the market teleconference this morning at 10.15 am AEDT.  (refer bottom of this email for teleconference details)

Summary Financials

Iluka advised at the 2009 full year results announcement that it expected to report a loss in the first half.

Relative to company expectations at that time, financial performance has been positively impacted by:

·          stronger sales volumes - 216 thousand tonnes of zircon (a four fold increase from 1st Half 2009);

·          lower total and unit cash costs of production ($262 million - 7.9% lower); and

·          a higher Mining Area C iron ore royalty contribution ($35.5 million- up 12%).

The result includes a restructuring charge of $9.3 million associated with redundancy costs arising from the idling of the Mid West, Western Australia mining operations following commencement of commercial production at the Jacinth-Ambrosia in South Australia.

Operating cash flow for the period was $42.6 million (1^st half 2009: $(94.4) million), which was moderated by:

·          an increase in working capital arising from the start of operations at Jacinth-Ambrosia (and the resultant increase in concentrate stocks held prior to processing); as well as

·          an increase in debtors by approximately $25 million due to the timing of shipments.

Net debt at 30 June 2010 was $439.0 million, compared with $382.1 million on 31 December 2009 and $309.4 million on 30 June 2009.

The movement in net debt reflects:

·          the payment of capital expenditure accrued at year end mainly associated with the new projects (capital expenditure payments in the period were $94.9 million); and

·          a working capital build of $45.5 million associated with increased concentrate stocks for the ramp-up of operations at Jacinth-Ambrosia and Murray Basin Stage 2. 

Subsequent to the half year, net debt as at 31 July reduced to $403.3 million.

Gearing (net debt/debt + equity) was 28.8 per cent at 30 June 2010, compared with 25.9 per cent at 31 December 2009 and 21.5 per cent at 30 June 2009.

David Robbs commentary included the following:

The constraints on margins are expected to dissipate progressively over the course of the second half of 2010 and into 2011 and should – in the absence of further global economic shocks – enable Iluka to deliver significantly improved financial performance in 2011.

Evidence is now emerging of tightening supply conditions as indicated by:

·         strong demand across Iluka’s full product suite and an associated drawdown in raw material inventories;

·         the company’s inability to meet customer demand fully;

·         industry wide price increases for zircon; and

·         the sale (to be supplied in the second half) of some small uncontracted volumes of high grade titanium dioxide product at prices materially higher than contracted prices.

Iluka foresees a supply challenge in both zircon and high grade titanium feedstocks and scope, therefore, for sustained price increases.

In this environment, Iluka is reviewing its zircon reserves position and considering opportunities to increase its zircon production above the 500 thousand tonnes per annum level indicated previously as the planned average for 2011-2013.

Iluka is determining the most appropriate commercial arrangements for the sale of high grade titanium dioxide products in 2011, given that most of the long term cap and collar pricing arrangements, which have prevailed for over a decade, lapse at the end of this year and will not be renewed.

Iluka intends to utilise the SR3 kiln in the Mid West as long as practicable into 2011 as a basis for testing the utilisation of Murray Basin and Jacinth-Ambrosia ilmenites as feedstock and for trials into new SR products.

This approach also enables the company to observe trends in synthetic rutile pricing in the near term before committing capital to kiln refurbishment as part of a major new production campaign.

As such, the company now plans to base load production during 2011 around only its largest, most efficient kiln in the South West of Western Australia, which has a capacity of approximately 200 thousand tonnes per annum.

Please contact me if you have questions.

Please note I will be in Perth on Thursday 26 August - so please try me on my mobile or the Perth corporate number of 08 9360 4751

For those looking to forecast 2nd half earnings for Iluka I have prepared a summary of second half physical and financial factors which the company has guided upon, as well as some commentary drawn from the half year results, of possible second half trends.  As indicated previously, 2011 is the first full year of the "new Iluka" and as such financial performance characteristics are expected to significantly improve.

Regards

Rob

Robert Porter | General Manager Investor Relations
Iluka Resources Limited | Level 50, 120 Collins Street | Melbourne VIC 3000
Mobile 0407 391 829 | Perth Corporate + 61 8 9360 4700

Investment presentation teleconference/webcast

10.15am – 11.15am (AEST)

Dial in arrangements Australia 1800 885 418

Dial in arrangements International +61 2 9696 0911

Slides will be available here and on Iluka’s website www.iluka.com