Annual Report
2017
Mineral sands
part of everyday life
Manufacturing
Zircon is heat resistant and
non-reactive and is used in
steel and glass manufacturing
and metal casting
Pigment
Paint coatings, plastic and
ceramics use titanium dioxide
in the form of pigment
Nanomaterials
Titanium dioxide uses include
solar cells, water purification
and noise absorption
Ceramics
tiles shown
Floor and wall
on the cover contain zircon.
Zircon contributes to whiteness
and the abrasion and heat
resistance that tiles provide
2 Iluka Resources Limited, Annual Report 2017
Bathroom/Lifestyle
Ceramics, sanitary and toilet
basins, glass, faucets for taps,
cosmetics, pharmaceutical
products,
toothpaste,
anti-perspirants, sunscreens
Roof/Building/
Construction
panels,
Solar
insulators,
fibre
and
interior paint,
anti-pollution coatings
electrical
bricks/cement,
exterior
tiles,
optics,
Home/Office
Mobile
plastic,
phones,
printer inks, paper, packaging
Kitchen/Utilities
Light bulbs, dishes, glasses,
clock parts, food colouring,
ceramic knives, pans
Automotive
linings/pads,
Brake
car
parking sensors, automotive
paint, catalytic converters,
automotive electrics, rubber
products
Sporting Goods/
Recreation
Golf clubs, tennis racquets,
bicycle frames (titanium)
Healthcare/Medicine
implants, hip and
Dental
bone
replacements, heart
pacemakers, kidney dialysis,
zirconia-nuclear medicine
Aircraft/Industry
Titanium metal, desalination
plants,
zirconium metal,
corrosion resistant coatings
Products
Iluka is the world’s largest
producer of zircon. Zircon
is opaque; and heat, water,
chemical and abrasion
include
resistant. Uses
ceramics, refractory and
foundry; and zirconium
chemicals.
high-grade
Iluka is a major producer
of
titanium
dioxide products (rutile and
synthetic rutile), as well
as ilmenite. Uses include
pigment (paints), titanium
metal and welding.
Zircon
Zr
Titanium Dioxide
TiO2
From everyday applications in the home and workplace, to medical, lifestyle and
industrial applications, the unique properties of titanium dioxide and zircon are
utilised in a vast array of products. Iluka also recovers and markets activated carbon
and iron concentrate; both of which are by-products of the synthetic rutile process.
Iluka Resources Limited, Annual Report 2017 1
ILUKA IS INVOLVED IN THE
EXPLORATION, PROJECT
DEVELOPMENT, MINING
OPERATIONS, PROCESSING
AND MARKETING
OF MINERAL SANDS
About Iluka Resources
Approach
Iluka is involved in all of the main stages of the mineral
sands process, from resource development through to
delivery of customer benefits.
Iluka’s objective is to create and deliver value for
shareholders and its approach is premised on
•
•
•
•
•
Being disciplined in capital allocation
Seeking a sustainable price environment for mineral
sands products
Preserving and advancing growth opportunities
Flexing assets in line with market conditions
Acting-counter cyclically where appropriate.
Iluka conducts its operations to high standards in terms of
governance and the environment; and strives for the best
outcomes in health and safety management, and engaging
with the communities in which it operates.
lluka Resources Limited (Iluka) is involved in the exploration,
project development, mining operations, processing and
marketing of mineral sands. The company is a major
producer of zircon globally and a large producer of the
high-grade titanium dioxide products rutile and synthetic
rutile. Iluka’s products are used in an increasing array of
applications including home, workplace, medical, lifestyle
and industrial uses.
With approximately 2,500 direct employees, the company
has operations in Australia and Sierra Leone; projects
in Australia, Sierra Leone and Sri Lanka; rehabilitation
programmes in the US and Australia; and a globally
integrated marketing network.
The company also has a royalty over iron ore sales
revenues from tenements of BHP Billiton’s Mining Area C
(MAC) province in the north west of Western Australia.
Iluka is listed on the Australian Securities Exchange and
its corporate support centre is located in Perth, Western
Australia.
Mineral sands process
Geological setting
Mining approach
Mineral separation
Synthetic rutile
“Mineral sands” are heavy
minerals found in sediments on,
or near to the surface of ancient
beach, dune or river systems.
Mineral sands include minerals
such as rutile, ilmenite, zircon
and monazite.
Mineral sands mining involves
both dry mining and wet (dredge
or hydraulic) operations. Mining
unit plants and wet concentrator
plants concentrate and separate
the heavy mineral sands from
waste material.
also
produces
Iluka
synthetic
ilmenite
rutile,
that is upgraded by high
temperature
chemical
processes.
The heavy mineral concentrate
is transported from the mine
to a mineral separation plant
for final product processing.
The plant separates the heavy
minerals from each other in
multiple stages by magnetic,
gravity
electrostatic
separation.
and
2 Iluka Resources Limited, Annual Report 2017
*
Sierra Leone
Western Australia
Eucla Basin
Murray Basin
Sri Lanka
Sierra Rutile operations
Gangama dry mine
Lanti dry mine
Lanti dredge mine
Sembehun project
Sembehun project
Processing operations
Cataby project
Synthetic rutile kilns
Jacinth-Ambrosia mine
Satellite deposits
Balranald project
Puttalam project
* Mining and processing activities were completed in Virginia, USA, in 2016 and the mineral sands areas are currently being rehabilitated.
Rehabilitation
Marketing
As mining progresses, the mining pit is
backfilled and covered with stockpiled
soils that were removed at the start of the
process. Rehabilitation is progressively
undertaken to return land to a form
similar to its pre-mining state and suitable
for various uses including agricultural,
pastoral and native vegetation.
Iluka transports the final products
of zircon, rutile, synthetic rutile and
ilmenite to customers around the
world.
Iluka Resources Limited, Annual Report 2017 3
CREATING AND
DELIVERING
VALUE
Narngulu mineral separation plant, Western Australia
About this report
This annual report is a summary of Iluka Resources and its subsidiary operations, activities and financial position as at
31 December 2017. Currency is expressed in Australian dollars (AUD) unless otherwise stated.
Iluka plans to publish a separate Sustainability Report, in accordance with the Global Reporting Initiative Framework, which will
contain information on Iluka’s sustainability approach and performance for the period 1 January 2017 – 31 December 2017.
The Sustainability Report is expected to be published in April 2018 on the company’s website www.iluka.com. Iluka’s 2016
Sustainability Report is available on the company’s website.
Iluka is committed to reducing the environmental footprint associated with the production of the annual report, and printed copies
are only posted to shareholders who have elected to receive a printed copy.
4 Iluka Resources Limited, Annual Report 2017
Contents
Business review
2017 Year in review
Chairman’s review
Managing Director’s review
Board and executive
Financial summary
Strategy, capital management and future prospects
Financial and operational review
Sustainability
Business risks and mitigations
Financial report
Results for announcement to the market
Directors’ report
Remuneration report
Auditor’s independence declaration
Financial statements
Directors’ declaration
Independent auditor’s report
Physical, financial and corporate information
Five year physical and financial summary
Operating mines physical data
Ore Reserves and Mineral Resources statement
Shareholder and investor information
Corporate information
6
8
10
12
14
18
20
38
40
42
44
45
53
74
75
123
124
130
132
134
135
142
144
Iluka Resources Limited, Annual Report 2017 5
2017 Year in review
Recovery in mineral sands markets
•
Combined zircon/rutile/synthetic rutile sales of 889 thousand
tonnes, up 27% from 2016.
• Moderate underlying demand growth in zircon markets
combined with supply constraints.
•
•
Pigment supply issues in China and Europe increasing average
utilisation across other plants. High-grade feedstocks used to
increase plant yield, leading to strong demand for rutile and
synthetic rutile.
Price improvement across all products from the start of the
year: zircon average price up 40% to US$1,128 per tonne in
Q4; rutile average price up 13% to US$825 per tonne in H2.
Strong underlying financial result
• Mineral sands revenue increased 40% to $1,017.5 million with
growth in sales volumes and prices.
• Mining Area C royalty income contributed $59.6 million.
•
•
•
•
•
Underlying Group EBITDA increased 140% to $360.5 million,
reflecting strong revenue and non-production cost reductions.
Impairment expense ($185.4 million) and rehabilitation provision
increase for closed sites ($127.4 million) resulted in net loss after
tax of $171.6 million.
Strong free cash flow of $321.9 million.
Significant debt reduction with closing net debt of $182.5 million
(2016: $506.3 million).
A fully franked final dividend of 25 CPS was declared, which
together with the interim dividend of 6 CPS brings the total 2017
dividend to 31 CPS representing 40% of free cash flow.
Sustainable business focus continued
•
•
•
Achieved $61.5 milllion reduction in non-production costs.
Detailed review of existing production portfolio and projects.
Consolidated Australian mineral processing plant capacity by
idling Hamilton plant with Narngulu plant considered sufficient
to process future Australian production.
Cataby project execute and Jacinth-Ambrosia restart
•
•
•
Cataby project approved in December.
$250-275 million capital spend for initial 8.5 year mine life.
Production to sustain Iluka’s synthetic rutile production.
Project underpinned by favourable offtake agreements for
85% of synthetic rutile production for at least four years.
•
Jacinth-Ambrosia successfully restarted in December.
6 Iluka Resources Limited, Annual Report 2017
Lanti dredge, Sierra Rutile
UNDERLYING GROUP
EBITDA INCREASED 140%
TO $360.5 MILLION
PRICE IMPROVEMENT
ACROSS ALL PRODUCTS:
ZIRCON PRICE UP 40%;
RUTILE PRICE UP 13%
SIGNIFICANT DEBT
REDUCTION WITH
CLOSING NET DEBT
OF $182.5 MILLION
(2016: $506.3 MILLION)
INCORPORATED INTO
2017 DOW JONES
SUSTAINABILITY
INDICES AUSTRALIA
FOR LEADING
SUSTAINABILITY
PERFORMANCE
Sierra Rutile improvements achieved and expansion
projects progressing
•
•
•
•
First full year of ownership and operations fully integrated into
Iluka Group.
Iluka expertise delivered significant operational improvements,
including increasing valuable heavy mineral recovery and
increasing heavy mineral concentrate grades.
Delivery of in-pit mining project.
Expansion projects progressed and on track.
Resource development projects
•
•
Rutile-rich Balranald project full-scale wear test successfully
completed in 2017. Planning advanced to progress to
production trial in 2018. Continue in staged development
approach.
Sri Lanka Puttalam project sulphate ilmenite deposit work
ongoing, including technical aspects and local engagement.
• WIM deposit options and exploration in Kazakhstan and
Canada provide longer term pipeline of potential developments.
Committed to sustainable development
•
•
•
•
•
•
•
Incorporated into 2017 Australian Dow Jones Sustainability
Indices for leading sustainability performance.
2017 total recordable injury frequency rate for Iluka, excluding
Sierra Rutile, increased from 4.4 to 4.8 with one less injury but
fewer overall hours worked than 2016.
Sierra Rutile total recordable injury frequency rate was 2.2 in
2017.
Continued integration of Iluka’s safety and risk mitigation
framework
to strengthen Sierra Rutile’s sustainability
performance.
Sustainability targets set and communicated externally to
track and improve performance across material issues.
Further detailed rehabilitation planning and analysis at closed
US operations leading to increase in provision by US$90
million. Reduction
in Australian operations rehabilitation
provision through completion of 212 hectares.
Awarded the South Australian Premier’s Community Excellence
Award for Social Inclusion.
Iluka Resources Limited, Annual Report 2017 7
Chairman’s review
Dear Shareholders
2017 marked a year of transition for Iluka
following the appointment of Tom O’Leary
as Managing Director in September 2016.
Key developments included:
•
•
•
the integration of the Sierra Rutile
operation, which was acquired in
December 2016;
a substantial improvement in mineral
sands market conditions;
changes in operational settings –
reflecting both improved markets and
a detailed review of Iluka’s production
portfolio and projects following the
Sierra Rutile acquisition; and
•
project approval of Cataby.
reporting
an unsatisfactory
Despite
financial loss for the year, Iluka’s underlying
performance in the midst of this transition
was strong with the company ending
2017 in sound shape from a financial,
operational and governance perspective.
In last year’s Annual Report I conveyed
the Board’s cautious optimism in relation
to mineral sands markets, which at that
time had experienced an extended period
of subdued conditions. As such, it was
pleasing to witness these markets continue
to recover over the course of 2017.
Looking ahead, it is the Board’s view that
the approach adopted by the company in
recent times has positioned Iluka to benefit
from improving demand and prices for its
products, leading to the creation of value
for shareholders in the process.
Iluka’s full year financial result was an
after tax loss of $171.6 million. The higher
mineral sands revenues achieved – driven
by increased volumes and prices and a
higher contribution from the Mining Area
C iron ore royalty, resulted in a strong
underlying performance. Free cash flow
was $322 million with Iluka ending 2017
with net debt of $183 million, down from
$506 million at the beginning of the year.
Synthetic rutile kiln, mid west operations
THE COMPANY ENDED 2017 IN SOUND
SHAPE FROM A FINANCIAL, OPERATIONAL
AND GOVERNANCE PERSPECTIVE
8 Iluka Resources Limited, Annual Report 2017
The Board declared a final dividend of
25 cents per share, fully franked. This is
consistent with Iluka’s dividend framework
to return to shareholders a minimum of
40 per cent of free cash flow not required
for investment purposes or balance sheet
activity. Adding Iluka’s interim dividend for
2017 of 6 cents per share, fully franked
translates to a total dividend for 2017 of
31 cents per share, fully franked.
Protecting the safety and wellbeing of
Iluka’s people lies at the heart of the
business and is an area of continuing
emphasis for the Board and Executive.
The company’s total recordable injury
frequency rate increased from 4.4 to 4.8
in 2017, with one less injury offset by a
slight reduction in hours worked. The
lost time injury frequency rate increased
from 0.4 to 0.9. As 2017 was a baseline
year for data collection at Sierra Rutile
following the implementation of Iluka’s
safety incident reporting framework, these
frequency rates and comparisons to 2016
performance exclude
that operation.
Sierra Rutile ended 2017 with a total
recordable injury frequency rate of 2.2
and a lost time injury frequency rate of
1.0. At 31 December 2017, the combined
Group (Iluka Resources including Sierra
Rutile) total recordable injury frequency
rate was 2.8 and lost time injury frequency
rate was 1.0. This will be used for 2018
comparisons.
Environmental incident reporting was also
introduced at Sierra Rutile in 2017, with 20
incidents reported for the year. Excluding
Sierra Rutile, Iluka recorded a reduction in
environmental incidents from 11 in 2016 to
7 in 2017. As reported in December, the
company completed detailed rehabilitation
planning for its closed Virginia operation in
the United States and identified potential
additional obligations relating
to past
rehabilitation activity. This resulted in a
US$90 million increase to the rehabilitation
provision, which
is a disappointing
outcome and one that has received close
examination by the Board and Executive.
As part of the commitment made to
align Iluka’s sustainability practices with
the International Council on Mining and
Metals (ICMM) Framework for Sustainable
Development, the company prepared a
separate, detailed sustainability report in
April 2017 for the 2016 reporting year. This
improvement in transparency and reporting
was recognised through Iluka’s first listing
on the Dow Jones Sustainability Index
(DJSI) Australia as a leading sustainability
performer.
sustainability
reports will remain an annual feature of
Iluka’s communication with shareholders
and external stakeholders more broadly.
Standalone
The Board has reviewed the current
remuneration structures for the Managing
Director and senior management and
determined to implement a new Executive
Incentive Plan (EIP) in 2018. Under the
new arrangements, the current Short
and Long Term Incentive plans will be
combined and rewards largely delivered
in Iluka shares with deferred vesting. The
EIP is designed to support the delivery
of Iluka’s strategic objectives and further
align management’s interests with those of
shareholders. Further details can be found
in the Remuneration Report.
On other governance matters, the Board
participated in an externally facilitated
review of its effectiveness, skills and
competency inventory. I am pleased to
report that this review identified a number
of strengths including a clear, shared
sense of the Board’s role; an excellent
relationship between the Chair, Board and
Managing Director; sound governance
policies and processes; and a good mix of
experience, skills and knowledge among
Directors. As always, the challenge for
the Board is continuous improvement in
building a governance framework and
capability in line with the evolution of Iluka’s
operations and strategic priorities for the
future. This will be an area of ongoing
focus and consideration.
I would like to conclude my letter by
acknowledging the leadership of Tom
O’Leary and the performance of his
Executive team. Eighteen months into his
tenure, Tom is focused on delivering on
commitments made and ensuring Iluka
does what it says it will do in a methodical,
transparent and commercial manner. He is
supported by an experienced and capable
Executive that has adapted well to Iluka’s
transition and I thank them, and the
broader Iluka workforce, for their collective
contribution and dedication over the past
year.
I would also like to record my appreciation
for the contribution and wise counsel of
my fellow Directors throughout 2017.
Finally, I extend my thanks to Iluka’s
continued
shareholders
support and interest in the progress and
development of the business.
their
for
Greg Martin
Chairman
Iluka Resources Limited, Annual Report 2017 9
These factors combined to enable Iluka
to achieve strong free cash flow and
significantly
from 2016
reduce debt
levels. The company concluded the year
in a robust financial position, reducing
gearing to 17 per cent. With the business
on a sustainable footing, Iluka’s approach
will be defined by disciplined capital
allocation; flexing production in line with
demand; preserving and advancing
acting
growth
counter-cyclically where appropriate. Over
the course of 2017 the company took a
range of actions in line with this approach
and its ultimate objective to create and
deliver value for shareholders.
opportunities;
and
for
the strength of
Notwithstanding
the
underlying performance, I am conscious
that Iluka’s reported financial result for
2017 was unsatisfactory, having been
impacted by impairments and provision
increases. In December Iluka announced a
US$90 million increase in the rehabilitation
the company’s closed
provision
operations in the United States. This
was a particularly regrettable outcome
in the context of the company’s strong
environmental performance over recent
years. Sustainable development, including
land rehabilitation, is an essential part of
Iluka’s operating model and I can assure
you of the company’s ongoing focus
on costs, safety and environmental
management. The final US remediation
programme is the subject of ongoing
engagement between Iluka and regulatory
authorities. As the nature and extent
of any change remains uncertain, the
provision increase has been calculated
on a probabilistic basis across a range of
scenarios.
Managing Director’s review
Dear Shareholders
I am pleased to report a welcome return to
positive mineral sands market conditions
in 2017, with a confident outlook for 2018.
The year was characterised by price
and volume recovery across all of Iluka’s
products, including the company securing
three separate price increases for zircon,
representing a 40 per cent increase in the
average premium and standard price by
the fourth quarter over the preceding 12
months.
When I wrote to you last year for the
first time as Iluka’s Managing Director, I
outlined my view that the company needs
to be structured and resourced such that
it is sustainable not only during periods
of attractive market conditions; but also
periods of low demand and pricing. This
has continued to be a focus throughout
2017, as Iluka further refined its operational
profile. The Hamilton mineral separation
plant in Victoria was placed on care and
maintenance in October; and the Narngulu
mineral separation plant
in Western
Australia will be returned to full capacity
over the medium term. This consolidation
to support
ensures optimal settings
planned production and resulted in a
pre-tax impairment of $151 million being
recorded at the half year. Following the
sustainable business review implemented
at the end of 2016, non-production costs
in 2017 decreased by $62 million.
Lanti Dredge, Sierra Rutile
10 Iluka Resources Limited, Annual Report 2017
The company is also conscious of the
need to achieve and maintain a sustainable
price environment for its products. Absent
a deterioration
in global economic
conditions, Iluka’s ability to execute these
priorities will determine the extent to which
it can create and deliver shareholder value
over the coming year and in the years
ahead. I have confidence in Iluka’s people
to meet this challenge; and I thank them
for their contribution in 2017.
Tom O’Leary
Managing Director and
Chief Executive Officer
Turning to capital allocation, in December
the development of
Iluka announced
the Cataby project in Western Australia.
Entailing capital expenditure of $250-
275 million and an initial mine life of 8.5
years, the development of Cataby ensures
continuity of synthetic rutile supply to the
company’s customers. The mine is also
an important source of high-quality zircon.
Central to the development decision were
offtake agreements secured by Iluka for
85 per cent of synthetic rutile production
associated with Cataby for a minimum
of four years. The structure and tenor of
these customer agreements deliver an
unprecedented level of revenue certainty
to Iluka’s synthetic rutile business. They
serve to underpin value from the project
and illustrate the company’s disciplined
approach to capital investment: Iluka will
commit funds to new projects only when
it is sufficiently confident of achieving
satisfactory returns for shareholders.
While Iluka enters the new year in a strong
position and with mineral sands markets
experiencing their best conditions in five
years, there is much work ahead. Delivery
is the company’s core focus in 2018,
with priorities including the development
of Cataby; delivering expansion of
production capacity at the Gangama and
Lanti Dry mines; decisions on expansions
at Jacinth-Ambrosia and at Sembehun in
Sierra Leone; and the ongoing pursuit of
excellence at all of Iluka’s operations.
The investment in Metalysis Limited, an
unlisted UK-based technology company
focused on solid state manufacturing
of metal powder, was impaired to $nil in
December resulting in a non-cash charge
of $30 million. Despite this disappointing
development, innovation remains a key
element of Iluka’s business model and the
company remains committed to exploring
opportunities to improve and grow its
operations.
Iluka’s
Jacinth-Ambrosia,
primary
zircon operation, restarted mining and
concentrating activities in December. This
followed a 20 month suspension to allow
heavy mineral concentrate inventory to be
drawn down during a period of subdued
demand. The restart has been completed
on time and on budget; and this action
enhances Iluka’s ability to take advantage
of the positive market dynamics now in
effect.
in
life asset
to perform broadly
With the acquisition of Sierra Rutile in
December 2016, Iluka added a large,
long
in Sierra Leone and
attractive growth options. Sierra Rutile
continues
line
Iluka’s expectations. 2017 saw
with
improved performance at the operation
across a number of areas, including
greater mineral recovery and increased
concentrate grades; the extension of the
Lanti dredge asset life; enhanced tailings
dam construction and management;
and progress towards the alignment of
safety practices with Iluka’s standards.
improvements reflect both the
These
commitment and dedication of the Sierra
Rutile workforce and Iluka’s mineral sands
experience. Improving the safety culture
in Sierra Rutile will be an enduring focal
point.
MINERAL SANDS MARKETS
ARE EXPERIENCING THEIR BEST
CONDITIONS IN FIVE YEARS
Iluka Resources Limited, Annual Report 2017 11
Board of Directors
Greg Martin
BEc, LLB, FAIM, MAICD
Tom O’Leary
LLB, BJuris
Chairman
Joined Iluka 2013
Managing Director and
Chief Executive Officer
Joined Iluka 2016
Murchison Metals Ltd,
Australian Gas Light Company Ltd,
Santos, Western Power
Wesfarmers Chemicals,
Energy and Fertilisers,
Wesfarmers Ltd
Marcelo Bastos
BEng (Mechanical) (UFMG),
MBA (FDC-MG), MAICD
Independent
Non-Executive Director
Joined Iluka 2014
Vale, BHP, MMG,
Aurizon Holdings,
Golder Associates
Xiaoling Liu
PhD, BEng, GAICD,
FAusIMM, FTSE
Independent
Non-Executive Director
Joined Iluka 2016
Newcrest, South 32,
Rio Tinto Minerals,
Australian Aluminium Council
Committees
James (Hutch) Ranck
BSE (Econ), FAICD
Jennifer Seabrook
BCom, FCA, FAICD
Independent
Non-Executive Director
Joined Iluka 2013
Elders Ltd, CSIRO, DuPont
Independent
Non-Executive Director
Joined Iluka 2008
Gresham Advisory Partners Ltd,
MMG, Australian Rail Track Corporation,
IRESS Ltd, Western Australian Treasury
Corporation
The Board of Directors comprises five Non-Executive Directors and one Executive Director (the Managing Director and Chief Executive Officer).
Audit and Risk Committee
Chairman – Jennifer Seabrook
People and Performance Committee
Chairman – James (Hutch) Ranck
Nominations and Governance Committee
Chairman – Greg Martin
12 Iluka Resources Limited, Annual Report 2017
Executive
Tom O’Leary
LLB, BJuris
Doug Warden
Steve Wickham
Matthew Blackwell
BCom, CA, MBA, GAICD
Assoc Dip in Mechanical
Engineering
BEng (Mech), Grad Dip
(Tech Mgt), MBA, MAICD,
MIEAust
Managing Director and
Chief Executive Officer
Joined Iluka 2016
Chief Financial Officer
and Head of Strategy
and Planning
Joined Iluka 2003
Chief Operating Officer,
Mineral Sands
Joined Iluka 2007
Head of Marketing,
Mineral Sands
Joined Iluka 2004
Wesfarmers Chemicals,
Energy and Fertilisers,
Wesfarmers Ltd
Summit Resources,
Jabiru Metals,
Ernst & Young, KPMG
Ticor South Africa,
Australian Zircon
Asia Pacific Resources,
WMC Resources,
Normandy Poseidon
Simon Hay
BSc (Hons), MAppSc,
Grad Dip (Mgmt), MAICD
Rob Hattingh
MSc (Geochem)
Sue Wilson
BJuris, LLB, FGIA,
FICSA, FAICD
Adele Stratton
BA (Hons), FCA, GAICD
Head of Resource
Development
Joined Iluka 2009
Chief Executive Officer,
Sierra Rutile
Joined Iluka 2008
General Counsel and
Company Secretary
Joined Iluka 2016
Mount Isa Mines,
WMC Resources,
BHP
Richards Bay Minerals,
Exxaro
South32, Bankwest,
Herbert Smith Freehills,
Western Power
General Manager Finance,
Investor Relations &
Corporate Affairs
Joined Iluka 2011
KPMG, Rio Tinto Iron Ore
Sarah Hodgson
Julian Andrews
LLB, GAICD
BCom (Hons), PhD, CFA,
GAICD
General Manager People
Joined Iluka 2013
Head of Business
Development
Joined Iluka 2017
Mercer, Westpac, KPMG
Wesfarmers Chemicals,
Energy & Fertilisers, PwC
Executive
The Executive is structured to include ten senior executives. Its
responsibilities include achieving defined business and financial
outcomes, capital deployment, business planning, identification
and pursuit of appropriate growth opportunities, sustainability
performance, promotion of diversity objectives and succession
planning.
Iluka Resources Limited, Annual Report 2017 13
Financial summary
1
Mineral
sands
revenue
2
$1,018m
Underlying
mineral
sands
EBITDA1
$301m
3
Mining
Area C
EBITDA
$60m
4
Underlying
Group
EBITDA1
$361m
$m
$m
$m
$m
1,018
301
88
361
820
763 725
726
232
204
189
33%
33%
103
28%
30%
14%
67
62
60
48
292
293
256
151
13 14 15 16 17
13 14 15 16 17
13 14 15 16 17
13 14 15 16 17
EBITDA1
EBITDA1 margin
1 Underlying minerals sands and Group EBITDA excludes adjustments including impairments, Sierra Rutile transaction costs and changes to
rehabilitation provisions for closed sites. Iluka’s share of Metalysis Ltd’s losses, which are non-cash in nature, are also excluded.
1 Mineral sands
revenue
2 Underlying mineral
sands EBITDA1
3 Mining Area C
4 Underlying
EBITDA
Group EBITDA1
sands
revenue
Mineral
increased by 40%
to
$1,017.5 million. Zircon/
rutile/synthetic rutile (Z/R/
SR) revenue increased by
38% to $959.1 million, its
highest level in five years.
This result reflects improved
in mineral
conditions
sands markets increasing
Iluka’s sales prices and
volumes, combined with
higher volumes following
the acquisition of Sierra
Rutile in December 2016.
Iluka’s Zircon Reference
Price increased in three
quarters
consecutive
achieving a realised zircon
standard and premium
price of US$1,128 per
in Q4, a 40%
tonne
increase
the start
from
of the year. Rutile prices
closed 13% higher, with
approximately
of
Sierra Rutile sales volume
on fixed price contracts.
Z/R/SR
volumes
sales
grew strongly, up 27%,
reflecting increases across
all products.
40%
Iluka’s royalty income from
Mining Area C increased
by 25% to $59.6 million.
rose
ore prices
Iron
16% and sales volumes
from
royalty area
increased 8%. No capacity
payments were received
in 2017 or 2016.
the
2017
The
underlying
Group EBITDA was $360.5
million, up
from 2016,
reflecting the combination
of increased revenue, non-
production cost reductions
and increased Mining Area
C royalty payments.
Iluka’s underlying mineral
sands EBITDA
almost
to 2016,
tripled relative
$300.9
to
increasing
million. This result reflects
the combination of strong
growth
revenue
and
reduced
non-production
(exploration,
costs
resource development and
corporate costs), down
$61.5 million,
following
Iluka’s sustainable business
review. Cash production
costs increased in 2017
with the inclusion of Sierra
Rutile operating costs, and
inventory was drawn down
in line with Iluka’s planned
reduction
inventory
in
levels. Restructure and
charges
idle
of $73.1 million were
again significant in 2017,
reflecting the operational
setting
changes with
respect to the Hamilton
mineral separation plant
Jacinth-
and
Ambrosia mining
and
activities
concentrating
suspended for the full year.
capacity
having
14 Iluka Resources Limited, Annual Report 2017
5
Net loss
after tax
6
Free
cash
flow
7
Net
(debt)
cash
8
ROE
and
ROC
$(172)m
$322m
$(183)m
$m
19
54
(63)
$m
322
196
155
47
$m
12%
32%
17%
4%
6
n/a
(59)
(207)
(183)
(172)
(224)
(28)
(506)
ROE (20)%
ROC (12)%
%
2
1
7
4
(4.0)
(2)
(12)
(17)
(18)
(20)
13 14 15 16 17
13 14 15 16 17
13 14 15 16 17
13 14 15 16 17
Net debt
Gearing %
Return on equity
Return on capital
5 Net loss after tax
6 Free cash flow
7 Net (debt)
8 ROE and ROC
Iluka recorded a net loss
after tax of $171.6 million
in 2017 which included the
following:
2017 free cash flow was
$321.9 million, reflecting
the
underlying
strong
EBITDA result.
cash
flows
Operating
contributed
$391.7
million and Mining Area C
contributed $59.9 million.
expenditure
Capital
in
2017 was $93.1 million.
Early works activities and
execute capital of $35
for
million was
Cataby during the year,
with remaining expenditure
focused on Sierra Rutile
projects and Balranald
(New South Wales).
incurred
•
•
$185.4 million pre-tax
impairment expense.
Iluka’s decision to idle
the Hamilton mineral
plant
separation
from October 2017
in $151.4
resulted
impairment
million
recorded
the
half year; and $30
million impairment of
Iluka’s investment in
UK-based,
titanium
technology company,
Metalysis Ltd.
at
An increase of $127.4
million
relation
in
to
the rehabilitation
provision for closed
increase
sites. This
relates
Iluka’s
to
closed US operations
in Virginia and Florida
and follows detailed
rehabilitation planning
identified
that has
potential
additional
relating
obligations
to past rehabilitation
activities.
Return on shareholders’
equity was (20.1)% and
return on capital was
(11.6)%,
the
company’s reported loss
for the year.
reflecting
Net debt was reduced by
64% in 2017. As at 31
December 2017, net debt
was $182.5 million, down
from $506.3 million at the
end of 2016. Gearing (net
debt / net debt + equity)
was reduced to 17.1% at
the end of 2017 (2016:
31.5%).
THE COMPANY’S
CORE OBJECTIVE
IS TO CREATE AND
DELIVER VALUE
Iluka Resources Limited, Annual Report 2017 15
Balance sheet
As at 31 December 2017, Iluka had total debt facilities of $695.1 million and net debt of $182.5 million.
Iluka has a Multi Optional Facility Agreement (MOFA) which comprises a series of five year unsecured bilateral revolving credit facilities
with several domestic and foreign institutions. Drawings under the MOFA at 31 December 2017 were $238.6 million (2016: $611.2
million). Undrawn MOFA facilities at 31 December 2017 were $456.5 million (2016: $404.2 million).
Of the above interest-bearing liabilities, $238.6 million is subject to an effective weighted average floating interest rate of 3.1% (2016:
interest-bearing liabilities of $611.2 million at 2.7%).
Note 15 of Iluka’s Financial Report provides details of the maturity profile and interest rate exposure.
Debt, gearing and debt facilities profile
Debt facilities maturity profile
526
96
73
18 19 20 21 22
$m
1000
800
600
400
200
0
-200
-400
Gearing %
100
80
60
40
20
0
695
17
(183)
1,010 1,015
833
871
4
(59)
n/a
6
12
(207)
32
(506)
13
14
15
16
17
Total facilities
Net (debt) cash
Gearing (%)
16 Iluka Resources Limited, Annual Report 2017
Synthetic rutile kiln, Western Australia
Dividend framework
Iluka’s dividend framework is to pay a minimum of 40% of free cash flow not required for investing or balance sheet activity.
The company also seeks to distribute the maximum franking credits payable.
Iluka’s 2017 full year dividend payment of 31 cents per share (25 cents per share final and 6 cents per share interim dividend), fully franked,
represents 40% of free cash flow for the year. This is consistent with Iluka’s framework and reflects the underlying strength in the 2017
result. Iluka continues to target credit metrics broadly consistent with investment grade credit metrics and future dividend decisions will
take into account balance sheet position and capital expenditure requirements.
Distribution metrics
Payout ratio % of free cash flow
Cumulative dividend payout ratio (from 2010) %
2016
27
66
2017
40
60
Hedging
Iluka commenced a foreign exchange hedging programme during the year as part of its financial risk management strategy. Iluka entered
into foreign exchange collar hedges covering US$271 million of expected USD revenue over the period 2018 to 2022. The collars are:
•
•
comprised of AUD call options with an average strike price of 80.2 cents; and
largely paid for by selling AUD put options with a strike price of 70 cents.
The five year period corresponds with long-term sales contracts entered into in 2017, including those in support of the Cataby development,
however the US$271 million does not represent the full value of expected sales under these contracts.
Iluka also has US$95 million of forward contracts which settle in 2018 at a forward rate of 80 cents.
NET DEBT HAS REDUCED
BY $324M TO $183M
Iluka Resources Limited, Annual Report 2017 17
Strategy, capital management and future prospects
Iluka’s objective is to create and deliver
value for its shareholders. The company
undertakes a range of activities to advance
this objective, with a business approach
comprising the following key elements:
•
•
•
•
•
flexing operations in line with market
demand;
a
seeking
environment
products;
sustainable
for mineral
price
sands
preserving and advancing growth
opportunities;
disciplined capital allocation; and
acting
appropriate.
counter-cyclically where
In 2017, significant activities undertaken
by Iluka as part of this approach included:
•
•
•
•
the integration of the Sierra Rutile
operation, which was acquired in
December 2016;
the consolidation of the company’s
Australian mineral separation plants
following a detailed review of Iluka’s
production portfolio and projects;
a focus on maintaining a sustainable
cost structure, with a $61.5 million
reduction in non-production costs;
and
pursuit of an appropriate pricing
strategy to allow sustainable returns
from the industry.
Iluka’s disciplined approach to investment
decisions and capital management
includes:
• maintaining credit metrics that are
broadly consistent with an investment
grade credit profile – generally
corresponding to a leverage ratio of
1.0 - 1.5 times net debt to EBITDA;
•
•
•
dividend
a
framework, which
stipulates returns to shareholders of
a minimum of 40% of free cash flow
not required for investment purposes
or balance sheet activity;
disciplined
allocation,
capital
meaning Iluka will commit funds
to new projects only when it is
sufficiently confident of achieving
satisfactory returns for shareholders;
and
insofar as inorganic growth options
Iluka considers
are concerned,
merger and acquisition opportunities
that demonstrate both financial merit
and strategic rationale.
THE COMPANY UNDERTAKES
A RANGE OF ACTIVITIES
TO CREATE AND DELIVER VALUE
18 Iluka Resources Limited, Annual Report 2017
To sustain and grow Iluka’s business over
the short to medium term, the company
has prioritised the delivery of its expansion
projects at both new and existing mines. A
summary is detailed below.
150
continued
production
development
• Cataby was approved by the Board
on 13 December 2017 and is a large
chloride
located
ilmenite deposit
kilometres
approximately
north of Perth. The ilmenite from
underpins
this
the
of
approximately 200ktpa of synthetic
rutile from Iluka’s synthetic rutile kiln
2 at Capel over an initial mine life of
8.5 years. Iluka has worked closely
with customers to secure offtake
agreements for approximately 85%
of the synthetic rutile production
associated with Cataby, ensuring an
appropriate return from the project
and delivering an unprecedented
level of revenue certainty for the
company’s synthetic rutile business.
•
concentrating
Jacinth-Ambrosia is the world’s
zircon mine. Mining
largest
and
activities
recommenced in December 2017 in
line with improved market conditions
following a 20 month suspension
to allow heavy mineral concentrate
inventory to be drawn down during
a period of subdued demand.
To offset declining ore grades at
Jacinth-Ambrosia, Iluka is planning
to expand the operation, increasing
plant throughput by approximately
30%.
•
The scope for this expansion includes
an upgrade of the wet concentrator
plant; a second mining unit
to
handle additional ore; and a capacity
increase at the site’s accommodation
camp. A definitive feasibility study
is expected to be completed by
mid-2018, with project execution
the
to commence
expected
second half of 2018 and completion
in 2019, subject to Board approval
and market conditions.
in
Sierra Rutile is a large, long life
asset in Sierra Leone with a number
of attractive growth options. These
include expansions
to existing
operations
(the Lanti Dry and
infrastructure
Gangama mines);
improvements (comprising a new in-
pit mining unit plant and upgrades at
both the mineral separation plant and
port); and a new mine development
at Sembehun. Currently at various
stages of
and
these options, once
planning,
implemented, will
substantially
enhance the Sierra Rutile operation
in line with Iluka’s acquisition case.
They will further consolidate Iluka’s
position as
largest
supplier of natural rutile.
commissioning
the world’s
Jacinth-Ambrosia, South Australia
Iluka is also progressing a portfolio of
longer-term organic growth options, with
a time horizon of approximately two to
five years. These include conventional
resource development
initiatives, such
as the Puttalam project in Sri Lanka and
exploration activities; and those based on
innovation and technical development.
The Balranald project is a large, deep,
rutile-rich deposit in the northern Murray
Basin, New South Wales. Iluka is pursuing
an innovative, unconventional approach to
this development, with a mining method
based on directional drill
technology.
Advantages of this approach encompass
the ability
to access deep deposits
(Balranald is approximately 60 metres
underground); a minimal environmental
footprint versus conventional mining;
potentially lower capital intensity; scalable
operations; and portfolio flexibility. The
company is taking a staged approach to
potential production start-up in 2021. This
includes continued de-risking in 2018,
with a third production trial scheduled at a
cost of approximately $25 million.
Iluka Resources Limited, Annual Report 2017 19
Financial and operational review
Income statement analysis
$ million
Z/R/SR revenue
Ilmenite and other revenue
Mineral sands revenue
Cash costs of production
Inventory movement - cash
Restructure and idle capacity charges
Government royalties
Marketing and selling costs
Asset sales and other income
Exploration and resources development
Corporate and other costs
Foreign exchange
Mineral sands EBITDA
Mining Area C EBITDA
Underlying Group EBITDA1
SRL transaction costs
Depreciation and amortisation
Inventory movement - non-cash
Rehabilitation for closed sites
Share of Metalysis Ltd's losses (associate)
Impairment expense
Group EBIT
Net interest costs and bank charges
Rehabilitation unwind and other finance costs
Profit (loss) before tax
Tax expense
Profit (loss) for the period (NPAT)
Average AUD/USD (cents)
2017
2016
% change
959.1
58.4
1,017.5
(372.4)
(141.5)
(73.3)
(25.2)
(33.8)
0.7
(24.6)
(47.1)
0.6
300.9
59.6
360.5
-
(111.0)
(66.8)
(127.4)
(3.3)
(185.4)
(133.4)
(15.5)
(16.7)
(165.6)
(6.0)
(171.6)
76.7
696.8
29.5
726.3
(260.6)
(107.6)
(69.5)
(20.4)
(36.3)
(0.6)
(79.4)
(53.8)
4.9
103.0
47.5
150.5
(14.1)
(79.9)
(57.3)
(42.6)
(3.3)
(201.0)
(247.7)
(15.4)
(14.6)
(277.7)
53.7
(224.0)
74.4
37.6
98.0
40.1
42.9
31.5
5.5
23.5
(6.9)
(216.7)
(69.0)
(12.5)
(87.8)
192.1
25.5
139.5
-
38.9
16.6
199.1
-
(7.8)
(46.1)
0.6
14.4
(40.4)
(111.2)
(23.4)
3.1
1
Underlying Group EBITDA excludes adjustments including impairments, SRL transaction costs, changes to rehabilitation provisions for closed sites.
Underlying EBITDA also excludes Iluka’s share of Metalysis Ltd’s losses, which are non-cash in nature.
20 Iluka Resources Limited, Annual Report 2017
Underlying NPAT
Loss for the period (NPAT)
Adjustments:
Rehabilitation of closed sites, post tax
Impairments, post tax
SRL transaction costs, post tax
Share of Metalysis Ltd’s losses, post tax
Underlying NPAT
Movement in NPAT
2017
(171.6)
125.0
138.9
-
3.3
95.6
2016
(224.0)
42.1
140.7
14.1
3.3
(23.8)
0
-50
-100
-150
-200
-250
(224)
(172)
67
15
(13)
16
21
86
(24)
(18)
(4)
12
54
(12)
(0)
(2)
e
c
i
r
P
l
o
V
i
x
M
X
F
l
e
d
I
6
1
0
2
r
e
b
m
e
c
e
D
1
3
r
e
h
t
o
d
n
a
m
l
I
S
G
O
C
t
i
n
U
(85)
n
o
i
t
a
t
i
l
i
b
a
h
e
R
r
e
h
t
o
d
n
a
s
l
a
r
e
n
M
i
x
a
T
C
A
M
e
t
a
r
o
p
r
o
C
t
s
e
r
e
t
n
I
t
n
e
m
r
i
a
p
m
I
i
n
o
i
t
a
c
e
r
p
e
D
(60)
r
e
h
t
o
&
d
n
w
n
U
i
7
1
0
2
r
e
b
m
e
c
e
D
1
3
The 2017 loss includes non-cash items of $267.2 million post-tax for impairments and increases to US rehabilitation provisions as noted
on page 28.
Sales commentary is contained on pages 22-23.
The Australian dollar strengthened compared to 2016, with the average exchange rate of 76.7 cents compared to 74.4 cents in 2016. This
reduces the Australian dollar Z/R/SR revenue received, with the majority of sales denominated in US dollars. Foreign exchange impacts on
operating costs, mainly those relating to Sierra Rutile operations, are included in the overall movement in unit cost of goods sold.
Cash costs of production have increased by $112 million, predominantly due to the inclusion of the Sierra Rutile operations for a full
12 months.
Unit cost of goods sold is higher at $743 per tonne compared to $698 per tonne in 2016 as a result of the inclusion of the higher cost
operations at Sierra Rutile and a combination of sales mix variances.
Idle costs result from the suspension of mining and concentrating activities at Jacinth-Ambrosia through to December 2017 whilst
concentrate inventory was drawn down; the idling of the Hamilton mineral separation plant from October 2017; costs associated with US
operations ($8 million); and the prolonged maintenance shut for the Narngulu mineral separation plant prior to it becoming the primary
MSP for Australia.
Mineral sands other and corporate costs are lower following the conclusion of a non-production cost review. The prior year included
$36.0 million of costs associated with trialling an unconventional mining approach for Balranald. These trials were sufficiently progressed
in 2017 to warrant treating the costs as capital in nature and $12 million is included within capital expenditure in 2017.
Tax expense has an effective tax rate of 3.6% compared with corporate tax rates of 30% in the main operating jurisdictions of Australia
and Sierra Leone. This distortion results from both the increase in the US rehabilitation provision and the impairment of the UK Metalysis
investment, which received no associated tax benefits.
Iluka Resources Limited, Annual Report 2017 21
Financial and operational review
Sales and markets
Zircon
Rutile
Synthetic Rutile
Ilmenite
Sales volumes (kt)
Sales volumes (kt)
Sales volumes (kt)
Sales volumes (kt)
370
352 346
339
380
264
244
338
317
300
182
168
172
134
187
171
82
46
203
18
13 14 15 16 17
13
14
15
16
17
13
14
15
16
17
13 14 15 16 17
Zircon
High-grade titanium feedstocks
titanium
feedstock
Iluka high-grade
sales volumes
increased by 42% to
509 thousand tonnes. Group rutile sales
were 264 thousand tonnes, 54% higher
than 2016, reflecting the inclusion of
133 thousand tonnes of rutile sales from
Sierra Rutile. Synthetic rutile sales were
244 thousand tonnes.
issues
inventories
Titanium dioxide pigment is the main
end market for high-grade feedstocks. In
2017, solid underlying demand growth
resulted
coupled with supply
improvement during
in pigment price
the year. Pigment
remain
below seasonal norms as the combined
impacts of European plant outages and
in
environmental enforcement actions
China dampened supply. Iluka estimates
that the closure of Chinese pigment
facilities
reduction of
250 thousand to 300 thousand tonnes
of sulphate pigment capacity. Capacity
utilisation
industry
have increased in response to these
circumstances. Pigment producers have
increased the utilisation of high-grade
feedstocks to improve plant yields and
maximise production in the short term.
This has provided support for rutile and
synthetic rutile demand in 2017.
rates across
resulted
in a
the
With these demand influences continuing
and the supply of rutile and synthetic rutile
feedstocks being limited across mineral
sands producers, especially in the short to
medium term, Iluka expects supply of high
grade feedstocks to remain tight entering
into 2018.
Rutile prices are normally settled on a six
month basis. The second half weighted
average rutile price of US$825 per tonne
was up 13% compared to full year 2016. It
is of note that approximately 40% of Sierra
Rutile’s 2017 rutile production volumes
(~60 thousand tonnes) were contracted at
fixed prices for the whole of 2017.
The majority of Iluka’s synthetic rutile sales
volumes in 2017 were contracted, and
sales volumes reflect a full year of kiln
production and some inventory drawdown.
Synthetic rutile prices increased relative to
2016 levels, consistent with contractual
arrangements and market conditions.
the
lower grade
Sales of
titanium
feedstock, ilmenite, were 203 thousand
tonnes. The
ilmenite
production was consumed internally in the
production of synthetic rutile.
remainder of
Iluka’s 2017 zircon sales volume of
380 thousand tonnes represents growth of
12% from 2016, a strong result following
several years of weak market conditions.
With these improved market conditions,
Iluka successfully implemented three price
increases in 2017, with US$50 per tonne
implemented effective from 15 February
2017, US$130 per tonne effective from 1
July 2017 and a further US$130 per tonne
effective for a six month period from 1
October 2017. These follow five years of
declining prices for zircon.
Iluka forecasts moderate growth for zircon
demand in the short to medium term, in
the absence of any changes to the global
economic outlook.
22 Iluka Resources Limited, Annual Report 2017
% of total 2017 mineral sands sales revenue
26%
Europe
33%
China
13%
Americas
Middle East
8%
14%
Asia including India
Australia
6%
Iluka mineral sands weighted average received prices – US$/t FOB
Zircon premium and standard
Zircon (all products including zircon in concentrate)1
Rutile (excluding HYTI)(2)
Synthetic rutile(3)
2013
1,171
1,150
1,075
1,150
2014
1,054
1,033
828
750
2015
2016
2017
986
961
763
-
810
773
731
-
958
940
790
-
(1) Zircon prices reflect the weighted average price for zircon premium and zircon standard, also with a weighted average price for all zircon materials,
including zircon concentrate. The prices for each product vary considerably, as does the mix of such products sold period to period. In 2017 the split
of premium, standard and concentrate by zircon sand-equivalent was approximately: 56%; 32%; 12% (2016: 47%; 33%; 20%).
(2) Excluded from rutile sales prices is a lower value titanium dioxide product, HYTI that typically has a titanium dioxide content of 70 to 90%. This product
sells at a lower price than rutile, which typically has a titanium dioxide content of 95%.
(3) Iluka’s synthetic rutile sales are, in large part, underpinned by commercial offtake arrangements. The terms of these arrangements, including the pricing
arrangements are commercial in confidence and as such not disclosed by Iluka. Synthetic rutile, due to its lower titanium dioxide content than rutile, is
priced lower than natural rutile.
ILUKA FORECASTS MODERATE
DEMAND GROWTH FOR ZIRCON
AND TITANIUM FEEDSTOCKS IN
THE SHORT TO MEDIUM TERM
Iluka Resources Limited, Annual Report 2017 23
Financial and operational review
Production and operations
Zircon
Rutile
Synthetic rutile
Ilmenite
Production volumes (kt)
Production volumes (kt)
Production volumes (kt)
Production volumes (kt)
389
358
347
312
285
177
127
137
118
302
211
211
585
466
448
365
329
165
59
0
13 14 15 16 17
13
14
15
16
17
13
14
15
16
17
13 14 15 16 17
Iluka produced 825 thousand tonnes of
zircon/rutile/synthetic rutile in 2017. This
is a 22% increase from 2016, reflecting
Iluka’s first full year of ownership of the
Sierra Rutile operation in Sierra Leone.
Sierra Rutile
At Sierra Rutile, Iluka implemented a
number of operational improvements over
the year and achieved rutile production of
168 thousand tonnes. The Sierra Rutile
operations consist of two dry mines, Lanti
Dry and Gangama, a dredge mine, Lanti
Dredge, and a mineral separation plant.
Adjustments to plant settings at the dredge
and dry mines and the establishment
of standard operating practice has
debottlenecked concentrator throughput
runtime, as well as
and
improving valuable heavy mineral recovery
and increasing heavy mineral concentrate
grades. The mineral separation plant was
also debottlenecked and rutile recoveries
improved over the year.
increased
Australia
Iluka’s Australian operational settings in
2017 continued to reflect the company’s
intent to draw down finished goods and
concentrate inventories. During the year
Iluka produced 612 thousand tonnes of
heavy mineral concentrate and processed
1.28 million tonnes. Rutile production
was 134 thousand tonnes and zircon
204 thousand tonnes, largely reflecting
production from concentrate inventory.
The Tutunup South mine
in south-
west Western Australia operated at full
capacity throughout the year, producing
ilmenite for use as a feedstock to Iluka’s
synthetic rutile kiln 2. Mining at Tutunup
South is expected to be completed in
February 2018 and Cataby will be the
feedstock to
next source of
maintain kiln operations. Iluka produced
211 thousand tonnes of synthetic rutile,
reflecting a full year of production. Ilmenite
stockpiles and external ilmenite purchases
have been planned to allow the kiln to
continue operating in 2018 prior to the
commencement of mining at Cataby in
2019.
ilmenite
Heavy mineral concentrate stockpiles
were processed at Iluka’s two Australian
mineral separation plants, Narngulu in
Western Australia and Hamilton in Victoria.
In 2017, in line with Iluka’s approach to
maintaining a cost focus and sustainable
business operations, processing capacity
at Narngulu was considered sufficient for
all expected Australian production and
the Hamilton plant was idled following the
completion of processing of the remnant
Murray Basin heavy mineral concentrate
stockpiles in October 2017. Narngulu
continued to process stockpiled Jacinth-
Ambrosia material during the year and
intermediate stockpiles are returning to
normal levels. Jacinth-Ambrosia mining
activities, which were idled in April 2016,
were restarted in December 2017 as
planned.
US
Iluka’s US operations were closed in
2016. A small amount of remnant zircon
concentrate stocks from the US operations
were shipped in 2017 and recognised as
zircon production (16kt) when sold.
24 Iluka Resources Limited, Annual Report 2017
HMC produced and processed
HMC produced
HMC processed
Cash cost and unit cost of production $/t
Cash cost of production
Unit cash cost per tonne of Z/R/SR produced
Unit cash cost per tonne of Z/R/SR excluding by-products
Unit costs of goods sold per tonne of Z/R/SR sold
$m
$/t
$/t
$/t
2017
612
1,280
2017
372.4
451
439
743
2016
% change
395
967
55
32
2016
% change
260.6
386
373
700
43.0
16.8
17.7
6.1
Mineral sands operations results
Revenue
Mineral sands EBITDA
EBIT
$ million
Australia
United States
Sierra Rutile
Resource development
and support costs
Intercompany elimination
2017
833.7
40.0
145.9
-
(2.1)
2016
690.2
18.3
17.8
-
-
Total
1,017.5
726.3
2017
359.1
(4.9)
30.8
(83.3)
(0.8)
300.9
2016
281.6
(35.4)
1.1
(144.3)
-
103.0
2017
53.5
(124.4)
(0.6)
(61.1)
(0.8)
(133.4)
2016
(52.7)
(76.3)
(0.9)
(117.8)
-
143.0
COMBINED ZIRCON/RUTILE/
SYNTHETIC RUTILE PRODUCTION
OF 825 THOUSAND TONNES,
UP 22% FROM 2016
Iluka Resources Limited, Annual Report 2017 25
Financial and operational review
Operations
Australia
Production volumes
Zircon
Rutile
Synthetic rutile
Total Z/R/SR production
Ilmenite
Total production volume
HMC produced
HMC processed
Unit cash cost of production - Z/R/SR 1
Mineral sands revenue
Cash costs of production
Inventory movements - cash costs of production
Restructure and idle capacity charges
Government royalties
Marketing and selling costs
Asset sales and other income
EBITDA
Depreciation and amortisation
Inventory movements - non-cash production costs
Rehabilitation costs for closed sites
Impairment expense
EBIT
2017
2016
%change
kt
kt
kt
kt
kt
kt
kt
kt
$/t
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
293.7
134.5
210.8
639.0
390.5
1,029.5
259
932
350
833.7
(223.6)
(151.8)
(65.3)
(18.2)
(16.4)
0.7
359.1
(67.7)
(75.0)
(7.9)
(155.0)
53.5
347.0
108.8
210.9
666.7
326.2
992.9
371
942
364
690.2
(242.5)
(88.2)
(38.8)
(19.7)
(18.3)
(1.1)
281.6
(74.3)
(57.3)
(1.7)
(201.0)
(52.7)
(15.4)
23.6
(0.0)
(4.2)
19.7
3.7
(30.1)
(1.1)
3.8
20.8
7.8
72.1
(68.3)
7.6
10.4
(163.6)
27.5
8.9
(30.9)
(364.7)
22.9
201.5
1 Calculated as cash costs of production, including by-product costs divided by Z/R/SR production.
Across Iluka’s Australian operations, the Tutunup South mine continued to be the only mine to operate throughout the full year, feeding
ilmenite to allow the synthetic rutile kiln to operate at full capacity.
Mineral separation activities were consolidated in Australia in October 2017 following the idling of the Hamilton mineral separation plant
(MSP) in the Murray Basin. This resulted in an impairment charge of $151.4 million pre-tax. The remaining impairment charge reflects
the write-down of land held above its current market value. Capacity at the Narngulu MSP in Geraldton, Western Australia, is considered
sufficient for processing all expected Australian production going forward.
Restructure and idle costs mainly reflect costs associated with Jacinth-Ambrosia, which remained idled until December 2017 combined
with restructure costs associated with the Hamilton MSP.
Inventory movements reflect the drawdown of both heavy mineral concentrate and finished goods across the operations. Iluka expects
inventory levels to return to normal levels of $300-$400 million for the Group in 2018.
26 Iluka Resources Limited, Annual Report 2017
Sierra Rutile
Production volumes
Zircon
Rutile
Ilmenite
Total production volume
HMC produced
HMC processed
Unit cash cost of production - saleable product 1
Mineral sands revenue
Cash costs of production
Inventory movements - cash
Government royalties
Marketing and selling costs
Asset sales and other income
EBITDA
Depreciation and amortisation
Inventory movement - non-cash
EBIT
1 Calculated as cash costs of production, including by-product costs divided by Z/R production.
2
2016 results reflect the 24 days of Iluka’s ownership from 7 December 2016.
2017
2016
kt
kt
kt
kt
kt
kt
$/t
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
3.0
167.6
57.6
228.2
352.9
348.1
783
145.9
(133.5)
31.7
(7.0)
(6.1)
(0.2)
30.8
(39.4)
8.0
(0.6)
0.1
8.8
3.2
12.1
233
24.6
777.0
17.8
(9.4)
(5.5)
(0.7)
(1.0)
(0.1)
1.1
(2.0)
-
(0.9)
Lanti Dredge, Sierra Rutile
The Sierra Rutile results represent Iluka’s first full year of ownership, having acquired the business on 7 December 2016.
Iluka has focused on operational improvements in the year, which is demonstrated by rutile production exceeding the guidance issued in
January 2017 of 150 thousand tonnes.
The Lanti dredge mine was expected to conclude mining in May 2018, but proactive maintenance and refined mine planning should result
in this operation being extended by a further six months. In addition, adjustments to the wet concentrator plant settings have resulted in
improved valuable heavy mineral recovery and improved mineral separation plant recoveries following detailed metallurgical work.
Mineral sands revenue of $145.9 million for year was represented by 135.7kt of Z/R sales and 51.2kt of ilmenite sales. Sales volumes
were lower than production results due to timing of shipments.
Iluka Resources Limited, Annual Report 2017 27
Financial and operational review
United States
Production volumes
Zircon
Total production
Unit cash cost of production
Mineral sands revenue
Cash costs of production
Inventory movement
Restructure and idle capacity charges
Marketing and selling costs
Asset sales and other income
EBITDA
Rehabilitation and holding costs for closed sites
EBIDTA
2017
2016
%change
kt
kt
$/t
$m
$m
$m
$m
$m
$m
$m
$m
$m
15.6
15.6
981
40.0
(15.3)
(22.6)
(8.0)
-
1.0
(4.9)
(119.5)
(124.4)
-
-
-
18.3
(8.7)
(13.9)
(30.7)
(0.4)
-
(35.4)
(40.9)
(76.3)
n/a
n/a
n/a
118.6
(75.9)
(62.6)
73.9
n/a
n/a
(86.2)
(192.2)
(63.0)
1 Calculated as cash costs of production, including by-product costs divided by zircon production.
Zircon and ilmenite production ceased in December 2015 following the completion of mining at Brink and Concord deposits in the US.
The US operations were permanently closed in December 2016. Production in 2017 represents the processing of remnant stockpiles, to
reduce future rehabilitation obligations.
Mineral sands revenue represents the sale of finished goods that had been stockpiled at the end of operations, combined with a
component of the remnant stockpiles processed in the year as at 31 December 2017. The US inventory balance was $29.2 million.
Cash costs of production largely reflect activities associated with product transportation, combined with some processing costs for the
remnant stockpiles.
Restructure and idle costs reflect regional management and holding costs following closure of operations. These costs are expected to
be broadly consistent with 2017 going forward until all stockpiles are diminished and rehabilitation is complete.
Rehabilitation costs reflect a US$90 million increase in the rehabilitation provision as a result of potential additional obligations relating
to past rehabilitation. Various remediation alternatives are being considered by the Group. Iluka continues to engage proactively with
regulatory agencies to assess the nature and extent of any change to its proposed rehabilitation programme.
The cost of rehabilitating the Virginia operation will largely depend on the rehabilitation programme ultimately undertaken by Iluka, which
can only be determined following what is expected to be extensive and ongoing engagement with the regulators. As the nature and extent
of any change remains highly uncertain, the provision increase has been calculated on a probabilistic basis across a range of scenarios.
28 Iluka Resources Limited, Annual Report 2017
Movement in net (debt) cash
$ million
Opening net cash (debt)
Operating cash flow
MAC royalty
Exploration
Interest (net)
Tax
Capital expenditure
Purchase of investment in Metalysis Ltd
Sri Lanka investment
Payment for hedging option contracts
Asset sales
Free cash flow
Dividends
Net cash flow
Exchange revaluation of USD net debt
SRL acquisition
Amortisation of deferred borrowing costs
(Increase) decrease in net debt
1H
2016
6.0
(15.5)
18.3
(10.7)
(4.9)
(10.3)
(16.7)
(12.1)
-
-
1.3
(50.6)
(79.5)
(130.1)
1.4
-
(1.4)
(130.1)
2H
2016
(124.1)
152.8
25.3
(14.0)
(9.1)
(3.5)
(47.0)
(6.7)
-
-
0.1
97.9
(12.6)
85.3
(11.0)
(455.1)
(1.4)
(382.2)
1H
2017
(506.3)
193.9
30.5
(5.6)
(8.8)
(6.4)
(24.6)
-
-
-
1.2
180.2
-
180.2
22.6
-
(1.1)
201.7
2H
2017
(304.6)
197.8
29.4
(7.0)
(6.5)
(3.6)
(65.9)
-
(2.6)
(2.3)
2.4
141.7
(25.1)
116.6
7.0
-
(1.5)
122.1
Closing net debt
(124.1)
(506.3)
(304.6)
(182.5)
Net debt reduced 64% to $182.5 million, reflecting strong free cash flow of $321.9 million and a strengthening in the Australian dollar
revaluing US dollar denominated debt.
Operating cashflow of $391.7 million is a 185% increase from 2016 reflecting the higher underlying EBITDA as a result of improved
market conditions.
Cashflows from the MAC royalty are received quarterly in arrears and have increased due to both higher iron ore sales volumes and
prices.
Iluka has invested $93.1 million on capital developments during 2017, including Cataby, Sierra Rutile projects, Balranald and an
instalment payment for the Sri Lanka tenements.
An interim dividend of 6 cents per share was paid in September and Iluka has announced a final fully franked dividend of 25 cents per
share payable in April 2018.
Iluka Resources Limited, Annual Report 2017 29
Financial and operational review
Non-IFRS financial information
This document uses non-IFRS financial information including underlying mineral sands EBITDA, underlying Group EBITDA and Group
EBIT which are used to measure both Group and operational performance. Non-IFRS measures are unaudited but derived from audited
accounts.
All currency shown in the Annual Report is expressed in Australian dollars, unless otherwise indicated.
Aus
833.7
(474.6)
-
-
-
359.1
(67.7)
US
40.0
(44.9)
-
-
-
(4.9)
-
SRL
145.9
(115.1)
-
-
-
Expl
& oth
Mineral
sands
(2.1)
1,017.5
(35.5)
(670.1)
-
-
-
-
-
-
30.8
(39.4)
(37.6)
(3.5)
347.4
(110.6)
(75.0)
-
8.0
0.2
(66.8)
2017
Mineral sands revenue
MS expenses
Mining Area C
FX
Corporate costs
Underlying EBITDA
Depn and amort
Inventory movement
- non-cash
Rehabilitation for
closed sites
Share of Metalysis Ltd's
losses
Impairment
EBIT
Net interest costs
Rehab unwind and other
finance costs
Profit before tax
(7.9)
(119.5)
-
(155.0)
53.5
-
(10.3)
43.2
-
-
(124.4)
-
(1.9)
(126.3)
Segment result
43.2
(126.3)
2016
Mineral sands revenue
MS expenses
Mining Area C
FX
Corporate costs
Underlying EBITDA
SRL transaction costs
Depn and amort
Inventory movement
- non-cash
Rehabilitation for
closed sites
Share of Metalysis Ltd's
losses
Impairment
EBIT
Net interest costs
Rehab unwind and other
finance costs
Profit before tax
Aus
690.2
(408.6)
-
-
-
281.6
-
(74.3)
(57.3)
US
18.3
(53.7)
-
-
-
(35.4)
-
-
-
(1.7)
(40.9)
-
(201.0)
(52.7)
-
(10.8)
(63.5)
-
-
(76.3)
-
(0.9)
(77.2)
n/a
(85.6)
59.2
n/a
(26.4)
MAC
-
-
59.6
-
-
59.6
(0.4)
-
-
-
-
59.2
-
-
59.2
Corp
& elim
-
-
-
0.6
(47.1)
(46.5)
-
-
-
(3.3)
(30.4)
(80.2)
(15.5)
(2.6)
(98.3)
Group
1,017.5
(670.1)
59.6
0.6
(47.1)
360.5
(111.0)
(66.8)
(127.4)
(3.3)
(185.4)
(133.4)
(15.5)
(16.7)
(165.6)
MAC
Corp
Group
-
-
47.5
-
-
47.5
-
(0.4)
-
-
-
-
47.1
-
-
47.1
-
-
-
4.9
(53.8)
(48.9)
-
-
-
-
(3.3)
-
(66.3)
(15.4)
(2.8)
(84.5)
726.3
(574.4)
47.5
4.9
(53.8)
150.5
-
(79.9)
(57.3)
(42.6)
(3.3)
(201.0)
(247.7)
(15.4)
(14.6)
(277.7)
-
-
-
(0.6)
-
(1.9)
(2.5)
(2.5)
SRL
17.8
(16.7)
-
-
-
1.1
-
(2.0)
-
-
-
-
-
-
(0.9)
-
-
-
(40.9)
-
-
(40.9)
(127.4)
-
(155.0)
(112.4)
-
(14.1)
(126.5)
Expl
& oth
-
(95.4)
-
-
-
(95.4)
-
(3.2)
-
-
-
-
-
Mineral
sands
726.3
(574.4)
-
-
-
151.9
-
(79.5)
(57.3)
(42.6)
-
(201.0)
(228.5)
-
(0.1)
(98.7)
(11.8)
(240.3)
(0.9)
(98.6)
Segment result
(63.5)
(77.2)
(0.9)
(n/a)
(141.6)
47.1
(n/a)
(94.5)
30 Iluka Resources Limited, Annual Report 2017
VISIT ILUKA’S WEBSITE WWW.ILUKA.COM
FOR MORE DETAILED INFORMATION ON
MINERAL SANDS MINING AND OPERATIONS
Kararra berth, Geraldton Port
Iluka Resources Limited, Annual Report 2017 31
Financial and operational review
Projects
Cataby, Western Australia
Cataby is a large, chloride ilmenite-rich deposit 150 kilometres north of Perth. The mine
development was approved in December 2017 with ilmenite from the mine to underpin
the continued production of synthetic rutile at Capel in south-west Western Australia. The
approval follows completion of the definitive feasibility study in 2016 and securing offtake
agreements for 85% of synthetic rutile production for a minimum of four years, negotiated
over the course of 2017, to underpin returns from the project.
The estimated capital cost is $250-275 million and construction is expected to take
around 18 months. First production is planned for 2019 with the company producing
approximately 200 thousand tonnes of synthetic rutile (from mined ilmenite feedstock),
50 thousand tonnes of zircon and 30 thousand tonnes of rutile on average over an initial
8.5 year mine life. Access to additional ore reserve could extend mine life for a further four
years.
Ilmenite will be transported to Capel for synthetic rutile production and the non-magnetic
stream to Iluka’s Narngulu mineral separation plant in Geraldton for final processing.
Associated infrastructure includes upgrades to power facilities, camps and public roads.
In 2017, pre-execute activities included major environmental approvals, detailed
engineering, establishment of the integrated project team and procurement of long lead
items. Following approval, contracts were awarded for a range of packages and tendering
for the balance of construction contracts advanced.
Jacinth-Ambrosia, South Australia
To offset declining ore grades at Jacinth-Ambrosia, Iluka is planning to expand the operation,
increasing plant throughput by approximately 30%. The scope for this expansion includes
an upgrade of the wet concentrator plant; a second mining unit to handle additional ore;
and a capacity increase at the site’s accommodation camp. A definitive feasibility study is
expected to be completed by mid-2018, with project execution expected to commence
in the second half of 2018 and completion in 2019, subject to Board approval and market
conditions.
Lanti Dry and Gangama expansions, Sierra Leone
Iluka’s planning for the acquisition of Sierra Rutile in December 2016 contemplated the
expansion of the Lanti Dry and Gangama deposits to increase throughputs and reduce
unit costs at the operation.
The Lanti Dry expansion is expected to approximately double mining capacity from 500-
600 tonnes per hour of ore to 1,000-1,200 tonnes per hour and involves the construction
of a second in-pit mining unit and additional concentrator capacity.
Similarly, the Gangama expansion project involves a doubling of mining capacity (500-600
tonnes per hour of ore to 1,000-1,200 tonnes per hour). Gangama is mined by truck and
shovel method and the expansion includes the construction of a second mining unit and
concentrator based on the current method.
Detailed feasibility studies were progressed in 2017 for both projects, including detailed
option assessment, engineering and construction planning. Commissioning of both
expansions is planned for 2019.
ILUKA HAS A DISCIPLINED
APPROACH TO CAPITAL INVESTMENT
32 Iluka Resources Limited, Annual Report 2017
Sembehun, Sierra Leone
Iluka’s Sembehun project is a proposed new mine development at the company’s Sierra
Rutile operations. Iluka’s planning contemplated the development prior to acquisition and
it is an integral part of the future of the Sierra Rutile operation, with the deposit containing
more than 70% of remaining ore reserves at Sierra Rutile. The proposed initial capacity
is 1,000-1,200 tonnes per hour, increasing in subsequent years as other deposits are
depleted.
A pre-feasibility study was progressed in 2017 and environmental baseline studies
commenced. The Board has approved funding for a detailed feasibility study to be
undertaken in 2018. The project has a construction period of around 18 months and
commissioning is planned for 2021.
Mineral separation plant upgrade, Sierra Leone
An upgrade to the mineral separation plant is required to meet the additional capacity to
be generated by the planned mine expansions. Work will involve upgrades to the feed
preparation plant and dry mill, and increase capacity from around 175 thousand tonnes
per annum of rutile to up to 300 thousand tonnes per annum. Upgrades will also improve
safety, operational and metallurgical efficiencies at the plant. A feasibility study and detailed
engineering began in 2017. Project completion is expected in 2019.
Balranald, Murray Basin, New South Wales
Balranald is two large, deep, high grade rutile-rich deposits in northern Murray Basin.
In 2017, Iluka continued to progress an unconventional, underground mining approach
to develop these deposits. The approach contemplates the use of directional drilling
technology and has the advantages of reduced environmental footprint, potentially lower
capital intensity, scalability of operations and portfolio flexibility.
Following the full field trial in 2016, work in 2017 has focused on testing and improving
the mining head unit by way of full-scale wear tests of different materials and enhanced
designs for key pieces of equipment. Assessment of this work is ongoing.
Subject to this assessment, the project could ultimately move to a staged start-up in 2021,
pending necessary approvals.
Puttalam, Sri Lanka
The Puttalam Quarry (PQ) deposit is a large, sulphate ilmenite deposit in north-west Sri
Lanka. The ilmenite ore sits atop a limestone layer currently being mined for cement
production. It is a large homogenous deposit with mineralisation close to surface and ore
up to 60 metres thick. There is also potential for substantial synergies with the current
mining operation, in areas such as infrastructure and rehabilitation.
A key focus of work to date has been securing necessary legal and investment agreements
and land access rights with the government of Sri Lanka and the owner of the deposit.
Such agreements are essential to provide the certainty required for further development.
In 2017, discussions with the Sri Lankan government continued in this regard and Iluka
submitted a revised and comprehensive project proposal. Going forward, Iluka hopes to
establish a pathway towards securing a binding development agreement.
A pre-feasibility study on the deposit was also progressed in 2017 with works now being
undertaken in technical and community engagement areas.
Iluka Resources Limited, Annual Report 2017 33
Financial and operational review
Exploration
Exploration works in Kazakhstan
Kazakhstan
Quebec, Canada
Sierra Leone
Iluka began greenfields
exploration
in northern Kazakhstan in 2015 for a
potential new zircon province. The work is
being undertaken with Kazgeology under
a consortium agreement.
Iluka has 76,192km2 available
for
exploration under licence and commenced
the first major drill programme in 2017,
drilling a total of 307 holes for 9,100m. The
targeted marine sand geological formation
is widely present across
the project
area and hosts concentrations of heavy
minerals. Drill samples have been shipped
to Australia for full laboratory analysis,
technical assessment and project review.
Pending positive results, a targeted drilling
campaign may take place in 2018.
34 Iluka Resources Limited, Annual Report 2017
Greenfields exploration targeting a large
rutile-ilmenite rich deposit continued in
2017 under a farm-in agreement with Vior
Inc. Work in 2017 included aeromagnetic
and gravity surveys, geological mapping
and glacial and petrographic studies.
Multiple geophysical targets identified in
the hard rock setting have been tested
by an initial diamond drilling programme.
Results are awaited with
technical
assessment to follow.
At Sierra Rutile, Iluka began updating
the local geological model to assist with
prioritising exploration targets near to
current operations and throughout the
region.
exploration
targeting
Brownfield
extensions and near mine additions to
the Sierra Rutile ore reserves.
is
ILUKA’S BALANCE OF
BROWNFIELD AND
GREENFIELD EXPLORATION
PROVIDES DEVELOPMENT
POTENTIAL IN THE SHORT
AND LONGER TERM
Other regions
Iluka continued to undertake early stage
in other regions,
exploration activities
including initial prospecting, assessment
of third party opportunities and tenement
acquisition.
Tenement position as at 31 December 2017
Region
Approx square kilometres
Eucla Basin (SA, Australia)
Murray Basin (NSW & VIC, Australia)
Perth Basin (WA, Australia)
Canning Basin (WA)
West Siberian Basin (Kazakhstan)
Sri Lanka
Sierra Leone
Tanzania
Total
15,178
5,297
534
322
53,688
135
742
296
76,192
Exploration expenditure 2017 – $12 million
Administration and
other costs
$1.7m
Other international
(Canada, West Africa)
$1.7m
Kazakhstan
$3.2m
Australia
$3.5m
Americas
$1.8m
Iluka Resources Limited, Annual Report 2017 35
ILUKA IS COMMITTED
TO HIGH LEVELS
OF SUSTAINABILITY
PERFORMANCE
36 Iluka Resources Limited, Annual Report 2017
Rehabilitation at Eneabba
Iluka Resources Limited, Annual Report 2017 37
Sustainability
During 2017, Iluka was recognised as
a leading sustainability performer in its
listing on the Dow Jones Sustainability
Index (DJSI) Australia. The DJSI tracks
the performance of over 2,500 leading
companies worldwide,
independently
evaluating
long-term economic,
environmental and social performance.
The top performers are selected for listing
on the DJSI.
their
sustainability
Iluka’s
and
performance is overseen by the Board and
integrated to all levels of the business.
approach
Iluka
Commencing
publicly
2017,
communicated sustainability improvement
targets to enable common understanding,
both internally and externally, of Iluka’s
sustainable development goals and
performance. The progress of these targets
is routinely reviewed by the Executive
and performance will be presented in the
company’s annual Sustainability Report.
The acquisition of Sierra Rutile in December
2016 changed Iluka’s sustainability risk
profile.
the
risks
recognises
Iluka
and
considerations of operating in this new
jurisdiction in areas such as human rights,
resettlement,
bribery and corruption,
health, safety and security; and has
continued to make significant progress on
strengthening its sustainability framework.
Over the last 12 months, integration
priorities for Sierra Rutile have included
the introduction of Iluka’s safety and risk
mitigation frameworks, as well as Code
of Conduct, to ensure alignment and
integration of Group level procedures and
processes.
Sustainability approach
Iluka is a company committed to high levels of sustainability performance. At Iluka that means integrating economic, environmental and
social considerations into business practice, and ensuring safe and responsible conduct underpins everything we do.
Iluka’s sustainability approach is governed through a series of policies and management systems that span across six key elements. This
is underpinned by the company’s core values of Commitment, Integrity and Responsibility.
Geraldton Port, Western Australia
Jacinth-Ambrosia, South Australia
North Capel, Western Australia
Governance
Economic responsibility
People
Iluka
its
is committed to conducting
business in accordance with the highest
standards of corporate governance.
to
is committed
Iluka
sustainable
economic outcomes allowing us to share
economic benefits with the communities
in which we operate, whilst creating and
delivering value to shareholders.
Iluka seeks to attract and retain the best
people while building and maintaining
a diverse, inclusive and high-achieving
workforce.
Hamilton, Victoria
Sembehun, Sierra Leone -
Stakeholder engagement meeting
Douglas, Victoria - Rehabilitation
Health and safety
Social performance
Environment
Iluka is committed to achieving a fatality-
free workplace, eliminating injuries and
protecting the health and wellbeing of its
people.
Iluka respects human rights, engages
meaningfully with stakeholders and seeks
to make a positive difference to the social
and economic development of the areas in
which it operates.
Iluka seeks to manage its impact on the
environment, use resources efficiently and
leave positive rehabilitation and closure
outcomes.
38 Iluka Resources Limited, Annual Report 2017
Safety performance
Total recordable injury frequency rate
Iluka’s people
its business.
the
The safety of
is
foundation of
committed to maintaining a fatality-free
workplace and making continual progress
on reducing injury potential.
is
Iluka
As 2017 was treated as a baseline year for
Sierra Rutile, Iluka’s injury frequency rates
for 2017 exclude Sierra Rutile. The total
recordable injury frequency rate increased
from 4.4 to 4.8, with one less injury in 2017
and a reduction in hours worked. The lost
time injury frequency rate increased from
0.4 to 0.9.
total
Sierra Rutile’s
injury
frequency rate was 2.2 and lost time injury
frequency rate was 1.0 in 2017.
recordable
At 31 December 2017, the combined
Group total recordable injury frequency
rate was 2.8 and lost time injury frequency
rate was 1.0. This will be used for 2018
comparisons.
At Sierra Rutile, there has been a focus on
safety risk identification and preventative
action planning. Over 1,800 employees
have been provided with a safety induction
and 250 employees provided with detailed
risk and hazard training. This resulted in a
notable improvement in hazard reporting,
increasing from an average of 23 per
month in the March quarter to 280 per
month in the December quarter.
Reporting
Full details of Iluka’s sustainability approach
and 2017 performance of material issues
will be available in the annual Sustainability
Report.
The report, covering the period 1 January
2017 to 31 December 2017, is being
prepared in accordance with the Global
Reporting Initiative, and will be released
in April 2018 on the company’s website,
www.iluka.com.
e
t
a
R
y
c
n
e
u
q
e
r
F
e
t
a
R
y
c
n
e
u
q
e
r
F
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
1.0
0.8
0.6
0.4
0.2
0.0
6.7
4.6
3.6
4.4
4.8
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
n
a
J
7
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7
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7
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7
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7
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7
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7
1
p
e
S
7
1
t
c
O
7
1
v
o
N
7
1
c
e
D
Lost time injury frequency rate
0.9 0.9
0.9
0.4
0.3
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
n
a
J
7
1
b
e
F
7
1
r
a
M
7
1
r
p
A
7
1
y
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7
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7
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7
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7
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7
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e
D
RECOGNISED AS A LEADING
SUSTAINABILITY PERFORMER ON
THE DOW JONES SUSTAINABILITY
INDEX (DJSI) AUSTRALIA
Iluka Resources Limited, Annual Report 2017 39
Business risks and mitigations
The nature and potential impact of risks
changes over time. The risks described
below are not the only risks that Iluka
faces, and whilst reasonable effort is made
to identify and manage material risks,
additional risks not currently known or
detailed below may also adversely affect
future performance.
Sustaining operations risks
Maintaining a pipeline of mineral resources,
mineral reserves and projects in order to
sustain operations and maintain business
is a key focus for Iluka. The success of
exploration activity and project delivery is
critical to sustain operations in a timely
manner.
Product demand and price risks
The resources sector typically exhibits
cyclicality, and Iluka is subject to cyclical
fluctuations in global economic conditions,
customer demand and end-use markets.
The demand for Iluka’s products may be
sensitive to a wide range of factors most
of which are outside of the company’s
control such as changes in the global
economy, adverse changes in pigment or
ceramic markets, or technology changes
that reduce the level of feedstock required
(substitution or thrifting). The prices for our
products are also subject to these market
conditions generally.
The company’s approach
in such
conditions is to adjust production and
inventory levels in the context of market
demand, and seek offtake agreements
that underpin project
returns where
appropriate.
Financial risks
Iluka faces risks relating to the cost of and
access to funds, movement in interest
rates and foreign exchange rates (refer
note 20). Iluka maintains policies which
define appropriate financial controls and
governance which seeks to ensure financial
risks are fully recognised, managed and
recorded in a manner consistent with:
•
•
•
the financial
delegations as set by Iluka’s Board;
risk appetite and
generally
industry
accepted
practice and corporate governance
standards; and
shareholder expectations of a mineral
sands producer.
Where an operation has entered into long-
term contracts with fixed or floor prices (i.e.
hedged the commodity price), Iluka may
manage the risks related to movements
in foreign exchange rates by entering into
appropriate hedging arrangements.
in accordance
is done
Any hedging
with Iluka’s risk tolerances and policies
including appropriate approvals.
Project development risks
Iluka regularly assesses
its ability to
enhance its production profile, or extend
the economic life of deposits, by the
development of new deposits within its
portfolio. A failure to develop and operate
projects in accordance with expectations
could negatively
results of
operations and the company’s financial
position.
impact
the ability
to major development projects
Risks
include
to acquire and/or
obtain appropriate access to property,
regulatory approvals, supply chain risks,
construction and commissioning risks.
There are also technology risks regarding
the new unconventional mineral sands
mining approach planned for the Balranald
deposit.
A structured capital process and project
delivery framework is utilised to facilitate
successful project development and
manage risks in bringing new projects into
operation.
Growth risks
Iluka attempts
To ensure a sustainable business going
forward,
to generate
growth options
through exploration,
innovation and appropriate external
growth opportunities. The ability of Iluka to
create and deliver value for shareholders is
to some extent dependent on successful
growth strategies.
selection
Evaluating growth opportunities requires
prudent risk taking as part of a disciplined
process of project
and
interrogation to maximise the opportunity,
the desired outcomes, and
achieve
the
manage
the associated risks
company. This
the
company’s established disciplines and
systems to evaluate growth opportunities
and assess their potential value and
impact considering a range of modifying
factors and assumptions.
to
includes applying
The identification and management of
risk is fundamental to achieving Iluka’s
objective. We are, therefore, committed to
managing risk in a proactive and effective
manner.
is
International Standard
is
Iluka’s Risk Management Policy
risk management
supported by a
to
aligned
framework which
the
risk
for
management, ISO 31000. This framework
provides a whole of business approach to
the management of risks and sets out the
process for the identification, management
and reporting of risk to the achievement of
our plans and objectives.
for
responsibility
The Board, through the Board Charter,
delegates
identifying
and managing risks to management.
Management is required to report to the
Board on those risks which could have
a material impact on the company’s
business. The Audit and Risk Committee
assists the Board with regard to oversight
risk management
of
practices.
the company’s
Through its risk management framework
Iluka seeks to:
•
•
•
•
•
•
embed a culture of risk awareness by
integrating risk management into our
business activities and processes;
identify, assess and manage risks in
a structured and systematic manner;
enable prudent risk taking in line with
business objectives and strategies;
establish and monitor appropriate
controls in line with agreed risk
tolerances;
ensure material business risks are
effectively identified, communicated
elevated
and
throughout all levels of management
and to the Board; and
appropriately
continue
requirements for risk management.
governance
fulfil
to
illness;
Iluka applies a structured and systematic
approach to assess the consequence
of risk in areas such as environment;
reputation; stakeholder;
injury;
compliance;
financial and company
objectives. Company risks, and how they
are being managed, are reviewed by the
Executive team regularly and reported to
the Board on a twice yearly basis.
Set out below are the key risk areas
that could have a material impact on the
company.
40 Iluka Resources Limited, Annual Report 2017
Country risk
Anti-bribery and corruption risk
international activities have
Increasing
increased Iluka’s exposure to country
risks. New or evolving regulations and
international standards are outside of the
company’s control and are often complex
and difficult to predict. The potential
development of international opportunities
can be
in
fiscal or regulatory regimes, difficulties
in interpreting or complying with local
laws, material differences in sustainability
standards and practices, or reversal of
current political, judicial or administrative
policies.
jeopardised by changes
Risks in the locations in which Iluka
operates could include terrorism, civil
judicial activism, community
unrest,
challenge or opposition,
regulatory
nationalisation,
investigation,
protectionism, renegotiation or nullification
of existing contracts, leases, permits or
other agreements, imposts, restrictions
on repatriation of earnings or capital and
changes in laws and policy, as well as
other unforeseeable risks.
If any of the company’s operations are
affected by one or more of these risks, it
could have a material adverse effect on
its assets in those countries, as well as
Iluka’s overall operating results, financial
condition and prospects.
Sierra Rutile risks
Sierra Rutile continues to work towards full
adoption of Iluka’s governance standards,
operational processes and controls. As
this continues, there are risks relating to the
standard of systems, processes, policies,
practices, or any related key controls
which require investment or improvement
to meet Iluka’s standards.
Iluka has made significant progress in
implementing the improvements outlined
at the time of acquisition such as modifying
the dry mining method to incorporate an
in-pit mining unit increasing throughput at
Lanti, revising plant designs for the current
mining units, improvements in mine pit
de-watering and detailed planning for
upgrades to the mineral separation plant.
A delay in these projects and in achieving
further operational improvements could
that may
impose unexpected costs
adversely affect the financial performance
of the company.
Iluka’s business activities and operations
are located in jurisdictions with varying
degrees of political and judicial stability,
including some countries with a relatively
high inherent risk with regards to bribery
and corruption. This exposes Iluka to the
risk of unauthorised payments or offers
of payments to or by employees, agents
or distributors that could be in violation
of applicable anti-corruption laws. Risks
also include possible delays or disruptions
resulting from a refusal to make so-called
facilitation payments or any other form of
benefit inconsistent with Iluka policy or
applicable laws.
Iluka has a clear Anti-bribery and
Corruption Policy, and internal controls
and procedures to protect against such
risks including training and compliance
programmes for its employees, agents
and distributors. However, there is no
assurance that such controls, policies,
procedures or programmes will protect
Iluka from potentially improper or criminal
acts. Violations of anti-corruption laws or
regulations may result in criminal or civil
sanctions and adverse publicity.
Environmental standards risk
Mining operations, by their nature, can have
a significant impact on the environment.
Given this, Iluka is committed to leading
practice in environmental management as
outlined in the Iluka Environment, Health
and Safety Policy.
Leading practice is based upon current
community
applicable
expectations,
legislation and regulatory standards, all of
which change over time. With increasing
to
government and public sensitivity
environmental sustainability, environmental
regulation is becoming more stringent.
Iluka could be subject to
increasing
environmental responsibility and liability,
including laws and regulations dealing
with air quality, water and noise pollution
and other discharges of materials into the
environment, plant and wildlife protection,
the reclamation and restoration of certain of
its properties, greenhouse gas emissions,
the storage, treatment and disposal of
wastes and the effects of its business on
the water table and groundwater quality.
Sanctions
for non-compliance with
these laws and regulations may include
administrative, civil and criminal penalties,
revocation
reputational
issues, increased licence conditions and
corrective action orders.
permits,
of
environmental
to comply with
incidents,
Accidents,
the
laws or
failure
regulations and real or perceived threats
to the environment or the amenity of
local communities could result in a loss of
Iluka’s ability to operate, leading to delays,
disruption or the shut-down of exploration
and production activities. Accidents,
environmental incidents and failures to
comply with laws or regulations could also
lead to fines, additional costs and adverse
publicity.
There is a risk that historic operations
or disposal methods by the company
or its predecessor companies, although
regulatory
materially compliant with
requirements at the time, may be subject
to
increased or new environmental
standards which require additional material
remediation costs.
The company monitors these risks on
an ongoing basis as part of the ongoing
remediation of its former mine sites and
operations.
Business interruption risks
from operating
Circumstances may arise which preclude
including natural
sites
disaster, material disruption to our logistics,
critical plant failure or industrial action. Iluka
undertakes regular reviews for mitigation
of property and business continuity
risks. Iluka also conducts planning and
preparedness activities to ensure rapid
and effective response in the event of a
crisis. Appropriate business plans, policies
and training provides support to Iluka’s risk
mitigation activities. Iluka also maintains a
prudent insurance programme that may
offset a portion of the financial impact of a
major interruption risk.
Social licence to operate risks
An integral part of Iluka’s activities is
maintaining a social licence to operate.
Iluka’s safety, health, environmental,
people and stakeholder performance
expectations are clearly articulated in its
policies and overseen by the Board.
further
information on
The annual Iluka Sustainability Report
contains
the
company’s operating conditions, as well
as elements of the business strategy.
This document, as well as other company
information, is available on Iluka’s website
www.iluka.com
Iluka Resources Limited, Annual Report 2017 41
Financial
Report
Balranald field trial, Murray Basin, New South Wales
42 Iluka Resources Limited, Annual Report 2017
CREATING AND
DELIVERING
VALUE
Financial report
Results for announcement to the market
Directors’ report
Remuneration report
Auditor’s independence declaration
Financial statements
Consolidated statement of profit or loss
and other comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors’ declaration
Independent auditor’s report
44
45
53
74
75
76
77
78
79
80
123
124
Iluka Resources Limited, Annual Report 2017 43
Results for announcement to the market
Iluka Resources Limited
31 December 2017
For the year ended 31 December 2017
RESULTS FOR ANNOUNCEMENT TO THE MARKET
Provided below are the results for announcement to the market in accordance with Australian Securities Exchange
(ASX) Listing Rule 4.2A and Appendix 4E for the consolidated entity Iluka Resources Limited and its controlled
entities for the year ended 31 December 2017 (the 'financial year') compared with the year ended 31 December
2016 ('comparative year').
All currencies shown in this report are Australian dollars unless otherwise indicated.
Revenue from ordinary activities
Loss from ordinary activities after tax attributable to members
Net loss for the period attributable to members
Up 39.2% to $1,077.8m
Down 23.4% to $171.6m
Down 23.4% to $171.6m
Dividends
2017 final: 25 cents per ordinary share (100% franked), to be paid in April 2018
2017 interim: 6 cents per ordinary share (100% franked), paid in September 2017
2016 final: nil
2016 interim: 3 cents per ordinary share (100% franked), paid in October 2016
Key ratios
Basic and diluted loss per share (cents)
Free cash flow per share (cents)
Return on Equity
Net tangible assets per share ($)
(i)
(ii)
2017
(41.0)
76.9
(20.1)
1.70
2016
(53.6)
11.3
(17.1)
2.18
(i) Free cash flow is determined as cash flow before refinance costs, proceeds/repayment of borrowings and dividends paid in the
year. 2016 free cash flow is stated before the acquisition cost of Sierra Rutile Limited of $375.4 million.
(ii) Calculated as Net Loss after Tax (NPAT) for the year as a percentage of average monthly shareholder's equity over the year.
The Company's Dividend Reinvestment Plan was suspended in late 2010 and has been terminated. A new
Dividend Reinvestment Plan has been introduced effective for the payment of the 2017 final dividend.
The commentary on the consolidated results and outlook are set out in the Operating and Financial Review section
of the Directors' Report.
Independent auditor's report
The Consolidated Financial Statements upon which this Appendix 4E is based have been audited.
44
44 Iluka Resources Limited, Annual Report 2017
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
Directors' Report
The directors present their report on the Group consisting of Iluka Resources Limited (the 'Company') and the
entities it controlled at the end of, or during, the year ended 31 December 2017.
The information appearing on pages 14 to 41 forms part of the Directors' Report for the financial year ended 31
December 2017 and is to be read in conjunction with the following information:
DIRECTORS
The following individuals were directors of Iluka Resources Limited during the whole of the financial year and up to
the date of the report, unless otherwise stated:
G Martin
M Bastos
X Liu
T O'Leary
J Ranck
J Seabrook
DIRECTORS' PROFILES
Greg Martin
BEc, LLB, FAIM, MAICD
58
Chairman and Non-executive Director
January 2013
Yes
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Current positions:
• Chairman of the Board
• Nominations and Governance Committee - Chairman
• Audit and Risk Committee - Member
• People and Performance Committee - Member
Relevant skills and experience:
Mr Martin has over 35 years’ experience in the energy, utility and infrastructure sectors, having spent 25 years with
the Australian Gas Light Company Ltd (AGL), including five years as CEO and Managing Director. After leaving
AGL, Greg was CEO of the infrastructure division of Challenger Financial Services Group and, subsequently,
Managing Director of Murchison Metals Limited.
Other relevant directorships and offices (current and recent):
• Sydney Desalination Plant Pty Limited - Chairman (current)
• Western Power - Deputy Board Chair (current)
• Spark Infrastructure - Non-executive Director (current)
• Member of CoAG Energy Council Energy Selection Panel (retired December 2017)
• Santos Limited - Non-executive Director (retired August 2017)
• Prostar Investments (Australia) Pty Ltd - Chairman (retired September 2017)
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Tom O'Leary
LLB, BJuris
54
Managing Director and Chief Executive Officer
October 2016
No
45
Iluka Resources Limited, Annual Report 2017 45
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
Relevant skills and experience:
Mr O’Leary was previously Managing Director of Wesfarmers Chemicals, Energy and Fertilisers division having
been appointed to the role in 2010. Tom joined Wesfarmers in 2000 in a Business Development role and was then
appointed to Managing Director, Wesfarmers Energy, in 2009. Prior to joining Wesfarmers, Tom worked in London
for 10 years in finance law, investment banking and private equity. Tom holds a law degree from The University of
Western Australia and has completed the Advanced Management Program at Harvard Business School.
Other relevant directorships and offices (current and recent):
• Clontarf Foundation - Director (current)
• Edith Cowan University Council - Member (retired June 2017)
James (Hutch) Ranck
BSE (Econ), FAICD
69
Non-executive Director
January 2013
Yes
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Current positions:
• People and Performance Committee - Chairman
• Audit and Risk Committee - Member
• Nominations and Governance Committee - Member
Relevant skills and experience:
Mr Ranck has held senior management positions with DuPont, both in Australia and international
in finance,
chemicals, pharmaceuticals and agriculture for over 30 years. Hutch also served as a Director of DuPont’s Hong
Kong based subsidiary, Titanium Technologies, for seven years. Hutch retired as Managing Director of DuPont
Australia and New Zealand and Group Managing Director of DuPont ASEAN in May 2010.
Other relevant directorships and offices (current and recent):
• Elders Limited - Chairman (current)
• CSIRO - Non-executive Member of the Board (current)
Jenny Seabrook
BCom, FCA, FAICD
61
Non-executive Director
May 2008
Yes
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Current positions:
• Audit and Risk Committee - Chairman
• Nominations and Governance Committee - Member
• People and Performance Committee - Member
Relevant skills and experience:
In Ms Seabrook's executive career, she worked at senior levels in chartered accounting, capital markets and
investment banking businesses. Jenny is a Senior Advisor to Gresham Advisory Partners Limited. Jenny was
formerly a member of the Takeovers Panel (2000 to 2012), and her previous non-executive directorships include:
Export Finance and Insurance Corporation, Amcor Limited, Bank of Western Australia Limited, West Australian
Newspapers Holdings Limited, Australian Postal Corporation, AlintaGas and Western Power Corporation.
Other relevant directorships and offices (current and recent):
• MMG Limited - Non-executive Director (current)
• IRESS Limited - Non-executive Director (current)
• Western Australian Treasury Corporation - Non-executive Director (current)
• Australian Rail Track Corporation - Non-executive Director (current)
46
46 Iluka Resources Limited, Annual Report 2017
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
Marcelo Bastos
Mechanical Engineering (UFMG), MBA (FDC-MG), MAICD
55
Non-executive Director
February 2014
Yes
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Current positions:
• Audit and Risk Committee - Member
• Nominations and Governance Committee - Member
Relevant skills and experience:
the global resources company, MMG Limited, with
Mr Bastos was formerly the Chief Operating Officer of
responsibility for operations in three continents. Marcelo has extensive experience in major projects development
and operation, and company management in the metals and mining industry (iron ore, gold, copper, nickel and coal
sectors). Marcelo also served as the Chief Executive Officer of BHP Billiton Mitsubishi Alliance (BMA), President of
Nickel West (BHP Billiton), President and Chief Operating Officer of Cerro Matoso and Nickel Americas (BHP
Billiton) and had a 19 year career with Vale (CVRD) in senior management and operational positions, the last of
those as Director of Non Ferrous Operations. Marcelo is a former Non-executive Director of Golding Contractors Pty
Ltd. He is also a former Member of the Western Australia Chamber of Mines and Energy and served as Vice
President of the Queensland Resources Council.
Other relevant directorships and offices (current and recent):
• Aurizon Holdings Limited - Non-executive Director (appointed November 2017)
• Golder Associates - Non-executive Director (appointed July 2017)
• MMG Limited - Chief Operating Officer (retired August 2017)
Xiaoling Liu
PhD, BEng, GAICD, FAusIMM, FTSE
61
Non-executive Director
February 2016
Yes
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Current positions:
• Audit and Risk Committee - Member
• Nominations and Governance Committee - Member
Relevant skills and experience:
Dr Liu is a former President and Chief Executive Officer of Rio Tinto Minerals. Over Xiaoling’s 26 years with the Rio
Tinto Group she held various positions in smelting operation management through to President and CEO of Rio
Tinto Minerals. Prior to joining Rio Tinto, she worked as a Research Fellow of City University (London). Xiaoling’s
previous Non-executive Director roles included: Board member of the California Chamber of Commerce; Vice
President of the Board of Australian Aluminium Council; and member of the University Council of the University of
Tasmania.
Other relevant directorships and offices (current and recent):
• Newcrest Mining Limited - Non-executive Director (current)
• Melbourne Business School - Non-executive Director (current)
• South 32 Limited - Non-executive Director (appointed 1 November 2017)
47
Iluka Resources Limited, Annual Report 2017 47
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
MEETINGS OF DIRECTORS
In 2017, the Board met on 11 occasions, of which six meetings were scheduled. In addition to these meetings, the
the meetings. The
Board spent a day primarily focused on strategic planning. The Chairman chaired all
Non-executive Directors periodically met
issues. Directors’
attendance at Board and committee meetings during 2017 is detailed below:
independent of management
to discuss relevant
DIRECTORS SHAREHOLDING
Directors shareholding is set out in the Remuneration Report, section 6.4.
48
48 Iluka Resources Limited, Annual Report 2017
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
EXECUTIVE TEAM PROFILES
Julian Andrews, BCom (Hons), PhD, CFA, GAICD
Head of Business Development
Mr Andrews joined Iluka as Head of Business Development in 2017. Prior to joining Iluka, Mr Andrews held various
roles at Wesfarmers, including General Manager, Business Development and Chief Financial Officer in Wesfarmers
Chemicals, Energy & Fertilisers division. He began his career in strategy consulting with PricewaterhouseCoopers
Canada and worked in project finance and corporate advisory in the USA before relocating to Perth in 2004.
Matthew Blackwell, BEng (Mech), Grad Dip (Tech Mgt), MBA, MAICD, MIEAust
Head of Marketing, Mineral Sands
Mr Blackwell joined Iluka in 2004 as President of US Operations. He has had responsibilities for Land Management
and as General Manager, USA, before being appointed Head of Marketing, Mineral Sands in February 2014. Prior
to joining Iluka, Mr Blackwell was Executive Vice President of TSX listed Asia Pacific Resources and based in
Thailand. He also held positions with WMC Resources and Normandy Poseidon. Mr Blackwell has more than 20
years' experience in the resources industry including senior positions in project management, maintenance,
production and business development.
Rob Hattingh, MSc (Geochem)
Chief Executive Officer, Sierra Rutile
Mr Hattingh joined Sierra Rutile in November 2016 from Iluka Resources where he held the position of General
Manager Innovation, Sustainability and Technology. Mr Hattingh has more than 25 years’ experience in the mineral
sand industry in a number of roles. He was Principal Environmental Scientist at Richards Bay Minerals in South
Africa and worked in senior roles at Exxaro Resources (now Tronox) where he was responsible for technical
disciplines for a number of years. In 2008, Mr Hattingh joined Iluka Resources in Perth where he held management
roles in the fields of hydrogeology, metallurgy, sustainability and business development.
Simon Hay, BSc (Hons), MAppSc, Grad Dip (Mgmt), MAICD
Head of Resource Development
Mr Hay joined Iluka in 2009 as Manager, South West Operations based in Capel. Mr Hay then moved to the
Marketing function and served as Iluka's Country Manager for China and then General Manager Zircon Sales based
in Singapore. He was appointed to his current role as Head of Resource Development in March 2016. Prior to
joining Iluka, Mr Hay worked at Mt Isa Mines, WMC Resources and BHP Billiton in the fields of metallurgy, projects
and operations management in base metals.
Sarah Hodgson, LLB, GAICD
General Manager People
Ms Hodgson joined the People team at Iluka in 2013 and was appointed as General Manager People in May 2017.
Ms Hodgson has 20 years’ HR experience specialising in remuneration and international mobility and started her
career at PricewaterhouseCoopers in London before relocating to Australia with KPMG in 2002. Prior to joining
Iluka Ms Hodgson held senior remuneration roles both as a consultant and in-house at Mercer, Westpac and
KPMG.
Adele Stratton, BA (Hons), FCA, GAICD
General Manager Finance, Investor Relations and Corporate Affairs
Ms Stratton joined Iluka in 2011 and held a number of senior financial roles before being appointed to General
Manager Finance, Investor Relations and Corporate Affairs in May 2017. Ms Stratton is a qualified chartered
accountant with 17 years’ experience working in both practice and public listed companies. Ms Stratton commenced
her career with KPMG, spending 7 years in the assurance practice both in the UK, where she qualified as a
chartered accountant, and Australia. Prior to joining Iluka, Ms Stratton worked in a number of finance roles at Rio
Tinto Iron Ore in Perth.
49
Iluka Resources Limited, Annual Report 2017 49
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
Douglas Warden, BCom, CA, MBA, GAICD
Chief Financial Officer and Head of Strategy and Planning
Mr Warden joined Iluka in 2003 and held a number of senior financial and commercial roles before leaving the
Company in 2007. Since returning to Iluka in 2009, Mr Warden has held a number of roles including, Head of
Resource Development, General Manager Business Development and General Manager Exploration. He was
appointed to his current role as Chief Financial Officer and Head of Strategy and Planning in June 2015. Mr Warden
has previously been CFO at Summit Resources Limited and Jabiru Metals Limited and began his career in
corporate finance and insolvency with Ernst & Young and KPMG.
Steven Wickham, Assoc Dip in Mechanical Engineering
Chief Operating Officer, Mineral Sands
Mr Wickham is a mechanical engineer with extensive experience in senior and executive roles in Australia and
South Africa in the manufacturing and mining sectors. Prior to joining Iluka in 2007, he was Chief Executive Officer
of Ticor South Africa and Managing Director of Australian Zircon.
Sue Wilson, BJuris, LLB, FGIA, FICSA, FAICD
General Counsel and Company Secretary
Ms Wilson joined Iluka in December 2016. She was previously the Head of Company Secretariat at South32
following the demerger from BHP Billiton. She was also General Counsel and Company Secretary and a member of
the executive team at Bankwest and HBOS Australia. Prior to joining Bankwest, Ms Wilson was a partner of law firm
Parker & Parker (now part of Herbert Smith Freehills). She is currently the Pro Chancellor and a member of the
Council at Curtin University and a former non-executive director of Western Power.
COMPANY SECRETARY
Ms Sue Wilson is the Company Secretary of the Company. Ms Wilson was appointed to the position of Company
Secretary in December 2016. Refer to the previous section for Ms Wilson’s profile.
Mr Nigel Tinley BBus CPA GAICD FGIA also acts as Company Secretary for the Company. Mr Tinley was
appointed to the position of Joint Company Secretary in 2013 and prior to that he held senior positions in Finance
and Sales and Marketing. Before joining Iluka in 2006, Mr Tinley held a range of accounting, financial and
commercial roles over his 18 years with BHP Billiton Limited (and former BHP Limited) both in Australia and
internationally.
DIRECTORS AND OTHER OFFICERS’ REMUNERATION
Discussion of the Board’s policy for determining the nature and amount of remuneration for directors and senior
executives and the relationship between such policy and company performance are contained in the remuneration
report on pages 53 to 73 of this Annual Report.
PRINCIPAL ACTIVITIES
The principal activities and operations of
the Group during the financial year were the exploration, project
development, mining operations, processing and marketing of mineral sands. The Company also has a royalty over
iron ore sales revenue from BHP Billiton's Mining Area C province in Western Australia.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Company indemnifies all directors of the Company named in this report and current and former executive
officers of the Company and its controlled entities against all liabilities to persons (other than the Company or the
related body corporate) which arise out of the performance of their normal duties as director or executive officer
unless the liability relates to conduct involving bad faith. The Company also has a policy to indemnify the directors
and executive officers against all costs and expenses incurred in defending an action that falls within the scope of
the indemnity and any resulting payments.
During the year the Company has paid a premium in respect of directors' and executive officers' insurance. The
contract contains a prohibition on disclosure of the amount of the premium and the nature of the liabilities under the
policy.
50
50 Iluka Resources Limited, Annual Report 2017
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
INDEMNIFICATION OF AUDITORS
The company's auditor is PricewaterhouseCoopers. The terms of engagement of Iluka's external auditor includes
an indemnity in favour of the external auditor. This indemnity is in accordance with PricewaterhouseCoopers'
standard Terms of Business and is conditional upon PricewaterhouseCoopers acting as external auditor. Iluka has
not otherwise indemnified or agreed to indemnify the external auditors of Iluka at any time during the financial year.
NON-AUDIT SERVICES
The Group may decide to employ the external auditor, PricewaterhouseCoopers, on assignments additional to their
statutory audit duties where the auditor's expertise and experience with the Group are important.
Fees that were paid or payable during the year for non-audit services provided by the auditor of the parent entity, its
network firms and non-related audit firms is set out in note 25 on page 114 of the financial report.
The Board of directors has considered the position and, in accordance with advice received from the Audit and Risk
Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001 for the following reasons:
•
•
all non-audit services were provided in accordance with Iluka’s Non-Audit Services Policy and External Auditor
Guidelines; and
all non-audit services were subject to the corporate governance processes adopted by the company and have
been reviewed by the Audit & Risk Committee to ensure that they do not affect the integrity or objectivity of the
auditor.
A copy of the auditors' independence declaration as required under section 307C of the Corporations Act 2011 is
set out on page 74.
ENVIRONMENTAL REGULATIONS
So far as the directors are aware, there have been no material breaches of the Group's licences and all mining and
exploration activities have been undertaken in compliance with the relevant environmental regulations.
OTHER MATTERS
On 24 March 2014 Iluka became aware that a litigation funder proposed to fund claims that current or former
shareholders may have against the Company in respect of continuous disclosure obligations in 2012. The potential
applicants sought an order from the Federal Court for pre-action discovery which was dismissed in July 2015 and
which subsequently appealed to the Full Federal Court. The Full Federal Court upheld the appeal in June 2017. The
Full Federal Court’s decision was then appealed to the High Court of Australia. The High Court dismissed the
in October 2017, such that Iluka was required to provide pre-action discovery which was completed in
appeal
January 2018.
Iluka has not received any substantive claim relating to the potential shareholder class action. Consistent with
Iluka’s announcement dated 24 March 2014, on receipt of any such substantive claim, Iluka will defend its position.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
The directors are not aware of any matter or circumstance not otherwise dealt with in the Directors' Report that has
or may significantly affect the operations of the entity, the results of those operations or the state of affairs of the
entity in subsequent financial years.
DIVIDEND
The directors have declared a fully franked final dividend of 25 cents per ordinary share payable on 23 April 2018.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
In the opinion of the directors, likely developments in and expected results of the operations of the Group have been
disclosed in the Operating and Financial Review on pages 20 to 35. Disclosure of any further material relating to
those matters could result in unreasonable prejudice to the interests of the Group.
CORPORATE GOVERNANCE STATEMENT
The Company’s Corporate Governance Statement for the year ended 31 December 2017 may be accessed from
the Company’s website at http://www.iluka.com/about-iluka/governance.
51
Iluka Resources Limited, Annual Report 2017 51
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
ROUNDING OF AMOUNTS
The Company is of a kind referred to in "ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument
2016/191", issued by the Australian Securities and Investments Commission, relating to the 'rounding off' of
amounts in the Directors' Report and accompanying Financial Report. Amounts in the Directors' Report have been
rounded off in accordance with that Rounding Instrument to the nearest hundred thousand dollars, or in certain
cases, to the nearest dollar.
This report is made in accordance with a resolution of the directors.
G Martin
Chairman
T O'Leary
Managing Director
27 February 2018
52
52 Iluka Resources Limited, Annual Report 2017
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
REMUNERATION REPORT
The directors of Iluka Resources Limited (Iluka or Company) present this Remuneration Report (Report) for the year
ended 31 December 2017.
ABOUT THIS REPORT
This Report provides information about the remuneration of Iluka’s key management personnel (KMP), being its
executives with authority for planning, directing and controlling the activities of the Company (Executive KMP) and its
Non-executive Directors. The Report has been prepared in accordance with the Corporations Act 2001 (Cth) and
includes the following sections:
SECTION 1
Overview of 2017
Remuneration
SECTION 2
Remuneration at Iluka
SECTION 3
Executive Remuneration
This section of
the Report provides a snapshot of key remuneration
developments at Iluka in 2017, as well as an overview of the total realised
remuneration received by Executive KMP for the relevant year.
This section gives an overview of Iluka’s remuneration principles and the process
for determining the structure of remuneration for Executive KMP.
This section outlines the remuneration structure and outcomes for Iluka’s
Executive KMP in 2017, being:
T O’Leary – Managing Director and Chief Executive Officer
M Blackwell – Head of Marketing
S Hay – Head of Resource Development
D Warden – Chief Financial Officer & Head of Strategy and Planning
S Wickham – Chief Operating Officer Mineral Sands
It also demonstrates how the components of remuneration at Iluka are aligned
with shareholder value-creation by being linked to the Company’s performance.
SECTION 4
Non-executive Director
Remuneration
This section outlines the remuneration structure and fees paid to Iluka’s Non-
executive Directors in 2017, being:
G Martin – Chairman, Independent Non-executive Director
M Bastos – Independent Non-executive Director
X Liu – Independent Non-executive Director
J Ranck – Independent Non-executive Director
J Seabrook – Independent Non-executive Director
SECTION 5
Changes to Remuneration for
2018
During the course of the year a comprehensive review of Iluka’s incentive
arrangements was undertaken. This section outlines the changes to incentive
arrangements for Iluka’s Executive KMP with effect from the performance period
commencing 1 January 2018.
SECTION 6
Statutory Remuneration
Disclosures
This section includes statutorily required remuneration disclosures for 2017,
including details of equity awards outstanding and Executive KMP and Non-
executive Director shareholdings in Iluka.
53
Iluka Resources Limited, Annual Report 2017 53
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
SECTION 1
OVERVIEW OF 2017 REMUNERATION
Iluka’s approach to remuneration is intended to ensure that remuneration received by Executive KMP is closely linked to
Iluka's performance and the returns generated for our shareholders.
1.1
Key developments in 2017
During 2017, the following developments occurred in relation to the Company's remuneration arrangements:
Total Fixed
Remuneration (TFR)
• No TFR increases were awarded during 2017.
• The Head of Marketing, Matthew Blackwell was relocated from the USA to Australia effective
15 March 2017. External benchmarking was undertaken to determine a localised AUD
remuneration package which reflected the scope and responsibility of the role, external
market conditions, internal relativities and Mr Blackwell’s experience and performance.
Short Term
Incentive Plan
(STIP)
• The 2017 STIP outcome equated to an average payment of 58 per cent of maximum
opportunity for Executive KMP. While underlying earnings exceeded targeted levels,
impairments of assets and increases to provisions reduced reported earnings well below
targeted levels.
• For the profitability component of the STIP the outcome was 53 per cent.
• For the sustainability component of the STIP the outcome was 88 per cent and 109 per cent
•
for Executive KMP with responsibilities relating to Sierra Rutile.
Individual performance measures for the STIP included the effective integration of the Sierra
Rutile acquisition, assessment of feasibility, attractiveness and timing of several expansion
projects, the implementation of commercial arrangements to underpin the Cataby
development, the continued flexing of production in light of market demand, market
development activities, and the achievement of targeted objectives on projects that are
expected to contribute to the Company’s earnings in the medium and long term.
• 50 per cent of the STIP outcome will be delivered in cash and 50 per cent will be deferred
for a period up to two years (consistent with previous years, to provide further alignment
between Executive KMP and shareholders).
Long Term
Incentive Plan
(LTIP)
• 25 per cent of the 2015 LTIP (performance period 1 January 2015 to 31 December 2017)
vested. The TSR of Iluka over the performance period was 47.8 per cent, which ranked at
the 50th percentile of the S&P/ASX 200 Materials Index comparator group. The average ROE
over the performance period was negative 11.1 per cent (reported earnings in both 2016 and
2017 were impacted by impairments and increases to provisions).
Long Term Deferred
Rights (LTDR)
•
In October 2016, LTDR’s were granted to the Managing Director as compensation for
incentives foregone from Mr O’Leary’s previous employer.
• During the year, 50 per cent of Tranche 1 of the Managing Director’s LTDR award
(performance period 1 October 2016 to 31 December 2017) vested. The TSR over the period
was 43.3 per cent, which ranked at the 82nd percentile of the S&P/ASX 200 Materials Index
comparator group. The average ROE was negative 19.5 per cent (reported earnings in both
2016 and 2017 were impacted by impairments and increases to provisions).
Non–Executive
Directors
Remuneration
• No changes were made to Non-executive Directors’ Board and Committee fees in 2017.
• A minimum shareholding policy for Non-executive Directors was approved by the Board in
December, with shareholding levels set at 12,000 shares for Directors and 30,000 shares for
the Chairman. There will be a two year transitional period for the shares to be acquired by
Non-executive Directors.
Review of Incentive
Arrangements
• The Board reviewed its executive remuneration and incentive framework for executives to
ensure that it remains fit for purpose with respect to the Company’s strategy and supports
the achievement of the Company’s key objective – to create and deliver value for
shareholders. Details of the new Executive Incentive Plan (EIP) are provided at section 5.
54 Iluka Resources Limited, Annual Report 2017
54
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
1.2
Total Realised Earnings for Executive KMP (non-IFRS)
This section uses non-IFRS information to explain the "actual pay" received by Executive KMP for 2017. This is a voluntary
disclosure intended to demonstrate the link between the remuneration received by Executive KMP and the performance
of Iluka over this same period. The information provided in the table below is shown on the following basis:
•
•
•
•
“TFR” includes base salary earned in 2017, as well as superannuation for Australian employees.
"Other" payments include non-monetary benefits received in 2017, including car parking, spousal travel, any
relevant US expenses (such as social security payments) and termination entitlements (such as payment in lieu
of notice and accrued annual and long service leave).
“STIP” reflects the total STIP amount receivable by Executive KMP in respect of performance in 2017 (paid in
March 2018 following the release of annual results). As outlined below, STIP is awarded half in cash and half in
deferred equity (in the form of restricted shares). Restricted shares remain subject to continued service conditions,
with half released in 12 months and half released in 24 months.
“LTIP” reflects LTIP awards of shares as a consequence of rights from prior years which reached the end of their
performance period and vested in 2017. It does not include 2017 LTIP awards which may vest in future years if
performance conditions are met.
Name
TFR
$
Other
$
STIP
$
Cash
Restricted
Shares
LTIP1/
LTDR2
$
Shares
Total
Earnings
$
Managing Director
T O'Leary
Executive KMP
M Blackwell3
S Hay
D Warden
S Wickham4
Total
1,400,000
21,350
382,620
382,620
751,634
2,938,224
705,334
608,523
660,000
734,463
272,342
13,402
13,402
83,249
175,475
149,940
170,874
187,795
175,475
149,940
170,874
187,795
129,881
1,458,507
53,108
240,551
145,960
974,913
1,255,701
1,339,262
4,108,320
403,745
1,066,704
1,066,704
1,321,134
7,966,607
1 Represents the estimated value of the 2015-2017 LTIP for which the performance period concluded on 31 December 2017. The estimate
was calculated using the closing share price of $10.17 at 1 January 2018. The actual value will be calculated using the closing share
price at the date of vesting (1 March 2018).
2 The estimated value of the 2016 LTDR award for T O’Leary was calculated using the closing share price of $10.17 at 1 January 2018.
The actual value will be calculated using the closing share price at the date of vesting (1 March 2018).
3 M Blackwell relocated from the US to Australia effective 15 March 2017. The USD denominated portion of his earnings have been
converted from USD to AUD for 2017 using the average foreign exchange rate for the duration of his 2017 US employment of 0.7510.
Expenses relating to US social security, US accrued leave paid out and relocation allowances are included in Other.
4 S Wickham received an additional allowance in consideration of the significant time he is required to spend in Sierra Leone.
55
Iluka Resources Limited, Annual Report 2017 55
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
SECTION 2
REMUNERATION AT ILUKA
2.1
Remuneration governance and principles
The following diagram outlines the governance framework in place at Iluka for setting remuneration for the Company’s
KMP and other employees. It also includes the key remuneration principles which underlie Iluka’s remuneration
governance framework and practices.
2.2
Components of Executive KMP remuneration in 2017
Executive remuneration is comprised of both fixed and "at risk" components. The table below describes each of the
components making up each Executive KMP’s total remuneration package applicable in 2017:
56 Iluka Resources Limited, Annual Report 2017
56
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
The following diagram sets out the mix of fixed and "at risk" remuneration for Executive KMP in 2017*:
* Percentages are based on achievement of target performance for the “at risk” remuneration components provided in 2017.
2.3
Equity related remuneration policies
Iluka has a number of Company policies in place, designed to support and reinforce the remuneration principles and
structure outlined in Section 2.1 of this Report. These policies include the following:
57
Iluka Resources Limited, Annual Report 2017 57
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
SECTION 3
2017 EXECUTIVE REMUNERATION
The remuneration of Executive KMP was linked to both annual business and individual performance outcomes and to the
Company’s ability to create and deliver sustainable levels of shareholder value. The terms of the incentive awards for
Executive KMP in 2017 are summarised below.
3.1
Short Term Incentive Plan
The STIP aimed to provide an incentive to participants whilst driving shareholder value creation and promoting equity
ownership by providing awards partly in cash and partly in deferred equity. The structure of Iluka’s STIP was as follows:
STIP opportunity
Performance targets
The STIP award opportunity was based on a percentage range of each
participant’s TFR and was determined by an individual’s role within the business
and capacity to impact the results of the Company.
Managing Director and Executive KMP targets were 60 per cent of TFR, with
stretch set at 90 per cent of TFR.
The PPC approved the annual STIP performance targets having regard to Iluka's
Corporate Plan, business conditions and market and shareholder expectations.
Performance targets included three elements that aligned with Iluka's strategy,
being Profitability, Growth and Sustainability.
Profitability measures included return on capital, free cash flow and net
profit after tax metrics. A fourth measure, all in unit cash costs of production
was included in 2017 given the organisational focus on securing a
sustainable cost structure.
Growth objectives were individual objectives that advanced the Company’s
longer term prospects and were set at a stretch level. Individual Growth
objectives were linked to major business opportunities and risks from the
Corporate Plan and business priorities for the year.
Sustainability targets related to safety and environmental objectives and
were set based on a combination of industry best practice and continual
improvement versus the prior year performance.
Vesting outcomes
For the Profitability and Sustainability STIP performance measures, a threshold,
target and stretch goal was set at the start of the 2017 performance year. STIP
outcomes were calculated according to the following schedule:
Performance Level
STI Outcome (% Target)
Threshold
Target
Stretch
0%
100%
150% (maximum)
A sliding scale operated between threshold and target, and between target and
stretch.
For individual Growth objectives, full vesting only occurred if there was a stretch
level of performance.
Performance assessment
STIP outcomes were determined in early 2018.
Payment timing
Payments will be made in March 2018.
Outcomes were subject to rigorous one up assessment and, for the Managing
Director and Executive KMP, assessment by the Board.
58 Iluka Resources Limited, Annual Report 2017
58
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
STIP deferral
Fifty per cent of the STIP award for Executive KMP will be deferred into restricted
shares in March 2018. Restricted shares will be granted for nil consideration.
Half of the restricted shares will vest one year after the grant date, while the
remaining half will vest two years after the grant date.
The number of restricted shares awarded to each participant will be based on
"face value" and determined by dividing the dollar value of the deferred
component by the Volume Weighted Average Price (VWAP) of Iluka shares
traded on the ASX over the five trading days following release of the Company’s
full year results.
Voting rights and dividends
Participants receive dividends and are entitled to exercise voting rights attaching
to the restricted shares.
Cessation of employment
Change of control
Board discretion
If a participant resigns or is dismissed for cause all of their restricted shares will
be forfeited, unless the Board determines otherwise. If a participant ceases
employment due to circumstances such as redundancy or retirement the
restricted shares will be released on the original vesting date subject to the
original conditions, unless the Board determines otherwise. If a participant
ceases employment due to death or total and permanent disablement, all of their
restricted shares will be released, unless the Board determines otherwise.
In the event of a takeover or other transaction that in the Board’s opinion should
be treated as a change of control event, the Board has a discretion to determine
that vesting of some or all of the restricted shares be accelerated.
Where the Board exercises its discretion under the STIP, for example in relation
to cessation of employment or a change of control, the Board will consider all
relevant factors at the time, which the Board expects will include the participant's
performance against the performance targets and the proportion of the
performance or deferral period that has elapsed.
3.2
2017 STIP Outcomes
Set out below is commentary on the performance outcome for each component of the 2017 STIP:
Rationale for inclusion
Performance outcome and commentary
Strategic
Driver
STIP
Measures
Profitability
(50% weighting)
Return on
Capital (ROC)
Reflects how efficiently Iluka
utilises capital to generate
earnings and is the ‘internal
surrogate’ for ROE.
Free Cash
Flow (FCF)
Net Profit After
Tax (NPAT)
Reflects the cash generation
of Iluka, with higher FCF
allowing more dividends to be
paid and/or greater investment
in sustaining and growing the
business while maintaining a
conservatively geared balance
sheet.
Reflects the profit made by
Iluka and the resulting impact
on returns generated for
shareholders.
Below threshold performance
The result for the year of negative 11.6 per cent
was disappointing (2016: negative 18.3 per cent).
Underlying earnings and
returns on capital
exceeded budgeted levels however impairments
returns well below
and provisions
targeted levels.
reduced
Above stretch performance
Iluka’s free cash flow was $322 million. This
reflected the strong underlying earnings result
driven by increased sales volumes and prices
achieved across the product suite.
Below threshold performance
Iluka recorded a loss after tax for the year of
$171.6 million, compared with a loss of $224.0
million for the previous corresponding period. As
noted above reported earnings were impacted by
impairments following the consolidation of the
Australian mineral separation activities into a
single plant in Western Australia ($106 million
post-tax impairment charge), the write down of the
59
Iluka Resources Limited, Annual Report 2017 59
Directors’ report
For the year ended 31 December 2017
All in Unit
Cash Costs of
Production
Reflects the management of
total cash costs within the
business.
Growth
(40% weighting)
Individual
objectives
Objectives reflect individual
roles and are linked to major
business opportunities and the
management of key risks as
identified in Iluka’s five-year
Corporate Plan, as well as the
priorities for the relevant year.
Iluka Resources Limited
investment in Metalysis Limited ($31 million pre and
post-tax) and an increase to the US rehabilitation
provisions.
At target performance
The all-in unit cash costs of production of $695 per
tonne reflected management’s focus on costs and
in particular the reduction in non-production costs
by $53 million from the prior year following the
sustainable business review undertaken in the
fourth quarter of 2016.
At target performance
Targeted progress was achieved in relation to the
following areas:
•
•
•
•
•
the integration of Sierra Rutile
the Sierra Rutile expansion projects
the Cataby project
the Cataby offtake contracts
the development of the Company’s longer term
investment opportunities and projects
the optimisation of the Company’s Australian
mineral separation plant assets
•
Areas in which less than targeted progress was
achieved included:
•
implementation and delivery of better buying
and better spending initiatives in procurement
are not as advanced as planned
the development of certain Company longer
term investment opportunities and projects
have not progressed as
far as or as
successfully as had been planned.
•
Sustainability
(10% weighting)
Total
Recordable
Injury
Frequency
Rate (TRIFR)
Providing a safe workplace for
all employees is an integral
part of Iluka’s corporate
objective and values.
Level 3 &
above
environmental
incidents
Iluka has a strong commitment
to ensuring that its activities do
not have an adverse impact on
the environment.
Sierra Rutile
hazard
reporting
environmental
incident
reporting
For Executive KMP with
responsibilities relating to
Sierra Rutile, the focus was
on hazard reporting and
environmental incident
reporting to underpin risk
assessment and to drive
improvement opportunities.
Above threshold performance
In 2017 TRIFR of 4.8 (rolling 12-month average to
31 December 2017, excluding SRL) was achieved,
with one less injury than 2016 offset by a slight
reduction in hours worked.
Above stretch performance
Above stretch performance level maintained with
an improvement on 2016 levels (7 incidents in 2017
compared with 11 incidents in 2016, excluding
SRL).
Above stretch performance
Above stretch performance level achieved with an
increase from an average of 23 hazards and 23
environmental incidents per month in the first
quarter to 342 hazards and 64 environmental
incidents per month in the last quarter.
60 Iluka Resources Limited, Annual Report 2017
60
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
The following chart provides a comparison between the maximum STIP opportunity for Executive KMP and the actual
amounts which were awarded in 2017 and 2016.
3.3
2017 Long Term Incentive Plan
Iluka’s LTIP was designed to focus executives’ attention on sustainable long-term growth and align the interests of
executives with those of shareholders.
Key details of the LTIP are set out in the table below:
LTIP opportunity
The award opportunity was determined by an individual’s role within the business and
capacity to impact the results of the Company.
Instrument
In 2017, the maximum LTIP opportunity for the Managing Director and CEO was 120 per cent
of TFR, and for other Executive KMP was 60 per cent of TFR.
As in previous years, the LTIP was awarded in share rights that entitle participants to acquire
fully-paid ordinary shares in the Company on vesting (subject to the performance hurdles
below). Rights were granted for nil consideration and no price will be payable on exercise of
any rights that vest. Share rights do not attract dividends and do not carry voting rights prior to
vesting and, where relevant, exercise.
Performance hurdles Return on equity (ROE) - 50% of LTIP award
Half of the award is tested against a ROE performance target which is measured over a four
year performance period with vesting occurring on a straight line basis for performance
between Threshold and Target.
Targets reflect expectations of the Company’s position within the mineral sands industry, the
industry business cycle, Corporate Plan and budget business performance expectations. ROE
is averaged over the four years, so a failure to achieve targeted levels of performance in any
one year increases the level of ROE required in the remaining years to achieve vesting.
The table below discloses the threshold and target ROE performance targets.
LTIP grant
2017 – 2020
2016 – 2019
2016 – 2018
2015 – 2017
Threshold
10%
10%
10%
10%
Target
14%
14%
14%
14%
61
Iluka Resources Limited, Annual Report 2017 61
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
Relative total shareholder return (TSR) - 50% of LTIP award
The remaining half of the award is assessed based on a relative TSR performance target,
which is also measured over four years. The TSR component vests based on Iluka's TSR
relative to a comparator group of companies. The S&P/ASX 200 Materials Index is used as
the comparator group, since it reflects the companies that operate within the same industry as
Iluka and with which Iluka competes for investment and talent.
A relative TSR hurdle is used as opposed to an absolute TSR hurdle, in recognition of the fact
that Iluka and many of its peers operate in cyclical markets. This creates incentives for
Executive KMP to continue to grow the business and look to the future at all points in the
cycle.
Vesting outcomes
Vesting occurs on a straight-line basis for performance between Threshold and Target (ROE
measure) and the 50th percentile and 75th percentile (TSR measure) based on the below
vesting schedule:
Measure
ROE
TSR
Performance level to be
achieved
Below threshold
Threshold
Target or above
Below 50th percentile
50th percentile
75th percentile or above
Total Grant (maximum award)
Percentage of
total grant that
will vest
0%
25%
50%
0%
25%
50%
Maximum
percentage of
total grant
50%
50%
100%
If the performance targets have not been met at the end of the four-year performance period,
the share rights will automatically lapse.
Performance against the ROE and relative TSR performance targets is assessed following the
end of the performance period and release of Iluka's full year audited results. There is no re-
testing of performance targets.
If a member of the Executive KMP resigns or is dismissed for cause all of their unvested share
rights will lapse, unless the Board determines otherwise. If a member of the Executive KMP
ceases employment due to any other circumstances (including death, total and permanent
disability, redundancy or retirement), the Board has discretion how to treat any unvested
share rights and may determine that some or all of the share rights lapse, vest or stay on foot.
Performance
assessment
Cessation of
employment
Change of control
In the event of a takeover or other transaction that in the Board’s opinion should be treated as
a change of control event, the Board has a discretion to determine that vesting of some or all
of the share rights be accelerated.
Board discretion
Where the Board exercises its discretion under the LTIP, for example in relation to cessation
of employment or a change of control, the Board will consider all relevant factors at the time,
which the Board expects will include Iluka’s performance against the performance targets
and the proportion of the performance period that has elapsed.
62 Iluka Resources Limited, Annual Report 2017
62
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
3.4
Five Year Performance
Shareholder returns
The table below illustrates shareholder returns over the one, three and five year periods to 31 December 2017.
Initial Investment of 1 share ($)
Closing Share Price ($)
Share Price Change (per cent)
Aggregate Dividends ($)
Dividend (ROI) (per cent)
Total Shareholder Return (per cent)
Company performance
5 years to
31 Dec 2017
3 years to
31 Dec 2017
1 year to
31 Dec 2017
9.02
10.17
13
0.72
8
21
5.95
10.17
71
0.47
8
79
7.27
10.17
40
0.06
1
41
The table below provides key performance metrics for 2017 and the prior four financial years.
Net profit/(loss) after tax ($ million)
EBITDA margin (per cent)
Free cash flow ($ million)
Earnings per share (cents)
Return on equity (per cent)
Closing share price ($)1
Dividends paid (cents)
Franking credit level (per cent)
Average AUD:USD spot exchange rate (cents)
2013
18.5
34.7
(27.5)
4.4
1.2
8.63
15
100
96.8
2014
(62.5)
32.5
196.3
(15.0)
(4.1)
5.95
10
100
90.3
2015
53.5
31.2
155.0
12.8
3.8
6.13
19
100
75.2
Revenue per tonne Z/R/SR sold ($/t)
1,173
1,030
1,136
1 Starting share price on 1 January 2013 was $9.02.
2016
2017
(224.0)
(171.6)
13.9
47.3
(53.3)
(17.1)
7.27
22
100
74.4
999
35.4
321.9
(41.0)
(20.1)
10.17
6
100
76.7
1,079
Over the five years to 31 December 2017 44 per cent of the Company’s Free Cash Flow (FCF) in total has been paid to
shareholders in dividends. Total incentives awarded under the STIP, LTIP and LTDR plans over the corresponding
period are equivalent to 8.6 per cent of FCF.
3.5
2015 LTIP outcomes
At the end of 2017, the 2015 LTIP award completed its performance period (1 January 2015 to 31 December 2017).
Performance was measured against both the ROE and relative TSR performance targets as follows:
Component
Performance target
Actual performance
Implication for vesting
ROE (50%)
50% vesting for Threshold
of 10% with full vesting at
target of 14%
50% vesting for 50th
percentile and full vesting
for 75th percentile
1 The 2016 and 2017 reported results were impacted by impairments and increases to provisions.
2 The TSR achieved over the three year period was 47.8 per cent which ranked at the 50th percentile threshold for vesting.
Relative TSR (50%)
(S&P/ASX 200 Materials
Index)
50th percentile2
-11.1 per cent1
Nil vesting of the
ROE component
50 per cent vesting of
the TSR component
63
Iluka Resources Limited, Annual Report 2017 63
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
3.6
2016 Long Term Deferred Rights – Managing Director
In October 2016, the Managing Director received an award of LTDR in consideration of joining Iluka and thereby
forfeiting benefits that he may have become entitled to at his previous employer.
The LTDR award comprised three tranches of share rights which vest subject to ROE and relative TSR performance
targets in line with the LTIP performance targets outlined in Section 3.4 above over staggered performance periods. The
diagram below illustrates the performance periods over which the performance targets will be measured and the
tranches will become eligible for vesting. This staggered approach was designed to promote sustained value creation for
shareholders:
Following the end of 2017, Tranche 1 of the LTDR grant was eligible to be tested against the ROE and relative TSR
performance targets over the performance period 1 October 2016 to 31 December 2017.
ROE performance of negative 19.5 per cent against a threshold of 10 per cent resulted in no vesting of the ROE
component (half of Tranche 1) and TSR of 43.3 per cent that ranked at the 82nd percentile of the S&P/ASX 200 Materials
Index comparator group on a relative basis resulted in full vesting of the TSR component (the remaining half of Tranche
1).
3.7
2017 Long Term Deferred Rights – Chief Operating Officer
The Board retains the flexibility to make one-off equity grants in recognition of executive position changes and the impact
these new and other specific roles will have on delivering Iluka’s future strategic plan. In recognition of the importance of
integration and delivery of the investment case for the Sierra Rutile operations, an equity grant was awarded as LTDR to
the Chief Operating Officer in 2017. Key details of the grant are set out in the table below:
LTDR opportunity
In 2017, the maximum LTDR opportunity for the Chief Operating Officer was 15 per cent of
TFR.
Instrument
The LTDR was awarded in share rights that entitle the participant to acquire fully-paid ordinary
shares in the Company on vesting and, where relevant, exercise of those rights. Rights are
granted for nil consideration and no price is payable on exercise of those rights. Share rights
do not attract dividends and do not carry voting rights prior to vesting and, where relevant,
exercise.
Performance Hurdles Share rights may vest at the end of the performance period subject to the satisfaction of
performance hurdles. Performance metrics, relating to the achievement of the investment
case for the Sierra Rutile acquisition and covering financial, sustainability, production and
reputational performance outcomes, will be assessed and the outcome disclosed at the
conclusion of the three year performance period ending 31 December 2019.
Conditions relating to cessation of employment, change of control and board discretion for the 2017 LTDR award are
consistent with the terms of the LTIP.
64 Iluka Resources Limited, Annual Report 2017
64
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
3.8
Executive employment agreements
Executive KMP are employed on terms set out in individual employment agreements. The employment agreements
continue on a rolling basis and do not contain a fixed term. Key terms of the agreements are as follows:
Executive
KMP
Position
Termination Notice
Period by Iluka or
Employee
Termination Payments1
T O'Leary
Managing Director and Chief Executive
Officer
6 months
6 months
M Blackwell
Head of Marketing, Mineral Sands
3 months
6 months
S Hay
Head of Resource Development
3 months
3 months
D Warden
Chief Financial Officer and Head of
Strategy and Planning
3 months
3 months
S Wickham
Chief Operating Officer, Mineral Sands
3 months
6 months
1 Termination payments (other than for gross misconduct) are calculated based on TFR at date of termination and are provided in
addition to the notice period or payment in lieu of notice.
Iluka may terminate Executive KMP’s employment agreements without notice and without providing payment in lieu of
notice where there is gross misconduct or other grounds for summary dismissal.
SECTION 4 NON-EXECUTIVE DIRECTOR REMUNERATION
The remuneration of the Non-executive Directors is determined by the Board on recommendation from the People and
Performance Committee within the maximum aggregate amount approved by shareholders at Iluka's Annual General
Meeting. The current cap on Non-executive Directors’ fees (including superannuation) as approved by shareholders in
May 2015 is $1.8 million. The total amount paid to Non-executive Directors in 2017 (including superannuation) was $1.0
million. Non-executive Directors do not receive any performance-based remuneration.
Details of Non-executive Director fees in 2017 are as follows:
Non-executive Director base fees
Board Chairman (inclusive of Committee fees)
Board Member
Board Member Committee fees
Audit and Risk Committee Chair
Audit and Risk Committee Member
People and Performance Committee Chair
People and Performance Committee Member
Nominations Committee Chair
Nominations Committee Member
$312,000
$125,000
$35,000
$17,500
$25,000
$12,500
Nil
Nil
The minimum required employer superannuation contribution up to the statutory maximum is paid into each Non-
executive Director’s nominated eligible fund and is in addition to the above fees.
65
Iluka Resources Limited, Annual Report 2017 65
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
SECTION 5
CHANGES TO REMUNERATION FOR 2018
5.1
Review of incentive structure for executives
During 2017 the Board undertook an extensive review of the effectiveness of the reward framework for the Company’s
strategy and business objectives. In particular the Board wanted to ensure that the incentive structure is fit for purpose
with respect to Iluka’s long term strategy and supports the achievement of the Company’s key objective to create and
deliver value for shareholders.
A key element of the review was engagement with internal and external stakeholders to ensure all perspectives were
considered. The Board continues to believe that executive remuneration is a key driver to incentivise executives to
deliver on the Company’s strategic objectives and, following the review, the Board determined that changes were
required. The Company has now adopted a new Executive Incentive Plan (EIP) for implementation in 2018. The primary
objectives of the new EIP are to:
Align the performance of executives with the interests of shareholders; and
To provide appropriate incentives to attract and retain talented and experienced executives.
The Board considers the vesting of equity in the hands of the executives is a powerful means of aligning executive and
shareholder interests over the long term. The implementation of an incentive structure that, subject to annual and
sustained performance, will result in a significant part of the executives’ overall reward delivered in shares will mean that
they are immediately aligned with, and exposed to the same financial consequences as, ordinary shareholders. Further,
the structure and arrangements the Board has developed are expected to ensure that executives build, and continue to
hold, a personally significant shareholding in Iluka.
5.2
EIP design features
The new EIP will combine the existing STIP and LTIP into a single incentive plan. The quantum of each Executive KMP’s
EIP award will be determined by their performance against a scorecard over a 12 month period (the Annual Performance
Period). The metrics for the annual performance scorecard will be set by the Board each year.
Following the end of each Annual Performance Period, any resulting EIP award will be delivered to Executive KMP as
follows:
Two thirds as a combination of:
o
o
a cash payment, made at the end of the Annual Performance Period; and
a grant of restricted shares, to be released in equal tranches over the three years following the end of the
Annual Performance Period; and
One third as a grant of performance rights, which will vest subject to meeting a further gateway test (based on the
Company’s relative TSR performance over a four year period commencing at the beginning of the Annual
Performance Period (the TSR Performance Period)).
This incentive structure has been designed to provide executives with share ownership and exposure to the Company’s
total shareholder returns over time. On this basis, EIP awards will have a lower cash component than under former plans
and it will reduce to zero for the Managing Director after two years.
In addition to the plan changes, the minimum shareholding requirements for executives have also been increased to two
times fixed remuneration for the Managing Director and once times fixed remuneration for other Executive KMP.
The following diagram provides an overview of the EIP elements and timings.
66 Iluka Resources Limited, Annual Report 2017
66
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
The Board is confident that the new reward framework will deliver greater value to shareholders, maintain a deliberate
and continued focus by executives on delivery of strategic objectives, and provide the potential for more value to
executives - to the extent that the Company’s objectives are met.
5.3
Details of the Executive Incentive Plan for 2018
The Board will invite the Executive KMP to participate in the new EIP in early 2018, with the Annual Performance Period
running from 1 January 2018 to 31 December 2018.
The initial awards of cash, restricted shares and performance rights will be made under the EIP in early 2019 (following
the end of the Annual Performance Period). Shareholder approval for the initial EIP grant to the Managing Director will be
sought at the Company’s 2018 AGM.
Description
The EIP has been designed to support Iluka’s ongoing strategy of delivering shareholder
return by strongly aligning Iluka’s executives with the interests of shareholders and fairly
rewarding executives for delivery of superior results. The EIP replaces both the STIP
and LTIP.
Eligibility
Managing Director, other Executive KMP and senior managers as approved by the
Board.
Reward Opportunity
Managing Director the ‘at target’ opportunity is 133% of the TFR and the maximum
opportunity is 200% of TFR.
Other Executive KMP the ‘at target’ opportunity is 100% of TFR and the maximum
Annual performance
scorecard measures and
weightings
opportunity is 150% of TFR.
Financial Measures 35%:
o Managing Director and Chief Financial Officer: Earnings per share; Return
on Equity and all in unit cash costs of production.
o Other Executive KMP: Net Profit After Tax; Return on Capital and all in unit
cash costs of production.
Strategic Measures 35%: A combination of Group and individual strategic
objectives derived from the corporate long-term plan..
Sustainability Measures 15%: Targets related to safety and environmental
objectives based on a combination of industry best practice and continual
improvement.
Production Measures 15%: Production targets across the group’s operating
mines.
Award type
Cash (to be phased out over two years for the Managing Director), restricted shares and
performance rights.
Performance periods
Mix of cash and equity
The quantum of the EIP award will be determined based on the annual performance
scorecard outcome at the end of the 12 month Annual Performance Period.
The cash component of the award will be paid at the end of the Annual
Performance Period.
Restricted shares will be granted at the end of the Annual Performance Period and
released in equal tranches annually over three years.
Performance rights will be granted at the end of the Annual Performance Period
and will vest subject to meeting a further gateway test based on the Company’s
relative TSR over the four year TSR Performance Period.
Managing Director: Cash (15% of award), restricted shares (52% of award) and
performance rights (33% of award). The cash component will reduce to zero after
two years and the restricted shares will increase to 67% of the award.
Other Executive KMP: Cash (17% of award), restricted shares (50% of award) and
performance rights (33% of award).
67
Iluka Resources Limited, Annual Report 2017 67
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
Equity allocation
methodology
The number of restricted shares and performance rights to be granted to executives will
be based on the dollar value determined by the annual performance scorecard outcome,
divided by the five day VWAP of Iluka shares commencing on the day after the release
of the Company’s annual results (following the end of the Annual Performance Period).
Release of restricted
shares
The restricted shares granted to executives following the end of the Annual Performance
Period will be subject to trading and disposal restrictions. They will be released from
these restrictions in equal tranches annually over a three year period.
‘Gateway test’ for vesting
of performance rights
The performance rights granted to executives will only vest into Iluka ordinary shares if
Iluka’s relative TSR ranks at the 50th percentile or greater against a comparator group
comprising the ASX 200 Resources Index (excluding companies primarily engaged in
the Oil and Gas sector and non-mining) over the four year TSR Performance Period. If
the relative TSR gateway test is not satisfied, all of the performance rights will lapse.
Dividends
Cessation of employment
Clawback
Restricted shares: Participants will receive dividends on restricted shares.
Performance rights: No dividends will be paid on performance rights prior to
vesting. For performance rights that vest, a cash payment equivalent to dividends
paid by Iluka during the period between grant of the performance rights and vesting,
will be made at or around the time of vesting.
In the event of an executive ceasing employment for reasons of resignation or
termination for cause, all of their restricted shares and performance rights will be
forfeited or lapse (as applicable). In the event of retirement and redundancy of an
executive, the restricted shares and performance rights will remain on foot and subject
to the original terms of the award.
The Board has power under the relevant rules to clawback incentives that have vested
and that have been paid or awarded to participants in certain circumstances. For
example, restricted shares and performance rights may be lapsed or forfeited (as
appropriate) if a participant acts fraudulently or dishonestly or if there is a material
misstatement or omission in the accounts of a Group company.
Minimum shareholding
requirements
Managing Director: 200% of TFR.
Other Executive KMP: 100% of TFR.
68 Iluka Resources Limited, Annual Report 2017
68
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
5.4
Comparison of 2017 incentive structure and Executive Incentive Plan for 2018
Current Arrangements
Executive Incentive Plan
Performance
period
Performance
measures
STIP
12 months
Profitability
Sustainability
Growth
LTIP
4 years
RTSR
ROE
12 months entire award
4 years Gateway RTSR test
Financials
Strategy
Sustainability
Production
Long-term Gateway RTSR
Incentive
components
Equity deferral
period
50% Cash
50% Equity
(restricted shares)
1-2 years from end
of performance
period
100% Equity
(share rights)
One-third Performance Rights
Two-thirds Restricted Shares and Cash1
4 years from start of
performance period
Equity component transferred in equal
instalments over 3 years from the end of the
performance period; dividends to be paid from
original issue date.
Gateway RTSR test 4 years from the start of the
annual performance period.
120% of TFR
60% of TFR
Managing Director
target opportunity
KMP target
opportunity
Shareholding
requirements
Target 60% of TFR
Maximum 90% of
TFR
Target 60% of TFR
Maximum 90% of
TFR
Managing Director
100% of TFR
Other KMP 75% of
TFR
Single incentive
Target 133% of TFR
Maximum 200% of TFR
Single incentive
Target 100% of TFR
Maximum 150% of TFR
Managing Director 200% of TFR
Other KMP 100% of TFR
1 The cash component for the Managing Director will reduce to zero after two years
69
Iluka Resources Limited, Annual Report 2017 69
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
SECTION 6
STATUTORY REMUNERATION DISCLOSURES
Details of the remuneration of the KMP, prepared in accordance with the requirements of the Corporations Act 2001
(Cth) and the relevant Australian Accounting Standards, are set out in the following tables.
6.1
Non-executive Director Statutory Remuneration Disclosures
Name
Year
Board, Committee
Fees
Non-Monetary
Benefits
Superannuation
Statutory Total
G Martin
M Bastos
X Liu
J Ranck
J Seabrook
Total
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
$
312,000
312,000
142,500
142,500
142,500
143,541
167,500
161,029
172,500
172,500
937,000
931,570
$
-
-
-
-
-
8,053
-
8,463
-
-
-
16,516
$
19,832
19,462
13,538
13,538
13,538
13,636
15,912
15,298
16,388
16,388
79,208
78,322
$
331,832
331,462
156,038
156,038
156,038
165,230
183,412
184,790
188,888
188,888
1,016,208
1,026,408
70 Iluka Resources Limited, Annual Report 2017
70
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
6.2
Executive KMP Statutory Remuneration Disclosures
Name
Year
TFR1
$
STIP
Cash2
$
Non-
Monetary
Benefits3
$
Termination
Benefits4
$
Other5
$
Share
Based
Payments2,6
$
Statutory
Total
$
Managing Director
T O'Leary7
2017
1,400,000
382,620
D Robb8
2016
2017
456,061
-
-
-
21,350
4,335
-
-
-
-
2016
1,354,231
1,800,000
46,746
2,081,693
Other Executive KMP
M
Blackwell9
2017
2016
802,095
175,475
14,600
717,356
112,984
-
S Hay10
D Warden
2017
2016
2017
2016
608,523
437,500
660,000
660,000
149,940
90,016
170,874
109,890
S Wickham 2017
734,463
187,795
2016
732,720
125,343
Total
2017
4,205,081
1,066,704
2016
4,357,868
2,238,233
13,402
11,085
13,402
11,356
7,012
4,980
69,766
78,502
-
-
-
-
-
-
-
-
-
-
-
-
-
1,740,198
3,544,168
338,178
798,574
-
-
864,961
6,147,631
160,981
286,069
1,439,220
60,779
53,108
-
-
-
76,237
-
323,065
1,214,184
236,010
155,024
202,743
373,462
330,569
341,733
1,007,875
693,625
1,047,019
1,154,708
1,336,076
1,204,776
237,218
2,795,589
8,374,358
2,081,693
60,779
2,396,423
11,213,498
1 Includes base salary and superannuation.
2 STIP cash payments and restricted share awards for 2017 will be made in March 2018.
3 Includes non-monetary benefits which consist of car parking and spouse travel.
4 Includes cessation entitlements relating to payment in lieu of notice, accrued leave entitlements and the settlement of the 2016 LTIP
award for D Robb. Termination payments were paid in accordance with approval obtained from shareholders at the 2011 AGM.
5 Includes US social security expenses and relocation allowances for M Blackwell and Sierra Leone travel allowance for S Wickham.
6 Amounts relate to the fair value of awards from prior years made under various incentive plans attributable to the year measured in
accordance with AASB 2 Share Based Payments.
7 T O’Leary became a KMP on 5 September 2016. Remuneration disclosures for 2016 reflect the period he was a KMP.
8 D Robb ceased to be a KMP on 2 September 2016. Remuneration disclosures for 2016 reflect the period he was a KMP.
9 M Blackwell relocated from the US to Australia effective 15 March 2017. TFR for 2017 includes $96,761 of US accrued leave paid out.
The USD denominated portion of his 2017 earnings have been converted from USD to AUD for 2017 using the average foreign
exchange rate for the duration of his 2017 US employment of 0.7510 and for 2016 using the 2016 YTD average foreign exchange rate
of 0.7444.
10 S Hay became a KMP on 1 March 2016. Remuneration disclosures for 2016 reflect the period he was a KMP.
6.3
Share–based Compensation
STIP restricted shares
Name
T O’Leary
M Blackwell
S Hay
D Warden
S Wickham
2015 STIP1
(restricted
shares)
2016 STIP1
(restricted
shares)
2017 STIP1,2
(restricted
shares)
% of total STIP opportunity awarded %3
(cash and restricted shares)
2015
2016
2017
-
18,664
6,697
15,678
21,392
-
16,177
13,208
16,124
18,391
37,623
17,255
14,744
16,802
18,466
-
37
37
35
43
-
35
39
37
38
61
60
56
58
57
1 STIP restricted share fair value is determined as the volume weighted average price of ordinary shares over the five trading days
following the release of the Company’s annual results. STIP restricted shares are awarded in March of the following year (e.g. 2017
STIP awards will be made in March 2018).
2 Represents the estimated number of restricted shares to be awarded under the 2017 STIP calculated using the closing share price of
$10.17 at 1 January 2018.
3 The percentage achieved of the STIP maximum incentive opportunity awarded for the financial year.
71
Iluka Resources Limited, Annual Report 2017 71
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
Share Rights
Number of share rights
Name
Balance at
1 January
2017
Granted
during
20171
Vested /
exercised
into shares
in 2017
Lapsed
during
20172
Balance at
31 December
2017
Value of share rights
Value of rights
granted in
2017
$
Value of rights
vested /
exercised into
shares in 2017
$
Managing Director
T O’Leary
758,304
246,493
Other Executive KMP
M Blackwell
204,798
S Hay
124,374
D Warden
233,248
S Wickham
211,765
57,662
52,820
58,102
80,662
-
-
-
-
-
-
1,004,797
1,614,529
(19,000)
243,460
(8,472)
168,722
(19,188)
272,162
(21,697)
270,730
377,686
345,971
380,568
532,615
-
-
-
-
-
1 Share rights granted in respect of the 2017 LTIP awards for the Managing Director and other Executive KMP and the 2017 LTDR
award for the Chief Operating Officer, which form part of share based payments for 2017 to 2020 inclusive.
2 Share rights which lapsed during 2017 relate to the 2014 LTIP award.
Fair Value
The fair value of each restricted share or share right and the vesting year for each incentive plan is set out below.
The maximum value of restricted shares and/or share rights yet to vest is not able to be determined as it is dependent on
satisfaction of service and performance conditions and Iluka’s future share price. The minimum value of unvested
restricted shares and/or share rights is nil.
Incentive Plan
Grant Date
2015 LTIP
2015 STIP1
2016 LTIP Tranche 1
2016 LTIP Tranche 2
2016 STIP1
2016 LTDR
March 2015
March 2016
May 2016
May 2016
March 2017
October 2016
2016 LTIP (MD grant)
October 2016
2017 LTIP
2017 STIP1,3
2017 LTDR4
March 2017
March 2018
March 2017
Fair Value per
Share or Right at
Grant Date2
$
Vesting Year
Expiry year5
5.88
6.63
5.14
5.07
6.82
4.68
4.57
6.55
10.17
6.82
2018
2017 & 2018
2019
2020
2018 & 2019
2017, 2018 & 2019
2021
2021
2019 & 2020
2021
–
–
2026
2026
–
2026
2026
2027
-
2027
1 Awards under these plans are restricted shares; all other plans grant share rights.
2 The fair value is calculated in accordance with the measurement criteria of Accounting Standard AASB 2 Share Based Payments.
3 Represents the estimated fair value of the 2017 STIP award for which the performance period concluded on 31 December 2017
calculated using the closing share price of $10.17 at 1 January 2018. The actual value will be calculated as the VWAP of ordinary
shares over the five trading days following the release of the Company’s 2017 annual results.
4 Represents the face value of the 2017 LTDR award for the Chief Operating Officer being the VWAP of Iluka shares traded over the five
trading days following the release of the Company’s 2016 annual results.
5 Rights granted from 2016 onwards are not automatically exercised and must be exercised by the executive KMP before the expiry
date. Rights that are not exercised by the expiry date are automatically exercised by this date. No amounts are payable on exercise of
the rights.
72 Iluka Resources Limited, Annual Report 2017
72
Directors’ report
For the year ended 31 December 2017
Iluka Resources Limited
6.4
KMP shareholdings
Shareholdings of Executive KMP and their related parties
Name
Balance held at
1 January 2017
Managing Director
T O’Leary
-
Other Executive KMP
M Blackwell
S Hay
D Warden
S Wickham
70,020
50,606
49,833
113,780
Number of shares
Vesting of share
rights pursuant
to LTDR and
LTIP
Awarded as
Restricted
Shares pursuant
to STIP
Other changes
Balance held at
31 December
2017
-
-
-
-
-
-
-
-
16,177
13,208
16,124
18,391
(33,160)
(2,947)
(10,511)
(60,204)
53,037
60,867
55,446
71,967
Shareholdings of Non-executive Directors and their related parties
Name
G Martin2
M Bastos2
X Liu2
J Ranck
J Seabrook2
Balance held at
1 January 2017
20,000
11,000
-
10,000
19,314
Number of shares1
Net movement
-
-
10,000
-
-
Balance held at
31 December 2017
20,000
11,000
10,000
10,000
19,314
1 Non-executive Directors do not receive share based compensation and movements in their shareholdings reflect on-market trades.
2 Includes shares held indirectly through a nominee or agent (e.g. family trust).
6.5
Transactions with Key Management Personnel
During the financial year there were no product or services purchases by KMP from the Group (2016: nil) and there are
no amounts payable at 31 December 2017 (2016: nil).
There have been no loans to KMP during the financial year (2016: nil).
73
Iluka Resources Limited, Annual Report 2017 73
Auditor’s Independence Declaration
For the year ended 31 December 2017
Auditor’s Independence Declaration
As lead auditor for the audit of Iluka Resources Limited for the year ended 31 December 2017, I
declare that to the best of my knowledge and belief, there have been:
(a)
Auditor’s Independence Declaration
Auditor’s Independence Declaration
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
As lead auditor for the audit of Iluka Resources Limited for the year ended 31 December 2017, I
(b)
declare that to the best of my knowledge and belief, there have been:
As lead auditor for the audit of Iluka Resources Limited for the year ended 31 December 2017, I
declare that to the best of my knowledge and belief, there have been:
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Iluka Resources Limited and the entities it controlled during the
(a)
period.
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(a)
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
no contraventions of any applicable code of professional conduct in relation to the audit.
(b)
This declaration is in respect of Iluka Resources Limited and the entities it controlled during the
period.
This declaration is in respect of Iluka Resources Limited and the entities it controlled during the
period.
Justin Carroll
Partner
PricewaterhouseCoopers
Justin Carroll
Justin Carroll
Partner
Partner
PricewaterhouseCoopers
PricewaterhouseCoopers
Perth
27 February 2018
Perth
27 February 2018
Perth
27 February 2018
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
74
74 Iluka Resources Limited, Annual Report 2017
Liability limited by a scheme approved under Professional Standards Legislation.
Liability limited by a scheme approved under Professional Standards Legislation.
74
74
Iluka Resources Limited ABN 34 008 675 018
Financial Report - 31 December 2017
Contents
Financial statements
Consolidated statement of profit or loss and other comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members
Page
76
77
78
79
80
123
124
About this report
These financial statements are the consolidated financial statements of the Group consisting of Iluka Resources
Limited and its subsidiaries (the Group). The financial statements are presented in Australian dollars.
Iluka Resources Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Iluka Resources Limited
Level 23
140 St George's Terrace
Perth WA 6000
A description of the nature of the Group's operations and its principal activities is included in the operating and
financial review section of the Directors' Report, which is not part of these financial statements.
The financial statements were authorised for issue by the directors on 27 February 2018. The directors have the
power to amend and reissue the financial statements.
Through the use of the internet, we have ensured that our corporate reporting is timely and complete. All ASX
releases, financial reports and other relevant information are available at www.iluka.com
75
Iluka Resources Limited, Annual Report 2017 75
Consolidated statement of profit or loss
Iluka Resources Limited
and other comprehensive income
Consolidated statement of profit or loss
and other comprehensive income
For the year ended 31 December 2017
For the year ended 31 December 2017
Iluka Resources Limited
Consolidated statement of profit or loss
and other comprehensive income
For the year ended 31 December 2017
Revenue
Other income
Expenses
Share of losses of investments accounted for using the equity method
Revenue
Interest and finance charges
Rehabilitation and mine closure provision discount unwind
Other income
Total finance costs
Expenses
Share of losses of investments accounted for using the equity method
Loss before income tax
Interest and finance charges
Rehabilitation and mine closure provision discount unwind
Income tax (expense) benefit
Total finance costs
Loss for the period attributable to owners
Notes
2017
$m
2016
$m
5
1,077.8
774.4
7
Notes
8(b)(ii)
5
15(d)
7
8(b)(ii)
11
15(d)
2.1
2017
(1,209.3)
$m
(3.3)
1,077.8
(18.8)
(14.1)
2.1
(32.9)
(1,209.3)
(3.3)
(165.6)
(18.8)
(14.1)
(6.0)
(32.9)
(171.6)
5.5
2016
(1,023.7)
$m
(3.3)
774.4
(18.8)
(11.8)
5.5
(30.6)
(1,023.7)
(3.3)
(277.7)
(18.8)
(11.8)
53.7
(30.6)
(224.0)
Loss before income tax
Other comprehensive income
(165.6)
(277.7)
Items that may be reclassified subsequently to profit or loss
Income tax (expense) benefit
Currency translation of foreign operations
Loss for the period attributable to owners
Hedge of net investment in foreign operation, net of tax
Changes in fair value of foreign exchange cash flow hedges, net of tax
Other comprehensive income
Items that will not be reclassified to profit or loss
Actuarial (losses) gains on defined benefit plans, net of tax
Items that may be reclassified subsequently to profit or loss
Share of losses relating to previously held interests in an associate
Currency translation of foreign operations
Hedge of net investment in foreign operation, net of tax
Total other comprehensive (loss) income for the year, net of tax
Changes in fair value of foreign exchange cash flow hedges, net of tax
Items that will not be reclassified to profit or loss
Total comprehensive loss for the year attributable to owners
Actuarial (losses) gains on defined benefit plans, net of tax
Share of losses relating to previously held interests in an associate
Total other comprehensive (loss) income for the year, net of tax
Total comprehensive loss for the year attributable to owners
Loss per share attributable to ordinary equity holders
Basic loss per share
Diluted loss per share
Loss per share attributable to ordinary equity holders
Basic loss per share
Diluted loss per share
11
17
17
17
17
17
17
17
17
19
19
19
19
(6.0)
(38.4)
(171.6)
14.8
(2.2)
(0.5)
-
(38.4)
14.8
(26.3)
(2.2)
(197.9)
(0.5)
-
Cents
(26.3)
53.7
15.2
(224.0)
(5.8)
-
0.3
(4.7)
15.2
(5.8)
5.0
-
(219.0)
0.3
(4.7)
Cents
5.0
(197.9)
(219.0)
(41.0)
(41.0)
Cents
(53.6)
(53.6)
Cents
(41.0)
(41.0)
(53.6)
(53.6)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
76
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
76 Iluka Resources Limited, Annual Report 2017
76
Consolidated balance sheet
Iluka Resources Limited
Consolidated balance sheet
As at 31 December 2017
As at 31 December 2017
Iluka Resources Limited
Consolidated balance sheet
As at 31 December 2017
ASSETS
Current assets
Cash and cash equivalents
Receivables
ASSETS
Inventories
Current assets
Derivative financial instruments
Cash and cash equivalents
Current tax receivables
Receivables
Total current assets
Inventories
Derivative financial instruments
Non-current assets
Current tax receivables
Investments accounted for using the equity method
Total current assets
Derivative financial instruments
Property, plant and equipment
Non-current assets
Deferred tax assets
Investments accounted for using the equity method
Intangible asset - MAC Royalty
Derivative financial instruments
Inventories
Property, plant and equipment
Total non-current assets
Deferred tax assets
Intangible asset - MAC Royalty
Inventories
Total assets
Total non-current assets
LIABILITIES
Current liabilities
Total assets
Payables
Derivative financial instruments
LIABILITIES
Current tax payable
Current liabilities
Provisions
Payables
Total current liabilities
Derivative financial instruments
Current tax payable
Non-current liabilities
Provisions
Interest-bearing liabilities
Total current liabilities
Provisions
Total non-current liabilities
Non-current liabilities
Interest-bearing liabilities
Provisions
Total liabilities
Total non-current liabilities
Net assets
Total liabilities
Notes
Notes
15
13
14
21
15
13
14
21
8(b)(ii)
21
10
12
8(b)(ii)
5(b)
21
14
10
12
5(b)
14
21
9
21
9
15
9
15
9
2017
$m
2017
$m
53.6
171.4
469.6
0.2
53.6
20.0
171.4
714.8
469.6
0.2
20.0
-
714.8
2.4
1,029.8
185.9
-
4.3
2.4
9.8
1,029.8
1,232.2
185.9
4.3
1,947.0
9.8
1,232.2
1,947.0
114.2
3.4
3.8
83.8
114.2
205.2
3.4
3.8
83.8
236.1
205.2
620.2
856.3
236.1
1,061.5
620.2
856.3
885.5
1,061.5
2016*
$m
2016*
$m
101.3
169.9
474.0
-
101.3
12.4
169.9
757.6
474.0
-
12.4
33.7
757.6
-
1,218.2
208.2
33.7
4.7
-
219.9
1,218.2
1,684.7
208.2
4.7
2,442.3
219.9
1,684.7
2,442.3
123.8
-
-
44.3
123.8
168.1
-
-
44.3
607.6
168.1
563.6
1,171.2
607.6
1,339.3
563.6
1,171.2
1,103.0
1,339.3
EQUITY
1,117.2
Contributed equity
1,103.0
Net assets
32.2
Reserves
(46.4)
Accumulated losses
EQUITY
1,103.0
Total equity
1,117.2
Contributed equity
32.2
Reserves
* Comparative balances have been restated to reflect the final purchase price accounting for the Sierra Rutile acquisition. Refer to
(46.4)
Accumulated losses
note 6 for details.
1,103.0
Total equity
1,119.7
885.5
9.4
(243.6)
885.5
1,119.7
9.4
(243.6)
885.5
16
17
17
16
17
17
* Comparative balances have been restated to reflect the final purchase price accounting for the Sierra Rutile acquisition. Refer to
note 6 for details.
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
77
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
77
Iluka Resources Limited, Annual Report 2017 77
Consolidated statement of changes in equity
Iluka Resources Limited
Consolidated statement of changes in equity
For the year ended 31 December 2017
For the year ended 31 December 2017
Iluka Resources Limited
Consolidated statement of changes in equity
For the year ended 31 December 2017
Balance at 1 January 2016
Loss for the year
Other comprehensive income (loss)
Balance at 1 January 2016
Other comprehensive income
Loss for the year
Transactions with owners in their capacity as owners:
Other comprehensive income (loss)
Transfer of shares to employees, net of tax
Share-based payments, net of tax
Other comprehensive income
Dividends paid
Transactions with owners in their capacity as owners:
space
Transfer of shares to employees, net of tax
Balance at 31 December 2016
Share-based payments, net of tax
Dividends paid
Loss for the year
space
Other comprehensive loss
Balance at 31 December 2016
Total comprehensive income
Loss for the year
Transactions with owners in their capacity as owners:
Other comprehensive loss
Transfer of shares to employees, net of tax
Share-based payments, net of tax
Total comprehensive income
Dividends paid
Transactions with owners in their capacity as owners:
space
Transfer of shares to employees, net of tax
Balance at 31 December 2017
Share-based payments, net of tax
Dividends paid
space
Balance at 31 December 2017
Notes
17
Notes
17
17
17
17
17
17
17
17
17
17
17
17
17
17
17
Attributable to owners of
Iluka Resources Limited
Share
capital
$m
Other
reserves
$m
Retained
earnings
$m
Attributable to owners of
Iluka Resources Limited
1,112.7
Share
capital
$m
-
-
1,112.7
-
23.1
Other
reserves
$m
-
8.1
23.1
8.1
272.8
Retained
earnings
$m
(224.0)
(3.1)
272.8
(227.1)
Total
equity
$m
1,408.6
Total
equity
$m
(224.0)
5.0
1,408.6
(219.0)
-
-
4.5
-
-
-
4.5
4.5
1,117.2
-
-
4.5
-
-
1,117.2
-
-
-
2.5
-
-
-
2.5
2.5
1,119.7
-
-
2.5
-
8.1
(4.5)
5.5
8.1
-
1.0
(4.5)
32.2
5.5
-
1.0
-
(25.8)
32.2
(25.8)
-
(25.8)
(2.5)
5.5
(25.8)
-
3.0
(2.5)
9.4
5.5
-
3.0
(224.0)
(3.1)
-
-
(227.1)
(92.1)
(92.1)
(224.0)
5.0
-
5.5
(219.0)
(92.1)
(86.6)
-
-
(46.4) 1,103.0
5.5
-
(92.1)
(92.1)
(86.6)
(92.1)
(171.6)
(171.6)
(26.3)
(0.5)
(46.4) 1,103.0
(197.9)
(172.1)
(171.6)
(0.5)
-
-
(172.1)
(25.1)
(25.1)
-
(243.6)
-
(25.1)
(25.1)
(171.6)
(26.3)
-
5.5
(197.9)
(25.1)
(19.6)
-
885.5
5.5
(25.1)
(19.6)
1,119.7
9.4
(243.6)
885.5
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
78
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
78 Iluka Resources Limited, Annual Report 2017
78
Consolidated statement of cash flows
Iluka Resources Limited
Consolidated statement of cash flows
For the year ended 31 December 2017
For the year ended 31 December 2017
Iluka Resources Limited
Consolidated statement of cash flows
For the year ended 31 December 2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Operating cash flow
.
Cash flows from operating activities
Interest received
Receipts from customers
Interest paid
Payments to suppliers and employees
Income taxes paid
Operating cash flow
Exploration expenditure
.
Mining Area C royalty receipts
Interest received
Net cash inflow from operating activities
Interest paid
Income taxes paid
Exploration expenditure
Cash flows from investing activities
Mining Area C royalty receipts
Payments for property, plant and equipment
Net cash inflow from operating activities
Sale of property, plant and equipment
Purchase of shares in Metalysis Limited
Sierra Rutile Ltd acquisition cost
Cash flows from investing activities
Sri Lanka deposit - instalment payment
Payments for property, plant and equipment
Payments for options contracts
Sale of property, plant and equipment
Net cash outflow from investing activities
Purchase of shares in Metalysis Limited
Sierra Rutile Ltd acquisition cost
Sri Lanka deposit - instalment payment
Cash flows from financing activities
Payments for options contracts
Repayment of borrowings
Net cash outflow from investing activities
Proceeds from borrowings
Dividends paid
Debt refinance costs
Cash flows from financing activities
Net cash (outflow) inflow from financing activities
Repayment of borrowings
Proceeds from borrowings
Dividends paid
Net (decrease) increase in cash and cash equivalents
Debt refinance costs
.
Net cash (outflow) inflow from financing activities
Cash and cash equivalents at 1 January
SRL cash acquired
Effects of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at end of period
.
Cash and cash equivalents at 1 January
SRL cash acquired
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of period
Notes
Notes
27
27
6
23(c)
6
23(c)
18
18
6
15
6
15
2017
$m
2017
994.1
$m
(602.4)
391.7
0.7
994.1
(16.0)
(602.4)
(10.0)
391.7
(12.6)
59.9
0.7
413.7
(16.0)
(10.0)
(12.6)
59.9
(90.5)
413.7
3.6
-
-
(2.6)
(90.5)
(2.3)
3.6
(91.8)
-
-
(2.6)
(2.3)
(403.7)
(91.8)
62.5
(25.1)
(1.4)
(367.7)
(403.7)
62.5
(25.1)
(45.8)
(1.4)
(367.7)
101.3
-
(1.9)
(45.8)
53.6
101.3
-
(1.9)
53.6
2016
$m
2016
715.4
$m
(578.1)
137.3
0.7
715.4
(14.7)
(578.1)
(13.8)
137.3
(24.7)
43.6
0.7
128.4
(14.7)
(13.8)
(24.7)
43.6
(63.5)
128.4
1.4
(19.0)
(375.4)
-
(63.5)
-
1.4
(456.5)
(19.0)
(375.4)
-
-
(210.1)
(456.5)
662.5
(92.1)
(0.5)
359.8
(210.1)
662.5
(92.1)
31.7
(0.5)
359.8
55.0
13.9
0.7
31.7
101.3
55.0
13.9
0.7
101.3
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
79
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
79
Iluka Resources Limited, Annual Report 2017 79
Notes to the financial statements
For the year ended 31 December 2017
Contents of the notes to the financial statements
Iluka Resources Limited
31 December 2017
Page
81
81
81
83
83
84
86
87
88
89
91
93
95
97
99
100
101
101
102
103
104
105
105
105
108
109
109
112
112
113
114
115
117
117
119
119
120
121
Basis of preparation
1. Reporting entity
2. Basis of preparation
3. Critical accounting estimates and judgements
Key numbers
Impairment of assets
4. Segment information
5. Revenue
6. Business combination
7. Expenses
8.
9. Provisions
10. Property, plant and equipment
11.
12. Deferred tax
13. Receivables
14.
Inventories
Income tax
Capital
15. Net debt and finance costs
16. Contributed equity
17. Reserves and retained earnings
18. Dividends
19. Loss per share
Risk
20. Financial risk management
21. Hedging
Group structure
22. Controlled entities
Other notes
23. Contingent liabilities
24. Commitments
25. Remuneration of auditors
26. Share-based payments
27. Reconciliation of loss after income tax to net cash inflow from operating activities
28. Retirement benefit obligations
29. Key Management Personnel
30. Parent entity financial information
31. Related party transactions
32. New accounting standards and interpretations
80
80 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
Notes to the financial statements
The notes include information which is required to understand the financial statements and is material and relevant
to the operations and the financial position and performance of the Iluka Group. Information is considered relevant
and material if:
• The amount is significant due to its size or nature;
• The amount is important in understanding the results of the Group;
• It helps to explain the impact of significant changes in the Group's business; or
• It relates to an aspect of the Group's operations that is important to its future performance.
Basis of preparation
This section of the financial report sets out the Group’s accounting policies that relate to the financial statements as
a whole. This section also sets out information related to critical accounting estimates and judgements applied to
these financial statements.
1 Reporting entity
Iluka Resources Limited (Company or parent entity) is domiciled in Australia. The financial statements are for the
Group consisting of Iluka Resources Limited and its subsidiaries. A list of the Group's subsidiaries is provided in
note 22.
2 Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations
Act 2001. Iluka Resources Limited is a for-profit entity and is primarily involved in mineral sands exploration, project
development, mining operations, processing and marketing.
The consolidated financial statements of Iluka Resources Limited also comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
These financial statements have been prepared under the historical cost convention except for financial assets and
liabilities which are required to be measured at fair value.
Iluka Resources Limited had to change some of its accounting policies as the result of new or revised accounting
standards which became effective for the annual reporting period commencing on 1 January 2017, which are
detailed in note 32.
New and amended standards adopted by the Group are disclosed in note 32.
(a) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Iluka Resources
Limited as at 31 December 2017 and the results of all subsidiaries for the year then ended. Iluka Resources Limited
and its subsidiaries together are referred to in this financial report as the Group. A list of controlled entities
(subsidiaries) at year-end is contained in note 22.
The financial statements of subsidiaries are included in the consolidated financial statements from the date on
which control commences until the date on which control ceases. Accounting policies of subsidiaries are changed
where necessary to ensure consistency with the policies adopted by the Group.
Iluka Resources Limited acquired Sierra Rutile Limited ('SRL') on 7 December 2016. The results of SRL are
included in the consolidated financial statements with the comparative figures representing the 24 days of
ownership from 7 December 2016 to 31 December 2016.
Intercompany transactions and balances, and unrealised gains on transactions between Group companies, are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the
asset transferred.
81
Iluka Resources Limited, Annual Report 2017 81
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
The Group accounts for business combinations using the acquisition method when control
is transferred to the
Group. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the
date of exchange. Transaction costs are expensed as incurred, except if related to the issue of debt or equity
securities.
(ii) Associates
Associates are all entities over which the Group has significant influence but not control or joint control. This is
generally the case where the Group holds between 20% and 50% of the voting rights. Investments in associates are
accounted for using the equity method of accounting from the date on which the investee becomes an associate.
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to
recognise the Group's share of the post-acquisition profits or losses of the investee in profit or loss, and the Group's
share of movements in other comprehensive income of the investee in other comprehensive income. Dividends
received or receivable from associates are recognised as a reduction in the carrying amount of the investment.
The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy
described in note 8.
(iii) Employee Share Trust
The Group's Employee Share Schemes are administered through the Iluka Director’s Executives and Employees
Share Acquisition Trust (the trust). This trust is consolidated, as the substance of the relationship is that the trust is
controlled by the Group. Shares in the Company held by the trust are disclosed as treasury shares in the
consolidated financial statements and deducted from contributed equity, net of tax.
(b) Foreign currency translation
The consolidated financial statements are presented in Australian dollars, which is the Company's functional and
presentation currency.
Where Group companies based in Australia transact in foreign currencies, these transactions are translated into
Australian dollars using the exchange rate on that day. Foreign currency monetary assets and liabilities are
translated to Australian dollars at each reporting date exchange rate. Non-monetary assets and liabilities that are
measured at fair value in a foreign currency are translated to Australian dollars at the exchange rate when the fair
value was determined. Foreign currency differences are generally recognised in profit or loss. Non-monetary items
that are measured based on historical cost in a foreign currency are not re-translated.
The financial position of foreign operations is translated into Australian dollars at the exchange rates at the reporting
date. The income and expenses of foreign operations are translated into Australian dollars at average exchange
rates each month. Foreign currency differences are recognised in other comprehensive income and accumulated in
the foreign currency translation reserve.
The Group had US dollar denominated borrowings that were used to hedge against translation differences arising
from assets held by the Group's SRL operations (see note 21 for more information).
To the extent that these borrowings did not exceed the net assets of these operations, foreign currency differences
arising on the translation of these borrowings were recognised in other comprehensive income and accumulated in
the foreign currency translation reserve. Any remaining differences were recognised in profit or loss. If these
operations were to be disposed of (in full or in part), the relevant amount in the foreign currency translation reserve
would be transferred to profit or loss as part of the gain or loss on disposal.
(c) Rounding of amounts
The Company is of a kind referred to in Rounding Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to the "rounding off" of amounts in the financial statements. Amounts in the
financial statements have been rounded off in accordance with that Rounding Instrument to the nearest hundred
thousand dollars, or in certain cases, the nearest thousand dollars and the nearest dollar.
82
82 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
3 Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future in applying its accounting policies. The
resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are noted below.
Estimates and underlying assumptions are reviewed on an ongoing basis, with revisions recognised in the period in
which the estimates are revised and future periods affected.
Estimates and assumptions which are material to the financial report are found in the following notes:
Impairment of assets
Rehabilitation and mine closure provisions
Net realisable value and classification of product inventory
SRL acquisition purchase price allocation
Deferred tax asset recognition
Tax balances
Key numbers
Significant items in the current reporting period
Impairments
Note 8
Note 9
Note 14
Note 6
Note 12
Note 11
During the year, Iluka recorded impairment charges of $185.3 million primarily in relation to the reconfiguration of its
mineral separation processing activities in Australia. Iluka placed the Hamilton mineral separation plant (MSP) on
care and maintenance effective from October 2017 and consolidated all Australian mineral separation activities into
the Narngulu MSP in Western Australia. This resulted in a full impairment charge of $151.4 million against the
Hamilton MSP.
In addition, Iluka fully impaired its investment in its associate, Metalysis Limited, with an impairment charge of $30.4
million recorded during the year.
Further details are provided in note 8.
Sierra Rutile acquisition
In December 2016, Iluka acquired 100% of Sierra Rutile Limited for £215.3 million (A$375.4 million). Sierra Rutile is
a mineral sands mining and processing operation based in Sierra Leone.
As at 31 December 2016, the acquisition accounting balances recognised were provisional due to ongoing work
finalising assessment of rehabilitation obligations and tax-related matters. The accounting balances have now been
finalised, with an increase of $44.6 million to the rehabilitation provision, an increase of $22.0 million to the deferred
tax asset and an increase of $23.3 million to mine reserves. The final accounting balances are detailed in note 6.
Rehabilitation provisions
Iluka notes that detailed rehabilitation planning for the Virginia operation identified potential additional obligations
relating to past rehabilitation; and various remediation alternatives were being considered. The provision for
rehabilitation and restoration for the closed US operations has increased by $119.5 million ($US90 million) during
the year. The cost of rehabilitating the Virginia operation will
largely depend on the rehabilitation programme
ultimately undertaken by Iluka, which can only be determined following what is expected to be extensive and
ongoing engagement with the regulators. As the nature and extent of any change remains highly uncertain, the
provision increase has been calculated on a probabilistic basis across a range of scenarios.
Hedging
During the year Iluka entered into both forward foreign exchange and foreign exchange collar contracts to assist
with managing the foreign currency exposure to projects with USD sales contracts. Further details on the financial
risk management and hedging contracts are contained in notes 20 and 21.
83
Iluka Resources Limited, Annual Report 2017 83
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
4 Segment information
(a) Description of segments
The Group has identified its operating segments based on the internal reports that are reviewed and used by the
executive management team (the chief operating decision-makers) in assessing performance and in determining
the allocation of resources.
Where finished product capable of sale to a third party is transferred between operating segments, the transfers are
made at arm's length prices. Any transfers of intermediate products between operating segments are made at cost.
Cash, debt and tax balances are managed at a group level together with exploration and other corporate activities
and are not allocated to segments.
The segments are unchanged from those reported at 31 December 2016.
Australia (AUS) comprises the integrated mineral sands mining and processing operations in Victoria, Western
Australia and South Australia. The processing activities in Western Australia also include the Group’s synthetic
in Victoria was idled in October 2017, Jacinth-Ambrosia
rutile kilns. The Hamilton mineral separation plant
operations were idled in April 2016 and recommenced in December 2017.
Sierra Rutile (SRL) comprises the integrated mineral sands mining and processing operations in Sierra Leone.
United States (US) comprises rehabilitation obligations in both Virginia and Florida. Mining and processing
activities were substantially ceased in Virginia in December 2015.
Mining Area C (MAC) comprises a deferred consideration iron ore royalty interest over certain mining tenements in
Australia operated by BHP Billiton Iron Ore.
(b) Segment information
2017
Total segment sales to external customers
Total segment result**
Impairment of assets
Depreciation and amortisation expense
Rehabilitation and holding costs for closed sites
Segment assets
Segment liabilities
Additions to non-current segment assets
2016*
Total segment sales to external customers
Total segment result**
Impairment of assets
Depreciation and amortisation expense
Rehabilitation and holding costs for closed sites
Segment assets
Segment liabilities
Additions to non-current segment assets
AUS
$m
US
$m
SRL
$m
MAC
$m
Total
$m
833.7
43.2
155.0
67.7
7.9
1,073.3
458.5
49.7
40.0
(126.3)
-
-
119.5
73.2
225.9
-
143.8
(2.5)
-
39.4
-
487.9
108.5
58.1
-
59.2
-
0.4
-
18.1
-
-
1,017.5
(26.4)
155.0
107.5
127.4
1,652.5
792.9
107.8
AUS
$m
US
$m
SRL
$m
MAC
$m
Total
$m
690.2
(63.5)
201.0
74.3
1.7
1,478.6
448.2
39.4
18.3
(77.2)
-
-
40.9
103.6
127.6
9.8
17.8
(0.9)
-
2.0
-
485.0
116.5
2.3
-
47.1
-
0.4
-
18.8
-
-
726.3
(94.5)
201.0
76.7
42.6
2,086.0
692.3
51.5
* Comparative balances have been restated to reflect the final purchase price accounting for the Sierra Rutile
acquisition. Refer to note 6 for details.
** Total segment result includes the impairment charge, depreciation and amortisation expenses and rehabilitation
and holding costs for closed sites that are also separately reported above.
84
84 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
Revenue is derived from sales to external customers domiciled in various geographical regions. Details of segment
revenue by location of customers are as follows:
China
Asia excluding China
Europe
Americas
Other countries
Sale of goods
2017
$m
333.6
138.2
267.9
132.5
145.3
1,017.5
2016
$m
252.4
61.5
232.0
65.8
114.6
726.3
Revenue of $147.0 million and $121.5 million was derived from two external customers of the mineral sands
segments, which individually account for greater than 10 per cent of the total segment revenue (2016: revenues of
$175.1 million and $84.1 million from two external customers).
Segment result is reconciled to the loss before income tax as follows:
Segment result
Interest income
Asset sales and other income
Other expenses
Marketing and selling
Corporate and other costs
Depreciation
Resource development
Interest and finance charges
Net foreign exchange gains
Impairments (Metalysis)
SRL transaction costs
Metalysis losses
Loss before income tax
2017
$m
(26.4)
0.7
(0.8)
(0.7)
(11.3)
(47.1)
(3.5)
(24.6)
(18.8)
0.6
(30.4)
-
(3.3)
(165.6)
Total segment assets and total segment liabilities are reconciled to the balance sheet as follows:
Segment assets
Corporate assets
Cash and cash equivalents
Current tax receivable
Deferred tax assets
Total assets as per the balance sheet
Segment liabilities
Corporate liabilities
Current tax payable
Interest-bearing liabilities
Total liabilities as per the balance sheet
1,652.5
35.0
53.6
20.0
185.9
1,947.0
792.9
28.7
3.8
236.1
1,061.5
2016
$m
(94.5)
0.6
0.6
-
(16.7)
(53.8)
(3.2)
(79.4)
(18.8)
4.9
-
(14.1)
(3.3)
(277.7)
2,086.0
34.4
101.3
12.4
208.2
2,442.3
692.3
39.4
-
607.6
1,339.3
85
Iluka Resources Limited, Annual Report 2017 85
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
5 Revenue
Sales revenue
Sale of mineral sands
Other revenue
Mining Area C royalty income
Interest
2017
$m
2016
$m
1,017.5
726.3
59.6
0.7
60.3
47.5
0.6
48.1
1,077.8
774.4
(a) Sale of mineral sands
Revenue is measured at
commissions, duties and other taxes.
the fair value of
the consideration received or receivable, net of rebates, sales
The Group sells mineral sands under a range of commercial terms. Sales are recognised as revenue when the
Group has transferred both the significant risks and rewards of ownership, and the amount of revenue can be
measured reliably. The passing of risk to the customer occurs when the product has been dispatched to the
customer and is no longer under the physical control of
the Group, or when the customer has formally
acknowledged its legal ownership of the product including all inherent risks. Where the sold product continues to be
stored in facilities the Group controls, it is clearly identified and available to the buyer.
(b) Mining Area C royalty income and amortisation of royalty asset
Iluka holds a royalty stream over BHP’s Mining Area C (MAC) iron ore mine. The royalty stream is paid as 1.232%
of Australian denominated revenue from the royalty area and a one-off payment of $1 million per million tonne
increase in annual production capacity.
Royalty income is recognised on an accrual basis and is received on a quarterly basis in arrears.
The royalty entitlement asset is an intangible asset and is amortised on a straight-line basis ($0.4 million per year)
over its estimated useful life of 25 years, of which 11 years is remaining (2016: 12 years remaining). The carrying
value of the asset at 31 December 2017 is $4.3 million (2016: $4.7 million).
(c)
Interest income
Interest income is recognised in profit or loss as it accrues, using the effective interest method.
86
86 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
6 Business combination
Iluka Resources Limited
31 December 2017
On 7 December 2016, Iluka completed the acquisition of Sierra Rutile Limited (‘SRL’) by means of a statutory
merger of SRL with Iluka Investments Limited (BVI), a wholly owned Iluka subsidiary. Iluka Investments (BVI)
Limited acquired 100 per cent of the issued share capital of SRL for 36 British pence cash per share, totalling
£215.3 million (A$375.4 million).
At 31 December 2016, the acquisition accounting balances recognised were provisional due to ongoing work
finalising asset valuations, provision balances and tax related matters. The acquisition accounting for this
transaction has now been finalised.
Comparative financial information has been restated to reflect the finalisation of the acquisition accounting. There
was no impact to the Group's profit or loss as a result of these changes. The following table summarises the
changes made to the provisional acquisition accounting:
Assets
Cash and cash equivalents
Receivables
Inventories
Property, plant and equipment
Deferred tax assets
Total assets
Liabilities
Payables
Current tax payable
Interest-bearing liabilities
Provisions
Total liabilities
Net assets acquired
space
Fair value
recognised on
acquisition
(Final)
A$m
Fair value
recognised on
acquisition
(Provisional)
A$m
13.9
17.1
41.4
373.5
144.0
589.9
(32.8)
(4.0)
(93.5)
(84.2)
214.5
13.9
17.1
41.4
350.2
122.0
544.6
(32.1)
(4.0)
(93.5)
(39.6)
169.2
375.4
375.4
Key estimate: SRL purchase price allocation
Business combinations (acquisitions of subsidiaries) are accounted for using the acquisition method. The
consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred,
liabilities assumed and the equity interests issued by the Group.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with
limited exceptions, measured initially at their fair values at the acquisition date. The financial assets and liabilities
acquired are assessed for appropriate classification and designation in accordance with the contractual terms,
economic conditions, the Group’s accounting policies and other pertinent conditions as at the acquisition date.
Under the acquisition method, the Group had up to 12 months post the acquisition date to finalise the fair value of
identifiable assets and liabilities, this is now finalised. This 12 month period expired on 7 December 2017.
Acquisition-related costs are expensed as incurred.
87
Iluka Resources Limited, Annual Report 2017 87
Notes to the financial statements
For the year ended 31 December 2017
7 Expenses
Expenses
Cash costs of production
Depreciation and amortisation
Inventory movement - cash costs of production
Inventory movement - non-cash production costs
Cost of goods sold
Ilmenite concentrate and by-product costs
Depreciation (idle, corporate and other)
Restructure and idle capacity charges
Rehabilitation costs for closed sites
Impairment of assets
Transaction costs
Government royalties
Marketing and selling costs
Corporate and other costs
Resource development costs
Net loss on disposal of property, plant and equipment
Iluka Resources Limited
31 December 2017
Notes
2017
$m
2016
$m
7(a)
7(b)
7(c)
7(d)
7(e)
8
362.2
90.5
141.5
66.8
661.0
10.2
20.5
73.3
127.4
185.3
-
25.2
33.8
47.1
24.6
0.9
1,209.3
252.3
71.3
107.6
57.3
488.5
8.3
8.6
69.5
42.6
201.0
14.1
20.4
36.3
53.8
79.4
1.2
1,023.7
(a) Cash costs of production
Cash costs of production include costs for mining and concentrating; transport of heavy mineral concentrate;
mineral separation; synthetic rutile production; externally purchased ilmenite and production overheads. This
category also includes landowner royalty payments, but excludes Australian state and Sierra Leone government
royalties which are reported separately.
(1,395.2)
(1,219.6)
(b) Cost of goods sold
Cost of goods sold is the inventory value of each tonne of finished product sold. All production is added to inventory
at cost, which includes direct costs and an appropriate portion of fixed and variable overhead expenditure, including
depreciation and amortisation, allocated on the basis of relative sales value. The inventory value recognised as cost
of goods sold for each tonne of finished product sold is the weighted average value per tonne for the stockpile from
which the product is sold.
Inventory movement represents the movement in balance sheet inventory of work in progress and finished goods,
including the non-cash depreciation and amortisation components and movement in the net realisable value
adjustments.
(c)
Ilmenite concentrate and by-product costs
Ilmenite and by-product costs include by-product costs such as for iron concentrate processing, activated carbon
and wet high intensity magnetic separation (WHIMS) ilmenite transport costs.
88
88 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
(d) Restructure and idle capacity charges
Idle capacity charges reflect ongoing costs incurred during periods of no or restricted production. Iluka suspended
mining and concentrating activities at Jacinth-Ambrosia in April 2016 and restarted operations in late 2017.
Liabilities for employee termination benefits associated with restructuring activities are recognised when the Group
is demonstrably committed to terminating the employment of current employees according to a detailed formal plan
without possibility of withdrawal and there is no further service required. Where further service is required to be
eligible for the benefit, the liability is recognised over the relevant service period.
(e) Rehabilitation costs for closed sites
These costs relate to adjustments to the rehabilitation provision for closed sites arising from the annual review of
rehabilitation programmes and estimates. These adjustments are expensed in accordance with the policy described
in note 9.
As disclosed to the ASX on 12 December 2017 and included in the number above was a $119.5 million (US$90
million) increase in the rehabilitation provision for US operations for additional obligations relating to past
Iluka's closed Virginia operations. The increase is dependent on the ultimate rehabilitation
rehabilitation at
programme undertaken and, given the nature and extent of any programme remains highly uncertain, the provision
increase has been calculated on a probabilistic basis across a range of scenarios.
In addition, there was a $7.9 million increase in the rehabilitation for Australian operations, primarily in relation to the
Hamilton MSP being placed on care and maintenance (2016: rehabilitation estimate increases of $40.9 million for
the US operations and $1.7 million for Australian operations incurred for closed sites).
Rehabilitation and mine closure provisions are detailed further in note 9.
(f) Other required disclosures
Expenses also include the following:
Employee benefits (excluding share-based payments)
Share-based payments
Exploration expenditure (included in Resource development expenses)
Operating leases
Inventory NRV write-downs - finished goods and WIP
8 Impairment of assets
(a)
Impairment policy
2017
$m
2016
$m
148.4
7.4
12.7
12.2
5.2
130.4
8.5
24.3
11.5
5.4
(185.9)
(180.1)
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment charge is recognised for the amount by which the asset's carrying amount
exceeds its recoverable amount. For the purposes of assessing impairment, operating assets are grouped at the
lowest levels for which there are separately identifiable cash flows (Cash Generating Units). The recoverable
amount of each CGU is determined as the higher of value-in-use and fair value less costs of disposal (FVLCD)
estimated on the basis of discounted present value of future cash flows (a level 3 fair value estimation method).
Assets that are not currently in use and not scheduled to be brought back into use (idle assets) are considered on a
standalone basis.
Indicators of impairment may include significant changes in business performance or future operating plans along
with changes in technology.
89
Iluka Resources Limited, Annual Report 2017 89
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
Key estimate: Recoverable amount calculation
The estimates of discounted future cash flows for each CGU are based on significant assumptions including:
• estimates of the quantities of mineral reserves and ore resources for which there is a high degree of confidence of
economic extraction and the timing of access to these reserves and ore resources;
• future production levels and the ability to sell that production;
• future product prices based on the Group’s assessment of short and long-term prices for each of the key products;
• future exchange rates for the Australian dollar compared to the US dollar using external forecasts by recognised
economic forecasters;
• successful development and operation of new mines, consistent with latest forecasts;
• future cash costs of production, sustaining capital expenditure, rehabilitation and mine closure; and
• the asset specific discount rate applicable to the CGU.
Given the nature of the Group’s mining activities, future changes in assumptions upon which these estimates are
based may give rise to material adjustments in future periods. This could lead to a reversal of part, or all, of
impairment charges recorded in the current or prior years, or the recognition of new impairment charges in the
future.
(b) Recognised impairment
Iluka identified the following assets for which an impairment charge has been recognised during 2017:
(i) Hamilton MSP
Iluka refined its operational profile during the year and placed the Hamilton MSP on care and maintenance in
October 2017. Iluka determined that it has sufficient processing capacity at its main mineral separation plant in
Narngulu, Western Australia to accommodate future processing from the Australian mines. Hamilton MSP was
previously considered able to be utilised to process HMC produced at Balranald, however with a staged approach
now considered likely for any future Balranald development, annual production volumes are likely to be lower than
had previously been envisaged. While it is possible that the Hamilton MSP may be utilised in the future to treat
HMC produced from the Murray Basin by Iluka or others, there is insufficient certainty at this time to justify carrying
the book value. This resulted in an impairment charge of $151.4 million. The recoverable amount was determined
as $nil based on its FVLCD at the time of impairment.
The fair value measurement is categorised as fair value based on the inputs in the valuation technique that are not
based on observable market data. In determining the FVLCD a nominal discount rate of 10 per cent was applied to
the cash flows expressed in nominal
terms. The key assumptions used for commodity prices are broadly
comparable to independent industry forecasts, and foreign exchange and inflation rates are aligned with current
economic forecast rates.
(ii) Metalysis
As at 31 December 2017 Iluka held a 27.8% share of Metalysis Limited, which is an unlisted UK-based technology
company focused on the development and commercialisation of solid state production of metal powder to titanium
alloys. Metalysis is accounted for as an investment in an associate resulting in losses of $3.3 million (2016: $3.3
million) recorded as the Group’s share of the losses. In December 2017 the remaining carrying value of the
investment was impaired to $nil, based on management’s assessment of the fair value of the investment which
resulted in an impairment charge of $30.4 million.
(iii) Australian land
Iluka holds land and buildings which relate to past, present and future operations. A review of land assets in
Australia highlighted some parcels of land where the current FVLCD is expected to be less than the carrying values.
An impairment charge of $3.6 million was recognised to bring these land parcels to FVLCD.
90
90 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
(c) Previously recognised impairment
Iluka recorded an impairment charge of $201.0 million for the year ended 31 December 2016. The impairment
charge related to the following standalone assets:
(i) Murray Basin property, plant and equipment
Idle and surplus equipment in the Murray Basin of $155.5 million, including the Douglas and Woornack, Rownack,
Pirro (WRP) mining units and wet concentrators. The recoverable amount was determined as $nil based on its
FVLCD at the time of impairment.
(ii) Balranald conventional mine development costs
In the Murray Basin, Iluka is continuing with trialling and evaluating an unconventional, underground mining
approach for Balranald following the cessation of work associated with the conventional mine development. As a
consequence, $20 million of capitalised costs associated with feasibility work for the conventional method were
impaired. The recoverable amount was determined as $nil based on its FVLCD at the time of impairment.
(iii) Exploration and evaluation assets and mine reserves
$25 million related to exploration and evaluation assets previously capitalised, as well as mine reserves in the Perth
and Murray Basins were impaired. The recoverable amount was determined as $nil based on its FVLCD at the time
of impairment.
9 Provisions
Current
Rehabilitation and mine closure
Employee benefits - long service leave
Workers compensation and other provisions
Non-current
Rehabilitation and mine closure
Employee benefits - long service leave
Retirement benefit obligations
Other provisions
Notes
9(a)
9(b)
9(a)
9(b)
28
2017
$m
69.8
10.4
3.6
83.8
599.4
3.0
14.8
3.0
620.2
2016*
$m
30.1
10.9
3.3
44.3
544.0
3.3
14.7
1.6
563.6
* Comparative balances have been restated to reflect the final purchase price accounting for the Sierra Rutile
acquisition. Refer to note 6 for details.
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that resources will be expended to settle the obligation and a reliable estimate can be made of
the amount of the obligation.
Key estimate: Discount rate for provisions
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and the risks specific to the liability to the extent they are not
included in the cash flows.
Rehabilitation and mine closure provisions have been calculated using discount rates of between 2 and 4 per cent
(2016: 2 and 4 per cent).
91
Iluka Resources Limited, Annual Report 2017 91
Notes to the financial statements
For the year ended 31 December 2017
(a) Rehabilitation and mine closure
The movements in the rehabilitation and mine closure provision are set out below:
Movements in rehabilitation and mine closure provisions
Balance at 1 January 2017
Change in provisions - charge for closed sites
Change in provision - additions to property, plant and equipment
Foreign exchange rate movements
Rehabilitation and mine closure provision discount unwind
Amounts spent during the year
Balance at 31 December 2017
Key estimate: Rehabilitation and mine closure provisions
Iluka Resources Limited
31 December 2017
Notes
$m
7
10
15(d)
574.1
127.4
4.7
(13.5)
14.1
(37.6)
669.2
The Group’s assessment of the present value of the rehabilitation and mine closure provisions requires the use of
significant estimates and judgements, including the future cost of performing the work required, timing of the cash
flows, discount rates, final remediation strategy and future land use requirements. The provision can also be
impacted prospectively by changes to legislation or regulations.
The provisions are reassessed at least annually. A change in any of the assumptions used to determine the
provisions could have a material impact on the carrying value of the provision. In the case of provisions for assets
which remain in use, adjustments to the carrying value of the provision are offset by a change in the carrying value
of the related asset. Where the provisions are for assets no longer in use, such as mines and processing sites that
have been closed, any adjustment is reflected directly in profit or loss.
The Group has obligations to dismantle and remove certain items of property, plant and equipment and to restore
and rehabilitate the land on which they sit.
A provision is raised for the estimated cost of settling the rehabilitation and restoration obligations existing at
balance date, discounted to present value using an appropriate pre-tax discount rate.
Where the obligation is related to an item of property, plant and equipment, its cost includes the present value of the
estimated costs of dismantling and removing the asset and restoring the site on which it is located. Costs that relate
to obligations arising from waste created by the production process are recognised as production costs in the period
in which they arise.
The increase in the provision associated with unwinding of the discount rate is recognised as a finance cost.
The total rehabilitation and mine closure provision of $669.2 million (2016: $528.1 million) includes $493.8 million
(2016: $374.5 million) for assets no longer in use. Changes to the provisions for assets no longer in use are
charged/credited directly to profit or loss. A review of cost estimates resulted in a charge of $127.4 million (2016:
charge of $42.6 million) which is reported within the expense item Rehabilitation costs for closed sites in note 7.
(b) Employee benefits
The employee benefits provision relates to long service leave entitlements measured as the present value of
expected future payments to be made in respect of services provided by employees up to the reporting date,
discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that
match, as closely as possible, the estimated future cash outflows. Liabilities for annual
leave are included in
payables.
The current provision represents amounts for vested long service leave for which the Group does not have an
unconditional right to defer settlement, regardless of when the actual settlement is expected to occur. However,
based on past experience, the Group does not expect all employees to take the full amount of accrued leave or
require payment within the next 12 months.
92
92 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
10 Property, plant and equipment
Iluka Resources Limited
31 December 2017
At 1 January 2016
Cost
Accumulated depreciation*
Opening written down value
Additions
SRL acquisition**
Disposals
Depreciation and amortisation
Exchange differences
Impairment of assets
Closing written down value
At 31 December 2016**
Cost
Accumulated depreciation*
Closing written down value
Plant
Year ended 31 December 2017
Additions
Disposals
Depreciation and amortisation
Exchange differences
Transfers
Impairment of assets
Closing written down value
Plant
At 31 December 2017
Cost
Accumulated depreciation*
Closing written down value
Plant,
machinery
&
equipment
$m
Mine
reserves &
development
$m
Exploration
&
evaluation
$m
Land &
buildings
$m
162.5
(40.7)
121.8
15.8
32.8
(1.5)
(2.5)
0.9
(1.3)
166.0
2,001.2
(1,307.4)
693.8
8.1
152.1
(0.6)
(62.1)
1.4
(154.1)
638.6
209.3
(43.3)
166.0
2,030.4
(1,391.8)
638.6
6.6
-
(3.7)
(5.7)
-
(7.2)
156.0
71.6
(3.8)
(77.0)
(14.9)
(4.3)
(147.8)
462.4
961.0
(748.4)
212.6
28.3
184.6
-
(14.8)
2.8
(30.7)
382.8
943.0
(560.2)
382.8
31.9
-
(29.9)
(14.6)
19.3
-
389.5
230.1
(74.1)
156.0
2,252.2
(1,789.8)
462.4
1,049.0
(659.5)
389.5
43.6
(2.0)
41.6
-
4.7
(0.3)
-
(0.3)
(14.9)
30.8
47.8
(17.0)
30.8
3.3
-
-
2.8
(15.0)
-
21.9
38.9
(17.0)
21.9
Total
$m
3,168.3
(2,098.5)
1,069.8
52.2
374.2
(2.4)
(79.4)
4.8
(201.0)
1,218.2
3,230.5
(2,012.3)
1,218.2
113.4
(3.8)
(110.6)
(32.4)
-
(155.0)
1,029.8
3,570.2
(2,540.4)
1,029.8
* Accumulated depreciation includes cumulative impairment charges.
** Comparative balances have been restated to reflect the final purchase price accounting for the Sierra Rutile
acquisition. Refer to note 6 for details.
(a) Property, plant and equipment
Property, plant and equipment is stated at cost, less accumulated depreciation and impairment charges. Cost
includes:
•
•
•
•
expenditure that is directly attributable to the acquisition of the items;
direct costs associated with the commissioning of plant and equipment, including pre-commissioning costs in
testing the processing plant;
if the asset is constructed by the Group, the cost of all materials used in construction, direct labour on the
project, project management costs and unavoidable borrowing costs incurred during construction of assets with
a construction period greater than 12 months and an appropriate proportion of variable and fixed overheads;
and
the present value of the estimated costs of dismantling and removing the asset and restoring the site on which it
is located.
93
Iluka Resources Limited, Annual Report 2017 93
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
As set out in note 9, in the case of rehabilitation provisions for assets which remain in use, adjustments to the
carrying value of the provision are offset by a change in the carrying value of the related asset. Total additions in the
year include $4.7 million (2016: $2.2 million) related to changes in the rehabilitation provision (refer note 9).
(b) Maintenance and repairs
Certain items of plant used in the primary extraction, separation and secondary processing of extracted minerals
are subject to a major overhaul on a cyclical basis. Costs incurred during such overhauls are characterised as either
capital in nature or repairs and maintenance. Work performed may involve:
(i)
the replacement of a discrete sub-component asset, in which case an asset addition is recognised and the book
value of the replaced item is written off; and
(ii) demonstrably extending the useful life or functionality of an existing asset, in which case the relevant cost is
added to the capitalised cost of the asset in question.
Costs incurred during a major cyclical overhaul which do not constitute (i) or (ii) above, are written off as repairs and
maintenance as incurred. General repairs and maintenance which are not characterised as part of a major cyclical
overhaul are expensed as incurred.
(c) Depreciation and amortisation
Items of property, plant and equipment are depreciated on a straight-line basis over their useful lives. The estimated
useful life of buildings is the shorter of applicable mine life or 25 years; plant and equipment is between 3 and 20
years. Land is not depreciated.
Expenditure on mine reserves and development is amortised over the life of mine, based on the rate of depletion of
the economically recoverable reserves (units of production methodology). If production has not yet commenced, or
the mine is idle, amortisation is not charged.
(i) Change in estimate of depreciation method effective 1 January 2017
The depreciation method for mine specific plant was revised effective 1 January 2017 from the units of production
method, to the straight line method, to more appropriately match depreciation charges with the expected pattern of
consumption of economic benefit of the asset (three to 20 years). This change in method impacts depreciation on
idle assets and reflects the expected duration of use and physical deterioration of assets and the impact of future
technical or commercial obsolescence.
(d) Assets not being depreciated
Included in plant, machinery and equipment, mine reserves and development, and land and buildings are amounts
totalling $46.6 million, $5.4 million and $0.2 million respectively (2016: $2.6 million, $2.2 million and $0.6 million
respectively) relating to assets under construction which are currently not being depreciated as the assets are not
ready for use.
In addition, within property, plant and equipment, excluding exploration and land assets, are amounts totalling
$196.8 million which have not been depreciated in the year as mining of the related area of interest has not yet
commenced (2016: $331.2 million). Idle plant, machinery and equipment of $145.1 million at 31 December 2016
recommenced depreciating from 1 January 2017 per the depreciation method change from units of production to
straight line noted above.
(e) Exploration, evaluation and development expenditure
Exploration and evaluation expenditure is accumulated separately for each area of interest. Such expenditure
comprises net direct costs and an appropriate portion of related overhead expenditure. Expenditure is carried
forward when incurred in areas for which the Group has rights of tenure and where economic mineralisation is
indicated, but activities have not yet reached a stage which permits a reasonable assessment of the existence or
otherwise of economically recoverable ore reserves, and active and significant operations in relation to the area are
continuing. Each such project is regularly reviewed. If the project is abandoned or if it is considered unlikely the
project will proceed to development, accumulated costs to that point are written off immediately.
Each area of interest is limited to a size related to a known mineral resource capable of supporting a mining
operation. Identifiable exploration assets acquired from another mining company are recognised as assets at their
cost of acquisition.
94
94 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
Projects are advanced to development status when it is expected that accumulated and future expenditure on
development can be recouped through project development or sale. Capitalised exploration is transferred to Mine
Reserves once the related ore body achieved JORC reserve status (reported in accordance with JORC, 2012) and
has been included in the life of mine plan.
All of the above expenditure is carried forward up to commencement of operations at which time it is amortised in
accordance with the reserves and development depreciation policy noted in (c) above.
(f)
Impairment of PPE
Refer to note 8 for details on impairment testing.
11 Income tax
Income tax expense comprises current and deferred tax and is recognised in profit or loss, as disclosed in (a)
below, except to the extent that it relates to items recognised directly in equity or other comprehensive income as
disclosed in (c) below.
(a)
Income tax expense (benefit)
Current tax
Deferred tax
Under (over) provided in prior years
Notes
12
2017
$m
(0.4)
5.2
1.2
6.0
2016
$m
(5.0)
(50.8)
2.1
(53.7)
(b) Reconciliation of income tax expense to prima facie tax payable
Loss before income tax expense
Tax at the Australian tax rate of 30% (2016: 30%)
Tax effect of amounts not deductible (taxable) in calculating taxable income:
(165.6)
(49.7)
(277.7)
(83.3)
Research and development credit
Current tax losses not recognised by overseas operations
Deferred tax losses not recognised by overseas operations
Metalysis write-down
SRL minimum tax (3.5% of revenue)
Non-deductible expenses
Other items
Difference in overseas tax rates
Under provision in prior years
Income tax expense (benefit)
(1.1)
-
35.7
10.1
5.2
4.3
(0.5)
4.0
0.8
1.2
6.0
(5.5)
26.8
-
-
-
6.1
-
(55.9)
0.1
2.1
(53.7)
159.5
331.5
95
Iluka Resources Limited, Annual Report 2017 95
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
No tax benefits have been recognised in respect of exploration activities of overseas operations as their recovery is
not currently considered probable.
The idling of the US operations at the end of 2015 means that the recovery of US state tax losses are not
considered probable. Unrecognised US state tax losses for which no deferred tax asset has been recognised are
US$162.9 million at 31 December 2017 (31 December 2016: US$161.7 million).
Unused capital losses for which no deferred tax asset has been recognised are approximately $92.7 million (2016:
$92.7 million) (tax at the Australian rate of 30%: $27.9 million (2016: $27.9 million)). The benefit of these unused
capital losses will only be obtained if sufficient future capital gains are made and the losses remain available under
tax legislation.
Tax transparency code
Iluka has adopted the Board of Taxation’s voluntary Tax Transparency Code (TTC). The TTC requires additional tax
disclosures in two parts. This note together with the income tax note 11 addresses the Part A disclosure
requirements being:
- a reconciliation of accounting profit to tax expense and to current year income tax payable;
- the identification of material temporary and non-temporary differences; and
- the effective company tax rates for Iluka's Australian and global operations.
Part B disclosure requirements will be addressed in the Sustainability Report 2017.
Effective income tax rate: Australian and global operations
Effective income tax rate (i)
Australia (ii)
Global (iii)
Current year income tax payable reconciliation
Loss before income tax
Income tax at the statutory rate of 30%
Non-temporary differences - income tax expense (iv)
Non-temporary differences - equity (v)
Temporary differences: deferred tax expense
Total
2017
42.9%
(3.6)%
$m
(165.6)
(49.7)
54.5
2.0
(5.2)
1.6
2016
28.7%
19.4%
$m
(277.7)
(83.3)
27.5
2.5
50.8
(2.5)
(i) Effective income tax rate = Income tax expense / profit before income tax.
(ii) Australian effective tax rate is higher than the Australian corporate tax rate of 30% primarily due to
non-deductible expenditure incurred in relation to non-Australian operations.
(iii) Reflects no income tax benefit recognised for tax losses arising from US operations and accounting impairment
of Iluka's investment in Metalysis.
(iv) Being non-temporary differences of $53.7 million and tax rates differences of $0.8 million (refer to note 11).
(v) Income tax impact of non-deductible Australian share based payments recognised to the share option reserve.
96
96 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
(c) Tax expense relating to items of other comprehensive income
Hedge of net investments in foreign operations
Changes in fair value of foreign exchange cash flow hedges
Actuarial gains (losses) on retirement benefit obligation
Iluka Resources Limited
31 December 2017
2017
$m
6.3
(0.9)
(0.2)
5.2
2016
$m
(2.5)
-
0.2
(2.3)
The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on
the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences and to unused tax losses. The current tax charge is calculated using the tax
rates and tax laws enacted or substantively enacted at the reporting date in the countries where the Group operates
and generates taxable income.
Key estimate: Tax balances
Tax balances are based on management's best estimate and interpretation of the tax legislation in a number of
jurisdictions. This treatment can be subject
to changes due to modification to legislation or differences in
interpretation by authorities. Where the amount of tax payable or recoverable includes some uncertainty, the Group
recognises amounts based on management’s best estimate of the most likely outcome.
12 Deferred tax
Deferred tax asset:
The balance comprises temporary differences attributable to:
Tax losses
R&D offset
Employee provisions
Provisions
Inventory
Cash flow hedge reserve (in equity)
Other
Gross deferred tax assets
2017
$m
2016*
$m
185.6
-
6.1
146.1
-
1.0
2.2
341.0
197.2
21.9
7.8
138.1
8.4
-
11.6
385.0
Amount offset to deferred tax liabilities pursuant to set-off provision
Net deferred tax assets
(155.1)
185.9
(176.8)
208.2
Deferred tax liability:
The balance comprises temporary differences attributable to:
Property, plant and equipment
Inventory
Receivables
Treasury shares (in equity)
Other
Gross deferred tax liabilities
Amount offset to deferred tax assets pursuant to set-off provision
Net deferred tax liabilities
(127.9)
(19.1)
(4.3)
(0.1)
(3.7)
(155.1)
155.1
-
(145.7)
(26.6)
(4.3)
(1.2)
1.0
(176.8)
176.8
-
97
Iluka Resources Limited, Annual Report 2017 97
Notes to the financial statements
For the year ended 31 December 2017
Movements in net deferred tax balance:
Balance at 1 January
Credited to the income statement
Under provision in prior years
DTA recognition on SRL acquisition
Charged directly to equity
Transfers
Balance at 31 December
Iluka Resources Limited
31 December 2017
2017
$m
208.2
(5.2)
(1.1)
-
(15.9)
(0.1)
185.9
2016*
$m
17.8
50.8
(10.9)
148.5
2.0
-
208.2
* Comparative balances have been restated to reflect the final purchase price accounting for the Sierra Rutile
acquisition. Refer to note 6 for details.
Deferred tax policy
Deferred income tax is provided on all temporary differences at the balance sheet date between accounting carrying
amounts and the tax bases of assets and liabilities.
Deferred income tax liabilities are recognised for all taxable temporary differences, other than for the exemptions
permitted under accounting standards.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax
assets and unused tax losses, to the extent it is probable that taxable profit will be available to utilise these
deductible temporary differences, other than for the exemptions permitted under accounting standards. The carrying
amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to
be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when
the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the balance sheet date.
Income taxes relating to items recognised directly in equity are also recognised in equity and not in the income
statement.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and
the same taxation authority.
Deferred tax recognised
The net deferred tax asset of $185.9 million includes an amount of $185.6 million representing the value of carried
forward losses incurred by SRL. The net deferred tax asset in relation to US operations (2016: $10.8 million) has
been derecognised in 2017 as a result of the repeal of the US loss carry back regime from US tax reforms enacted
in December 2017.
Key estimate: Deferred tax asset recognition
Deferred income tax assets are recognised for all deductible temporary differences, carried forward unused tax
assets and unused tax losses. Deferred tax assets are based on tax laws (and tax rates) that have been enacted or
substantively enacted at the balance sheet date.
Deferred tax assets have been recognised to the extent that their recovery is probable, having regard to the
availability of sufficient taxable temporary differences relating to the same tax authority and the same taxable entity,
the projected future taxable income of these taxable entities and after taking account of specific risk factors that are
expected to affect the recovery of these assets.
98
98 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
13 Receivables
Trade receivables
Mining Area C royalty receivable
Other receivables
Prepayments
Iluka Resources Limited
31 December 2017
2017
$m
118.9
13.8
19.5
19.2
171.4
2016
$m
107.9
14.1
18.3
29.6
169.9
Trade receivables are recognised initially at the value of the invoice sent to the customer and subsequently at the
amount considered recoverable. Trade receivables are generally due within 50 days of the invoice being issued
(2016: 60 days). The Group sells mineral sands to substantially all its customers on varying credit terms. Sales are
generally denominated in US dollars. Revenue is recognised using spot exchange rates on the date of sale, with
trade receivables being translated at the spot exchange rate at balance date and translation differences accounted
for in line with the Group’s accounting policy (refer note 2(b)).
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are
written off. A provision for doubtful receivables is established when there is sufficient evidence that the Group will
not be able to collect all amounts due. Expected credit losses for the Group's trade receivables are reviewed on an
ongoing basis.
There was $4.1 million overdue (2016: $30.0 million), of which all are less than 28 days overdue (2016: $13.0
million). Due to the short-term nature of the Group’s receivables, their carrying value is considered to approximate
fair value.
(a) Trade receivables purchase facilities
Iluka has a trade receivables purchase facility for the sale of eligible trade receivables. Under the agreement Iluka
transfers the majority of the risks and rewards of ownership, including credit risk (subject to a maximum first loss).
Iluka maintains an insurance policy to assist in managing the credit risk of its customers. The credit insurance policy
is a separate instrument to the receivables and reduces the exposure to credit risk. The trade receivables balance
of $118.9 million excludes $64.0 million (31 December 2016: excludes $88.1 million) of receivables sold under the
trade receivables purchase facility. Iluka has assigned a portion of the insurance policy to the supplier of the trade
receivables purchase facility but retains credit risk up to a maximum loss of $10.9 million (2016: $13.7 million). An
asset for the loss amount has been recognised within other receivables offset by a corresponding continuing
involvement liability in payables.
(b) Credit risk
At 31 December 2017 the trade receivables balance was $118.9 million, with $113.5 million covered by credit risk
insurance and a further $5.4 million by letters of credit. As a result, the Group had no uninsured receivables at 31
December 2017 (31 December 2016: $68.8 million).
99
Iluka Resources Limited, Annual Report 2017 99
Notes to the financial statements
For the year ended 31 December 2017
14 Inventories
Current
Work in progress
Finished goods
Consumable stores
Total current inventories
Non-current
Work in progress
Finished goods
Total non-current inventories
Iluka Resources Limited
31 December 2017
2017
$m
2016
$m
144.0
261.5
64.1
469.6
4.8
5.0
9.8
113.1
296.4
64.5
474.0
174.9
45.0
219.9
Non-current heavy mineral concentrate and finished goods reduced in 2017, as inventory was drawn down to meet
increased sales volumes.
Inventories are valued at the lower of weighted average cost and estimated net realisable value. The net realisable
value is the estimated selling price in the normal course of business, less any anticipated costs of completion and
the estimated costs to sell, including royalties.
There are separate inventory stockpile values for each product, including HMC and other intermediate products, at
each inventory location.
Weighted average cost includes direct costs and an appropriate portion of fixed and variable overhead expenditure,
including depreciation and amortisation. As a result of mineral sands being co-products from the same mineral
separation process, costs are allocated to inventory on the basis of the relative sales value of the finished goods
produced. No cost is attributed to by-products, except direct costs.
Finished goods inventory of $14.3 million (2016: $35.1 million) is carried at net realisable value, with all other
product inventory carried at cost.
Consumable stores include ilmenite acquired from third parties, flocculant, coal, diesel and warehouse stores. A
regular and ongoing review is undertaken to establish the extent of surplus, obsolete or damaged stores, which are
then valued at estimated net realisable value.
Inventories expected to be sold (or consumed in the case of stores) within 12 months after the balance sheet date
are classified as current assets; all other inventories are classified as non-current assets.
Key estimate: Net realisable value and classification of product inventory
The Group’s assessment of the net realisable value and classification of its inventory holdings requires the use of
estimates, including the estimation of the relevant future product price and the likely timing of the sale of the
inventory.
During the year, inventory write-downs of $5.2 million occurred for work in progress or finished goods (2016: $5.4
million). If finished goods future selling prices were 5% lower than expected, no inventory write-down would be
required at 31 December 2017.
Inventory of $9.8 million (2016: $219.9 million) was classified as non-current as it is not expected to be sold within
12 months of the balance sheet date.
100
100 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
Capital
15 Net debt and finance costs
Cash and cash equivalents
Cash at bank and in hand
Total cash and cash equivalents
Non-current interest-bearing liabilities (unsecured)
Multi Optional Facility Agreement
Deferred borrowing costs
Total interest-bearing liabilities
Net debt
(a) Cash and cash equivalents
2017
$m
53.6
53.6
238.6
(2.5)
236.1
2016
$m
101.3
101.3
611.2
(3.6)
607.6
236.1
607.6
182.5
506.3
Cash and cash equivalents include cash on hand and deposits held at call with financial institutions with original
maturities of three months or less.
Cash and deposits are at floating interest rates between 0.0 per cent and 2.12 per cent (2016: 0.0 per cent and 2.45
per cent) on Australian and foreign currency denominated deposits.
(b) Interest-bearing liabilities
Interest-bearing liabilities are initially recognised at
fair value less directly attributable transaction costs, with
subsequent measurement at amortised cost using the effective interest rate method. Under the amortised cost
method the difference between the amount initially recognised and the redemption amount is recognised in profit or
loss over the period of the borrowings on an effective interest basis.
Interest-bearing liabilities are classified as current liabilities unless the Group has an unconditional right to defer
settlement for at least 12 months after the balance sheet date.
(i) Multi Optional Facility Agreement
The Multi Optional Facility Agreement (MOFA) comprises a series of unsecured five year bilateral revolving credit
facilities with several domestic and foreign institutions, totalling A$695.1 million (2016: A$1,015.4 million).
The table below details the facility expiries:
A$million
At 31 December 2017
At 31 December 2016
Total
facility
695.1
1,015.4
2017
-
175.0
2018
Facility expiry
2020
2019
-
-
96.2
102.0
72.5
579.0
2021
-
159.4
2022
526.4
Drawings under the MOFA at 2017 were A$238.6 million (2016: A$611.2 million). Undrawn MOFA facilities at 31
December 2017 were A$456.5 million (2016: A$404.2 million).
(c)
Interest rate exposure
Of the above interest-bearing liabilities, $238.6 million is subject to an effective weighted average floating interest
rate of 3.1 per cent (2016: interest-bearing liabilities of $611.2 million at 2.7 per cent). The contractual repricing date
of all of the floating rate interest-bearing liabilities at the balance date is within one year.
101
Iluka Resources Limited, Annual Report 2017 101
Notes to the financial statements
For the year ended 31 December 2017
(d) Finance costs
Interest charges on interest-bearing liabilities
Bank fees and similar charges
Amortisation of deferred borrowing costs
Rehabilitation and mine closure provision discount unwind
Total finance costs
Iluka Resources Limited
31 December 2017
2017
$m
15.4
0.8
2.6
14.1
32.9
2016
$m
14.7
1.3
2.8
11.8
30.6
(i) Amortisation of deferred borrowing costs
Fees paid on establishment of borrowing facilities are recognised as transaction costs and amortised over the
period until the next expected facility extension. Transaction costs of $1.5 million associated with the extension of
the MOFA were incurred and capitalised in 2017 (2016: $0.5 million).
(ii) Rehabilitation and mine closure provision discount unwind
Rehabilitation and mine closure unwind represents the cost associated with the passage of time. Rehabilitation
provisions are recognised as the discounted value of the present obligation to restore, dismantle and rehabilitate
with the increase in the provision due to passage of time being recognised as a finance cost in accordance with the
policy described in note 9(a).
16 Contributed equity
(a) Share capital
Ordinary shares - fully paid
Treasury shares - net of tax
2017
Shares
2016
Shares
418,701,360
(53,218)
418,648,142
418,701,360
(466,050)
418,235,310
2017
$m
1,120.0
(0.3)
1,119.7
2016
$m
1,120.0
(2.8)
1,117.2
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in
proportion to the number of and amounts paid on the shares held. On a show of hands, every holder of ordinary
shares present at a meeting in person or by proxy is entitled to one vote, and upon a poll each share is entitled to
one vote. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds. There have been no movements in fully paid ordinary shares since
7 May 2009.
(b) Treasury shares
Treasury shares are shares in Iluka Resources Limited acquired on market and held for the purpose of issuing
shares under the Directors, Executives and Employees Share Acquisition Plan and the Employee Share Plan.
Opening balance at 1 January 2016
Employee share issues, net of tax
Balance at 31 December 2016
Employee share issues, net of tax
Balance at 31 December 2017
Number of
shares
1,194,708
(728,658)
466,050
(412,832)
53,218
$m
7.3
(4.5)
2.8
(2.5)
0.3
102
102 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
17 Reserves and retained earnings
Asset revaluation reserve
Balance at 1 January
Transfer to retained earnings on disposal
Balance at 31 December
blank
Hedge reserve
Mark to market value of hedging instruments
Deferred tax
Balance 31 December
blank
Share-based payments reserve
Balance at 1 January
Transfer of shares to employees, net of tax
Share-based payments, net of tax
Balance at 31 December
blank
Foreign currency translation
Balance at 1 January
Currency translation of US operation
Currency translation of Sierra Rutile
Translation differences on other foreign operations
Hedge of net investment in Sierra Rutile
Deferred tax
Balance at 31 December
blank
Total reserves
blank
Retained earnings
Balance at 1 January
Net loss for the period
Dividends paid
Actuarial (losses) gains on retirement benefit obligation, net of tax
Associates conversion to equity accounting share of losses
Transfer from asset revaluation reserve
Balance at 31 December
(a) Asset revaluation reserve
Notes
17(a)
17(b)
17(c)
21(a)
17(d)
2017
$m
11.8
-
11.8
(3.2)
1.0
(2.2)
(1.1)
(2.5)
5.5
1.9
21.5
(0.3)
(37.9)
(0.2)
21.1
(6.3)
(2.1)
9.4
(46.4)
(171.6)
(25.1)
(0.5)
-
-
(243.6)
2016
$m
13.1
(1.3)
11.8
-
-
-
(2.1)
(4.5)
5.5
(1.1)
12.1
1.5
13.9
(0.2)
(8.3)
2.5
21.5
32.2
272.8
(224.0)
(92.1)
0.3
(4.7)
1.3
(46.4)
The asset revaluation reserve records revaluations of non-current assets prior to the adoption of AIFRS. Transfers
are made to retained earnings on disposal of previously revalued assets.
(b) Hedge reserve
Iluka uses two types of hedging instruments as part of its foreign currency risk management strategy associated
with its US denominated sales, as described in note 21. These include foreign currency forward contracts and
foreign currency collars, both of which are designated in cash flow hedge relationships. To the extent these hedges
are effective, the change in fair value of the hedging instrument is recognised in the cash flow hedge reserve.
103
Iluka Resources Limited, Annual Report 2017 103
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
(c) Share-based payments reserve
The employee share-based payments reserve is used to recognise the fair value of equity instruments granted but
not yet
issued to employees under the Group's various equity-based incentive schemes. Shares issued to
employees are acquired on-market prior to the issue. Shares not yet issued to employees are shown as treasury
shares. When shares are issued to employees the cost of the on-market acquisition, net of tax, is transferred from
treasury shares (refer note 16) to the share-based payment reserve.
(d) Foreign currency translation reserve
Exchange differences arising on translation of
including US dollar
denominated debt used as a hedge of the net investment, are taken into the foreign currency translation reserve net
of applicable income tax, as described in note 2(b). At 31 December 2017, US$120.7 million was designated as a
hedge of the net investment in Sierra Rutile Limited (2016: US$297.0 million). The reserve is recognised in profit or
loss when the net investment is disposed of.
in foreign operations,
investment
the net
18 Dividends
Final dividend
for 2015 of 19 cents per share, fully franked
Interim dividend
for 2017 of 6 cents per share, fully franked
for 2016 of 3 cents per share, fully franked
Total dividends
2017
$m
-
-
25.1
-
25.1
25.1
2016
$m
79.5
79.5
-
12.6
12.6
92.1
Since balance date the directors have determined a final dividend for 2017 of 25 cents per share, fully franked
(2016: no final dividend). The dividend is payable on 23 April 2018 for shareholders on the register as at 28 March
2018. The aggregate amount of the proposed dividend is $104.7 million, which has not been included in provisions
at balance sheet date as it was not declared on or before the end of the financial year.
The Company's Dividend Reinvestment Plan was suspended in late 2010 and has been terminated. A new
Dividend Reinvestment Plan has been introduced effective for the payment of the 2017 final dividend.
(a) Franking credits
The balance of franking credits available for future years is $84.3 million (2016: $88.5 million). This balance is
based on a tax rate of 30% (2016: 30%). This amount includes franking credits that will be reduced by the receipt of
the tax refund of $5.0 million following the lodgement of
the 2017 income tax return for the Australian tax
consolidated group (2016: $6.1 million).
104
104 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
19 Loss per share
Basic loss per share (cents)
Diluted loss per share (cents)
Iluka Resources Limited
31 December 2017
2017
Cents
(41.0)
(41.0)
2016
Cents
(53.6)
(53.6)
Loss (earnings) per share (EPS) is the amount of post-tax loss or earnings attributable to each share.
Basic EPS is calculated on the loss for the period attributable to equity owners of $171.6 million (2016: loss of
$224.0 million) divided by the weighted average number of shares on issue during the year, excluding treasury
shares, being 418,525,273 shares (2016: 418,027,206 shares).
Diluted EPS takes into account the dilutive effect of all outstanding share rights vesting as ordinary shares. The
weighted average share rights outstanding would be anti-dilutive in 2017 and 2016 as they would reduce the loss
per share and therefore have not been included in the calculation of diluted EPS.
Risk
20 Financial risk management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk and interest rate
risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on the financial performance of the Group.
Financial risk management is managed by a central treasury department under policies approved by the Board.
(a) Market risk
Market risk is the risk that changes in market prices such as foreign exchange rates and interest rates will affect the
Group’s income or value of its holdings of financial instruments.
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising predominantly from the US
dollar, which is the currency the Group’s sales are generally denominated in.
The Group has operations in Sierra Leone and rehabilitation obligations in the US, which both have a USD
functional currency. The balance sheet translation risk is managed by designating part of the Group’s borrowing in
US dollars as a hedge against the net US dollar investment in the Sierra Rutile operation (translation differences are
taken to the foreign currency translation reserve). Other US dollar borrowings act as a ‘natural’ hedge against
movements in US dollar receivables from Australian sales (translation differences taken to the profit or loss).
Foreign exchange risk is also managed through entering into forward foreign exchange contracts and collar
contracts detailed in note 21.
The treasury function of the Group to address foreign currency risk is managed centrally. The Group hedges foreign
exchange exposures for firm commitments relating to sales. The hedging instrument must be in the same currency
as the hedged item.
The objective of
fluctuations.
Iluka’s policy on foreign exchange hedging is to protect
the Group from adverse currency
105
Iluka Resources Limited, Annual Report 2017 105
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
The Group's exposure to USD foreign currency risk (by entities which have an Australian dollar functional currency)
at the end of the reporting period, expressed in Australian dollars, was as follows:
Cash and cash equivalents
Receivables
Payables
Interest-bearing liabilities
2017
$m
21.9
85.6
(25.1)
(238.6)
(156.2)
2016
$m
25.8
99.1
(27.4)
(411.9)
(314.4)
The Group's balance sheet exposure to other foreign currency risk is not significant.
(ii) Group sensitivity
The average US dollar exchange rate during the year was 0.7668 (2016: 0.7444). The US dollar spot rate at 31
December 2017 was 0.7784 (31 December 2016: 0.7214). Based on the Group's net financial assets at 31
December 2017, the following table demonstrates the estimated sensitivity to a -/+ 10% movement in the US dollar
spot exchange rate, with all other variables held constant, on the Group's post-tax profit (loss) for the year and
equity:
31 December 2017
31 December 2016
-10%
Strengthen
+10%
Weaken
Profit (loss)
$m
(0.2)
7.5
Equity
$m
(11.9)
(32.1)
Profit (loss)
$m
0.2
(6.2)
Equity
$m
9.7
26.3
(iii) Interest rate risk
Interest rate risk arises from the Group’s borrowings and cash deposits. During 2017 and 2016, the Group's
borrowings at variable rates were denominated in Australian dollars and US dollars. At 31 December 2017, if
variable interest rates for the full year were -/+ 1% from the year-end rate with all other variables held constant,
pre-tax profit for the year would have moved as per the table below.
31 December 2017
31 December 2016
+1%
$m
3.6
2.2
-1%
$m
(3.6)
(2.2)
The sensitivity is calculated using the average debt position for the year ended 31 December 2017. The interest
charges in note 15(d) of $15.4 million (2016: $14.7 million) reflect interest-bearing liabilities in 2017 that range
between $236.1 million and $607.6 million (2016: $49.0 million and $607.6 million).
(b) Credit risk
Credit risk arises from cash and cash equivalents and hedging instruments held with financial institutions, as well as
credit exposure to customers.
The Group has policies in place to ensure that credit sales are only made to customers with an appropriate credit
history. The Group also maintains an insurance policy to assist in managing the credit risk of its customers. Further
details are set out in note 13.
Derivative counterparties and cash transactions are limited to high credit quality financial institutions and policies
limit the amount of credit exposure to any one financial institution.
The Group's policy is to ensure that cash deposits are held with counterparties with a minimum A-/A3 credit rating.
Credit exposure limits are approved by the Board based on both credit and sovereign ratings.
106
106 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
(c) Liquidity risk
Liquidity risk is the risk the Group will not be able to meet its financial obligations as they fall due. Liquidity risk
management involves maintaining sufficient cash on hand or undrawn credit
facilities to meet the operating
requirements of the business. This is managed through committed undrawn facilities under the MOFA (refer note
15(b)(i)) of $456.5 million at balance date as well as cash and cash equivalents of $53.6 million and prudent cash
flow management.
(d) Maturities of financial liabilities
The tables below analyse the Group's interest-bearing liabilities into maturity groupings based on the remaining
period at the reporting date to the contractual maturity date. For the MOFA, the contractual maturity dates are dates
which range from 2019 to 2022 and contractual cash flows are until the next contractual re-pricing date, which are
all within one year. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due
within 12 months equal their carrying balances as the impact of discounting is not significant. All other financial
liabilities are due within 12 months (refer note 15). Derivative cash flows include the net amounts expected to be
paid for foreign exchange forward contracts and net amounts expected to be received for foreign exchange collar
contracts.
Weighted
average rate
Less than
1 year
$m
Between
1 and 2
years
$m
Between
2 and 5
years
$m
Total
contractual
cash flows
$m
Carrying
amount
liabilities
$m
%
3.1
114.2
1.5
115.7
-
-
-
-
238.6
238.6
114.2
240.1
354.3
114.2
238.6
352.8
Weighted
average rate
Less than 1
year
Between
1 and 2
years
Between
2 and 5
years
Total
contractual
cash flows
Carrying
amount
liabilities
$m
$m
$m
$m
$m
At 31 December 2017
Non-derivatives
Payables
Interest-bearing variable rate
Total non-derivatives
At 31 December 2016
Non-derivatives
Payables
Interest-bearing variable rate
Total non-derivatives
2.7
123.8
2.8
126.6
-
-
-
-
611.2
611.2
123.8
614.0
737.8
123.8
611.2
735.0
At 31 December 2017
Derivatives
Less than
1 year
$m
Between
1 and 2
years
$m
Between
2 and 5
years
$m
Over 5
years
$m
Total
contractual
cash flows
$m
Carrying
amount
liabilities
$m
Foreign exchange forward contracts
Foreign exchange collar contracts
Total non-derivatives
3.4
(0.2)
3.2
-
(1.2)
(1.2)
-
(1.2)
(1.2)
-
-
-
3.4
(2.6)
0.8
3.4
(2.6)
0.8
Refer to note 21 for detail on derivative instruments.
107
Iluka Resources Limited, Annual Report 2017 107
Notes to the financial statements
For the year ended 31 December 2017
21 Hedging
Current assets
Foreign exchange collar hedges
Total current derivative financial instrument assets
Non-current assets
Foreign exchange collar hedges
Total non-current derivative financial instruments assets
Current liabilities
Foreign exchange forward contracts
Total current derivative financial instrument liabilities
Iluka Resources Limited
31 December 2017
2017
$m
2016
$m
0.2
0.2
2.4
2.4
3.4
3.4
-
-
-
-
-
-
The Group is exposed to risk from movements in foreign exchange in relation to its forecast US dollar denominated
sales and as part of the risk management strategy has entered into the following types of derivative contracts during
the year:
•
•
foreign exchange forward contracts covering US$114.0 million at an average rate of 76.1 cents and a further
US$103.9 million at an average rate of 80.1 cents. As at 31 December 2017 there was US$95 million of forward
foreign exchange contracts remaining at an average rate of 80.1 cents; and
foreign exchange collar hedges, covering US$271.0 million of expected USD revenue over the period 2018 to
2022. Over this five year period, the collars comprise US$271 million worth of purchased AUD call options with
a weighted average strike price of 80.2 cents, which have been largely paid for by selling US$271 million of
AUD put options at a strike price of 70 cents. The net cost of these collars was $2.3 million, which was paid up
front in December 2017. This five year period corresponds with long-term sales contracts entered into in 2017
including those in support of the Cataby development. However, the hedged USD revenues do not represent
the full value of expected sales under these contracts over this period.
Recognition
is entered into and are
Derivatives are initially recognised at
subsequently re-measured to their fair value at the end of each reporting period. The accounting for subsequent
changes in fair value depends on whether the derivative is designated as a hedging instrument and, if so, the nature
of the item being hedged and the type of hedge relationship designated.
fair value on the date a derivative contract
Hedge accounting
At the start of a hedge relationship, the Group formally designates and documents the hedge relationship, including
the risk management strategy for undertaking the hedge. This includes identification of the hedging instrument, the
hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging
instrument’s effectiveness. Hedge accounting is only applied where effective tests are met on a prospective basis.
Iluka will discontinue hedge accounting prospectively only when the hedging relationship, or part of the hedging
relationship, no longer qualifies for hedge accounting. This includes where there has been a change to the risk
management objective and strategy for undertaking the hedge and instances when the hedging instrument expires
or is sold, terminated or exercised. The replacement or rollover of a hedging instrument into another hedging
instrument is not treated as an expiration or termination if such a replacement or rollover is consistent with our
documented risk management objective.
The foreign exchange forward contracts and foreign exchange collars Iluka holds are classified as cash flow
hedges. Hedges are classified as cash flow hedges when they hedge a particular risk associated with the cash
flows of recognised assets and liabilities and highly probable forecast transactions.
108
108 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
Cash flow hedges
For cash flow hedges, the portion of the gain or loss on the hedging instrument that is effective is recognised
directly in equity, while the ineffective portion is recognised in profit or loss. This was immaterial in the current
period. The maturity profile of these hedges is shown in note 20(d), the recognition of the future gain or loss is
expected to be consistent with this timing.
Amounts recognised in equity are transferred to the income statement when the hedged sale occurs or when the
hedging instrument is exercised.
If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to
the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or
roll over, or if its designation as a hedge is revoked, amounts previously recognised in equity remain in equity until
the forecast transaction occurs.
Net investment hedge
The Group also designates US denominated debt as a hedge against the Group's net investment in Sierra Leone,
which has a US dollar functional currency. During the period the Group's net investment hedge resulted in $14.8
million being recorded in the foreign currency translation reserve (2016: $5.8 million reserve reduction).
Group structure
22 Controlled entities and deed of cross guarantee
The consolidated financial statements incorporate the following subsidiaries:
Controlled entities
* Iluka Resources Limited (Parent Company)
* Westlime (WA) Limited
* Ilmenite Proprietary Limited
* Southwest Properties Pty Ltd
* Western Mineral Sands Proprietary Limited
* Yoganup Pty Ltd
* Iluka Corporation Limited
* Associated Minerals Consolidated Ltd
* Iluka Royalty Holdings Limited
* Iluka Consolidated Pty Limited
* Iluka Exploration Pty Limited
* Iluka (Eucla Basin) Pty Ltd
* Gold Fields Asia Ltd
* Iluka International Limited
* NGG Holdings Ltd
* Iluka Midwest Limited
* Western Titanium Limited
* The Mount Lyell Mining and Railway Company Limited
* Renison Limited
* Iluka Finance Limited
* The Nardell Colliery Pty Ltd
* Glendell Coal Ltd
* Lion Properties Pty Limited
* Basin Minerals Limited
* Basin Minerals Holdings Pty Ltd
* Basin Properties Pty Ltd
* Swansands Pty Ltd
* Iluka International (UAE) Pty Ltd
* Iluka International (Lanka) Pty Ltd
* Iluka International (China) Pty Ltd
* Iluka International (Brazil) Pty Ltd
109
Country of
incorporation
Equity holding
2016
%
2017
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Iluka Resources Limited, Annual Report 2017 109
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
* Iluka Share Plan Holdings Pty Ltd
* Iluka International (Netherlands) Pty Ltd
* Iluka Royalty (MAC) Pty Limited
* Iluka International (ERO) Pty Ltd
* Iluka International (West Africa) Pty Ltd
Ashton Coal Interests Pty Limited
Iluka International Coӧperatief U.A.
Iluka Investments 1 B.V.
Iluka Trading (Europe) B.V.
Iluka Lanka P Q (Private) Limited
Iluka Lanka Resources (Private) Limited
Iluka Lanka Exploration (Private) Limited
Iluka Trading (Shanghai) Co., Ltd
Iluka Brasil Mineracao Ltda
Iluka (UK) Ltd
Iluka Technology (UK) Ltd
Associated Minerals Consolidated Investments
Iluka (USA) Investments Inc
Iluka Resources Inc
Iluka Resources (NC) LLC
Iluka Resources (TN) LLC
IR RE Holdings LLC
Iluka Atlantic LLC
Iluka International (SE Asia) Pte. Ltd.
Iluka Exploration (Kazakhstan) Limited Liability Partnership
ERO (Tanzania) Limited
Iluka Exploration (Canada) Limited
Iluka Investments (BVI) Limited
SRL Acquisition No. 3 Limited
Sierra Rutile (UK) Limited
Sierra Rutile Holdings Limited
Sierra Rutile Limited
Sierra Rutile Marketing Limited
Australia
Australia
Australia
Australia
Australia
Australia
The Netherlands
The Netherlands
The Netherlands
Sri Lanka
Sri Lanka
Sri Lanka
China
Brazil
United Kingdom
United Kingdom
USA
USA
USA
USA
USA
USA
USA
Singapore
Kazakhstan
Tanzania
Canada
British Virgin Islands
British Virgin Islands
United Kingdom
British Virgin Islands
Sierra Leone
United Kingdom
100.0
100.0
100.0
100.0
100.0
95.8
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
95.8
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
* The above companies are parties to a Deed of Cross Guarantee (the Deed) under which each company
guarantees the debts of the others.
By entering into the Deed of Cross Guarantee, the wholly-owned entities represent a closed group and have been
relieved from the requirements to prepare a Financial Report and Directors' Report under ASIC Corporations
(Wholly-owned Companies) Instrument 2016/785. The closed group is also the extended closed group.
110
110 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
(a) Condensed financial statements of the extended closed group
Condensed statement of profit or loss and other comprehensive income
Revenue from ordinary activities
Expenses from ordinary activities
Finance costs
Income tax expense
Profit (loss) for the period
Other comprehensive income
Actuarial gains on defined benefit plans, net of tax
Changes in the fair value of cash flow hedges
Total comprehensive (loss) income for the period
Summary of movements in consolidated retained earnings
Retained earnings at the beginning of the financial year
Profit (loss) for the period
Dividends paid
Retained earnings at the end of the financial year
Condensed balance sheet
Current assets
Cash and cash equivalents
Receivables
Inventories
Current tax receivables
Derivative financial instruments
Total current assets
Non-current assets
Inventories
Other financial assets - investments in non-closed group entities
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial instruments
Total non-current assets
Total assets
Current liabilities
Payables
Provisions
Derivative financial instruments
Total current liabilities
2017
$m
894.9
(839.3)
(28.7)
(16.1)
10.8
-
(2.2)
8.6
3.4
10.8
(25.1)
(10.9)
2017
$m
27.1
157.7
365.1
3.7
0.2
553.8
2016
$m
738.7
(951.4)
(29.4)
59.0
(183.1)
0.2
-
(182.9)
278.6
(183.1)
(92.1)
3.4
2016
$m
72.6
170.1
415.1
6.2
-
664.0
4.7
617.8
615.8
4.3
38.0
2.4
1,283.0
188.4
532.7
793.0
4.7
47.8
-
1,566.6
1,836.8
2,230.6
73.6
58.0
3.4
135.0
87.6
48.5
-
136.1
111
Iluka Resources Limited, Annual Report 2017 111
Notes to the financial statements
For the year ended 31 December 2017
Condensed balance sheet
Non-current liabilities
Interest-bearing liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
Other notes
23 Contingent liabilities
(a) Bank guarantees
Iluka Resources Limited
31 December 2017
2017
$m
2016
$m
236.1
343.9
580.0
715.0
607.6
354.7
962.3
1,098.4
1,121.8
1,132.2
1,119.7
13.0
(10.9)
1,121.8
1,117.2
11.6
3.4
1,132.2
The Group has a number of bank guarantees in favour of various government authorities and service providers to
meet its obligations under exploration and mining tenements. At 31 December 2017, the total value of performance
commitments and guarantees was $120.4 million (2016: $122.9 million).
(b) Native title
There is some risk that native title, as established by the High Court of Australia's decision in the Mabo case, exists
over some of the land over which the Group holds tenements or over land required for access purposes. It is
impossible at this stage to quantify the impact, if any, which these developments may have on the operations of the
Group.
(c) Sri Lanka exploration deposits
In October 2013 the Group acquired all of the share capital in PKD Resources (Pvt) Ltd, a Sri Lankan domiciled
company which owns an exploration tenement located near the city of Puttalam in the North Western Province of
Sri Lanka. The consideration for the acquisition which remains contingent on future events includes:
•
•
payment of US$8.0 million on the Iluka Board approving a development of mining operations on EL 170 or on
expiry of the stage 3 period, being October 2019; and
the payment of an annual trailing payment calculated at one per cent of the gross sale proceeds received from
the annual sale of all mineral products and sand clay produced from the tenement, less the US$2.0 million paid
on the grant of the mining license over EL 170, which is being treated as an advance on the trailing payment.
Iluka has a put option to transfer either the shares in PKD Resources (Pvt) Ltd or the tenements back to the vendor.
If exercised, Iluka will not be required to make the payments referred to above.
(d) Other claims
In the course of its normal business, the Group occasionally receives claims arising from its operating activities. In
the opinion of the directors, all such matters are covered by insurance or, if not covered, are without merit or are of
such a kind or involve such amounts that would not have a material adverse effect on the operating results or
financial position of the Group if settled unfavourably.
112
112 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
24 Commitments
(a) Exploration and mining lease commitments
Commitments in relation to leases contracted for at
recognised as liabilities payable:
reporting date but not
Within one year
Later than one year but not later than five years
Later than five years
Iluka Resources Limited
31 December 2017
2017
$m
18.3
34.3
46.7
99.3
2016
$m
17.9
41.3
49.6
108.8
These costs are discretionary. If the expenditure commitments are not met then the associated exploration and
mining leases may be relinquished.
(b) Lease commitments
Commitments for minimum lease payments in relation to non-cancellable operating
leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
11.5
7.8
0.4
19.7
12.6
15.7
0.6
28.9
The Group leases various storage facilities, offices, mining equipment and motor vehicles under non-cancellable
operating leases expiring within one to 10 years with varying terms.
(c) Capital commitments
Capital expenditure contracted for and payable, but not recognised as liabilities are $27.0 million (2016: $5.7
million). All of the commitments relate to the purchase of property, plant and equipment and are payable within one
year of the reporting date.
113
Iluka Resources Limited, Annual Report 2017 113
Notes to the financial statements
For the year ended 31 December 2017
25 Remuneration of auditors
Iluka Resources Limited
31 December 2017
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its
related practices and non-related audit firms:
(a) PricewaterhouseCoopers Australia
Audit and other assurance services
Audit and review of financial statements*
Other assurance services
Tax and other services
Tax compliance and advisory services
Other compliance and advisory services
Total remuneration
(b) Network firms of PricewaterhouseCoopers Australia
Audit and review of financial statements*
Other compliance and advisory services
2017
$000
2016
$000
619
13
632
-
52
52
684
181
22
203
615
5
620
6
50
56
676
102
11
113
(c) Non-PricewaterhouseCoopers audit firms
Audit and review of financial statements*
48
268
Summary of total fees disclosed above:
Audit and review of financial statements*
Other assurance services
Tax compliance and advisory services
Other compliance and advisory services
848
13
-
74
935
985
5
6
61
1,057
* Included in the remuneration of auditors are the annual costs incurred by Sierra Rutile Limited. Iluka has only
recognised a portion of these costs within the Group profit or loss account for 2016, pro-rated in relation to Iluka's
period of ownership. Full annual costs are disclosed to assist users of accounts.
114
114 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
26 Share-based payments
Iluka Resources Limited
31 December 2017
Share-based compensation benefits are provided to employees via incentive plans, the Director's, Executives and
Employees Share Acquisition Plan, the Equity Incentive Plan and the Employee Share Plan. Information relating to
these schemes is set out in the Remuneration Report.
The fair value of shares granted is determined based on market prices at grant date, taking into account the terms
and conditions upon which those shares were granted. The fair value is recognised as an expense through profit or
loss on a straight-line basis between the grant date and the vesting date for each respective plan.
The fair value of share rights is independently determined using a Monte Carlo simulation that takes into account
the exercise price, the term of the share right, the impact of dilution, the share price at grant date and expected
price volatility of the underlying share, the expected dividend yield and the risk free interest rate of the term of the
share right. The fair value of the Long Term Incentive Plan (LTIP - TSR tranche) and Long Term Deferred Rights
(LTDR - TSR tranche) also take into account the Company's predicted share prices against the comparator group
performance at vesting date.
A credit to the share-based payments expense arises where unvested entitlements lapse on resignation or the
non-fulfilment of the vesting conditions that do not relate to market performance. Payroll tax payable on the grant of
restricted shares or share rights is recognised as a component of the share-based payments expense when paid.
The share-based payment expense recognised in profit or loss of $7.4 million (2016: $8.5 million) results from
several schemes summarised below.
Schemes
STIP (i)
2017
2016
2015
2014
2013
LTIP - TSR (ii)
2017
2016 MD Grant
2016
2016
2015
2014
2013
LTIP - ROE (ii)
2017
2016 MD Grant
2016
2016
2015
2014
MD LTDR (iii)
COO LTDR (iv)
Employee Share Plan (v)
Restricted Share Plan (vi)
Grant
date
Vesting
date
Fair
value
Shares /
rights at
Expense
2017
Shares /
rights at
Expense
2016
$
31 Dec 17
$m
31 Dec 16
$m
Mar-18 Mar-19/20
Mar-17 Mar-18/19
Mar-16 Mar-17/18
Mar-15 Mar-16/17
Mar-14 Mar-15/16
10.17
6.82
6.63
7.66
9.44
-
-
-
-
-
May-17
Oct-16
May-16
May-16
Feb-15
Feb-14
Feb-13
May-17
Oct-16
May-16
May-16
Feb-15
Feb-14
Mar-21
Mar-21
Mar-20
Mar-19
Mar-18
Mar-17
Mar-16
Mar-21
Mar-21
Mar-20
Mar-19
Mar-18
Mar-17
Oct-16 Mar-18/19/20
Mar-17
Mar-20
5.66
3.71
4.27
4.27
5.02
5.74
7.72
7.44
5.42
5.86
6.01
6.74
8.49
4.68
6.82
9.01
6.82
431,698
126,688
270,656
270,656
261,984
-
-
431,724
126,687
270,674
270,674
261,984
-
504,929
16,133
-
-
1.3
0.7
0.3
-
-
0.6
-
0.2
0.3
0.3
-
-
0.8
-
0.4
0.4
-
-
1.3
0.1
0.5
0.2
7.4
-
-
-
-
-
-
126,688
321,643
321,643
308,153
129,058
-
-
126,687
321,664
321,664
308,153
129,058
-
-
-
-
-
2.2
1.2
0.8
0.1
-
-
0.4
0.6
0.7
0.4
0.1
-
-
0.6
0.8
0.9
1.1
0.3
-
0.5
-
8.5
115
Iluka Resources Limited, Annual Report 2017 115
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
(i) Short Term Incentive Plan (STIP)
The fair value of the STIP is determined as the volume weighted average price of ordinary shares over the five
trading days following the release of the Company’s annual results.
(ii) Long Term Incentive Plan (LTIP)
The fair value at grant date for the 2017 LTIP takes into account the exercise price of $nil, the share price at grant
date of $8.39, the expected price volatility of the share price (based on historical volatility), the expected dividend
yield of 3.08% and the risk free rate of return of 1.88%. The fair value of the TSR tranche also takes into account
the Company’s predicted share prices against the comparator group performance at vesting date.
Prior year expenses related to rights that do not vest for the Return on Equity (ROE) tranche are credited to the
share-based payments expense.
(iii) Managing Director's Long Term Deferred Rights (LTDR)
The fair value at grant date for the Managing Director's LTDR takes into account the exercise price of $nil, the share
price at grant date of $6.27, the expected price volatility of the share price (based on historical volatility), the
expected dividend yield of 3.47% and the risk free rate of return of 1.53%. The fair value of the TSR tranche also
takes into account the Company’s predicted share prices against the comparator group performance at vesting
date.
Full details of the LTDR granted in October 2016 are set out in the 2016 Remuneration Report. The fair value of
$4.68 per right is the weighted average for all share rights in the LTDR.
(iv) Chief Operating Officer's Long Term Deferred Rights (LTDR)
The fair value at grant date for the Chief Operating Officer's LTDR represents the face value of the 16,133 deferred
rights.
(v) Employee share plan
A total of 45,954 (2016: 85,007) shares were issued to eligible employees who participated in the plan. Each
participant was issued with shares worth $1,000 based on a volume weighted average market price of $9.01 (2016:
$5.90) for the five days following the close of the offer period.
(vi) Restricted share plan
95,674 (2016: 33,800) restricted shares were issued to eight (2016: four) eligible employees who participated in the
plan. Shares were issued to participants based on a volume weighted average price of $6.82 (2016: $5.90)
calculated over the five trading days following the release of the Company’s 2016 annual results.
116
116 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
27 Reconciliation of loss after income tax to net cash inflow from operating activities
Loss for the year
Depreciation and amortisation
Exploration capitalised
Doubtful debts
Net loss (gain) on disposal of property, plant and equipment
Net exchange differences
Rehabilitation and mine closure provision discount unwind
Non-cash share-based payments expense
Amortisation of deferred borrowing costs
Equity accounted share of losses
Impairment of assets
Inventory NRV write-down
Non-cash rehabilitation for closed sites
Change in operating assets and liabilities
Increase in receivables
Decrease in inventories
Increase in net current tax asset
Decrease (increase) in net deferred tax
Decrease in payables
Decrease in provisions
Net cash inflow from operating activities
28 Retirement benefit obligations
(a) Superannuation plan
(i) Australia
2017
$m
(171.6)
111.0
-
1.3
0.9
(1.9)
14.1
7.4
2.6
3.3
185.4
5.2
127.4
(31.1)
203.4
(8.5)
3.8
(7.0)
(32.0)
413.7
2016
$m
(224.0)
79.9
0.3
-
(1.2)
9.6
11.8
8.5
2.8
3.3
201.0
-
42.6
(30.7)
158.6
(28.1)
(43.0)
(14.7)
(48.3)
128.4
Iluka previously provided defined lump sum and pension benefits to employees of the Group who did not elect a
fund under the Superannuation Fund Choice legislation via the Iluka Resources Superannuation Plan. Iluka has
closed this defined benefits plan to new members and there are no remaining members. The Group has no further
legal or contructive obligation in relation to this plan.
(ii) USA
All employees of the United States (US) operations are entitled to benefits from the US operations' pension plans on
retirement, disability or death. The US operations have one defined benefit plan and one defined contribution plan.
The defined benefit plan provides a monthly benefit based on average salary and years of service. The defined
contribution plan receives an employee's elected contribution and an employer's match-up to a fixed percentage.
The entity's legal or constructive obligation is limited to these contributions.
117
Iluka Resources Limited, Annual Report 2017 117
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
(iii) SRL
SRL does not operate any retirement benefit plan for its employees. For employees of the Sierra Leone based
subsidiary, the Group makes a contribution of 10% of the employees' basic salary to the National Social Security
and Insurance Trust ("NASSIT") for payment of pension to staff on retirement. These employees also contribute 5%
of their basic salary to NASSIT.
The Sierra Leone based subsidiary also provides for end-of-term benefits based on the provisions contained in the
collective bargaining agreements negotiated with the trade unions representing the relevant employees. These
benefits are paid to employees falling under this category when they leave the Group. The retirement benefit
obligation recognised in the balance sheet represents the present value of the defined benefit obligation in relation
to this agreement.
The following sets out details in respect of the defined benefit sections only for Australia, US and SRL.
(b) Financial position
The net financial position of the Group’s defined benefit plans based on information supplied from the plans'
actuarial advisors per the table below.
Australia
United States
Sierra Rutile
Total
Net plan position
Surplus
Deficit
Deficit
2017
$m
0.4
(11.1)
(4.1)
(14.8)
2016
$m
0.4
(12.2)
(2.9)
(14.7)
A net deficit of $14.8 million (2016: deficit $14.7 million) is included in non-current provisions in note 9. The table
below provides a summary of the net financial position at 31 December for the past five years.
Defined benefit plan obligation
Plan assets
Deficit
2017
$m
(36.0)
21.2
(14.8)
2016
$m
(35.0)
20.3
(14.7)
2015
$m
(31.1)
20.4
(10.7)
2014
$m
(29.5)
19.3
(10.2)
2013
$m
(20.5)
16.7
(3.8)
(c) Defined benefits superannuation expense
In 2017, $1.7 million (2016: $2.9 million) was recognised in expenses for the year in respect of the defined benefit
plans.
Other disclosures in respect of retirement benefit obligations required by AASB 119 are not included in the financial
report as the directors do not consider them to be material to an understanding of the financial position and
performance of the Group.
118
118 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
29 Key Management Personnel
(a) Key Management Personnel
Iluka Resources Limited
31 December 2017
Key Management Personnel of the Group comprise directors of Iluka Resources Limited as well as other specific
employees of the Group who met the following criteria: "personnel who have authority and responsibility for
planning, directing and controlling the activities of the Group, either directly or indirectly."
(i) Key Management Personnel compensation
Detailed information about
Remuneration Report on pages 53 to 73.
the remuneration received by each key management person is provided in the
The below provides a summary:
Short-term benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
Total
2017
$000
6,412
183
-
-
2,796
9,391
2016
$000
7,835
211
-
2,082
2,396
12,524
(b) Transactions with Key Management Personnel
There were no transactions between the Group and Key Management Personnel that were outside of the nature
described below:
(i)
(ii)
(iii)
occurrence was within a normal employee, customer or supplier relationship on terms and conditions no
more favourable than those it is reasonable to expect the Group would have adopted if dealing at arms
length with an unrelated individual;
information about these transactions does not have the potential to adversely affect the decisions about the
allocation of scarce resources made by users of the financial report, or the discharge of accountability by
the Key Management personnel; and
the transactions are trivial or domestic in nature.
30 Parent entity financial information
(a) Summary financial information for Iluka Resources Limited
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
2017
$m
2016
$m
203.5
1,228.4
1,431.9
34.0
393.9
427.9
264.0
1,888.2
2,152.2
44.0
871.1
915.1
1,004.0
1,237.1
119
Iluka Resources Limited, Annual Report 2017 119
Notes to the financial statements
For the year ended 31 December 2017
Shareholders' equity
Contributed equity
Other reserves
Profit reserve (i)
(Accumulated loss) retained earnings
space
Loss (profit) for the year
Other comprehensive income
Changes in the fair value of cash flow hedges, net of tax
Total comprehensive loss (income)
(i) Profits have been appropriated to a profits reserve for future dividend payments.
Iluka Resources Limited
31 December 2017
1,120.0
10.4
82.1
(208.5)
1,004.0
1,120.0
9.8
-
107.3
1,237.1
208.5
(67.9)
2.2
210.7
-
(67.9)
(b) Contingent liabilities of the parent entity
The parent had contingent liabilities for performance commitments and guarantees of $40.0 million as at 31
December 2017 (2016: $38.0 million).
(c) Contractual commitments for the acquisition of property, plant or equipment
As at 31 December 2017, the parent entity had contractual commitments for the acquisition of property, plant or
equipment totalling $22.3 million (2016: $0.1 million).
(d) Parent entity financial information
The financial information for the parent entity has been prepared on the same basis as the consolidated financial
statements, except as set out below.
Investments in subsidiaries
(i)
Investments in subsidiaries are accounted for at cost.
(ii) Tax consolidation legislation
Iluka Resources Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation
legislation as of 1 January 2004. On adoption of the tax consolidation legislation, the entities in the tax consolidation
group entered into a tax sharing agreement which limits the joint and several liability of the wholly-owned entities in
the case of a default by the head entity, Iluka Resources Limited.
31 Related party transactions
The only related party transactions are with Directors and Key Management Personnel (refer note 29). Details of
material controlled entities are set out in note 22. The ultimate Australian controlling entity and the ultimate parent
entity is Iluka Resources Limited.
120
120 Iluka Resources Limited, Annual Report 2017
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
32 New and amended standards adopted by the group
Iluka Resources Limited is required to change some of its accounting policies as the result of new or revised
accounting standards which became effective for the annual reporting period commencing on 1 January 2017. The
affected policies and standards are:
· AASB 2016-1 Amendments to Australian Accounting Standards - Recognition of Deferred Tax Assets for
Unrealised Losses
· AASB 2016-2 Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB 107
· AASB 2017-2 Amendments to Australian Accounting Standards - Further Annual Improvements 2014-2016 Cycle
The adoption of these amendments did not have any impact on the current period or any prior period and is not
likely to affect future periods.
Early adopted standards
AASB 9 Financial Instruments
(i)
The Group has elected to apply AASB 9 Financial Instruments as issued in December 2014, from 1 January 2017
because the new accounting standard provides more relevant information for the users of the financial report. In
accordance with the transitional provisions in AASB 9 (7.2.15), comparative figures have not been restated.
AASB 9 replaces the provisions of AASB 139 Financial Instruments that relate to the recognition, classification and
measurement of financial assets and financial liabilities, including derecognition, impairment and changes to hedge
accounting rules. AASB 9 also amends other standards dealing with financial instruments such as AASB 7 Financial
Instruments: Disclosures.
The adoption of AASB 9 did not result in a significant change to the recognition or measurement of financial
instruments for the Group as presented in the financial report. The new hedge accounting rules align the accounting
for hedging instruments more closely to the Group’s risk management practices, which allows the Group’s natural
hedge relationship and derivatives to qualify for hedge accounting under AASB 9. See note 21.
On adoption of AASB 9 Iluka has also reclassified its financial assets as subsequently measured at amortised cost
or fair value depending on the business model for those assets and the contractual cash flow characteristics. There
was no change in the classification or measurement of financial liabilities. The principal impact on Iluka's financial
assets at 1 January 2017 is the reclassification of the trade receivables from ‘loans and receivables’ under AASB
139 to ‘financial assets at amortised cost’ under AASB 9. This did not change the balance of trade receivables
recognised at 31 December 2017.
In relation to the reclassification of financial assets and liabilities, there was no impact on the income statement, the
statement of comprehensive income, balance sheet or statement of changes in equity on adoption of AASB 9.
As a result of adopting AASB 9, the accounting policy for trade receivables (note 13) and hedging (note 21) has
been updated and is applicable from 1 January 2017.
The terminology in the above policies has been updated in accordance with the requirements of AASB 9. There has
been no material change to the measurement and recognition of these items.
121
Iluka Resources Limited, Annual Report 2017 121
Notes to the financial statements
For the year ended 31 December 2017
Iluka Resources Limited
31 December 2017
New accounting standards not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December
2017 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of
these new standards and interpretations is set out below.
AASB 15 Revenue from contracts with customers (effective from 1 January 2018)
(i)
AASB 15 Revenue from contracts with customers will replace AASB 118 Revenue and introduces a new framework
for revenue recognition. The new framework is based on a five step process where revenue is recognised for each
distinct performance obligation, at the point control of the good or service passes to the customer. This replaces the
previously applied risks and rewards approach under AASB 15.
The Group sells mineral sands on a variety of shipping terms. Under some of these shipping terms control of the
final product passes to the customer although the Group still retains obligations to deliver the goods. Under AASB
15 this is deemed a separate performance obligation and this component will be separately presented as freight
revenue. This change is not expected to materially impact the overall Group’s reported revenue. No other changes
are expected.
The Group has implemented the new standard effective from 1 January 2018.
AASB 16 Leases (effective from 1 January 2019)
(ii)
AASB 16 Leases will replace AASB 117 Leases and removes the distinction between operating and financing
leases and introduces a single framework which results in the lessee being required to recognise all leases with a
term longer than 12 months on the balance sheet. This is presented in the balance sheet as a right to use asset
being the leased item, and financial liability being the lease payments over the term of the lease. For operating
leases, the cost of these leases will then be presented as amortisation of the leased asset and interest expense as
the discount rate on the liabilities unwind, rather than operating cash costs as the current approach under AASB
117.
The Group has various lease arrangements for office buildings and equipment, although leases for less than 12
months will be exempted from recognition on the balance sheet. The Group is currently evaluating the impact of
AASB 16. Information in relation to the current lease commitments is disclosed in note 24.
The Group will implement the new standard on 1 January 2019.
There are no other standards that are not yet effective and that would be expected to have a material impact on the
entity in the current or future reporting periods and on foreseeable future transactions.
122
122 Iluka Resources Limited, Annual Report 2017
Directors’ declaration
For the year ended 31 December 2017
DIRECTORS' DECLARATION
In the directors' opinion:
Iluka Resources Limited
31 December 2017
(a)
(b)
(c)
the financial statements and notes set out on pages 75 to 122 are in accordance with the Corporations Act
2001, including:
(i)
complying with Accounting Standards and other mandatory professional reporting requirements as
detailed above, and the Corporations Regulations 2001; and
giving a true and fair view of
performance for the financial year ended on that date, and
the Group's financial position as at 31 December 2017 and of
(ii)
its
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable, and
at the date of this declaration, there are reasonable grounds to believe that the members of the extended
closed group identified in note 22 will be able to meet any obligations or liabilities to which they are, or may
become, subject by virtue of the deed of cross guarantee described in note 22.
Note 2 confirms that the financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required
by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
G Martin
Chairman
T O'Leary
Managing Director
27 February 2018
123
Iluka Resources Limited, Annual Report 2017 123
Independent auditor’s report To the members of Iluka Resources Limited
For the year ended 31 December 2017
Independent auditor’s report
To the members of Iluka Resources Limited
Independent auditor’s report
Report on the audit of the financial report
To the members of Iluka Resources Limited
Independent auditor’s report
To the members of Iluka Resources Limited
Our opinion
Report on the audit of the financial report
Our opinion
Report on the audit of the financial report
In our opinion:
Our opinion
The accompanying financial report of Iluka Resources Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
In our opinion:
(a)
The accompanying financial report of Iluka Resources Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
(b)
(a)
giving a true and fair view of the Group's financial position as at 31 December 2017 and of its
financial performance for the year then ended
The accompanying financial report of Iluka Resources Limited (the Company) and its controlled
complying with Australian Accounting Standards and the Corporations Regulations 2001.
entities (together the Group) is in accordance with the Corporations Act 2001, including:
giving a true and fair view of the Group's financial position as at 31 December 2017 and of its
financial performance for the year then ended
What we have audited
(b)
The Group financial report comprises:
giving a true and fair view of the Group's financial position as at 31 December 2017 and of its
financial performance for the year then ended
complying with Australian Accounting Standards and the Corporations Regulations 2001.
In our opinion:
(a)
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
the consolidated balance sheet as at 31 December 2017
the consolidated statement of changes in equity for the year then ended
What we have audited
The Group financial report comprises:
What we have audited
The Group financial report comprises:
the consolidated balance sheet as at 31 December 2017
the consolidated statement of cash flows for the year then ended
the consolidated balance sheet as at 31 December 2017
the consolidated statement of profit or loss and other comprehensive income for the year then
the consolidated statement of changes in equity for the year then ended
ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
the consolidated statement of profit or loss and other comprehensive income for the year then
accounting policies
ended
the consolidated statement of profit or loss and other comprehensive income for the year then
the directors’ declaration.
ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the consolidated statement of cash flows for the year then ended
the directors’ declaration.
the directors’ declaration.
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
Basis for opinion
report section of our report.
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
report section of our report.
our opinion.
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
Basis for opinion
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
Independence
our opinion.
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Independence
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
We are independent of the Group in accordance with the auditor independence requirements of the
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
in accordance with the Code.
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
PricewaterhouseCoopers, ABN 52 780 433 757
Liability limited by a scheme approved under Professional Standards Legislation.
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
124
Liability limited by a scheme approved under Professional Standards Legislation.
124 Iluka Resources Limited, Annual Report 2017
Liability limited by a scheme approved under Professional Standards Legislation.
124
124
Independent auditor’s report To the members of Iluka Resources Limited
For the year ended 31 December 2017
Our audit approach
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
The Group is a producer of zircon and high-grade titanium dioxide products of rutile and synthetic
rutile, with operations in Australia, the United States and Sierra Leone. The Group also earns royalty
income from a tier one iron ore operation – BHP Billiton’s Mining Area C province in Western
Australia.
The Group is a producer of zircon and high-grade titanium dioxide products of rutile and synthetic
rutile, with operations in Australia, the United States and Sierra Leone. The Group also earns royalty
income from a tier one iron ore operation – BHP Billiton’s Mining Area C province in Western
Australia.
Materiality
Materiality
For the purpose of our audit we used overall Group materiality of $10.0 million, which represents
approximately 1% of the Group’s total revenue.
For the purpose of our audit we used overall Group materiality of $10.0 million, which represents
approximately 1% of the Group’s total revenue.
We applied this threshold, together with qualitative considerations, to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the
financial report as a whole.
We applied this threshold, together with qualitative considerations, to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the
financial report as a whole.
We chose revenue as the materiality benchmark rather than profit before tax due to the recent volatility in
profit before tax. Revenues are reflective of the Group’s operating activities, are relatively stable when
compared to profit before tax and provide a level of materiality which, in our view, is appropriate for the audit
having regard to the expected requirements of users of the Group’s financial report.
We chose revenue as the materiality benchmark rather than profit before tax due to the recent volatility in
profit before tax. Revenues are reflective of the Group’s operating activities, are relatively stable when
compared to profit before tax and provide a level of materiality which, in our view, is appropriate for the audit
having regard to the expected requirements of users of the Group’s financial report.
We utilised a 1% threshold based on our professional judgement, noting it is within the range of commonly
We utilised a 1% threshold based on our professional judgement, noting it is within the range of commonly
acceptable thresholds.
acceptable thresholds.
Audit Scope
Audit Scope
Our audit focused on where the directors made subjective judgements; for example, significant accounting
Our audit focused on where the directors made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
estimates involving assumptions and inherently uncertain future events.
Component auditors, operating under our instructions, performed audit procedures over the Group’s Sierra
Leone operations’ financial information. These procedures, combined with the work performed by us which
included reviewing component auditors’ work, as the Group engagement team, provided sufficient
appropriate audit evidence as a basis for our opinion on the Group financial report as a whole.
Component auditors, operating under our instructions, performed audit procedures over the Group’s Sierra
Leone operations’ financial information. These procedures, combined with the work performed by us which
included reviewing component auditors’ work, as the Group engagement team, provided sufficient
appropriate audit evidence as a basis for our opinion on the Group financial report as a whole.
Iluka Resources Limited, Annual Report 2017 125
125
125
Independent auditor’s report To the members of Iluka Resources Limited
For the year ended 31 December 2017
Key audit matters
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Committee.
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Committee.
Key audit matter
How our audit addressed the key audit matter
Key audit matter
Closure and rehabilitation provisions
Refer to Critical accounting estimates and judgements
in note 3 and Provisions in note 9 to the financial
report
Closure and rehabilitation provisions
Refer to Critical accounting estimates and judgements
in note 3 and Provisions in note 9 to the financial
report
As a result of its mining and processing operations, the
Group is obliged to restore and rehabilitate the
environment disturbed by these operations.
Rehabilitation activities are governed by a combination
of legislative requirements and Group policies. At
31 December 2017 the balance sheet included
provisions for such obligations of $669.2m. We placed
particular focus on the increased closure and
rehabilitation provisions of $119.5m and related
disclosure for the Group’s legacy operations in Virginia
due to the significant estimates made by the Group in
determining the likely outcome of the matters
identified and the quantum of possible outcomes which
may result in further costs to the Group.
As a result of its mining and processing operations, the
Group is obliged to restore and rehabilitate the
environment disturbed by these operations.
Rehabilitation activities are governed by a combination
of legislative requirements and Group policies. At
31 December 2017 the balance sheet included
provisions for such obligations of $669.2m. We placed
particular focus on the increased closure and
rehabilitation provisions of $119.5m and related
disclosure for the Group’s legacy operations in Virginia
due to the significant estimates made by the Group in
determining the likely outcome of the matters
identified and the quantum of possible outcomes which
may result in further costs to the Group.
This was a key audit matter given the determination of
these provisions required judgement in the assessment
of the nature and extent of the work to be performed,
the future cost of performing the work, the timing of
when the rehabilitation will take place and economic
assumptions such as the discount rate for future cash
outflows associated with rehabilitation activities.
This was a key audit matter given the determination of
these provisions required judgement in the assessment
of the nature and extent of the work to be performed,
the future cost of performing the work, the timing of
when the rehabilitation will take place and economic
assumptions such as the discount rate for future cash
outflows associated with rehabilitation activities.
How our audit addressed the key audit matter
We performed tests on key controls over the
assessment of the work required to rehabilitate
disturbed areas and the estimated future cost of that
work which forms the basis for the Group’s closure and
rehabilitation provision models for Australia, the US
and Sierra Leone.
We performed tests on key controls over the
assessment of the work required to rehabilitate
disturbed areas and the estimated future cost of that
work which forms the basis for the Group’s closure and
rehabilitation provision models for Australia, the US
and Sierra Leone.
We evaluated key assumptions utilised in these models
by performing the following procedures:
We evaluated key assumptions utilised in these models
by performing the following procedures:
comparing the rehabilitation costs being incurred
comparing the rehabilitation costs being incurred
at the Group’s sites which are no longer operating
at the Group’s sites which are no longer operating
to operating sites with similar expected
to operating sites with similar expected
rehabilitation profiles to check that rehabilitation
rehabilitation profiles to check that rehabilitation
estimates take into account current experience
estimates take into account current experience
assessing the ability of the Group to make reliable
estimates of the extent of future rehabilitation
expenditure by comparing actual cash outflows in
2017 to those forecast as part of the provision in
previous years
assessing the ability of the Group to make reliable
estimates of the extent of future rehabilitation
expenditure by comparing actual cash outflows in
2017 to those forecast as part of the provision in
previous years
examining the Group’s assessment of significant
changes in future cost estimates from the prior
year
examining the Group’s assessment of significant
changes in future cost estimates from the prior
year
reading expert reports obtained by the Group with
reading expert reports obtained by the Group with
respect to its rehabilitation obligations
respect to its rehabilitation obligations
assessing the Group’s range of probable outcomes
of the manner in which the rehabilitation of legacy
sites in Virginia is likely to occur
assessing the Group’s range of probable outcomes
of the manner in which the rehabilitation of legacy
sites in Virginia is likely to occur
comparing the rehabilitation costs being estimated
by external experts retained by the Group to the
cost inputs in the rehabilitation models
comparing the rehabilitation costs being estimated
by external experts retained by the Group to the
cost inputs in the rehabilitation models
evaluating the competency and independence of
the experts retained by the Group to assist with the
assessment of its rehabilitation obligations
evaluating the competency and independence of
the experts retained by the Group to assist with the
assessment of its rehabilitation obligations
126 Iluka Resources Limited, Annual Report 2017
126
126
Independent auditor’s report To the members of Iluka Resources Limited
For the year ended 31 December 2017
Key audit matter
How our audit addressed the key audit matter
Key audit matter
How our audit addressed the key audit matter
considering the timing of work to be performed in
life of mine plans and/or other environmental
requirements, and
considering the timing of work to be performed in
life of mine plans and/or other environmental
requirements, and
considering the appropriateness of the discount
rates and inflation rates utilised in calculating the
provision by comparing them to current market
consensus.
considering the appropriateness of the discount
rates and inflation rates utilised in calculating the
provision by comparing them to current market
consensus.
We also evaluated the accounting treatment applied to
changes in the rehabilitation provision, including
We also evaluated the accounting treatment applied to
whether they are expensed or capitalised, due to the
changes in the rehabilitation provision, including
Group’s significant proportion of sites which are no
whether they are expensed or capitalised, due to the
longer operating and require changes in the
Group’s significant proportion of sites which are no
rehabilitation provision to be expensed.
longer operating and require changes in the
rehabilitation provision to be expensed.
We assessed the rehabilitation provision acquired
through the acquisition of Sierra Rutile Limited as set
out in the key audit matter below – Finalisation of the
Sierra Rutile Limited business combination.
We assessed the rehabilitation provision acquired
through the acquisition of Sierra Rutile Limited as set
out in the key audit matter below – Finalisation of the
Sierra Rutile Limited business combination.
We focussed on significant judgements made by the
directors in finalising provisional fair value
measurements of Sierra Rutile Limited’s assets and
liabilities by assessing new information obtained about
facts and circumstances that existed at the acquisition
date in respect of:
We focussed on significant judgements made by the
directors in finalising provisional fair value
measurements of Sierra Rutile Limited’s assets and
liabilities by assessing new information obtained about
facts and circumstances that existed at the acquisition
date in respect of:
property, plant and equipment. We assessed the
property, plant and equipment. We assessed the
reasonableness of key revised model assumptions
in the Group’s fair value model. To do this we read
reasonableness of key revised model assumptions
the Group’s current life of mine plan, including
in the Group’s fair value model. To do this we read
resource to reserve conversion, and future areas of
the Group’s current life of mine plan, including
interest to be developed,
resource to reserve conversion, and future areas of
interest to be developed,
asset retirement obligations. We assessed key
asset retirement obligations. We assessed key
revised assumptions including expected timing and
quantum of cash outflows to rehabilitate the Sierra
Rutile operations, and
revised assumptions including expected timing and
quantum of cash outflows to rehabilitate the Sierra
Rutile operations, and
deferred tax assets. We assessed the resultant
deferred tax assets. We assessed the resultant
deferred tax impact of the fair value adjustments to
property, plant and equipment and asset
deferred tax impact of the fair value adjustments to
retirement obligations on the Group’s deferred tax
property, plant and equipment and asset
position.
retirement obligations on the Group’s deferred tax
position.
Finalisation of the Sierra Rutile Limited
business combination
Finalisation of the Sierra Rutile Limited
Refer to Business combination in note 6 to the
business combination
financial report
Refer to Business combination in note 6 to the
financial report
On 7 December 2016, a wholly owned subsidiary of the
Company merged with Sierra Rutile Limited for
On 7 December 2016, a wholly owned subsidiary of the
purchase consideration of $375m.
Company merged with Sierra Rutile Limited for
purchase consideration of $375m.
The acquisition of a business is complex and the
accounting standards require the Group to identify all
assets and liabilities of the newly acquired subsidiary
and estimate the fair value of each item. Given the
short period of time between acquisition date and the
year end, the Group assigned provisional fair values to
the identified assets and liabilities at 31 December
2016. Finalisation of the provisional fair values resulted
in an increase to property, plant and equipment of
$23.5m, deferred tax assets of $22.0m and asset
retirement obligations of $44.6m.
The acquisition of a business is complex and the
accounting standards require the Group to identify all
assets and liabilities of the newly acquired subsidiary
and estimate the fair value of each item. Given the
short period of time between acquisition date and the
year end, the Group assigned provisional fair values to
the identified assets and liabilities at 31 December
2016. Finalisation of the provisional fair values resulted
in an increase to property, plant and equipment of
$23.5m, deferred tax assets of $22.0m and asset
retirement obligations of $44.6m.
The finalisation of these fair values was a key audit
matter given its significance to the Group and that
significant judgement is involved in determining
provisional and final fair values to the assets and
liabilities acquired.
The finalisation of these fair values was a key audit
matter given its significance to the Group and that
significant judgement is involved in determining
provisional and final fair values to the assets and
liabilities acquired.
Iluka Resources Limited, Annual Report 2017 127
127
127
Independent auditor’s report To the members of Iluka Resources Limited
For the year ended 31 December 2017
Key audit matter
How our audit addressed the key audit matter
Key audit matter
Recognition and measurement of deferred tax
assets
Refer to Business combination in note 6 to the
financial report
Recognition and measurement of deferred tax
assets
Refer to Business combination in note 6 to the
financial report
As a result of the acquisition of Sierra Rutile Limited on
7 December 2016 and its operating performance for the
As a result of the acquisition of Sierra Rutile Limited on
year ended 31 December 2017, the Group recognised
7 December 2016 and its operating performance for the
$144.0m of deferred tax assets, primarily comprising
year ended 31 December 2017, the Group recognised
the anticipated benefit of existing tax losses reducing
$144.0m of deferred tax assets, primarily comprising
future tax payable as at 31 December 2017.
the anticipated benefit of existing tax losses reducing
future tax payable as at 31 December 2017.
The recognition and measurement of these deferred tax
assets was a key audit matter given that there was
significant judgement in assessing the availability of
these losses and the sufficiency of future taxable profits
to utilise these tax losses.
The recognition and measurement of these deferred tax
assets was a key audit matter given that there was
significant judgement in assessing the availability of
these losses and the sufficiency of future taxable profits
to utilise these tax losses.
How our audit addressed the key audit matter
We obtained a reconciliation of the tax losses of Sierra
Rutile Limited carried forward as at 31 December 2017
which was prepared by Sierra Rutile Limited’s tax
advisors in Sierra Leone. We found this to be materially
consistent with the Group’s underlying assessment of
carry forward tax losses as at 31 December 2017. We
also evaluated advice the Group received with respect
to the availability of these losses given the change in
control as a result of the acquisition.
We obtained a reconciliation of the tax losses of Sierra
Rutile Limited carried forward as at 31 December 2017
which was prepared by Sierra Rutile Limited’s tax
advisors in Sierra Leone. We found this to be materially
consistent with the Group’s underlying assessment of
carry forward tax losses as at 31 December 2017. We
also evaluated advice the Group received with respect
to the availability of these losses given the change in
control as a result of the acquisition.
We also evaluated the Group’s rationale for the
recognition and measurement of deferred tax assets of
We also evaluated the Group’s rationale for the
$144.0m. We evaluated the Group’s mine plan and
recognition and measurement of deferred tax assets of
financial model to assess the Group’s conclusion that
$144.0m. We evaluated the Group’s mine plan and
sufficient taxable income would likely be earned in the
financial model to assess the Group’s conclusion that
future to utilise the tax losses for which deferred tax
sufficient taxable income would likely be earned in the
assets have been recognised.
future to utilise the tax losses for which deferred tax
assets have been recognised.
Other information
Other information
The directors are responsible for the other information. The other information comprises the Business
review, Results for announcement to the market, Directors’ report, and Physical, financial and
corporate information included in the Group’s annual report for the year ended 31 December 2017 but
does not include the financial report and our auditor’s report thereon.
The directors are responsible for the other information. The other information comprises the Business
review, Results for announcement to the market, Directors’ report, and Physical, financial and
corporate information included in the Group’s annual report for the year ended 31 December 2017 but
does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and Corporations Act 2001 and
for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and Corporations Act 2001 and
for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
128 Iluka Resources Limited, Annual Report 2017
128
128
Independent auditor’s report To the members of Iluka Resources Limited
For the year ended 31 December 2017
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Report on the remuneration report
Our opinion on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 53 to 73 of the directors’ report for the
year ended 31 December 2017.
We have audited the remuneration report included in pages 53 to 73 of the directors’ report for the
year ended 31 December 2017.
In our opinion, the remuneration report of Iluka Resources Limited for the year ended 31 December
2017 complies with section 300A of the Corporations Act 2001.
In our opinion, the remuneration report of Iluka Resources Limited for the year ended 31 December
2017 complies with section 300A of the Corporations Act 2001.
Responsibilities
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
PricewaterhouseCoopers
Justin Carroll
Partner
Justin Carroll
Partner
Perth
Perth
27 February 2018
27 February 2018
Iluka Resources Limited, Annual Report 2017 129
129
129
Physical,
financial and
corporate
information
South-west operations, Western Australia
130 Iluka Resources Limited, Annual Report 2017
CREATING AND
DELIVERING
VALUE
Five year physical and financial summary
Operating mines physical data
Ore Reserves and Mineral Resources statement
Shareholder and investor information
Corporate information
132
134
135
142
144
Iluka Resources Limited, Annual Report 2017 131
Five year physical and financial summary
2017
2016
2015
2014
2013
Production volumes (kt)
- Zircon
- Rutile
- Synthetic rutile
Total Z/R/SR
- Ilmenite
Sales volumes (kt)
- Zircon
- Rutile
- Synthetic rutile
Total Z/R/SR
- Ilmenite
Weighted average annual prices (US$/t)
- Zircon (premium and standard)
- Zircon (all products)
- Rutile (excluding HYTI)
- Synthetic rutile
Average AUD:USD spot exchange rate (cents)
AUD:USD range (cents)
Unit revenue and cash cost ($/t)
Revenue per tonne Z/R/SR sold (A$/t)
Unit cash costs of production per tonne Z/R/SR
produced including by-product costs
Unit cost of goods sold per tonne of Z/R/SR
Summary financials ($m)
Z/R/SR revenue
Ilmenite and other revenue
Revenue from operations
Cash costs of production
Inventory movement - cash costs of production
Restructure and idle capacity charges
Government royalties
Marketing and selling costs
Asset sales and other income
Corporate and other costs
Resources development
Underlying mineral sands EBITDA1
Mining Area C EBITDA
Underlying Group EBITDA1
Rehabilitation and holding costs for closed sites
SRL transaction costs
Depreciation and amortisation
Inventory movement - non-cash production costs
Share of Metalysis Ltd losses (associate)
Significant non-cash items
Net interest and finance charges
Income tax (expense) benefit
Net profit (loss) after tax for the period (NPAT)
Operating cash flow
Capital expenditure
Free cash inflow (outflow)2 ($m)
Net (debt) cash
132 Iluka Resources Limited, Annual Report 2017
312.3
302.1
210.8
825.2
448.1
380.4
264.3
244.4
889.1
202.7
347.1
117.6
210.9
675.6
329.4
338.8
172.1
186.8
697.7
17.7
388.6
136.5
164.9
690
466.1
346.2
133.6
171.2
651
299.8
810
773
731
958
940
790
986
961
763
Not disclosed Not disclosed Not disclosed
75.2
69.2/82.3
74.4
68.6/78.0
76.7
71.8/80.6
357.6
177.2
-
534.8
365.4
352.2
182.0
82.0
616.2
316.6
285.1
127.0
59.0
471.1
584.5
370.2
168.0
46.2
584.4
337.5
1,054
1,033
828
750
90.3
81.1/94.9
1,171
1,150
1,075
1,150
96.8
88.5/105.9
1,079
439
743
959.1
58.4
1017.5
(372.4)
(141.5)
(73.3)
(25.2)
(33.8)
0.7
(47.1)
(24.6)
300.9
59.6
360.5
(127.4)
-
(111.0)
(66.8)
(3.3)
(185.4)
(32.2)
(6.0)
(171.6)
391.7
(93.1)
321.9
(182.5)
999
373
700
696.8
29.5
726.3
(260.6)
(107.6)
(69.5)
(20.4)
(36.3)
(0.6)
(53.8)
(79.4)
103.0
47.5
150.5
(42.6)
(14.1)
(79.9)
(57.3)
(3.3)
(201.0)
(30.0)
53.7
(224.0)
137.3
(82.5)
47.3
(506.3)
1,136
1,030
1,173
558
780
739.7
80.1
819.8
668
862
634.8
90.1
724.9
757
896
685.8
77.3
763.1
(392.5)
(381.9)
(376.1)
9.6
(38.3)
(21.0)
(32.0)
1.4
(52.7)
(58.4)
231.8
61.6
293.4
(2.7)
-
(132.0)
(15.3)
-
-
(56.4)
(33.1)
53.5
222.2
(66.4)
155.0
6.0
14.7
(40.1)
(10.6)
(30.1)
6.0
(48.4)
(45.3)
189.2
66.8
256.0
1.0
-
14.0
(69.6)
(15.2)
(28.2)
3.1
(42.1)
(44.9)
204.1
88.3
292.4
2.8
-
(191.7)
(181.7)
-
-
(82.0)
(31.8)
(14.0)
(62.5)
254.8
(48.3)
196.3
(59.0)
-
-
(40.0)
(49.5)
(5.5)
18.5
124.0
(52.5)
(27.5)
(206.6)
Capital and dividends
Ordinary shares on issue (millions)
Dividends per share in respect of the year (cents)
Franking level %
Opening year share price ($)
Closing year share price ($)
Financial ratios
Underlying Group EBITDA/revenue margin %
Mineral sands EBITDA/revenue margin %
Basic earnings (loss) per share (cents)
Free cash flow per share (cents)
Return on shareholders’ equity3 %
Return on capital4 %
Gearing (net debt/net debt + equity) %
Financial position as at 31 December ($m)
Total assets
Total liabilities
Net assets
Shareholders’ equity
Net tangible asset backing per share ($)
Employees, as at 31 December
Full-time equivalent employees5
Iluka Ore Reserves and Mineral Resources
Mineral Resources in situ HM tonnes
Ore Reserve in situ HM tonnes
HM grade (%) Ore Reserves
Assemblage6 (%)
- Zircon
- Rutile
- Ilmenite
Sierra Rutile Ore Reserves and Mineral Resources
Mineral Resources in situ rutile tonnes
Ore Reserves in situ rutile tonnes
2017
2016
2015
2014
2013
418.7
25
100
7.27
10.17
35.4
29.6
(41.0)
76.9
(20.1)
(11.6)
17.1
418.7
3
100
6.13
7.27
20.7
14.2
(53.6)
11.3
(17.1)
(18.3)
31.5
418.7
25
100
5.95
6.13
35.8
28.3
12.8
37.0
3.8
6.8
n/a
1947.0
(1061.5)
885.5
885.5
1.7
2442.3
(1339.3)
1103.0
1103.0
2.2
2103.3
(694.7)
1408.6
1408.6
3.3
418.7
19
100
8.63
5.95
35.3
26.1
(15.0)
46.9
(4.1)
(2.0)
3.9
2173.4
(738.8)
1434.6
1434.6
3.4
418.7
9
100
9.02
8.63
38.3
26.7
4.4
(6.6)
1.2
2.2
11.8
2368.7
(830.6)
1538.1
1538.1
3.7
2543
687
876
827
835
2017
2016
2015
2014
2013
172.9
23
5.7
18
6
53
176.4
24.9
5.4
18
6
52
178.7
26.6
5.6
19
6
52
169.4
16.4
5.8
19
4
52
170.5
16.7
5.9
19
4
52
2017
2016
7.3
3.8
7.5
3.9
1 Underlying Group EBITDA excludes adjustments including impairments, Sierra Rutile Limited transaction costs, changes to rehabilitation provisions
for closed sites. Underlying EBITDA also excludes Iluka’s share of Metalysis Ltd’s losses, which are non-cash in nature.
2
Free cash flow is determined as cash flow before any debt refinance costs, proceeds/repayment of borrowings and dividends paid in the year. 2016
free cash flow is stated before the acquisition cost of Sierra Rutile Limited of $375.4 million.
3 Calculated as NPAT for the year as a percentage of the average monthly shareholders equity over the year.
4 Calculated as EBIT for the year as a percentage of average monthly capital employed for the year.
5
2016 data excludes Sierra Rutile Limited.
6 Mineral assemblage is reported as a percentage of the in situ heavy mineral content.
Refer pages 109 to 115 of the Iluka Annual Report for Iluka’s Ore Reserves and Mineral Resources statement or refer to Iluka’s website www.iluka.com
The Ore Reserves and Mineral Resources for the Sierra Leone rutile deposits are reported separately as there is insufficient information to state the
assemblage in terms of a portion of the heavy mineral (HM) content which is traditionally done in reporting heavy minerals. Historical data focused on the in
situ rutile content which is honoured in the reporting of Ore Reserves and Mineral Resources for Sierra Leone.
Iluka Resources Limited, Annual Report 2017 133
Operating mines physical data
12 months to 31 December 2017
Mining
Overburden moved kbcm
Ore mined kt
Ore grade HM %
VHM grade %
Concentrating
HMC produced kt
VHM produced kt
VHM in HMC assemblage %
- Zircon
- Rutile
- Ilmenite
Processing
HMC processed kt
Finished product[1] kt
- Zircon
- Rutile
- Ilmenite
(saleable/upgradeable/WHIMS)
Synthetic rutile produced kt
Jacinth-
Ambrosia
Murray
Basin
Western
Australia
Australia
total
Virginia
816
620
4.6
4.1
11
10
90.7
65.9
6.1
18.7
-
-
-
-
-
-
-
-
-
-
210
1,635
12.0
11.7
248
218
88.0
15.7
5.6
66.7
1,026
2,255
10.0
9.6
259
229
88.1
17.9
5.6
64.6
437
225
270
932
-
-
-
-
-
-
-
-
-
-
-
Sierra
Leone
11
11,126
-
-
353
256
72.6
3.6
50.3
18.6
Group
total
2017
1,037
13,382
n/a
n/a
612
485
79.2
9.7
31.4
38.1
Group
total
2016
819
4,894
n/a
n/a
395
335
84.8
29.5
7.9
47.4
348
1,280
967
213.5
34.7
117.6
-
57.2
92.7
119.4
-
23.0
7.1
153.5
210.8
293.7
134.5
390.5
210.8
15.6
-
-
-
3.0
167.6
57.6
-
312.3
302.1
448.1
210.8
347.1
117.6
329.4
210.9
[1] Finished product includes material from heavy mineral concentrate (HMC) initially processed in prior periods.
Glossary
Overburden moved (bank cubic metres) refers to material moved to enable mining of an ore body.
Ore mined (thousands of tonnes) refers to material moved containing heavy mineral ore.
Ore grade HM % refers to percentage of heavy mineral (HM) found in the ore mined.
VHM grade % refers to percentage of valuable heavy mineral (VHM) – titanium dioxide (rutile and ilmenite), and zircon - found in a deposit.
Concentrating refers to the production of heavy mineral concentrate (HMC) through a concentrating process at the mine site, which is
then transported for final processing into finished product at one of the company’s two Australian mineral processing plants, or the Virginia
mineral processing plant.
HMC produced refers to HMC, which includes the valuable heavy mineral concentrate (zircon, rutile, ilmenite) as well as other non-
valuable heavy minerals (gangue).
VHM produced refers to an estimate of valuable heavy mineral in heavy mineral concentrate expected to be processed.
VHM produced and the VHM assemblage – provided to enable an indication of the valuable heavy mineral component in HMC.
HMC processed provides an indication of material emanating from each mining operation to be processed.
Finished product is provided as an indication of the finished production (zircon, rutile, ilmenite – both saleable and upgradeable)
attributable to the VHM in HMC production streams from the various mining operations. Finished product levels are subject to recovery
factors which can vary. The difference between the VHM produced and finished product reflects the recovery level by operation, as well
as processing of finished material/concentrate in inventory. Ultimate finished product production (rutile, ilmenite, and zircon) is subject to
recovery loss at the processing stage – this may be in the order of 10 per cent.
Ilmenite is produced for sale or as a feedstock for synthetic rutile production. Typically, one tonne of upgradeable ilmenite will produce
between 0.56 to 0.60 tonnes of SR. Iluka also purchases external ilmenite for its synthetic rutile production process. Refer Iluka’s website
www.iluka.com – Mineral Sands Technical Information for more detailed information on the mineral sands mining and production process.
134 Iluka Resources Limited, Annual Report 2017
Ore Reserves and Mineral Resources statement
HM Ore Reserves
Iluka HM Ore Reserve breakdown by country, region and JORC category at 31 December 2017
Summary of Ore Reserves for Iluka(1,2,3)
Ore
Reserve
category
Proved
Probable
Proved
Probable
HM Assemblage(4)
Ore
tonnes
millions
98
4
102
88
92
180
In situ HM
tonnes
millions
3.8
0.1
3.9
5.6
7.0
12.5
186
96
283
9.4
7.0
16.4
HM
grade
(%)
3.9
2.2
3.8
6.3
7.5
6.9
5.0
7.3
5.8
Ilmenite
grade
(%)
27
20
27
60
61
60
47
60
52
Zircon
grade
(%)
50
52
50
9
8
9
26
9
19
Rutile
grade
(%)
4
4
4
4
4
4
4
4
4
Change HM
tonnes
millions
(0.0)
(0.3)
(0.3)
Country
Australia
Total
Australia
Region
Eucla Basin
Eucla Basin
Perth Basin
Total
Perth Basin(5)
Proved
Probable
Total
Total
Grand total
Notes:
(1) Competent Person - Ore Reserves: C Lee (MAusIMM(CP)). The Ore Reserves in this table have been estimated in accordance with the JORC Code
(2012 edition), other than the Ore Reserves for the IPL North and South West deposits, which have not materially changed and have been estimated
in accordance with the JORC Code (2004 edition). Iluka Resources is undertaking further work in order to report these estimates in accordance with
the JORC Code (2012 edition).
(2) Ore Reserves are a sub-set of Mineral Resources.
(3) Rounding may generate differences in last decimal place.
(4) Mineral assemblage is reported as a percentage of in situ HM content.
(5) Rutile component in Perth Basin south west operations is sold as a leucoxene product.
(6) The quoted figures are stated as at the 31 December 2017 and have been depleted for all production conducted to this date.
Iluka Resources Limited, Annual Report 2017 135
Ore Reserves and Mineral Resources statement
Rutile Ore Reserves (Sierra Leone)
Iluka Rutile Ore Reserve for Sierra Leone by JORC Category at 31 December 2017
Summary of Ore Reserves for Iluka(1,2,3)
Ore
Reserve
category
Proved
Probable
Region
Sierra Leone
Sierra Leone
Ore
tonnes
millions
26
274
300
In situ
rutile
tonnes
millions
0.4
3.4
3.8
In situ mineral content(4)
Rutile
grade
(%)
1.5
1.2
1.3
Ilmenite(5)
grade
(%)
-
-
-
Zircon(5)
grade
(%)
-
-
Change
rutile
tonnes
millions
(0.1)
Country
Sierra Leone
Total
Notes:
(1) Competent Person - Ore Reserves: C Lee (MAusIMM(CP))
(2) Ore Reserves are a sub-set of Mineral Resources.
(3) Rounding may generate differences in last decimal place.
(4) Mineral content is reported as a percentage of in situ material.
(5) The ilmenite and zircon are only considered to be at an inferred level of confidence in the Mineral Resources estimates, and while present, currently
have a low value ascribed in the reserve optimisation process for Sierra Leone. This is not material to the economic viability.
(6) The quoted figures are stated as at 31 December 2017 and have been depleted for all production conducted to this date.
Ore Reserves are estimated using all available geological and relevant drill hole and assay data, including mineralogical sampling and test
work on mineral recoveries and final product qualities. Reserve estimates are determined by the consideration of all of the “modifying
factors” in accordance with the JORC Code 2004 and 2012, and for example, may include but are not limited to, product prices, mining
costs, metallurgical recoveries, environmental consideration, access and approvals. These factors may vary significantly between deposits.
The Ore Reserves and Mineral Resources for the Sierra Leone rutile deposits are reported separately as there is insufficient information
to state the assemblage in terms of a portion of the heavy mineral (HM) content which is traditionally done in reporting heavy minerals.
Historical data focused on the in situ rutile content which is honoured in the reporting of Ore Reserves and Mineral Resources for Sierra
Leone. An equivalent comparison of the rutile tonnages contained in Iluka’s Ore Reserves inventory for heavy minerals can be calculated
using the formula:
[Rutile tonnes = HM tonnes * rutile %] that is [16.7*(4/100)] = 0.7 Mt of rutile.
For the year ending 2017, HM Ore Reserves decreased by 0.3Mt HM associated with mining depletion and adjustments, down from
16.7Mt HM to 16.4Mt HM. The main factors contributing to the movement in Iluka’s HM Ore Reserves during 2017 include the following:
•
•
The Eucla Basin Ore Reserves decreased by 0.02Mt HM associated with mining depletion and pit re-design at Jacinth.
The Perth Basin Ore Reserves decreased by 0.26Mt HM as a result of mine depletion and adjustment at Tutunup South.
136 Iluka Resources Limited, Annual Report 2017
Ore reserves and mineral resources statement
HM Ore Reserves mined and adjusted
Iluka HM Ore Reserves mined and adjusted by country and region at 31 December 2017
Summary of Ore Reserve depletion(1)
In situ
HM
tonnes
millions
2016
2.0
2.0
3.9
0.3
12.5
12.8
2.3
14.4
16.7
In situ
HM
grade
(%)
2016
4.1
3.5
3.8
12.7
5.5
5.7
4.6
6.1
5.9
In situ
HM
tonnes
millions
mined
2017
In situ
HM
tonnes(2)
millions
adjusted
2017
(0.0)
-
(0.0)
(0.2)
-
(0.2)
(0.2)
-
(0.2)
(0.0)
-
(0.0)
(0.1)
-
(0.1)
(0.1)
-
(0.1)
In situ
HM
tonnes
millions
2017
2.0
2.0
3.9
0.0
12.5
12.5
2.0
14.4
16.4
In situ
HM
grade
(%)
2017
4.3
3.5
3.8
10.2
6.9
6.9
4.3
6.1
5.8
In situ
HM
tonnes(3)
millions
net
change
(0.0)
-
(0.0)
(0.3)
-
(0.3)
(0.3)
-
(0.3)
Country
Australia
Region
Eucla Basin
Category
Active mines
Non-active sites
Active mines
Non-active sites
Active mines
Non-active sites
Total
Australia
Eucla Basin
Perth Basin
Total
Perth Basin
Total
Total
Total
Notes:
Ore Reserves
(1) Rounding may generate differences in last decimal place.
(2) Adjusted figure includes write-downs and modifications in mine design.
(3) Net change includes depletion by mining and adjustments.
Rutile Ore Reserves mined and adjusted
Iluka rutile Ore Reserves mined and adjusted for Sierra Leone at 31 December 2017
Summary of Ore Reserve depletion(1)
In situ
rutile
tonnes
millions
2016
1.0
2.9
3.9
In situ
rutile
grade
(%)
2016
1.4
1.2
1.3
In situ
rutile
tonnes
millions
mined
2017
In situ
rutile
tonnes(2)
millions
adjusted
2017
(0.2)
-
(0.2)
0.1
-
0.1
In situ
rutile
tonnes
millions
2017
0.9
2.9
3.8
In situ
rutile
grade
(%)
2017
1.4
1.2
1.3
In situ
rutile
tonnes(3)
millions
net change
(0.1)
-
(0.1)
Country
Sierra Leone Sierra Leone
Region
Category
Active mines
Non-active sites
Sierra Leone
Total
Notes:
(1) Rounding may generate differences in last decimal place.
(2) Adjusted figure includes write-downs and modifications in mine design.
(3) Net change includes depletion by mining and adjustments.
The rutile Ore Reserves for Sierra Leone decreased by 0.1Mt rutile associated with mining depletion and adjustment at Lanti, Gangama
and Gbeni, down from 3.9Mt rutile to 3.8Mt rutile.
Iluka Resources Limited, Annual Report 2017 137
Ore Reserves and Mineral Resources statement
HM Mineral Resources
Iluka HM Mineral Resources breakdown by country, region and JORC category at 31 December 2017
Summary of Mineral Resources for Iluka(1,2,3)
Mineral
resource
category
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Country
Australia
Region
Eucla Basin
Total
Australia
Eucla Basin
Murray Basin
Total
Australia
Murray Basin
Perth Basin
Total
USA
Perth Basin(5)
Atlantic Seaboard
Total
Sri Lanka
Atlantic Seaboard(6)
Sri Lanka
Total
Sri Lanka(7)
Total
Total
Total
Grand Total
Notes:
Material
tonnes
millions
228
85
74
In situ HM
tonnes
millions
7.1
8.1
3.7
HM assemblage(4)
In situ
HM
grade
(%)
3.1
9.5
5.1
Ilmenite
grade
(%)
32
65
60
Zircon
grade
(%)
44
20
20
Rutile
grade
(%)
4
2
2
Change HM
tonnes
millions
387
16
88
85
189
485
309
217
1,011
52
43
16
111
214
36
440
690
995
561
832
18.9
4.4
18.5
10.1
33.0
28.5
16.7
11.0
56.2
2.1
2.4
0.5
5.0
22.2
3.1
31.0
56.3
64.3
48.8
56.3
2,388
169.4
4.9
27.6
21.0
11.9
17.5
5.9
5.4
5.1
5.6
4.1
5.6
2.9
4.5
10.4
8.6
7.0
8.2
6.5
8.7
6.7
7.1
52
62
56
49
54
58
54
55
56
65
65
61
64
70
69
66
67
60
58
61
60
29
11
11
10
11
10
9
10
10
12
10
11
11
3
4
4
4
12
11
7
10
3
11
14
14
13
5
5
5
5
-
-
-
-
4
3
5
4
5
8
6
6
(0.0)
-
(0.9)
(0.23)
-
(1.1)
(1) Competent Person - Mineral Resources: B Gibson (MAIG).
(2) Mineral Resources are inclusive of Ore Reserves.
(3) Rounding may generate differences in last decimal place.
(4) Mineral assemblage is reported as a percentage of the in situ HM component.
(5) Rutile component in Perth Basin South West operations is sold as a leucoxene product.
(6) Rutile is included in Ilmenite for the Atlantic Seaboard region.
(7) The Sri Lanka resource estimates are based on a 100 per cent ownership basis which applies to the exploration stage. The Sri Lankan Exchange
Control Act currently limits the percentage holding of a foreign entity in a Sri Lankan mining company to 40 per cent, although approval for up to
100% may be granted.
138 Iluka Resources Limited, Annual Report 2017
Rutile Mineral Resources (Sierra Leone)
Iluka rutile Mineral Resources for Sierra Leone by JORC category at 31 December 2017
Summary of Mineral Resources for Iluka(1,2,3)
Country
Sierra Leone
Region
Sierra Leone
Mineral
Resource
category
Measured
Indicated
Inferred
Material
tonnes
millions
51
525
126
In situ
rutile
tonnes
millions
0.6
5.3
1.3
Total
Notes:
Sierra Leone
701
7.3
(1) Competent Person - Mineral Resources; B Gibson (MIAG).
(2) Mineral Resources are reported inclusive of Ore Reserves.
(3) Rounding may generate differences in last decimal place.
(4) Mineral assemblage is reported as a percentage of in situ material.
In situ mineral content(4)
Change
rutile
tonnes
millions
Ilmenite(5)
grade
(%)
0.3
0.2
0.1
Zircon(5)
grade
(%)
0.2
0.1
0.0
0.2
0.1
(0.2)
Rutile
grade
(%)
1.3
1.0
1.0
1.0
(5) Ilmenite and zircon are included for tabulation purposes under the Measured and Indicated Resource Categories. The confidence in the Mineral
Resource estimates for Ilmenite and zircon are only considered to be at an Inferred level of confidence and should not be used in the estimation of
Ore Reserves.
Mineral Resources are estimated using all available and relevant geological, drill hole and assay data, including mineralogical sampling
and test work on mineral and final product qualities. Resource estimates are determined by consideration of geology, heavy mineral (HM)
cut-off grades, mineralisation thickness vs. overburden ratios and consideration of the potential mining and extraction methodology and
are prepared in accordance with the 2012 JORC Code. These factors may vary significantly between deposits.
For the year ending 2017, Mineral Resources (excluding the Mineral Resources attributable to the Sierra Rutile acquisition) decreased by
1.1Mt HM net of mining depletion and adjustments (sale, relinquishment, exploration discovery and development and write-downs) down
from 170.5Mt HM to 169.4Mt HM.
The change in Mineral Resources for 2017 was driven by the following:
•
•
•
•
Eucla Basin Mineral Resources decreased by less than 0.01Mt HM principally as a result of mining depletion at Jacinth following re-
commencement of operations during December 2017.
The Perth Basin Mineral Resources decreased by 0.88Mt HM principally associated with mining depletion and write down of Tutunup
South (0.44Mt HM). Decreases in Mineral Resources were recorded as a result of re-estimation and write-downs for Yarloop (0.14Mt
HM), Yoganup Extended (0.11Mt HM) and the Northern leases/extensions (0.18Mt HM).
Atlantic Seaboard Mineral Resources decreased by 0.23Mt HM as a result of a write down for Brink with rehabilitation of the site
now in progress.
The rutile Mineral Resources for Sierra Leone decreased by 0.21Mt rutile associated with mining depletion at Lanti, Gangama and
Gbeni, down from 7.51Mt rutile to 7.30Mt rutile.
Iluka Resources Limited, Annual Report 2017 139
Ore Reserves and Mineral Resources statement
HM Mineral Resources mined and adjusted
Iluka Mineral Resources mined and adjusted by country and region at 31 December 2017
Summary of Mineral Resource depletion(1)
In situ
HM
tonnes
millions
2016
2.3
16.6
18.9
-
33.0
33.0
0.5
56.6
57.0
-
5.2
5.2
-
56.3
56.3
2.8
167.7
170.5
In situ
HM
grade
(%)
2016
3.9
5.1
4.9
-
17.5
17.5
9.7
5.5
5.5
-
7.4
4.4
-
8.2
8.2
4.3
7.1
7.0
In situ
HM
tonnes
millions
mined
2017
In situ
HM
tonnes(2)
millions
adjusted
2017
(0.0)
-
(0.0)
-
-
-
(0.2)
-
(0.2)
-
-
-
-
-
-
(0.2)
-
(0.2)
0.0
-
0.0
-
-
-
(0.2)
(0.4)
(0.7)
-
(0.2)
(0.2)
-
-
-
(0.2)
(0.7)
(0.9)
In situ
HM
tonnes
millions
2017
2.3
16.6
18.9
-
33.0
33.0
0.0
56.1
56.2
-
5.0
5.0
-
56.3
56.3
2.3
167.0
169.4
In situ
HM
grade
(%)
2017
3.8
5.1
4.9
-
17.5
17.5
8.5
5.6
5.6
-
4.5
4.5
-
8.2
8.2
3.9
7.2
7.1
In situ
HM
tonnes(3)
millions
net
change
(0.0)
-
(0.0)
-
-
-
(0.4)
(0.4)
(0.9)
-
(0.2)
(0.2)
-
-
-
(0.4)
(0.7)
(1.1)
Country
Australia
Region
Eucla Basin
Total
Australia
Eucla Basin
Murray Basin
Total
Australia
Murray Basin
Perth Basin
Total
USA
Perth Basin
Atlantic Seaboard
Total
Sri Lanka
Atlantic Seaboard
Sri Lanka
Total
Sri Lanka
Total
Total
Total
Notes:
Mineral Resources
Category
Active mines
Non-active sites
Active mines
Non-active sites
Active mines
Non-active sites
Active mines
Non-active sites
Active mines
Non-active sites
Active mines
Non-active sites
(1) Rounding may generate differences in last decimal place.
(2) Adjusted figure includes write-downs and modifications in mine design.
(3) Net difference includes depletion by mining and adjustments.
Rutile Mineral Resources mined and adjusted (Sierra Leone)
Iluka rutile Mineral Resources mined and adjusted for Sierra Leone at 31 December 2017
Summary of Mineral Resource depletion(1)
In situ
rutile
tonnes
millions
2016
2.0
5.5
7.5
In situ
rutile
grade
(%)
2016
1.2
1.0
1.0
In situ
rutile
tonnes
millions
mined
2017
In situ
rutile
tonnes(2)
millions
adjusted
2017
(0.2)
-
(0.2)
(0.0)
-
(0.0)
In situ
rutile
tonnes
millions
2017
1.8
5.5
7.3
In situ
rutile
grade
(%)
2017
1.2
1.0
1.0
In situ
rutile
tonnes(3)
millions
net
change
(0.2)
-
(0.2)
Country
Sierra Leone Sierra Leone
Region
Sierra Leone
Total
Notes:
Category
Active mines
Non-active sites
(1) Rounding may generate differences in last decimal place.
(2) Adjusted figure includes write-downs and modifications in mine design.
(3) Net difference includes depletion by mining and adjustments.
140 Iluka Resources Limited, Annual Report 2017
Annual statement of Mineral Resources and Ore Reserves
The Annual Statement of Mineral Resources and Ore Reserves as at 31 December 2017 presented in this report has been prepared
in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2012 Edition (the
JORC Code 2012) and ASX listing rules and disclosed in the announcement dated the 20/2/2017. Information prepared and disclosed
under the JORC Code 2004 edition which has not materially changed since last reported has not been updated. Iluka is not aware of
any new information or data that materially affects the information included in this Annual Statement and confirms that the all the material
assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not
materially changed.
Competent Persons statement
The information in this report that relates to Mineral Resources is based on information compiled by Mr Brett Gibson who is a Member of
the Australian Institute of Geoscientists.
The information in this report that relates to Ore Reserves is based on information compiled by Mr Chris Lee who is a member of the
Australasian Institute of Mining and Metallurgy (AUSIMM).
Mr Gibson and Mr Lee are full-time employees of Iluka Resources.
Mr Gibson and Mr Lee have sufficient experience that is relevant to the styles of mineralisation and types of deposits under consideration
and to the activity which is being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves, the JORC Code 2012 Edition. Mr Gibson and Mr Lee consent to
the inclusion in this report of the matters based on his information in the form and context in which it appears.
The information in this report that relates to specific Mineral Resources and Ore Reserves is based on and accurately reflects reports
compiled by Competent Persons as defined in the JORC Code 2012 for each of the company regional business units. Each of these
persons is a full-time employee of Iluka Resources Limited or its relevant subsidiaries, holds equity securities in Iluka Resources Limited
and is entitled to participate in Iluka’s executive equity long term incentive plan, details of which are included in Iluka’s 2017 remuneration
report.
All the Competent Persons named are Members of The Australasian Institute of Mining and Metallurgy and/or The Australian Institute
of Geoscientists and/or the relevant jurisdiction Recognised Overseas Professional Organisation (ROPO) and have sufficient experience
which is relevant to the styles of mineralisation and types of deposits under consideration and to the activity they are undertaking to qualify
as a Competent Person as defined in the JORC Code 2012. At the reporting date, each Competent Person listed in this report is a full-
time employee of Iluka Resources Limited or one of its subsidiaries. Each Competent Person consents to the inclusion of material in the
form and context in which it appears.
All of the Mineral Resource and Ore Reserve figures reported represent estimates as at 31 December 2017. All tonnes and grade
information has been rounded, hence small differences may be present in the totals. All of the Mineral Resource information is inclusive of
Ore Reserves (i.e. Mineral Resources are not additional to Ore Reserves).
Mineral Resources and Ore Reserves corporate governance
Iluka has an established governance process supporting the preparation and publication of Mineral Resources and Ore Reserves which
includes a series of structures and processes independent of the operational reporting through business units and product groups.
The Audit and Risk Committee has in its remit the governance of resources and reserves. This includes an annual review of Mineral
Resources and Ore Reserves at a Group level, as well as review of findings and progress from the Group Resources and Reserves internal
audit programme within the regular meeting schedule.
Mineral Resources and Ore Reserves are estimated by Iluka personnel or suitably qualified independent personnel using industry standard
techniques and supported by internal guidelines for the estimation and reporting of Mineral Resources and Ore Reserves.
All Mineral Resources and Ore Reserves estimates and supporting documentation is reviewed by Competent Persons employed by Iluka.
If there is a material change in the estimate of a Mineral Resource, the modifying factors for the preparation of Ore Reserves, or reporting
an inaugural Mineral Resource and Ore Reserve and if it is considered prudent to have an external review then the estimate and supporting
documentation in question is reviewed by a suitably qualified independent Competent Person.
The Iluka Mineral Resource and Ore Reserve position is reviewed annually by a suitably qualified independent Competent Person prior to
publication and the governance process is also audited by an independent body (PwC).
Iluka has continued the development of internal systems and controls in order to meet JORC (2012) guidelines in all external reporting
including the preparation of all reported data by Competent Persons as members of The Australasian Institute of Mining and Metallurgy
(The AusIMM), The Australian Institute of Geoscientists (AIG) or ROPOs.
The establishment of an enhanced governance process has also been supported by a number of process improvements and training
initiatives over recent years, including a web-based group reporting and sign-off database, annual internal Competent Person reports and
Competent Person development and training.
Iluka Resources Limited, Annual Report 2017 141
Shareholder and investor information
As at 31 January 2018
Australian Securities Exchange listing
Iluka’s shares are listed on the Australian Securities Exchange (ASX) Limited. The company is listed as “Iluka” with an ASX code of ILU.
Shares on issue
The company had 418,701,360 shares on issue as at 31 January 2018. A total of 767,470 ordinary shares are restricted pursuant to the
directors, executives and employees share acquisition plan, equity incentive plan and employee share plan.
Shareholdings
There were 19,780 shareholders. Voting rights, on a show of hands, are one vote for every registered holder and on a poll, are one vote
for each share held by registered holders.
Distribution of shareholdings
Size of shareholding
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 1,000,000
1,000,001 and over
Unmarketable parcel (less than $500)
Top 20 shareholders (nominee company holdings)
Shareholder
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd (DRP)
BNP Paribas Nominees Pty Ltd (Agency Lending DRP)
HSBC Custody Nominees (Australia) Limited
Australian Foundation Investment Company Limited
Citicorp Nominees Pty Limited
National Nominees Limited
(Agency Lending Collateral)
Argo Investments Limited
AMP Life Limited
Australian Foundation Investment Company Limited
CS Third Nominees Pty Limited
R O Henderson (Beehive) Pty Limited
UBS Nominees Pty Ltd
SBN Nominees Pty Limited
BNP Paribas Noms (NZ) Ltd (DRP)
Mirrabooka Investments Limited
Number of holders
11,322
6,740
1,055
611
35
17
1,153
Number of shares
% of issued capital
135,179,604
85,768,549
49,913,479
44,842,729
18,296,623
12,475,353
3,362,723
2,367,000
2,230,496
1,850,000
1,833,000
1,700,000
1,511,605
1,275,000
1,187,012
1,145,000
1,074,662
1,000,000
909,713
900,000
32.29
20.48
11.92
10.71
4.37
2.98
0.80
0.57
0.53
0.44
0.44
0.41
0.36
0.30
0.28
0.27
0.26
0.24
0.22
0.21
Substantial shareholders (as provided in disclosed substantial shareholder notices to the company)
Shareholder
Size of shareholding
% of issued capital
Schroder Investment Management Australia Limited
Blackrock Investment Management (Australia) Limited
Cooper Investors Pty Limited
Sumitomo Mitsu Trust Holdings, Inc (SMTH)
Paradice Investment Management Pty Ltd
142 Iluka Resources Limited, Annual Report 2017
36,429,953
35,260,285
27,325,760
25,794,175
22,335,344
8.70%
8.42%
6.53%
6.16%
5.33%
Calendar of key events 2018
27 February
19 April
22 April 9:30am (WST)
24 April 9:30am (WST)
24 July
15 August
26 October
31 December
Announcement of financial results
March quarter report
Closure of acceptances of proxies for AGM
Annual General Meeting – Perth
June quarter report
Announcement of half year financial results
September quarter report
31 December financial year end
All dates are indicative and subject to change. Shareholders are advised to check with the company to confirm timings.
Shareholder and new investor information
Key shareholder information – Iluka website
To assist those considering an investment in the company, the investors and media section of the Iluka website contains key shareholder
information, which includes the calendar of events.
This site contains information on Iuka’s products, marketing, operations, ASX releases and financial and quarterly reports. It also contains
links to other sites, including the share registry.
Investor relations enquiries
Adele Stratton
General Manager Finance, Investor Relations and Corporate Affairs
Level 23, 140 St Georges Terrace
Perth WA 6000
Telephone: +61 8 9360 463
Mobile: +61 415 999 005
Email: adele.stratton@iluka.com
Dividends
Iluka’s Board of directors typically makes each determination on dividend payments twice a year. Iluka will be operating a dividend
reinvestment plan (DRP) in 2018.
Share registry services
Shareholders who require information about their shareholdings, dividend payments or related administrative matters should contact the
company’s share registry:
Computershare Investor Services Pty Limited
Level 11, 172 St Georges Terrace
Perth, WA 6000
Telephone: 1300 733 043 (within Australia) or +61 3 9415 4000 (outside Australia)
Facsimile: +61 3 9473 2500
Postal address
GPO Box 2975
Melbourne VIC 3001
Website: www.investorcentre.com
Annual reports and email notification of major accounts
Shareholders can elect to receive a printed copy of the Annual Report and/or receive an email notification related to major company
events. Please contact Computershare.
Each enquiry should refer to the shareholder number which is shown on issuer-sponsored holding statements and dividend statements.
Iluka Resources Limited, Annual Report 2017 143
Corporate information
Company details
Iluka Resources Limited
ABN: 34 008 675 018
Registered office
Level 23, 140 St Georges Terrace
Perth, Western Australia, 6000
Postal address
GPO Box U1988
Perth, Western Australia, 6845 Australia
Telephone: +61 8 9360 4700
Facsimile: +61 8 9360 4777
Company Secretary
Sue Wilson, Company Secretary
Nigel Tinley, Joint Company Secretary
Website
www.iluka.com
The site contains information on Iluka’s products, marketing, operations, ASX releases and financial and quarterly reports. It also contains
links to other sites, including the share registry.
Notice of Annual General Meeting
Iluka’s 63rd Annual General Meeting of Shareholders will be held in River View Room 5 at the Perth Convention and Exhibition Centre, 21
Mounts Bay Road, Perth, Western Australia, on Tuesday, 24 April 2018 commencing at 9:30am (WST).
Disclaimer – forward-looking statements
This document has been prepared by Iluka Resources Limited (Iluka). By viewing this document you acknowledge that you have read and
understood the following statement.
Forward-looking statements
This document contains certain statements which constitute “forward-looking statements”.
Often, but not always, forward-looking statements can generally be identified by the use of forward-looking words such as “may”, “will”,
“expect”, “plan”, “believes”, “estimate”, “anticipate”, “outlook” and “guidance”, or similar expressions, and may include, without limitation,
statements regarding plans; strategies and objectives of management; anticipated production and production potential; estimates of
future capital expenditure or construction commencement dates; expected costs or production outputs; estimates of future product
supply, demand and consumption; statements regarding future product prices; and statements regarding the expectation of future Mineral
Resources and Ore Reserves.
Where Iluka expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith
and on a reasonable basis. No representation or warranty, express or implied, is made by Iluka that the matters stated in this document
will in fact be achieved or prove to be correct.
The information is based on Iluka forecasts and as such is subject to variation related to, but not restricted to, economic, market demand/
supply and competitive factors. It is Iluka’s approach to modify its production settings based on market demand, and this can have a
significant effect on operational parameters and associated physical and financial characteristics of the company.
Forward-looking statements are only predictions and are subject to known and unknown risks, uncertainties, assumption and other
important factors that could cause the actual results, performances or achievements of Iluka to differ materially from future results,
performances or achievements expressed, projected or implied by such forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the date thereof. Such risks and factors include, but are
not limited to: changes in exchange rate assumptions; changes in product pricing assumptions; major changes in mine plans and/or
resources; changes in equipment life or capability; emergence of previously underestimated technical challenges; increased costs and
demand for production inputs; and environmental or social factors which may affect a licence to operate, including political risk.
Capital estimates include contingency and risk allowances commensurate with international estimating classification systems.
144 Iluka Resources Limited, Annual Report 2017
To the extent permitted by law, Iluka, its officers, employees and advisors expressly disclaim any responsibility for the accuracy or
completeness of the material contained in this document and exclude all liability whatsoever (including in negligence) for any loss or
damage which may be suffered by a person as a consequence of any information in this document or any error or omission therefrom.
Iluka does not undertake to release publicly any revisions to any forward-looking statement to reflect events or circumstances after the
date of this document, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.
No independent third party has reviewed the reasonableness of the forward-looking statements or any underlying assumptions.
Non-IFRS financial information
This document contains non-IFRS financial measures including cash production costs, non-production costs, mineral sands EBITDA,
Underlying Group EBITDA, EBIT, free cash flow, and net debt amongst others. Iluka management considers these to be key financial
performance indicators of the business and they are defined and/or reconciled in Iluka’s annual results materials and/or Annual Report.
Non-IFRS measures have not been subject to audit or review.
All figures are expressed in Australian dollars unless stated otherwise.
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Iluka Resources Limited, Annual Report 2017 145
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www.iluka.com