Annual Report
2019
1
DELIVER
SUSTAINABLE
VALUE
Iluka Resources Limited, Annual Report 2019 PRODUCTS
OTHER
PRODUCTS
Iluka recovers and markets
activated carbon and iron
concentrate, which are
produced as a part of the
synthetic rutile process.
The company also has
a burgeoning interest in
monazite, from which rare
earth elements are derived.
Certain rare earths are
considered a critical input
across a number of rapidly
evolving markets, including
permanent magnets used in
electric cars, wind turbines
and electronics.
TiO2
TITANIUM
DIOXIDE
Iluka is the world’s largest
producer of natural rutile
and a major producer of
synthetic rutile, which is an
upgraded form of ilmenite.
Collectively, these products
are referred to as high-grade
titanium dioxide feedstocks,
owing to their high titanium
content. Primary uses include
pigment (paints), titanium
metal and welding.
Zr
ZIRCON
Iluka is the world’s largest
producer of zircon. Zircon
is opaque; and heat, water,
chemical and abrasion
resistant. Primary uses
include ceramics; refractory
and foundry; and zirconium
chemicals.
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Iluka Resources Limited, Annual Report 2019 MINERAL SANDS
PART OF EVERYDAY LIFE
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’S MATERIALS ARE ALSO USED
IN END-USE PRODUCTS WHICH CREATE SUSTAINABLE BENEFITS, INCLUDING
RENEWABLE ENERGY TECHNOLOGIES.
PHOTOCATALYTICS
ROOF/BUILDING/CONSTRUCTION
The photocatalytic properties of titanium dioxide (TiO2) have
driven new and innovative applications. Titanium dioxide
products are used in self-cleaning windows, air and water
purification systems, light emitting diodes and solar cells.
Electrical insulators, bricks/cement, fibre optics, exterior
and interior paint, tiles, anti-pollution coatings.
SUSTAINABLE DEVELOPMENT PRODUCTS
HOME/OFFICE
Renewable energy technologies (solar panels, wind turbines
and electric vehicles), wastewater treatment, potable water
filtration, air purification, desalination plants, and energy
efficient reflective roof coatings.
Mobile phones, plastic, printer inks, paper, packaging.
KITCHEN
HEALTHCARE AND MEDICINE
Light bulbs, dishes, glasses, clock parts, food colouring,
ceramic knives, pans.
Prosthetics, orthopaedic implants, medical instruments.
CERAMICS
PIGMENTS
Most types of ceramic tiles used for floor and wall coverings
contain zircon. Zircon contributes to whiteness, opacity, and
the abrasion and chemical resistance that tiles provide.
Paint coatings, inks, plastic and ceramics use titanium
dioxide in the form of pigment.
BATHROOM/LIFESTYLE
AUTOMOTIVE
Ceramics, sanitary and toilet basins, glass, faucets for
taps, cosmetics, pharmaceutical products, toothpaste,
antiperspirants, sunscreens.
Brake linings/pads, car parking sensors, automotive paint,
catalytic converters, automotive electrics, rubber products.
SPORTING GOODS AND RECREATION
AIRCRAFT AND INDUSTRY
Golf clubs, tennis racquets, bicycle frames.
Titanium metal, desalination plants, zirconium metal, corrosion
resistant coatings.
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Iluka Resources Limited, Annual Report 2019 ABOUT ILUKA
RESOURCES
MINERAL SANDS
PROCESS
GEOLOGICAL SETTING
1
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.
MINING APPROACH
2
Mineral sands mining involves both dry mining and wet (dredge
or hydraulic) operations. All of Iluka’s current mining operations
use a dry mining approach. Mining units and wet concentrator
plants separate ore from waste material and concentrate the
heavy mineral sands.
MINERAL SEPARATION
3
The heavy mineral concentrate is transported from the mine
to a mineral separation plant for final product processing.
The plant separates the heavy minerals zircon, rutile and ilmenite
from each other in multiple stages by magnetic, electrostatic and
gravity separation.
SYNTHETIC RUTILE
4
Iluka also produces synthetic rutile from ilmenite that is upgraded by
high temperature chemical processes.
REHABILITATION
5
As mining progresses, the mining pit is backfilled and covered
with stockpiled soils that were removed at the start of the mining
process. Rehabilitation is undertaken progressively to return land to
a form similar to its pre-mining state and suitable for various uses
including agricultural, pastoral and native vegetation.
MARKETING
6
Iluka transports the final products of zircon, rutile, synthetic rutile
and ilmenite to customers around the world.
lluka Resources Limited (Iluka) is primarily
an international mineral sands company with
expertise in exploration, project development,
mining operations, processing, marketing
and rehabilitation.
Its core objective is to deliver sustainable value
by leveraging the company’s expertise and over
60 years of mineral sands industry experience.
The company is the largest producer of zircon
and rutile globally and a major producer of
synthetic rutile. Iluka’s products are used in an
increasing array of applications including home,
workplace, medical, lifestyle and industrial uses.
With over 3,000 direct employees, the company
has operations and projects in Australia
and Sierra Leone; and a globally integrated
marketing network.
Iluka conducts international exploration
activities and is actively engaged in the
rehabilitation of previous operations in the
United States, Australia and Sierra Leone.
Listed on the Australian Securities Exchange
and headquartered in Perth, the company
has a royalty business with a world-class
cornerstone royalty asset over iron ore sales
revenues from tenements of BHP’s Mining
Area C (MAC) province in the north west of
Western Australia.
THE COMPANY
IS THE LARGEST
PRODUCER
OF ZIRCON AND
RUTILE GLOBALLY
AND A MAJOR
PRODUCER OF
SYNTHETIC RUTILE
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Iluka Resources Limited, Annual Report 2019 WHERE WE OPERATE
UNITED STATES
Rehabilitation
SIERRA LEONE
Sierra Rutile mining, concentrating
and processing operations
Sembehun project
Rehabilitation
SRI LANKA
Puttalam project
WESTERN
AUSTRALIA
Narngulu processing
Cataby mining and concentrating
Capel synthetic rutile processing
Corporate support centre
Rehabilitation
Eneabba mineral sands
recovery project
SOUTH
AUSTRALIA
Jacinth-Ambrosia mining
and concentrating
Atacama project
Rehabilitation
VICTORIA
Wimmera project
Rehabilitation
NEW SOUTH
WALES
Balranald project
OPERATIONS,
RESOURCE
DEVELOPMENT AND
REHABILITATION
ACTIVITIES
3
Iluka Resources Limited, Annual Report 2019 Capel synthetic rutile kiln, Western Australia
ABOUT THIS REPORT
This Annual Report is a summary of Iluka Resources Limited and
its subsidiaries’ operations, activities and financial position as at
31 December 2019. Currency is expressed in Australian dollars (AUD)
unless otherwise stated.
Iluka publishes annually a separate Sustainability Report, in accordance
with the Global Reporting Initiative Framework. The company plans to
publish its 2019 Sustainability Report in April 2020 and will cover the
company’s sustainability performance for the period 1 January to
31 December 2019.
Current and previous Sustainability Reports are available on the
company’s website – www.iluka.com. Iluka also plans to publish
its Tax and Other Payments to Governments Report in April 2020.
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.
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OVER 3000
EMPLOYEES
GLOBALLY
Iluka Resources Limited, Annual Report 2019 DELIVER SUSTAINABLE VALUE
BUSINESS REVIEW
2019 year in review
Chairman’s review
Managing Director’s review
Board and Executive
Financial summary
Strategy and business model
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
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8
10
12
14
18
20
38
40
44
45
56
81
82
136
137
144
146
148
155
157
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Iluka Resources Limited, Annual Report 2019
Cataby, Western Australia
2019 YEAR
IN REVIEW
UNDERLYING
EBITDA
$616m
CATABY MINE
COMMISSIONED
APRIL
$270m
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SOLID UNDERLYING FINANCIALS
•
$616 million underlying Group EBITDA — third highest on record — building on strong
performance of $600 million EBITDA in 2018
• Mineral sands revenue of $1,193 million, down 4% from 2018 reflecting mixed
market conditions
• Reported net loss after tax of $300 million impacted by Sierra Rutile write-down of
$414 million (US$290 million) combined with the associated removal of $162 million
(US$115 million) deferred tax asset
• Solid free cash flow of $140 million, delivered after capital expenditure of $198 million
•
$43 million net cash position as at 31 December 2019
• Mining Area C royalty contribution of $85 million
•
Total dividend payment of 13 cents per share, fully franked (5 cents per share interim
dividend; 8 cents per share final dividend) reflects 40% of free cash flow in line with
dividend framework
MIXED MARKET CONDITIONS
• Demand for Iluka’s product suite of high-grade titanium feedstocks (rutile and synthetic
rutile) was solid throughout the year, with tight supply providing support for price growth
•
Zircon demand was affected by US-China trade tensions and other sources of global
economic uncertainty, which impacted end market sentiment and customer purchasing
• Pressure on tile producers to remain competitive and reduce costs has shifted some
demand to lower grades of zircon and increased instances of thrifting. Iluka maintained a
stable Zircon Reference Price, augmented its product offering and introduced new initiatives
to support customers
PROJECTS DELIVERED
• New mine commissioned at Cataby, Western Australia in April 2019 for $270 million
• SR2 kiln, Western Australia, major maintenance outage (MMO) ensured the kiln was prepared
to receive ilmenite from Cataby to produce synthetic rutile for the next four year campaign.
Delivered ahead of schedule and on budget, the MMO has additionally facilitated an increase
in SR2’s processing capacity from ~205ktpa to 225ktpa
• Gangama, Sierra Leone, doubling of capacity by duplication of existing design
•
Lanti, Sierra Leone, doubling of capacity with addition of second mining unit and repurposed
concentrator
• Ambrosia, South Australia, mine move to new deposit to provide capacity and flexibility to
maintain zircon production at current levels over future years
• All projects delivered on or ahead of schedule and on or under budget
PROPOSED DEMERGER OF ROYALTY BUSINESS
•
Follows comprehensive review of corporate and capital structure during 2019
• Determined as best means to deliver value to shareholders from a historically significant
evolution in the development of the MAC province - BHP’s South Flank project
• Will liberate two distinct business – each with quality assets and promising futures – into two
stand-alone ASX-listed companies
• An example of the capital discipline Iluka will continue to practice as the company considers
future investment opportunities
Iluka Resources Limited, Annual Report 2019 SOLID UNDERLYING
FINANCIALS
OPERATIONAL TRANSITION
•
Expansions and new developments executed across the business as a new operational
configuration was established
• Sierra Rutile operations transitioned during the year to accommodate expansions at Lanti
and Gangama, with fourth quarter (post expansion) rutile production of 44 thousand tonnes —
the strongest consistent production performance since acquisition in late 2016
• Cataby ramped up to near nameplate production as at December 2019
•
Jacinth-Ambrosia operated as per plan
• Narngulu mineral separation plant reconfigured with a barite facility in order to process
Cataby’s zircon and rutile streams
• Synthetic rutile kiln outperformed expectations
PIPELINE OF GROWTH PROJECTS
• Pipeline of projects to sustain and grow production progressed over 2019
SR2
•
Iluka poised to produce and market monazite – from which rare earths are derived – for the
first time in many years - with commencement of Eneabba mineral sands recovery project in
2020, currently under construction
KILN OUTPERFORMED
EXPECTATIONS
• Sembehun development re-scoping advanced and field trials for alternative mining method
planned in 2020
• Balranald third trial (T3) committed for 2020
• Other zircon, high-grade titanium and rare earth focused projects at various stages
of evaluation
SUSTAINABILITY PERFORMANCE
• Material reduction in the number of injuries classified as having serious potential
•
Iluka’s total recordable injury frequency rate decreased from 3.5 to 2.9 with four less injuries
than 2018
• Sierra Rutile achieved 12 months without a lost time injury
•
Increase in ‘near hits’ classified as having the potential for severe injury or fatality to 76 from
47 in 2018. While this may in part be a reflection of improvements in incident classification
and reporting implemented in 2019, it remains a focus for continual improvement in safety
•
35% reduction in reportable environmental incidents
• Proactive measures introduced to manage the impact of communicable diseases including
malaria and typhoid
• Demolition of redundant assets, clean-up of sites; and rehabilitation and revegetation of
former mined land as part of ongoing closure and land management activities
•
Inclusion within 2019 Australian Dow Jones Sustainability Indices and FTSE4Good Index for
leading sustainability performance
• Progress on understanding of physical climate risks and opportunities, in line with the
recommendations of the Taskforce on Climate-related Financial Disclosure (TCFD)
35%
REDUCTION IN
REPORTABLE
ENVIRONMENTAL
INCIDENTS
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Iluka Resources Limited, Annual Report 2019 CHAIRMAN’S REVIEW
DEAR SHAREHOLDERS,
2019 was a year which produced accomplishment and
disappointment at Iluka; and yet demonstrated the company’s
resilience overall.
This mixed performance across the portfolio was reflected in the
company’s results and attributable to lingering uncertainties in
the global economy, uneven mineral sands market conditions
and challenges with respect to our investment in Sierra Leone.
Key features included:
• a total recordable injury frequency rate of 2.9, down from
3.5 in 2018;
• a reported net loss of $300 million, after write-downs of
$414 million for Sierra Rutile and an associated $162 million
reduction in the deferred tax asset;
• underlying group EBITDA of $616 million, up 3% on 2018;
• free cash flow of $140 million, after capital expenditure of
$198 million; and
• a net cash position of $43 million at 31 December 2019.
The notable disappointment was the $414 million carrying value
write-down of Sierra Rutile. Nevertheless, Iluka’s underlying
performance was the third best in the company’s history – achieved
against a backdrop of commissioning five key capital projects; and
a challenging macroeconomic environment for business generally.
The company declared a final dividend of 8 cents per share.
Total dividends for the year were 13 cents per share, consistent
with our dividend framework to return to shareholders a minimum
of 40% of free cash flow not required for investment purposes or
balance sheet activity.
Business sentiment softened over the course of the year, for the
most part a result of persistent trade and other geopolitical tensions.
The subsequent impact across Iluka’s markets was varied, with
ceramics customers reducing zircon inventories, placing pressure
on sales volumes and prices into both China and Europe. Market
conditions in the high-grade titanium feedstock market, by contrast,
remained steady. Iluka took a number of steps to adapt to these
conditions and the company’s mineral sands business remains well
positioned, with strong fundamentals serving as a foundation from
which to continue to meet our objective – to deliver sustainable value.
In a significant development, your Board and Executive have taken
the decision to make preparations to put a proposal to shareholders
regarding a demerger of the Mining Area C (MAC) royalty business
from the mineral sands business via an in specie distribution.
8
Iluka Resources Limited, Annual Report 2019 The position of the MAC royalty within Iluka’s portfolio has
been subject to ongoing consideration by the company over
many years. Our primary driver for pursuing a demerger at this
time relates to greater clarity, proximity and certainty from BHP
regarding the development of its South Flank iron ore project.
South Flank is now more than 50% complete and expected
to deliver a production increase within the MAC royalty area
of approximately 80 million dry metric tonnes per annum
from 2023, increasing the potential cash flows generated by
Iluka’s royalty business substantially. A demerger holds the
prospect of liberating two fundamentally distinct and different
businesses – each with quality assets and promising futures –
into two separate, stand-alone ASX listed companies.
Your Board plans to put a demerger resolution to shareholders
at an Extraordinary General Meeting to be held later this
year. We expect to be in a position to provide you an update
on specific timing at our Annual General Meeting in April.
The decision to pursue a demerger follows a comprehensive
review undertaken over the past year, which intensified
following our announcement to the ASX in October.
That review determined a demerger would deliver the
most appropriate corporate structure for the future of both
businesses; and the best means to deliver value from what
is a historically significant evolution in the development of the
MAC province. Shareholders will in time receive a demerger
booklet setting out the rationale for this proposal in detail.
In Sierra Leone, I would reiterate our disappointment at
the write-down of Sierra Rutile. Put plainly, since acquiring
the asset in 2016, we have not been able to achieve what
we thought we would, including a defined development
approach to Sembehun. Notwithstanding our disappointment,
Sembehun remains one of the largest, highest quality known
rutile deposits in the world and offers the potential to extend
the operating life of Sierra Rutile by up to 25 years. We are
pursuing a development approach in a disciplined and rigorous
manner that ensures an appropriate balance between risk and
return. Progress on operational improvements has also been
slower than that anticipated in the investment case, though
I would note that over the last several months Sierra Rutile
has delivered its strongest consistent production performance
since acquisition.
Iluka’s safety performance also reflected mixed results across
the business – at Sierra Rutile we achieved 12 months without
a lost time injury, which is a terrific outcome; whereas in
Australia, while our headline statistical performance improved,
we saw a concerning rise in incidents with the potential to
cause serious harm. Iluka simply cannot afford to lose focus
on the company’s first and enduring priority – the safety and
well-being of our people. Renewed efforts in this area are at
the forefront of the Board’s agenda, including implementation
of a number of grass roots, ‘back to basics’ initiatives.
On sustainability matters more broadly, Iluka recorded
13 reportable environmental incidents in 2019, down
from 20 during the previous year. The company rehabilitated
686 hectares of land previously disturbed by mining,
compared with 808 hectares in 2018. Steps to implement
the recommendations made by the Task Force on Climate
related Financial Disclosures (TCFD) continued, with the
Board Charter revised to provide for an annual review of
climate-related risks. Iluka also participated in the resource
and energy industries’ modern slavery collaborative group,
developing an understanding and capability to support the
implementation of Australian modern slavery legislation.
Renewal at Board level continued in 2019, with the
appointments of Susie Corlett and Lynne Saint in May and
October respectively. Given the prospect of considerable
evolution in Iluka’s business over the coming period, the
Board is mindful of balancing institutional memory with
fresh perspectives and Susie and Lynne are already making
important contributions in this regard.
While early 2020 has brought some welcome geopolitical
developments – including signs of rapprochement between
the US and China on trade and resolution with respect to the
UK’s departure from the EU – the state of the global economy
remains finely balanced and it is likely that a degree of external
uncertainty will persist for some time to come. In these
circumstances, as ever, it is imperative that Iluka continues
to capitalise on the opportunities that are available, consistent
with the company’s objective.
I would like to thank my fellow Directors, Iluka’s Executive
and wider workforce for their shared dedication to this task.
I am also grateful for the enduring interest and support of
our shareholders.
Greg Martin
Chairman
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Iluka Resources Limited, Annual Report 2019 MANAGING DIRECTOR’S
REVIEW
DEAR SHAREHOLDERS,
Over the past three years Iluka has embarked on an ambitious agenda
of delivery designed to put the company on a sustainable footing.
In 2019 we realised the first phase of this agenda, with the completion
of key projects at Cataby and the associated refresh of synthetic rutile
kiln 2 in Western Australia ($305 million); Ambrosia in South Australia
($35 million); and Lanti and Gangama in Sierra Leone ($US78 million) –
each on time and budget.
Parallel to these developments, the company has pursued a range
of complementary marketing, operational and corporate initiatives
as part of an enduring focus on capital discipline, which is inexorably
linked to the delivery of sustainable value. The past 12 months has
seen this programme tested amid challenging business conditions,
with mixed results. The disappointing outcome was at Sierra Rutile,
where to this point the acquisition has fallen well short of investment
case expectations, both in terms of the operational outcomes that
have been achievable in Sierra Leone and the potential cost to develop
Sembehun. As we look to the period ahead and the prospect of
progressing our next phase of production replacement and growth
options, Iluka will pursue capital discipline of the quality demonstrated
in the Cataby development and deploy capital only where and when we
have sufficient confidence in achieving a satisfactory return.
Markets
Revenue generated from mineral sands was $1,193 million, down
4% on 2018. Lower sales volumes were partially offset by price
increases across the portfolio, with revenue per tonne sold up 17%.
The company identified short-term softness in the zircon market at
mid-year and responded in the second half. Inasmuch as sustainability,
transparency and predictability had governed our approach during
the market tightness of 2017-18, in 2019 we added flexibility,
via enhanced loyalty rewards and an augmented product mix of
standard grade zircon and zircon-in-concentrate. This enabled us to
achieve sales volumes in line with revised guidance despite cautious
purchasing behaviour, some thrifting in downstream industries and
an attendant reduction in demand. Destocking on the part of Iluka’s
customers was evident during the year, though there are indications
this may have now run its course. Long-term fundamentals for
zircon remain positive, with a projected return to market tightness
as demand grows modestly and new supply sources become
increasingly challenging.
Conditions for high-grade titanium dioxide provided an altogether
different scenario, with Iluka’s rutile and synthetic rutile sales
constrained by production with limited inventory. Major pigment
producers have expressed optimism around improving demand and
pricing in 2020; and there is tangible strength in welding and titanium
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Iluka Resources Limited, Annual Report 2019
sponge markets. In January, Iluka and Kronos signed a
take-or-pay sales offtake agreement for 75% of standard
grade rutile produced at Sierra Rutile through to the end
of 2022. This agreement provides certainty for one of our
key customers and supports value generation at Lanti and
Gangama, which is especially important as we progress work
on a development approach to the Sembehun project. With
the signing of the Kronos contract; the offtake agreements in
place to underpin synthetic rutile production from Cataby; and
the rutile take-or-pay contracts agreed with Japanese titanium
metal customers announced last year, we have achieved an
unprecedented level of revenue certainty for our titanium
dioxide feedstocks business.
Operations
Iluka’s full year production of 702 thousand tonnes was down
4% on 2018, as the company adjusted settings in response
to market dynamics. In addition, each of our operations
experienced some planned disruption in association with
major projects being commissioned. In Australia, synthetic
rutile kiln 2 underwent a major maintenance outage in January
prior to receiving ilmenite sourced from Cataby, which itself
commenced production in April and ramped up over the rest
of the year. Similarly, the Narngulu mineral separation plant was
reconfigured with a barite facility in order to process Cataby’s
zircon and rutile streams, in addition to concentrate from
Ambrosia following the mine move from Jacinth in August.
Overall performance was solid given the scale of change,
though I would echo the Chairman’s comments regarding
safety, which is the essential foundation for whatever else we
might achieve as a company and must improve. With assets
now largely settled, Iluka’s Australian sites are well placed to
return to operational excellence over the coming year.
At Sierra Rutile, the year began with the decommissioning of
dredge operations and the commencement of Iluka’s strategic
partnership with the International Finance Corporation – the
private sector development arm of the World Bank and one of
the country’s largest foreign donors. This was followed by the
commissioning of the Lanti and Gangama expansions in the
fourth quarter, which have doubled the production capacity
of each of these mines. Punctuating our year of transition
was a 32% increase in fourth quarter production, comprising
44 thousand tonnes of rutile, with the mineral separation
plant operating at capacity. Improvement – albeit slower
than anticipated and off a poor year in 2018 – is discernible,
whether in the area of safety, production or our relationships
with local stakeholders. While clearly we still have a long way to
go, Iluka will continue to implement measures to maintain and
build on these results as part of our ongoing efforts in-country.
Projects
2019 saw progress throughout Iluka’s project development
pipeline, which includes traditional mineral sands
developments (Sembehun, synthetic rutile kiln 1, Atacama),
those based on innovation (Wimmera, Balranald) and potential
diversification prospects (Eneabba, Wimmera). These projects
provide a range of options to drive the next stage of the
company’s growth. Clearly not all of them will be developed
simultaneously; indeed some may not be developed at all for
technical or market reasons.
We are at present actively engaged in preparations for
the key trial of underground mining technology at Balranald
in New South Wales. At Eneabba in Western Australia, site
construction has commenced at our strategic stockpile
of historical material. Commissioning for Phase 1 at Eneabba,
which involves recovering and processing these tailings to
produce a mixed zircon and monazite concentrate, is
expected in the first half of 2020. Studies into Phase 2,
which involves further processing to separate the zircon
and monazite product streams, are well underway. This is a
low risk, low capital project that delivers strong returns as well
as reducing an ongoing rehabilitation obligation. I would add
that the production and sale of monazite – from which rare
earths are derived – affords Iluka the opportunity to establish
some customer and shareholder credibility in a market
the company has not participated in for many years. This
credibility will be very important as we consider the Wimmera
project in particular, which is a potentially long-life zircon and
rare earths development currently at pre-feasibility study
stage. More information on our project pipeline can be found
on pages 34-35.
Iluka commences 2020 with a healthy balance sheet; settled
operations; a diverse project pipeline; and a demonstrated
ability to adapt flexibly to changes in our key markets, both
of which display strong fundamentals over the long term.
These are characteristics of a company with a sustainable
future, which underpins the Board’s decision to move toward
demerging the MAC royalty business. The potential demerger
is a further example of the capital discipline Iluka will continue
to practice as we consider future investment opportunities.
Tom O’Leary
Managing Director and Chief Executive Officer
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Iluka Resources Limited, Annual Report 2019
BOARD OF DIRECTORS
SUMMARY OF EXPERIENCE
GREG MARTIN
BEc, LLB, FAIM, MAICD
ROB COLE
LLB (Hons), BSc
Chairman
Independent Non-Executive Director
Joined Iluka 2013
Murchison Metals, The Australian Gas
Light Company, Santos, Western Power
Independent Non-Executive Director
Joined Iluka 2018
Perenti, GLX Group, Synergy,
Southern Ports, St Bartholomew’s
House, Woodside Petroleum,
King & Wood Mallesons
TOM O’LEARY
LLB, BJuris
Managing Director
Chief Executive Officer
Joined Iluka 2016
Wesfarmers Chemicals, Energy &
Fertilisers, Wesfarmers; Nikko, Nomura,
Allen & Overy, Clayton Utz
JENNIFER SEABROOK
BCom, FCA, FAICD
Independent Non-Executive Director
Joined Iluka 2008
IRESS, BGC Australia, ARTC Corporation,
MMG, Gresham, Hartley Poynton,
Touche Ross
JAMES (HUTCH) RANCK
MARCELO BASTOS
BSE (Econ), FAICD
Independent Non-Executive Director
Joined Iluka 2013
Elders, CSIRO, DuPont
BEng Mechanical (Hons, UFMG), MBA
(FDC-MG), MAICD
Independent Non-Executive Director
Joined Iluka 2014
Vale, BHP, MMG, Aurizon Holdings,
Golder Associates, Golding Contractors,
Anglo American PLC
12
SUSIE CORLETT
BSc (Geo Hons), GAICD, FAusIMM
Independent Non-Executive Director
Joined Iluka 2019
Aurelia Metals Ltd, The Foundation for
National Parks and Wildlife, Standard
Bank Limited, Macquarie Bank
LYNNE SAINT
BCom, GradDip Ed Studies,
Cert Business Administration, FAICD
Independent Non-Executive Director
Joined Iluka 2019
Bechtel Group, Australian Society
of Certified Practising Accountants
Image above (L-R):
James (Hutch) Ranck, Susie Corlett, Marcello
Bastos, Lynne Saint, Greg Martin, Tom O’Leary,
Jennifer Seabrook, Rob Cole
Iluka Resources Limited, Annual Report 2019
ROB HATTINGH
MSc (Geochem)
DANIEL MCGRATH
BSc (Math)
Chief Executive Officer Sierra Rutile
Joined Iluka 2008
Richards Bay Minerals; Exxaro
General Manager, Cataby & Southwest
Joined Iluka 1993
EXECUTIVE
TOM O’LEARY
LLB, BJuris
Managing Director and Chief
Executive Officer
Joined Iluka 2016
Wesfarmers Chemicals, Energy &
Fertilisers; Wesfarmers; Nikko; Nomura
ADELE STRATTON
BA (Hons), FCA, GAICD
Chief Financial Officer
Joined Iluka 2011
KPMG; Rio Tinto Iron Ore
JULIAN ANDREWS
BCom (Hons), PhD, CFA, GAICD
Head of Strategy, Planning and
Business Development
Joined Iluka 2017
Wesfarmers Chemicals, Energy &
Fertilisers; PwC
MATTHEW BLACKWELL
SUE WILSON
BEng (Mech), Grad Dip (Tech Mgt), MBA,
MAICD, MIEAust
BJuris, LLB, FGIA, FICSA, FAICD
General Counsel and Company
Secretary
Joined Iluka 2016
South32; Bankwest; Herbert Smith
Freehills; Western Power
MELISSA ROBERTS
BCom (Hons), MBA
General Manager, Investor Relations
and Commercial Mineral Sands
Operations
Joined Iluka 2009
CSBP (now part of Wesfarmers);
Mayne Health
Head of Major Projects, Engineering
& Innovation
Joined Iluka 2004
Asia Pacific Resources; WMC
Resources; Normandy Poseidon
SARAH HODGSON
LLB, GAICD
General Manager People &
Sustainability
Joined Iluka 2013
Mercer; Westpac; KPMG
COMMITTEES
CHRISTIAN BARBIER
M.Sc. (Management)
Head of Marketing
Joined Iluka 2016
Sibelco Asia, Alcan International
TIM BARTHOLOMEW
B.Eng. (Hons)
General Manager Strategic
Management and Closure
Joined Iluka 2007
Peabody Energy; Mussellbrook Coal
Company; Henry Walker Eltin
SHANE TILKA
BCom
General Manager Jacinth-Ambrosia
& Midwest
Joined Iluka 2004
Image above (L-R):
Tim Bartholomew, Sue Wilson, Rob Hattingh,
Adele Stratton, Daniel McGrath, Tom O’Leary,
Julian Andrews, Matthew Blackwell, Melissa
Roberts, Shane Tilka, Sarah Hodgson,
Christian Barbier
The Board of Directors comprises six non-executive Directors and one executive Director (the Managing Director).
Audit and Risk Committee
Chairman – Jennifer Seabrook
People and Performance Committee
Chairman – James (Hutch) Ranck
Nominations and Governance Committee
Chairman – Greg Martin
EXECUTIVE
The Executive is structured to include 12 senior leaders. 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.
13
Iluka Resources Limited, Annual Report 2019
FINANCIAL
SUMMARY
MINERAL
SANDS
REVENUE
UNDERLYING
MINERAL
SANDS
EBITDA
MINING
AREA C
EBITDA
UNDERLYING
GROUP
EBITDA
$1,193m
$531m
$85m
$616m
$m
$m
$m
$m
1,244
1,193
1,018
820
726
545
531
85
616
600
301
232
28%
103
14%
30%
44%
45%
62
48
60
56
361
293
151
15 16 17 18 19
15 16 17 18 19
15 16 17 18 19
15 16 17 18 19
Iluka’s 2019 underlying
Group EBITDA of $616 million
represents the third best
underlying performance in
the company’s history and
is the second consecutive
year of strong results. This
is a significant achievement
in a period of subdued zircon
market conditions and
operational configuration
transition.
Mining Area C royalty
income was $85 million, up
53% from 2018, reflecting
strong iron ore prices,
7% higher sales volumes
and a stronger US dollar
exchange rate.
BHP’s South Flank iron
ore project is now more
than 50% complete and
expected to deliver a
production increase within
the MAC royalty area of
approximately 80 million dry
metric tonnes per annum
from 2023, increasing
the potential cash flows
generated by Iluka’s royalty
business substantially.
EBITDA 1
EBITDA 1 margin
2019 underlying mineral
sands EBITDA was $531
million, down 3% from
2018, driven by lower
sales volumes.
The Group reset its operating
configuration during the year,
with the commencement of
mining and concentrating
at the new Cataby mine
development in Western
Australia, the mine move
from Jacinth to Ambrosia
in South Australia and the
doubling of production
capacity at both Lanti and
Gangama mines in Sierra
Leone. This operational reset
increased cash production
costs as a result of increased
mining activities. The mineral
sands business continued
to generate strong EBITDA
margins, up to 45% (2018:
44%).
Mineral sands revenue was
$1,193 million, down 4% from
2018. This reflects an 18%
decline in Z/R/SR sales volumes,
partially offset by a 17% increase
in average revenue per tonne.
Zircon sales volumes declined
28% to 274 thousand tonnes as
geopolitical and trade tensions
weighed on business sentiment
in key markets. Iluka maintained
a stable Zircon Reference Price
at US$1,580 per tonne over
2019, resulting in the average
zircon premium and standard
prices up 10% relative to 2018.
The company’s flexible approach
in offering an augmented product
mix of standard grade zircon and
zircon-in-concentrate enabled
Iluka to maintain price stability
for premium products.
Market conditions remained
solid for high-grade titanium,
though sales were production
constrained and down 9%.
Weighted average rutile prices
increased by 20%, reflecting
market tightness for high-grade
titanium feedstocks.
14
Iluka Resources Limited, Annual Report 2019
NET (LOSS)
PROFIT
AFTER TAX
FREE
CASH
FLOW
NET
CASH
(DEBT)
$(300)m
$140m
$43m
$m
$m
$m
%
304
54
322
304
4%
32%
43
2
n/a
n/a
6
n/a
155
140
(172)
(224)
(300)
47
(183)
(506)
ROE
AND
ROC
ROE (26.6)%
ROC 4.6%
54
32
7
4
(17)
(18)
(12)
(20)
5
(27)
15 16 17 18 19
15 16 17 18 19
15 16 17 18 19
15 16 17 18 19
Net debt
Gearing %
Return on equity
Return on capital
The reported loss as a
consequence of the Sierra
Rutile write-down is reflected
in a return on shareholders
equity (ROE) of (26.6%) and
return on capital (ROC)
of 4.6%.
Iluka reported a net cash
position of $43 million as at
31 December 2019, up from
net cash of $2 million at 31
December 2018. Over the
course of 2019, net debt
peaked at $142 million with
significant capital expenditure
on project completion to
sustain future production.
Solid cash flows from Iluka’s
underlying business funded
these projects and returned
the business to a net cash
position over the second half
of the year.
Iluka reported a net loss
after tax of $300 million in
2019. This reflects a $414
million (US$290 million)
write-down for the carrying
value of assets associated
with Sierra Rutile combined
with the associated removal
of $162 million (US$115
million) deferred tax asset.
Underlying net profit after
tax was $279 million.
The adjustment to the
Sierra Rutile carrying value
is a function of operational
performance achieved
to date being below the
acquisition investment
case; and that Iluka does
not currently have a defined
development approach for
the Sembehun deposit.
The company is however
continuing to implement
various measures to drive
production improvement
and advance Sembehun
development options.
2019 free cash flow was
$140 million, down from
$304 million in 2018.
Operating cash flow was
$408 million and the Mining
Area C royalty contributed
$79 million.
Capital expenditure in
2019 was $198 million,
with a number of
projects completed and
commissioned during the
year, including the Cataby
development and associated
kiln refresh at SR2; the
Lanti and Gangama mine
expansions at Sierra Rutile;
and the mine move from
Jacinth to Ambrosia in
South Australia.
The free cash flow includes
tax payments of $147 million
(further tax payments of $94
million relating to the 2019
financial year are to be made
in 2020).
15
Iluka Resources Limited, Annual Report 2019
Nitti Port, Sierra Rutile, Sierra Leone
BALANCE SHEET
As at 31 December 2019, Iluka had total debt facilities of $519 million and net cash
of $43 million. The company 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. In July 2019, Iluka completed a refinancing
of its MOFA resulting in improved (lower) margins and fees and an extension of
maturity through to July 2024. Following an assessment of its medium term liquidity
requirements, Iluka reduced the size of its facilities to ~$520 million from $620 million.
Drawings under the MOFA at 31 December 2019 were $56 million (2018: $50 million).
Of the above interest-bearing liabilities, $56 million is subject to an effective weighted
average floating interest rate of 3.1% (2018: 4.2%). 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
Debt & Facility
$m
519
1200
1000
800
600
400
200
0
(200)
(400)
(600)
1,010 1,015
Gearing %
100
80
60
40
20
0
695
618
519
32%
17%
6
2
43
(183)
(506)
15
16
17
18
19
Facility
Debt
%
Gearing
0
0
0
0
20 21 22 23 24
16
Iluka Resources Limited, Annual Report 2019 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 available. Iluka’s 2019 full year dividend payment of 13 cents per share
(8 cents per share final and 5 cents per share interim dividend), fully franked, represents
40% of free cash flow for the year.
HEDGING
Distribution metrics
Payout ratio % free cash flow
2019
2018
40
40
Iluka extended its foreign exchange hedging programme during the year as part of its
financial risk management strategy by entering into US$32 million in forward foreign
exchange contracts maturing in 2020 at an average AUD:USD rate of 69.3 cents in
relation to expected 2020 USD revenue.
US$118 million in foreign exchange collar contracts consisting of US$118 million
of bought AUD call options with weighted average strike prices of 80.5 cents and
US$118 million of sold AUD put options with weighted average strike prices of
70.0 cents expired during the year.
Note 21 of Iluka’s Financial Report provides details of Iluka’s open hedge contracts at
31 December 2019.
17
Iluka Resources Limited, Annual Report 2019 OUR PURPOSE
DELIVER
SUSTAINABLE
VALUE
OUR CORE
We are an
INTERNATIONAL MINERAL SANDS COMPANY
with expertise in
exploration, development, mining,
processing, marketing and
rehabilitation.
OUR VALUES
Act with
INTEGRITY
Demonstrate
RESPECT
Show
COURAGE
Take
ACCOUNTABILITY
COLLABORATE
OUR
DIRECTION
-
NEAR TERM
DELIVER TO
GROW OUR
FUTURE
EXECUTE
our projects
EXCEL
in our core
MATURE
our options
OUR DIRECTION
-
LONGER TERM
GROW WHERE WE
CAN ADD VALUE
Mineral sands opportunities
and diversification
Cataby, Western Australia
18
THE ILUKA PLAN
The Iluka Plan outlines Iluka’s values, purpose,
core and direction. It is the strategic reference
point that guides the company’s priorities and
decision-making.
Iluka Resources Limited, Annual Report 2019
STRATEGY AND
BUSINESS MODEL
OUR VALUES
INTEGRITY
RESPECT
COURAGE
ACCOUNTABILITY
COLLABORATION
OUR PURPOSE
•
zircon product suite, which is essential in the
context of challenging market conditions in
the short term.
Expansion projects to double production
levels at Lanti and Gangama in Sierra Leone
have been delivered on schedule and budget.
With these expansions commissioned, fourth
quarter production at Sierra Rutile was up
32%, comprising 44 thousand tonnes of
rutile, with the mineral separation plant
operating at capacity.
GROW WHERE WE CAN ADD VALUE
The company is also maturing its portfolio
of projects with a view to future production
replacement and growth options.
Iluka’s purpose is to deliver sustainable value.
This includes:
The company aims to achieve this by:
•
•
•
•
protecting the safety, health and wellbeing
of our employees;
optimising shareholder returns through
prudent capital management and allocation;
developing a robust business that can
maintain and grow returns over time;
providing a competitive offering to
our customers;
• managing our impact on the environment;
•
•
supporting the communities in which
we operate; and
building and maintaining an engaged,
diverse and capable workforce.
DELIVER TO GROW OUR FUTURE
Iluka delivered five major projects in 2019,
establishing a strong base to sustain the
company’s operations.
•
•
•
The Cataby mine in Western Australia was
commissioned and supports synthetic
rutile production for at least the next
8.5 years, with the possibility of further
extending mine life. The operation achieved
near nameplate production in December.
Ilmenite mined at Cataby is processed
at synthetic rutile kiln 2 (SR2), which
underwent a major refresh prior to receiving
Cataby material. Delivered ahead of schedule
and on budget, the refresh has additionally
facilitated an increase in SR2’s processing
capacity from approximately 205 thousand
tonnes per annum to approximately
225 thousand tonnes per annum.
The mine move from Jacinth to Ambrosia
in South Australia was achieved ahead of
schedule and significantly under budget.
This development enables Iluka to sustain
zircon production levels into the medium term.
It also provides for enhanced flexibility in Iluka’s
•
•
•
traditional mineral sands developments
(Sembehun, synthetic rutile kiln 1, Atacama);
developments based on innovation (Wimmera,
Balranald); and
diversification prospects (Eneabba, Wimmera).
An overview of Iluka’s development pipeline,
including the current status of each of these
projects is detailed on pages 34-35 of this report.
Insofar as inorganic growth options are
concerned, Iluka considers merger and acquisition
opportunities that demonstrate both a clear
business advantage and value for shareholders
on a risk-adjusted basis.
CAPITAL MANAGEMENT
Iluka’s approach to capital management seeks
to balance the impact of mineral sands pricing
and investment factors. Central aspects of the
company’s methodology in this area include:
•
•
disciplined capital allocation, meaning Iluka will
commit funds to new projects only where and
when it is sufficiently confident of achieving a
satisfactory return; and
Iluka’s dividend framework, which stipulates
distributions to shareholders of a minimum
of 40% of free cash flow not required for
investment purposes or balance sheet activity.
Risks to the achievement of the Iluka Plan, and their
associated mitigation measures, are outlined on
pages 40-41 of this report.
19
Iluka Resources Limited, Annual Report 2019
FINANCIAL AND
OPERATIONAL
REVIEW
20
Iluka Resources Limited, Annual Report 2019 AMBROSIA, SOUTH AUSTRALIA
Operations at Jacinth-Ambrosia in South Australia moved
from the Jacinth deposit to the Ambrosia deposit in August.
In this section
SALES AND MARKETS
PRODUCTION AND OPERATIONS
PROJECTS
EXPLORATION
21
Iluka Resources Limited, Annual Report 2019 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 EBITDA
Depreciation and amortisation
Inventory movement - non-cash
Rehabilitation for closed sites
Write-down of Sierra Rutile Limited
Group EBIT
Net interest costs and bank charges
Rehabilitation unwind and other finance costs
(Loss) profit before tax
Tax expense
2019
2018
% change
1,128.7
1,179.0
64.4
65.1
1,193.1
1,244.1
(539.6)
(455.1)
63.4
(19.7)
(39.4)
(35.0)
(3.5)
(42.2)
(48.0)
1.8
(68.5)
(24.7)
(38.1)
(38.1)
1.8
(30.1)
(48.1)
1.3
530.9
544.5
85.1
616.0
(163.2)
15.5
(3.2)
(414.3)
50.8
(13.8)
(38.0)
(1.0)
55.6
600.1
(93.6)
(28.3)
4.6
-
482.8
(14.1)
(16.7)
452.0
(4.3)
(1.1)
(4.1)
18.6
n/a
(20.2)
3.4
(8.1)
n/a
40.2
(0.2)
38.5
(2.5)
53.1
2.6
74.4
n/a
n/a
n/a
(89.5)
(2.1)
127.5
n/a
(298.7)
(148.1)
101.7
Profit (loss) for the period (NPAT)
(299.7)
303.9
Average AUD/USD (cents)
69.5
74.8
n/a
(7.1)
(1) Underlying Group EBITDA excludes adjustments including write-downs, and changes to
rehabilitation provisions for closed sites.
UNDERLYING NPAT
$ million
NPAT
Non-recurring adjustments:
Rehabilitation for closed sites - total (post tax)
Derecognition of SRL tax assets
Write-down of Sierra Rutile Limited
Underlying NPAT
2019
(299.7)
(2.2)
(161.9)
(414.3)
278.7
2018
303.9
3.2
-
-
300.7
FINANCIAL
AND
OPERATIONAL
REVIEW
Sierra Rutile, Sierra Leone
22
Iluka Resources Limited, Annual Report 2019 MOVEMENT IN UNDERLYING NPAT
500
400
300
200
100
0
130
301
90
(4)
(117)
(22)
5
30
11
279
(107)
(5)
(16)
(17)
e
c
i
r
P
l
o
V
i
x
M
X
F
8
1
0
2
r
e
b
m
e
c
e
D
1
3
h
t
O
&
m
l
I
S
G
O
C
t
i
n
U
l
e
d
I
b
a
h
e
R
x
a
T
r
e
h
t
O
d
n
a
S
n
M
i
C
A
M
r
e
h
t
O
&
d
n
w
n
U
i
9
1
0
2
r
e
b
m
e
c
e
D
1
3
Sales commentary is contained on pages 24-25.
The Australian dollar weakened in 2019, with an average
exchange rate of 69.5 cents compared to 74.8 cents in 2018.
This increased the Australian dollar Z/R/SR revenue received,
with the majority of sales denominated in US dollars. The
Group has hedging contracts to assist in managing exchange
rate exposure, which are detailed on page 17 of this report.
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 increased by $85 million, despite
lower production volumes. Increased costs related to
increased mining activity with commencement of mining
and concentrating activities at the new Cataby mine in April
2019. Higher costs at Sierra Rutile were due to increased
production levels resulting in higher variable costs, along with
increased maintenance and power costs. Also, exchange rate
depreciation has contributed to higher Australian dollar costs
on conversion of the Sierra Rutile US dollar cost base.
Unit cost of goods sold increased to $889 per tonne
compared to $750 per tonne in 2018, reflecting a combination
of factors including sales mix, with a greater proportion of
higher cost Sierra Rutile sales and the change in the operating
configuration of the Group, with the introduction of higher cost
Cataby mine replacing Tutunup South mine for production of
synthetic rutile.
Idle costs reflect ongoing maintenance and land management
costs for idle plant and operations at Eneabba, Tutunup South,
Murray Basin and the US.
Sierra Rutile was written down by $414 million. The adjustment
to the Sierra Rutile carrying value is a function of operational
performance achieved to date being below the acquisition
investment case; and that Iluka does not currently have a
defined development approach for the Sembehun deposit.
The company is however continuing to implement various
measures to drive production improvement and advance
Sembehun development options.
Tax expense increased dramatically due to the de-recognition
of US$115 million of deferred tax assets in Sierra Leone
following the write-down of Sierra Rutile (although this had no
impact on tax paid in the year, and tax losses are still available
to be utilised if sufficient profit is generated). The corporate tax
rate applicable in the main operating jurisdictions of Australia
and Sierra Leone remained at 30%. Corporate tax payments in
Sierra Leone are based on the higher of 30% of taxable profit
or 3.5% of turnover. The group effective tax rate adjusted for
write-down, deferred tax de-recognition and rehabilitation for
closed sites was 32.8%.
.
23
Iluka Resources Limited, Annual Report 2019
FINANCIAL AND
OPERATIONAL REVIEW
SALES AND MARKETS
ZIRCON
RUTILE(1)
SYNTHETIC RUTILE
ILMENITE
Sales volumes (kt)
Sales volumes (kt)
Sales volumes (kt)
Sales volumes (kt)
380 379
346 339
274
172
134
264
233
200
244
215
207
300
187
171
225
203
171
18
15 16 17 18 19
15 16 17 18 19
15 16 17 18 19
15 16 17 18 19
Zircon
Iluka sold 274 thousand tonnes of zircon in 2019, down 28% compared to 2018.
In 2019, sales were affected by subdued business and consumer confidence, particularly in China, as US-China trade tensions
and a softer economic growth outlook weighed on end demand for zircon products and customer buying patterns.
Throughout the course of 2019, Iluka recorded a shift in customer buying patterns to lower grades of zircon in an effort to reduce
costs and increase competitiveness. The company responded by managing sales of zircon across the product suite, including more
Standard Zircon and zircon-in-concentrate. Iluka also introduced a number of enhanced loyalty rewards to support the company’s
customer base.
Iluka’s Zircon Reference Price remained stable at US$1,580 per tonne during 2019.
High-grade titanium feedstocks
Iluka’s 2019 sales of high-grade titanium feedstocks, rutile and synthetic rutile, were 407 thousand tonnes. Full year sales of
high-grade titanium dioxide feedstock products (rutile and synthetic rutile) exceeded production reflecting solid demand for Iluka’s
high-grade products.
The pigment industry, which accounts for around 90% of global titanium feedstock demand, went through a phase of destocking
in 2019. However, for high-grade feedstocks, tight supply contributed to solid market conditions. Iluka’s feedstocks continue to
be sought after for their high-grade titanium dioxide content properties, which increase average pigment plant feed grade for the
company’s customers.
Iluka’s synthetic rutile is predominantly sold under contract. Sales volumes reflect annual production from the kiln and minor inventory
movement. As per contractual arrangements, prices are not disclosed, but increased in line with market conditions. Iluka’s weighted
average rutile price increased by 20% in 2019 to US$1,142 per tonne (excludes lower grade HYTI).
(1) Includes HYTI.
24
Iluka Resources Limited, Annual Report 2019 EUROPE
33%
34%
CHINA
AMERICAS
11%
ASIA &
MIDDLE EAST
18%
AUSTRALIA
3%
% OF TOTAL 2019 MINERAL SANDS SALES REVENUE
Weighted average received prices – US$/t FOB
Zircon premium and standard
Zircon all products (including zircon in concentrate)1
Rutile (excluding HYTI)2
Synthetic rutile3
2019
1,487
1,380
1,142
-
2018
1351
1321
952
-
2017
2016
2015
958
940
790
-
810
773
731
-
986
961
763
-
(1) Zircon prices reflect the weighted average price for zircon premium, zircon standard and zircon-in-concentrate. The prices for each product
vary considerably, as does the mix of such products sold period to period. In 2019, full year split of premium, standard and concentrate by zircon
sand-equivalent was approximately: 42%, 28%, 30% (2018: 50%, 30%, 20%).
Included in rutile sales volumes reported elsewhere in this Annual Report is a lower titanium dioxide product, HYTI that typically has a titanium dioxide
content of 70 to 91%. This product sells at a lower price than rutile, which typically has a titanium dioxide content of 95%. 2019 full year sales of the
lower grade HYTI material were 23% of rutile sales (2018: 22%).
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
(2)
(3)
rutile, is priced lower than natural rutile.
25
Iluka Resources Limited, Annual Report 2019
FINANCIAL AND
OPERATIONAL REVIEW
PRODUCTION AND OPERATIONS
ZIRCON
RUTILE (1)
SYNTHETIC RUTILE
ILMENITE
Production volumes (kt)
Production volumes (kt)
Production volumes (kt)
Production volumes (kt)
389
347
349
312
322
302
211
211
220
196
165
499
448
395
329
319
184
163
137
118
15 16 17 18 19
15 16 17 18 19
15 16 17 18 19
15 16 17 18 19
Australia
Iluka’s operational configuration underwent significant change over 2019. In April, the Cataby mine development began production.
Cataby produces magnetic (ilmenite) and non-magnetic (zircon and rutile) product streams. The ilmenite is processed at synthetic
rutile kiln 2 (SR2) at Capel to produce synthetic rutile. The non-magnetic fraction is processed at the Narngulu mineral separation plant
in Geraldton to produce zircon and rutile. Following a period of commissioning, Cataby ramped up over the course of 2019, operating
at near nameplate production by December; and producing 240 thousand tonnes of heavy mineral concentrate for the year.
SR2 produced 196 thousand tonnes of synthetic rutile, down on the previous year due to a planned major maintenance outage
undertaken in the first quarter of 2019. Full year production was above expectations, owing to the maintenance being completed
ahead of schedule; and higher runtimes resulting from plant improvements implemented during the year.
Mining at Jacinth-Ambrosia in South Australia moved from the Jacinth North to the Ambrosia deposit. This move was expedited
from the previously planned move in 2022 to provide capacity and flexibility to maintain zircon production at current levels over
future years. The move was completed in August and operations were returned to full capacity. The mine produced 558 thousand
tonnes of heavy mineral concentrate in 2019, which resulted from improved grades following the move to Ambrosia and increased
mineral recoveries.
The Narngulu mineral separation plant processed 519 thousand tonnes of heavy mineral concentrate during 2019, including
material from both the Cataby and Jacinth-Ambrosia mines. Operational settings at the plant were adjusted during the year to
respond to market requirements across the zircon product suite, including the processing of heavy mineral concentrate with
lower zircon assemblage.
Sierra Leone
2019 was also a year of major operational transition at Sierra Rutile. In February, Iluka decommissioned the dredge operation at the
end of its life, as planned. This was followed by two major expansion projects being commissioned at Lanti and Gangama dry mines.
Sierra Rutile produced a total of 137 thousand tonnes of rutile during 2019, up 13% on the previous year (2018: 122 thousand
tonnes). The operations experienced lower run time and throughput during 2019. Subsequently, a number of operational improvement
initiatives were identified and implemented.
Post commissioning of the expansions, performance improved month-on-month over the December quarter, with rutile production
reaching 44 thousand tonnes for the quarter, as the mineral separation plant operated at capacity. This represents Sierra Rutile’s
strongest consistent production performance for some time.
Work continues on improving run times and throughput across the operation.
(1) Includes HYTI.
26
Iluka Resources Limited, Annual Report 2019
HMC produced and processed
HMC produced
HMC processed
2019
1087
961
2018
934
1037
% change
16.4
(7.3)
Cash cost and unit cost of production $/t
Cash costs of production
Unit cash production cost per tonne Z/R/SR produced1
Unit cost of goods sold per tonne Z/R/SR sold
$m
$/t
$/t
2019
539.6
753
889
2018
455.1
606
750
% change
18.6
24.2
18.5
(1) Calculated as cash costs of production, excluding by-product costs divided by Z/R/SR production.
Mineral sands operations results
$ million
Jacinth-Ambrosia / Midwest
Cataby / Southwest
Idle Ops
SRL
Support, Corporate & other elim
Elimination - Interco Sales
Revenue
Mineral sands EBITDA
EBIT
2019
482.7
414.2
38.6
257.6
0.9
(0.9)
2018
568.6
297.2
184.9
205.7
-
(12.3)
2019
343.3
220.6
3.9
63.3
(99.9)
(0.3)
530.9
2018
378.8
142.3
83.9
30.2
(88.6)
(2.1)
544.5
2019
330.2
172.7
(4.4)
(427.6)
(19.8)
(0.3)
50.8
2018
364.0
115.6
54.4
(12.5)
(36.7)
(2.1)
482.8
Total
1,193.1
1,244.1
Testing and analysis
Iluka has advanced testing and analysis facilities at Capel,
Western Australia.
27
Iluka Resources Limited, Annual Report 2019 FINANCIAL AND
OPERATIONAL REVIEW
OPERATIONS
Jacinth-Ambrosia/Mid West
Production volumes
Zircon
Rutile
Total Z/R/SR production
Ilmenite
Total saleable production
HMC produced
HMC processed
Unit cash cost of production - Z/R/SR (1)
Mineral Sands revenue
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
EBITDA
Depreciation and amortisation
Inventory movement - non-cash production costs
Rehabilitation costs for closed sites
EBIT
2019
2018
% change
260.2
31.2
291.4
107.0
398.4
558.3
454.8
557
482.7
(162.3)
57.8
(2.4)
(23.6)
(8.9)
-
343.3
(28.9)
14.2
1.6
330.2
311.9
38.0
349.9
121.7
471.6
674
530
491
568.6
(168.4)
16.8
(3.4)
(26.2)
(8.9)
0.4
378.8
(25.3)
2.0
8.6
364.0
(16.6)
(17.9)
(16.7)
(12.1)
(15.5)
(17.1)
(14.1)
13.4
(15.1)
(3.6)
243.7
(29.9)
(9.9)
0.1
(n/a)
(9.4)
14.2
618.1
(81.4)
(9.3)
kt
kt
kt
kt
kt
kt
kt
$/t
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
(1) Calculated as cash costs of production, including by-product costs divided by Z/R/SR production.
Mineral sands revenue of $483 million for the year
decreased 15% on lower demand for zircon, despite
stronger sales prices.
Lower market demand resulted in a 40% increase in
inventories held to $237 million at year end.
Cash costs of production reduced, predominantly reflecting
lower production, with lower transport of concentrate to the
mineral separation plant and less concentrate treatment in line
with zircon demand.
Gross margin remained strong, increasing to 75% from 69% in
2018 mainly driven by improved pricing.
28
Iluka Resources Limited, Annual Report 2019 Cataby/South West
Production volumes
Zircon
Rutile
Synthetic rutile
Total Z/R/SR production
Ilmenite
Total saleable production
HMC produced
HMC processed
Unit cash cost of production - Z/R/SR
Mineral sands revenue
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
EBITDA
Depreciation and amortisation
Inventory movement - non-cash production costs
Rehabilitation costs for closed sites
EBIT
2019
2018
% change
53.5
15.6
196.2
265.3
152.4
417.7
240
217
747
414.2
(198.1)
24.9
(6.8)
(4.2)
(9.4)
-
220.6
(54.0)
6.2
(0.1)
15.9
3.7
219.9
239.5
168.1
407.6
20
265
512
297.2
(120.6)
(16.9)
(4.6)
(2.6)
(11.0)
0.9
142.3
(20.1)
(5.1)
(1.4)
172.7
115.6
236.5
321.6
(10.8)
10.8
(9.3)
2.5
1,075.6
(18.4)
45.9
39.3
64.2
(246.9)
46.6
61.9
(14.9)
(100.0)
55.1
168.8
(221.6)
(92.9)
49.3
kt
kt
kt
kt
kt
kt
kt
kt
$/t
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Mineral sands revenue of $414 million increased by 39%
with increased sales of Z/R/SR due to higher production
following the successful commencement of operations
at Cataby, as well as higher sales prices per tonne of
Z/R/SR sold. Take-or-pay offtake agreements for at least
175 thousand tonnes of synthetic rutile production provided
higher levels of certainty around both offtake and price.
The planned major maintenance outage of the SR2 kiln
resulted in lower production volumes of synthetic rutile in
2019, but was completed ahead of budget and will facilitate
increased production.
Inventories increased 24% to $143 million with the new Cataby
mine and associated operations stockpiles also reflected in
the change in inventory movements year on year.
Cash costs of production reflect the mining commencement
at Cataby, with unit cash costs of production reflective of ramp
up rates and treatment of lower grade ores in 2019.
Gross margin increased to 42% (2018: 39%).
Activated carbon warehouse
Iluka sells and markets activated carbon, a by-product of its
synthetic rutile kiln operations.
29
Iluka Resources Limited, Annual Report 2019 FINANCIAL AND
OPERATIONAL REVIEW
OPERATIONS
Sierra Rutile
Production volumes
Zircon
Rutile
Total Z/R/SR production
Ilmenite
Total saleable production
HMC produced
HMC processed
Unit cash cost of production - Z/R/SR
Mineral sands revenue
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
EBITDA
Depreciation and amortisation
Inventory movement - non-cash production costs
Rehabilitation costs for closed sites
Write-down expense
EBIT
2019
2018
% change
8.5
137.2
145.7
59.2
204.9
288
289.8
1,185
257.6
(172.6)
(7.9)
1.2
(10.7)
(3.7)
(0.6)
63.3
(74.6)
(2.0)
-
(414.3)
(427.6)
11.4
121.5
132.9
54.5
187.4
240
242
1,155
205.7
(153.5)
(11.7)
(2.5)
(6.9)
(0.9)
-
30.2
(41.1)
(2.9)
1.3
-
(25.4)
12.9
9.6
8.6
9.3
20.2
19.8
2.6
25.2
12.4
(32.5)
(148.0)
55.1
311.1
100.0
109.6
81.5
(31.0)
(100.0)
n/a
(12.5)
3,320.8
kt
kt
kt
kt
kt
kt
kt
$/t
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Sierra Rutile was written down by $414 million. The adjustment
to the Sierra Rutile carrying value is a function of operational
performance achieved to date being below the acquisition
investment case; and that Iluka does not currently have a
defined development approach for the Sembehun deposit.
Mineral sands revenue increased 25% on higher sales
prices, with production constraining sales volumes. Sales in
2020 will be supported by the take-or-pay offtake agreement
with Kronos Worldwide Inc. for 75% of standard grade rutile
produced by Sierra Rutile through to December 2022.
The company is however continuing to implement various
measures to drive production improvement and advance
Sembehun development options.
Sierra Rutile
Iluka’s safety performance in Sierra Leone was outstanding,
with the Sierra Rutile operation exceeding one year without
a lost time injury across its workforce and contractors.
30
Iluka Resources Limited, Annual Report 2019 Idle operations (United States/Murray Basin)
Production volumes
Zircon
Total Z/R/SR production
Ilmenite
Total saleable production
Unit cash cost of production - Z/R/SR
Mineral sands revenue
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
EBITDA
Depreciation and amortisation
Inventory movement - non-cash production costs
Rehabilitation costs for closed sites
EBIT
2019
2018
% change
-
-
-
-
-
38.6
(6.5)
(11.4)
(11.6)
(0.9)
(1.3)
(2.9)
4.0
(0.6)
(3.0)
(4.7)
(4.3)
9.3
9.3
50.8
60.1
225
184.9
(12.5)
(68.8)
(14.1)
(2.4)
(3.8)
0.8
83.9
(3.4)
(22.2)
(3.9)
54.4
-
-
-
-
-
(79.1)
(48.1)
(83.4)
(18.0)
(63.0)
(65.9)
(462.5)
(95.2)
(82.2)
(86.5)
21.2
(107.9)
kt
kt
kt
kt
$/t
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Discontinued and idle operations reflect rehabilitation
obligations in the United States (Florida and Virginia) and
certain idle assets in Australia (Murray Basin). Zircon and
ilmenite production ceased in the US in December 2015
following the completion of mining at Brink and Concord
deposits. The US operations were permanently closed
in December 2016. Production in 2018 represented
the processing of remnant stockpiles to reduce future
rehabilitation obligations.
Mineral sands revenue represents the sale of finished goods
that had been stockpiled before cessation of production.
The US inventory balance was $2.0 million at 31 December
2019 and the Murray Basin held $6.0 million of inventory.
Cash costs of production were largely driven by activities
associated with product transportation, combined with some
processing costs for the remnant stockpiles in 2018.
Restructure and idle costs reflect regional management
and holding costs following closure of operations and care
and maintenance of idled assets. These costs decreased
by 18% in 2019 but are expected to continue to be broadly
consistent until all stockpiles are diminished and rehabilitation
is complete.
Rehabilitation costs remained consistent with the prior year.
The cost of rehabilitating the Virginia operation will largely
depend on the rehabilitation programme ultimately undertaken
by Iluka, which will be determined following engagement with
local regulators.
31
Iluka Resources Limited, Annual Report 2019 FINANCIAL AND
OPERATIONAL REVIEW
Movement in net (debt) cash
Opening net cash (debt)
Operating cash flow
MAC royalty
Exploration
Interest (net)
Tax
Capital expenditure
Proceeds from changes in ownership interests
Payments for options contracts
Principal element of lease payments AASB 16
Asset sales
Share purchases
Free cash flow
Dividends
Net cash flow
Exchange revaluation of USD net debt
Amortisation of deferred borrowing costs
(Decrease)/increase in net cash (debt)
Closing net cash (debt)
H1
2018
(182.5)
306.5
29.6
(4.6)
(4.7)
(2.4)
H2
2018
(34.4)
287.7
26.2
(7.1)
(1.9)
(2.8)
(93.6)
(217.9)
-
-
-
1.1
(6.4)
225.5
(69.2)
156.3
(7.3)
(0.9)
148.1
(34.4)
-
(0.6)
-
1.3
(6.0)
78.9
(39.1)
39.8
(2.9)
(0.7)
36.2
1.8
H1
2019
1.8
179.9
30.4
(5.0)
(2.9)
(143.9)
(145.0)
28.5
-
(4.0)
1.8
(5.0)
(65.2)
(79.6)
(144.8)
1.8
(0.3)
(143.3)
(141.5)
H2
2019
(141.5)
228.2
48.1
(6.3)
(2.8)
(3.5)
(52.5)
-
-
(4.1)
0.2
(2.4)
204.9
(20.3)
184.6
1.1
(0.9)
184.8
43.3
Net cash increased to $43 million, reflecting strong free cash
flow of $140 million, partially offset by a weaker Australian
dollar revaluing US dollar denominated debt.
Iluka invested $198 million on capital developments
during 2019, predominantly at Cataby and the expansions
at Sierra Rutile.
Operating cash flow of $408 million was a 31% decrease
from 2018 due to higher cash costs, reflecting increased
mining activities with the commissioning of the new Cataby
mine; a build in inventories for both finished goods and run
of mine stockpiles at Cataby; and higher receivables from
customers at year end.
Cash flows from the MAC royalty are received quarterly in
arrears and were 40% higher, predominantly due to higher
iron ore sales prices.
An interim dividend of 5 cents per share was paid in
September and Iluka has announced a final fully franked
dividend of 8 cents per share payable in April 2020.
32
Iluka Resources Limited, Annual Report 2019 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.
2019
Mineral sands revenue
AASB 15 freight revenue
Expenses
Mining Area C
FX
Corporate costs
EBITDA
Depn & Amort
Inventory movement - non-cash
Rehabilitation for closed sites
Write-down of Sierra Rutile
EBIT
Net interest costs
JA/MW C/SW
482.7
414.2
19.8
7.4
Idle
38.6
3.3
SRL
Expl
& oth
Mineral
sands
257.6
(0.0)
1,193.1
8.1
-
38.6
(159.3)
(201.0)
(37.9)
(202.4)
(37.6)
(638.1)
-
-
-
-
-
-
343.2
220.6
(28.9)
14.3
1.6
-
(54.0)
6.2
(0.1)
-
-
-
-
4.0
(0.6)
(3.0)
(4.7)
-
-
-
-
63.3
(74.6)
(2.0)
-
(414.3)
(37.5)
593.6
85.1
(62.7)
616.0
(4.7)
(162.8)
(0.4)
MAC
Corp
Group
-
-
-
85.1
-
-
-
-
1,193.1
38.6
(16.5)
(654.6)
-
1.8
85.1
1.8
(48.0)
(48.0)
-
-
-
-
-
-
-
84.7
(62.7)
-
-
(13.2)
-
(163.2)
15.5
(3.2)
(414.3)
50.8
(13.8)
(38.0)
-
-
-
-
-
-
-
-
-
15.5
(3.2)
(414.3)
28.8
(0.6)
(38.0)
(9.8)
(9.8)
Rehab unwind and other finance costs
(13.1)
(12.1)
(10.5)
330.2
172.7
(4.3)
(427.6)
(42.2)
(0.3)
(0.2)
-
(0.1)
(2.3)
-
-
Profit before tax
Segment result
316.8
160.4
(14.8)
(430.0)
(42.2)
316.8
160.4
(14.8)
(430.0)
n/a
84.7
84.7
(75.9)
(1.0)
n/a
117.1
2018
JA/MW C/SW
Idle
SRL
Expl
& oth
Mineral
sands
MAC
Corp
Group
Mineral sands revenue
568.6
297.2
184.9
205.7
(12.3)
1,244.1
AASB 15 freight revenue
26.2
4.9
12.0
7.0
-
50.3
(206.9)
(138.9)
(143.2)
(182.5)
(31.6)
(703.1)
Expenses
Mining Area C
FX
Corporate costs
EBITDA
Depn & Amort
Inventory movement - non-cash
Rehabilitation for closed sites
EBIT
Net interest costs
Rehab unwind and other finance costs
(5.1)
Profit before tax
Segment result
358.9
358.9
-
-
-
-
-
-
378.8
142.3
(25.3)
(20.1)
2.0
8.6
(5.1)
(1.4)
364.0
115.6
-
-
(5.2)
110.5
110.5
-
-
-
83.9
(3.4)
(22.2)
(3.9)
54.4
-
(4.4)
50.0
50.0
-
-
-
55.6
-
-
55.6
(0.4)
-
-
-
-
-
-
1.3
1,244.1
50.3
(703.1)
55.6
1.3
(48.1)
(48.1)
(46.8)
600.1
-
-
-
(93.6)
(28.3)
4.6
-
-
-
30.2
(41.1)
(2.9)
1.3
-
-
-
(43.9)
(3.3)
-
-
-
-
-
591.3
(93.2)
(28.3)
4.6
(12.5)
(47.2)
474.4
55.2
(46.8)
482.8
-
(2.0)
(14.5)
(14.5)
-
-
(47.2)
n/a
-
(16.7)
457.7
504.9
-
-
55.2
55.2
(14.1)
-
(60.9)
n/a
(14.1)
(16.7)
452.0
560.1
33
Iluka Resources Limited, Annual Report 2019 FINANCIAL AND
OPERATIONAL REVIEW
PROJECTS
ENEABBA MINERAL SANDS
RECOVERY, WESTERN
AUSTRALIA
The Eneabba mineral sands recovery
project involves the extraction,
processing and sale of a strategic
stockpile of historical monazite-rich
material that is currently stored in
a mining void at Eneabba, Western
Australia.
The focus of Phase 1 is to monetise
monazite concentrates contained in
the Mineral Separation Plant By-
Product Mineral Resource. This has
required the development of a viable
processing methodology and the
selection of a channel to market,
which satisfies product stewardship
protocols. The execution budget for
Phase 1 is less than $10 million.
An offtake agreement to underpin
the project was finalised during the
year, with construction and off-site
fabrication activities commencing
soon after. Approvals have been
granted and the project is on track for
commissioning in the first half of 2020.
Studies into Phase 2 of the project,
which involves further processing,
are well underway.
AMBROSIA,
SOUTH AUSTRALIA
BALRANALD, NEW SOUTH
WALES
Balranald and Nepean are two
rutile-rich deposits in the northern
Murray Basin, New South Wales.
Work in 2019 focused on planning
for a third trial (T3) to take place in
2020. This will determine whether an
underground mining and backfilling
technology developed by Iluka is
economically viable in a continuous
mining and processing environment.
Operations at Jacinth-Ambrosia in
South Australia moved from the Jacinth
deposit to the Ambrosia deposit
in August. The planned mine move
was expedited from 2022 to 2019
to provide capacity and flexibility to
maintain zircon production at current
levels over future years. Site works
included road, earthworks, power
and water infrastructure; and pipe
and pumping equipment. The mining
unit was relocated and production
recommenced within three days of
outage. The project was delivered
ahead of schedule and under budget.
CATABY, WESTERN
AUSTRALIA
Iluka completed and commissioned the
$270 million Cataby development in
early 2019, on schedule and on budget.
Cataby is a large, chloride ilmenite-rich
deposit 150 kilometres north of Perth.
The mine is a conventional mineral
sands development, utilising dozer push
and truck and excavator mining to feed
two in-pit mining units. An onsite Wet
High Intensity Magnetic Separation
(WHIMS) plant separates the magnetic
(ilmenite) and non-magnetic product
streams (zircon and rutile). Ilmenite
sourced from Cataby is transported
to Capel for synthetic rutile production
and the non-magnetic stream to Iluka’s
Narngulu mineral separation plant
at Geraldton for final processing of
zircon and rutile.
ATACAMA, SOUTH
AUSTRALIA
Atacama is a satellite deposit to Iluka’s
existing operation at Jacinth-Ambrosia.
Iluka undertook project work to
evaluate the potential for this deposit
to add material zircon production
when required by utilising existing
infrastructure. The pre-feasibility
study commenced in late 2018 and
progressed over 2019.
34
Iluka Resources Limited, Annual Report 2019 LANTI AND GANGAMA,
SIERRA LEONE
During 2019 Iluka completed projects
doubling the capacity at both the Lanti
and Gangama mining operations in
Sierra Leone.
The Gangama project involved
the addition of mining fleet and
construction of a second concentrator,
duplicating the design of existing
operations. Commissioning of the
Gangama concentrator began in May
and was operating at design capacity
by June.
At Lanti, a second mining unit was
added and the floating concentrator
from the decommissioned dredge
operation was beached and
refurbished. Construction and
commissioning activities were
completed during August.
Both projects were delivered on
schedule and on budget.
PUTTALAM, SRI LANKA
The Puttalam Quarry (PQ) deposit is a
large sulphate ilmenite deposit, located
approximately 30 kilometres from
the town of Puttalam in north western
Sri Lanka. A pre-feasibility study on
the deposit has been completed.
In April Iluka withdrew its project team
from the country following the Colombo
terrorist attacks. The company
subsequently recommenced limited
engagement activities with government
on legal and investment terms for the
development. As anticipated, little
progress was made in the lead up to
the November presidential election.
SR1 RESTART, WESTERN
AUSTRALIA
WIMMERA, VICTORIA
A scoping study commenced and was
completed on the potential restart of
Iluka’s synthetic rutile kiln 1 (SR1) at Capel,
Western Australia. The kiln is adjacent to
the currently operational SR2 kiln and has
capacity to produce 110-120 thousand
tonnes of synthetic rutile per annum.
Key long-lead items have been
manufactured. Approval to commence
the bulk of the scope of works for
refurbishment of the kiln remained subject
to the company securing ilmenite feed
source and appropriate commercial
arrangements.
SEMBEHUN, SIERRA LEONE
The Sembehun group of deposits are
situated 20 to 30 kilometres north west
of the existing Sierra Rutile operations.
Sembehun is one of the largest and
highest quality known rutile deposits in
the world.
Detailed engineering and definitive
estimates based on original project
scope to achieve production capacity
of 300 thousand tonnes per annum
of rutile were completed in first half of
2019. These estimates were beyond
that estimated in mid-2018. In response,
the company determined the most
prudent approach was to revisit
and broaden the value optimisation
studies to consider changes to the
parameters that had been set at the
time of acquisition, as well as mining
technique and mine sequencing, with
a view to determining a development
option which was both fit for purpose
and ensured an appropriate balance
between risk and return.
Study work focused on a number
of areas including identifying and
evaluating infrastructure, logistics and
mining methods.
The Wimmera project involves the
mining and beneficiation of a fine
grained heavy mineral sand ore body
in the Victorian Murray Basin for the
potential long-term supply of zircon
and rare earths. Technical challenges
relating to purity and recovery of the
valuable mineral have, in the past,
impeded development of this style
of deposit. Iluka has undertaken
technical development studies which
have yielded pathways to address the
challenges with recovery and purity.
Over the course of the year a number
of key project milestones were
achieved, including the successful
production of a rare earth carbonate
mixture and pilot plant optimisation
of separation and refining processes.
Product samples were provided
to customers for the purposes of
assessing quality, which resulted in
changes to the process flow-sheet
that will be tested in 2020. Work was
also undertaken to understand the
implications of recent hydrogeological
modelling and geotechnical studies
on the range of possible earth moving
techniques.
The pre-feasibility study is now
scheduled for completion in 2020.
35
Iluka Resources Limited, Annual Report 2019
Atacama, South Australia
FINANCIAL AND
OPERATIONAL REVIEW
EXPLORATION
EXPLORATION AND GEOLOGY
Growing and improving the quality of Iluka’s Ore Reserves and
Mineral Resources is important to the company’s ability to deliver
sustainable value. Brownfield exploration is focused on extending the
life of existing assets via value-adding extensions and discoveries.
Greenfield exploration is focused on identifying regionally significant
deposits capable of delivering significant longer-term growth.
The assessment of exploration opportunities is managed through a
stage-gate approach requiring specific technical and non-technical
criteria to be satisfied before progressing to the next stage of
assessment.
SIERRA LEONE
At Sierra Rutile, drilling was conducted for potential extensions near
current mining areas and to improve confidence at the Sembehun
group of deposits. Approximately 21,000m of drilling was completed
in 2,359 holes. Updated geological modelling was carried out
over a number of the deposits in response to the field exploration.
In January 2019, Iluka announced the inaugural Pejebu Mineral
Resource estimate of 0.22Mt of rutile, which is proximate to current
mining areas. Following an assessment of the regional geological
setting, four new exploration lease applications have been submitted
and are currently being processed. If awarded, these leases are
considered to have the potential to add standalone deposits and
extensions to Sembehun.
AUSTRALIA
Iluka completed over 19,000m of drilling supporting key projects
at Cataby, Western Australia; Ambrosia, South Australia; and the
Wimmera project, Victoria.
At Atacama, 10,148m of drilling was completed to improve the
confidence in mineralisation with high zircon content, aimed at
supporting feasibility study mining options.
At Cataby, in excess of 5,000m of drilling was completed to support
mining operations.
4,000m of drilling was completed in relation to the ongoing economic
assessment of Wimmera project and associated regional prospects.
LEADERS IN MINERAL
SAND EXPLORATION
36
Iluka Resources Limited, Annual Report 2019
QUEBEC, CANADA
Iluka continued to explore for high-grade rutile bearing ilmenite bodies through its
agreement with Canadian junior Societe d’Exploration Miniere Vior Inc. Four diamond
drill holes targeting gravity anomalies identified during 2018 were completed, totalling
1,256m. No significant mineralisation was identified. The focus of the activity shifted
to the Grand Duc region, with the remaining targets subject to detailed ground gravity
surveys to refine the drill hole designs. Drilling of the remaining targets is scheduled to
commence in late Q1 2020.
GENERATION AND EXTERNAL OPPORTUNITIES
Over 15,500m of drilling was completed on exploration projects in Australia and
the United States, with a significant proportion of this completed in South Australia.
Follow up drilling is planned on several targets as part of ongoing exploration activities
aimed at providing a sustainable operational pipeline. Additionally, the Group continues
to generate both greenfield and brownfield targets through the assessment of
standalone, internally generated opportunities and third-party approaches.
During 2019 Iluka applied for and sought access to over 2,600 square kilometres
of new exploration leases for greenfield exploration activity.
Granted tenement position as at 31 December 2019
Region
Eucla Basin, South Australia
Murray Basin (NSW & Vic)
Perth Basin (WA)
Other - Australia
Sierra Leone
Sri Lanka
Other - international
Total
Tenement applications as at 31 December 2019
Region
Eucla Basin, South Australia
Murray Basin (NSW & Vic)
Perth Basin (WA)
Other - Australia (QLD)
Sierra Leone
Sri Lanka
Other - international
Total
Approx. square kilometres
10,427
3,669
584
0
559
147
0
15,386
Approx. square kilometres
0
874
6
1,791
858
0
0
3,529
Exploration and geology expenditure 2019 - $11.0 Million
Administration + other
$0.9m
Operations and
project support
$2.5m
Australian
exploration
$4.3m
US + Canada
$3.1m
International
exploration
$0.2m
37
Iluka Resources Limited, Annual Report 2019
SUSTAINABILITY
SUSTAINABILITY APPROACH
Iluka aspires to achieve high levels of sustainability performance integrating economic, environmental and social
considerations into business practice and ensuring safe and responsible conduct underpins everything we do.
Iluka’s sustainability approach and performance is overseen by the Board and is integrated into all levels of the
business. Sustainability is governed through a series of policies and management systems aligned to the company’s
core values – to act with integrity, demonstrate respect, show courage, take accountability and collaborate.
Governance and integrity
Health and safety
We conduct our business by adhering to the
highest standards of corporate governance whilst
acting with integrity by being transparent and
honouring our commitments.
We strive to protect the health and safety of our
people through identifying risk and taking appropriate
action to avoid workplace fatalities and minimise
injuries and illnesses.
Economic responsibility
Social performance
We aim to create sustainable economic outcomes,
which allow us to share economic benefits with our
host communities and deliver sustainable value.
We respect human rights, engage meaningfully with
stakeholders and look to make a positive difference
to the communities where we operate whilst
minimising and managing potential impacts.
People
Iluka aims to attract and retain the best people
while building and maintaining a diverse, inclusive
and high-achieving workforce.
Environment
We seek to manage our impact on the environment,
use resources efficiently and leave positive
rehabilitation and closure outcomes.
Health and safety performance
The health and safety of Iluka’s people is the foundation of our business, and a personal responsibility of all
members of our workforce. Iluka continues to strive to avoid fatalities and life-changing injuries from occurring in
our workplace and minimising injury and illness potential. Thirty people sustained recordable injures while working
for Iluka in 2019; 1 of these was a lost time injury, 23 were medical treatment injuries and 6 were restricted work
cases. The Group total recordable injury frequency rate decreased from 3.5 in December 2018 to 2.9 in December
2019. The Group lost time injury frequency rate reduced to 0.1 compared to 1.0 in 2018. The severity of injuries
has reduced with the severity rate declining from 18.8 to 2.4. The number of serious incidents or near hits classified
as having the potential for severe injury or fatality has increased to 76 from 47 in 2018. While this may in part be a
reflection of improvements in incident classification and reporting implemented in 2019, it remains a key area of
focus for continual safety improvement across the Iluka Group.
Iluka’s safety performance in Sierra Leone was outstanding with the Sierra Rutile operation exceeding one year
without a lost time injury across its workforce and contractors.
Environmental and social performance
Iluka continued to improve our environmental performance with 13 recordable environmental incidents compared
to 20 during the previous year; and successfully rehabilitated 686 hectares of disturbed area. An improvement in the
number of social incidents also occurred during 2019 with a reduction from 14 level 3 and above incidents in 2018
to a total of 7 in 2019. No level 5 environmental or social incidents occurred during 2019.
THE HEALTH AND SAFETY OF ILUKA’S PEOPLE
IS THE FOUNDATION OF OUR BUSINESS
38
Iluka Resources Limited, Annual Report 2019
SUSTAINABILITY INITIATIVES
Iluka continued to make progress with a number of
sustainability initiatives, including the development of a
modern slavery work programme and the assessment of
potential physical climate risks and opportunities.
Iluka is committed to managing its climate change risks
and taking advantage of associated business opportunities.
The company is committed to the Paris Agreement
objectives and accepts the Intergovernmental Panel
on Climate Change (IPCC) assessment of climate
change science. Iluka is taking steps to implement the
recommendations made by the Task Force on Climate-
related Financial Disclosures (TCFD) over a three-year
period. During 2019, this included the company assessing
the potential physical climate risks and opportunities that
may impact our operations. In 2020 Iluka will evaluate the
transition risks which may impact the business.
The Board Charter was revised to stipulate the requirement
for the Board to conduct an annual review of climate-related
risks and approve climate-related disclosures. The Board’s
duties also extend to measuring and reviewing Iluka’s
performance against climate change and sustainability
targets. Further discussion of Iluka’s progress on
implementing the recommendations of the TCFD will
be provided in the 2019 Sustainability Report, to be
released in April 2020.
Iluka retained its position on the Australian DJSI and
was included in the FTSE4Good Index in recognition of
strong environmental, social and governance practices.
These indices track the performance of over 3,500 leading
companies worldwide, independently evaluating their
long-term sustainability performance.
The company has continued its commitment to
building capacity for the understanding and application
of revegetation science across the mining industry,
both in Australia and overseas. July 2019 marked the
launch of the Iluka Chair in Vegetation Science and
Biogeography, embedded within the Harry Butler Institute,
Murdoch University.
Iluka participated in the resource and energy industries’
modern slavery collaborative group, developing an
understanding and capability to support measures to
comply with the implementation of Australian modern
slavery legislation. The company plans to release its first
Modern Slavery Statement in 2021.
Tutunup South native plant nursery, Western Australia
39
Iluka Resources Limited, Annual Report 2019 BUSINESS RISKS AND MITIGATIONS
The identification and management
of risk is fundamental to achieving
Iluka’s objective to deliver sustainable
value. The company is committed
to managing risk in a proactive
and effective manner. Iluka’s Risk
Management Policy is supported by a
risk management framework which is
aligned to the International Standard
for risk management, ISO 31000. This
framework provides a whole of business
approach to the management of
risks and sets out the process for the
identification, assessment, monitoring,
review and reporting of risk to facilitate
the achievement of our plans and
objectives. The Board, through the
Board Charter, delegates responsibility
for identifying and managing risks and
implementing effective controls 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 of the company’s risk
management practices. Through its risk
management framework Iluka seeks to:
• apply a structured and systematic
risk management process across
the Group;
• 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 the
effectiveness of controls in line
with agreed risk tolerances;
• ensure material business risks are
effectively identified, communicated
and appropriately elevated
throughout all levels of management
and to the Board;
•
implement appropriate insurance
strategies;
• assess regularly the effectiveness
of the risk management process
and risk controls; and
• continue to fulfil governance
requirements for risk management.
Iluka applies a structured and systematic
approach to assess the consequence
of risk in areas such as injury; illness;
community; environment; compliance;
financial; company objectives and
reputation. Company risks, and how they
are being managed, are reviewed and
updated by the Executive regularly and
are reported, along with the Executive’s
assessment of the company’s risk profile,
for approval by the Board twice yearly.
Set out below are the key risk areas
that could have a material impact on
the company. The nature and potential
40
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 adversely affect future performance.
Emerging risk is a standing Board
agenda item. Risks identified through this
process are incorporated into the Iluka
corporate planning process.
HEALTH & SAFETY RISKS
Iluka faces risks relating to the health and
safety of our workforce and it is our top
priority to look after the wellbeing of our
employees and contractors. Iluka works
actively to protect the health and safety
of our people by identifying and taking
appropriate action aiming to eliminate
workplace fatalities, and life-changing
injuries and minimise injuries and
illnesses through the delivery of effective
training, capturing accurate safety
statistics, conducting thorough incident
investigations and sharing learnings.
SUSTAINING OPERATIONS RISKS
Maintaining a pipeline of Ore Reserves
and projects in order to sustain
operations is a key focus for Iluka.
The success of exploration activity
and project delivery is critical to
sustain operational production profiles.
Tailings dam management is an ongoing
management and Board focus at
Iluka across all of our mines. Iluka has
dedicated geotechnical resources and
draws on external tailings and dam
management experts to continue to
improve our designs and monitoring
activities to reflect best practice. Annual
reviews are conducted of the company’s
resources and reserves, asset
integrity, short and long term planning,
geotechnical and hydrogeological
modelling.
ATTRACTING AND RETAINING
KEY PEOPLE RISKS
Attracting and retaining key personnel
is a priority and Iluka has effective plans
in place to develop and deliver ongoing
training and leadership development
combined with succession planning
and talent management processes.
PROJECT DEVELOPMENT RISKS
Iluka regularly assesses its ability to
enhance its production profile or extend
the economic life of deposits through
the development of new deposits within
its portfolio. A failure to develop and
operate projects in accordance with
expectations could negatively impact
results of operations and the company’s
financial position. Risks to major
development projects include the ability
to acquire and/or obtain appropriate
access to property, regulatory approvals,
supply chain risks, construction and
commissioning risks. There are also
technology risks associated with
some projects; for example, the new
unconventional mineral sands mining
approach planned for the Balranald
deposit, and in the Wimmera project in
Victoria. A structured capital process and
project delivery framework is utilised to
facilitate successful project development
to manage risks associated with bringing
new projects into operation.
PRODUCT DEMAND AND
PRICE RISKS
Iluka is subject to 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 products are
also subject to these market conditions.
The company’s approach to these
risks is to adopt pricing strategies that
promote sustainability (of demand and
pricing) and where appropriate to seek
offtake agreements that support project
capital returns, and to adjust production
and inventory levels in the context of
market demand.
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 in financial statements).
Iluka maintains policies which define
appropriate financial controls and
governance which seek to ensure
financial risks are fully recognised,
managed and recorded in a manner
consistent with:
•
the financial risk appetite and
delegations as set by Iluka’s Board;
• generally accepted industry
practice and corporate governance
standards; and
• shareholder expectations of a
mineral sands producer.
Where Iluka has entered into long-term
contracts with fixed or floor prices
(i.e. hedged the commodity price),
Iluka will consider the management
of the risks related to movements in
foreign exchange rates by entering into
appropriate hedging arrangements.
Any hedging is conducted in accordance
with Iluka’s risk tolerances and policies
including appropriate approvals.
Iluka Resources Limited, Annual Report 2019
GROWTH RISKS
To deliver sustainable value, Iluka
attempts to generate growth options
through exploration, innovation, project
development and appropriate external
growth opportunities. Evaluating growth
opportunities requires prudent risk
taking as part of a disciplined process
of project selection and evaluation
to maximise the opportunity, achieve
the desired outcomes, and manage
the associated risks to the company.
This includes applying 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.
GLOBAL ECONOMIC UNCERTAINTY
RISK
Iluka operates in a context of global
economic uncertainty. Contributing
factors currently include subdued
economic growth, trade tensions and
the impact of COVID-19. The company
maintains a strong business focus
to detect and respond to changes in
demand which inform changes to the
operational settings of our assets.
GOVERNMENT AND REGULATORY
RISK
Increasing international activities have
increased Iluka’s exposure to country
risks. New or evolving regulations and
international standards are outside
the company’s control and are often
complex and difficult to predict. The
potential development of international
opportunities can be jeopardised by
changes to fiscal or regulatory regimes,
adverse changes to tax laws, difficulties
in interpreting or complying with local
laws, material differences in sustainability
standards and practices, or changes to
existing political, judicial or administrative
policies and changing community
expectations. Risks in the locations
in which Iluka operates could include
terrorism, civil unrest, judicial activism,
community challenge or opposition,
regulatory investigation, nationalisation,
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.
ANTI-BRIBERY AND CORRUPTION
RISK
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.
COMMUNITY/ SOCIAL
EXPECTATIONS RISK
Iluka operates in different jurisdictions
with varying community and social laws
and expectations which are addressed
through having dedicated internal
resources to deal with these issues
on a regional basis. Community
expectations are continually evolving
and can be best managed through
the development of robust strategies,
maintaining strong relationships and
delivering on our commitments.
ENVIRONMENTAL RISK
Iluka is committed to leading practice
in environmental management as
outlined in the Iluka Health, Safety,
Environment and Community Policy.
Leading practice is based upon current
community expectations, applicable
legislation and regulatory standards,
all of which change over time. With
increasing government and public
sensitivity to 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,
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 of permits,
reputational issues, increased licence
conditions and corrective action orders.
Historic operations or disposal methods
by the company or its predecessor
companies, although materially
compliant with regulatory requirements
at the time, may be subject to increased
or new environmental standards which
require additional remediation. The
company monitors these risks as part
of the ongoing remediation of its former
operational sites.
BUSINESS INTERRUPTION RISKS
Circumstances may arise which preclude
sites from operating including natural
disaster, material disruption to our
logistics chain, critical plant failure or
industrial action. Iluka experienced illegal
industrial action at the Sierra Rutile
operation during late 2018. The Board
and Executive have developed specific
actions in response to the 2018 events
which address the risks to the stability of
Sierra Rutile’s operating environment.
The company undertakes regular reviews
for mitigation of property and business
continuity risks. Iluka also conducts
planning and simulated scenarios to
ensure rapid and effective response
in the event of an emergency or crisis.
Appropriate business plans, policies and
training exercises provides support to
mitigate Iluka’s risk. Iluka also maintains a
prudent insurance programme that may
offset a portion of the financial impact of
a major business interruption event.
SUSTAINABILITY RISK
Iluka’s safety, health, environmental,
people and community performance
expectations are clearly articulated in
its policies and are overseen by the
Board. The annual Iluka Sustainability
Report contains further information on
the company’s operating conditions,
as well as elements of the business
strategy. This document (for the
2018 year), as well as other company
information, is available on Iluka’s website
www.iluka.com. Iluka plans to publish a
Sustainability Report in respect of the
2019 year, in April 2020.
CLIMATE CHANGE RISK
Iluka is committed to managing its
climate change risks and taking
advantage of associated business
opportunities. The company is
committed to the Paris Agreement
objectives and accepts the
Intergovernmental Panel on Climate
Change (IPCC) assessment of climate
change science. Iluka is taking steps
to implement the recommendations
made by the Task Force on Climate
related Financial Disclosures (TCFD)
over a three-year period. During 2019,
this included the company assessing
the potential physical climate risks
and opportunities that may impact its
operations. In 2020 Iluka will evaluate
the transition risks which may impact
the business.
41
Iluka Resources Limited, Annual Report 2019
Capel synthetic rutile kiln, Western Australia
42
Iluka Resources Limited, Annual Report 2019 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
56
81
82
83
84
85
86
87
136
137
SYNTHETIC RUTILE KILNS, CAPEL,
WESTERN AUSTRALIA
Iluka’s Capel operation includes two synthetic rutile kilns: SR1 and
SR2. The SR1 kiln is currently idle, with a project focused on the
restarting of the kiln is underway.
43
Iluka Resources Limited, Annual Report 2019
RESULTS FOR ANNOUNCEMENT TO THE MARKET
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
For the year ended 31 December 2019
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 2019 (the 'financial year') compared with the year ended 31
December 2018 (the 'comparative year').
All currencies shown in this report are Australian dollars unless otherwise indicated.
Revenue from ordinary activities
Net loss after tax for the period from ordinary activities
Net loss after tax for the period attributable to equity holders of the parent
Down 2.4% to $1,318.0m
Down to $299.7m
Down to $279.9m
Dividends
2019 final: 8 cents per ordinary share (100% franked), to be paid in April 2020
2019 interim: 5 cents per ordinary share (100% franked), paid in October 2019
2018 final: 19 cents per ordinary share (100% franked), paid in April 2019
2018 interim: 10 cents per ordinary share (100% franked), paid in September 2018
Key ratios
Basic (loss)/profit per share (cents)
Diluted (loss)/profit per share (cents)
Free cash flow per share (cents)¹
Return on Equity²
Net tangible assets per share ($)
2019
(71.0)
(71.0)
33.0
(26.6)
1.63
2018
72.2
71.8
72.1
31.8
2.12
¹Free cash flow is determined as cash flow before refinance costs, proceeds/repayment of borrowings and dividends paid in
the year.
²Calculated as Net Profit/(Loss) after Tax (NPAT) for the year as a percentage of average monthly shareholder's equity over the
year.
Commentary on the consolidated results and outlook are set out in the Operating and Financial Review section of
the Directors' Report.
Dividend Reinvestment Plan (DRP)
The current Dividend Reinvestment Plan (DRP) was approved by the Board of Directors, effective for all dividends
from the 2017 final dividend onwards. Under the plan, eligible shareholders can reinvest either all or part of their
dividend payments into additional fully paid Iluka shares. The DRP remained active for the 2019 interim and final
dividends.
The Directors have determined that no discount will apply for the DRP in respect of the 2019 final dividend.
Shares allocated to shareholders under the DRP for the 2019 final dividend will be allocated at an amount equal
to the average of the daily volume weighted average market price of ordinary shares of the Company traded on
the ASX over the period of 10 trading days commencing on 11 March 2020. The last date for receipt of election
notices for the DRP is 9 March 2020.
Independent auditor's report
The Consolidated Financial Statements upon which this Appendix 4E is based have been audited.
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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 2019.
The information appearing on pages 14 to 41 forms part of the Directors' Report for the financial year ended 31
December 2019 and is to be read in conjunction with the following information:
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:
S Corlett (appointed 1 June 2019)
X Liu (retired 16 April 2019)
L Saint (appointed 24 October 2019)
DIRECTORS
G Martin
M Bastos
R Cole
T O'Leary
J Ranck
J Seabrook
Name:
Age:
Role:
Appointed:
Independent:
DIRECTORS' PROFILES
Qualifications:
BEc, LLB, FAIM, MAICD
Greg Martin
Chairman and Non-executive Director
January 2013
60
Yes
Current positions:
• Chairman of the Board
• Nominations and Governance Committee - Chairman
• People and Performance Committee - Member
Relevant skills and experience:
Mr Martin has 4 decades of 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 Ltd.
Other relevant directorships and offices (current and recent):
• Sydney Desalination Plant Pty Ltd - Chairman (retired July 2019)
• Western Power Corporation - Deputy Board Chair (appointed April 2015)
• Spark Infrastructure - Non-executive Director (appointed January 2017)
• Coronado Global Resources Inc. - Chairman (retired February 2019)
• Prostar Investments (Australia) Ply Ltd - Chairman (retired December 2017)
• Santos Limited - Non-executive Director (retired August 2017)
44
45
44
Iluka Resources Limited, Annual Report 2019 DIRECTOR’S REPORT
For the year ended 31 December 2019
DIRECTORS' REPORT
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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 2019.
The information appearing on pages 14 to 41 forms part of the Directors' Report for the financial year ended 31
December 2019 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
R Cole
S Corlett (appointed 1 June 2019)
X Liu (retired 16 April 2019)
T O'Leary
J Ranck
L Saint (appointed 24 October 2019)
J Seabrook
DIRECTORS' PROFILES
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Greg Martin
BEc, LLB, FAIM, MAICD
60
Chairman and Non-executive Director
January 2013
Yes
Current positions:
• Chairman of the Board
• Nominations and Governance Committee - Chairman
• People and Performance Committee - Member
Relevant skills and experience:
Mr Martin has 4 decades of 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 Ltd.
Other relevant directorships and offices (current and recent):
• Sydney Desalination Plant Pty Ltd - Chairman (retired July 2019)
• Western Power Corporation - Deputy Board Chair (appointed April 2015)
• Spark Infrastructure - Non-executive Director (appointed January 2017)
• Coronado Global Resources Inc. - Chairman (retired February 2019)
• Prostar Investments (Australia) Ply Ltd - Chairman (retired December 2017)
• Santos Limited - Non-executive Director (retired August 2017)
45
45
Iluka Resources Limited, Annual Report 2019 DIRECTOR’S REPORT
For the year ended 31 December 2019
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Tom O'Leary
LLB, BJuris
56
Managing Director
October 2016
No
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
Relevant skills and experience:
Mr O’Leary was previously Managing Director of Wesfarmers Chemicals, Energy & Fertilisers having been
appointed to the role in 2010. Tom joined Wesfarmers in 2000 in a Business Development role and was then
in 2009. Prior to joining Wesfarmers, Tom worked in
appointed to Managing Director, Wesfarmers Energy,
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)
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Marcelo Bastos
BEng Mechanical (Hons, UFMG), MBA (FDC-MG), MAICD
56
Non-executive Director
February 2014
Yes
Current positions:
• Audit and Risk Committee - Member
• Nominations and Governance Committee - Member
Relevant skills and experience:
Mr Bastos was formerly the Chief Operating Officer of the global resources company, MMG Limited, with
responsibility for operations on 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
OZ Minerals Limited and Golding Contractors Pty Ltd, 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):
• OZ Minerals Limited - Non-executive Director (retired April 2019)
• Aurizon Holdings Limited - Non-executive Director (appointed November 2017)
• Golder Associates - Non-executive Director (appointed July 2017)
• Anglo American PLC - Non-executive Director (appointed April 2019)
Qualifications:
LLB (Hons), BSc
Rob Cole
57
Non-executive Director
Name:
Age:
Role:
Appointed:
Independent:
March 2018
Yes
Current positions:
• Nominations and Governance Committee - Member
• People and Performance Committee - Member
Relevant skills and experience:
Mr Cole is an experienced business leader and has worked for over 35 years in the energy and resources
industry. Rob has held a diverse range of senior positions in commercial, corporate, marketing and business
strategy and planning functions. Rob was previously Managing Director of oil and gas production and exploration
company, Beach Energy, where he led a whole of business review and successfully implemented a new strategic
direction for the company. Rob also spent over eight years at Woodside Petroleum Limited across a number of
senior positions in commercial, corporate and legal areas, including Executive Director, Executive Vice President
(Corporate and Commercial) and General Counsel. Prior to his time at Woodside, Rob was a Partner at the law
firm King & Wood Mallesons.
Other relevant directorships and offices (current and recent):
• Perenti Global Limited - Non-executive Director (appointed July 2018)
• Synergy - Non-executive Chair (appointed November 2017)
• GLX Group - Chair (appointed November 2016)
• St Bartholomew's House Inc. - Non-executive Director (appointed November 2016)
• Southern Ports Authority - Non-executive Chair (appointed July 2016)
Qualifications:
BSc (Geo, Hons), FAusIMM, GAICD
Name:
Age:
Role:
Appointed:
Independent:
Current positions:
Susie Corlett
49
June 2019
Yes
Non-executive Director
• Audit and Risk Committee - Member
• Nominations and Governance Committee - Member
Relevant skills and experience:
Ms Corlett is a professional non-executive director following an executive career spanning mine operations,
investment banking and private equity. Susie is currently a non-executive director of Aurelia Metals Ltd, a Trustee
of the Australian Institute of Mining and Metallurgy (AusIMM) Education Endowment Fund and a director of The
Foundation for National Parks and Wildlife. A geologist, Susie's background is in mining operations and
exploration for RGC Ltd and Goldfields Ltd. Susie was most recently an Investment Director for global mining
private equity fund, following a career in mining project finance and credit risk management for Standard Bank
Limited, Deutsche Bank and Macquarie Bank.
Other relevant directorships and offices (current and recent):
• Aurelia Metals Ltd - non-executive Director (appointed October 2018)
• Australian Institute of Mining & Metallurgy (AusIMM) Education Endowment Fund - Trustee (appointed June
2018)
• Foundation for National Parks and Wildlife - Director and Treasurer (appointed June 2018)
• The David Burgess Foundation - Director (retired June 2019)
46
47
46
Iluka Resources Limited, Annual Report 2019 DIRECTOR’S REPORT
For the year ended 31 December 2019
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Rob Cole
LLB (Hons), BSc
57
Non-executive Director
March 2018
Yes
Current positions:
• Nominations and Governance Committee - Member
• People and Performance Committee - Member
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
Relevant skills and experience:
Mr Cole is an experienced business leader and has worked for over 35 years in the energy and resources
industry. Rob has held a diverse range of senior positions in commercial, corporate, marketing and business
strategy and planning functions. Rob was previously Managing Director of oil and gas production and exploration
company, Beach Energy, where he led a whole of business review and successfully implemented a new strategic
direction for the company. Rob also spent over eight years at Woodside Petroleum Limited across a number of
senior positions in commercial, corporate and legal areas, including Executive Director, Executive Vice President
(Corporate and Commercial) and General Counsel. Prior to his time at Woodside, Rob was a Partner at the law
firm King & Wood Mallesons.
Other relevant directorships and offices (current and recent):
• Perenti Global Limited - Non-executive Director (appointed July 2018)
• Synergy - Non-executive Chair (appointed November 2017)
• GLX Group - Chair (appointed November 2016)
• St Bartholomew's House Inc. - Non-executive Director (appointed November 2016)
• Southern Ports Authority - Non-executive Chair (appointed July 2016)
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Susie Corlett
BSc (Geo, Hons), FAusIMM, GAICD
49
Non-executive Director
June 2019
Yes
Current positions:
• Audit and Risk Committee - Member
• Nominations and Governance Committee - Member
Relevant skills and experience:
Ms Corlett is a professional non-executive director following an executive career spanning mine operations,
investment banking and private equity. Susie is currently a non-executive director of Aurelia Metals Ltd, a Trustee
of the Australian Institute of Mining and Metallurgy (AusIMM) Education Endowment Fund and a director of The
Foundation for National Parks and Wildlife. A geologist, Susie's background is in mining operations and
exploration for RGC Ltd and Goldfields Ltd. Susie was most recently an Investment Director for global mining
private equity fund, following a career in mining project finance and credit risk management for Standard Bank
Limited, Deutsche Bank and Macquarie Bank.
Other relevant directorships and offices (current and recent):
• Aurelia Metals Ltd - non-executive Director (appointed October 2018)
• Australian Institute of Mining & Metallurgy (AusIMM) Education Endowment Fund - Trustee (appointed June
2018)
• Foundation for National Parks and Wildlife - Director and Treasurer (appointed June 2018)
• The David Burgess Foundation - Director (retired June 2019)
47
47
Iluka Resources Limited, Annual Report 2019 DIRECTOR’S REPORT
For the year ended 31 December 2019
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
James (Hutch) Ranck
BSE (Econ), FAICD
71
Non-executive Director
January 2013
Yes
Current positions:
• People and Performance Committee - Chairman
• Nominations and Governance Committee - Member
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
Relevant skills and experience:
Mr Ranck has held senior management positions with DuPont, both in Australia and internationally 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. In 2018 Hutch retired
as Chairman of Elders Ltd after 6 years as a director and 4 years as Chairman. Also in 2018 Hutch retired as a
director of CSIRO after an appointment of 7 years.
Other relevant directorships and offices (current and recent):
• Elders Limited - Chairman (retired December 2018)
• CSIRO - Non-executive Member of the Board (retired May 2018)
• Autopak-Vetlab Group - Chairman (appointed April 2019)
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Lynne Saint
BCom, GradDip Ed Studies, FCPA, AICD, Cert Business Administration
57
Non-executive Director
October 2019
Yes
Current positions:
• Audit and Risk Committee - Member
• Nominations and Governance Committee - Member
Relevant skills and experience:
Ms Saint joins the Board from Bechtel Group, where she acquired more than 19 years’ leadership experience in
her executive career. Having most recently served as Chief Audit Executive, Lynne was formerly Chief Financial
Officer of Bechtel’s Mining and Metals Global Business Unit. Lynne's expertise encompasses corporate
governance, enterprise risk and supply chain and project management. In 2003, Lynne was recognised as the
Telstra Queensland Business Woman of the Year.
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Current positions:
Jenny Seabrook
BCom, FCA, FAICD
62
Non-executive Director
May 2008
Yes
• Audit and Risk Committee - Chairman
• Nominations and Governance Committee - Member
Relevant skills and experience:
In Ms Seabrook's executive career, she has worked at senior levels in chartered accounting, capital markets and
investment banking businesses. Jenny is a Senior Advisor to Gresham 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, Western Power Corporation, Western
Australian Treasury Corporation and MMG Limited.
Other relevant directorships and offices (current and recent):
• BGC (Australia) Pty Ltd - Non-executive Director (appointed October 2018)
• Esther Investments Pty Ltd - Non-executive Director (appointed October 2018)
• MMG Limited - Non-executive Director (retired October 2019)
• IRESS Limited - Non-executive Director (appointed August 2008)
• Australian Rail Track Corporation - Non-executive Director (appointed December 2016)
48
49
48
Iluka Resources Limited, Annual Report 2019 DIRECTOR’S REPORT
For the year ended 31 December 2019
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Jenny Seabrook
BCom, FCA, FAICD
62
Non-executive Director
May 2008
Yes
Current positions:
• Audit and Risk Committee - Chairman
• Nominations and Governance Committee - Member
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
Relevant skills and experience:
In Ms Seabrook's executive career, she has worked at senior levels in chartered accounting, capital markets and
investment banking businesses. Jenny is a Senior Advisor to Gresham 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, Western Power Corporation, Western
Australian Treasury Corporation and MMG Limited.
Other relevant directorships and offices (current and recent):
• BGC (Australia) Pty Ltd - Non-executive Director (appointed October 2018)
• Esther Investments Pty Ltd - Non-executive Director (appointed October 2018)
• MMG Limited - Non-executive Director (retired October 2019)
• IRESS Limited - Non-executive Director (appointed August 2008)
• Australian Rail Track Corporation - Non-executive Director (appointed December 2016)
49
49
Iluka Resources Limited, Annual Report 2019 DIRECTOR’S REPORT
For the year ended 31 December 2019
MEETINGS OF DIRECTORS
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
In 2019, the Board met on 11 occasions, of which 8 meetings were scheduled. In addition to these meetings, the
Board spent a day primarily focused on strategic planning. The Non-executive Directors periodically met
independent of management to discuss relevant issues. Directors’ attendance at Board and committee meetings
during 2019 is detailed below:
(1) “Held” indicates the number of meetings held during the period of each director’s tenure. Where a director is not a member
but attended meetings during the period, only the number of meetings attended is shown.
(2) “Attended” indicates the number of meetings attended by each director.
(3) Mr Martin and Mr Ranck retired from the Audit and Risk Committee on 30 September 2019.
(4) Ms Corlett was appointed as a director and member of the Audit and Risk Committee on 1 June 2019.
(5) Dr Liu retired as a director on 16 April 2019.
(6) Ms Saint was appointed as a director and member of the Audit and Risk Committee on 24 October 2019.
(7) Ms Seabrook retired from the People and Performance Committee on 30 September 2019.
DIRECTORS SHAREHOLDING
Directors shareholding is set out in the Remuneration Report, section 7.
EXECUTIVE TEAM PROFILES
Julian Andrews, BCom (Hons), PhD, CFA, GAICD
Head of Strategy, Planning & Business Development
Mr Andrews joined Iluka as Head of Business Development in 2017 and assumed his current role in 2018. Prior to
joining Iluka, Mr Andrews held various roles at Wesfarmers, including General Manager, Business Development
and Chief Financial Officer of Wesfarmers Chemicals, Energy & Fertilisers. 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.
50
51
50
Christian Barbier, M.Sc. (Management), GAICD
Head of Marketing
Mr Barbier joined Iluka in January 2016 and prior to appointment as Head of Marketing, was the General Manager
Zircon Sales at Iluka. He has over 25 years of experience in leading resources and industrial multinational
corporations, holding senior management positions in Europe, Australia and Asia. Prior to Iluka, Mr Barbier was
President Markets at Sibelco Asia, overseeing marketing, communication and sales. He arrived in Asia in 2004 as
Managing Director of Alcan International SE Asia & Australia, after having worked with Alcan and Pechiney in
Europe and Australia, in marketing, sales and finance positions.
Tim Bartholomew, B.Eng Mining (Hons), G.Dip. Energy & Resource Law, GAICD
General Manager, Strategic Development & Closure
Mr Bartholomew joined Iluka in 2007 and has held technical and project roles across the business in Operations,
Major Projects and most recently in Rehabilitation and Closure. Mr Bartholomew has over 20 years of experience
in the mining industry within Australia, New Zealand and the USA predominantly in the coal and mineral sands
sectors.
Matthew Blackwell, BEng (Mech), Grad Dip (Tech Mgt), MBA, MAICD, MIEAust
Head of Major Projects, Engineering & Innovation
Mr Blackwell joined Iluka in 2004 as President of US Operations. He had responsibilities for Land Management
and as General Manager, USA, before being appointed Head of Marketing, Mineral Sands in February 2014. In
2019, Mr Blackwell commenced in his current role of Head of Major Projects, Engineering & Innovation. Prior to
joining Iluka he was Executive Vice President of TSX listed Asia Pacific Resources, based in Thailand. Mr
Blackwell has a background in mining and processing with positions in project management, maintenance,
production and business development.
Rob Hattingh, MSc (Geochem), GAICD
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 28 years’ experience in the
mineral sands 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’ mineral sands business (now part of 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.
Sarah Hodgson, LLB, GAICD
General Manager, People & Sustainability
KPMG.
Daniel McGrath, B.Sc (Math)
General Manager, Cataby & Southwest
Ms Hodgson joined the People team at Iluka in 2013 and was appointed to her current role in March 2018. 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
Mr McGrath joined Iluka in 1993 and has held technical and operations management roles throughout Iluka for
many years. His most recent appointment was as Chief Metallurgist where he oversaw the technical
development and metallurgy functions. Prior to this Mr McGrath has held senior operational positions at Iluka’s
Western Australian, Eastern Australian, and USA operations while also having held metallurgy and process
engineering roles in Australia, Indonesia and Sierra Leone.
Iluka Resources Limited, Annual Report 2019 DIRECTOR’S REPORT
For the year ended 31 December 2019
Christian Barbier, M.Sc. (Management), GAICD
Head of Marketing
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
Mr Barbier joined Iluka in January 2016 and prior to appointment as Head of Marketing, was the General Manager
Zircon Sales at Iluka. He has over 25 years of experience in leading resources and industrial multinational
corporations, holding senior management positions in Europe, Australia and Asia. Prior to Iluka, Mr Barbier was
President Markets at Sibelco Asia, overseeing marketing, communication and sales. He arrived in Asia in 2004 as
Managing Director of Alcan International SE Asia & Australia, after having worked with Alcan and Pechiney in
Europe and Australia, in marketing, sales and finance positions.
Tim Bartholomew, B.Eng Mining (Hons), G.Dip. Energy & Resource Law, GAICD
General Manager, Strategic Development & Closure
Mr Bartholomew joined Iluka in 2007 and has held technical and project roles across the business in Operations,
Major Projects and most recently in Rehabilitation and Closure. Mr Bartholomew has over 20 years of experience
in the mining industry within Australia, New Zealand and the USA predominantly in the coal and mineral sands
sectors.
Matthew Blackwell, BEng (Mech), Grad Dip (Tech Mgt), MBA, MAICD, MIEAust
Head of Major Projects, Engineering & Innovation
Mr Blackwell joined Iluka in 2004 as President of US Operations. He had responsibilities for Land Management
and as General Manager, USA, before being appointed Head of Marketing, Mineral Sands in February 2014. In
2019, Mr Blackwell commenced in his current role of Head of Major Projects, Engineering & Innovation. Prior to
joining Iluka he was Executive Vice President of TSX listed Asia Pacific Resources, based in Thailand. Mr
Blackwell has a background in mining and processing with positions in project management, maintenance,
production and business development.
Rob Hattingh, MSc (Geochem), GAICD
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 28 years’ experience in the
mineral sands 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’ mineral sands business (now part of 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.
Sarah Hodgson, LLB, GAICD
General Manager, People & Sustainability
Ms Hodgson joined the People team at Iluka in 2013 and was appointed to her current role in March 2018. 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.
Daniel McGrath, B.Sc (Math)
General Manager, Cataby & Southwest
Mr McGrath joined Iluka in 1993 and has held technical and operations management roles throughout Iluka for
many years. His most recent appointment was as Chief Metallurgist where he oversaw the technical
development and metallurgy functions. Prior to this Mr McGrath has held senior operational positions at Iluka’s
Western Australian, Eastern Australian, and USA operations while also having held metallurgy and process
engineering roles in Australia, Indonesia and Sierra Leone.
51
51
Iluka Resources Limited, Annual Report 2019 DIRECTOR’S REPORT
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
Melissa Roberts, BCom (Hons), MBA
General Manager, Investor Relations and Commercial Mineral Sands Operations
Ms Roberts joined Iluka in 2009 and has held a number of roles across the business in Commercial, Business
Development, IT and Investor Relations. Ms Roberts has 19 years’ experience within the health, chemicals and oil
& gas industries. Prior to joining Iluka, Ms Roberts held various positions consulting to a range of oil and gas
operators in the UK, including, Maersk, BP and Talisman Energy. She also held positions in Australia with
Wesfarmers Chemicals, Energy & Fertilisers division, and with Mayne Health.
Adele Stratton, BA (Hons), FCA, GAICD
Chief Financial Officer
Ms Stratton joined Iluka in 2011 and was appointed Chief Financial Officer in August 2018. In the intervening
period she held numerous senior roles across the company, most recently General Manager Finance, Investor
Relations and Corporate Affairs. She is a qualified chartered accountant with 18 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, she worked in a number of finance roles at Rio Tinto Iron Ore in Perth.
Shane Tilka, BCom
General Manager, Jacinth-Ambrosia & Midwest
Mr Tilka joined Iluka in November 2004 and has held operations management roles throughout Iluka. His most
recent appointment was as Chief Operating Officer for Sierra Rutile Ltd. Prior to this Mr Tilka was General
Manager for Iluka’s US Operations and has held other senior roles at Iluka’s Western Australian and South
Australian operations.
Sue Wilson, BJuris, LLB, FGIA, FCIS, 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. She is a former Chairman of the WA State Council of the Governance Institute of
Australia and non-executive director of Western Power.
COMPANY SECRETARY
Ms 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 FCIS 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 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 56 to 80 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 and rehabilitation. The Company
also has a royalty business, with its cornerstone asset being a royalty over iron ore sales revenue from BHP's
Mining Area C province in Western Australia.
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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.
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
important.
The Group has, from time to time, employed the external auditor, PricewaterhouseCoopers, on assignments
additional to their statutory audit duties where the auditor's expertise and experience with the Group are
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 27 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
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
A copy of the auditors' independence declaration as required under section 307C of the Corporations Act 2011 is
•
•
Auditor Guidelines; and
the auditor.
set out on page 81.
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.
52
53
52
Iluka Resources Limited, Annual Report 2019 DIRECTOR’S REPORT
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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.
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 has, from time to time, employed 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 27 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 81.
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.
53
53
Iluka Resources Limited, Annual Report 2019 DIRECTOR’S REPORT
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
OTHER MATTERS
ROUNDING OF AMOUNTS
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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.
Shareholder class action
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. On 23 April
2018, Iluka was served with an originating application and statement of claim in respect of a shareholder class
action for alleged breaches of continuous disclosure obligations, and misleading and deceptive conduct.
During the current reporting period, the presiding judge has made orders for the exchange of evidence in the
proceedings and a trial date has been set for 1 March 2021. Iluka remains unable to reliably estimate the
quantum of liability, if any, that the Group may incur in respect of this class action.
Sierra Leone environmental class action
On 22 January 2019, class action proceedings were brought by a group of landowner representatives in Sierra
Leone, who allege they suffered a loss as a result of Sierra Rutile Limited’s mining operations. As at the reporting
date, it is not practicable for Iluka to estimate the quantum of liability, if any, that Iluka may incur in respect of this
class action.
Other than the above matters, which are disclosed in note 24 of the financial statements, 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 its operations or the state of affairs of the entity in
subsequent financial years.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
Following a comprehensive review of the Group’s corporate and capital structure during 2019, the Board and
management have decided to make preparations to put a proposal to shareholders regarding a demerger of the
Mining Area C (MAC) royalty business from the Group’s mineral sands business. This option has been
determined as the best means to deliver value to shareholders by separating distinct businesses and creating
two stand-alone ASX-listed companies. As the proposal is still in development and will be subject to further
Board approval, as well as regulatory, and shareholder approvals, MAC is not classified as held-for-sale as at 31
December 2019.
The directors are not aware of any other matter or circumstance not otherwise dealt with in the Financial Report
(refer to note 25) or the Directors' Report that has or may significantly affect the operations of the entity, the
results of its operations or the state of affairs of the entity in subsequent financial years.
DIVIDEND
The directors have declared a fully franked final dividend of 8 cents per ordinary share payable on 2 April 2020.
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 37. 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 2019 may be accessed from
the Company’s website at http://www.iluka.com/about-iluka/governance.
G Martin
Chairman
T O'Leary
Managing Director
20 February 2020
54
55
54
Iluka Resources Limited, Annual Report 2019 DIRECTOR’S REPORT
For the year ended 31 December 2019
ROUNDING OF AMOUNTS
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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
20 February 2020
55
55
Iluka Resources Limited, Annual Report 2019 DIRECTOR’S REPORT
For the year ended 31 December 2019
Remuneration Report
Message from the Chairman of the People & Performance Committee
Dear Shareholders
On behalf of the Board I am pleased to present Iluka’s
2019 Remuneration Report.
As the Chairman and Managing Director have outlined in
their Annual Report letters, 2019 saw accomplishment –
exemplified in the delivery of five key projects across
Iluka’s portfolio; and disappointment – being the write-
down of the carrying value of Sierra Rutile. Overall, the
company demonstrated resilience in the face of mixed
market conditions and global economic uncertainties,
delivering EBITDA of $616 million, the third best
underlying financial performance in Iluka’s history.
Safety performance at Sierra Rutile saw significant
improvement, with the operation achieving 12 months
without a lost time injury. Across the Group total injuries
reduced from 34 in 2018 to 30 in 2019. Environmental
incidents also reduced compared to the previous year;
and Iluka successfully rehabilitated 686 hectares of land
disturbed by mining activities.
2019 Remuneration outcomes
As a Board we apply a disciplined approach to our
assessment of performance and determination of
remuneration outcomes.
Notwithstanding Iluka’s strong underlying performance,
scorecard outcomes for 2019 reflect the impact of the
write down of Sierra Rutile on the overall financial result
and mixed results achieved across various performance
measures.
The Board believes the outcomes set out in this report
balance the accomplishments and disappointment the
business faced, along with the progress achieved in
maturing Iluka’s project development pipeline.
Key 2019 Highlights:
• MD Executive Incentive Plan outcome was 43%
•
of maximum (64% of target)
Executive Key Management Personnel outcomes
were between 38% and 45% of maximum (58%
and 67% of target)
Further detail is provided in Section 3 of this Report.
Response to the 2018 strike
Iluka received a ‘first strike’ on remuneration as a result
of more than 25% of shareholders voting against the
2018 Remuneration Report.
Since the 2019 AGM, the Board has engaged with
investors and proxy advisers to understand key
concerns and determine an appropriate response.
56
Based on our consultation with stakeholders, the key
concerns which led to the first strike related to the
perceived short term nature of the Executive Incentive
Plan (EIP), a preference towards longer vesting periods,
the nature of the long term performance test and the
weighting of financial metrics in the scorecard.
The Board and management value the insights received
during the consultation process and we thank you for
your willingness to provide feedback. We have spent
considerable time reflecting on your concerns and
reviewing our executive remuneration arrangements.
2020 executive incentives
The Board continues to believe the fundamental
objectives of the EIP remain appropriate for Iluka’s
business and the cyclical environment in which we
operate. Through the EIP we aim to:
•
•
•
•
facilitate a personally significant shareholding in
Iluka, subject to performance, with the majority of
the award being delivered in equity;
align the performance of executives with the
interests of shareholders over the long-term;
set targets annually that are directly impacted by
the performance of executives and feed into Iluka’s
strategy to deliver sustainable value; and
address the difficulty in setting appropriate
performance measures over a long-term period.
In determining appropriate changes to the EIP for 2020,
the Board considered shareholders’ feedback and
determined an approach that continues to support our
objectives and the achievement of our long term
corporate plan.
The key changes for 2020 are:
•
•
•
•
•
extending performance and vesting periods so
the plan operates over a five year period;
increasing the proportion of the award that is
subject to a second performance test at the end
of the (extended) five year period;
reshaping our performance scorecard and
increasing the weighting of financial
performance to 50%;
introducing scale vesting for the Relative Total
Shareholder Return test on the performance
rights portion of the award; and
a modest increase to target EIP incentive
opportunities following detailed benchmarking
against Iluka’s peers.
Full details regarding the changes for 2020 are outlined
in this report (see Section 2).
We have also updated the disclosure and worked to
improve the transparency in this Remuneration Report.
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
We have attempted to explain clearly how our executive
remuneration approach reflects the needs of the
business and to provide more clarity around our
decision making.
On behalf of the Board, I invite you to review our
Remuneration Report. We look forward to your ongoing
feedback and discussion with our shareholders and their
proxy advisers on our remuneration approach including
the EIP structure and this report.
Thank you for your ongoing support
Yours sincerely
Hutch Ranck
People and Performance Committee Chair
57
Iluka Resources Limited, Annual Report 2019 DIRECTOR’S REPORT
For the year ended 31 December 2019
Contents
1. Who is covered by this report?
2.
Iluka’s approach to executive remuneration
3. 2019 performance highlights and alignment to Executive KMP remuneration outcomes
4. Executive remuneration framework and details
5. Remuneration governance
6. Non-executive director fees
7. Statutory disclosures
1. Who is covered by this report?
58
59
63
70
73
76
77
This Report details the remuneration arrangements for Iluka’s key management personnel (KMP). KMP in 2019 comprised
the Managing Director and other key executives (Executive KMP), as well as non-executive directors.
Name
Position
Managing Director
Term as KMP
T O’Leary
Managing Director and Chief Executive Officer
Full year
Current Executive KMP
J Andrews
Head of Strategy, Planning and Business Development
Full year
C Barbier
Head of Marketing
Appointed 10 June 2019
M Blackwell
Head of Major Projects, Engineering and Innovation
A Stratton
Chief Financial Officer
Former Executive KMP
Full year
Full year
S Hay
Head of Resource Development
S Wickham
Chief Operating Officer, Mineral Sands
Ceased 7 June 20191
Ceased 7 June 20192
Current Non-Executive Directors
G Martin
M Bastos
R Cole
S Corlett
J Ranck
L Saint
Chairman, Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Full year
Full year
Full year
Independent Non-Executive Director
Commenced 1 June 2019
Independent Non-Executive Director
Full year
Independent Non-Executive Director
Commenced 24 October 2019
J Seabrook
Independent Non-Executive Director
Full year
Former Non-Executive Directors
X Liu
Independent Non-Executive Director
Ceased 16 April 2019
1 S Hay was a member of KMP until ceasing employment on 7 June 2019.
2 S Wickham ceased to be a member of KMP on 7 June 2019 when he transferred into the role of Operations Transition Advisor.
Following the completion of transition projects, Mr Wickham plans to depart from Iluka (expected during 2020.)
58
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
2. Iluka’s approach to executive remuneration
Remuneration Principles
Iluka’s Remuneration Principles provide the foundations for how remuneration is determined and paid. Remuneration
arrangements are structured to achieve the following:
Remuneration which is comparable and competitive within the relevant market;
Performance based with targets that reflect both prevailing business expectations and minimum time requirements;
Trailing exposure to company performance through deferred equity plans and minimum shareholding requirements;
•
•
•
• An appropriate balance between fixed and ‘at risk’ remuneration;
• Alignment to shareholder returns through performance objectives which support improved shareholder returns, and
•
Fair and transparent remuneration based on performance, compliance with legislated frameworks and clear and
concise disclosure.
Executive Remuneration Approach
Our purpose to deliver sustainable value is key to Iluka’s approach to executive remuneration. Our Executive Incentive Plan
(EIP) is designed to ensure remuneration received by Executive KMP is closely linked to the Company’s performance,
aligning it with the returns generated for our shareholders over the long term.
The EIP design, guided by our Remuneration Principles, reflects that we operate in a cyclical industry with volatile results
largely influenced by price and foreign exchange. The Board sets an annual scorecard to focus our Executive KMP on
financial and strategic imperatives they can influence and are critical to Iluka’s long-term sustainability. In 2019 objectives
for Executive KMP covered:
•
Financial performance;
• Optimisation of production;
•
•
Sustainability focusing on protecting our people, our environment and our communities; and
Key strategic projects to deliver sustainable value over the long-term and progression of longer term growth.
In setting objectives, the Board aims to ensure that targets are quantifiable and drive the right commercial and strategic
outcomes for Iluka. Section 3 provides a detailed explanation of the specific targets set in 2019, how they were measured
and our assessment of performance. The EIP award is delivered with a larger proportion of ‘at risk’ remuneration in equity,
deferred over several years. This, coupled with requiring our Executive KMP to maintain a personally significant
shareholding in Iluka, aligns Executive KMP with and exposed to the same financial consequences as shareholders.
Executive remuneration framework and approach for 2019
Attract and retain highly
skilled and engaged
executives to Iluka
Pay for performance and delivering shareholder value
Reward for results and tie executives to long-term Company performance
Fixed remuneration
Executive Incentive Plan (FY19)
Set after considering:
Annual scorecard of financial and strategic measures. Board assesses scorecard
performance at the end of the year with resulting award split into three components:
- Market median
-
Executive KMP’s
experience and
performance
Executive KMP’s role
responsibilities
-
Cash – a small proportion providing modest reward for short-term results
Restricted rights - vest in equally weighted tranches on the first, second and third
anniversary of the grant
Performance rights are subject to performance testing at two stages. Initial scorecard
performance determines the amount of the grant. A further performance test relating to
Iluka’s relative TSR is undertaken at the end of four years ensures the award will only
vest if relative TSR meets or exceeds the median TSR performance of the selected peer
group over the period. The award lapses if median performance is not met
Governance
Remuneration principles and structure are supported by policies and mechanisms including security trading
and minimum shareholding policies and clawback arrangements
59
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
Response to 2018 Remuneration Report Strike
We introduced the EIP in 2018, following significant consultation with investors and proxy advisers over the course of
2017 and incorporating the feedback received in the final design. The EIP was outlined in our 2017 Remuneration Report,
which received a 99.4% ‘for’ vote. Following this initial support, we implemented the new structure in 2018 and
shareholders expressed concern with some elements of the plan and we received a first strike on the 2018 Remuneration
Report.
Your feedback identified several concerns including:
Structural elements of the EIP
Communicating our approach and decision-making
•
•
Timelines regarded as too short term focussed
Long-term performance test not considered to be
challenging enough and applying to an insufficient
portion
• Weighting on financial performance considered too
low
Clarity of communication not regarded as sufficient in
relation to:
•
•
•
remuneration structures;
expectations of performance; and
the translation to remuneration outcomes
Having spent considerable time reflecting on the issues raised, we remain committed to the EIP as the right structure for
our business and operating environment. We have addressed your feedback in relation to both structure and
communication by making several changes, outlined below.
Structural elements of the EIP
Feedback
How it looked in 2019
How the EIP will look in 2020
EIP performance
timelines regarded as
being too short
Equity makes up the majority of the EIP
award, with the remainder in cash. The
quantum of cash and equity was awarded
following testing of performance against a
scorecard over a 12 month period.
Restricted rights (two thirds of the equity
component) vested in three equal
tranches, one, two- and three-years
following award.
Performance rights (the remaining one
third) vest three years after award subject
to a further performance test (with a four-
year relative TSR performance period).
We have extended vesting periods so over half
the award vests over a four and five year period.
From 2020, there will be four equal tranches of
restricted rights vesting up to four years after
award.
For performance rights, an additional year has
been added so vesting will occur four years
after grant subject to a relative TSR
performance over the preceding five years.
These extended timelines complement our
existing requirement for executives to hold
personally significant shareholdings.
The longer-term
performance test is
not regarded as
challenging enough
and applying to an
insufficient portion of
the EIP
Vesting of the performance rights was
subject to a further performance test of
achieving median performance relative
TSR over a four year period.
One third of the EIP equity award was
granted as performance rights subject to
the further relative TSR testing.
Performance rights will continue to be subject
to performance testing at two stages; once to
determine the size of award granted; and a
further time at vesting, to ensure that TSR
performance above median has been sustained.
We have changed the vesting approach on the
second test to a “sliding scale”– where 50% of
the award will vest for median performance,
increasing to 100% of the award vesting where
TSR is at or above the 75th percentile relative to
the selected comparator group.
We have also increased the portion of EIP equity
awards delivered in performance rights from
33% to 40%.
60
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
Feedback
How it looked in 2019
How the EIP will look in 2020
The weighting on
financial measures is
considered to be too
low
2019 scorecard performance measures
(and weighting) covered the following
areas:
Financial (35%), Production (15%),
Sustainability (15%), Group strategy (10%)
and Individual strategy (25%)
Two sets of financial metrics were used –
one for the MD and CFO and one for other
Executive KMP.
We have simplified our scorecard and increased
the weighting of financial measures to 50% in
addition to introducing one set of financial
metrics for all participants.
Group and individual strategic priorities will no
longer be measured separately.
Payment of dividend
equivalents was
questioned
Dividend equivalents were to be paid on
restricted rights and performance rights at
vesting – to the extent awards did not vest,
dividend equivalents were not paid.
As equity awarded under the EIP is a result of
performance, dividend equivalent payments will
be paid on restricted rights and performance
rights at the time of vesting only to the extent
the rights vest.
2020 Executive Incentive Plan changes
After the changes, the EIP will operate as below.
2021
2022
2023
2024
2025
Cash payment
(Executives only. MD will not receive a cash component)
Annual Performance
Period
Scorecard outcome
determines value of
entire EIP award
Restricted
rights 25%
vesting (1 year)
Restricted rights
25% vesting (2 years)
Restricted rights
25% vesting (3 years)
Restricted rights
25% vesting (4 years)
Relative TSR (5 years)
Grant subject to EIP
scorecard performance
Performance rights
Second performance test four years after award; five year relative TSR
performance assessed against a sliding scale test for vesting
61
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
Remuneration mix
Remuneration mix
A substantial portion of variable remuneration for Executive KMP is delivered in equity.
A substantial portion of variable remuneration for Executive KMP is delivered in equity.
As disclosed in the 2018 Remuneration Report, from 2020 onwards, the Managing Director will not receive cash. All
As disclosed in the 2018 Remuneration Report, from 2020 onwards, the Managing Director will not receive cash. All
variable remuneration will be delivered as equity, creating further alignment with shareholders.
variable remuneration will be delivered as equity, creating further alignment with shareholders.
Managing Director Remuneration mix (maximum opportunity)
Managing Director Remuneration mix (maximum opportunity)
2019
10%
2020 Onwards
33%
32%
57%
68%
Fixed
At Risk - Cash
At Risk - Equity
Fixed
At Risk - Equity
Communicating our approach and decision-making on remuneration
Communicating our approach and decision-making on remuneration
We also received your feedback on several other items relating to remuneration and have made further changes to
We also received your feedback on several other items relating to remuneration and have made further changes to
address this.
address this.
Further developments
Further developments
Existing incentive opportunities have been reviewed against incentives paid elsewhere in the market
Existing incentive opportunities have been reviewed against incentives paid elsewhere in the market
through a thorough benchmarking exercise and in light of the changes being made to our EIP
through a thorough benchmarking exercise and in light of the changes being made to our EIP
structure in 2020.
structure in 2020.
Modest increases to the maximum incentive opportunity will be made for 2020 awards. For the MD,
Modest increases to the maximum incentive opportunity will be made for 2020 awards. For the MD,
the maximum incentive opportunity has increased by 10% to 210% of fixed remuneration and for
the maximum incentive opportunity has increased by 10% to 210% of fixed remuneration and for
other executive KMP, there has been an increase of 15% to 165% of fixed remuneration to maximum
other executive KMP, there has been an increase of 15% to 165% of fixed remuneration to maximum
incentive opportunity from 2020.
incentive opportunity from 2020.
We have provided disclosure of our costs, production, sustainability and strategic targets. We have
We have provided disclosure of our costs, production, sustainability and strategic targets. We have
not disclosed certain financial and strategic targets due to commercial sensitivities. See section 3
not disclosed certain financial and strategic targets due to commercial sensitivities. See section 3
for further details.
for further details.
We have reviewed our disclosure with the aim to provide a clearer and more transparent explanation
We have reviewed our disclosure with the aim to provide a clearer and more transparent explanation
of our remuneration arrangements and how and why remuneration decisions are made.
of our remuneration arrangements and how and why remuneration decisions are made.
At the 2018 and 2019 Annual General Meetings (AGM), Iluka sought shareholder approval for the
At the 2018 and 2019 Annual General Meetings (AGM), Iluka sought shareholder approval for the
Managing Director’s 2018 and 2019 EIP equity grants, with the number of restricted rights and
Managing Director’s 2018 and 2019 EIP equity grants, with the number of restricted rights and
performance rights to be determined following the 12 month scorecard performance assessment
performance rights to be determined following the 12 month scorecard performance assessment
using the equity allocation methodology disclosed. Shareholder approval was sought at that time to
using the equity allocation methodology disclosed. Shareholder approval was sought at that time to
ensure support before implementing the EIP grants.
ensure support before implementing the EIP grants.
As shareholder approval for the Managing Director’s 2019 EIP equity grant has already been
As shareholder approval for the Managing Director’s 2019 EIP equity grant has already been
obtained, we will not seek shareholder approval again for the grant at the 2020 AGM. At the 2021
obtained, we will not seek shareholder approval again for the grant at the 2020 AGM. At the 2021
AGM we will seek shareholder approval for the Managing Director 2020 EIP grant. This approach
AGM we will seek shareholder approval for the Managing Director 2020 EIP grant. This approach
reflects market practice and will allow shareholders the opportunity to approve the actual number of
reflects market practice and will allow shareholders the opportunity to approve the actual number of
securities to be allocated based on the 2020 EIP outcome.
securities to be allocated based on the 2020 EIP outcome.
Quantum of EIP
Quantum of EIP
opportunity was
opportunity was
questioned as
questioned as
being too high by
being too high by
some
some
Insufficient
Insufficient
disclosure of
disclosure of
performance
performance
targets
targets
Communication
Communication
was not
was not
sufficiently clear
sufficiently clear
Approach to
Approach to
obtaining
obtaining
shareholder
shareholder
approval of the
approval of the
Managing Director
Managing Director
EIP award
EIP award
62
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
3. 2019 performance highlights and alignment to Executive KMP remuneration outcomes
Outlined below is the 2019 performance compared to the historic performance of the Group.
Historical Company Performance
Net profit/(loss) after tax ($m)
Underlying EBITDA (Group) ($m)1
EBITDA margin (%)
Free cash flow ($ million)
Earnings per share (cents)
Return on equity (%)
Closing share price ($)2
Dividends paid (cents)3
Franking credit level (%)
Average AUD : USD spot exchange rate (cents)
Revenue per tonne Z/R/SR sold ($/t)
2015
53.5
293.4
31.2
155.0
12.8
3.8
6.13
25
100
75.2
1,136
20164
(224.0)
150.5
13.9
47.3
(53.3)
(17.1)
7.27
3
100
74.4
999
20174
(171.6)
360.5
35.4
321.9
(41.0)
(20.1)
10.17
31
100
76.7
2018
303.9
600.1
48.2
304.4
72.2
31.8
7.62
29
100
74.8
20194
(299.7)
616.0
51.6
139.7
(71.0)
(26.6)
9.30
13
100
69.5
1,079
1,426
1,654
1Underlying Group EBITDA excludes adjustments including impairments, write-downs and changes to rehabilitation provisions for closed
sites.
2Starting share price on 1 January 2015 was $8.63.
3 Dividends paid in relation to the year
4 Reported earnings in 2016, 2017 and 2019 were impacted by impairments, write-downs and changes to rehabilitation provisions for closed
sites.
63
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
2019 EIP Scorecard and outcomes achieved
The EIP Scorecard is approved by the Board at the commencement of the financial year and focuses executives on
business priorities that support the delivery of Iluka’s Corporate five year plan. Outlined below are the targets that were set
in 2019, and the performance achieved.
Scorecard measure
and target
FINANCIALS
(MD and CFO)
Weight
Performance and outcome
Threshold – Target - Stretch
35%
Outcome – 27% of target; 18% of maximum
Below threshold
Group ROE (%)1
Target 2019 budget
15%
Return of (26.6%) was well below expectations primarily due to the $414 million write-
down of Sierra Rutile and the associated write off of the deferred tax asset. The
underlying Group earnings were strong, particularly given the mixed mineral sands
market conditions, with the Group achieving an underlying EBITDA of $616 million, an
improvement on last year’s strong performance of $600 million.
EPS (c/s )1
Target 2019 budget
10%
Earnings per share of (71c) compared to 72c in 2018 was below expectations,
predominantly due to the write-down of Sierra Rutile.
Below threshold
All in Unit Cash Costs
of Production $/t
Target $1,016 / t
10%
1Disclosure of financial targets
Towards target
All in cash costs of $1,032 /t are slightly higher than budget primarily due to lower
production volumes at Sierra Rutile. Overall costs were lower than expectations.
No specific targets are disclosed in relation to the financial earnings measures due to commercial sensitivity. Iluka’s approach to the marketing and pricing of
its products is key to achievement of the company’s objective to deliver sustainable value. We believe maintaining confidentiality on financial earnings targets,
even on a retrospective basis, is critical to our competitive advantage and is in the best interests of shareholders.
PRODUCTION
15%
Outcome – 56% of target; 33% of maximum
Australia
Z/R/SR Kt
Target 565
Sierra Rutile
Z/R Kt
Target 155
10%
5%
Below target
Australian production of 556.7 Kt was 1 per cent below budget. Zircon production was
intentionally constrained in the last quarter to reflect current market conditions.
Synthetic Rutile production was above expectations due to an earlier restart after the
planned major maintenance outage in the first quarter and consistently higher runtime
for the remainder of the year.
Below threshold
Overall production of 145.7kt was below threshold.
Production lower due to continued mining runtime and throughput issues (noting
production performance improved in the fourth quarter).
64
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
Scorecard measure
and target
Weight
Performance and outcome
Threshold – Target - Stretch
SUSTAINABILITY
15%
Outcome – 75% of target; 50% of maximum
Below threshold
Group Total
Recordable Injury
Frequency Rate
Reduction to 2.6
Group Closure Index
(%)
Reduction of
rehabilitation liability
through closure index
target of 101%
Group environmental
level 3 and above
incidents
Target of 20 or less
Closed actions by due
date
95% of actions
(excluding SRL)
closed out by initial
set due date
GROUP STRATEGY/
PROJECTS
5%
While failing to achieve the targeted reduction, TRIFR has decreased by 0.6 to finish the
year at 2.9. Total Recordable Injuries reduced from 34 in 2018 to 30 in 2019.
Sierra Rutile operations achieved 12 months without a lost time injury in December
2019.
Above stretch (maximum)
5%
Above stretch performance was achieved as a result of the rehabilitation of 686
hectares during the year and the opening of new land maintained within budgeted mine
plans
Above stretch (maximum)
2.5%
There was a significant reduction in number of serious environmental incidents
(classified as Level 3 or above defined by Iluka’s incident classification matrix) with 13
incidents during the year, compared with 20 in 2018.
Below threshold
2.5%
Disappointing result with 86% of actions (identified through incident investigations,
planned workplace inspections and safety visits) closed out by initial due date on a
rolling 12 month basis. The monthly close out of actions over the second half of the
year has increased to targeted levels and remains a key focus for the business.
10%
Outcome – 100% of target; 66.7% of maximum
Measures focused on
progressing 5 year strategic plan
covering:
• Delivery of key projects
• Optimisation of marketing
•
•
approach
Improvement of social
performance in Sierra
Leone
Progression of growth
projects
At target performance has been assessed overall reflecting:
•
Strong delivery of major projects to sustain production, provide additional flexibility
and increase capacity across our operations;
Resilient performance in a subdued zircon market;
Significant improvement in social performance at Sierra Rutile with a reduction in
social incidents rated level 3 and above from 14 in 2018 to 7 in 2019
Progress made on a range of growth project feasibility studies during the year.
•
•
•
Detailed outcomes for the individual strategic objectives set for the Managing Director
are covered in the following pages, which provide more information relating to key
projects.
GROUP SCORECARD MD and CFO2 Outcome – 52% of target; 34.7% of maximum
2 Financials, Production, Sustainability, Group Strategy
The financial measures and outcomes for other Executive KMP were Return on Capital (below threshold performance
outcome), Net Profit after tax (below threshold performance outcome) and All in Unit Cash Costs of Production as
described above. These outcomes resulted in a Group EIP scorecard result of 52% of target for other Executive KMP.
65
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
Managing Director individual objectives
Individual strategic objectives were set based on individual KMP accountabilities. Outlined below is assessment of the
MD’s performance against the Individual Strategy scorecard measure and corresponding EIP outcome.
Scorecard
measure
(weight)
INDIVIDUAL
STRATEGY
(25%)
Deliver,
execute and
progress
growth
projects
Optimise SRL
financial and
social
performance
Optimise price
and volume
settings
Performance
Threshold – Target - Stretch
Outcome – 100% of target; 67% of maximum
The Group delivered five major projects in 2019, establishing a strong base to sustain operations.
•
•
•
•
The Cataby mine was commissioned and will support synthetic rutile production for at least the
next 8.5 years. The operation achieved near nameplate production in December.
Ilmenite mined at Cataby is processed at synthetic rutile kiln 2, which underwent a major refresh
prior to receiving this material. Delivered ahead of schedule and on budget, the refresh has
facilitated an increase in processing capacity from ~205ktpa to 225ktpa.
The mine move from Jacinth to Ambrosia was achieved ahead of schedule and significantly
under budget (>25%). This development enables Iluka to sustain zircon production levels into the
medium term. It also provides for enhanced flexibility in Iluka’s zircon product suite, which is
important given challenging market conditions.
Expansion projects to double current production levels at Lanti and Gangama in Sierra Leone
have been delivered on schedule and budget. With these expansions commissioned, fourth
quarter production at Sierra Rutile was up 32%, comprising 44 Kt of rutile, with the mineral
separation plant operating at capacity.
The Sembehun development did not progress in line with plan and reverted to scoping stage.
The feasibility study for the Eneabba Mineral Sands Recovery project was completed during the year,
with several studies progressed including those on the Wimmera, Balranald and Atacama
developments also progressed.
Overall financial performance at SRL was disappointing and, with its write-down, the Board has
acknowledged that the acquisition has fallen well short of investment case expectations, both in
terms of the operational outcomes that have been achievable in Sierra Leone and the potential cost to
develop Sembehun.
2019 exhibited improvement in SRL’s performance with respect to safety and stakeholder
relationships. This included 12 months without a lost time injury; improved production (following the
completion of expansion projects); and commencement of a strategic partnership with the IFC – the
private sector development arm of the World Bank and one of the country’s largest foreign donors and
comparatively calm industrial relations notwithstanding the shutdown of the dredge.
Iluka identified short term softness in the zircon market at mid-year and responded in the second half
with enhanced loyalty rewards and an augmented product mix of standard grade zircon and zircon-in-
concentrate. This enabled the achievement of sales volumes in line with revised guidance despite
cautious purchasing behaviour, some thrifting in downstream industries and an attendant reduction in
demand.
Iluka implemented a new leadership framework in 2019, setting out expectations of leaders. This was
complemented by the launch of new leadership development programmes.
Deliver people
strategy
The Executive was restructured to strengthen Iluka’s resource development and project execution
capability. This saw three new members to the Executive (all internal appointees).
The SRL Executive was also strengthened through expatriate and local Sierra Leonean hires, building
operational leadership capability.
Overall EIP scorecard outcome for the MD
Scorecard measure
Weight
Outcome
75%
25%
52%
100%
Group Scorecard
Individual Strategy MD
Outcome
OVERALL MD RESULT
66
Weighted
Outcome
39%
25%
64%
Threshold – Target - Stretch
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
The Individual strategy scorecard area outcomes for other Executive KMP ranged from 74 – 111 % of target.
EIP awards from 2019 scorecard outcomes
The following table presents the outcomes of the EIP award attributed to the 2019 performance year. The face value of
restricted rights and performance rights has been presented, as the fair value will not be determined until the grant is
made in March 2020.
Executive
KMP
T O’Leary
J Andrews
C Barbier1
Maximum
EIP
opportunity
$2,800,000
$ 837,123
$ 484,418
M Blackwell
$ 982,500
A Stratton
$ 925,274
S Wickham2
$ 475,948
% of target
EIP earned
64
% of
maximum
EIP earned
43
67
61
64
67
58
45
41
43
44
38
Cash
$179,031
Restricted
Rights
$ 620,642
Performance
Rights
$393,869
Total
$1,193,542
$ 74,671
$175,478
$123,208
$373,357
$39,399
$92,588
$65,009
$196,996
$83,971
$197,332
$138,552
$419,855
$82,164
$193,086
$135,571
$410,821
$36,552
$85,899
$60,312
$182,763
1 Represents the period that C Barbier was a member of KMP.
2 Represents the period that S Wickham was a member of KMP.
Summary of realised remuneration paid to Executive KMP in 2019
This section uses non-IFRS information to explain the “realised remuneration” received by Executive KMP for 2019. 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.
Fixed
Remuneration
Other
Cash
EIP
$1,400,000
$11,499
$179,031
Executive
KMP
T O’Leary1
J Andrews
$ 553,125
$11,499
$ 74,671
C Barbier2
$ 312,569
$ 67,217
M Blackwell
$ 655,000
$11,499
A Stratton
$ 612,708
$11,499
$39,399
$83,971
$82,164
Former Executives
Restricted
Rights
$ 620,642
$175,478
$92,588
$197,332
$193,086
S Hay
$ 262,500
$280,622
-
-
S Wickham3
$ 320,688
$ 34,010
$36,552
$85,899
LTIP/LDTR
Performance
Rights
$433,185
-
-
-
-
-
-
Total
$2,644,357
$814,773
$511,773
$947,802
$899,457
$543,122
$477,149
1 The estimated value of the 2016 LTDR award for T O’Leary was calculated using the opening share price of $9.30 at 1 January 2020.
The actual value will be calculated using the closing price at the date of vesting (1 March 2020).
2 Represents the period that C Barbier was a member of KMP.
3 Represents the period that S Wickham was a member of KMP.
“Fixed Remuneration (FR)” includes base salary and superannuation earned in 2019.
“Other” payments include non-monetary benefits received in 2019, including car parking, relocation benefits, and
termination entitlements (such as payment in lieu of notice and accrued annual and long service leave).
“EIP” reflects the EIP cash amount and restricted right award receivable by executive KMP in respect of performance in
2019 (paid in March 2020 following the release of the annual results). It does not include the performance rights
component of EIP outcomes, as they will only vest in future years if additional performance conditions are met.
“LTIP/LTDR” reflects previous awards of shares as a consequence of rights from prior years which reached the end of
their performance period in 2019 and vested in 2020. It does not include awards which may vest in future years subject to
performance conditions.
67
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
Legacy Arrangements
2016 LTIP outcome
The four-year 2016 LTIP award which commenced on 1 January 2016 completed its performance period at the end of
2019. Based on the results of testing, the Board determined that the award would not vest as outlined below.
Performance Measure/
Weighting
ROE (50%)
Relative TSR (50%)
(S&P/ASX 200 Materials
Index)
Performance Target
Actual Performance
Vesting outcome
50% vesting at Threshold of 10%
with full vesting at target of 14%
over performance period
Did not reach threshold
50% vesting at 50th percentile
and full vesting for 75th percentile
39th percentile
0%
0%
Managing Director One-off equity grant
In October 2016, the Managing Director received an award of Long Term Deferred Rights (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
over staggered performance periods.
Following the end of 2019, the third and final tranche of award was eligible to be tested against the ROE and relative TSR
performance targets over the performance period 1 October 2016 to 31 December 2019.
Average ROE performance of the period was below the threshold of 10% (reported earnings in 2016, 2017 and 2019 were
impacted by impairments, write-downs and increases to provisions) resulting in no vesting of the ROE component (half of
tranche 3) and TSR of 53rd percentile of the S&P/ASX 200 Materials Index comparator group on a relative basis resulted in
57% vesting of the TSR component (the remaining half of Tranche 3).
Award
Performance
Period
Award details
Award outcome
Tranche 3
1 October 2016 to
31 December 2019
163,031 share rights granted
46,579 share rights to vest in March 2020
(116,452 share rights to lapse)
Prior year LTDR award outcome
Tranche 1
1 October 2016 to
31 December 2017
147,814 share rights granted
73,907 share rights vested (March 2018)
(75,907 share rights lapsed)
Tranche 2
1 October 2016 to
31 December 2018
194,084 share rights granted
69,288 shares rights vested (March 2019)
(124,796 shares rights lapsed)
68
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
Long-Term Deferred Rights (LTDR) award – Chief Operating Officer, Mineral Sands
The Board has historically retained flexibility to make one-off equity grants to key executives to recognise change of
position and the impact of these will have on delivering Iluka’s future strategic plan. In recognition of the ongoing
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 2019. Grants were also made during the 2017 and 2018 financial years.
Following the end of 2019, the 2017 and 2019 LTDR granted to the Chief Operating Officer, Mineral Sands were eligible to
be tested. Performance was assessed against Sierra Rutile specific objectives covering financial, operational and safety
performance, and effective succession plans for key senior roles.
Award
Details
Award
Details
2017 LTDR – Chief
Operating Officer
2019 LTDR – Chief
Operating Officer
Share rights vest at the end
of three-year performance
period
23% of rights to vest 1
March 2020
3,711 rights will vest
12,422 rights will lapse
Share rights vest at the end
of one-year performance
period
35% of rights to vest 1
March 2020
4,117 rights will vest
7,645 rights will lapse
The following ad-hoc rights award will lapse on Steve Wickham’s departure from Iluka in 2020:
Award
Details
2018 LTDR – Chief
Operating Officer
Share rights vest at the end
of three-year performance
period
Award
n/a
Details
Award will lapse in 2020
69
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
4. Executive remuneration framework and details
Our current executive remuneration framework is described below in further detail.
Executive remuneration framework and remuneration mix
Fixed remuneration
2019 remuneration mix
Base salary,
superannuation and salary
sacrificed items.
A substantial proportion of variable remuneration is delivered in equity (restricted rights
and performance rights) as the below remuneration mix illustrates, based on the
achievement of maximum performance.
Managing Director
Other Executive KMP
10%
12%
33%
40%
57%
48%
Fixed
At Risk - Cash
At Risk - Equity
From 2020, EIP awards provided to the MD will be delivered solely in equity.
Iluka undertakes executive
remuneration
benchmarking to ensure
fixed remuneration
remains competitive within
the relevant markets and
against our chosen peer
groups. These are based
on market capitalisation,
industry and matching of
similar roles.
Two peer groups have
been used for
benchmarking in 2019.
The first consisting of
twenty ASX 200
companies in the
Materials, Energy, Utilities
and Industrials Global
Industry Classification and
a second general industry
peer group based on
similar market
capitalisation to Iluka.
Iluka’s remuneration policy
is to position remuneration
at the market median.
70
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
Fixed remuneration for 2019
In 2019 there was no increase to the Managing Director’s fixed remuneration, which has not changed since his
appointment to the role in September 2016. A benchmarking exercise was undertaken during 2019 and some roles
received an increase to their fixed remuneration where there was a change in scope and accountabilities.
•
Julian Andrews’ accountabilities were increased seeing him take charge of the exploration, geology and mine
planning functions.
• Adele Stratton’s accountabilities were increased seeing her take charge of the procurement function in addition to her
CFO role.
Executive KMP
T O’Leary
J Andrews
C Barbier
M Blackwell
A Stratton
S Wickham
At 31 December 2018
Fixed Remuneration
At 31 December 2019
Fixed Remuneration
$1,400,000
$ 500,000
N/A
$ 655,000
$ 575,000
$ 733,000
$1,400,000
$ 580,000
$ 575,000
$ 655,000
$ 630,000
$ 733,000
Key design features of 2019 EIP
2019 EIP
opportunity
The EIP opportunity is expressed as a percentage of fixed remuneration (FR).
Managing Director
Other Executive KMP
Target
(% of FR)
133%
100%
Maximum
(% of FR)
200%
150%
Change for 2020: The maximum incentive opportunity has been increased by an additional 10% of FR
for the MD and by 15% of FR for Other Executive KMP based on the results of external remuneration
benchmarking.
Performance
Measures
The EIP scorecard includes Financial Performance, Production, Sustainability, Group and Individual
Strategy measures. For all scorecard performance measures, a threshold, target and stretch goal was
set at the start of 2019.
Change for 2020: Increased weighting on financial measures. Scorecard has been simplified to
include the same financial measures for all participants. Additionally, strategy will be measured on an
individual basis only (2019 also measured strategic objectives set at the group level).
Vesting schedule EIP scorecard outcomes are calculated based on the following schedule, with a sliding scale operating
between threshold and target, and between target and stretch:
Performance Level
Threshold
Target
Stretch (maximum)
EIP Outcome
(% Target)
50%
100%
150%
Performance
assessment
EIP outcomes are determined following assessment of performance measures at the end of the 2019
performance period.
Outcomes are subject to one up assessment and, for the Managing Director and Executive KMP,
assessment by the Board.
Award type and
timing
EIP awards are delivered in the form of cash, restricted rights and performance rights. The award will
be granted for nil consideration in March 2020.
71
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
Allocation
Methodology
Restriction and
performance
periods on EIP
equity
The number of restricted rights and performance rights awarded to each participant are based on face
value. This is 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
the release of the Company’s full year results.
EIP equity is subject to restriction or performance conditions:
Restricted Rights
Performance Rights
Restricted rights will be granted following the
end of the 2019 performance period and vest in
equally weighted tranches on the first, second
and third anniversary of the grant, subject to
continued service.
Change for 2020: Restricted rights be released in
four tranches over four years.
Performance rights will be subject to an
additional performance test prior to vesting.
TSR performance will be measured over a four-
year period commencing on 1 January 2019
against the S&P / ASX 200 Resources Index
(excluding companies primarily engaged in the
oil and gas sector and non-mining activities).
Change for 2020: TSR measured over five years
and subject to sliding scale vesting. Proportion
of equity award subject to the TSR test has been
increased from 33% of the equity award to 40%.
Voting rights and
dividends
No dividends are paid on restricted rights or performance rights prior to vesting. For any restricted rights
or performance rights that ultimately vest, a cash payment equivalent to dividends paid by Iluka during
the period between grant of the awards and vesting will be made. No cash payment will be made in
respect of dividends on awards which do not vest.
72
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
5. Remuneration governance
We have established a governance framework around remuneration, to ensure that decisions around remuneration of our
executive and employees reflects our remuneration principles.
Remuneration governance framework
External advice provided to PPC
External remuneration consultants were engaged by the PPC in 2019 to conduct benchmarking analysis in respect to
executive and non-executive directors’ remuneration and provide advice in relation to incentive arrangements. The
remuneration consultants did not provide a ‘Remuneration Recommendation’ as defined in the Corporations Act 2011
during the 2019 financial year.
EIP governance framework and mechanisms
The structure of the EIP provides different ways to allow the PPC and the Board the flexibility to ensure remuneration
outcomes reflect the performance of Iluka and each individual.
Cessation of
employment
In the event of an Executive KMP ceasing employment for:
Resignation or termination for cause: all restricted shares and unvested performance rights and
restricted rights will be forfeited or lapse (as applicable).
Any other circumstances (including death, total and permanent disability, retirement or redundancy):
unvested restricted shares, restricted rights, and performance rights will remain on foot and be subject
to the original terms of the award.
Clawback &
Malus
The Board has power to clawback incentives that have vested and that have been paid or awarded to
participants in certain circumstances. For example, restricted shares, restricted rights 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.
73
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
Change of control Board discretion to determine that vesting of some or all of the performance rights and restricted rights
be accelerated and that dealing restrictions on restricted shares be released, in the event of a takeover
or other transaction that in the Board’s opinion should be treated as a change of control event.
Board discretion Where the Board exercises its discretion under the EIP, the Board will consider all relevant factors at the
time, which may include the participant's performance against the performance targets and the
proportion of the performance or deferral period that has elapsed.
Minimum Shareholding Requirement
Executive KMP Executive KMP are required to acquire and hold a personally significant shareholding in Iluka to align
executives to the interests of shareholders. Through shareholding, executives are exposed to the
experience of shareholders (e.g., share price appreciation and dividends). Executive KMP are required to
build the shareholding over a reasonable time frame taking into account vesting and taxation
obligations.
As at 31 December 2019, two members of Executive KMP have met the minimum shareholding
requirement.
MSR requirement
Managing Director
Other KMP
% of FR (year-end)
200%
100%
Non- executive
directors
The Board is committed to non-executive directors acquiring and holding a shareholding within three
years of appointment.
As at 31 December 2019 all Board members, with the exception of the Board members who joined the
Board in 2019, have bought and now hold at least the minimum shareholding requirement.
MSR requirement
Chairman
Other NEDs
No of shares
30,000
12,000
See Section 7 for details of current KMP and NED shareholdings
Securities Trading Policy
Security Trading
Policy
Directors and employees (including Executive KMP) are prohibited from trading in financial products
issued or created over the Company’s securities created by third parties, and from trading in associated
products and entering into transactions which operate to limit the economic risk of their security
holdings in the Company.
The Security Trading Policy is available on the Company’s website at www.iluka.com.
74
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
Executive employment agreements
Iluka’s Executive KMP are employed on terms set out in individual employment agreements which do not contain a fixed
term. Key terms of the agreements are as follows:
Executive KMP
T O'Leary
Managing Director
J Andrews
Head of Strategy, Planning and Business Development
C Barbier
Head of Marketing
M Blackwell
Head of Major Projects, Engineering and Innovation
A Stratton
Chief Financial Officer
Former Executives
S Hay
Head of Resource Development
S Wickham
Chief Operating Officer
Termination Notice Period by Iluka or Employee1
6 months
3 months
3 months
3 months
6 months
3 months
3 months
1If the executive’s employment is terminated by Iluka (other than for gross misconduct or on other grounds for summary dismissal). The
executive may be eligible to receive a termination payment to a maximum of 6 months TFR (inclusive of any payment made 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.
75
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
6. Non-executive director fees
Non-executive director fees are paid from an aggregate fee pool of $1.8 million as approved by shareholders at Iluka’s
AGM in May 2015. The total amount paid to non-executive directors in 2019 (including superannuation) was $1, 221,204.
There were no increases to the non-executive directors’ fees in 2019.
2019 Non-executive director fee policy
Board and Committee Fees
Board
Audit and Risk Committee
People and Performance Committee
Nomination Committee
Chair
Member
2018
$321,400
$ 36,100
$ 30,600
Nil
2019
$321,400
$36,100
$30,600
Nil
2018
$128,800
$ 18,100
$ 15,350
Nil
2019
$128,800
$18,100
$15,350
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.
2019 Non-executive director Statutory Remuneration Disclosures
Outlined below are the fees paid to non-executive directors in 2019, prepared in accordance with the requirements of the
Corporations Act 2001 (Cth) and the relevant Australian Accounting Standards.
Name
Year
Board, Committee
Fees
Non-Monetary
Benefits
Superannuation
Statutory Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$20,767
$20,290
$13,956
$13,886
$13,694
$12,553
$8,141
$16,433
$16,704
$2,629
$16,759
$17,001
$4,652
$13,886
$97,031
$94,320
$342,167
$340,123
$160,856
$160,053
$157,844
$144,691
$93,833
$189,408
$192,537
$30,306
$193,171
$195,959
$53,619
$160,053
$1,221,204
$1,193,416
Current Non-Executive Directors
G Martin
M Bastos
R Cole1
S Corlett2
J Ranck
L Saint3
J Seabrook
2019
2018
2019
2018
2019
2018
2019
2019
2018
2019
2019
2018
$321,400
$319,833
$146,900
$146,167
$144,150
$132,138
$85,692
$172,975
$175,833
$27,677
$176,412
$178,958
Former Non-Executive Directors
X Liu4
Total fees
2019
2018
2019
2018
$48,967
$146,167
$1,124,173
$1,099,096
1R Cole was appointed 1 March 2018
2S Corlett was appointed 1 June 2019
3L Saint was appointed 24 October 2019
4X Liu resigned effective 16 April 2019
76
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
7. Statutory 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.
Executive KMP Statutory Remuneration Disclosures
Name
Current Executives
Year
FR1
EIP/STIP
Cash2
Non-
Monetary
Benefits3
Termination
Benefits4
Other5
T O’Leary
J Andrews
C Barbier7,8
M Blackwell
A Stratton
2019
2018
2019
2018
2019
2019
2018
2019
2018
$1,400,000
$179,031
$11,499
$1,400,000
$323,569
$13,406
$553,125
$74,671
$11,499
$500,000
$115,350
$13,406
$312,569
$39,399
$ 67,217
$655,000
$83,971
$11,499
$655,000
$153,729
$13,406
$612,708
$82,164
$11,499
$469,783
$132,653
$13,406
-
-
-
-
-
-
-
-
-
Share
Based
Payments,
6
Statutory
Total
$1,590,547 $3,181,077
$1,065,428 $2,802,403
$204,440
$843,735
$157,036
$785,792
$185,194
$604,379
$465,032
$1,215,502
$373,502
$1,195,637
$258,970
$965,341
$205,213
$821,055
$7,707
$550,829
$323,472
$1,071,698
-
-
-
-
-
-
-
-
-
-
-
Former Executives
S Hay9
S Wickham10
Total
2019
2018
2019
2018
2019
$262,500
-
$4,932
$275,690
$600,000
$134,820
$13,406
$320,688
$36,552
$733,000
$155,909
$2,073
$4,434
-
-
-
$31,937
$657,805
$1,049,055
$ 73,000
$481,435
$1,447,778
$4,116,590
$495,788
$120,218
$275,690
$31,937
$3,369,695 $8,409,918
201811
$4,357,783 $1,016,030
$71,464
-
$73,000
$2,606,086 $8,124,363
1 Includes base salary and superannuation.
2 EIP cash payments and restricted share awards for 2019 will be made in March 2020.
3 Includes car parking, medical insurance and relocation costs for C Barbier. Includes car parking for other KMP.
4 Includes cessation entitlements relating to payment in lieu of notice and accrued leave entitlements.
5 Includes 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 C Barbier became a KMP on 10 June 2019. Remuneration disclosures reflect the period he was a KMP
8 C Barbier relocated from Singapore to Australia effective 7 October 2019. The SGD denominated portion of his 2019 earnings
have been converted from SGD to AUD for 2019 using the average monthly foreign exchange rate for the duration of his 2019
Singapore employment.
9 S Hay ceased to be a KMP on 7 June 2019. Remuneration disclosures for 2019 reflect the period he was a KMP.
10 S Wickham ceased to be a KMP on 7 June 2019. Remuneration disclosures reflect the period he was a KMP
11 The total for 2018 is different from the total in the 2018 Annual Report as those figures included D Warden, who is no longer
an employee of Iluka
77
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
KMP Share–based Compensation
EIP and STIP restricted shares and restricted share rights
2016 STIP1
(restricted
shares)
-
2017 STIP1
(restricted
shares)
36,273
2018 EIP1
(restricted
shares)
119,991
2019 EIP2
(restricted
rights)
64,132
Name
T O’Leary
J Andrews
C Barbier4
-
-
-
-
M Blackwell
16,177
16,635
A Stratton
-
-
Former Executives
28,998
18,868
-
38,646
33,348
9,955
21,218
20,761
S Hay5
S Wickham6
13,208
18,391
14,215
17,803
33,894
39,195
-
21,337
% of maximum opportunity awarded 3
2019
2018
2017
2016
-
-
-
35
-
39
38
61
-
-
60
-
56
57
77
77
-
78
77
75
71
43
45
41
43
44
-
38
1 The 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. Restricted shares are awarded in March of the following year (e.g. 2018 EIP
awards were made in March 2019).
2 Represents the estimated number of restricted rights to be awarded under the 2019 EIP calculated using the closing share price of
$9.30 at 1 January 2020.
3 The percentage achieved of the EIP or STIP maximum incentive opportunity awarded for the financial year
4 C Barbier became a KMP on 10 June 2019. Disclosures reflect the period he was a KMP.
5 S Hay ceased to be a KMP on 7 June 2019. Disclosures for 2019 reflect the period he was a KMP
6 S Wickham ceased to be a KMP on 7 June 2019. Disclosures for 2019 reflect the full year
Performance Rights
Number of share rights
Value of share rights
Name
Balance at
1 January
2019/KMP
start date1
T O’Leary
856,983
J Andrews
-
Granted
during
20192
76,148
20,360
C Barbier
46,463
-
M Blackwell
192,378
A Stratton
24,006
S Hay
147,836
S Wickham
223,746
27,134
23,414
23,796
39,281
Vested /
exercised
into shares
in 2019
Lapsed
during
20193
Balance at
31 December
2019/ KMP
end date4
Granted in
2019
$
(69,288)
(124,796)
739,047
-
-
-
-
20,360
46,463
(16,840)
(50,518)
152,154
(1,754)
(5,260)
40,406
(11,877)
(159,755)
-
711,852
190,328
-
253,652
218,877
-
(16,583)
(49,747)
196,697
367,200
Value of rights
vested /
exercised into
shares in 2019
$5
630,867
-
-
156,444
16,053
109,159
149,910
1 Balance at date commenced as KMP for C Barbier.
2 Share rights granted in respect of the 2018 EIP, and 2018 and 2019 LTDR awards for the Chief Operating Officer, which form part of share
based payments for 2018 to 2021 inclusive.
3 Share rights which lapsed during 2019 relate to the 2016 LTIP award and MD LTDR (Tranche 2). Share rights were forfeited upon the
departure of S Hay.
4 Balance at KMP end date for S Wickham.
5 Value at point of vest.
78
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
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.
Fair value of equity grants
Incentive Plan
Grant Date
2016 LTIP Tranche 2
May 2016
2016 LTDR3
October 2016
2016 LTIP (MD grant)
October 2016
2017 LTIP
2017 STIP4
2017 LTDR5
2018 LTDR5
2019 LTDR5
2018 EIP6
2018 STIP6
2019 EIP7
2019 STIP7
March 2017
March 2018
March 2017
March 2018
March 2019
March 2019
March 2019
March 2020
March 2020
Fair Value per
Share or Right at
Grant Date1
$
Vesting Year
Expiry year2
5.07
4.68
4.57
6.55
10.55
6.82
10.55
9.35
9.35
9.35
9.30
9.30
2020
2020
2021
2021
2020
2021
2021
2020
2026
2026
2026
2027
2019,2020
2027
2028
2029
2020, 2021, 2022
2020,2021,2022
2020, 2021
2020,2021
2021, 2022, 2023
2021,2022,2023
2021, 2022
2021,2022
1 The fair value is calculated in accordance with the measurement criteria of Accounting Standard AASB 2 Share Based Payments.
2 Rights granted under the LTIP and LTDR 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.
3 2016 LTDRs awarded to the Managing Director are tested at the end of 2017, 2018 and 2019.
4 Awards under these plans are restricted shares; all other plans grant share rights.
5 Represents the face value of the 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 2017, 2018 and 2019 annual results, respectively.
6 Represents the estimated fair value of restricted shares and performance rights to be awarded under the 2018 EIP/STIP for which the
performance period concluded on 31 December 2018 calculated using VWAP of ordinary shares over the five trading days following the
release of the Company’s 2018 annual results.
7 Represents the estimated fair value of restricted rights and performance rights to be awarded under the 2019 EIP/STIP for which the
performance period concluded on 31 December 2019 calculated using the closing share price of $9.30 at 1 January 2020. The actual value
will be calculated as the VWAP of ordinary shares over the five trading days following the release of the Company’s 2019 annual results.
79
Iluka Resources Limited, Annual Report 2019
DIRECTOR’S REPORT
For the year ended 31 December 2019
Shareholdings of executive KMP and their related parties
Name
Balance
held at
1 January
2019/ KMP
start
date1,2
Number of shares
Vesting/exercise
of share rights
pursuant to
LTDR and LTIP
Awarded as
Restricted Shares
pursuant to EIP
Other
changes3
Balance held at 31
December
2019/KMP end
date
Minimum
shareholding
met? 6
T O’Leary
110,180
69,288
J Andrews
C Barbier4
M Blackwell
A Stratton
S Hay5
S Wickham6
4,740
31,377
63,555
13,923
66,669
69,878
-
-
16,840
1,754
11,877
16,583
119,991
28,998
-
38,646
33,348
33,894
39,195
-
-
-
(36,764)
-
(112,440)
(44,851)
299,459
33,738
31,377
82,277
49,025
-
80,805
Yes
No
No
Yes
No
N/A
N/A
1 S Wickham ceased to be a member of KMP on 7 June 2019. The closing balance reflects the period he was a KMP.
2 Includes shares held directly or through a nominee or agent (e.g. family trust).
3 Other changes may include changes due to personal trades and forfeited shares.
4 C Barbier became a member of KMP on 10 June 2019. The opening balance reflects the period he was a KMP.
5 S Hay ceased to be a member of KMP on 7 June 2019. The closing balance reflects this date.
6 As at 31 December with share price of $9.30
Shareholdings of Non-executive directors and their related parties
Balance held at
31 December 2019
30,000
Minimum shareholding
met?
Yes
Name
G Martin2
M Bastos2
R Cole2,
S Corlett
J Ranck
L Saint3
J Seabrook2
Balance held at
1 January 2019
30,000
13,985
4,000
-
12,412
-
19,977
Number of shares1
Net movement
-
394
8,000
5,588
350
-
563
14,379
12,000
5,588
12,762
-
20,540
Former Non-Executive Directors
X Liu2
12,000
-
12,000
Yes
Yes
No
Yes
No
Yes
N/A
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).
3 L Saint was appointed a non-executive director on 24 October 2019. Remuneration disclosures for 2019 reflect the period she was a
non-executive director.
On-market Share Purchases
The total number of Iluka shares acquired on-market to satisfy employee incentive schemes in 2019 was 856,601 at an
average price of $8.59 per share.
Transactions with Key Management Personnel
During the financial year there were no product or services purchases by KMP from the Group (2018: nil) and there are no
amounts payable at 31 December 2019 (2018: nil).
There have been no loans to KMP during the financial year (2018: nil).
80
Auditor’s Independence Declaration
As lead auditor for the audit of Iluka Resources Limited for the year ended 31 December 2019, I
declare that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit, and
(b)
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
period.
Justin Carroll
Partner
PricewaterhouseCoopers
Perth
20 February 2020
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.
Iluka Resources Limited, Annual Report 2019
AUDITOR’S INDEPENDENCE DECLARATION
For the year ended 31 December 2019
Auditor’s Independence Declaration
As lead auditor for the audit of Iluka Resources Limited for the year ended 31 December 2019, I
declare that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit, and
(b)
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
period.
Justin Carroll
Partner
PricewaterhouseCoopers
Perth
20 February 2020
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.
81
Iluka Resources Limited, Annual Report 2019 ILUKA RESOURCES LIMITED ABN 34 008 675 018
FINANCIAL REPORT - 31 DECEMBER 2019
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
83
84
85
86
87
136
137
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 17
240 St Georges 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 20 February 2020. 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.
82
82
Iluka Resources Limited, Annual Report 2019 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
ILUKA RESOURCES LIMITED
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
OTHER COMPREHENSIVE INCOME
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
For the year ended 31 December 2019
Revenue
Other income
Expenses
Write-down of Sierra Rutile Limited
Interest and finance charges
Rehabilitation and mine closure provision discount unwind
Total finance costs
+0.1 DR
Profit/(loss) before income tax
Income tax expense
Profit/(loss) for the period, attributable to:
Equity holders of Iluka Resources Limited
Non-controlling interest
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Currency translation of foreign operations
Hedge of net investment in foreign operation, net of tax
Movements in foreign exchange cash flow hedges, net of tax
Items that will not be reclassified to profit or loss
Actuarial (losses) gains on defined benefit plans, net of tax
Total other comprehensive income/(loss) for the year, net of tax
Total comprehensive income/(loss) for the year, attributable to:
Equity holders of Iluka Resources Limited
Non-controlling interest
Notes
2019
$m
2018
$m
-
-
-
5
6
7
15
11
22
17
17
17
22
1,318.0
1,350.9
-
2.4
(854.1)
(414.3)
(15.0)
(38.0)
(53.0)
3.1
(870.3)
-
(15.0)
(16.7)
(31.7)
(0.1)
-
(1.0)
452.0
(298.7)
-
(299.7)
(279.9)
(19.8)
-
-
2.7
(2.6)
4.7
(3.9)
0.9
-
-
(298.8)
(279.0)
(19.8)
(148.1)
303.9
303.9
-
-
43.2
(2.1)
(7.9)
0.6
33.8
-
-
337.7
337.7
-
Cents
Cents
Profit/(loss) per share attributable to ordinary equity holders of the parent
Basic profit/(loss) per share
Diluted profit/(loss) per share
19
19
(71.0)
(71.0)
72.2
71.8
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
83
83
Iluka Resources Limited, Annual Report 2019 CONSOLIDATED BALANCE SHEET
ILUKA RESOURCES LIMITED
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2019
For the year ended 31 December 2019
ASSETS
Current assets
Cash and cash equivalents
Receivables
Inventories
Current tax receivables
Total current assets
Non-current assets
Property, plant and equipment
Deferred tax assets
Intangible asset - MAC Royalty
Inventories
Right of use assets
-0.1 CR
+0.1 DR
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Payables
Derivative financial instruments
Current tax payable
Provisions
Lease liabilities
-0.1 CR
+0.1 DR
Total current liabilities
Non-current liabilities
Interest-bearing liabilities
Derivative financial instruments
Provisions
Financial liabilities at fair value through profit or loss
Lease liabilities
-0.1 CR
+0.1 DR
Total non-current liabilities
-0.1 CR
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Accumulated losses
Non-controlling interests
Total equity
+0.1 DR
Notes
2019
$m
2018
$m
15
13
14
9
12
5(c)
14
10
21
8
10
15
21
8
22
10
16
17
17
22
97.3
196.3
341.1
3.3
638.0
1,126.2
22.1
3.5
84.1
20.5
1,256.4
51.3
162.6
387.1
7.7
608.7
1,379.1
215.6
3.9
4.6
-
-
0.1
(0.1)
-
1,603.2
1,894.4
2,211.9
140.8
3.7
96.1
112.6
9.2
362.4
54.0
1.6
715.6
28.4
20.8
820.4
0.1
-
-
(0.1)
0.1
153.2
4.4
143.6
105.6
-
406.8
-
(0.1)
49.5
7.3
638.3
-
-
695.1
0.1
-
-
1,182.8
1,101.9
711.6
1,110.0
1,157.6
24.0
(472.0)
2.0
711.6
(0.1)
1,154.0
42.6
(86.6)
-
1,110.0
-
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
84
84
Iluka Resources Limited, Annual Report 2019 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
ILUKA RESOURCES LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
For the year ended 31 December 2019
Attributable to owners of
Iluka Resources Limited
Share
capital
$m
Other
reserves
$m
Retained
earnings
$m
Total
equity
$m
Balance at 1 January 2018
1,119.7
9.4
(244.2)
884.9
Notes
Profit for the year
Other comprehensive income (loss)
Total comprehensive income
Transactions with owners in their capacity as owners:
Transfer of shares to employees, net of tax
Purchase of treasury shares, net of tax
Share-based payments, net of tax
Dividends paid
space
Balance at 31 December 2018
17
17
17
17
-
-
-
-
33.2
33.2
303.9
0.6
304.5
303.9
33.8
337.7
4.6
(8.9)
-
38.6
34.3
(4.6)
-
4.6
-
-
-
-
-
(146.9)
(146.9)
-
(8.9)
4.6
(108.3)
(112.6)
1,154.0
42.6
(86.6) 1,110.0
Balance at 1 January 2019
Loss for the year
Other comprehensive income (loss)
Total comprehensive income
Notes
17
17
Transfer of asset revaluation reserve
space
Transactions with owners in their capacity as owners:
Transfer of shares to employees, net of tax
Purchase of treasury shares, net of tax
Share-based payments, net of tax
Dividends paid
Transactions with non-controlling interests
17
17
22
Attributable to owners of
Iluka Resources Limited
Share
capital
$m
Other
reserves
$m
Retained
earnings
$m
Total
$m
NCI¹
$m
Total
equity
$m
1,154.0
42.6
(86.6) 1,110.0
- 1,110.0
-
-
-
-
-
4.8
4.8
(279.9)
(3.9)
(283.8)
(279.9)
0.9
(279.0)
(19.8)
-
(19.8)
(299.7)
0.9
(298.8)
0.1
(0.1)
-
-
-
8.0
(6.0)
-
1.6
-
3.6
(8.0)
-
5.9
-
(21.4)
(23.5)
-
-
-
(101.5)
-
(101.5)
-
(6.0)
5.9
(99.9)
(21.4)
(121.4)
-
-
-
-
21.8
21.8
-
(6.0)
5.9
(99.9)
0.4
(99.6)
space
Balance at 31 December 2019
¹Non-controlling interest - refer to note 22.
1,157.6
24.0
(472.0)
709.6
2.0
711.6
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
85
85
Iluka Resources Limited, Annual Report 2019 CONSOLIDATED STATEMENT OF CASH FLOWS
ILUKA RESOURCES LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2019
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
Notes
2019
$m
2018
$m
CONTENTS OF THE NOTES TO THE FINANCIAL STATEMENTS
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Operating cash flow
.
Interest received
Interest paid
Income taxes paid
Exploration expenditure
Mining Area C royalty receipts
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Sale of property, plant and equipment
Payments for options contracts
Net cash outflow from investing activities
Cash flows from financing activities
Repayment of borrowings
Proceeds from borrowings
Purchase of treasury shares
Proceeds from changes in ownership interests
Dividends paid
Principal element of lease payments
Debt refinance costs
Net cash outflow from financing activities
Net increase/(decrease) in cash and cash equivalents
.
Cash and cash equivalents at 1 January
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of period
1,189.8
(781.7)
408.1
1.2
(6.9)
(147.4)
(11.3)
78.5
322.2
(197.5)
2.0
-
(195.5)
(324.7)
332.7
(7.4)
28.5
(99.9)
(8.2)
(2.0)
(81.0)
45.7
51.3
0.3
97.3
1,277.4
(683.2)
594.2
1.0
(7.6)
(5.2)
(11.7)
55.8
626.5
(311.5)
2.4
(0.6)
(309.7)
(366.0)
166.0
(12.4)
-
(108.3)
-
-
(320.7)
(3.9)
53.6
1.6
51.3
30
18
15
Basis of preparation
Reporting entity
Basis of preparation
Key numbers
Critical accounting estimates and judgements
Segment information
Revenue
Expenses
Impairment of assets
Provisions
Property, plant and equipment
Leases
Income tax
Deferred tax
Receivables
Inventories
Capital
Net cash/(debt) and finance costs
Contributed equity
Reserves and retained earnings
Dividends
Profit/(loss) per share
Risk
20.
21.
Financial risk management
Hedging
Group structure
Other notes
Changes in ownership interests held in controlled entities
Controlled entities and deed of cross guarantee
Contingent liabilities
Events occurring after the reporting period
Commitments
Remuneration of auditors
Share-based payments
Post-employment benefit obligations
Key Management Personnel
Parent entity financial information
Related party transactions
New and amended standards
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
Reconciliation of profit/(loss) after income tax to net cash inflow from operating activities
Page
88
88
88
90
90
90
93
94
96
98
100
102
104
106
107
108
109
109
111
112
114
114
115
115
118
120
120
121
124
124
125
125
126
127
129
131
131
132
133
134
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
86
87
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Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
CONTENTS OF THE NOTES TO THE FINANCIAL STATEMENTS
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
Basis of preparation
1.
2.
3.
Reporting entity
Basis of preparation
Critical accounting estimates and judgements
Key numbers
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Capital
15.
16.
17.
18.
19.
Risk
20.
21.
Segment information
Revenue
Expenses
Impairment of assets
Provisions
Property, plant and equipment
Leases
Income tax
Deferred tax
Receivables
Inventories
Net cash/(debt) and finance costs
Contributed equity
Reserves and retained earnings
Dividends
Profit/(loss) per share
Financial risk management
Hedging
Group structure
22.
23.
Changes in ownership interests held in controlled entities
Controlled entities and deed of cross guarantee
Other notes
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
Contingent liabilities
Events occurring after the reporting period
Commitments
Remuneration of auditors
Share-based payments
Post-employment benefit obligations
Reconciliation of profit/(loss) after income tax to net cash inflow from operating activities
Key Management Personnel
Parent entity financial information
Related party transactions
New and amended standards
Page
88
88
88
90
90
90
93
94
96
98
100
102
104
106
107
108
109
109
111
112
114
114
115
115
118
120
120
121
124
124
125
125
126
127
129
131
131
132
133
134
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Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
Iluka Resources Limited and its subsidiaries together are referred to in this financial report as the Group.
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 23.
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 Group also has a royalty business, with
the cornerstone asset being a royalty over BHP's Mining Area C in Western Australia.
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.
New and amended standards adopted by the Group, and the related impacts on the financial statements, are
detailed in note 34.
(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 2019 and the results of all subsidiaries for the year then ended. A list of controlled
entities (subsidiaries) at year-end is contained in note 23.
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.
Intercompany transactions, 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.
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.
88
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Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
(ii) Employee Share Trust
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
The Group's Employee Share Schemes are administered through the Iluka Resources Limited Employee Share
Plan 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 Sierra Rutile Limited 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 of amounts in the financial statements. In accordance with
that Rounding Instrument, amounts in the financial statements have been rounded to the nearest hundred
thousand dollars, or in certain cases, the nearest thousand dollars or nearest dollar.
89
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Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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
Tax balances
Deferred tax asset recognition
Net realisable value and classification of product inventory
KEY NUMBERS
4 SEGMENT INFORMATION
(a) Description of segments
Note
7
8
11
12
14
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.
During the current reporting period, the Group changed the internal reporting basis of its operations to match
changes in the operational structure of the business, with the resultant new operating segments of the Group
being as follows:
Jacinth-Ambrosia/Mid West (JA/MW) comprises the mining operations at Jacinth-Ambrosia located in South
Australia, and associated processing operations at the Narngulu mineral separation plant in Western
Australia.
Cataby/South West (C/SW) comprises mining activities at Cataby and processing of ilmenite at Synthetic Rutile
Kiln 2, both located in Western Australia.
Sierra Rutile (SRL) comprises the integrated mineral sands mining and processing operations in Sierra Leone.
Mining Area C (MAC) comprises a deferred consideration iron ore royalty interest over certain mining tenements
in Australia operated by BHP Group.
United States/Murray Basin (US/MB) comprises rehabilitation obligations in the United States (Florida and
Virginia), where mining and processing activities were substantially completed in December 2015, although sale
of remnant product remains an activity; and certain idle assets located in Australia (Murray Basin).
The previous Australia operating segment has been disaggregated to form the Jacinth-Ambrosia/Mid West and
Cataby/South West operating segments. Certain idle assets previously included in the Australia operating
segment have been combined with the United States operating segment to form the United States/Murray Basin
segment. The Sierra Rutile and Mining Area C segments are unchanged. Comparative information for changed
segments has been restated.
Cash, debt and tax balances are managed at a group level, together with exploration and other corporate
activities, and are not allocated to segments.
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Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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. No such transfers took place between segments during the year ended 31 December 2019 (2018: $12.4
million).
(b) Segment information
2019
JA/MW
$m
C/SW
$m
SRL
$m
MAC
$m
US/MB
$m
Total
$m
Total segment sales of mineral sands
Total segment freight revenue
Write-down of Sierra Rutile Limited
Depreciation and amortisation expense
Changes in rehabilitation for closed sites
Total segment result¹
Segment assets
Segment liabilities
Additions to non-current segment assets
482.7
19.8
-
28.9
1.6
316.8
588.4
248.1
78.0
414.2
7.4
-
54.0
(0.1)
160.4
717.2
254.7
113.1
257.6
8.1
414.3
74.6
-
(430.0)
220.2
169.3
79.9
-
-
-
0.4
-
84.7
23.7
-
-
38.6
3.3
-
0.6
(4.7)
(14.8)
154.1
304.6
2.0
1,193.1
38.6
414.3
158.5
(3.2)
117.1
1,703.6
976.7
273.0
2018
JA/MW
$m
C/SW
$m
SRL
$m
MAC
$m
US/MB
$m
Total
$m
Total segment sales of mineral sands
Total segment freight revenue
Depreciation and amortisation expense
Changes in rehabilitation for closed sites
Total segment result¹
Segment assets
Segment liabilities
Additions to non-current segment assets
568.6
26.3
25.3
(8.6)
358.9
465.6
198.9
9.8
297.2
5.0
20.1
1.4
110.5
624.8
209.5
263.1
203.9
7.0
41.1
(1.3)
(14.5)
621.0
137.6
109.9
-
-
0.4
-
55.2
17.5
-
-
174.4
12.0
3.4
3.9
50.0
165.9
319.2
8.2
1,244.1
50.3
90.3
(4.6)
560.1
1,894.8
865.2
391.0
¹Total segment result includes impairment charges, depreciation and amortisation expenses, and rehabilitation and holding
costs for closed sites that are also separately reported above.
Mineral sands 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
2019
$m
2018
$m
404.1
200.9
400.1
135.9
52.1
1,193.1
462.3
198.4
304.5
230.7
48.2
1,244.1
Revenue of $187.7 million and $136.9 million was derived from two external customers of the mineral sands
segments, which individually account for greater than 10% of the total segment revenue (2018: revenues of
$147.3 million and $143.0 million from two external customers).
91
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Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
Segment result is reconciled to profit/(loss) before income tax as follows:
Segment result
Interest income
Asset sales and other income
Marketing and selling
Corporate and other costs
Depreciation
Resource development
Interest and finance charges
Net foreign exchange gains
Profit/(loss) before income tax
2019
$m
117.1
-
1.8
(11.9)
(47.3)
(4.6)
(42.2)
(13.9)
-
(1.0)
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
1,703.6
68.1
97.3
3.3
22.1
1,894.4
976.7
56.0
96.1
54.0
1,182.8
2018
$m
560.1
1.0
0.8
(13.6)
(48.2)
(3.3)
(30.1)
(15.1)
0.4
452.0
1,894.8
42.5
51.3
7.7
215.6
2,211.9
865.2
43.6
143.6
49.5
1,101.9
92
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Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
5 REVENUE
-0.1 CR
Sales revenue
Sale of goods
Freight revenue
Other revenue
Mining Area C royalty income
Interest
(a) Sale of mineral sands
Notes
5(a)
5(b)
5(c)
5(d)
2019
$m
0.1
2018
$m
-
1,193.1
38.6
1,244.1
50.3
85.1
1.2
86.3
55.6
0.9
56.5
1,318.0
1,350.9
The Group earns revenue by mining, processing, and subsequently selling mineral sands (including zircon, rutile,
synthetic rutile and ilmenite) by export to customers based in the Americas, Europe, China, the rest of Asia, and
other countries under a range of commercial terms.
Revenue from the sale of product is recognised when control has been transferred to the customer, generally
being when the product has been dispatched and is no longer under the physical control of the Group. In cases
where control of product is transferred to the customer before dispatch takes place, revenue is recognised when
the customer has formally acknowledged their legal ownership of the product, which includes all inherent risks
associated with control of the product. In these cases, product is clearly identified and immediately available to
the customer.
Sales to customers are generally denominated in US Dollars, which are translated into the functional currency of
the Group using the spot exchange rate applicable on the transaction date. The effect of variable consideration
arising from rebates, discounts and other similar arrangements with customers is included in revenue to the
extent that it is highly probable that there will be no significant reversal of the cumulative amount of revenue
recognised when any pricing uncertainty is resolved. Revenue is recognised net of duties and other taxes.
The Group does not expect to have any contracts where the period between the transfer of the promised goods
or services to the customer and payment by the customer exceeds one year. Accordingly, the group does not
adjust transaction prices for the time value of money.
(b) Freight revenue
The Group also earns revenue from freighting its products to customers in accordance with the incoterms in
each particular sales contract. Freight revenue is recognised to the extent that the freight service has been
delivered, specifically with reference to the proportion of completed freight distance to total freight distance,
which is determined by the Group at each reporting date.
Freight revenue is allocated from the overall contract price at its standalone selling price (where observable) or
otherwise at its estimated cost plus margin.
Freight revenue includes $2.4 million relating to contracts in place at the end of the prior year (2018: $0.9 million).
Deferred freight revenue of $1.5 million has been deferred at the end of the current year in relation to unfulfilled
shipping obligations.
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Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
(c) Mining Area C royalty income and amortisation of royalty asset
Iluka holds a royalty over BHP’s Mining Area C (MAC) iron ore mine. The royalty stream is paid as 1.232% of
Australian dollar 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 over its estimated useful life.
(d) Interest income
Interest income is recognised in profit or loss as it accrues, using the effective interest method.
6 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
Government royalties
Marketing and selling costs, including freight
Corporate and other costs
Resource development costs
Net loss on disposal of property, plant and equipment
Write-down of Sierra Rutile Limited
Impairment recognised against property, plant and equipment
Write-down of inventory to net realisable value
Notes
6(a)
6(b)
6(c)
6(d)
6(e)
7
2019
$m
528.7
155.6
(63.4)
(15.5)
605.4
10.9
7.6
19.7
3.2
39.4
73.6
48.0
42.2
4.1
854.1
375.2
39.1
414.3
2018
$m
443.6
84.1
68.5
28.3
624.5
11.5
9.4
24.7
(4.6)
38.1
88.5
48.1
30.1
-
870.3
-
-
-
(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; but
exclude Australian state and Sierra Leone government royalties which are reported separately.
(1,268.4)
(870.3)
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Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
(b) Cost of goods sold
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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.
(d) Restructure and idle capacity charges
Idle capacity charges reflect ongoing costs incurred during periods of no or restricted production.
(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 recognised in profit or loss in accordance
with the policy described in note 8.
(f) Other required disclosures
Expenses also include the following:
Employee benefits (excluding share-based payments)
Share-based payments
Exploration expenditure
Operating leases
Inventory NRV write-downs - finished goods and WIP
Inventory NRV write-downs - Sierra Rutile Limited consumables
2019
$m
2018
$m
194.7
6.2
11.3
4.8
2.7
39.1
174.5
6.2
11.8
1.8
11.4
-
(258.8)
(205.7)
95
95
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
7 IMPAIRMENT OF ASSETS
(a) Impairment policy
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 -
CGUs). The recoverable amount of each CGU is determined as the higher of value-in-use and fair value less costs
of disposal (FVLCD) estimated based on the discounted present value of future cash flows (a level 3 fair value
estimation method) and other adjustments. 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.
Key estimate: Recoverable amount calculation
In determining the recoverable amount of assets, estimates are made regarding the present value of future
cash flows in the absence of quoted market prices. These estimates require significant levels of judgement and
are subject to risk and uncertainty that may be beyond the control of the Group, including political risk, climate
change risk, and other global uncertainty risks, like the impacts of COVID-19. Given the nature of the Group’s
mining activities, changes in assumptions upon which these estimates are based may give rise to material
adjustments. This could lead to recognition of new impairment charges in the future, or the reversal of
impairment charges already recognised.
Where an impairment assessment is needed, the estimates of discounted future cash flows for each CGU used
in determining its FVLCD 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 using external forecasts (2019 long term AUD:USD exchange rate of 0.75, unchanged
from 2018 assessment);
• 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 (SRL: 12%; Australian operations: 10%).
96
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Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
(b) Impairment of Sierra Rutile Limited cash generating unit
An impairment indicator was noted in Iluka’s Interim Report for 30 June 2019 for SRL due to management’s
decision to delay the Sembehun Early Works beyond the end of 2019 in order to revisit and broaden optimisation
studies following further expected increases to the capital costs to develop Sembehun based on production
capacity, over time, in excess of 300 thousand tonnes of rutile production per annum. As noted in that report, no
impairment was recognised at that time. The fair value was assessed with reference both to the value implied by
the IFC investment in Sierra Rutile, announced on 6 June 2019, and to a range of life of mine discounted cash
flow estimates.
The Group has continued to progress the Sembehun optimisation studies and does not currently have a defined
development approach, resulting in difficulties in ascribing any meaningful value to the Sembehun deposit in the
impairment assessment at this time. SRL operational performance achieved to date has also been below the
acquisition investment case. In line with the requirements of accounting standards, the Group’s determination of
the recoverable amount of SRL assumes limited improvement from current budgeted performance levels and has
valued the Sembehun deposit on the current status of development. Iluka is continuing to implement various
measures to drive production increases in its current SRL operations, and to advance the Sembehun
development options, but has not incorporated these potential increases in value into the determination of fair
value.
In accordance with the Group policy, at 31 December 2019, the Group wrote down Sierra Rutile’s carrying amount
as well as associated deferred tax assets as detailed in the table below:
-
-
-
Property, plant and equipment
Consumables
-
Write-down amount
Notes
9
14
AUD
$m
375.2
39.1
414.3
USD
$m
262.6
27.4
290.0
-
The recoverable amount of the SRL cash generating unit (which is now equal to its carrying value) was
determined with reference to its fair value less costs of disposal. The fair value estimate is a level 3
measurement, as defined in AASB 13 Fair Value Measurement. In addition to the assumptions noted above,
specific assumptions were required for the SRL CGU with regards to:
• The approach to valuing the Sembehun deposit that would be taken by a third party, given it does not currently
have a defined development approach;
• Key operational performance metrics in the existing operations and their impact on the costs of production; and
• The timing and approach to mining that would be assumed by a third party in determining its valuation.
The recoverable amount of the SRL CGU is particularly sensitive to changes in rutile prices, production and sales
volumes, cash costs, and capital expenditures. Changes in assumptions or real-world developments that impact
these inputs,
including the establishment of a Sembehun development option, could result in a reversal of
impairment or an additional reduction to CGU carrying value.
In addition, deferred tax assets with a carrying value of A$161.9 (US$115.0 million) were derecognised against
income tax expense, as detailed in note 11.
97
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Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
8 PROVISIONS
Current
Rehabilitation and mine closure
Employee benefits - long service leave
Workers compensation and other provisions
-0.1 CR
Non-current
Rehabilitation and mine closure
Employee benefits - long service leave
Retirement benefit obligations
Other provisions
-0.1 CR
Notes
8(a)
8(b)
8(a)
8(b)
29
2019
$m
97.7
12.7
2.2
112.6
-
690.8
2.4
22.4
-
715.6
0.1
2018
$m
87.7
12.2
5.7
105.6
0.1
616.1
2.0
17.9
2.3
638.3
-
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.
(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 2019
Amounts spent during the year
Rehabilitation and mine closure provision discount unwind
Change in provision - additions to property, plant and equipment
Change in provision - expense for closed sites
Rehabilitation discount rate changes - for closed sites
Rehabilitation discount rate changes - for open sites
Foreign exchange rate movements
Balance at 31 December 2019
Notes
$m
15(d)
9
6
15(d)
703.8
(53.5)
19.7
52.0
3.2
18.3
43.0
2.0
788.5
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 -
refer to note 15(d).
98
98
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
The total rehabilitation and mine closure provision of $788.5 million (2018: $703.8 million) includes $450.8
million (2018: $464.0 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 to profit or loss of
$3.2 million (2018: credit of $4.6 million) which is reported within the expense item Rehabilitation costs for closed
sites in note 6.
Key estimate: Rehabilitation and mine closure provisions
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 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.
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 by discounting risk adjusted cash flows at
risk-free discount rates, representing government bond rates for the associated currencies. Iluka has re-set the
risk free discount rate used in calculating the Australian rehabilitation provision due to the continuing decline in
Australian dollar bond rates. The 15-year Australian Government Bond rate is used as a proxy for the risk-free
discount rate and is now calculated at 1.3% (2018: 3%). This has resulted in an increase of $61.3 million to the
provision. Of this amount, $18.3 million relates to closed sites, which is reported within finance costs item
‘Rehabilitation discount rate changes’ in note 15(d).
Rehabilitation and mine closure provisions for the US and Sierra Rutile have been calculated by discounting risk
adjusted cash flows at discount rates of 2% (2018: 2%).
(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.
99
99
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
9 PROPERTY, PLANT AND EQUIPMENT
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
At 1 January 2018
Cost
Accumulated depreciation¹
Opening written down value
Additions
Disposals
Depreciation and amortisation
Exchange differences
Transfers/reclassifications
Closing written down value
At 31 December 2018
Cost
Accumulated depreciation¹
Closing written down value
Plant
Year ended 31 December 2019
Additions
Disposals
Depreciation and amortisation
Exchange differences
Transfers
Impairment of Sierra Rutile Limited
Closing written down value
Plant
At 31 December 2019
Cost
Accumulated depreciation¹
Closing written down value
Plant,
machinery &
equipment
$m
Mine
reserves &
development
$m
Exploration
&
evaluation
$m
Land &
buildings $m
Total
$m
230.1
(74.1)
156.0
9.5
(1.0)
(2.9)
7.9
6.6
176.1
2,252.2
(1,789.8)
462.4
1,049.0
(659.5)
389.5
38.9
(17.0)
21.9
3,570.2
(2,540.4)
1,029.8
235.4
(0.4)
(68.7)
22.2
7.8
658.7
152.1
-
(20.1)
15.8
(11.2)
526.1
0.2
-
(1.9)
1.2
(3.2)
18.2
397.2
(1.4)
(93.6)
47.1
-
1,379.1
256.4
(80.3)
176.1
2,541.4
(1,882.7)
658.7
1,066.5
(540.4)
526.1
35.1
(16.9)
18.2
3,899.4
(2,520.3)
1,379.1
10.3
(1.9)
(11.4)
(0.1)
55.6
(57.0)
171.6
109.1
(3.6)
(86.1)
(2.8)
(61.9)
(154.8)
458.6
165.0
-
(57.3)
0.8
(1.8)
(154.7)
478.1
-
-
-
0.3
8.1
(8.7)
17.9
284.4
(5.5)
(154.8)
(1.8)
-
(375.2)
1,126.2
320.5
(148.9)
171.6
2,536.7
(2,078.1)
458.6
1,265.4
(787.3)
478.1
43.6
(25.7)
17.9
4,166.2
(3,040.0)
1,126.2
¹Accumulated depreciation includes cumulative impairment charges.
(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.
100
100
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
As set out in note 8, 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 $94.9 million (2018: $47.9 million) relating to rehabilitation, mainly due to changes in the
discount rate used in calculating the carrying value of rehabilitation provisions in Australia ($43.0 million) and an
increased footprint due to developing the new mine at Cataby.
(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 2 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.
(d) Assets not being depreciated
Included in plant, machinery and equipment, mine reserves and development, and land and buildings are amounts
totalling $33.0 million, $17.7 million and $10.1 million, respectively, relating to assets under construction which
are currently not being depreciated as the assets are not ready for use (2018 $218.7 million, $86.2 million and
$2.3 million, respectively).
In addition, within property, plant and equipment, excluding exploration and land assets, are amounts totalling
$61.2 million which have not been depreciated in the year as mining of the related area of interest has not yet
commenced (2018: $218.5 million).
(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.
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.
101
101
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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 7 for details on impairment testing.
10 LEASES
(a) Amounts recognised in the statement of financial position
Right-of-use assets
Buildings
Plant, machinery and equipment
Lease liabilities
Current
Non-current
2019
$m
9.0
11.5
20.5
(9.2)
(20.8)
(30.0)
Adoption
date
$m
10.9
18.6
29.5
(9.6)
(27.6)
(37.2)
Additions to the right-of-use assets during the reporting period were $2.2 million. Right-of-use assets are
reflected net of incentives received.
(b) Amounts recognised in the statement of profit or loss
Amortisation charge of right-of-use assets
Buildings
Plant, machinery and equipment
Borrowing costs
Expense relating to short term leases, low value leases and leases with variable payments
...
Total cash flow for leases
2019
$m
1.7
6.7
8.4
1.5
2.0
8.2
Until the end of the comparative period, leases were accounted for by applying the principles of AASB 117
Leases, which classified arrangements as either finance leases or operating leases. From 1 January 2019, the
Group accounting policy was changed so that leases are recognised by applying the principles of AASB16
Leases. Under the new standard, leases are recognised as right-of-use assets with corresponding lease liabilities
- refer to note 34 for details of the impact on the Group of adopting the new standard.
The group leases various offices, warehouses, equipment and vehicles. Rental contracts are typically made for
fixed periods of 6 months to 10 years, but may have extension options as described below.
Contracts may contain both lease and non-lease components. The group allocates the consideration in the
contract to the lease and non-lease components based on their relative stand-alone prices.
102
102
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
The lease agreements do not impose any covenants other than the security interests in the leased assets that are
held by the lessor. Leased assets may not be used as security for borrowing purposes.
Lease liabilities
Liabilities arising from a lease are initially measured on a present value basis by discounting the following lease
payments to their present value:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable
• variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the
commencement date
• amounts expected to be payable by the group under residual value guarantees
• the exercise price of a purchase option if the group is reasonably certain to exercise that option, and
• payments of penalties for terminating the lease, if the lease term reflects the group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of
the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases in the Group, the incremental borrowing rate is used, being the
rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar
value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. The
weighted average borrowing rate used for the year was 4.3%.
Subsequently to initial recognition, lease liabilities are carried at amortised cost. Payments are allocated between
repayment of principal and borrowing costs, which are charged to profit or loss over the lease period so as to
produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets
Right-of-use assets are initially recognised at cost, comprising:
• The amount of the lease liability
• Any lease payments made at or before the commencement date, less any incentives received
• Initial direct costs, and
• Restoration costs.
Subsequently. right-of-use assets are depreciated over the shorter of the asset's useful life and the lease term on
a straight-line basis. Where the Group is reasonably certain to exercise a purchase option, the right-of-use asset
is depreciated over the underlying asset’s useful life.
Short term leases, leases of low value assets and leases containing variable payments
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are
recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term
of 12 months or less.
103
103
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
11 INCOME TAX
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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
(b) Reconciliation of income tax expense to prima facie tax payable
(Loss)/profit before income tax expense
Tax at the Australian tax rate of 30% (2018: 30%)
Tax effect of amounts not deductible (taxable) in calculating taxable income:
Research and development credit
Deferred tax losses not recognised by other overseas operations
Recognition of historical alternative minimum tax (AMT) credits
Deferred tax balances derecognised by Sierra Rutile Limited
Tax benefit not recognised by Sierra Rutile Limited¹
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)
2019
$m
111.6
188.6
(1.5)
298.7
(1.0)
(0.3)
(1.3)
4.1
(7.2)
161.9
131.4
9.2
1.7
(1.3)
298.2
2.0
(1.5)
298.7
2018
$m
157.3
(10.1)
0.9
148.1
452.0
135.6
(0.7)
1.3
-
-
-
7.4
2.1
1.5
147.2
-
0.9
148.1
(600.1)
¹Sierra Rutile Limited could not recognise a tax benefit associated with the write-down of $414.3 million of assets
expensed in the current year.
(297.7)
104
104
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
No tax benefits have been recognised in respect of exploration activities of overseas operations as their recovery
is not currently considered probable.
The idling of the US operations at the end of 2015 means that the recovery of US state tax losses are not
considered probable. Unrecognised US state tax losses for which no deferred tax asset has been recognised are
US$ 216.3 million at 31 December 2019 (31 December 2018: US$193.4 million).
Unused capital losses for which no deferred tax asset has been recognised are approximately $90.7 million
(2018: $92.7 million) (tax at the Australian rate of 30%: $27.2 million (2018: $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.
The write-down of Sierra Rutile Limited means that the recovery of Sierra Leone tax losses are not considered
probable. Unrecognised Sierra Leone tax losses for which no deferred tax asset has been recognised are
US$500.7 million at 31 December 2019.
(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
2019
$m
(1.1)
(2.0)
(1.7)
(4.8)
2018
$m
(0.9)
(3.4)
0.2
(4.1)
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.
105
105
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
12 DEFERRED TAX
Deferred tax asset:
The balance comprises temporary differences attributable to:
Tax losses
Employee provisions
Provisions
Cash flow hedge reserve (in equity)
Other
Lease liabilities
Gross deferred tax assets
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
2019
$m
2018
$m
-
7.4
149.3
2.1
8.0
8.9
175.7
209.3
6.9
160.2
4.3
8.3
-
389.0
Amount offset to deferred tax liabilities pursuant to set-off provision
Net deferred tax assets
(153.6)
22.1
(173.4)
215.6
Deferred tax liability:
The balance comprises temporary differences attributable to:
Property, plant and equipment
Inventory
Receivables
Treasury shares (in equity)
Other
Right of use assets
Gross deferred tax liabilities
Amount offset to deferred tax assets pursuant to set-off provision
Net deferred tax liabilities
Movements in net deferred tax balance:
Balance at 1 January
(Charged)/credited to the income statement
Under provision in prior years
Charged directly to equity
Balance at 31 December
Deferred tax policy
(119.2)
(18.1)
(6.7)
(1.2)
(0.1)
(8.3)
(153.6)
153.6
-
215.6
(188.6)
(7.0)
2.1
22.1
(153.9)
(12.9)
(4.4)
(1.9)
(0.4)
-
(173.5)
173.5
-
185.9
10.1
(2.2)
21.8
215.6
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.
106
106
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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
During the reporting period, the carried forward tax losses for Sierra Rutile Limited were derecognised resulting in
an income tax expense of $161.9 million. As at 31 December 2019, there were $nil million of carried forward tax
losses recognised by SRL (2018: $209.3 million).
Key estimate: Deferred tax asset recognition
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.
13 RECEIVABLES
Trade receivables
Mining Area C royalty receivable
Other receivables
Prepayments
2019
$m
130.9
20.2
29.3
15.9
196.3
2018
$m
114.4
13.6
26.7
7.9
162.6
Trade receivables are recognised initially at the value of the invoice sent to the customer and subsequently at the
amount considered recoverable, translated using the spot exchange rate at balance date with translation
differences accounted for in line with the Group's accounting policy (refer note 2). Recognition occurs at the
earlier of dispatch or formal acknowledgement of legal ownership by a customer, as this is the point in time that
the consideration is unconditional because only the passage of time is required before payment is due. Trade
receivables are generally due within 41 days of the invoice being issued (2018: 45 days).
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 based on the expected credit loss approach.
Expected credit losses for the Group’s trade receivables are reviewed on an ongoing basis based on groups of
receivables with shared risk characteristics.
There was $9.4 million overdue at balance date (2018: $1.7 million), of which $3.6 million are less than 28 days
overdue (2018: $1.4 million). Due to the short-term nature of the Group’s receivables, their carrying value is
considered to approximate fair value.
107
107
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
(a) Trade receivables purchase facilities
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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 $130.9 million excludes $117.3 million (31 December 2018: excludes $70.6 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 $16.7 million
(2018: $11.5 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 2019 the trade receivables balance was $130.9 million, with $112.3 million covered by credit risk
insurance and a further $18.6 million by letters of credit. As a result, the Group had no uninsured receivables at
the reporting date (2018: $nil).
14 INVENTORIES
Current
Work in progress
Finished goods
Consumable stores
Total current inventories
-0.1 CR
Non-current
Work in progress
Total non-current inventories
2019
$m
110.5
208.7
21.9
341.1
(0.1)
84.1
84.1
2018
$m
139.3
178.9
68.9
387.1
-
4.6
4.6
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 Heavy Mineral Concentrate (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 $nil million (2018: $2.0 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.
108
108
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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 $41.8 million occurred for work in progress or finished goods (2018:
$11.4 million). Of this amount, $39.1 million is due to the write-down of inventory to its net realisable value due
to the write-down of Sierra Rutile Limited. If finished goods future selling prices were 5% lower than expected,
no inventory write-down would be required at 31 December 2019 (2018: no write-down).
Inventory of $84.1 million (2018: $4.6 million) was classified as non-current as it is not expected to be sold
within 12 months of the balance sheet date.
CAPITAL
15 NET CASH/(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 cash
(a) Cash and cash equivalents
2019
$m
97.3
97.3
(55.7)
1.7
(54.0)
2018
$m
51.3
51.3
(50.4)
0.9
(49.5)
43.3
1.8
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% and 2.7% (2018: 0.0% and 2.5%) 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$519.3 million (2018: A$618.3 million).
109
109
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
The table below details the facility expiries:
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
A$million
At 31 December 2019
At 31 December 2018
Total
facility
519.3
618.3
2020
-
77.1
Facility Expiry
2021
-
2022
-
-
541.2
2023
-
-
2024
519.3
-
Undrawn MOFA facilities at 31 December 2019 were A$463.6 million (2018: A$567.9 million).
(c) Interest rate exposure
Of the above interest-bearing liabilities, $55.7 million is subject to an effective weighted average floating interest
rate of 3.1% (2018: interest-bearing liabilities of $50.4 million at 4.2%). The contractual repricing date of all of the
floating rate interest-bearing liabilities at the balance date is within one year.
(d) Finance costs
Interest charges on interest-bearing liabilities
Bank fees and similar charges
Amortisation of deferred borrowing costs
Lease borrowing costs
Rehabilitation and mine closure provision discount unwind
Rehabilitation provision discount rate changes
Total finance costs
+0.1 DR
(i) Amortisation of deferred borrowing costs
2019
$m
7.3
5.0
1.2
1.5
19.7
18.3
53.0
-
2018
$m
7.2
6.2
1.6
-
16.7
-
31.7
0.1
Fees paid on establishment of borrowing facilities are recognised as transaction costs and amortised over the
period until the next expected facility extension. During the current reporting period, $2.0 million in transaction
costs associated with the extension of the MOFA were incurred and capitalised (2018: $nil) and $0.6 million of
previously capitalised costs were written off (2018: $nil).
(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 8(a).
Any change in the discount rate for closed sites is recorded as a finance cost. Refer to note 8(a) for further
details.
110
110
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
16 CONTRIBUTED EQUITY
(a) Share capital
Ordinary shares - fully paid
Treasury shares - net of tax
2019
Shares
2018
Shares
422,584,778
(470,456)
422,114,322
422,395,677
(675,521)
421,720,156
2019
$m
1,160.4
(2.8)
1,157.6
2018
$m
1,158.6
(4.6)
1,154.0
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.
Movements in ordinary share capital
The Group issues ordinary shares to shareholders who elect to receive shares instead of cash dividends as part
of the Dividend Reinvestment Plan (DRP), the terms of which are detailed in the ASX announcement dated 27
February 2018. During the year, the Group issued the following shares under the DRP:
space
2018 final
2019 interim
(b) Treasury shares
Date issued
Price per share
Number of ordinary
shares issued
4 April 2019
2 October 2019
$8.86
$7.57
103,439
85,662
189,101
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 2018
Acquisition of shares by the Trust
Employee share issues, net of tax
Balance at 31 December 2018
Acquisition of shares by the Trust
Employee share issues, net of tax
Balance at 31 December 2019
Number of
shares
53,218
1,246,312
(624,009)
675,521
992,972
(1,198,037)
470,456
$m
0.3
8.9
(4.6)
4.6
6.2
(8.0)
2.8
111
111
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
17 RESERVES AND RETAINED EARNINGS
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
Asset revaluation reserve
Balance at 1 January
Transfer to retained earnings on disposal
Balance at 31 December
blank
Hedge reserve
Balance at 1 January
Deferred costs of hedging
Changes in the fair value of hedging instruments recognised in equity
Reclassified to profit or loss
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
Other reserves
Gain on part disposal of investment in subsidiary
Loss on initial recognition of put option
Balance at 31 December
blank
Total reserves
blank
Retained earnings
Balance at 1 January
Adjustment on adoption of AASB 15 (net of tax)
Net profit/(loss) for the period
Dividends paid
Actuarial gains/(losses) on retirement benefit obligation, net of tax
Balance at 31 December
-0.1 CR
Notes
17(a)
17(b)
17(c)
21(a)
17(d)
17(e)
2019
$m
11.4
(0.1)
11.3
(10.1)
0.4
3.6
2.8
(1.5)
(4.8)
2.3
(8.0)
5.9
0.2
39.0
(1.0)
4.0
(0.3)
(3.6)
1.0
39.1
6.7
(28.5)
(21.8)
24.0
2018
$m
11.8
(0.4)
11.4
(2.2)
(14.4)
(5.4)
8.5
3.4
(10.1)
1.9
(4.6)
5.0
2.3
(2.1)
(15.7)
59.7
(0.8)
(3.0)
0.9
39.0
-
-
-
42.6
(86.6)
-
(279.9)
(101.5)
(3.9)
(472.0)
(0.1)
(243.6)
(0.6)
303.9
(146.9)
0.6
(86.6)
-
112
112
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
(a) Asset revaluation reserve
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
The asset revaluation reserve records revaluations of non-current assets prior to the adoption of AIFRS.
Transfers are made to retained earnings on disposal of previously revalued assets.
(b) Hedge reserve
Iluka uses two types of hedging instruments as part of its foreign currency risk management strategy associated
with its US denominated sales, as described in note 21. These include foreign currency forward contracts and
foreign currency collars, both of which are designated in cash flow hedge relationships. To the extent these
hedges are effective, the change in fair value of the hedging instrument is recognised in the cash flow hedge
reserve.
(c) Share-based payments reserve
The employee share-based payments reserve is used to recognise the fair value of equity instruments granted
but not yet issued to employees under the Group's various equity-based incentive schemes. Shares issued to
employees are acquired on-market prior to the issue. Shares not yet issued to employees are shown as treasury
shares. When shares are issued to employees the cost of the on-market acquisition, net of tax, is transferred
from treasury shares (refer note 16) to the share-based payment reserve.
(d) Foreign currency translation reserve
Exchange differences arising on translation of the net investment in foreign operations, including US dollar
denominated debt used as a hedge of the net investment, are taken into the foreign currency translation reserve
net of applicable income tax, as described in note 2(b). At 31 December 2019, US$nil was designated as a hedge
of the net investment in Sierra Rutile Limited (2018: US$nil million). The reserve is recognised in profit or loss
when the net investment is disposed of.
(e) Other reserves
The impact on equity of transactions related to changes in the structure of the Group are accumulated in other
reserves. As detailed in note 22, the Group recognised a gain on partial disposal of its investment in SRL of $6.7
million, and a loss on initial recognition of the related put option held by the IFC of $28.5 million against other
reserves in equity.
113
113
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
18 DIVIDENDS
Final dividend
for 2018 of 19 cents per share, fully franked
for 2017 of 25 cents per share, fully franked
Interim dividend
for 2019 of 5 cents per share, fully franked
for 2018 of 10 cents per share, fully franked
Total dividends
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
2019
$m
2018
$m
80.3
-
80.3
21.1
-
101.5
-
104.7
104.7
-
42.2
146.9
Of the total $21.1 million interim dividend declared for 2019 and the total $80.3 million final dividend declared for
2018, shareholders respectively took up $0.6 million and $0.9 million as ordinary shares as part of the Dividend
Reinvestment Plan. Refer to note 16(a).
Since balance date the directors have determined a final dividend for 2019 of 8 cents per share, fully franked. The
dividend is payable on 2 April 2020 for shareholders on the register as at 6 March 2020. The aggregate amount
of the proposed dividend is $33.8 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.
Franking credits
The balance of franking credits available as at 31 December 2019 is $129.2 million (2018: $27.9 million). This
balance is based on a tax rate of 30% (2018: 30%).
19 PROFIT/(LOSS) PER SHARE
Basic (loss)/profit per share (cents)
Diluted (loss)/profit per share (cents)
2019
Cents
(71.0)
(71.0)
2018
Cents
72.2
71.8
Earnings/(loss) per share (EPS) is the amount of post-tax earnings or loss attributable to each share.
Basic EPS is calculated on the loss for the period attributable to equity owners of the parent of $299.7 million
(2018: profit of of $303.9 million) divided by the weighted average number of shares on issue during the year,
excluding treasury shares, being 422,146,281 shares (2018: 420,797,114 shares).
Diluted EPS takes into account the dilutive effect of all outstanding share rights vesting as ordinary shares. The
weighted average share rights outstanding were not dilutive in 2019 as they would reduce the loss per share and
therefore were not included in the calculation of diluted EPS in the current period.
114
114
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
RISK
20 FINANCIAL RISK MANAGEMENT
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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, to the extent possible, a
portion of the Group’s borrowings in US dollars as a hedge against the net US dollar investment in the Sierra
Rutile operation (with associated translation differences taken to the foreign currency translation reserve in
equity).
Net US dollar-denominated working capital and cash balances act as a ‘natural’ hedge against movements in US
dollar receivables from Australian sales (with associated translation differences taken to 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 manages foreign currency risk centrally. The Group hedges foreign exchange
exposures for firm commitments relating to a portion of sales, where the hedging instrument must be in the
same currency as the hedged item.
The objective of Iluka’s policy on foreign exchange hedging is to protect the Group from adverse currency
fluctuations.
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
Derivative financial instruments
The Group's balance sheet exposure to other foreign currency risk is not significant.
2019
$m
45.0
75.4
(21.0)
(55.7)
(33.7)
10.0
2018
$m
9.0
59.4
(16.7)
(50.4)
(7.3)
(6.0)
115
115
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
(ii) Group sensitivity
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
The average US dollar exchange rate during the year was 0.6950 (2018: 0.7479). The US dollar spot rate at 31
December 2019 was 0.7000 (31 December 2018: 0.7050). Based on the Group's net financial assets at 31
December 2019, 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:
-10%
Strengthen
Profit (loss)
$m
0.3
0.4
Equity
$m
(29.7)
(37.1)
+10%
Weaken
Profit (loss)
$m
(0.2)
0.2
Equity
$m
18.1
24.5
31 December 2019
31 December 2018
(iii) Interest rate risk
Interest rate risk arises from the Group’s borrowings and cash deposits. During 2019 and 2018, the Group's
borrowings at variable rates were denominated in Australian dollars and US dollars. At 31 December 2019, 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 2019
31 December 2018
+1%
$m
0.6
0.5
-1%
$m
(0.6)
(0.5)
The sensitivity is calculated using the average debt position for the year ended 31 December 2019. The interest
charges in note 15(d) of $7.3 million (2018: $7.2 million) reflect interest-bearing liabilities in 2019 that range
between $40.1 million and $191.4 million (2018: $38.4 million and $236.1 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 and makes use of letters of credit 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
policies limit the amount of credit exposure to any one financial institution.
institutions and
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 credit ratings from external ratings agencies.
(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 $463.6 million at balance date as well as cash and cash equivalents of $97.3 million and prudent cash
flow management.
116
116
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
(d) Maturities of financial liabilities
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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 and
contractual cash flows are until the next contractual re-pricing date in 2024. 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 non-derivative financial liabilities are due within 12 months.
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
Over 5
years
$m
Total
contractual
cash flows
$m
Carrying
amount
liabilities
$m
At 31 December 2019
Non-derivatives
Payables
Lease liabilities
Interest-bearing variable rate
Total non-derivatives
Derivatives
%
4.3
3.1
140.8
9.2
-
150.0
-
8.6
-
8.6
-
6.0
55.7
61.7
Forward foreign exchange
contracts
Foreign exchange collar contracts
Put option
Total derivatives
0.6
3.1
-
3.7
-
1.6
28.4
30.0
-
-
-
-
-
6.2
-
6.2
-
-
-
-
140.8
30.0
55.7
226.5
140.8
30.0
55.7
226.5
0.6
4.7
28.4
33.7
0.6
4.7
28.4
33.7
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 2018
Non-derivatives
Payables
Interest-bearing variable rate
Total non-derivatives
4.2
Derivatives
Forward foreign exchange contracts
Foreign exchange collar contracts
Total derivatives
153.2
0.3
153.5
-
3.8
3.8
-
-
-
0.6
3.1
3.7
-
50.4
50.4
-
4.2
4.2
153.2
50.7
203.9
153.2
50.4
203.6
0.6
11.1
11.7
0.6
11.1
11.7
Refer to note 21 for detail on derivative instruments.
117
117
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
21 HEDGING
Current liabilities
Foreign exchange collar hedges
Foreign exchange forward contracts
Non-current liabilities
Foreign exchange collar hedges
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
2019
$m
2018
$m
3.1
0.6
3.7
1.6
3.8
0.6
4.4
7.3
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 foreign exchange forward
contracts and foreign exchange collar contracts.
(a) Recognition
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
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.
(b) Fair value of derivatives
Derivative financial instruments are the only assets and liabilities measured and recognised at fair value at 31
December 2019 and 31 December 2018. The fair value of these instruments is determined using valuation
techniques with inputs that are observable market data (a level 2 measurement). The valuation of forward
contracts is determined using forward exchange rates at the balance date. The valuation of the options making
up the collars is determined using forward foreign exchange rates, volatilities and interest rates at the balance
date. The only unobservable input used in the calculations is the credit default rate, movements in which would
not have a material effect on the valuation.
(c) 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.
118
118
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
Cash flow hedges
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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. The ineffective portion was
immaterial in the current and prior periods. 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.
The following contracts in relation expected USD revenue, predominantly from contracted sales to 31 December
2022, remain open at the reporting date:
•
•
foreign exchange forward contracts covering US$63.6 million at a weighted average rate of 70.7 cents,
including US$32 million of new foreign exchange forward contracts entered into during the year with a
weighted average rate of 69.3 cents (31 December 2018: US$31.6 million at a weighted average rate of 72.1
cents); and
foreign exchange collar hedges covering US$193.1 million of expected USD revenue to 31 December 2022.
The collars comprise US$193.1 million worth of purchased AUD call options with a weighted average strike
price of 78.5 cents and US$193.1 million of AUD put options at a strike price of 68.6 cents.
The period above corresponds with the long-term sales contracts entered into in 2017 including those in support
of the development of the Cataby project. However, the hedged USD revenues do not represent the full value of
expected sales under these contracts over this period.
US$118 million in foreign exchange collar contracts consisting of US$118 million of bought AUD call options with
weighted average strike prices of 80.5 cents and US$118 million of sold AUD put options with weighted average
strike prices of 70.0 cents expired during the year. No foreign exchange forward contracts expired during the
year.
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 the
foreign currency translation reserve being reduced by $2.6 million (2018: $2.1 million reserve reduction).
119
119
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
GROUP STRUCTURE
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
22 CHANGES IN OWNERSHIP INTERESTS HELD IN CONTROLLED ENTITIES
On 21 February 2019, the Group announced the potential for the International Finance Corporation (IFC), a
member of the World Bank Group, to acquire a 10% equity interest in Sierra Rutile Limited (SRL), thereby
commencing a strategic partnership in relation to the Group’s Sierra Rutile operation.
The transaction was subject to the completion of due diligence and necessary approvals being obtained, as
disclosed in note 23(a) of the 2018 annual report.
Upon completion of the above prerequisites, agreements to effect the transaction were finalised. The key terms
thereof are summarised in the ASX announcement released on 6 June 2019, being:
•
•
•
IFC will be issued new shares in Iluka Investments (BVI) Limited, the holding company of Sierra Rutile
Limited.
IFC acquires their 10% equity interest in two tranches, with the first being the acquisition of 3.57% for
US$20 million on 6 June 2019. Acquisition of the second tranche will occur upon approval of
construction of early works on the Sembehun project. If approval is not obtained, then IFC may elect to
acquire the second tranche regardless.
The Group enters into an arrangement whereby IFC has the right to dispose of their interest back to the
Group at its fair value on date of exercise of the put. The put becomes exercisable after three years if the
Sembehun early works are not approved, alternatively the put is exercisable after seven years.
As advised on 17 December 2019, the terms and timing of the second tranche of this investment will likely be
subject to renegotiation given the delay in approval of the Sembehun project.
(i) Non-controlling interest
The first tranche of the transaction was effected on 6 June 2019. The Group recognised a non-controlling interest
of $21.8 million on this date, representing IFC's 3.57% share in the net assets of SRL. The Group received $28.5
million (US$20 million) in cash consideration for the equity interest, with the resulting gain of $6.7 million
recognised in other reserves in equity.
Subsequently, an amount of $19.8 million has been charged to the non-controlling interest, representing the IFC's
share in the after tax losses of the Iluka Investments (BVI) group from the transaction date until the reporting
date, predominantly reflecting the impairment of the Sierra Rutile operations.
(ii) Put option held by the IFC
The Group also recognised a financial liability at its fair value on 6 June 2019 of $28.5 million against other
reserves in equity.
Subsequently, the Group translated the put option carrying value to Australian dollars at the spot rate applicable
on the reporting date, with the resulting foreign exchange translation gain of $0.1 million recognised in profit or
loss.
The fair value of the put option was determined based on a significant unobservable input, and accordingly it is
classified as level 3 in the fair value hierarchy. The significant unobservable input is the estimated settlement
amount, which is based on the issue price of the interest held by the IFC.
120
120
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
23 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
* 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
A.C.N. 637 824 027 Limited
A.C.N. 637 858 425 Pty Ltd
A.C.N. 637 858 434 Pty Ltd
A.C.N. 637 858 809 Pty Ltd
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
121
Country of
incorporation
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
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
The Netherlands
The Netherlands
The Netherlands
Sri Lanka
Sri Lanka
Sri Lanka
China
Brazil
Equity holding
2018
2019
%
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
95.8
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
95.8
-
-
-
-
100
100
100
100
100
100
100
100
121
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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 (Eurasia) 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
Iluka International (UK) Limited
Iluka South Africa (Pty) Limited
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
South Africa
100
100
100
100
100
100
100
100
100
100
100
100
100
96.4
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
* 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.
(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 for the period
Other comprehensive income
Changes in the fair value of cash flow hedges
Total comprehensive income for the period
2019
$m
1,046.8
(560.4)
(44.0)
(131.7)
310.7
2018
$m
1,118.7
(605.1)
(24.1)
(143.9)
345.6
(2.4)
308.3
(7.9)
337.7
Summary of movements in consolidated retained earnings
Retained earnings/(accumulated loss) at the beginning of the financial year
Profit for the period
Dividends paid
Retained earnings/(accumulated loss) at the end of the financial year
187.8
310.7
(101.5)
397.0
(10.9)
345.6
(146.9)
187.8
122
122
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
Condensed balance sheet
Current assets
Cash and cash equivalents
Receivables
Inventories
Total current assets
Non-current assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Inventories
Other financial assets - investments in non-closed group entities
Right of use assets
Total non-current assets
Total assets
Current liabilities
Payables
Derivative financial instruments
Current tax payable
Provisions
Lease liabilities
Total current liabilities
Non-current liabilities
Interest-bearing liabilities
Derivatives
Provisions
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
2019
$m
2018
$m
69.3
161.9
300.4
531.6
933.2
17.5
3.5
84.1
721.8
20.0
1,780.1
18.4
118.0
292.5
428.9
838.3
46.3
3.9
4.6
729.2
-
1,622.3
2,311.7
2,051.2
81.8
3.7
94.4
62.9
9.2
252.0
54.0
1.6
433.7
20.4
509.7
100.0
4.4
137.3
82.2
-
323.9
49.5
7.3
336.0
-
392.8
761.7
716.7
1,550.0
1,334.5
1,157.5
(4.5)
397.0
1,550.0
1,154.0
(7.3)
187.8
1,334.5
123
123
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
OTHER NOTES
24 CONTINGENT LIABILITIES
(a) Bank guarantees
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 2019, the total value of
performance commitments and guarantees was $125.3 million (2018: $123.6 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$2 million upon grant of a mining license, US$3 million on the Iluka Board approving a
development of mining operations and US$3 million upon commencement of commercial production; and
the payment of an annual trailing payment calculated at 1% 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.
(d) Shareholder class action
On 24 March 2014 Iluka became aware that a litigation funder proposed to fund claims that current or former
shareholders may have against Iluka Resources Limited in respect of alleged breaches of Iluka’s continuous
disclosure obligations and misleading and deceptive conduct in 2012.
On 23 April 2018, Iluka was served with an originating application and statement of claim in respect of a
shareholder class action filed in the Federal Court of Australia. The proceedings have been brought by a group of
Iluka shareholders for alleged breaches of Iluka’s continuous disclosure obligations, and misleading and
deceptive conduct in relation to disclosures made by Iluka to the market between April and July 2012.
In late January 2019, Iluka was informed that a dispute had arisen between the applicant and its third party
litigation funder, Harbour Fund II LP. On 2 August 2019, Iluka was notified that the applicant secured funding
from a replacement funder, August Ventures Limited.
The presiding judge has made orders for the exchange of evidence in the proceedings and a trial date has been
set for 1 March 2021.
Iluka denies liability in respect of the allegations and is defending the proceedings.
This contingent liability was first disclosed in Iluka’s 2018 Interim Report. The status of the proceedings has still
not reached a stage where Iluka is able to reliably estimate the quantum of liability, if any, that Iluka may incur in
respect of the class action.
(e) Sierra Leone environmental class action
On 22 January 2019, SRL was served with a writ and statement of claim in respect of an action filed in the High
Court of Sierra Leone Commercial And Admiralty Division against both SRL and The Environmental Protection
Agency.
124
124
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
(e) Sierra Leone environmental class action (continued)
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
The proceedings have been brought by a group of landowner representatives (Representatives) who allege that
they suffered loss as a result of SRL’s mining operations. The claims primarily relate to environmental matters.
The Representatives allege, in part, that SRL engaged in improper mining practices resulting in environmental
degradation and contamination, did not meet certain rehabilitation obligations and violated local mining laws.
SRL denies liability in respect of the allegations and intends to defend the claims. SRL filed its defence in March
2019 and also applied to the Court for an order requiring the Representatives to provide further detail on their
claims.
As at 31 December 2019, the status of the proceedings has still not reached a stage where SRL is able to reliably
estimate the quantum of liability, if any, that SRL may incur in respect of the class action.
(f) 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.
25 EVENTS OCCURRING AFTER THE REPORTING PERIOD
Following a comprehensive review of the Group’s corporate and capital structure during 2019, the Board and
management have decided to make preparations to put a proposal to shareholders regarding a demerger of the
Mining Area C (MAC) royalty business from the Group’s mineral sands business. This option has been
determined as the best means to deliver value to shareholders by separating distinct businesses and creating
two stand-alone ASX-listed companies. As the proposal is still in development and will be subject to further
Board approval, as well as regulatory, and shareholder approvals, MAC is not classified as held-for-sale as at 31
December 2019. The carrying values of assets and liabilities as at the reporting date and related profit or loss for
the year are disclosed in note 4(b). Any gain on distribution of non-cash assets to owners that may arise would
depend on the fair value of those assets at the date of distribution, and can therefore not be estimated as at the
reporting date.
No matter or circumstance has occurred subsequent to period end that has significantly affected, or may
significantly affect, the operations of the Group, the results of those operations or the state of affairs of the
Group or economic entity in subsequent financial years.
26 COMMITMENTS
(a) Exploration and mining lease commitments
Commitments in relation to leases contracted for at reporting date but not
recognised as liabilities payable:
Within one year
Later than one year but not later than five years
Later than five years
2019
$m
2018
$m
14.9
34.7
46.8
96.4
15.7
32.7
47.0
95.4
These costs are discretionary. If the expenditure commitments are not met then the associated exploration and
mining leases may be relinquished.
125
125
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
(b) Lease commitments
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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
-
-
-
-
7.2
15.8
14.3
37.3
From 1 January 2019, the group has recognised right-of-use assets for these leases, except for short-term and
low-value leases, see notes 10 and 34 for further information.
(c) Capital commitments
Capital expenditure contracted for and payable, but not recognised as liabilities is $26.5 million (2018: $57.8
million). All of the commitments relate to the purchase of property, plant and equipment. Of the total amount,
$25.7 million is payable within one year of the reporting date and $0.8 million is payable between one and five
years of the reporting date.
27 REMUNERATION OF AUDITORS
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:
2019
$000
2018
$000
514
131
645
7
10
17
662
199
16
215
514
-
514
10
-
10
524
156
34
190
(a) PricewaterhouseCoopers Australia
Audit and other assurance services
Audit and review of Group financial statements
Audit and review of subsidiary financial statements
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
126
126
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
For the year ended 31 December 2019
(c) Non-PricewaterhouseCoopers audit firms
Audit and review of financial statements
Other compliance and advisory services
Summary of total fees disclosed above:
Audit and review of financial statements
Tax compliance and advisory services
Other compliance and advisory services
28 SHARE-BASED PAYMENTS
96
15
111
940
7
41
988
76
142
218
746
10
176
932
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.
127
127
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
The share-based payment expense recognised in profit or loss of $6.2 million (2018: $6.2 million) results from
several schemes summarised below.
Schemes
STIP (i)
2019
2018
2017
2016
LTIP - TSR (ii)
2017
2016 MD Grant
2016
2016
LTIP - ROE (ii)
2017
2016 MD Grant
2016
2016
2015
EIP (iii)
MD LTDR (iv)
COO LTDR (v)
COO LTDR (v)
COO LTDR (v)
Employee Share Plan (vi)
Restricted Share Plan (vii)
(i) Short Term Incentive Plan (STIP)
Fair
value
Shares /
rights at
Expense
2019
Shares /
rights at
Expense
2018
Grant
date
Vesting date
$
31 Dec 19
$m
31 Dec 18
$m
Mar-20 Mar-21/22/23
Mar-19
Mar-18
Mar-17
May-17
Oct-16
May-16
May-16
May-17
Oct-16
May-16
May-16
Feb-15
Mar-20/21
Mar-19/20
Mar-18/19
Mar-21
Mar-21
Mar-20
Mar-19
Mar-21
Mar-21
Mar-20
Mar-19
Mar-18
Mar-18 Mar-20/21/22/23
Oct-16 Mar-18/19/20
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
9.30
7.62
10.55
6.82
5.66
3.71
4.27
4.27
7.44
5.42
5.86
6.01
6.74
7.62
4.68
6.82
10.55
9.35
9.01
6.82
-
-
-
-
376,858
126,688
211,502
1,607
369,845
126,687
211,519
-
-
-
163,031
16,133
10,424
11,762
-
-
-
-
-
-
401,657
126,688
237,217
267,739
401,681
126,687
237,234
267,757
-
-
357,115
16,133
10,424
-
-
1.2
1.3
0.5
-
0.5
0.2
-
-
0.6
(0.4)
(0.9)
(1.0)
-
3.1
0.2
0.1
0.1
0.1
-
0.6
6.2
-
1.5
1.4
0.4
0.5
(0.3)
0.2
0.1
0.7
0.3
0.3
(0.9)
(1.6)
2.5
0.1
0.1
0.1
0.4
0.4
6.2
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 LTIP took into account the exercise price of $nil, the share price at grant date,
the expected price volatility of the share price (based on historical volatility), the expected dividend yield of and
the risk free rate of return. The fair value of the total shareholder return tranche also took 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
share-based payments expense.
(iii) Executive Incentive Plan (EIP)
Equity awarded under the Executive Incentive Plan is allocated on 1 March each year. The number of restricted
shares and performance rights to be awarded are determined based on a volume weighted average market price
of Iluka shares for the five days following the release of the full year results. The values disclosed represent the
face value.
128
128
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
(iv) 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.
(v) 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 38,819 (2018:
26,557) share rights.
(vi) Employee share plan
In the current reporting period, no shares were issued. In the
The employee share plan ceased in 2018.
comparative period 37,400 shares were issued to eligible employees who participated in the plan. Under the plan,
each participant was issued with shares worth $1,000 based on a volume weighted average market price for the
five days following the close of the offer period (2018: $11.28).
(vii) Restricted share plan
51,548 (2018: 52,029) restricted shares were issued to five (2018: seven) eligible employees who participated in
the plan. Shares were issued to participants based on a volume weighted average price of $9.35 (2018: $10.55)
calculated over the five trading days following the release of the Company’s 2018 annual results.
29 POST-EMPLOYMENT BENEFIT OBLIGATIONS
(a) Superannuation plan
(i) Australia
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. During the current
reporting period, the remaining net plan surplus was derecognised, as the Group has no further legal or
constructive 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.
129
129
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
(iii) SRL
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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 trade unions representing employees. On 1 January 2018,
this benefit was extended to include senior and management employees, in addition to all other employees, with
the obligation to the newly added senior and management employees becoming effective from 1 January 2019.
The post-employment benefit obligation recognised in the balance sheet represents the present value of the
defined benefit obligation in relation to this arrangement.
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 Leone
Total
Net plan position
-
Deficit
Deficit
2019
$m
-
(15.7)
(6.7)
(22.4)
2018
$m
0.4
(12.1)
(6.2)
(17.9)
A net deficit of $22.4 million (2018: deficit $17.9 million) is included in non-current provisions in note 8. 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
2019
$m
(46.7)
24.3
(22.4)
2018
$m
(39.4)
21.5
(17.9)
2017
$m
(36.0)
21.2
(14.8)
2016
$m
(35.0)
20.3
(14.7)
2015
$m
(31.1)
20.4
(10.7)
(c) Defined benefits superannuation expense
In 2019, $2.4 million (2018: $2.3 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.
130
130
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
30 RECONCILIATION OF PROFIT/(LOSS) AFTER INCOME TAX TO NET CASH INFLOW
FROM OPERATING ACTIVITIES
Profit (loss) for the year
Depreciation and amortisation
Doubtful debts/(reversed)
Net loss (gain) on disposal of property, plant and equipment
Net exchange differences
Rehabilitation and mine closure provision discount unwind
Rehabilitation discount rate change
Non-cash share-based payments expense
Amortisation of deferred borrowing costs
Impairment of Sierra Rutile Limited assets
Inventory NRV write-down
Changes in rehabilitation provisions for closed sites
Change in operating assets and liabilities
(Increase)/decrease in receivables
(Increase)/decrease in inventories
Increase/(decrease) in net current tax liability
Decrease/(increase) in net deferred tax
(Decrease) in payables
Increase/(decrease) in provisions
Net cash inflow from operating activities
31 KEY MANAGEMENT PERSONNEL
(a) Key Management Personnel
2019
$m
(299.7)
163.2
1.6
4.1
0.3
19.7
18.3
6.2
1.2
375.2
41.8
3.2
(39.8)
(35.2)
(43.1)
199.0
(111.7)
17.9
322.2
2018
$m
303.9
93.6
(1.4)
(1.3)
1.6
16.7
-
6.2
1.6
-
11.4
(4.6)
7.5
85.9
152.1
(6.7)
(35.3)
(4.7)
626.5
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 the remuneration received by each Key Management Person is provided in the
Remuneration Report on pages 56 to 80.
The below provides a summary:
-
Short-term benefits
Post-employment benefits
Termination benefits
Share-based payments
Total
2019
$000
6,213
205
276
3,362
10,056
2018
$000
6,997
232
175
2,312
9,716
131
131
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
(b) Transactions with Key Management Personnel
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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.
32 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
Shareholders' equity
Contributed equity
Other reserves
Profit reserve¹
Accumulated loss
space
Profit/(loss) for the year
Other comprehensive income
Changes in the fair value of cash flow hedges, net of tax
Total comprehensive loss (income)
¹Profits have been appropriated to a profits reserve for future dividend payments.
2019
$m
2018
$m
106.5
1,481.1
1,587.6
40.6
439.2
479.8
165.6
1,393.9
1,559.5
196.4
390.1
586.5
1,107.8
973.0
1,160.3
2.6
153.4
(208.5)
1,107.8
1,158.7
0.5
22.3
(208.5)
973.0
234.3
86.8
(2.4)
231.9
(7.9)
78.9
(b) Contingent liabilities of the parent entity
The parent had contingent liabilities for performance commitments and guarantees of $10.6 million as at 31
December 2019 (2018: $42.8 million). In addition, the parent has a contingent liability related to the shareholder
class action, as detailed in note 24.
132
132
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
(c) Contractual commitments for the acquisition of property, plant or equipment
As at 31 December 2019, the parent entity had contractual commitments for the acquisition of property, plant or
equipment totalling $6.3 million (2018: $26.1 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.
33 RELATED PARTY TRANSACTIONS
The only related party transactions are with Directors and Key Management Personnel (refer note 31). Details of
material controlled entities are set out in note 23. The ultimate Australian controlling entity and the ultimate
parent entity is Iluka Resources Limited.
133
133
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
34 NEW AND AMENDED STANDARDS
New standards and amendments adopted
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
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 2019.
The affected policies and standards are:
AASB16 Leases
The Group has adopted AASB 16 with effect from 1 January 2019 (the ‘adoption date’), but has not restated
comparatives for the 2018 reporting period. All relevant contracts, other than short term contracts or those
relating to low-value assets, have been assessed to determine whether they are, or contain, leases. For initial
adoption purposes, short term contracts include contracts that are for a total period of more than 12 months, but
that expire within 12 months or less of the adoption date.
The new accounting policy applicable to leases, including measurement of lease liabilities and right-of-use
assets, from 1 January 2019 is detailed in note 10.
The Group recognised lease liabilities and right of use assets in relation to leases which had previously been
classified as operating leases under the principles of AASB 117. No adjustments were made to the opening
balance on retained earnings. The Group did not have any leases previously classified as finance leases on the
adoption date.
Lease liabilities
The weighted average interest rate used to discount the payments due over the remaining term for each lease
was 4.3%. The Group estimated remaining lease terms including the effects of any renewal options or
termination options expected to be exercised, applying hindsight where appropriate.
Operating lease commitments disclosed at the end of the comparative period are reconciled to the opening lease
liability balance as follows:
Operating lease commitments disclosed as at 31 December 2018
Discounted using the Group's weighted average incremental borrowing rate on 1 January 2019
Less: short-term and low value leases recognised on a straight-line basis
Add: contracts reassessed as leases
Lease liabilities recognised on 1 January 2019
$m
37.3
32.7
(1.4)
5.9
37.2
Right-of-use assets
Right-of-use assets were measured at amounts equal to the carrying amount of their respective lease liabilities
on the adoption date, adjusted for incentives, accruals and prepayments and to exclude initial direct costs. A total
of $29.5 million was recognised on the adoption date.
There were no onerous lease contracts that would have required an adjustment to the right-of-use assets on the
adoption date.
134
134
Iluka Resources Limited, Annual Report 2019 NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2019
Impact on the current reporting period
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
Adoption of AASB 16 impacted all segments (except for MAC) and certain non-segment corporate and other
items:
-
Lease liabilities
Recognised on adoption
Additional lease liabilities recognised
Remeasurement adjustments
Borrowing costs
Payments
Lease liabilities as at 31 December 2019
-
Right of use assets
Recognised on adoption
Additional right of use assets recognised
Remeasurement adjustments
Accumulated amortisation
Right of use assets as at 31 December 2019
-
JA/MW
$m
C/SW
$m
Corporate
and
other
$m
SRL US/MB
$m
$m
8.2
1.0
-
0.3
(4.0)
5.5
8.2
1.0
-
(3.5)
5.7
5.0
0.9
-
0.2
(2.9)
3.2
5.0
0.9
-
(2.6)
3.3
0.3
-
-
0.1
(0.1)
0.3
0.3
-
-
(0.1)
0.2
1.1
0.1
-
0.1
(0.6)
0.7
1.1
0.1
-
(0.5)
0.7
22.6
0.2
(2.8)
0.9
(0.6)
20.3
14.9
0.2
(2.8)
(1.7)
10.6
Total
$m
37.2
2.2
(2.8)
1.5
(8.2)
30.0
29.5
2.2
(2.8)
(8.4)
20.5
The impact on the profit or loss items of the JA/MW, C/SW, SRL and US/MB segments was not material, nor was
there a material impact on Group earnings per share. The impact on the profit or loss of the Group was:
-
-
Decrease in operating lease expense
Increase in borrowing costs on lease liabilities
Increase in right of use asset amortisation
Decrease in profit before tax
Decrease in income tax expense
Decrease in profit after tax
Total
$m
8.2
(1.5)
(8.4)
(1.7)
0.5
(1.2)
Forthcoming standards and amendments not yet adopted
There are no other forthcoming standards and amendments that are expected to have a material impact on the
entity in the current or future reporting periods, or on foreseeable future transactions.
135
135
Iluka Resources Limited, Annual Report 2019 DIRECTOR’S DECLARATION
For the year ended 31 December 2019
DIRECTORS' DECLARATION
In the directors' opinion:
ILUKA RESOURCES LIMITED
31 DECEMBER 2019
(a)
the financial statements and notes set out on pages 82 to 135 are in accordance with the Corporations
Act 2001, including:
(i)
(ii)
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 the Group's financial position as at 31 December 2019 and of its
performance for the financial year ended on that date, and
(b)
(c)
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
20 February 2020
136
136
Independent auditor’s report
To the members of Iluka Resources Limited
Report on the audit of the financial report
Our opinion
In 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:
(a)
giving a true and fair view of the Group's financial position as at 31 December 2019 and of its
financial performance for the year then ended, and
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
the consolidated balance sheet as at 31 December 2019
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated statement of profit or loss and other comprehensive income for the year then
the notes to the consolidated financial statements, which include a summary of significant
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
ended
accounting policies, and
the directors’ declaration.
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
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
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 (including Independence
Standards) (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
Liability limited by a scheme approved under Professional Standards Legislation.
Iluka Resources Limited, Annual Report 2019
INDEPENDENT AUDITOR’S REPORT
To the members of Iluka Resources Limited
For the year ended 31 December 2019
Independent auditor’s report
To the members of Iluka Resources Limited
Report on the audit of the financial report
Our opinion
In 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:
(a)
giving a true and fair view of the Group's financial position as at 31 December 2019 and of its
financial performance for the year then ended, and
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated balance sheet as at 31 December 2019
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies, and
the directors’ declaration.
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
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
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 (including Independence
Standards) (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
Liability limited by a scheme approved under Professional Standards Legislation.
137
Iluka Resources Limited, Annual Report 2019
INDEPENDENT AUDITOR’S REPORT
To the members of Iluka Resources Limited
For the year ended 31 December 2019
Our audit approach
Key audit matters
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.
Materiality
•
For the purpose of our audit we used overall Group materiality of $13 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 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
acceptable thresholds.
Audit Scope
• Our audit focused on where the Group made subjective judgements; for example, significant accounting
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.
138
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
Impairment of assets in Sierra Rutile
Refer note 3 and note 7 to the financial statements
The Group performed an assessment for impairment
We performed the following procedures on the Group’s
indicators across its cash generating units (CGUs) given
impairment assessment for the Sierra Rutile CGU:
this is required by Australian Accounting Standards.
During the year, the Group reviewed its approach to
developing the Sembehun deposit in Sierra Leone due
to unfavourable changes made to capital expenditure
estimates on the previously preferred development
option. The Group identified this as an indicator of
impairment for the cash generating unit in Sierra
Leone (the Sierra Rutile CGU) at year end and
undertook an impairment assessment. This assessment
resulted in an impairment charge of $375.2 million as
the Group concluded the fair value less cost of disposal
(FVLCOD) of the Sierra Rutile CGU was below its
carrying value at 31 December 2019. When an
impairment assessment is performed, there are
significant judgements made in relation to
assumptions, such as:
long term mineral sands pricing
reserve estimates and production and processing
•
•
volumes
• operating costs, capital costs for future
developments, rehabilitation and mine closure
costs, foreign exchange rates and inflation rates,
and
• discount rates.
This was a key audit matter due to the significant
carrying value of the Sierra Rutile CGU’s non current
assets and the significance of the impairment expense
to the profit and loss, which are subject to the
judgements and assumptions outlined above in relation
to impairment.
• assessed whether the Sierra Rutile CGU
appropriately included all directly attributable
assets and liabilities
• considered whether the discounted cash flow model
used to estimate the ‘fair value less costs of
disposal’ (the impairment model) was consistent
with the basis required by Australian Accounting
•
tested whether forecast cash flows used in the
impairment model were consistent with the most
recent Corporate Plan formally approved by
Standards
directors
• considered whether the forecast cash flows used in
the impairment model were reasonable and based
on supportable assumptions by:
o
o
o
o
o
comparing long term mineral sands pricing
data used in the impairment model to
independent industry forecasts and long term
sales contracts
comparing the forecasted cash flows to actual
cash flows for previous years to assess the
accuracy of the Group’s forecasting
assessing the objectivity and competence of
internal engineering experts who assisted in
developing ore reserve estimates for the Sierra
Rutile CGU’s future developments
comparing foreign exchange rate and inflation
rate assumptions in the impairment model to
current economic forecasts, and
assessing the Group’s discount rate
calculations, including having regard to the
inputs utilised in the Group’s weighted
average cost of capital such as peer company
Iluka Resources Limited, Annual Report 2019
INDEPENDENT AUDITOR’S REPORT
To the members of Iluka Resources Limited
For the year ended 31 December 2019
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 matter
How our audit addressed the key audit matter
Impairment of assets in Sierra Rutile
Refer note 3 and note 7 to the financial statements
The Group performed an assessment for impairment
indicators across its cash generating units (CGUs) given
this is required by Australian Accounting Standards.
During the year, the Group reviewed its approach to
developing the Sembehun deposit in Sierra Leone due
to unfavourable changes made to capital expenditure
estimates on the previously preferred development
option. The Group identified this as an indicator of
impairment for the cash generating unit in Sierra
Leone (the Sierra Rutile CGU) at year end and
undertook an impairment assessment. This assessment
resulted in an impairment charge of $375.2 million as
the Group concluded the fair value less cost of disposal
(FVLCOD) of the Sierra Rutile CGU was below its
carrying value at 31 December 2019. When an
impairment assessment is performed, there are
significant judgements made in relation to
assumptions, such as:
•
•
long term mineral sands pricing
reserve estimates and production and processing
volumes
• operating costs, capital costs for future
developments, rehabilitation and mine closure
costs, foreign exchange rates and inflation rates,
and
• discount rates.
This was a key audit matter due to the significant
carrying value of the Sierra Rutile CGU’s non current
assets and the significance of the impairment expense
to the profit and loss, which are subject to the
judgements and assumptions outlined above in relation
to impairment.
We performed the following procedures on the Group’s
impairment assessment for the Sierra Rutile CGU:
• assessed whether the Sierra Rutile CGU
appropriately included all directly attributable
assets and liabilities
• considered whether the discounted cash flow model
used to estimate the ‘fair value less costs of
disposal’ (the impairment model) was consistent
with the basis required by Australian Accounting
Standards
tested whether forecast cash flows used in the
impairment model were consistent with the most
recent Corporate Plan formally approved by
directors
•
• considered whether the forecast cash flows used in
the impairment model were reasonable and based
on supportable assumptions by:
o
comparing long term mineral sands pricing
data used in the impairment model to
independent industry forecasts and long term
sales contracts
comparing the forecasted cash flows to actual
cash flows for previous years to assess the
accuracy of the Group’s forecasting
assessing the objectivity and competence of
internal engineering experts who assisted in
developing ore reserve estimates for the Sierra
Rutile CGU’s future developments
comparing foreign exchange rate and inflation
rate assumptions in the impairment model to
current economic forecasts, and
assessing the Group’s discount rate
calculations, including having regard to the
inputs utilised in the Group’s weighted
average cost of capital such as peer company
o
o
o
o
139
Iluka Resources Limited, Annual Report 2019
INDEPENDENT AUDITOR’S REPORT
To the members of Iluka Resources Limited
For the year ended 31 December 2019
Key audit matter
How our audit addressed the key audit matter
Other information
Closure and rehabilitation provisions in
Virginia
Refer to Critical accounting estimates and judgements
in note 3 and note 8 to the financial statements
As a result of its mining and processing operations, the
Group is obliged to restore and rehabilitate the
environment disturbed by these operations and remove
related infrastructure. Rehabilitation activities are
governed by a combination of legislative requirements
and Group policies.
At 31 December 2019 the balance sheet included
provisions for such obligations of $788.5 million. We
placed particular focus on the closure and
rehabilitation provisions for the Group’s legacy
operations in Virginia and related disclosure due to the
significant estimates made by the Group in determining
the likely outcome of these matters. These provisions
comprise a substantial portion of the $304.4 million
US/MB segment liabilities.
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.
betas, risk free rate and gearing ratios,
assisted by PwC valuation experts
tested the mathematical accuracy of the
impairment model’s calculations, and
•
• evaluated the adequacy of the disclosures made in
note 7 including those regarding key assumptions
used in the impairment assessment, in light of the
requirements of Australian Accounting Standards.
We performed tests over the calculation and
disclosures relating to the rehabilitation provision for
the Group’s legacy Virginia operations.
We evaluated key assumptions utilised in these models
by performing the following procedures:
• evaluated the competency and independence of the
experts retained by the Group to assist with the
assessment of its rehabilitation obligations
• examined the Group’s assessment of significant
changes in future cost estimates from the prior year
• compared the estimated future rehabilitation costs
to actual costs being incurred at the Group’s sites
for similar activities and current contracts in place
to assess the extent to which rehabilitation
estimates take into account current experience
• assessed the ability of the Group to make reliable
estimates of the extent of future rehabilitation
expenditure by comparing actual cash outflows in
2019 to those forecast as part of the provision in
previous years
• assessed the Group’s judgments in relation to the
manner in which the rehabilitation of legacy sites in
Virginia is likely to occur, and
• considered the appropriateness of the discount
rates and inflation rates utilised in calculating the
provision by comparing them to current market
consensus.
140
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 31 December 2019, 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.
In connection with our audit of the financial report, our responsibility is to read the other information
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 on the other information that we obtained prior to the date of
this auditor’s report, 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
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 the 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.
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
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.
Iluka Resources Limited, Annual Report 2019
INDEPENDENT AUDITOR’S REPORT
To the members of Iluka Resources Limited
For the year ended 31 December 2019
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 31 December 2019, 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.
In connection with our audit of the financial report, our responsibility is to read the other information
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 on the other information that we obtained prior to the date of
this auditor’s report, 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
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 the 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.
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
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.
141
Iluka Resources Limited, Annual Report 2019
INDEPENDENT AUDITOR’S REPORT
To the members of Iluka Resources Limited
For the year ended 31 December 2019
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 56 to 80 of the directors’ report for the
year ended 31 December 2019.
In our opinion, the remuneration report of Iluka Resources Limited for the year ended 31 December
2019 complies with section 300A of the Corporations Act 2001.
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.
PricewaterhouseCoopers
Justin Carroll
Partner
Perth
20 February 2020
142
Iluka Resources Limited, Annual Report 2019 PHYSICAL, FINANCIAL
AND CORPORATE
INFORMATION
In this section
FIVE YEAR PHYSICAL AND FINANCIAL SUMMARY
OPERATING MINES PHYSICAL DATA
ORE RESERVES AND MINERAL RESOURCES STATEMENT
SHAREHOLDER AND INVESTOR INFORMATION
CORPORATE INFORMATION
Cataby mine, Western Australia
143
Iluka Resources Limited, Annual Report 2019 FIVE YEAR PHYSICAL AND FINANCIAL SUMMARY
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
- Synthetic rutile
2019
2018
2017
2016
2015
322.1
184.1
196.2
702.4
318.6
274.0
200.1
206.7
680.8
170.8
1,487
1,380
1142
348.6
163.2
219.9
731.7
395.1
379.3
233.2
214.6
827.1
224.5
1,351
1,321
952
312.3
302.1
210.8
825.2
448.1
380.4
264.3
244.4
889.1
202.7
958
940
790
347.1
117.6
210.9
675.6
329.4
338.8
172.1
186.8
697.7
17.7
810
773
716
388.6
136.5
164.9
690
466.1
346.2
133.6
171.2
651
299.8
986
961
721
Not disclosed
Not disclosed
Not disclosed
Not disclosed
Not disclosed
Average AUD:USD spot exchange rate (cents)
69.5
74.8
76.7
74.4
75.2
AUD:USD range (cents)
67.0/72.7
70.4/81.2
71.8/80.6
68.6/78.0
69.2/82.3
Unit revenue and cash cost ($/t)
Revenue per tonne Z/R/SR sold (A$/t)
1,654
1,415
1,079
Unit cash costs of production per tonne Z/R/SR
produced excluding by-products
Unit cost of goods sold per tonne of Z/R/SR
Summary financials ($m)
Z/R/SR revenue
Ilmenite and other revenue
Revenue from operations
Cash costs of production
Inventory movement – cash costs of production
Restructure and idle capacity charges
Government royalties
Marketing and selling costs
Asset sales and other income
Corporate and other costs
Resources development
Mineral sands EBITDA
Mining Area C EBITDA
Underlying Group EBITDA1
Rehabilitation and holding costs for closed sites
SRL transaction costs
Depreciation and amortisation
Inventory movement – non-cash production costs
Significant non-cash items
Net interest and finance charges
Income tax (expense) benefit
Net profit (loss) after tax for the period (NPAT)
Operating cash flow
Capital expenditure
Free cash (outflow) inflow2 ($m)
Net (debt) cash
144
753
889
606
750
2019
2018
1,128.7
1,179.0
64.4
1,193.1
(539.6)
65.1
1,244.1
(455.1)
63.4
(19.7)
(39.4)
(35.0)
(3.5)
(64.5)
(25.7)
530.9
85.1
616.0
(3.2)
-
(163.2)
15.5
(414.3)
(51.8)
(298.7)
(299.7)
408.0
(197.5)
139.7
43.3
(68.5)
(24.7)
(38.1)
(38.1)
1.8
(48.1)
(30.1)
544.5
55.6
600.1
4.6
-
(93.6)
(28.3)
-
(30.8)
(148.1)
303.9
594.2
(311.5)
304.4
1.8
439
743
2017
959.1
58.4
1,017.5
(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)
(185.4)
(32.2)
(6.0)
(171.6)
391.7
(93.1)
321.9
999
373
700
2016
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)
(201.0)
(30.0)
53.7
(224.0)
137.3
(82.5)
47.3
(182.5)
(506.3)
1,136
558
780
2015
739.7
80.1
819.8
(392.5)
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
Iluka Resources Limited, Annual Report 2019 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 Reserves 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
2019
422.6
13
100
7.22
9.3
51.6
44.5
(65.3)
33.1
(24.5)
6.8
n/a
2018
422.4
29
100
10.01
7.62
48.2
43.8
72.2
72.1
31.8
54.0
n/a
2017
418.7
31
100
7.27
10.17
35.4
29.6
(41.0)
76.9
(20.1)
(11.6)
17.1
2016
418.7
3
100
6.13
7.27
20.7
14.2
(53.6)
11.3
(17.1)
(18.3)
31.5
2015
418.7
25
100
5.95
6.13
35.8
28.3
12.8
37.0
3.8
6.8
n/a
1,894.5
(1,159.0)
735.5
735.5
1.6
2,211.9
(1101.9)
1,110.0
1,110.0
2.1
1,947.0
(1061.5)
885.5
885.5
1.7
2,442.3
(1339.3)
1,103.0
1,103.0
2.2
2,103.3
(694.7)
1,408.6
1,408.6
3.3
3,427
3421
2543
687
876
2019
165.4
13
5.6
18
3
56
2019
8.2
3.7
2018
167.8
15.7
5.8
17
4
54
2018
8
3.8
2017
169.4
16.4
5.8
19
4
52
2017
7.3
3.8
2016
170.5
16.7
5.9
19
4
52
2016
7.5
3.9
2015
172.9
23
5.7
18
6
53
2015
-
-
Notes:
(1) Underlying Group EBITDA excludes non-recurring adjustments including write-downs, 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.
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. Refer pages 147 to 153 or Iluka’s website www.iluka.com for Ore Reserves and Mineral Resources Statement.
145
Iluka Resources Limited, Annual Report 2019 OPERATING MINES PHYSICAL DATA
12 MONTHS TO 31 DECEMBER 2019
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
HMC processed kt
Finished product[1] kt
Zircon
Rutile
Ilmenite (saleable/upgradeable)
Synthetic rutile produced kt
Jacinth-
Ambrosia/
Mid west
Cataby/
South
west
Australia
Total
Sierra
Leone
Total
Producing
Ops
1,465
9,845
6.3%
5.7%
558
500
89.6%
53.6%
7.9%
28.1%
455
260.2
31.2
107.0
-
11,138
12,602
-
11,001
20,846
8,278
4.0%
3.0%
5.1%
4.3%
240
209
86.9%
10.7%
9.5%
799
709
88.8%
40.7%
8.4%
66.8%
39.7%
217
671
53.5
15.6
152.4
196.2
313.7
46.9
259.3
196.2
3.3%
2.6%
288
202
70.0%
4.0%
47.1%
18.9%
290
8.5
137.2
59.2
-
12,602
29,124
4.6%
3.8%
1,087
911
83.8%
30.9%
18.7%
34.2%
961
322.1
184.1
318.6
196.2
Idle
Ops
-
-
0.0%
0.0%
-
-
0.0%
0.0%
0.0%
0.0%
-
-
-
-
-
Group
Total
2019
Group
Total
2018
12,602
4,467
29,124
20,192
4.6%
3.8%
1,087
911
5.4%
4.6%
934
786
83.8%
84.2%
30.9%
46.7%
18.7%
16.7%
34.2%
20.8%
961
1,037
322.1
348.7
184.1
163.2
318.6
395.2
196.2
219.9
Notes:
(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 a deposit.
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 wet concentrating process at the mine site,
which is then transported for final processing into finished product at a 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, 1 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.
146
Iluka Resources Limited, Annual Report 2019
ORE RESERVES AND MINERAL
RESOURCES STATEMENT
HM ORE RESERVES
Iluka HM Ore Reserve breakdown by country, region and JORC Category at 31 December 2019
Summary of Ore Reserves for Iluka (1,2,3,6)
HM Assemblage(4)
Country
Region
Ore
Reserve
Category
Ore
Tonnes
Millions
In Situ HM
Tonnes
Millions
HM
Grade
(%)
Ilmenite
Grade
(%)
Zircon
Grade
(%)
Rutile
Grade
(%)
Change HM
Tonnes
Millions
Australia
Eucla Basin
Proved
Probable
Total
Eucla Basin
Australia
Perth Basin
Proved
Probable
Total
Total
Total
Perth Basin(5)
Proved
Probable
Grand Total
82
5
87
89
55
144
171
60
231
2.5
0.1
2.6
6.2
4.2
10.4
8.7
4.3
13.0
3.0
2.0
2.9
7.0
7.7
7.2
5.1
7.2
5.6
28
18
28
57
72
63
49
71
56
47
51
47
11
9
10
21
10
18
5
4
5
4
2
3
4
2
3
(0.6)
(2.1)
(2.7)
Notes:
(1) Competent Persons — Ore Reserves: A Walkenhorst (MAusIMM). The Ore Reserves in this table have been estimated in accordance with the
JORC Code (2012 Edition), other than the Ore Reserves for the Perth Basin, 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 2019 and have been depleted for all production conducted to this date.
147
Iluka Resources Limited, Annual Report 2019
ORE RESERVES AND MINERAL
RESOURCES STATEMENT
RUTILE ORE RESERVES (SIERRA LEONE)
Iluka Rutile Ore Reserve for Sierra Rutile by JORC Category at 31 December 2019
Summary of Ore Reserves for Iluka (1, 2, 3, 6, 7)
In Situ Mineral Content (4)
Country
Region
Ore
Reserve
Category
Ore
Tonnes
Millions
In Situ Rutile
Tonnes
Millions
Rutile
Grade
(%)
Ilmenite (5)
Grade
(%)
Zircon (5)
Grade
(%)
Change Rutile
Tonnes
Millions
Sierra Leone Sierra Leone
Proved
Probable
Total
Sierra Leone
34
238
272
0.5
3.2
3.7
1.3
1.3
1.3
-
-
-
-
-
-
(0.3)
Notes:
(1) Competent Persons — Ore Reserves: A Walkenhorst (MAusIMM).
(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 Resource 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 2019 and have been depleted for all production conducted to this date.
(7)
In June 2019, International Finance Corporation acquired a 3.57% equity stake in Iluka Investments (BVI) Limited, the holding company of Sierra
Rutile Limited. Refer Iluka ASX announcement dated 6 June 2019 for further information.
In June 2019, International Finance Corporation invested US$20m for a 3.57% equity stake in Iluka Investments (BVI) Limited, the
holding company of Sierra Rutile Limited, detailed in an ASX announcement titled “Iluka to Partner With IFC In Sierra Leone” dated
6 June 2019 and available on the Iluka website at www.iluka.com.
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 HM content which is traditionally done in reporting HM. 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 Reserve inventory for HM can be calculated using the formula:
[Rutile tonnes = HM tonnes * Rutile %] that is [13.0*(3/100)] = 0.39 Mt of rutile.
For the year ending 2019, HM Ore Reserves decreased by 2.7Mt HM associated with mining depletion and adjustments, down from
15.7Mt HM to 13.0Mt HM.
The main factors contributing to the movement in Iluka’s HM Ore Reserves during 2019 include the following:
The Eucla Basin Ore Reserves decreased by 0.6Mt HM associated with mining depletion and pit re-design at Jacinth
and Ambrosia.
The Perth Basin Ore Reserves decreased by 2.1Mt HM as a result of mine depletion and adjustment at Cataby delisting
IPL North and reporting of the Mineral Separation Plant (MSP) By-Product Stockpile.
•
•
148
Iluka Resources Limited, Annual Report 2019
HM ORE RESERVES MINED AND ADJUSTED
Iluka HM Ore Reserves mined and adjusted by country and region at 31 December 2019
Summary of Ore Reserve Depletion (1)
Country Region
Category
Australia
Eucla Basin
Active Mines
Non-Active Sites
Total
Eucla Basin
Perth Basin
Active Mines
Non-Active Sites
Total
Total
Total
Perth Basin
Active Mines
Non-Active
Sites
Total
Ore Reserves
In Situ
HM
Tonnes
Millions
2018
In Situ
HM
Grade
(%)
2018
In Situ
HM
Tonnes
Millions
Mined
2019
In Situ
HM
Tonnes(2)
Millions
Adjusted
2019
In Situ
HM
Tonnes
Millions
2019
In Situ
HM
Grade
(%)
2019
In Situ
HM
Tonnes(3)
Millions
Net Change
1.3
2.0
3.2
-
12.5
12.5
1.3
14.4
15.7
3.5
3.5
3.5
-
6.9
6.9
3.5
6.1
5.8
(0.6)
-
(0.6)
(0.3)
-
(0.3)
(0.9)
1.9
(2.0)
(0.0)
7.1
(8.9)
(1.8)
9.0
2.6
-
2.6
6.8
3.6
10.4
9.4
-
(10.8)
3.6
(0.9)
(1.8)
13.0
3.0
2.9
2.9
5.8
13.5
7.2
5.2
6.3
5.6
1.3
(2.0)
(0.6)
6.8
(8.9)
(2.1)
8.1
(10.8)
(2.7)
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.
RUTILE ORE RESERVES MINED AND ADJUSTED
The rutile Ore Reserves for Sierra Leone decreased by 0.3Mt rutile associated with mining depletion and adjustment at Lanti,
Gangama and Gbeni and adjustments at Benduma, Dodo, Kamatipa, Kibi and Komende down from 3.9Mt rutile to 3.7Mt rutile.
Iluka Rutile Ore Reserves mined and adjusted for Sierra Rutile at 31 December 2019
Summary of Ore Reserve Depletion (1)
Country Region
Category
Sierra
Leone
Sierra Leone
Active Mines
Non-Active Sites
Total
Sierra Leone
In Situ
Rutile
Tonnes
Millions
2018
0.8
3.1
3.9
In Situ
Rutile
Grade
(%)
2018
1.4
1.3
1.4
In Situ
Rutile
Tonnes
Millions
Mined
2019
In Situ
Rutile
Tonnes(2)
Millions
Adjusted
2019
In Situ
Rutile
Tonnes
Millions
2019
In Situ
Rutile
Grade
(%)
2019
In Situ
Rutile
Tonnes(3)
Millions
Net Change
(0.1)
-
(0.1)
(0.1)
(0.0)
(0.1)
0.6
3.1
3.7
1.3
1.3
1.3
(0.2)
(0.0)
(0.3)
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.
149
Iluka Resources Limited, Annual Report 2019
ORE RESERVES AND MINERAL
RESOURCES STATEMENT
HM MINERAL RESOURCES
Iluka Mineral Resource Breakdown by country, region and JORC category at 31 December 2019
Summary of Mineral Reserves for Iluka (1,2,3)
HM Assemblage(4)
Country
Region
Mineral
Resource
Category
Material
Tonnes
Millions
In Situ HM
Tonnes
Millions
In Situ HM
Grade
(%)
Ilmenite
Grade
(%)
Zircon
Grade
(%)
Rutile
Grade
(%)
Change HM
Tonnes
Millions
Australia
Eucla Basin
Measured
Indicated
Inferred
Total
Eucla Basin
Murray Basin
Measured
Indicated
Inferred
Total
Murray Basin
Perth Basin
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Total
USA
Perth Basin(5)
Atlantic
Seaboard
Total
Atlantic
Seaboard(6)
Sri Lanka Sri Lanka
Total
Total
Total
Total
Sri Lanka(7)
Measured
Indicated
Inferred
204
81
76
361
16
88
91
195
482
308
204
994
27
47
16
91
214
93
366
673
943
617
753
5.5
8.0
3.9
17.4
4.4
18.5
10.5
33.4
29.0
16.5
10.1
55.6
1.3
2.5
0.5
4.4
22.2
6.7
25.7
54.6
62.5
52.2
50.7
Grand Total
2,313
165.4
2.7
9.8
5.1
4.8
27.6
21.0
11.6
17.2
6.0
5.4
4.9
5.6
4.9
5.3
3.1
4.8
10.4
7.2
7.0
8.1
6.6
8.5
6.7
7.1
34
68
59
55
62
56
49
54
58
54
56
56
67
64
60
64
70
69
65
68
60
59
59
60
40
18
21
26
11
11
10
11
11
10
9
10
9
11
11
10
3
3
4
4
11
11
7
10
4
2
2
3
11
14
14
13
5
5
5
5
-
-
-
-
4
3
5
4
5
7
6
6
(0.8)
0.0
0.0
-
(1.7)
(2.4)
Notes:
(1) Competent Persons — 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
per cent may be granted.
150
Iluka Resources Limited, Annual Report 2019 RUTILE MINERAL RESOURCES (SIERRA LEONE)
Iluka Rutile Mineral Resources for Sierra Rutile by JORC Category at 31 December 2019
Summary of Mineral Resources for Iluka (1,2,3,6)
In Situ Mineral Content (4)
Country
Region
Mineral
Resource
Category
Material
Tonnes
Millions
In Situ Rutile
Tonnes
Millions
Rutile
Grade
(%)
Ilmenite (5)
Grade
(%)
Zircon (5)
Grade
(%)
Change Rutile
Tonnes
Millions
Sierra Leone
Sierra Leone Measured
Indicated
Inferred
Total
Sierra Leone
56
506
177
739
0.7
5.6
1.9
8.2
1.2
1.1
1.1
1.1
0.5
0.9
0.7
0.8
0.1
0.1
0.1
0.1
0.2
Notes:
(1) Competent Persons — Mineral Resources: B Gibson (MAIG).
(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.
(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.
In June 2019, International Finance Corporation acquired a 3.57% equity stake in Iluka Investments (BVI) Limited, the holding company of Sierra
Rutile Limited. Refer Iluka ASX announcement dated 6 June 2019 for further information.
(6)
In June 2019, International Finance Corporation invested US$20m for a 3.57% equity stake in Iluka Investments (BVI) Limited, the
holding company of Sierra Rutile Limited, detailed in an ASX announcement titled “Iluka to Partner With IFC In Sierra Leone” dated
6 June 2019 and available on the Iluka website at www.iluka.com.
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, 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 2019, Mineral Resources (excluding the Mineral Resources attributable to Sierra Rutile) decreased by
2.4Mt HM net of mining depletion and adjustments (exploration discovery, development and write-downs) down from 167.8Mt HM
to 165.4Mt HM.
The change in Mineral Resources for 2019 was driven by the following:
•
•
Eucla Basin Mineral Resources decreased by 0.8Mt HM as a result of re-estimation, re-reporting and mining depletion at Ambrosia
and mining depletion and write-down at Jacinth.
The Perth Basin Mineral Resources increased by 0.01Mt HM principally associated with re-estimation of the MSP By-Product
Stockpile, re-estimation, re-reporting and mining depletion at Cataby and write-down of the South Secondary Mids.
• Sri Lanka Mineral Resources decreased by 1.7Mt HM as a result of re-estimation and re-reporting.
The rutile Mineral Resources for Sierra Leone increased by 0.22Mt rutile, net of mining and adjustments, associated with mining
depletion and write-down for Lanti (-0.03Mt of rutile) and Gbeni (-0.04Mt of rutile), mining depletion and adjustment for Gangama
(0.07Mt of rutile) and inaugural estimation and reporting for Pejebu (0.22Mt of rutile).
151
Iluka Resources Limited, Annual Report 2019
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 2019
Summary of Mineral Resource Depletion (1)
Country
Region
Category
Australia
Eucla Basin
Total
Eucla Basin
Murray Basin
Total
Murray Basin
Perth Basin
Active
Mines
Non-Active
Sites
Active
Mines
Non-Active
Sites
Active
Mines
Non-Active
Sites
Total
Perth Basin
USA
Atlantic
Seaboard
Active
Mines
Non-Active
Sites
Active
Mines
Non-Active
Sites
Total
Atlantic
Seaboard
Sri Lanka Sri Lanka
Total
Total
Total
Total
Sri Lanka
Active Mines
Non-Active
Sites
Mineral
Resources
In Situ HM
Tonnes
Millions
2018
In Situ HM
Grade
(%)
2018
In Situ HM
Tonnes
Millions
Mined
2019
In Situ HM
Tonnes (2)
Millions
Adjusted
2019
In Situ
HM
Tonnes
Millions
2019
In Situ
HM
Grade
(%)
2019
In Situ HM
Tonnes (3)
Millions Net
Change
1.6
16.6
18.2
-
33.4
33.4
-
55.6
55.6
-
4.4
4.4
-
56.3
56.3
1.6
166.2
167.8
3.2
5.1
4.8
-
17.2
17.2
-
5.6
5.6
-
4.8
4.8
-
8.2
8.2
3.2
7.2
7.1
(0.6)
-
(0.6)
-
-
-
3.2
4.2
2.3
2.6
(3.4)
(0.2)
-
0.0
0.0
13.3
17.4
-
7.5
4.8
-
33.4
17.2
33.4
17.2
(3.4)
(0.8)
-
0.0
0.0
(0.3)
14.0
13.7
4.5
13.7
-
(0.3)
(13.7)
0.3
41.9
55.6
-
6.1
5.6
-
4.4
4.8
4.4
4.8
-
-
-
-
-
-
(1.7)
(1.7)
17.2
54.6
54.6
17.9
(18.7)
147.5
8.1
8.1
3.6
8.1
(13.7)
0.0
-
-
-
-
(1.7)
(1.7)
16.3
(18.7)
-
-
-
-
-
-
(0.9)
-
(0.9)
(1.6)
165.4
7.1
(2.4)
Notes:
(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.
152
Iluka Resources Limited, Annual Report 2019
RUTILE MINERAL RESOURCES MINED AND ADJUSTED (SIERRA LEONE)
Iluka Mineral Resources mined and adjusted for Sierra Rutile at 31 December 2019
Summary of Mineral Resource Depletion (1)
Country
Region
Category
In Situ
Rutile
Tonnes
Millions
2018
In Situ
Rutile
Grade
(%)
2018
In Situ
Rutile
Tonnes
Millions
Mined
2019
In Situ
Rutile
Tonnes (2)
Millions
Adjusted
2019
Sierra
Leone
Sierra Leone
Total
Sierra Leone
Active
Mines
Non-Active
Sites
1.7
6.3
8.0
1.2
1.1
1.1
(0.1)
-
(0.1)
0.1
0.2
0.4
In Situ
Rutile
Tonnes
Millions
2019
In Situ
Rutile
Grade
(%)
2019
In Situ
Rutile
Tonnes (3)
Millions Net
Change
1.7
1.2
(0.0)
6.5
8.2
1.1
1.1
0.2
0.2
Notes:
(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.
153
Iluka Resources Limited, Annual Report 2019 ANNUAL STATEMENT OF MINERAL RESOURCES AND ORE RESERVES
The Annual Statement of Mineral Resources and Ore Reserves as at 31 December 2019 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 as disclosed in the announcement dated 20/02/2017. 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
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 (MAIG).
The information in this report that relates to Ore Reserves is based on information compiled by Mr Andrew Walkenhorst who is a
Member of the Australasian Institute of Mining and Metallurgy (MAusIMM).
Mr Gibson and Mr Walkenhorst are full-time employees of Iluka Resources.
Mr Gibson and Mr Walkenhorst each 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 Walkenhorst consent to the inclusion in this report of the matters based on their 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 2019
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 ROPO (Recognised Overseas Professional Organisation) 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 2019. 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 Resource and Ore Reserve 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 or 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 (PricewaterhouseCoopers).
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 Recognised Overseas Professional Organisations (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.
154
Iluka Resources Limited, Annual Report 2019
SHAREHOLDERS AND CORPORATE INFORMATION
as at 31 January 2020
AUSTRALIAN SECURITIES EXCHANGE LISTING
Iluka’s shares are listed on the Australian Securities Exchange (ASX) Limited. The company is listed as Iluka Resources Limited with an
ASX code of ILU.
SHARES ON ISSUE
The company had 422,584,778 shares on issue as at 31 January 2020. A total of 470,456 ordinary shares are restricted pursuant to
the Directors, Executives and employees share acquisition plan, equity incentive plan and employee share plan.
SHAREHOLDINGS
There were 19,953 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
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 1,000,000
1,000,001 Over
Unmarketable Parcels
TOP 20 SHAREHOLDERS (NOMINEE COMPANY HOLDINGS)
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD (DRP)
BNP PARIBAS NOMINEES PTY LTD (AGENCY LENDING DRP A/C)
UBS NOMINEES PTY LTD
CS FOURTH NOMINEES PTY LIMITED (HSBC CUST NOM AU LTD 11 A/C)
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED (NT-COMNWLTH SUPER CORP A/C)
UBS NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED (COLONIAL FIRST STATE INV A/C)
ARGO INVESTMENTS LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
R O HENDERSON (BEEHIVE) PTY LIMITED
NETWEALTH INVESTMENTS LIMITED (WRAP SERVICES A/C)
BNP PARIBAS NOMS (NZ) LTD (DRP)
UBS NOMINEES PTY LTD
WARBONT NOMINEES PTY LTD (UNPAID ENTREPOT A/C)
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD DRP
BNP PARIBAS NOMINEES PTY LTD (IB AU NOMS RETAILCLIENT DRP)
Total holders
11,981
6,985
1,157
672
36
14
(less than $500) - 1,274
Number of shares
% Units
136,061,433
90,595,400
49,370,210
37,395,216
15,341,144
10,879,458
10,276,490
4,552,143
3,115,390
2,711,374
2,140,673
1,700,000
1,233,756
1,080,000
983,995
912,916
749,218
702,000
671,719
607,976
32.20
21.44
11.68
8.85
3.63
2.57
2.43
1.08
0.74
0.64
0.51
0.40
0.29
0.26
0.23
0.22
0.18
0.17
0.16
0.14
SUBSTANTIAL SHAREHOLDERS (AS PROVIDED IN DISCLOSED SUBSTANTIAL SHAREHOLDER
NOTICES TO THE COMPANY)
Shareholder
Perpetual Limited
Schroder Investment Management Australia Limited
Sumitomo Mitsui Trust Holdings, Inc. (Nikko Asset Management Australia)
BlackRock Group
The Vanguard Group, Inc.
Shareholding
% of issued capital
52,080,085
37,438,989
35,063,675
28,442,428
21,123,617
12.32%
8.86%
8.30%
6.73%
5.00%
155
Iluka Resources Limited, Annual Report 2019
CALENDAR OF KEY EVENTS
20 February
7 April 9:30am (WST)
9 April 9:30am (WST)
29 April
22 July
20 August
27 October
31 December
Announcement of financial results
Closure of acceptances of proxies for AGM
Annual General Meeting – Perth
March quarterly review
June quarterly review
Announcement of half year financial results
September quarterly review
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: www.iluka.com
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 Iluka’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
Investor Relations
Level 17, 240 St Georges Terrace
Perth WA 6000
Telephone: +61 8 9360 4700
Email: investor.relations@iluka.com
DIVIDENDS
Iluka’s Board of Directors typically makes a determination on dividend payments twice each year. Iluka introduced 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 4801 (outside Australia)
Facsimile: +61 3 9473 2500
Postal address
GPO Box 2975
Melbourne VIC 3001
Website: www.investorcentre.com/au
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 holding statements
and dividend statements.
156
Iluka Resources Limited, Annual Report 2019
CORPORATE INFORMATION
COMPANY DETAILS
COMPANY SECRETARY
POSTAL ADDRESS
Iluka Resources Limited
ABN: 34 008 675 018
Sue Wilson, Company Secretary
Nigel Tinley, Joint Company Secretary
REGISTERED OFFICE
Level 17, 240 St Georges Terrace Perth
Western Australia, 6000
WEBSITE
www.iluka.com
GPO Box U1988 Perth
Western Australia, 6845 Australia
Telephone: +61 8 9360 4700
Facsimile: +61 8 9360 4777
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 65th Annual General Meeting of Shareholders will be held in Meeting Room 1 at the Perth Convention and Exhibition Centre,
21 Mounts Bay Road, Perth, Western Australia, on Thursday, 9 April 2020 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, assumptions 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.
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.
157
Iluka Resources Limited, Annual Report 2019
Front cover image:
Major maintenance outage (MMO) SR2 kiln, Capel, Western Australia
www.iluka.com
158
Iluka Resources Limited, Annual Report 2019