Annual Report
2020
DELIVER
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ABOUT ILUKA RESOURCES
lluka Resources Limited (Iluka) is an international mineral
sands company with expertise in exploration, project
development, mining, processing, marketing and
rehabilitation.
The company’s objective is to deliver sustainable value.
With over 60 years’ industry experience, Iluka is a
leading global producer of zircon and the high grade
titanium dioxide feedstocks rutile and synthetic rutile. In
addition, the company has an emerging position in rare
earth elements (rare earths). Iluka’s products are used
in an increasing array of applications including home,
workplace, medical, lifestyle and industrial uses.
PRODUCTS
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 (ASX)
and headquartered in Perth. Iluka holds a 20% stake in
Deterra Royalties Limited (Deterra), the largest ASX-listed
resources focussed royalty company.
TiO2
TITANIUM DIOXIDE
Zr
ZIRCON
Iluka is the largest producer of natural
rutile and a major producer of synthetic
rutile, which is an upgraded, value added
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.
Iluka is a leading global producer of
zircon. Zircon is opaque; and heat, water,
chemical and abrasion resistant. Primary
uses include ceramics; refractory and
foundry applications; and zirconium
chemicals.
RARE EARTHS
OTHER PRODUCTS
Iluka has an emerging position in rare
earths, which are contained in the mineral
sands monazite and xenotime. 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.
Iluka recovers and markets activated
carbon and iron concentrate, which are
produced as a part of the synthetic rutile
process.
FORWARD LOOKING STATEMENT
This document contains certain statements which
constitute “forward-looking statements”. While these
forward-looking statements reflect Iluka’s expectations
at the date of this report, they are not guarantees or
predictions of future performance or statements of
fact and readers are cautioned against relying on them.
Further information regarding forward-looking statements
in this Annual Report is provided on page 167.
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. These
non-IFRS measures are not subject to audit or review,
however, a reconciliation of the measures to Iluka’s
statutory accounts is provided on page 33.
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Iluka Resources Limited, Annual Report 2020
MINERAL SANDS PROCESS
1. GEOLOGICAL SETTING
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 the rare earth
bearing minerals monazite and xenotime.
2. MINING APPROACH
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.
3. MINERAL SEPARATION
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, ilmenite,
monazite and xenotime from one another in multiple stages by
magnetic, electrostatic and gravity separation.
4. SYNTHETIC RUTILE
Iluka also produces synthetic rutile from ilmenite that is
upgraded by high temperature chemical processes.
5. MARKETING
Iluka transports the final products of zircon, rutile, synthetic rutile,
monazite and ilmenite to customers around the world.
6. REHABILITATION
As mining progresses, mining pits are 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.
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Iluka Resources Limited, Annual Report 2020
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MINERAL SANDS & RARE EARTHS
PART OF EVERYDAY LIFE
FABRICATION
AEROSPACE
Ship building | Welding
Titanium minerals are used to make welding
electrodes for important end uses such as
ship building and construction, as these
electrodes produce high quality welds in an
outdoor, windy environment.
Aircraft engines and frames | Spacecrafts
Rare earths in alloying agents create high-
strength metals in aircraft engines. Zircon has
a strong thermal stability and titanium metal
has the highest strength to weight ratio of all
metals.
AUTOMOTIVE
HEALTHCARE
TECHNOLOGY
Engines | Paint | Electronics
Medical equipment
Electronics I Batteries
Titanium, zircon and rare earths are
required for vehicles in the brake linings/
pads, parking sensors, oxygen sensors,
engine management systems, paint,
catalytic converters, electrics and rubber
products. Rare earths are used in catalytic
converters and electric vehicles, enabling
lighter and more efficient motors.
The anti-corrosive nature and
biocompatibility of titanium makes it ideal
for prosthetics, orthopaedic implants and
medical instruments. Zirconia materials
are highly desired for medical implants,
and zirconium chemicals provide filtering
function to home dialysis systems.
Rare earths are used in a range of modern
technologies including smartphones, televisions,
lasers, rechargeable batteries and computer hard
drives. Zirconia materials are applied in various
electronics, such as piezoelectric components
which make smart phones “smart” through sensors,
ultra-tough structural casings for mobile phones and
watches, and new-generation of higher-capacity and
safer solid-state batteries.
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Iluka Resources Limited, Annual Report 2020
ILUKA’S PRODUCTS ARE CRITICAL INPUTS TO THE MODERN ECONOMY. FROM PAINT AND TILES TO MEDICAL,
LIFESTYLE, INDUSTRIAL AND RENEWABLE ENERGY TECHNOLOGIES, THE UNIQUE PROPERTIES OF TITANIUM DIOXIDE,
ZIRCON AND RARE EARTHS ARE ESSENTIAL TO A WIDE VARIETY OF APPLICATIONS, PART OF EVERYDAY LIFE.
SUSTAINABLE DEVELOPMENT
TECHNOLOGIES
PHOTOCATALYTICS
INDUSTRIAL
Wind turbines | Electric vehicles | Solar
Rare earths, particularly the high value elements
neodymium and praseodymium, are essential for
creating extremely strong permanent magnets
used in motors for electric vehicles and wind
turbines. Emerging solar cell technologies typically
use titanium dioxide as the semiconductor doped
with zirconium to increase its efficiency.
Desalination |
Water and air purification
The photocatalytic properties of TiO2 are used in
self-cleaning windows, air and water purification
systems, light emitting diodes and solar
cells. Zirconium chemicals are used in water
purification systems to remove pollutants, such
as heavy metals.
Steel and glass production |
Casting of parts and engines
Refractory linings and foundry castings
utilise zircon in their manufacturing to
provide chemical, thermal shock and
corrosion resistance.
CERAMICS
HOME APPLICATIONS
PIGMENTS & CONSTRUCTION
Tiles | Sanitary ware
Zircon is hard wearing and
water, heat, chemical and wear
resistant making it ideal for use in
ceramics and sanitary ware.
Cosmetics | Pharmaceuticals |
Home appliances
Iluka products are used in light bulbs, dishes,
glasses, clock parts, food colouring, ceramic
knives, pans, toothpaste, antiperspirants and
sunscreens, glass and faucets for taps.
Paint | Plastic | Ceramics
Titanium dioxide provides UV and chemical
resistance, preventing fading, peeling and
cracking when used in paint coatings, inks and
plastics. Zircon provides corrosion resistance
to glassfibres applied to high-performance
concrete for building construction, including
3D-printed concrete structures.
Iluka Resources Limited, Annual Report 2020
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WHERE WE OPERATE
OPERATIONS, RESOURCE DEVELOPMENT
AND REHABILITATION ACTIVITIES
UNITED STATES
SIERRA LEONE
WESTERN AUSTRALIA
Rehabilitation
Sierra Rutile mining, concentrating
and processing operations
Sembehun project
Rehabilitation
Narngulu processing
Cataby mining and concentrating
Eneabba monazite processing
Capel synthetic rutile processing
Corporate support centre
Rehabilitation
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Iluka Resources Limited, Annual Report 2020
SOUTH AUSTRALIA
VICTORIA
NEW SOUTH WALES
Jacinth-Ambrosia mining
and concentrating
Atacama project
Rehabilitation
Wimmera project
Rehabilitation
Hamilton processing (idle)
Balranald project
Iluka Resources Limited, Annual Report 2020
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BUSINESS REVIEW
2020 year in review
Chairman's and 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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167
ABOUT THIS REPORT
This Annual Report is a summary of Iluka Resources' and its subsidiaries' operations,
activities and financial position as at 31 December 2020. 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 2020 Sustainability Report is expected to
be published in April 2021 and will cover the company’s sustainability performance for
the period 1 January to 31 December 2020.
Current and previous sustainability reports are available on the company’s website –
www.iluka.com.
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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Iluka Resources Limited, Annual Report 2020
2020 YEAR IN REVIEW
FINANCIALS
DETERRA ROYALTIES
DEMERGER
$947m
MINERAL SANDS REVENUE
36%
MINERAL SANDS EBITDA MARGIN
$423m
CREATED AUSTRALIA’S LARGEST
ASX-LISTED ROYALTY COMPANY
$2,247m
GAIN FROM DEMERGER
20% stake
UNDERLYING GROUP EBITDA
RETAINED FOR FINANCIAL STRENGTH
$50m
NET CASH
(as at 31 December 2020)
SALES AND MARKETS
PRODUCTION AND
OPERATIONS
MAINTAINED PRICE
STABILITY
OPERATIONAL CONFIGURATION
ALIGNED TO MARKET CONDITIONS
MARKET DISCIPLINE IN
CHALLENGING CONDITIONS
585kt
Z/R/SR PRODUCTION
517kt
Z/R/SR
SOLD
SUSTAINABILITY
44kt
MONAZITE CONCENTRATE
PRODUCED AND SHIPPED
2.8
28%
576 hectares
TOTAL RECORDABLE
INJURY FREQUENCY RATE
INDIGENOUS EMPLOYMENT
AT JACINTH-AMBROSIA
LAND
REHABILITATED
Mining Unit Plant, Jacinth-Ambrosia, South Australia
Iluka Resources Limited, Annual Report 2020
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2020 YEAR IN REVIEW
DISCIPLINED FINANCIAL RESULT
MARKET CONDITIONS IMPACTED
BY COVID-19
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Mineral sands revenue of $947 million, down 21%, as a
result of the impact of the COVID-19 pandemic on key
markets.
Underlying mineral sands EBITDA was $342 million,
reflecting Iluka’s financial, operational and market
discipline.
Mining Area C royalty contributed $81 million.
Reported net profit after tax was $2,410 million, inclusive
of $2,247 million gain from the demerger of Iluka’s royalty
business. Underlying net profit after tax was $151 million.
Free cash flow was $36 million, incorporating $71 million
in capital expenditure in 2020 and $166 million in tax
payments, including a 2019 final tax payment of $98
million made in the second half of 2020.
Reported net cash as at 31 December 2020
was $50 million.
Iluka declared a full year dividend of 2 cents per share, fully
franked, for 2020.
DETERRA ROYALTIES DEMERGER DELIVERED
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Demerger of royalty business completed in November
to create Australia’s largest ASX-listed royalty company,
Deterra Royalties.
Iluka’s existing shareholders received a 1:1 share
distribution in Deterra; and Iluka retained a 20% stake in
the new company to provide further financial strength.
Deterra’s cornerstone asset is a revenue based royalty
over the BHP operated Mining Area C in Western Australia.
Deterra plans to grow and diversify its portfolio.
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The COVID-19 pandemic significantly affected global
mineral sands end markets.
Ceramic plants in China and Europe shut down early in
the year in response to the pandemic, with operating
rates down and a decline in end market demand. This
market recovered modestly over the remainder of
2020. Other zircon market segments had mixed results,
reflecting exposure to consumables, automotive parts
manufacturing and other component industries.
• Weighted average zircon price (premium and standard)
was US$1,319 per tonne, down 8% from Q4 2019,
although stable throughout H2 and indicative of Iluka’s
efforts to maintain pricing support through disciplined
market participation.
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In titanium dioxide markets, pigment utilisation rates
dropped in Q2 and planned pigment plant maintenance
was brought forward. Demand for high grade feedstocks
subsequently rebounded, with the paint market
experiencing strong demand from DIY and professional
paint segments. End markets for welding and titanium
metal were impacted due to exposure to aeronautics and
ship building.
Synthetic rutile contracted sales were affected by a
dispute with a major customer, resulting in significantly
lower synthetic rutile sales volumes.
• Weighted average rutile[1] price increased 7% to US$1,220
per tonne.
[1] Excluding HYTI
Metallurgical Testing Facility, Capel, Western Australia
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Iluka Resources Limited, Annual Report 2020
Iluka Laboratory, Capel, Western Australia
OPERATIONAL SETTINGS ADJUSTED
GROWTH PROJECTS PROGRESSED
TO DELIVER FUTURE VALUE
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Operational configuration set to balance zircon production
in line with market conditions.
Production settings at the Narngulu mineral separation
plant were adjusted, reducing global zircon supply by
around 10%.
In August, mining returned from Ambrosia to the Jacinth
deposit, improving cash flow from lower operating costs
and delaying future capital spend.
Record production performance from Synthetic Rutile Kiln
2 (SR2) at Capel. Production from SR2 will be suspended
for a period of three to six months from February 2021, to
optimise inventory levels and minimise costs.
Sierra Rutile production hampered by downtime events
and disruptions associated with COVID-19. Travel
restrictions limited Iluka’s ability to maintain specialised skill
sets typically provided by expatriate workers.
ENTRY TO RARE EARTHS MARKET
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First production of a 20% monazite-zircon concentrate
at Eneabba, now the highest grade rare earths operation
globally. Phase 1 involves a simple reclamation and
screening of material stored in a former mining void.
Revenue from other mineral sands increased 65% to
$106 million largely as a result of first sales of monazite
from Eneabba. Iluka shipped 44 thousand tonnes of mixed
monazite-zircon concentrate for the year.
Phase 2, currently under construction, to produce a
dedicated monazite concentrate at 90%, suitable as direct
feed to a rare earths refinery.
Iluka is actively exploring the potential for the downstream
processing of rare earths in Australia.
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Pleasing progress on key technology projects in Australia
– Balranald (mining); Wimmera (processing); and Eneabba
(diversification).
Hydraulic mining method field trial at Sembehun in Sierra
Leone delayed due to pandemic. The trial is now planned
for completion in 2021.
SUSTAINABILITY PERFORMANCE
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Total recordable injury frequency rate decreased from
2.9 to 2.8 with three less injuries than 2019.
Serious incidents or near hits classified as having the
potential for a serious complex permanent disabling injury
or fatality decreased from 76 to 61. This remains a key area
of focus for continual safety improvement.
Implementation of COVID-19 site controls and the support
of local initiatives maintained operational continuity
across all Iluka sites. The company reported zero cases
of infection at its Australian operations; and Sierra Rutile
received approval for on-site COVID-19 quarantine and
isolation facilities for staff as part of extensive safety
measures.
No major environmental incidents.
576 hectares of land topsoiled and vegetated; and
significant rehabilitation earthworks at various sites
completed, contributing to future rehabilitation and
mitigating Iluka’s closure liability.
Ongoing activity to demolish redundant assets and
clear former sites.
Inclusion in 2020 Australian Dow Jones Sustainability
Index and FTSE4Good Index for leading sustainability
performance.
Iluka Laboratory, Jacinth-Ambrosia, South Australia
Laboratory, Narngulu, Western Australia
Iluka Resources Limited, Annual Report 2020
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CHAIRMAN'S AND MANAGING DIRECTOR'S REVIEW
Dear Shareholders,
2020 was a year like no other in Iluka’s history.
The COVID-19 pandemic, which was only in its very early stages
when we last wrote to you, evolved to become the source of
several unprecedented challenges for our business, as it did
for many others. These challenges spanned substantial threats
to operational and supply chain continuity, market demand,
timetables for the development of major projects and the
planned demerger of our royalty business.
Against this backdrop, Iluka delivered a disciplined performance,
prioritising the safety of our people and communities; prudent
management of the company’s financial position; execution
of the demerger; and adjusting production settings in line
with market conditions – preserving margins and, ultimately,
the value of the mineral products we mine and process. That
discipline is reflected in a number of significant achievements
detailed throughout this year’s Annual Report.
Our financial result included:
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NPAT of $2.4 billion, inclusive of the non-cash,
non-taxable reported profit associated with the demerger;
underlying group EBITDA of $423 million;
free cash flow of $36 million; and
a net cash position of $50 million as at
31 December 2020.
Although the underlying result was modest by historical
standards, it is nonetheless notable given the extraordinary
circumstances in which it was attained. Iluka declared a full year
dividend of 2 cents per share, fully franked.
DISCIPLINE IN DELIVERING SUSTAINABLE
VALUE – DEMERGER OF ROYALTY BUSINESS
A major milestone was accomplished in November via the
listing of Deterra Royalties on the ASX, with the Mining Area C
(MAC) royalty as its foundational asset and Iluka retaining a 20%
stake in the new company. This marked the culmination of a
substantial programme of work following the announcement of
our demerger plans in February.
In liberating two fundamentally different businesses – each with
high quality assets and promising futures – the demerger is
expected to unlock long term value for shareholders, particularly
given the increase in materiality and cash flows from the MAC
royalty associated with BHP’s South Flank development.
The position of the royalty business within Iluka’s portfolio
had been subject to ongoing internal consideration for many
years. Iluka is first and foremost a mineral sands business,
with our objective to deliver sustainable value. We have always
been disciplined in pursuing this objective; and the decision
to demerge the royalty business is a further expression of
that discipline. Post demerger, Iluka and Deterra have been
set up for success, each with the financial flexibility to pursue
opportunities and deliver on their respective strategies. The
external tumult of 2020 aside, both companies can look to the
future with confidence.
SUSTAINABILITY DISCIPLINE
Safety is always our first focus at Iluka and we intensified our
efforts in this area following a concerning rise in potentially
serious incidents during 2019. A number of ‘back to basics’
initiatives were implemented, with several of these adapted
and amplified in response to the additional health and safety
challenges posed by the onset of the pandemic. The company
achieved a 20% reduction in serious potential injuries which,
while pleasing, remains a target for ongoing improvement and
vigilance. Iluka’s total recordable injury frequency rate was
steady at 2.8, compared to 2.9 the previous year. Continuity
with respect to rehabilitation activities was maintained, with 576
hectares of land topsoiled and vegetated at current and former
mines sites. No major environmental incidents were recorded.
MARKET AND OPERATIONAL DISCIPLINE
2020 saw market conditions for Iluka’s products split over
sectors and quarters. For zircon, we experienced a significant
drop in demand in Q1, initially as a result of COVID-19 related
factory shutdowns in the Chinese ceramics industry. Key
markets in Italy and Spain were also affected by the pandemic’s
first wave. A modest recovery ensued over the second half,
with increased purchasing most evident in Q4 – a traditionally
subdued sales period. This resulted in total sales of 240
thousand tonnes for the year, compared to 274 thousand
tonnes in 2019.
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Iluka Resources Limited, Annual Report 2020
Conditions for our high grade titanium dioxide feedstocks lagged
zircon to some extent, with a solid first quarter followed by a
period of deterioration in the pigment market; and recovery
evident by year end. Iluka’s sales of synthetic rutile were
impacted substantially by a contractual dispute with a major
customer. While the dispute remains the subject of litigation,
sales to this customer recommenced in accordance with the
contract in January 2021.
Confronted with this volatility, Iluka took a number of
measures encompassing:
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adjustments to production settings at the Narngulu mineral
separation plant and Jacinth Ambrosia mine, reducing
global zircon supply by approximately 10%;
implementation of a company-wide efficiency programme
to improve business processes and cost effectiveness, and
changes to the Iluka Executive;
protecting our contractual rights in relation to the supply of
synthetic rutile; and
where possible, progressing planned key investments in the
company’s future.
The subsequent pricing support we achieved as a result of these
actions – maintaining prices across our core product suite – was
an excellent outcome given COVID-19’s wide-ranging impacts
on market sentiment.
Furthermore, that Iluka was able to maintain operational
continuity in the face of the pandemic, particularly in Sierra
Leone, was in no small part attributable to the dedication and
sacrifices made by many of our people. Yet again, our Australian
operations demonstrated their flexibility and adaptiveness,
with the aforementioned production adjustments executed
seamlessly, accompanied by a record production performance
at Synthetic Rutile Kiln 2. Iluka’s Indigenous employment at
Jacinth-Ambrosia approached 30%, a reflection of our strong
working relationship with the Far West Coast people of South
Australia.
The impact of the pandemic was considerably more severe in
Sierra Leone than Australia and this too was reflected at the
operational level. Sierra Rutile was hampered by a number of
downtime events and reduced throughput, with lockdowns,
quarantine and travel restrictions impeding Iluka’s ability to
sustain specialised skillsets typically provided by expatriate
resources. The significance of maintaining operational continuity
should not be underestimated, particularly given Sierra
Rutile’s importance to the national economy and to the local
communities in the vicinity of our operations. Iluka invested
around $3 million on measures to avoid having to suspend
operations, including substantial health contributions to our local
communities.
DEVELOPMENT AND
DIVERSIFICATION DISCIPLINE
2020 also saw progress on important aspects of Iluka’s major
project pipeline. A period of evolution in the mineral sands
industry has been discernible for some time, with increasing
depletion of the traditional deposits that have underpinned
global production for many years. The strategic choice that
follows is for companies to seek out new deposits in new
jurisdictions; and/or pursue innovation at technically challenging
deposits in mature jurisdictions. While Iluka’s portfolio has both
types of projects, more progress was made in Australia than in
Sierra Leone over the past year given the various travel and other
restrictions in effect.
Of particular note are our key technology projects at Balranald
(mining); Wimmera (processing); and Eneabba (diversification).
Each of these developments is potentially transformative for
Iluka and the industry and, while we still have some ground
to cover, we are pleased by what has been achieved to date.
Over the course of Q3, Iluka completed the third trial of the
company’s novel underground mining technology at Balranald,
which is aimed initially at commercialising two predominantly
rutile deposits distinguished by both their quality and depth.
At Wimmera, the focus of our feasibility work is on validating a
processing solution that, although challenging, could unlock a
multi decade source of zircon and rare earths if realised.
April marked Iluka’s entry into the rare earths market, with first
production from Eneabba, which is now the world’s highest grade
rare earths operation. First sales followed in June. Formerly a
prodigious and historic mineral sands province, Eneabba’s quality
from a rare earths perspective is less the result of geology than
sound foresight on the part of Iluka’s antecedents. Monazite
(a mineral containing rare earths) is produced as a by-product
of our processing activities at Narngulu. Since the 1990s, this
material has been stockpiled directly in a former mine void at
Eneabba in anticipation that it would one day be regarded as
valuable – that time is now upon us.
As is appropriate for a logical and significant diversification, Iluka
is pursuing an incremental approach to Eneabba’s development.
Phase 1, now in operation, is producing a mixed monazite-zircon
concentrate, with the monazite fraction at approximately 20%.
Phase 2, currently under construction, will see an upgrade to
produce a dedicated monazite concentrate at approximately
90%, suitable as a direct feed to a downstream rare earths
refinery. First production from Phase 2 is expected in the first half
of 2022. Additionally, Iluka is actively exploring the potential for
the downstream processing of rare earths in Australia.
Of their many high value applications, some rare earths are
essential for the production of permanent magnets, which are
in turn used to produce the motors that power electric vehicles,
generate power in wind turbines and in other sustainable
development technologies. Demand across this supply chain is
expected to grow substantially over coming years. As the world
pursues widespread electrification, Iluka’s assets at Eneabba
and potentially Wimmera provide the company a world class
foundation from which to participate. Our emerging position
brings with it several options for further development and
shareholders can be assured these too will be pursued in a
disciplined manner.
If 2020 has taught us anything, it is that nothing can be taken
for granted. The external environment remains uncertain on
any number of fronts; and 2021 will doubtless bring further
challenges for the global economy and for business generally.
Regardless, over the past year your company undertook all
appropriate steps to guide and shape its future. On behalf of the
Board and Executive, we would like to pay tribute in particular
to Iluka’s people for their steadfast efforts and commitment
throughout a most unexpected 12 months. We also gratefully
acknowledge the continuing interest and support of our
shareholders, for whom we remain focused on our objective of
delivering sustainable value.
Greg Martin
Chairman
Tom O'Leary
Managing Director and CEO
Iluka Resources Limited, Annual Report 2020
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BOARD OF DIRECTORS AND COMMITTEES
GREG MARTIN
TOM O’LEARY
BEc, LLB, FAIM, MAICD
LLB, BJuris
Chairman
Independent Non-Executive Director
Joined Iluka 2013
Managing Director and
Chief Executive Officer
Joined Iluka 2016
Murchison Metals, The Australian Gas
Light Company, Santos, Western Power
Wesfarmers Chemicals; Energy &
Fertilsers, Wesfarmers, Nikko, Nomura,
Allen & Overy, Clayton Utz
JAMES (HUTCH) RANCK
MARCELO BASTOS
BSE (Econ), FAICD
BEng Mechanical (Hons, UFMG), MBA
(FDC-MG), MAICD
ROB COLE
LLB (Hons), BSc
Independent Non-Executive Director
Joined Iluka 2013
Independent Non-Executive Director
Joined Iluka 2014
Independent Non-Executive Director
Joined Iluka 2018
Elders, CSIRO, DuPont
Vale, BHP, MMG, Aurizon Holdings,
Golder Associates, Golding Contractors,
Anglo American PLC
Perenti, GLX Group, Synergy, Southern
Ports, St Bartholomew’s House,
Woodside Petroleum, King & Wood
Mallesons
COMMITTEES
The Board of Directors comprises six
non-executive Directors and one executive
Director (the Managing Director).
Audit and Risk Committee
Chairman - Lynne Saint
People and Performance Committee
Chairman - James (Hutch) Ranck
Nominations and Governance Committee
Chairman - Greg Martin
SUSIE CORLETT
BSc (Geo Hons), GAICD, FAusIMM
LYNNE SAINT
BCom, GradDip Ed Studies, FCPA, Cert
Business Administration, FAICD
Independent Non-Executive Director
Joined Iluka 2019
Independent Non-Executive Director
Joined Iluka 2019
Aurelia Metals, The Foundation for
National Parks & Wildlife, Standard Bank,
Macquarie Bank, Pacific Road Capital
Management
Bechtel Group, Fluor Daniel,
Placer Dome, NuFarm
12
Iluka Resources Limited, Annual Report 2020
EXECUTIVE
TOM O’LEARY
LLB, BJuris
Managing Director and
Chief Executive Officer
Joined Iluka 2016
Wesfarmers Chemicals; Energy &
Fertilsers, Wesfarmers, Nikko, Nomura,
Allen & Overy, Clayton Utz
ADELE STRATTON
MATTHEW BLACKWELL
BA (Hons), FCA, GAICD
Chief Financial Officer
and Head of Development
Joined Iluka 2011
KPMG, Rio Tinto Iron Ore
BEng (Mech), Grad Dip (Tech Mgt), MBA,
MAICD, MIEAust
Head of Major Projects and Marketing
Joined Iluka 2004
Asia Pacific Resources, WMC Resources,
Normandy Poseidon
ROB HATTINGH
SUE WILSON
SARAH HODGSON
MSc (Geochem), GAICD
B Juris, LLB, FGIA, FCG, FAICD
LLB, GAICD
Chief Development Officer,
Sierra Rutile
Joined Iluka 2008
Richards Bay Minerals, Exxaro
General Counsel and
Company Secretary
Joined Iluka 2016
South32, Bankwest, Herbert Smith
Freehills, Western Power
General Manager People
and Sustainability
Joined Iluka 2013
KPMG, Westpac, Mercer
DANIEL MCGRATH
SHANE TILKA
BSc (Math)
BCom
Chief Technical Officer and
Head of Rare Earths
Joined Iluka 1993
General Manager,
Australian Operations
Joined Iluka 2004
The Executive is structured to include
eight 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.
Iluka Resources Limited, Annual Report 2020
13
FINANCIAL SUMMARY
MINERAL SANDS
REVENUE
UNDERLYING
MINERAL SANDS
EBITDA
MINING AREA C
EBITDA
UNDERLYING
GROUP EBITDA
$947m
$342m
$81m
$423m
$m
$m
$m
$m
1,244
1,193
1,018
947
726
545
531
342
301
44% 45%
36%
103
30%
14%
85
81
60
56
48
600 616
423
361
151
16 17 18 19 20
16
17
18
19
20
16
17
18
19
20
16 17 18
19
20
Underlying group
EBITDA was $423 million,
demonstrating Iluka’s
discipline in the face of
unprecedented challenges
posed by COVID-19.
The Mining Area C royalty
contributed $81 million
EBITDA in 2020, representing
100% of royalty receipts to
the September quarter, prior
to the demerger of Deterra
Royalties and subsequent
earnings from Iluka’s 20%
stake in Deterra Royalties
during the December quarter.
EBITDA
EBITDA margin
Underlying mineral sands
EBITDA was $342 million.
Iluka adjusted zircon
operational settings in
response to the uncertain
market conditions, including
changes to settings at the
Narngulu mineral separation
plant and a return to mining
at the Jacinth deposit from
Ambrosia.
Despite the challenging
market conditions, minerals
sands continued to generate
strong EBITDA margins at
36% (2019: 45%).
Mineral sands revenue was $947
million in 2020, down 21% from 2019.
Z/R/SR sales volumes were down
24% and average revenue per tonne
declined 2%.
Zircon sales volumes declined 13%
to 240 thousand tonnes with markets,
particularly ceramics, impacted by
COVID-19 shutdowns in the first
half. Despite a subsequent, gradual
recovery, demand remained down
on the previous year. Iluka’s weighted
average zircon price was down only
8% from Q4 2019 as a result of
efforts to ensure pricing stability in
uncertain market conditions.
High grade titanium feedstock
markets experienced a decrease in
demand in the second quarter of
2020 though rebounded strongly.
Synthetic rutile sales were lower
largely due to a contractual dispute
with major customer, Chemours.
The decline in rutile sales reflects
production constraints. Iluka’s
weighted average rutile price
increased 7% from 2019 due to
ongoing market tightness.
Ilmenite and other revenue increased
65% to $106 million, including
the commencement of sales of
monazite-zircon concentrate from
Eneabba, with 44 thousand tonnes
shipped in 2020.
14
Iluka Resources Limited, Annual Report 2020
Rehabilitation site, Gingin, Western Australia
NET PROFIT
AFTER TAX
FREE CASH
FLOW
$2,410m
$36m
NET CASH
(DEBT)
$50m
ROE AND
ROC
ROE 284%
ROC 311%
$m
$m
$m
%
2,410
322
304
32%
17%
2
43
50
311
284
304
(224)
(172)
(300)
140
(183)
47
36
(506)
54
32
7
(25)
(17)
(12)
(18)
(20)
16 17 18 19 20
16 17 18 19 20
16 17 18 19 20
16 17 18 19 20
Reported net profit after
tax was $2,410 million. This
result includes the $2,247
million gain on sale from the
demerger of Iluka’s royalty
business, completed in
November.
Underlying net profit after tax
was $151 million (2019: $279
million).
Free cash flow was $36
million. Operating cash flow
was $184 million reflecting
the impact of COVID-19 on
mineral sands markets. Iluka
also continued to progress
the innovative Balranald field
trial at a cost of $34 million
in 2020.
Cash flow contribution from
the Mining Area C royalty was
$92 million.
Capital expenditure was
$71 million, down from
$198 million in 2019. The
lower spend reflects both
completion of major projects
in 2019 and COVID-19
related travel restrictions
hampering Iluka’s ability
to progress some site-
based aspects of projects,
particularly in Sierra Leone.
Total tax payments of $166
million include a $98 million
2019 final tax payment paid
in the second half of 2020.
Net Cash (Debt)
Gearing %
Return on equity
Return on capital
As at 31 December 2020,
Iluka reported a net cash
position of $50 million, up
from $43 million net cash as
at 31 December 2019.
Reported return on equity of
284% and return on capital of
311%, both encompassing
the gain from the demerger
of Deterra Royalties.
Underlying return on equity of
19.2% and return on capital
of 36.0% are excluding
the demerger of Deterra
Royalties (but including Sri
Lanka impairment and IFC
Put Option).
Iluka prioritised maintenance
of a strong balance sheet,
with a focus on managing
operational settings in line
with market conditions,
minimising costs and
reducing discretionary
spending, while also
maintaining operational
continuity and progressing
growth projects.
Iluka Resources Limited, Annual Report 2020
15
BALANCE SHEET
As at 31 December 2020, Iluka had total debt facilities of $500 million and net cash
of $50 million. The company has a Multi Optional Facility Agreement (MOFA), which
comprises a series of committed five-year unsecured bilateral revolving credit facilities
with several domestic and foreign institutions. The facilities are denominated in both
AUD and USD, and mature in 2024.
Drawings under the MOFA at 31 December 2020 were $38 million (2019: $56 million).
Of the above interest-bearing liabilities, $38 million is subject to an effective weighted
average floating interest rate of 1.5% (2019: 3.1%). Note 21 of Iluka’s Financial Report
provides details of the maturity profile and interest rate exposure.
NET DEBT, GEARING AND
DEBT FACILITIES
DEBT FACILITIES
MATURITY PROFILE
Gearing %
500
100
80
60
40
20
0
618
519
500
43
50
2
0
0
0
0
21 22 23 24 25
$m
1000
800
600
400
200
0
-200
-400
-600
1,015
695
32%
17%
(183)
(506)
16
17
18
19
20
Debt facilities $m
Net cash (debt)
Gearing (%)
16
Iluka Resources Limited, Annual Report 2020
Synthetic Rutile Kiln 2, North Capel, Western Australia
DIVIDEND FRAMEWORK
Iluka’s dividend framework is to pay a minimum of 40% of free cash flow not required
for investing or balance sheet activity. The company also seeks to distribute the
maximum franking credits available. This framework is unchanged following the
demerger of Deterra.
Iluka declared a full year dividend of 2 cents per share, fully franked, for 2020. This is
consistent with the company’s dividend framework, after adjusting for the voluntary
refund of the JobKeeper subsidy which will occur in 2021.
HEDGING
Iluka manages a component of its foreign exchange risk via a foreign exchange
hedging program. US$98.4 million in foreign exchange collar contracts in relation to
expected USD revenue, predominantly from contracted sales to 31 December 2022,
remain open as at 31 December 2020.
The following hedging contracts matured during the year:
•
•
US$63.6 million in foreign exchange forward contracts at a weighted average rate
of 70.7 cents; and
US$94.7 million in foreign exchange collar contracts consisting of US$94.7 million
of bought AUD call options with weighted average strike prices of 78.4 cents and
US$94.7 million of sold AUD put options with weighted average strike prices of
68.6 cents.
No further hedging was undertaken in 2020.
Note 22 of Iluka’s Financial Report provides details of Iluka’s open hedge contracts at
31 December 2020.
Iluka Resources Limited, Annual Report 2020
17
STRATEGY AND BUSINESS MODEL
THE ILUKA PLAN
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
-
LONGER TERM
GROW WHERE WE
CAN ADD VALUE
Mineral Sands opportunities
and diversification
OUR
DIRECTION
-
NEAR TERM
DELIVER TO
GROW OUR
FUTURE
EXECUTE
our projects
EXCEL
in our core
MATURE
our options
OUR PURPOSE
DELIVER
SUSTAINABLE
VALUE
Iluka’s purpose is to deliver
sustainable value. 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.
OUR VALUES
INTEGRITY
RESPECT
COURAGE
ACCOUNTABILITY
COLLABORATION
18
Iluka Resources Limited, Annual Report 2020
DELIVER TO GROW
OUR FUTURE
SAFETY OF PEOPLE
AND COMMUNITIES
PRUDENT FINANCIAL
MANAGEMENT
DEMERGER OF BUSINESS
– LISTING OF DETERRA
ROYALTIES
ADJUSTMENTS TO
PRODUCTION SETTINGS
GROW WHERE WE
CAN ADD VALUE
The COVID-19 pandemic was the source of several unprecedented challenges for Iluka’s
business in 2020. These challenges spanned substantial threats to operational and
supply chain continuity, market demand, timetables for the development of major projects
and the planned demerger of the company’s royalty business.
In response, Iluka prioritised the safety of its people and communities; prudent
management of the company’s financial position; adjusting production settings in line
with market conditions; and execution of the MAC royalty demerger. Iluka delivered a
disciplined performance against these priorities, as reflected in the company’s financial
result.
Protecting the safety, health and wellbeing of Iluka’s employees is the company’s
enduring and highest priority. The implementation of protective measures in response
to COVID-19 enabled Iluka to maintain operational continuity in both Australia and Sierra
Leone. Measures included site-specific, risk-based Infectious Disease Management
Plans; and extensive mental health programmes and support.
Iluka invested around $3 million to avoid a suspension of operations in Sierra Leone,
which included significant health contributions to local communities. This encompassed
funding to disseminate COVID-19 safety educational messages; and donations of
medical supplies and personal protective equipment. The operation also received
approval for on-site COVID-19 quarantine and isolation facilities, in addition to the
progression of faster in-house polymerase chain reaction (PCR) testing capabilities.
Iluka’s ongoing focus on maintaining a strong balance sheet saw the company end
2020 in a net cash position of $50 million. Free cash flow was $36 million, incorporating
investment of $71 million in capital expenditure and payment of $166 million in tax. Iluka
declared a full year dividend of 2 cents per share, fully franked.
The company received $13.6 million in JobKeeper subsidies from the Australian
Government following a significant decline in zircon demand and associated revenue in
Q1. Given Iluka’s subsequent financial performance, the company has decided to return
this voluntarily, which will occur in 2021.
Iluka is also implementing an efficiency programme to ensure business improvement and
cost effectiveness; and has made changes to the Iluka Executive.
The demerger of Iluka’s royalty business was completed in November and resulted in the
creation of Australia’s largest ASX-listed royalty company, Deterra Royalties. Deterra has
the Mining Area C (MAC) royalty as its foundational asset, with Iluka retaining a 20% stake
in the new company. The demerger is expected to unlock significant value and enables
the Board and management of each company to focus on their distinct growth strategies.
Iluka’s operational flexibility enabled the company to preserve margins across its core
product suite throughout a period of uncertainty and market instability. Production
adjustments at both the Narngulu mineral separation plant in Western Australia and
Jacinth-Ambrosia mine in South Australia, reduced global zircon supply by approximately
10%. Mine planning adjustments at Jacinth-Ambrosia also resulted in improved cash flow,
lower operating costs, and deferred capital spend. Narngulu has the ability to return to
normal production settings quickly, as and when required.
Iluka also made important progress on key aspects of its major project pipeline in
Australia. The company entered the rare earths market with first sales from the world’s
highest grade rare earths operation at Eneabba in Western Australia. The third trial (T3)
of Iluka’s innovative underground mining technology was completed successfully at
Balranald in New South Wales. At the Wimmera deposit in Victoria, work focussed on
validating a zircon processing solution that could unlock a multi-decade source of zircon
and rare earths.
Progress was more challenging in Sierra Leone as a result of travel and other restrictions
associated with the pandemic. Centred on one of the largest and highest quality known
rutile deposits in the world, all field work at the Sembehun project was suspended. A field
trial of an alternative hydraulic mining method is planned for commencement in H1 2021.
Iluka Resources Limited, Annual Report 2020
19
FINANCIAL AND
OPERATIONAL REVIEW
Cataby, Western Australia
20
Iluka Resources Limited, Annual Report 2020
In this section
PROJECT PIPELINE
SALES AND MARKETS
PRODUCTION AND OPERATIONS
PROJECTS
EXPLORATION
Iluka Resources Limited, Annual Report 2020
21
FINANCIAL AND OPERATIONAL REVIEW
INCOME STATEMENT ANALYSIS
$ million
Z/R/SR revenue
Ilmenite and other revenue
Mineral sands revenue
Cash costs of production
Inventory movement - cash
Restructure and idle capacity charges
Government royalties
Marketing and selling costs
Asset sales and other income
Major projects, exploration and innovation
Corporate and other costs
Foreign exchange
Underlying mineral sands EBITDA
EBITDA from discontinued operations
Share of profit in associate
Underlying Group EBITDA
Depreciation and amortisation
Inventory movement - non-cash
Rehabilitation costs for closed sites
Demerger transaction costs
Gain on demerger of Deterra Royalties
Gain on change of ownership of
Deterra Royalties
Gain on remeasurement of IFC Put Option
Impairment of Sri Lanka interests
Write-down of Sierra Rutile Limited
Group EBIT
Net interest and bank charges
Rehabilitation unwind and other finance costs
Profit before tax
Tax expense
Profit for the period (NPAT)
Average AUD/USD rate for the period (cents)
22
Iluka Resources Limited, Annual Report 2020
2020
841.0
106.0
947.0
(558.7)
142.3
(20.9)
(22.3)
(27.7)
(1.5)
(62.3)
(54.6)
0.7
342.0
81.0
0.1
423.1
(184.8)
39.9
7.2
(13.3)
1,808.1
452.0
19.4
(12.4)
-
2,539.2
(7.1)
(26.6)
2,505.5
(95.5)
2,410.0
69.1
2019
1,128.7
64.4
1,193.1
(539.6)
63.4
(19.7)
(39.4)
(35.0)
(3.5)
(42.2)
(48.0)
1.8
530.9
85.1
-
616.0
(163.2)
15.5
(3.2)
-
-
-
-
-
(414.3)
50.8
(13.8)
(38.0)
(1.0)
(298.7)
(299.7)
69.5
% change
(25.5)
64.6
(20.6)
(3.5)
124.4
(6.1)
43.4
20.9
57.1
(47.6)
(13.8)
(61.1)
(35.6)
(4.8)
-
(31.3)
(13.2)
157.4
-
-
-
-
-
-
-
-
48.6
30.0
-
68.0
-
(0.6)
MOVEMENT IN UNDERLYING NPAT
$ million
NPAT
Non-recurring adjustments:
Rehabilitation for closed sites - Total (post tax)
Sri Lanka exploration impairment
Derecognition of SRL Tax assets
Write-down of Sierra Rutile Limited
Put Option revaluation (post tax)
MAC Demerger Gain (net of transactions costs)
Underlying NPAT
300
250
200
(31)
m
$
150
279
(98)
23
6
5
2020
2,410.0
5.0
(12.4)
-
-
19.4
2,246.8
151.2
2019
(299.7)
(2.2)
-
(161.9)
(414.3)
-
-
% change
-
-
-
-
-
-
-
278.7
(45.7)
100
50
0
9
1
0
2
r
e
b
m
e
c
e
D
1
3
10
17
7
11
(91)
(20)
(4)
(7)
e
c
i
r
P
l
o
V
i
x
M
X
F
r
e
h
t
o
&
m
l
I
S
G
O
C
t
i
n
U
r
e
h
t
O
&
e
d
l
I
j
s
t
c
e
o
r
P
r
o
a
M
j
C
A
M
p
r
o
C
t
n
I
r
e
h
t
o
&
d
n
w
n
U
i
s
e
i
t
l
a
y
o
R
t
n
e
m
n
r
e
v
o
G
45
x
a
T
151
0
2
0
2
c
e
D
1
3
Sales commentary is contained on pages 24-25.
The Australian dollar remained steady in 2020, with an average
exchange rate of 69.1 cents compared to 69.5 cents in 2019. The
Group has hedging contracts to assist in managing exchange rate
exposure, which are detailed on page 126 of this report. Foreign
exchange impacts on operating costs, mainly those related to
Sierra Rutile operations, are included in the overall movement in
unit cost of goods sold.
Cash costs of production increased by $19 million despite
lower finished goods production volumes. Mining at all operations
continued throughout the year, with production settings reduced
at the final stage of finished goods production at the Narngulu
mineral separation plant.
Australian operations increased to $730 per tonne from $650
per tonne due to higher material movements as a result of lower
ore grades at Jacinth-Ambrosia (2020: 4% HM ore grade; 2019:
6% HM ore grade) combined with higher cost synthetic rutile
production as the ilmenite feed transitioned to Cataby ilmenite.
Idle and restructure costs reflect ongoing maintenance and
land management costs for idle plant and operations at Eneabba,
Tutunup South, Murray Basin and the United States, as well as
restructure costs in Australia.
The International Finance Corporation (IFC) increased its interest
in Sierra Rutile in November 2020 to 10% and the Put Option was
revalued following the negotiations, resulting in a reduction in the
liability of $19 million.
The Cataby mine operated for a full 12 months (compared with
only 8 months in 2019) and the Synthetic Rutile Kiln 2 also
operated for a full year, with 16% higher production. This led
to $34 million higher costs in the Southwest/Cataby business
unit. Shifts in the mine plan at Jacinth-Ambrosia and changes
in production settings at the Narngulu mineral separation plant
resulted in lower overall production as the Group managed
inventory levels, with $31 million lower costs at that operation.
Sierra Rutile was operating all 4 mining units throughout the year
resulting in marginally higher heavy mineral concentrate (HMC)
produced. Sierra Rutile suffered from increased maintenance and
unplanned outage events, along with additional costs to manage
the COVID-19 pandemic.
Unit cost of goods sold increased to $1,032 per tonne
compared to $889 per tonne in 2019. This reflected a cost of
US$1,455 per tonne at Sierra Rutile, up from US$1,175 per tonne
in 2019, due to higher cash costs of production from unplanned
maintenance, higher costs in managing COVID-19 and lower
production volumes.
Corporate cost increases arose from restructure and redundancy
costs as activities and personnel were streamlined to increase
efficiency in Australia.
Major projects, exploration, and innovation included the
conclusion of the Balranald T3 field trials which were expensed as
research and development as new mining methods were explored
to open new areas of extraction. Government royalties decreased
on lower assessable sales volumes.
Tax expense had an effective tax rate of 4% as the gain on the
demerger of Deterra was a non-taxable event. Adjusting for the
gain, the effective tax rate was 39%, driven by Sierra Leone’s
minimum tax rate of 3.5% of Sierra Rutile’s revenue. The corporate
tax rate applicable in the main operating jurisdictions of Australia
and Sierra Leone remained at 30%.
Iluka Resources Limited, Annual Report 2020
23
FINANCIAL AND OPERATIONAL REVIEW
SALES AND MARKETS
ZIRCON
RUTILE[1]
SYNTHETIC
RUTILE
ILMENITE
MONAZITE
Sales volumes (kt)
Sales volumes (kt)
Sales volumes (kt)
Sales volumes (kt)
Sales volumes (kt)
380
379
339
264
233
200
274
240
172
162
244
215
207
187
225
203
256
44
116
171
16 17 18 19 20
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
18
0 0
0
0
Notes:
[1] Includes HYTI
Zircon
Iluka’s zircon sales profile in 2020 reflected the challenging and
evolving market conditions over the course of the year.
Zircon sales in the first half of 2020 were significantly impacted
by lockdowns associated with COVID-19. Ceramics account
for over half of zircon use around the world and some of the
largest ceramic producing countries, including China, Spain and
Italy, all halted production over various periods in H1. However,
with easing of restrictions, operating rates at customer plants
gradually increased over H2, though total demand remained
down on previous years.
Demand for zircon in the foundry market was also considerably
less in 2020, with the idling of car manufacturing plants in every
region and a marked reduction of consumer goods exports
from China. The zircon chemicals market experienced mixed
conditions over the year with periods of strong demand for
Chinese exports from the United States and Japan, followed
by a short period of inventory build and then rundown. The
refractory and fused zirconia markets, though not immune from
impacts of lower demand globally, were relatively stable.
Overall, consumer inventories remained low throughout the year
as businesses preserved cash in the uncertain environment. It
is anticipated that consumers will have to increase purchasing
to build stock to a safe level and support production.
Mindful of both short-term challenges and the longer-term
opportunities, Iluka adjusted its product mix. This resulted in
sales of zircon sand remaining at levels similar to 2019 and
proportionally lower sales of zircon in concentrate. Iluka sold
187 thousand tonnes of zircon sand, down a very modest 2%
from 2019. Overall, 2020 zircon sales of 240 thousand tonnes
(including zircon in concentrate) were 12% lower than 2019
sales.
Iluka’s weighted average price for zircon premium and standard
in 2020 was US$1,319 per tonne, down 8% from Q4 2019. This
was considered a solid result given the market conditions and
Iluka’s efforts to preserve margins.
24
Iluka Resources Limited, Annual Report 2020
High-Grade Titanium Feedstocks
High grade titanium feedstocks markets serviced by Iluka,
including the pigment, welding and titanium sponge markets,
experienced a rapid slowdown in demand associated with the
COVID-19 pandemic in Q2. Pigment plants reduced capacity
utilisation and many brought forward planned maintenance.
Over the remainder of 2020, the pigment industry rebounded
strongly, bolstered by strong DIY and professional paint
demand. Pigment plant utilisation rates have gradually
increased as a result.
The welding market remained strong despite the global
pandemic, buoyed by increased government stimulus measures
and infrastructure spending in emerging economies, especially
in South East Asia and India. Titanium sponge producers
outside of China continue to experience the impacts of reduced
demand from the aerospace industry.
Iluka’s synthetic rutile product is largely sold under multi-year
contracts. Iluka announced in June 2020, that it had issued
a Notice of Default to a major synthetic rutile customer,
Chemours. Following this, Iluka commenced proceedings
against Chemours for breach of contract regarding failure to
take or pay for scheduled shipments in May and July. Chemours
took no further synthetic rutile shipments in 2020.
Full year rutile sales of 162 thousand tonnes were also down
from 2019 reflecting production constraints at Sierra Rutile.
Iluka’s weighted average price of rutile (excluding HYTI and TIC)
in 2020 was US$1,220 per tonne, up 7% from 2019.
Monazite
Iluka commenced sales of a 20% monazite concentrate in
H1 2020, following completion of Eneabba Phase 1. The
sales contract includes a fixed price which is commercial in
confidence.
The Board approved Eneabba Phase 2 in August 2020, which
produces a 90% monazite concentrate. No sales contracts are
in place for that offtake.
% OF TOTAL 2020 MINERAL SANDS SALES REVENUE
31%
EUROPE
AMERICAS
8%
MIDDLE
EAST
5%
33%
CHINA
ASIA
23%
Weighted Average Received Prices – US$/t FOB
Zircon (premium and standard)
Zircon (all products)1
Rutile (excluding HYTI and TIC)2
Synthetic rutile3
Notes:
2020
1,319
1,217
1,220
-
2019
1,487
1,380
1,142
-
2018
1,351
1,321
952
-
2017
2016
958
940
790
-
810
773
716
-
(1)
(2)
(3)
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 2020, the split of zircon sand and concentrate by zircon sand-equivalent
was approximately: 78%,22% (2019: 70%,30%).
Included in rutile sales volumes reported elsewhere in this Annual Report are lower titanium dioxide products, HYTI and titanium-in-concentrate
(TIC). 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%. 2020 full year sales of the lower grade HYTI material were 29% of rutile sales (2019: 23%).
Iluka’s synthetic rutile sales are, in large part, underpinned by commercial offtake arrangements. The terms of these arrangements, including the
pricing arrangements are commercial in confidence and as such not disclosed by Iluka. Synthetic rutile, due to its lower titanium dioxide content
than rutile, is priced lower than natural rutile.
Iluka Resources Limited, Annual Report 2020
25
FINANCIAL AND OPERATIONAL REVIEW
PRODUCTION AND OPERATIONS
AUSTRALIA
AUSTRALIA
SIERRA
LEONE
Iluka’s operational configuration in 2020 was based on settings
in line with market conditions; minimising costs and improving
cash flow.
Synthetic Rutile Kiln 2 (SR2) at Capel, Western Australia,
delivered record annual production of 227 thousand tonnes of
synthetic rutile.
In April, Iluka announced changes to its Australian operational
settings in response to the impact of COVID-19 on mineral
sands markets. At the Narngulu mineral separation plant in
Western Australia, the amended settings reduced expected
zircon production for the year by around 110 thousand tonnes.
The plant retained its flexibility to return to full production
settings when required. In 2020, Narngulu processed 367
thousand tonnes of material to produce 134 thousand tonnes
of zircon and 47 thousand tonnes of rutile.
The Eneabba operation in Western Australia began production
in April. Phase 1 of the operation consists of reclamation and
screening of a strategic monazite stockpile, stored from Iluka’s
historic mineral processing operations. The first shipment of a
mixed monazite-zircon concentrate left Geraldton port in June,
ahead of schedule. Operations continued on a campaign basis,
with 44 thousand tonnes of concentrate being shipped.
SIERRA LEONE
At Jacinth-Ambrosia in South Australia, the mine plan was
adjusted with mining returned to Jacinth from Ambrosia in
August. This change improved cash flow with lower operating
costs, including a lower strip ratio. Unit costs were also lowered
due to less heavy mineral concentrate haulage and pumping
distance to the concentrator. The adjustment also deferred
capital spend required for future tailings facilities. The operation
produced 357 thousand tonnes of heavy mineral concentrate
for the year.
Sierra Rutile faced a number of challenges in 2020. Iluka
focussed on the health and safety of its employees and local
communities, providing additional assistance in managing
the local impacts of the COVID-19 pandemic where possible.
COVID-19 controls were implemented at all locations and
operations were able to continue throughout the year, however
disruptions and travel restrictions hampered Iluka’s ability to
maintain specialised skillsets typically provided by expatriate
resources.
Iluka’s Cataby mine in Western Australia was fully operational,
producing 520 thousand tonnes of heavy mineral concentrate.
Of this, 345 thousand tonnes of magnetic material (mainly
ilmenite) was trucked to Capel for further processing and
upgrading to synthetic rutile, and 164 thousand tonnes of
non-magnetic material was transported to the Narngulu mineral
separation for processing to final products (zircon and rutile).
The operation produced 120 thousand tonnes of rutile (down
from 137 thousand tonnes in 2019). Output was affected by
a number of downtime events, leading to lower mining and
processing throughputs.
26
Iluka Resources Limited, Annual Report 2020
ZIRCON
RUTILE[1]
SYNTHETIC
RUTILE
ILMENITE
MONAZITE
Production volumes (kt)
Production volumes (kt)
Production volumes (kt)
Production volumes (kt)
Production volumes (kt)
347
349
312
322
302
211
185
184
173
163
118
220
211
196
227
456
448
395
329
319
44
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
0
0 0
0
Notes:
[1] Includes HYTI
Heavy mineral concentrate (HMC) produced and processed
HMC produced
HMC processed
Cash costs
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
Jacinth-Ambrosia / Mid west
Cataby / South west
Australia Total
Sierra Rutile
Total
Notes:
(1) Cash cost of production excluding by-products, divided by Z/R/SR production
Mineral sands operations results
kt
kt
$m
$/t
$/t
2020
1,182
1,008
2020
558.7
918
592
915
730
2,015
1,032
Revenue
EBITDA
EBIT
$ million
Jacinth-Ambrosia /Mid west
Cataby / South west
Idle Ops
SRL
Support and corporate
Elimination - interco sales
Total
2020
389.0
300.4
34.5
223.1
0.0
0.0
947.0
2019
482.7
414.2
(38.6)
257.6
-
(12.3)
1,193.1
2020
270.2
163.1
10.1
26.4
(141.0)
0.0
328.8
2019
343.3
220.6
4.0
63.3
(88.6)
(2.1)
530.9
2020
245.5
120.1
11.0
(40.8)
2,203.4
0.0
2,539.2
2019
1,087
961
% change
8.7
4.9
2019
% change
539.6
753
473
816
650
1,692
889
3.4
21.9
25.1
12.2
12.2
19.1
16.1
2019
330.2
172.7
(4.3)
(427.6)
(36.7)
(2.1)
50.8
Iluka Resources Limited, Annual Report 2020
27
FINANCIAL AND OPERATIONAL REVIEW
OPERATIONS
JACINTH-AMBROSIA/MID WEST
Production volumes
Zircon
Rutile
Total Z/R 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
Restructure, idle capacity and other non-production costs
Government royalties
Marketing and selling costs
EBITDA
Depreciation and amortisation
Inventory movement - non-cash
Rehabilitation costs for closed sites
EBIT
2020
2019
% change
kt
kt
kt
kt
kt
kt
kt
$/t
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
114.9
24.5
139.4
67.7
207.1
357
232
940
389.0
(131.0)
26.7
(3.2)
(6.4)
(4.9)
270.2
(36.2)
9.8
1.7
245.5
260.2
31.2
291.4
107.0
398.4
558
455
557
482.7
(162.3)
57.8
(2.4)
(23.6)
(8.9)
343.3
(28.9)
14.2
1.6
330.2
(55.8)
(21.5)
(52.2)
(36.7)
(48.0)
(36.1)
(49.0)
(68.8)
(19.4)
19.3
(53.8)
33.3
72.9
44.9
(21.3)
(25.3)
31.0
6.2
(25.7)
Lower market demand resulted in a 10% increase in inventories
held to $260 million at year end and lower mineral sands
revenue.
Lower demand for zircon also resulted in lower volumes of HMC
transported from the mine to the Narngulu mineral separation
plant.
Cash costs of production reduced due to changes in the mine
plan, with mining returned to Jacinth from Ambrosia in August.
This change improved cash flow with lower operating costs,
including a lower strip ratio. Costs were also lowered due to less
heavy mineral concentrate haulage and pumping distance to
the concentrator. The adjustment also deferred capital spend
required for future tailings facilities. The operation produced
357 thousand tonnes of heavy mineral concentrate for the year.
Government royalties for Jacinth-Ambrosia are predominantly
calculated on a mine gate departure, with lower movements of
HMC reducing the royalty payable.
Gross margin remained robust at 66%, down from 75%
in 2019.
28
Iluka Resources Limited, Annual Report 2020
CATABY/SOUTH WEST
Production volumes
Zircon
Rutile
Synthetic rutile
Total Z/R/SR production
Ilmenite - saleable and upgradeable
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
Restructure, idle capacity and other non-production costs
Government royalties
Marketing and selling costs
Asset sales and other income
EBITDA
Depreciation and amortisation
Inventory movement - non-cash
Rehabilitation costs for closed sites
EBIT
2020
2019
% change
kt
kt
kt
kt
kt
kt
kt
kt
$/t
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
58.8
27.9
227.4
314.1
342.4
656.5
520
483
739
300.4
(232.2)
112.6
(3.3)
(6.8)
(7.7)
0.1
163.1
(72.3)
29.1
0.2
120.1
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)
172.7
9.9
78.8
15.9
18.4
124.7
57.2
116.5
122.5
(2.9)
(27.5)
(17.2)
339.8
51.5
61.9
18.1
-
(26.1)
(33.9)
354.8
-
(30.5)
Mineral sands revenue of $300 million decreased 28% on
lower synthetic rutile sales largely reflecting the contractual
dispute with Chemours.
Restructure and idle costs related to holding costs for idle and
closed operations in the Southwest, along with restructuring
activities.
Cash costs of production increased, with a full year of mining
at Cataby (mine commenced in April 2019) as well as higher
synthetic rutile production, with Synthetic Rutile Kiln 2 achieving
record production following the 45 day major maintenance
undertaken in 2019 to reset the kiln for its next 4 year campaign.
Inventories increased to $294 million as Cataby recorded a full
year of production, coupled with reduced sales, also reflected in
the change in inventory movements year on year.
Increased Cataby production resulted in increased charges
for government royalties on increased kiln feed to produce
synthetic rutile.
Depreciation and amortisation increased to reflect a full 12
months charge at the Cataby mine (only 9 months in 2019).
Gross margin remained steady at 46% (2019: 47%).
Iluka Resources Limited, Annual Report 2020
29
FINANCIAL AND OPERATIONAL REVIEW
OPERATIONS
SIERRA RUTILE
Production volumes
Zircon
Rutile
Total Z/R production
Ilmenite
Total production
HMC produced
HMC processed
Unit cash cost of production - Z/R/SR
Mineral sands revenue
Cash costs of production
Inventory movement - cash
Restructure, idle capacity and other non-production costs
Government royalties
Marketing and selling costs
Asset sales and other income
EBITDA
Depreciation and amortisation
Inventory movement - non-cash
Rehabilitation and holding costs for closed sites
Write-down expense
EBIT
2020
2019
% change
kt
kt
kt
kt
kt
kt
kt
$/t
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
6.6
120.2
126.8
45.8
172.6
306
293
1,450
223.1
(183.8)
7.7
(5.3)
(8.6)
(3.4)
(3.3)
26.4
(72.2)
1.9
3.1
-
(40.8)
8.5
137.2
145.7
59.2
204.9
288
290
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)
(22.4)
(12.4)
(13.0)
(22.6)
(15.8)
6.1
1.2
22.3
(13.4)
(6.5)
-
-
19.6
8.1
-
(58.3)
3.2
-
-
-
-
Mineral sands revenue decreased 13% on lower rutile sales as
constrained production limited available product for sale.
Other non-production costs reflected additional expenses for
managing Sierra Rutile’s COVID-19 pandemic response.
Sierra Rutile was operating all 4 mining units throughout the
year resulting in marginally higher HMC produced. Sierra Rutile
suffered from increased maintenance and unplanned outage
events, resulting in increased cash costs of production.
30
Iluka Resources Limited, Annual Report 2020
IDLE OPERATIONS (UNITED STATES/MURRAY BASIN)
Production volumes
Zircon
Mineral sands revenue
Cash costs of production
Inventory movement - cash
Restructure, idle capacity and other non-production costs
Government royalties
Marketing and selling costs
Asset sales and other income
EBITDA
Depreciation and amortisation
Inventory movement - non-cash
Rehabilitation and holding costs for closed sites
EBIT
2020
2019
% change
4.9
34.5
(11.7)
(4.7)
(9.1)
(0.5)
(0.2)
1.8
10.1
(0.4)
(0.9)
2.2
11.0
-
-
38.6
(6.5)
(11.4)
(11.6)
(0.9)
(1.3)
(2.9)
4.0
(0.6)
(3.0)
(4.7)
(4.3)
(10.6)
80.0
58.8
21.6
44.4
84.6
-
170.0
33.3
70.0
-
-
kt
$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). Production in 2020
represented sale of remnant stockpiles in the United States.
The United States successfully sold its remaining inventory in
the year and the Murray Basin continues to hold $2 million of
inventory.
Cash costs of production were largely driven by activities
associated with product transportation and processing costs
for the remnant stockpiles.
Restructure and idle costs reflect regional management and
holding costs following closure of operations and care and
maintenance of idled assets. These costs decreased by 22%
in 2020 but are expected to continue to be broadly consistent
until all stockpiles are diminished, and rehabilitation is complete.
Rehabilitation costs reflected a decrease in the United States
rehabilitation provision, with changes for closed sites taken
directly to profit and loss. While the rehabilitation programme for
the Virginia operation continues to be discussed with regulators,
positive early indications resulted in a minor reduction of the
rehabilitation provision in the year.
Iluka Resources Limited, Annual Report 2020
31
FINANCIAL AND OPERATIONAL REVIEW
MOVEMENT IN NET (DEBT) CASH
Movement in net debt ($million)
H1 2019
H2 2019
H1 2020
H2 2020
Opening net cash (debt)
Operating cash flow
MAC royalty
Exploration
Interest (net)
Tax
Capital expenditure
Proceeds from changes in SRL ownership interests
Government grants
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
Increase in net cash/(debt)
Closing net cash/(debt)
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)
(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
43.3
96.7
41.6
(5.5)
(1.0)
(39.4)
(49.6)
-
4.3
(4.8)
3.9
-
46.2
(32.6)
13.6
5.5
(0.3)
18.8
62.1
62.1
87.1
50.6
(4.5)
(1.5)
(125.3)
(21.6)
-
9.6
(4.5)
1.2
-
(9.9)
-
(9.9)
(1.6)
(0.3)
(11.9)
50.2
Net cash increased to $50.2 million as a disciplined approach
to cash management was adopted while the COVID-19
crisis unfolded, with reduced capital and other expenditures
preserving cash balances.
Operating cash flow of $183.8 million was a 55% decrease
from 2019 due to lower underlying EBITDA from weaker market
conditions as COVID-19 impacted key industries.
Cash flows from discontinued operations from the MAC
royalty were lower due to the demerger of Deterra Royalties in
November 2020, though royalties collected until the demerger
benefitted from rising iron ore prices throughout the year.
Iluka invested $71 million on capital developments during
2020, including planned mine development at Cataby;
completing Eneabba Phase 1 and commencing Phase 2;
progressing Sembehun study options; early works on other
development options; and sustaining capital at Australian sites
and at Sierra Rutile.
No dividend was paid in September. Iluka declared a full year
dividend of 2 cents per share, fully franked, will be paid on 8 April
2021.
32
Iluka Resources Limited, Annual Report 2020
Narngulu, Western Australia
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.
2020
JA/MW
C/SW US/MB
SRL
Expl &
Oth
Corp
Mineral sands revenue
389.0
300.4
AASB 15 freight revenue
20.6
8.5
34.5
6.1
223.1
(0.0)
7.8
-
(139.4)
(145.8)
(30.5)
(204.5)
(73.9)
Expenses
Mining Area C
Share of profit in associate
FX
Corporate costs
EBITDA
-
-
-
-
-
-
-
-
270.2
163.1
Depreciation and amortisation
(36.2)
(72.3)
Inventory movement
- non-cash
9.8
29.1
-
-
-
-
10.1
(0.4)
(0.9)
-
-
-
-
-
-
-
-
1.9
Rehabilitation for closed sites
1.7
0.2
2.2
3.1
Mineral
Sands
947.0
43.0
(594.1)
-
0.1
0.7
-
-
-
-
0.1
0.7
(54.6)
(54.6)
MAC
Group
-
-
-
947.0
43.0
(594.1)
81.0
81.0
-
-
-
0.1
0.7
(54.6)
26.4
(73.9)
(53.8)
342.1
81.0
423.1
(72.2)
(0.3)
(3.1)
(184.5)
(0.3)
(184.8)
-
-
-
-
-
-
39.9
7.2
2,246.8
2,246.8
19.4
19.4
(12.4)
-
(12.4)
-
-
-
-
-
39.9
7.2
2,246.8
19.4
(12.4)
-
-
-
-
-
-
-
-
-
-
-
-
245.5
120.1
11.0
(40.8)
(86.6)
2,209.3
2,458.5
80.7
2,539.2
(1.0)
(2.5)
(0.5)
(2.8)
(0.1)
(11.1)
(0.2)
(10.2)
-
-
(5.3)
(7.1)
-
(26.6)
-
-
(7.1)
(26.6)
Demerger Gain
Gain on re-measurement
of Put Option
Impairment
EBIT
Net interest costs
Rehab unwind and other
finance costs
Profit Before tax
242.0
116.8
Segment result
242.0
116.8
(0.2)
(0.2)
(51.2)
(86.6)
2,204.0
2,424.8
80.7
2,505.5
(51.2)
n/a
n/a
307.4
80.7
388.1
Iluka Resources Limited, Annual Report 2020
Capel, Western Australia
33
Cataby, Western Australia
FINANCIAL AND
OPERATIONAL REVIEW
PROJECTS
ENEABBA
The company develops and progressively
gates projects towards execution subject to: (i)
improving confidence and satisfaction with the
risk-return attributes, (ii) continued strategic
alignment, and (iii) sequencing to take advantage
of economic and market outlook.
In 2020, travel restrictions associated with
COVID-19 hampered access to some sites.
Nevertheless, material progress was made on a
number of projects, as outlined here.
ENEABBA
WESTERN AUSTRALIA
DEVELOPMENT STAGE
Project Execution
The Eneabba project in Western Australia involves the
extraction, processing and sale of a strategic stockpile rich
in monazite (a mineral containing rare earths) and zircon. This
stockpile is stored in a mining void resulting from Iluka’s historic
mineral sands operations at Eneabba.
Phase 1 of the project, involving a simple reclamation and
screening of the stockpile to produce a 20% monazite-zircon
concentrate, began production in April 2020. The first shipment
of material occurred ahead of schedule in June. Eneabba is now
the highest grade rare earths operation globally.
Phase 2, involving the upgrade to a 90% monazite concentrate,
was approved by the Board in August and has progressed in
line with plans over the remainder of the year. The concentrate
produced during Phase 2 will be a direct feed to a rare earths
refinery.
Iluka is actively exploring the potential for the downstream
processing of rare earths in Australia.
34
Iluka Resources Limited, Annual Report 2020
BALRANALD
WIMMERA
CATABY
BALRANALD
NEW SOUTH WALES
WIMMERA
VICTORIA
DEVELOPMENT STAGE
Preliminary Feasibility Study
DEVELOPMENT STAGE
Preliminary Feasibility Study
Wimmera is a large-scale, fine-grained heavy mineral sands
deposit in the Victorian Murray Basin with the potential to
support the long term supply of ceramic-grade zircon and rare
earths. The project aims to apply innovative mineral processing
to overcome technical challenges associated with impurities
in the zircon. If successful, this approach would enable the
development of other similar challenging projects in the region.
Project work in 2020 focussed on validating a processing
solution to remove impurities and produce a ceramic
grade zircon that would be eligible for the ceramics market.
Environmental baseline studies were also progressed.
Balranald and Nepean are two rutile-rich deposits in the
northern Murray Basin, New South Wales. Owing to their
relative depth, Iluka is assessing the potential to develop these
deposits via a novel, internally developed, underground mining
technology.
In 2020, Iluka undertook a third technology trial (T3) to
determine whether the technology is economically viable.
Field activities were delayed in the first half of the year due to
COVID-19 related travel restrictions, however the trial was able
to commence in Q3 and fieldwork was completed in Q4.
The trial confirmed the effectiveness of the underground mining
method and validated key elements of the mining unit design,
such as materials of construction that have thwarted previous
attempts to mine for extended periods of time. Attempts to
undertake continuous backfilling of tailings into the mining void
were not successful. This is not considered a fatal flaw, as the
more traditional on-surface placement is a low-risk alternative.
Work has commenced to scope the Definitive Feasibility Study
(DFS) and the company is targeting a decision on whether to
proceed with a DFS in mid-2021.
Iluka Resources Limited, Annual Report 2020
35
FINANCIAL AND OPERATIONAL REVIEW
PROJECTS
SEMBEHUN MINE
SR KILN 1
SEMBEHUN MINE
SIERRA LEONE
SR KILN 1 RESTART
AND SOUTH WEST DEPOSITS,
WESTERN AUSTRALIA
DEVELOPMENT STAGE
DEVELOPMENT STAGE
Scoping Study / Preliminary Feasibility Study
Definitive Feasibility Study
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. Iluka is focussed on determining an
approach which balances the risk and reward associated with
the development of Sembehun and has commenced a process
to identify third parties willing to invest in the next phase of
Sierra Rutile’s growth.
Study work in 2019 identified a potentially suitable alternative
mining method, hydraulic mining. A field trial was planned
for the first half of 2020, however, in response to COVID-19
restrictions, all field work was suspended. For much of the
year project work focussed on progressing critical preliminary
feasibility study activities that protected the project schedule
but did not require site access or significant third-party
interaction.
Iluka is progressing plans to undertake a field trial of hydraulic
mining at the current mining area in early 2021.
The Synthetic Rutile Kiln 1 (SR1) is located adjacent to Iluka’s
operational SR2 kiln. Refurbishing SR1 represents a low capital
expenditure, low risk opportunity to produce up to an additional
110ktpa of high grade synthetic rutile. The project to restart the
kiln is execute ready. Initiation is subject to securing satisfactory
commercial arrangements, ilmenite feedstock and the market
outlook.
Iluka retains a number of tenements in south west Western
Australia containing chloride ilmenite suitable as a feedstock
to the synthetic rutile kilns. A preliminary feasibility study to
develop these sites has begun. Any development, or re-start of
SR1, will be subject to market conditions.
36
Iluka Resources Limited, Annual Report 2020
ATACAMA
PUTTALAM QUARRY
ATACAMA
SOUTH AUSTRALIA
PUTTALAM QUARRY
SRI LANKA
DEVELOPMENT STAGE
Preliminary Feasibility Study
Atacama is a satellite deposit located approximately five
kilometres from Ambrosia. The deposit has the potential to
supplement and extend zircon production at Jacinth-Ambrosia
and also provide a meaningful supply of ilmenite (nearly two
thirds of valuable mineral assemblage at Atacama relates to
ilmenite) by utilising existing infrastructure.
Viability of the project is dependent on a processing solution
which enables upgrading or selling of ilmenite; work continues
to validate a processing route.
Puttalam Quarry (PQ) is a large, predominantly sulphate
ilmenite deposit, located in the Puttalam District of Sri Lanka,
approximately 170 kilometres from the capital Colombo.
Iluka’s exploration lease covering the PQ Resource
(approximately 333Mt) expired in September 2020. At the
time, outstanding key approvals prevented Iluka from lodging
an application to convert the exploration lease to an Industrial
Mining License. The write down of the PQ Resource has been
reflected in Iluka’s 2020 Ore Reserves and Mineral Resources
Statement and Iluka recorded an associated impairment charge
of $12 million.
Iluka retains an interest in Sri Lanka, with step-in rights that can
be exercised if progress is made on a number of key areas to
further the development of deposits in Sri Lanka.
Iluka Resources Limited, Annual Report 2020
37
2020 PROJECT PIPELINE
REGION AND
MINERAL RESOURCE 1
ASSESS
Scoping Study
SELECT
Preliminary Feasibility Study
EUCLA BASIN
345Mt @ 4.8% HM for 16.6 Mt in Situ HM
MURRAY BASIN
195Mt @ 17.2% HM for 33.4Mt in Situ HM 1
MID WEST /
SOUTH WEST WA
986Mt @ 5.6% HM for 54.9Mt in Situ HM
SIERRA LEONE
715Mt @ 1.1% Rutile for 7.9Mt in Situ Rutile
ATACAMA
WIMMERA
BALRANALD
SEMBEHUN
SOUTH WEST
DEPOSITS
STAGE DESCRIPTION:
Determine what it could be
Determine what it should be
ESTIMATE ACCURACY RANGE:
(AT END OF PHASE)
-30% to +60%
-15% to +30%
The Mineral Resource information on this indicative growth pipeline summary is extracted from the company’s previously published statements and are available
at: www.iluka.com.au. Iluka confirms that it is not aware of any new information or data that materially affects the information included in the original market
announcements and, in the case of estimates of Mineral Resources or Ore Reserves, that all material assumptions and technical parameters underpinning
the estimates in the relevant market announcement continue to apply and have not materially changed. Iluka confirms that the form and context in which
the Competent Person’s findings are presented have not been materially modified from the original market announcement. All Mineral Resource figures are
estimates. This table should be read in conjunction with the disclaimers and compliance statement on page 167.
38
Iluka Resources Limited, Annual Report 2020
Cataby, Western Australia
DEVELOP
EXECUTE
PRODUCE
Definitive Feasibility Study
Project Execution
Operate and Maximise
SR1 KILN
RESTART
ENEABBA
(PHASE 2)
JACINTH-
AMBROSIA
ENEABBA
(PHASE 1)
CATABY
LANTI
GANGAMA
Determine what it will be
Deliver the project
Extract value
-10% to +15%
n/a
n/a
No Resource estimate
Resource estimate
Reserve estimate
Other
Iluka Resources Limited, Annual Report 2020
39
FINANCIAL AND OPERATIONAL REVIEW
EXPLORATION
Growing and improving the quality of Iluka’s Mineral
Resource and Ore Reserves is integral to the company’s
ability to deliver sustainable value.
Exploration opportunity assessment is managed
through a structured, stage-gated process considering a
combination of technical and economic factors, taking a
risk-weighted approach.
Near Mine exploration seeks to add value in areas
adjacent to existing assets, where synergies can
deliver additional value through mine life extension
or progressive development. New Mine exploration
focusses on identifying new high quality mineralisation
that can deliver a new operation and longer term growth.
Please refer to the Ore Reserves and Mineral Resources
Statement section for changes and updates to
Resources on page 157.
GENERATION AND
EXTERNAL OPPORTUNITIES
Travel restrictions impacted activities throughout 2020,
limiting Iluka’s ability to complete field work and testing
on existing and newly identified opportunities. The
company focussed on completing a comprehensive
review of opportunities within Australia and the United
States jurisdictions to augment the existing project
pipeline. More than 100 opportunities were reviewed,
identifying a number of high priority prospects.
Substantial areas of exploration access are being sought,
with tenure applications submitted over approximately
4,300km2. A structured review program is currently
ongoing covering other global jurisdictions.
AUSTRALIA
Prior to travel limitations impacting the ability to
complete on-ground work, substantial near mine and
new mine exploration programs were completed in
Western Australia, South Australia, Victoria and New
South Wales.
At Cataby, 9,341m were completed in 209 drill holes to
improve confidence, expand existing Resources and
support mining operations.
At Jacinth, in the northern extension of the main deposit,
1,221m in 58 drill holes were completed to infill existing
data and improve Resource confidence ahead of mining.
At Wimmera, 4,429m in 144 drill holes were completed,
focussed on specific geological and metallurgical
definition as part of the on-going preliminary feasibility
study.
Regional exploration was carried out in the Balranald
district to test new mineralisation targets, with 1,361m
completed in 14 drill holes.
A total of 1,791 km2 of new tenure was granted during
the year providing new access for exploration, with
budget and plans developed to progress work.
UNITED STATES
Following the implementation of detailed COVID-19 risk
management plans, Iluka was able to progress one of
several regional scale new mine opportunities. A total of
2,109m from 46 drill holes were completed.
The exploration review also identified a number of
priority opportunities in the United States and work is
progressing to secure access and implement exploration
processes during 2021.
40
40
Iluka Resources Limited, Annual Report 2020
Iluka Resources Limited, Annual Report 2020
CANADA
SIERRA LEONE
Early in 2020, Iluka, with its Canadian joint venture
partner Societe d’Exploration Miniere Vior Inc (now
renamed Vior Inc), continued to explore for high-grade
rutile bearing ilmenite bodies. A total of 9 diamond holes
for 1,515m were drilled based on 7 geophysical targets.
Vior made an announcement on the 20 May in respect
of this programme. Analysis of the core and results have
been extensively delayed due to laboratory closures
related to COVID-19, with results expected during
Q1 2021.
Infill drilling of existing resources within both Area 1 and
the Sembehun project continued throughout the year.
A total of 10,200m of drilling was completed in both
Area 1 (current operational area) and Area 5 (Sembehun)
in 1,177 drilling holes, including a combination of
hollow flight auger and aircore drilling. This focussed
on improving the geological models, collecting
metallurgical and geometallurgical data and improving
Resource confidence as part of the ongoing Life of Mine
programme and Sembehun Feasibility process.
Granted tenement position
as at 31 December 2020
Tenement applications
as at 31 December 2020
Region
Eucla Basin, (SA)
Murray Basin (NSW & VIC)
Perth Basin (WA)
Other - Australia (QLD)
Sierra Leone
Sri Lanka
Other - International
Total
Approx. square
kilometres
Region
Approx. square
kilometres
10,427
Eucla Basin (SA & WA)
3,650
574
1,791
559
105
0
Murray Basin (NSW & VIC)
Perth Basin (WA)
Other - Australia (QLD)
Sierra Leone
Sri Lanka
Other - International
17,106
Total
4,072
874
268
0
858
0
0
6,072
Exploration and Geology Expenditure 2020 – $9.4M
Administration + Other
$1.1M, 12%
Australian Exploration
$3.1M, 33%
International
Exploration
$0.1M, 1%
Operations &
Project Support
$2.2M, 23%
US + Canada
$2.9M, 31%
Iluka Resources Limited, Annual Report 2020
41
FINANCIAL AND OPERATIONAL REVIEW
SUSTAINABILITY
CLIMATE CHANGE
•
Iluka recognises that the physical and transitional
impacts of climate change may affect its assets,
productivity, supply chains and markets. Several
opportunities are available and the risks identified are
broadly within the company’s control, with the overall
risk presented by climate manageable. Iluka understands
that close monitoring and continued focus on this is
important.
Iluka is committed to the Paris Agreement objectives
and accepts the Intergovernmental Panel on Climate
Change (IPCC) assessment of climate change science.
During 2020, Iluka progressed the implementation of the
recommendations of the Task Force For Climate Related
Disclosures (TCFD), building on the analysis of physical
risks undertaken in 2019. The company undertook an
assessment of the key transition risks which may impact
its business. A response is being developed and a group
of metrics and targets identified.
In year one of the TCFD work, Iluka had an external
review (by KPMG) to ascertain whether climate-related
risks could be recorded and addressed under Iluka’s
risk management approach. The strategic risk register
records and describes mitigations and plans in relation
to climate related risks that extend out to 10 years.
Risks beyond this period will be recorded as emerging
risks. Risks related to the physical risk assessment, and
which are apparent from year one, are now identified and
addressed at the group and site level.
Furthermore, as the world manages and adapts to the
impacts of climate change, Iluka produces critical mineral
products that both support and facilitate this transition.
•
•
End uses for the company’s mineral sands products
include sustainable development applications
in renewable energy technologies, water and air
purification and catalytic converters, among others.
For its titanium dioxide business, Iluka operates
almost exclusively in the very high-grade segment
of the market, with the products rutile and synthetic
rutile each containing titanium content in excess of
90%. Pigment is the most prominent application for
titanium dioxide; and the quality of Iluka’s products
enables our pigment customers to operate their
plants more efficiently, with less impact on the
environment.
42
Iluka Resources Limited, Annual Report 2020
Iluka has an emerging position in rare earths. Of
their many high value applications, some rare earths
(neodymium and praseodymium in particular) are
essential for the production of permanent magnets,
which are in turn used to produce the motors that
power electric vehicles, generate power in wind
turbines and in other sustainable development
technologies. Demand across this supply chain is
expected to grow substantially over coming years
as the world pursues widespread electrification.
Iluka’s assets at Eneabba and Wimmera have the
potential to play a significant role in the global
supply of rare earths as essential building blocks for
a low carbon future.
GOVERNANCE
The Board Charter stipulates that the Board is required
to conduct an annual review of climate-related risks and
approve climate-related disclosures. Duties also extend
to measuring and reviewing Iluka’s performance against
climate change and sustainability targets.
In 2020 the Board was provided an update on Iluka’s
roadmap to implementing the recommendations of the
TCFD, together with an overview of scenario analysis
used to identify climate-related transition risks and
opportunities.
RISK MANAGEMENT
Iluka’s scenario analysis, aligned to the TCFD, included
three climate scenarios: 1.5°C, to reflect rapid
decarbonisation; a 2°C-3°C, to reflect delayed action;
and >3°C, to reflect minimal action on climate change.
Physical risks associated with a >3°C ‘business as usual’
scenario was detailed in Iluka’s 2019 Sustainability
Report.
Cross-functional workshops were conducted covering
Iluka’s entire value chain (including both upstream supply
chains and downstream customers). For each risk or
opportunity identified, Iluka has selected a series of
signposts that will indicate a change in impact on our
business. The company will continue to monitor these
signposts to guide its climate strategy.
Iluka’s Material Transition Risks
Risk Type
Description
Response
Policy and legal
A price on carbon will impact the cost
of production and operations, as well as
downstream production costs for Iluka’s
customers.
Iluka will assess the feasibility of implementing
an internal price on carbon to monitor the impact
of a carbon price on operations and future
capital projects.
Reputation
Investor and key stakeholder reputational risk
may materialise if Iluka fails to manage key
ESG issues such as land assets, emissions
strategies, or other climate-related risks.
Technology
Assets may become ‘stranded’ in a rapid
transition to a low-carbon economy.
Iluka continues to respond to queries from
investors relating to our climate-related risks
and commitments. The company is continually
working to improve disclosures and to support
increased understanding of the impact of both
climate change risks and opportunities on the
business.
Iluka completes assessments as part of the
project evaluation process to understand the
impact of future scenarios on the life of an asset.
Where applicable, this will include carbon pricing
and other climate-related risks.
Iluka’s Material Transition Opportunities
Description
Response
Opportunity
Type
Energy Source
Increased use of
renewable energy
Resource
Efficiency
Utilisation of by-products
Markets
Improved market position due to lower
whole-of-life emissions
Iluka has an opportunity to work with renewable
energy generators to reduce overall emissions
footprint through the utilisation of clean energy.
End use applications of Iluka’s mineral sands
and rare earth products are critical in renewable
energy technologies; including permanent
magnets essential for the construction of wind
turbines; and in emerging solar cell technologies.
Iluka maintains stockpiles of by-products which
may experience an increase in demand in a
low-carbon economy. The company continues
to support research and development into
increased use for these products.
Iluka has a continued focus on providing
high-quality products to its customers. These
products allow our customers to produce a
lower whole-of-life emissions footprint for final
goods when compared to lower quality products.
Demonstrated through Iluka’s titanium products,
their high quality enables pigment customers to
operate their plants with greater efficiency. End
use applications of Iluka’s products are critical in
growing sectors such as electric vehicles, water
and air purification, and catalytic converters.
Iluka Resources Limited, Annual Report 2020
43
FINANCIAL
AND OPERATIONAL
REVIEW
SUSTAINABILITY
METRICS AND TARGETS
Iluka has begun a process to identify
internal metrics for each of the company’s
material climate-related risks and
opportunities. As the company develops
its response, it is expected that targets will
be established and published.
Iluka’s 2020 Sustainability Report will be
released in April 2021.
HUMAN RIGHTS AND MODERN
SLAVERY
Iluka progressed its Modern Slavery Work
Programme, implementing a governance
framework and commencing vendor risk
assessments and modern slavery and
human rights training. The company has
continued to participate in the resource
and energy industries’ modern slavery
group, working collaboratively on the
development of measures to support
compliance with the Australian modern
slavery legislation. Iluka plans to release
its first Modern Slavery Statement in
2021.
ABORIGINAL ENGAGEMENT
AND CULTURAL HERITAGE
Iluka acknowledges the special
connection that Indigenous peoples have
with land and seeks to build constructive
and authentic relationships. Relationships
with Iluka’s Aboriginal stakeholders extend
from Board level through to day-to-day
relationships at our operational sites.
Indigenous employment at Iluka’s Jacinth-
Ambrosia operation in South Australia
approached 30% in 2020, a reflection of
the strong working relationship between
the Far West Coast people and Iluka.
At any location where cultural heritage is
identified, engagement is undertaken and
a Cultural Heritage Management Plan is
implemented to ensure the protection of
sites and artefacts.
To develop internal capability to
build and maintain strong, effective
relationships with Aboriginal groups,
Iluka has commenced the development
of an Aboriginal cultural awareness
and engagement programme, which
commenced at the end of January 2021.
44
Iluka Resources Limited, Annual Report 2020
ZIRCON AND HIGH GRADE TITANIUM DIOXIDE
PRODUCTS (RUTILE AND SYNTHETIC RUTILE)
HAVE WIDE RANGING ENVIRONMENTAL
BENEFITS; FROM LOWER ENVIRONMENTAL
IMPACTS IN PRODUCTION COMPARED TO
ALTERNATIVES, TO THE ENHANCEMENT OF
VARIOUS END-USE APPLICATIONS AND THEIR
SUSTAINABILITY.
LOWER GLOBAL WARMING POTENTIAL [1]
Zircon has approximately a 16% lower Global Warming Potential
than alumina, the main alternative product, when used as
ceramic whitener and opacifier in porcelain stoneware tile
production. Using zircon generates lower overall environmental
impacts in production versus alumina, over a range of
environmental indicators.
LOWER PRODUCT ENVIRONMENTAL
FOOTPRINT [5]
TiO2 pigment is used in approximately 95% of paints; and is
the main end-use of Iluka’s rutile and synthetic rutile products.
Paints with high TiO2 pigment content have the highest opacity,
meaning fewer coats of paint are needed. The closest potential
alternative opacifier is around 35% less effective, requiring
a higher raw material demand and producing greater waste
generation.
REDUCE AIR POLLUTION [5]
Specialty TiO2 pigments are helping to reduce air pollution
through photocatalysis on the surface of buildings; converting
nitrogen oxides into harmless soluble nitrate salts which wash
away in rain. Zirconium (derived from zircon) is used as a dopant
to further increase the photocatalytic activity of TiO2 in air
quality improvement.
ESSENTIAL IN THE CONSTRUCTION OF
WIND TURBINES AND ELECTRIC VEHICLES [6]
High value rare earth elements (rare earths) such as neodymium
(Nd) and praseodymium (Pr), are the key inputs required to
produce high strength permanent magnets. These ultra-strong,
long life magnets are essential in the production of the motors
and generators that power electric vehicles and wind turbines.
Other rare earths such as Terbium (Tb) and Dysprosium (Dy)
can be used to improve the performance in some of these
applications.
HIGHER ENGINE EFFICIENCY AND LOWER
VEHICLE EMISSIONS [2] [3] [8] [9]
Zirconia oxygen sensors are essential in ensuring top
performance outcomes from modern car engines. The oxygen
sensors avoid fuel wastage and enhance environmentally-
friendly operation. Also, zirconia together with rare earth
compounds are used as sub-catalysts and catalyst supports
in emissions reduction of carbon monoxide, hydrocarbons,
nitrogen oxides and other toxic substances.
Rare earths are also used in automotive catalytic converters
for gasoline and diesel powered vehicles to convert harmful
pollutants in the vehicle’s exhaust stream into less harmful
emissions.
GREATER EFFICIENCY FOR NUCLEAR ENERGY
AND ZERO GREENHOUSE EMISSIONS [1][4] [10]
Zirconium-containing alloys are widely used across structural
components in the nuclear industry. The alloys offer excellent
corrosion and irradiation creep resistance, as well as low
neutron-absorption, critical for increasing the efficiency of the
nuclear reactor. Nuclear power plant operations produce zero
greenhouse gas emissions.
REDUCE URBAN HEAT ISLAND EFFECT [7] [5]
Zircon-containing tiles used as a building envelope, could
improve a building’s thermal comfort as zircon increases the
tiles solar reflectance index. Ceramics with zircon-containing
glazes are also able to reduce maintenance costs compared to
other ‘cool materials’ thanks to its high chemical and abrasion
resistance. TiO2 pigments in paint applied to the surfaces of
buildings and ‘cool roofs’ can also help to reduce heat build-up.
TiO2 pigment has a very high refractive index, reflecting the heat
generated by the rays of the sun
Source:
[1] Zircon Industry Association [zircon-association.org]
[2] CO2 Meter [CO2Meter.com]
[3]. ABMARC [fcai.com.au]
[4] World Nuclear Association [world-nuclear.org]
[5] TDMA [tdma.info]
[6] Journal of Cleaner Production [sciencedirect.com]
[7] Institute of Materials, Minerals and Mining [IOM3.org]
[8] US Environmental Protection Agency [epa.gov]
[9] Journal of Physics: Conference Series [iopscience.iop.org]
[10] World Nuclear Association [www.world-nuclear.org]
Iluka Resources Limited, Annual Report 2020
45
BUSINESS RISK AND MITIGATION
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 reports to the Board
those risks which could have a material impact on the 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 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 risks are effectively identified,
communicated and appropriately elevated to Executives
and to the Board;
implement appropriate insurance risk retention and
transfer strategies;
assess regularly the effectiveness of the risk management
processes and controls; and
continue to fulfill risk management governance
requirements.
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 the company’s risk profile is provided to the Board
for endorsement twice yearly.
Set out below are the key risk areas that could have a material
impact on the company. The nature and potential impact of
risks changes over time. The risks described below are not
the only risks that Iluka faces and, whilst reasonable effort is
made to identify and manage material risks, additional risks not
currently known or detailed below may adversely affect future
performance. Emerging risk is a standing Board agenda item.
Risks identified through this process are incorporated into the
Iluka Corporate Plan development.
46
Iluka Resources Limited, Annual Report 2020
HEALTH AND SAFETY RISKS
Iluka faces risks relating to the health and safety of its workforce
and it is the company’s top priority to manage the wellbeing
of both employees and contractors. Iluka has continued to
manage the resultant COVID-19 related risks through the
implementation of targeted protective measures. Iluka works
actively to protect the health and safety of its people by
identifying and taking appropriate action to eliminate workplace
fatalities, life-changing injuries, 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 Executive and Board focus at Iluka across all of its
mines. Iluka has dedicated geotechnical resources and draws
on external tailings and dam management experts to continue
to improve 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 plans in place to develop and deliver ongoing training
and leadership capability building 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 projects 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 in New South Wales and 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.
PRODUCTION DEMAND AND PRICE RISKS
FINANCIAL 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 changes that reduce the level of feedstock
required by our customers (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 settings and
inventory levels in the context of market demand.
CYBER RISKS
Iluka takes a risk-based approach to manage cyber security with
a focus on ensuring good practice across standard processes.
Iluka leverages leading frameworks such as National Institute of
Standards and Technology (NIST) and guidance from Australian
Government’s Cyber Security Centre. Iluka has a range of
measures to manage cyber security risk including:
•
•
•
•
•
•
a cybersecurity strategy program as part of Iluka’s overall
IT strategy;
clear responsibilities with a centralised IT function and
dedicated capability of a cyber team;
governance reporting and regular assurance including
external audits, penetration testing, and assessment
against standards and leading guidance such as the
Australian Cyber Security Centre Essential Eight;
a focus on ‘good basics’ including awareness and
training, patching, accurate asset and software registers,
authentication controls, management of change, physical
access controls to critical centres and servers and cyber
risk reviews;
a range of technical platforms and controls from leading
providers; and
cyber response plan including post incident review
processes with root cause analysis.
The Sierra Rutile operation has a stand-alone separate IT
environment and team, including locally set and managed cyber
controls.
Iluka faces risks relating to the cost of and access to funds,
movement in interest rates and foreign exchange rates (refer
Note 21 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.
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 on resultant
product demand. The company maintains a strong business
focus to detect and respond to changes in demand which
inform changes to the operational settings of Iluka’s assets.
Iluka Resources Limited, Annual Report 2020
47
BUSINESS RISK AND MITIGATION
GOVERNMENT AND REGULATORY RISK
ENVIRONMENTAL RISKS
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,
heritage and social laws and expectations which are addressed
through dedicated internal resources to deal with these issues.
Community expectations are continually evolving and Iluka
can best manage these through the development of robust
strategies, maintaining strong relationships with communities
and delivering on its commitments.
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 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 INTERRUPTIONS RISK
Circumstances may arise which preclude sites from operating
including natural disaster, material disruption to Iluka’s logistics
chain, critical plant failure or industrial action.
The company undertakes regular reviews for mitigation of
property and business continuity risks. Iluka utilised the
company’s Crisis and Emergency Management Processes
to manage the COVID-19 outbreak and to conduct detailed
site-based risk assessments, procedures and processes,
and minimise the health, safety and business impacts.
The Emergency Management Processes and COVID-19
Management Plans are still fully active in Sierra Leone to protect
the health and safety of Iluka’s employees and the communities
in which it operates. Appropriate business plans, policies and
training exercises at Iluka sites provide support to mitigate
the company’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
which are overseen by the Board. The company's Sustainability
Report contains further information on Iluka's operating
conditions, as well as elements of the business strategy.
This document (for the 2019 year), as well as other company
information, is available on Iluka’s website www.iluka.com.
The Iluka Sustainability Report in respect to the 2020 year, is
planned for release in April 2021.
48
Iluka Resources Limited, Annual Report 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. This has included the company assessing
the potential physical and transition climate risks and
opportunities which may impact its operations.
Physical risks may include:
•
•
•
•
•
decreased rainfall and prolonged drought;
increased number of very hot days and heatwaves;
less frequent, but more intense rainfall;
reduced access to consumables; and
reduced availability of water.
Transition risks may include:
•
•
•
the implementation of a carbon price;
investor and key stakeholder reputational risk; and
stranded asset risk for equipment and machinery.
Transition opportunities may include:
•
•
•
increased utilisation of renewable energy by sites;
increased utilisation of by-products; and
Improved market position due to higher demand for
products, due to lower whole-of-life emissions, and
due to increased demand for rare earths as a result of
global shift toward renewable power generation and
electrification.
Iluka Resources Limited, Annual Report 2020
49
DELIVER
SUSTAINABLE
VALUE
50
Iluka Resources Limited, Annual Report 2020
FINANCIAL REPORT AND
REMUNERATION 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
52
53
63
87
88
89
91
92
93
94
145
146
Iluka Resources Limited, Annual Report 2020
51
RESULTS FOR ANNOUNCEMENT TO THE MARKET
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
For the year ended 31 December 2020
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 2020 (the 'financial year') compared with the year ended 31
December 2019 (the 'comparative year').
All currencies shown in this report are Australian dollars unless otherwise indicated.
Revenue from ordinary activities - continuing operations
Net profit after tax for the period from ordinary activities - continuing operations
Net profit after tax for the period attributable to equity holders of the parent
Down 19.7% to $990.6m
Up to $103.5m
Up to $2,411.9m
Dividends
2020 final: 2 cents per ordinary share (100% franked) to be paid in April 2021
2019 final: 8 cents per ordinary share (100% franked) paid in April 2020
Demerger dividend of $1,808.1 million, distributed in November 2020
Key ratios
Basic profit/(loss) per share (cents) - continuing operations
Diluted profit/(loss) per share (cents) - continuing operations
Free cash flow per share (cents)¹
Return on Equity²
Net tangible assets per share ($)
2020
24.5
24.4
5.2
283.7
3.03
2019
(71.0)
(71.0)
33.0
(26.6)
1.63
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 remains active for the 2020 final dividend.
The Directors have determined that no discount will apply for the DRP in respect of the 2020 final dividend.
Shares allocated to shareholders under the DRP for the 2020 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 15 March 2021. The last date for receipt of election
notices for the DRP is 11 March 2021.
Independent auditor's report
The Consolidated Financial Statements upon which this Appendix 4E is based have been audited.
52
52
Iluka Resources Limited, Annual Report 2020
DIRECTORS’ REPORT
For the year ended 31 December 2020
DIRECTORS' REPORT
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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 2020.
The information appearing on pages 14 to 49 forms part of the Directors' Report for the financial year ended 31
December 2020 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
T O'Leary
M Bastos
R Cole
S Corlett
J Ranck
L Saint
J Seabrook (retired 9 April 2020)
DIRECTORS' PROFILES
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Greg Martin
BEc, LLB, FAIM, MAICD
61
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:
Greg contributes to Iluka 40 years’ experience in the utilities, financial services , energy and energy related
infrastructure sectors in Australia, New Zealand and internationally.
Greg held the position of Managing Director and Chief Executive Officer of The Australian Gas Light Company for
five years. After AGL, Greg joined Challenger Financial Services Group as Chief Executive,
Infrastructure,
principally engaged in the management of predominantly European and North and South American infrastructure
investments.
Greg is a previous Non-Executive Director of Energy Developments Limited and the Australian Energy Market
Operator Limited; Chairman of the Royal Botanic Gardens & Domain Trust of New South Wales; and Deputy
Chairman of the Australian Gas Association. Greg also previously served as inaugural Chairman of the Energy
Supply Association of Australia. He is also a past member of the Business Council of Australia and Committee
for the Economic Development of Australia.
53
Iluka Resources Limited, Annual Report 2020
53
DIRECTORS’ REPORT
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
Other relevant directorships and offices (current and recent):
• Prostar Investments (Australia) Ply Ltd - Non-executive Chairman (retired December 2017)
• Sydney Desalination Plant Pty Ltd - Non-executive Chairman (retired July 2019)
• Coronado Global Resources Inc. - Non-executive Chairman (retired February 2019)
• Western Power Corporation - Non-executive Deputy Board Chair (appointed April 2015)
• Spark Infrastructure - Non-executive Director (appointed January 2017)
• Santos Limited - Non-executive Director (retired August 2017)
• Cosmos Capital Limited - Non-executive Chairman (appointed July 2020)
• Hunter Water Corporation - Non-executive Chair (appointed January 2021)
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Tom O'Leary
LLB, BJuris
57
Managing Director
October 2016
No
Relevant skills and experience:
Tom contributes to Iluka more than 30 years’ experience in executive management, business development and
investment banking in the energy and banking sectors.
Tom 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 appointed
Managing Director, Wesfarmers Energy, in 2009. Prior to joining Wesfarmers, Tom worked in London for 10 years
in finance law, investment banking and private equity. Tom holds a law degree from The University of Western
Australia and has completed the Advanced Management Program at Harvard Business School.
Other relevant directorships and offices (current and recent):
• Clontarf Foundation - Non-executive Director (appointed June 2006)
• Edith Cowan University Council - Non-executive Member (retired June 2017)
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Marcelo Bastos
BEng Mechanical (Hons, UFMG), MBA (FDC-MG), MAICD
57
Non-executive Director
February 2014
Yes
Current positions:
• Audit and Risk Committee - Member
• Nominations and Governance Committee - Member
Relevant skills and experience:
Marcelo contributes to Iluka more than 35 years’ of operational and project experience in the mining industry
across numerous commodities and geographies, particularly in Australia, Africa and South America.
Marcelo has extensive experience in major projects development and operation, and company management in
the metals and mining industry. Marcelo was formerly the Chief Operating Officer of the global resources
company, MMG Limited, with responsibility for its global operations.
Prior to MMG, Marcelo held senior executive positions with BHP and Vale, including CEO BHP Billiton Mitsubishi
Alliance (BMA), President of BHP’s Nickel West, President of Cerro Matoso and Nickel Americas, and Vale
Director of Copper Operations. Marcelo is a former Member of the Western Australia Chamber of Mines and
Energy and served as Vice President of the Queensland Resources Council.
54
54
Iluka Resources Limited, Annual Report 2020
DIRECTORS’ REPORT
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
Other relevant directorships and offices (current and recent):
• Golder Associates - Non-executive Director (appointed July 2017)
• Aurizon Holdings Limited - Non-executive Director (appointed November 2017)
• OZ Minerals Limited - Non-executive Director (retired April 2019)
• Anglo American PLC - Non-executive Director (appointed April 2019)
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Rob Cole
LLB (Hons), BSc
58
Non-executive Director
March 2018
Yes
Current positions:
• Nominations and Governance Committee - Member
• People and Performance Committee - Member
Relevant skills and experience:
Rob contributes to Iluka more than 30 years’ of commercial, business strategy and planning experience in the
energy and resources sectors.
Rob was previously Managing Director of oil and gas production and exploration company, Beach Energy. 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.
Rob is currently a non-executive director of various public, government-owned and not for profit companies and
an external advisor (gas industry) to the Power and Water Corporation of the Northern Territory.
Other relevant directorships and offices (current and recent):
• Southern Ports Authority - Non-executive Chair (resigned February 2020)
• GLX Group - Non-executive Chair (resigned April 2020)
• St Bartholomew's House Inc. - Non-executive Director (appointed November 2016)
• Synergy - Non-executive Chair (appointed November 2017)
• Perenti Global Limited - Non-executive Director (appointed July 2018)
• Power & Water Corporation (Northern Territory) - external member of the Regulation & Market Operations
subcommittee (appointed June 2020)
• Landgate - Non-executive Chair (appointed August 2020)
55
Iluka Resources Limited, Annual Report 2020
55
DIRECTORS’ REPORT
For the year ended 31 December 2020
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Susie Corlett
BSc (Geo, Hons), FAusIMM, GAICD
50
Non-executive Director
June 2019
Yes
Current positions:
• Audit and Risk Committee - Member
• Nominations and Governance Committee - Member
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
Relevant skills and experience:
Susie contributes to Iluka more than 25 years’ experience in exploration, mining operations, mining finance and
investment.
Susie is a professional non-executive director following an executive career spanning mine operations,
investment banking and private equity 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 Pacific Road Capital Ltd (a 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):
• Australian Institute of Mining & Metallurgy (AusIMM) Education Endowment Fund - Trustee (appointed June
2018)
• Foundation for National Parks and Wildlife - Non-executive Director (appointed June 2018)
• Aurelia Metals Ltd - Non-executive Director (appointed October 2018)
• The David Burgess Foundation - Non-executive Director (retired June 2019)
• Mineral Resources Limited - Non-executive Director (appointed January 2021)
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
James (Hutch) Ranck
BSE (Econ), FAICD
72
Non-executive Director
January 2013
Yes
Current positions:
• People and Performance Committee - Chairman
• Nominations and Governance Committee - Member
Relevant skills and experience:
Hutch contributes to Iluka a combination of over 40 years’ experience covering a wide mix of industries,
geographies as well as management practices, and extensive experience in mentoring leaders.
Hutch 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 2010. Hutch previously served as a director in a variety of companies and organisations
including: CSIRO; Business Council of Australia; Australian Government Statutory Authority - APVMA; Chemical
and Plastics Association - PACIA; and was a member of the Prime Minister’s Science, Engineering and Innovation
Council - PMSEIC.
56
56
Iluka Resources Limited, Annual Report 2020
DIRECTORS’ REPORT
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
Other relevant directorships and offices (current and recent):
• Elders Limited - Non-executive Chairman (retired December 2018)
• CSIRO - Non-executive Member of the Board (retired May 2018)
• Autopak-Vetlab Group - Non-executive Chairman (appointed April 2019)
• J.L.Lennard - Non-executive Chairman (appointed May 2020)
Name:
Qualifications:
Age:
Role:
Appointed:
Independent:
Lynne Saint
BCom, GradDip Ed Studies, FCPA, FAICD, Cert Business Administration
58
Non-executive Director
October 2019
Yes
Current positions:
• Audit and Risk Committee - Chairman
• Nominations and Governance Committee - Member
Relevant skills and experience:
Lynne contributes to Iluka over 30 years’ financial, auditing, corporate governance, enterprise risk, supply chain
management, project management, and commercial experience both within Australia and internationally.
Lynne 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. Prior to Bechtel, Lynne worked in commercial roles
at Fluor Daniel and Placer Dome. Lynne also held consulting and auditing roles with PwC and KPMG. In 2003,
Lynne was recognised as the Telstra Queensland Business Woman of the Year.
Other relevant directorships and offices (current and recent):
• NuFarm Ltd (appointed December 2020)
57
Iluka Resources Limited, Annual Report 2020
57
DIRECTORS’ REPORT
For the year ended 31 December 2020
MEETINGS OF DIRECTORS
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
In 2020, the Board met on 13 occasions, of which seven were scheduled meetings. In addition to these formal
meetings, the Board spent a day dedicated to strategic planning. Due to the COVID-19 pandemic, site visits were
not able to be carried out during 2020. The Chairman chaired all the meetings. In addition, the non-executive
directors meet independent of management to discuss relevant issues at each board meeting. Directors’
attendance at Board and committee meetings during 2020 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) Ms Saint was appointed Chairman of the Audit and Risk Committee on 9 April 2020.
(4) Ms Seabrook retired as a director on 9 April 2020.
DIRECTORS SHAREHOLDING
Directors shareholding is set out in the Remuneration Report, section 7.
EXECUTIVE TEAM PROFILES
Matthew Blackwell, BEng (Mech), Grad Dip (Tech Mgt), MBA, MAICD, MIEAust
Head of Projects and Marketing
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 was made Head of Major Projects, Engineering & Innovation. In late 2020, Mr Blackwell
reassumed responsibility for Sales and Marketing. Prior to joining Iluka he was Executive Vice President of TSX
listed Asia Pacific Resources, based in Thailand. Mr Blackwell’s background in the mining industry includes
varied roles spanning multiple commodities.
58
58
Iluka Resources Limited, Annual Report 2020
DIRECTORS’ REPORT
For the year ended 31 December 2020
Rob Hattingh, MSc (Geochem), GAICD
Chief Development Officer, Sierra Rutile
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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 and 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)
Chief Technology Officer and Head of Rare Earths
Mr McGrath joined Iluka in 1993 and has held technical and operations management roles throughout Iluka for
many years. Mr McGrath is now focused on developing Iluka's rare earths business as well as serving as chief
technology officer. His most recent appointment was as General Manager - Cataby and Southwest Operations
where he oversaw mining and synthetic rutile operations along with 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.
Adele Stratton, BA (Hons), FCA, GAICD
Chief Financial Officer and Head of Development
Ms Stratton joined Iluka in 2011, was appointed Chief Financial Officer in August 2018 and assumed
accountabilities for Head of Development in October 2020. She is a qualified chartered accountant with 20 years’
experience working in both public 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, Australian Operations
Mr Tilka joined Iluka in November 2004 and has held operations management roles throughout Iluka. His most
recent appointment was General Manager - Jacinth Ambrosia and Midwest. Prior to this Mr Tilka was the Chief
Operating Officer for Sierra Rutile Ltd, 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, FCG, 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 was the Pro Chancellor and a member of the
Council at Curtin University until March 2020. She is also a former Chairman of the WA State Council of the
Governance Institute of Australia and non-executive director of Western Power. She is currently Deputy Chair and
a member of the Board at Amana Living, an aged care provider.
59
Iluka Resources Limited, Annual Report 2020
59
DIRECTORS’ REPORT
For the year ended 31 December 2020
COMPANY SECRETARY
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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 FCG (CS, CGP) 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 63 to 86 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. Iluka has an
emerging position in rare earths elements, which are contained in the mineral sands monazite and xenotime.
Iluka holds a 20% stake in Deterra Royalties Limited (Deterra), the largest ASX-listed resources focused royalty
company.
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 28 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
60
60
Iluka Resources Limited, Annual Report 2020
DIRECTORS’ REPORT
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
•
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 87.
ENVIRONMENTAL REGULATIONS
So far as the directors are aware, there have been no material breaches of the Group's licences and all mining
and exploration activities have been undertaken in compliance with the relevant environmental regulations.
OTHER MATTERS
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 or 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 the
Applicant on behalf of Iluka shareholders for alleged breaches of Iluka’s continuous disclosure obligations, and
misleading or deceptive conduct in relation to disclosures made by Iluka to the market between April and July
2012.
The trial of the class action is scheduled to commence on 8 March 2021 in the New South Wales registry of the
Federal Court of Australia.
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.
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.
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
that arose prior to the Group acquiring its interest in SRL. 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 2020, 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.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
The directors are not aware of any other matter or circumstance not otherwise dealt with in the Financial Report
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.
61
Iluka Resources Limited, Annual Report 2020
61
DIRECTORS’ REPORT
For the year ended 31 December 2020
DIVIDEND
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
The directors have declared a fully franked final dividend of 2 cents per ordinary share payable on 8 April 2021.
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 41. 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 2020 may be accessed from
the Company’s website at http://www.iluka.com/about-iluka/governance.
ROUNDING OF AMOUNTS
The Company is of a kind referred to in "ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument
2016/191", issued by the Australian Securities and Investments Commission, relating to the 'rounding off' of
amounts in the Directors' Report and accompanying Financial Report. Amounts in the Directors' Report have been
rounded off in accordance with that Rounding Instrument to the nearest hundred thousand dollars, or in certain
cases, to the nearest dollar.
This report is made in accordance with a resolution of the directors.
G Martin
Chairman
T O'Leary
Managing Director
25 February 2021
62
62
Iluka Resources Limited, Annual Report 2020
DIRECTORS’ REPORT
For the year ended 31 December 2020
REMUNERATION REPORT
MESSAGE FROM THE CHAIRMAN OF THE PEOPLE & PERFORMANCE COMMITTEE
Dear Shareholders
I am pleased to present Iluka’s 2020 Remuneration
Report.
As the Chairman and the Managing Director have
reflected, the company delivered a disciplined
performance over the past year across a number of
areas – operations, marketing, growth opportunities and
sustainability – all in the face of unprecedented
challenges. This included the demerger of the royalty
business, which was an especially important milestone.
IMPACT OF COVID-19
The COVID-19 pandemic presented a particularly unique
challenge and whilst the focus for the company was on
maintaining business outcomes, the care and welfare of
our people has also been at the forefront of our actions
and decision making. We are proud of the willingness of
our employees to respond to the changing
circumstances throughout the year. Their commitment
to Iluka has ensured the delivery of a disciplined
operational performance.
In light of the exceptional circumstances of 2020, the
Board has carefully considered remuneration outcomes.
This consideration encompassed company performance
and achievements; the experience of shareholders;
rewarding executives appropriately; and alignment with
stakeholder expectations. The Board also appreciates
the feedback provided by shareholders and proxy
advisers as part of the consideration process.
For 2020, the Board has determined that all Executive
awards under the Executive Incentive Plan (EIP) will be
delivered fully in equity, with no cash incentive paid. This
is in addition to the change in structure for the Managing
Director’s award which will be fully delivered in equity
from 2020 onwards. Scorecard objectives approved by
the Board at the beginning of the year, prior to the onset
of the pandemic, remained assessable throughout, with
no adjustment for the business impact of COVID-19.
EXECUTIVE REMUNERATION APPROACH
Iluka’s approach to executive remuneration is designed
to operate through changing circumstances and
environments. Executives are rewarded through a single
incentive plan (the EIP). Outcomes are determined based
on an annual scorecard set by the Board, with the award
delivered predominately in equity that vests over 5 years
(for 2020, all awards are in equity). A significant
proportion of the equity awarded is also subject to a
relative total shareholder return hurdle.
A number of changes have been made to the EIP,
effective for the 2020 year, following engagement with
and feedback from shareholders. These changes were
detailed in our 2019 Remuneration Report and received
strong support with the report receiving a 97.35% ‘for’
vote.
2020 changes to Executive Incentive Plan:
•
•
•
•
•
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
Further detail is provided in Section 3 of this Report.
2020 PERFORMANCE OUTCOMES
While Iluka’s reported financial result was very strong as
a consequence of the profit on demerger (of Deterra
Royalties) underlying earnings were modest but notable
given the circumstances in which they were achieved.
Notwithstanding the company’s disciplined approach to
production settings and markets, the threshold set for
financial performance was not met. The Board is,
however, pleased with the way in which management has
driven the financial performance of the company given
the circumstances faced through 2020.
Threshold targets for production performance, which
related exclusively to Sierra Rutile, were also not
achieved.
Sustainability targets were partially met. On safety, the
total recordable injury frequency rate was marginally
lower at 2.8 (compared to 2.9 in 2019) and the company’s
rehabilitation target was met. Disappointingly, threshold
performance for environmental incidents was not met.
Strong performance was achieved across a number of
strategic objectives. In particular, the demerger of Iluka’s
royalty business was executed in November, with the
listing of Deterra Royalties on the ASX, and is expected
to unlock significant value over the longer term. Key
growth projects were also progressed, including Iluka’s
Rare Earth initiative. These are detailed further in Section
4 of this report.
Key 2020 Highlights:
•
•
MD Executive Incentive Plan outcome was 30% of
maximum (45% of target).
Executive Key Management Personnel outcomes
were between 23 % and 30% of maximum (34% and
45% of target).
Further detail is provided in Section 4 of this Report.
1
Iluka Resources Limited, Annual Report 2020
63
DIRECTORS’ REPORT
For the year ended 31 December 2020
The Board believes these outcomes fairly recognise the
strong, disciplined performance of a management team
confronted by truly exceptional circumstances.
HISTORICAL INCENTIVE PLAN OUTCOMES
The performance period relating to the 2017 Long Term
Incentive Plan (LTIP), the last grant under the legacy LTIP,
ended on 31 December 2020 and 43.57% of this award
will vest.
In addition, the performance period for the Managing
Director’s 2016 LTIP award came to an end in December
2020. 35.72% of this award will vest.
Further detail relating to these awards can be found in
Section 4.
IMPACT OF DETERRA ROYALTIES DEMERGER
As part of the demerger, the Board put arrangements in
place relating to outstanding equity awards. These
arrangements preserve the overall value of the
incentives following the demerger; and ensure that
Executives and employees are not materially
advantaged or disadvantaged by the transaction. They
are detailed further in Section 8.
On behalf of the Board, I invite you to review our
Remuneration Report. We look forward to your ongoing
feedback and continuing discussions with our
shareholders and their proxy advisers on our
remuneration approach. Thank you for your ongoing
support.
Yours sincerely
Hutch Ranck
People and Performance Committee Chair
64 Iluka Resources Limited, Annual Report 2020
2
DIRECTORS’ REPORT
For the year ended 31 December 2020
CONTENTS
1. Who is covered by this report?
2.
3.
4.
5.
6.
7.
8.
Iluka’s approach to executive remuneration
Executive remuneration framework and details
2020 performance highlights and alignment to Executive KMP remuneration outcomes
Remuneration governance
Non-executive director fees
Statutory disclosures
Impact of the demerger of Deterra Royalties on Executive incentives
65
66
67
71
77
80
81
85
1. WHO IS COVERED BY THIS REPORT?
This Report details the remuneration arrangements for Iluka’s key management personnel (KMP). KMP in 2020 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
M Blackwell
A Stratton
Head of Projects and Sales & Marketing1
Chief Financial Officer and Head of Development2
Full year
Full year
S Tilka
General Manager, Australian Operations
Appointed 27 October 2020
Former Executive KMP
J Andrews
Head of Strategy, Planning and Business Development
C Barbier
Head Of Marketing
Ceased 30 October 20203
Ceased 30 October 20204
Current Non-Executive Directors
G Martin
M Bastos
R Cole
S Corlett
J Ranck
L Saint
Chairman, Independent Non-Executive Director5
Independent Non-Executive Director
Independent Non-Executive Director6
Independent Non-Executive Director
Independent Non-Executive Director7
Independent Non-Executive Director
Former Non-Executive Directors
Full year
Full year
Full year
Full year
Full year
Full year
J Seabrook
Independent Non-Executive Director
Ceased 9 April 20208
1 Prior to 27 October 2020 M Blackwell held the role of Head of Major Projects, Innovation and Engineering.
2 Prior to 27 October 2020 A Stratton held the role of Chief Financial Officer.
3J Andrews was a member of KMP until 30 October when he ceased employment with the company and became Managing Director of Deterra
Royalties
4C Barbier ceased to be a KMP on 30 October and is expected to cease employment with the company in 1H 2021.
5G Martin was appointed to the People and Performance committee (previously Remuneration and Nomination Committee) on 21 February
2014.
6R Cole was appointed to the People and Performance Committee on 1 March 2018.
7J Ranck was appointed Chair of the People and Performance Committee on 18 May 2016.
8J Seabrook was appointed Chair of Deterra Royalties Limited on 15 June 2020.
Iluka Resources Limited, Annual Report 2020
65
3
DIRECTORS’ REPORT
For the year ended 31 December 2020
2.
ILUKA’S APPROACH TO EXECUTIVE REMUNERATION
Remuneration Principles
Iluka’s Remuneration Principles provide the foundations for how remuneration is structured and awarded 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, volume 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 2020 objectives for
Executive KMP covered:
•
•
•
•
Financial performance;
Optimisation of production and price settings;
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 including
the strategic review of the royalty business and implementation of the Board’s preferred approach.
In setting objectives, the Board aims to ensure that targets are quantifiable and drive the right commercial and strategic
outcomes for Iluka. Section 4 provides a detailed explanation of the specific targets set in 2020, how they were measured and
our assessment of performance. The EIP award is delivered with a large 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 ensures they are exposed to the same financial consequences as shareholders.
66
Iluka Resources Limited, Annual Report 2020
4
DIRECTORS’ REPORT
For the year ended 31 December 2020
3. EXECUTIVE REMUNERATION FRAMEWORK AND DETAILS
Attract and retain highly
skilled and engaged
executives to Iluka.
Pay for performance and delivering shareholder value
Reward for results and ties executives to long-term company performance.
Fixed remuneration
Executive Incentive Plan (FY20)
Set after considering:
-
Trajectory of the
company’s growth and key
strategic objectives
Relevant market,
comparators and scarcity
of talent
Executive KMP’s
experience and
performance
Executive KMP’s role
responsibilities
-
-
-
Annual scorecard of financial and strategic measures. Board assesses scorecard
performance at the end of the year with resulting award normally split into three
components:
Cash – To be delivered as restricted rights in lieu of cash for 20201 2
Restricted rights - vest in equally weighted tranches on the first, second, third and
fourth 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 five years and the award will vest on a
straight line basis if relative TSR meets or exceeds the median TSR performance of the
selected peer group over the period.
Remuneration principles and structure are supported by policies and mechanisms including security trading and
minimum shareholding policies and clawback arrangements.
Governance
1 As noted in last year’s report, from 2020 the Managing Director’s award will be delivered entirely in equity. In addition, for 2020 only, for other
Executive KMP the cash component will be awarded as restricted rights. From 2021 the cash component will be reinstated for Executive KMP.
2J Andrews will receive his pro-rated 2020 EIP award in cash as agreed as part of his arrangements on appointment to Deterra Royalties.
Iluka Resources Limited, Annual Report 2020
5
67
DIRECTORS’ REPORT
For the year ended 31 December 2020
EXECUTIVE REMUNERATION MIX
For the Managing Director, all variable remuneration is delivered in equity. For other Executive KMP, the design of the EIP
includes a component of variable remuneration delivered in cash. However, in order to better reflect the circumstances of
2020, the Board has determined to award all of the EIP outcomes in equity.
The following diagram sets out the mix for fixed and “at risk” remuneration for Executive KMP during 2020.
2020 remuneration mix (at maximum opportunity)
Managing Director
Other Executive KMP
41%
41%
38%
38%
37%
37%
32%
32%
27%
27%
25%
25%
Fixed
At Risk – Restricted Rights
At Risk – Performance Rights
Fixed
At Risk – Restricted Rights
At Risk – Performance Rights
FIXED REMUNERATION FOR 2020
The Board regularly reviews executive remuneration levels against the market comparators based on a number of factors
including revenue, industry and operational factors including international scope and complexity. Whilst the market
capitalisation of the company has reduced following the demerger of Deterra Royalties, and remuneration positioning against
the market has increased when measured on a market capitalisation basis, the scope and complexity of Executive roles have
not changed materially. The Board also notes that the competition for talent within the resources industry remains extremely
tight, particularly in Western Australia.
There has been no increase to the Managing Director’s fixed remuneration since his appointment to the role in September
2016. No changes were made to Adele Stratton’s or Matthew Blackwell’s remuneration on the broadening of their
accountabilities to include Development (A Stratton) and Sales and Marketing (M Blackwell) in October 2020.
The Board will continue to monitor remuneration levels and appropriate remuneration arrangements will be put in place for
any new appointments.
Executive KMP
T O’Leary
M Blackwell
A Stratton
S Tilka
Former executives
C Barbier
J Andrews
Fixed Remuneration
At 31 December 2019
Fixed Remuneration
At 31 December 2020
$1,400,000
$655,000
$630,000
N/A
$575,000
$580,000
$1,400,000
$655,000
$630,000
$550,000
N/A
N/A
68
Iluka Resources Limited, Annual Report 2020
6
DIRECTORS’ REPORT
For the year ended 31 December 2020
EXECUTIVE INCENTIVE PLAN FOR 2020
As foreshadowed in the 2019 Remuneration Report, the following changes have been made to the EIP effective for the 2020
financial year:
•
•
Increasing the vesting periods, so that over half of the award vests over a four and five year period;
The second test on performance rights has been changed so that 50% of the performance rights will vest for median
performance (which is also the threshold for any vesting), increasing on a sliding scale to 100% of the award vesting
where TSR is at or above the 75th percentile relative to the selected comparator group;
The scorecard has been simplified by increasing the weighting of the financial metrics to 50% and applying the same
set of financial metrics for all participants. Group and individual strategic objective will no longer be measured
separately; and,
A modest increase to target EIP incentive opportunities following detailed benchmarking against Iluka’s peers.
•
•
For 2020, the EIP will operate as below1.
Legend
Award
Vesting
2021
2022
2023
2024
2025
Annual Performance
Period
Scorecard outcome
determines value of entire
EIP award
Relative TSR (5 years)
Grant subject to EIP
scorecard performance
Restricted
rights 25%
vesting (1 years)
Restricted rights
25% vesting (2 years)
Restricted rights
25% vesting (3 years)
Restricted rights
25% vesting (4 years)
Performance rights
Four year vesting period based on
five year relative TSR performance
Five year relative TSR performance
1In 2021, the EIP structure for other Executive KMP will revert to 3 components, which includes a cash payment, delivered at
the end of the annual performance period. The Managing Director award will continue to be delivered fully in equity.
Iluka Resources Limited, Annual Report 2020
7
69
DIRECTORS’ REPORT
For the year ended 31 December 2020
KEY DESIGN FEATURES OF 2020 EIP
2020 EIP
opportunity
The EIP opportunity is expressed as a percentage of fixed remuneration (FR).
Managing Director
Other Executive KMP
Target
(% of FR)
140%
110%
Maximum
(% of FR)
210%
165%
Performance
Measures
Scorecard is based on financial (50%), production (10%), sustainability (15%), individual strategic (25%)
measures.
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 2020
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
For 2020, EIP awards will be delivered in the form of 60% restricted rights and 40% performance rights.
(This was a change from 2019 with the proportion of performance rights increasing from 33%). The
award will be granted for nil consideration in March 2021.
Allocation
Methodology
Restriction and
performance
periods on EIP
equity1
The number of restricted rights and performance rights awarded to each participant is 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 2020
performance period and vest in
equally weighted tranches on the first,
second, third and fourth anniversary of
the grant, subject to continued
service.
Performance rights will be subject to an additional
performance test prior to vesting.
TSR performance will be measured over a five-year period
commencing on 1 January 2020 against the S&P / ASX 200
Resources Index (excluding companies primarily engaged in
the oil and gas sector and non-mining activities). Vesting is
subject to sliding scale.
Performance level to be
achieved
Below 50th percentile
50th percentile
Between 50th and 75th
percentile
75th percentile
Percentage vesting
0%
50%
Sliding scale vesting
100%
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.
1Treatment on termination is detailed in section 5.
70
Iluka Resources Limited, Annual Report 2020
8
DIRECTORS’ REPORT
For the year ended 31 December 2020
4. 2020 PERFORMANCE HIGHLIGHTS AND ALIGNMENT TO EXECUTIVE KMP
REMUNERATION OUTCOMES
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Outlined below is the 2020 performance compared to the historic performance of the Group.
HISTORICAL COMPANY PERFORMANCE
Net profit/(loss) after tax ($m) - Reported
(224.0)
(171.6)
20161
20171
Net profit/(loss) after tax ($m) – Underlying2
Underlying EBITDA (Group) ($m)2
EBITDA (Group) margin (%)
Free cash flow ($ million)
Earnings per share (cents)
Return on equity (%)
Closing share price ($)4
Dividends paid (cents)5
Franking credit level (%)
Average AUD : USD spot exchange rate (cents)
Revenue per tonne Z/R/SR sold ($/t)
(23.8)
150.5
13.9
47.3
(53.3)
(17.1)
3.69
3
100
74.4
999
95.6
360.5
35.4
321.9
(41.0)
(20.1)
5.17
31
100
76.7
2018
303.9
300.7
600.1
48.2
304.4
72.2
31.8
3.87
29
100
74.8
20191
20201
(299.7)
2,410
278.7
151.23
616.0
423.1
51.6
139.7
(71.0)
(26.6)
4.73
13
100
69.5
44.7
36.3
570.4
283.7
6.49
2
100
69.1
1,079
1,426
1,654
1,625
1Reported earnings in 2016, 2017, 2019 and 2020 were impacted by significant impairments and write-downs; profit on demerger and/or
changes to rehabilitation provisions for closed sites.
2Underlying Net profit/(loss) after tax and Group EBITDA excludes adjustments including impairments and write-downs; profit on demerger; and
changes to rehabilitation provisions for closed sites.
3The reconciliation for the 2020 Underlying Net profit/(loss) after tax can be found on pages 22-23 of the Financial Results.
42016, 2017, 2018 and 2019 represent the historical closing share price adjusted for the demerger of Deterra Royalties, sourced from FactSet
via Nasdaq Excel Add-in.
5 Dividends paid in relation to the year.
Iluka Resources Limited, Annual Report 2020
9
71
DIRECTORS’ REPORT
For the year ended 31 December 2020
2020 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 2020, and the performance achieved. These targets were not adjusted for the
impact of COVID-19. The Board did, however, exercise discretion to exclude the impact of the profit on demerger of Deterra
Royalties from performance outcomes.
Scorecard measure
and target
Weight
Performance and outcome
Threshold – Target - Stretch
FINANCIALS
50%
Outcome – 0% of target; 0% of maximum
Group ROC (%)1
Target 2020 budget
20%
Group NPAT1
15%
All in Unit Cash Costs
of Production $/t
Target $1,129 / t
15%
1Disclosure of financial targets
Below threshold
Return on capital of 311% was adjusted to exclude the impact of the profit on the
demerger of Deterra. The adjusted return on capital of 36% was below threshold.
Adjusted returns were lower due to reduced sales volumes resulting from the
COVID-19 pandemic, whilst product pricing was maintained throughout this
challenging period.
Below threshold
Similarly, Group NPAT was adjusted to exclude the profit on demerger; adjusted
NPAT was below threshold. 2020 saw market demand for zircon and titanium
dioxide feedstocks hampered by the ensuing global lockdowns caused by COVID-
19. This reduction in demand had a direct impact on the NPAT generated in
comparison to what was originally targeted prior to the pandemic and this had the
largest impact on financial performance. Pleasingly, sales prices were maintained
despite this backdrop due to Iluka’s market discipline demonstrated through the
adjustment to production settings.
Below threshold
Zircon production settings were reduced, removing ~10% of global supply –
preserving price margins and, ultimately, the value of the mineral products mined
and processed. The lower production resulted in higher unit costs, despite the cost
saving measures introduced throughout the year.
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
10%
Outcome – 0% of target; 0% of maximum
Below threshold
Sierra Rutile
Z/R kt
Target 170
10%
Overall production of 127kt was below threshold. Operations in Sierra Leone were
impacted by a number of downtime events and reduced throughput and COVID-19
quarantine and travel restrictions which limited the ability to maintain specialised
expatriate skillsets
72
Iluka Resources Limited, Annual Report 2020
10
DIRECTORS’ REPORT
For the year ended 31 December 2020
Scorecard measure
and target
Weight
Performance and outcome
Threshold – Target - Stretch
SUSTAINABILITY
15%
Outcome – 60% of target; 40% of maximum
Group Total
Recordable Injury
Frequency Rate
Reduction to 2.6
Group Closure Index
(%)
Reduction of
rehabilitation liability
through closure index
target of 103%
Group environmental
level 3 and above
incidents
Target of 13 or less
5%
5%
Threshold
The targeted reduction was not met although the TRIFR decreased from 2.9 at the
end of 2019 to 2.8 at the end of 2020. Total Recordable Injuries reduced from 30 in
2019 to 27 in 2020.
Target
Target performance was achieved as a result of rehabilitation of 576 hectares
during 2020. Despite expansion of our operating sites, this outcome has enabled
Iluka’s total open area to remain steady at 10,125 hectares.
Below Threshold
2.5%
There were 15 level 3 (or above) environmental incidents during 2020 compared to
13 in 2019. The majority (11) were associated with non-toxic slurry, sediment or
saline water releases. The remainder comprised land disturbance (2), a single
hydrocarbon spill and air emission exceedance.
Threshold
Closed actions by due
date
95% of actions
(excluding SRL) closed
out by initial set due
date
GROUP SCORECARD2 Outcome – 12% of target; 8% of maximum
2.5%
91% of actions (identified through incident investigations, planned workplace
inspections and safety visits) were closed out by initial due date on a rolling 12
month basis. Performance improved from March 2020 where target performance
was generally achieved across the Australian operations.
2 Financials, Production, Sustainability
Iluka Resources Limited, Annual Report 2020
11
73
DIRECTORS’ REPORT
For the year ended 31 December 2020
MANAGING DIRECTOR INDIVIDUAL OBJECTIVES
Individual strategic objectives were set based on individual KMP accountabilities. Outlined below is assessment of the
Managing Director’s performance against the Individual Strategy scorecard measure and corresponding EIP outcome.
Given the unprecedented external circumstances presented in 2020, initially as a direct result of the COVID-19 pandemic, the
Board considered carefully its assessment of the delivery of strategic objectives. In determining the final outcome, the Board
assessed the Managing Director’s performance highly, in particular his strong leadership in delivering the demerger of Deterra
Royalties, the management of price and volume settings, the phased advancement of Iluka’s rare earths initiative, and the
focus on costs as evidenced by the efficiency programme commenced in H2 2020, all achieved in the circumstances of the
2020 year.
Scorecard
measure
(weight)
INDIVIDUAL
STRATEGY (25%)
Complete strategic
review of royalty
business and
implement Board’s
preferred approach
Pursue value
accretive
opportunities to
deliver sustainable
value over the long
term
Performance
Threshold – Target - Stretch
Outcome – 144% of target; 96% of maximum
Strategic review resulted in decision to proceed with demerger of Deterra Royalties (Deterra) in
February 2020 and successfully implemented in H2 2020, despite the challenges presented by the
COVID-19 pandemic. The demerger resolution was supported by 99.92% of shareholders who
voted in the October 2020 shareholder extraordinary general meeting.
Field activities associated with the third trial (T3) of Iluka’s innovative underground mining method
at Balranald were completed during the year. The field activities confirmed the effectiveness of the
underground mining method and the company will determine whether to proceed with a Definitive
Feasibility Study in 2021.
Iluka’s rare earths initiative continues to develop. Phase 1 at Eneabba is operational and exporting
a 20% monazite-zircon concentrate. Phase 2 was approved in August 2020 and is in execute, with
the objective of producing a 90% monazite concentrate. Iluka is also exploring the possibility of
implementing Phase 3: the establishment of a rare earths refinery at Eneabba, comprising a
cracking and leaching plant, together with separation and finishing facilities, with a view to
producing refined rare earth oxides.
Other potential developments have been progressed and are continuing in feasibility study phase.
Progress
Sembehun
feasibility study and
implement Board’s
preferred approach
to further
investment in Sierra
Rutile
The hydro mining trial scheduled for Q1 2020 to inform the Sembehun development was not
possible as a result of COVID-19 related travel restrictions in Sierra Leone. As a result the
feasibility study has not been completed and the focus shifted, early in 2020, to maintaining the
safety and continuity of operations. While continuity has been maintained and the health and
safety of the employees and community members has been prioritised through treatment of
impacted people, contact tracing, isolating and quarantining; production and financial
performance were impacted and returns continued to disappoint; Iluka continues to consider the
most appropriate path to generate value from the investment.
Optimise price and
volume settings
As a consequence of COVID-19 related impacts on global zircon consumption, Iluka adjusted its
production settings to withdraw approximately 10% of global supply from the market in 2020. The
more balanced supply/demand settings led to relatively stable zircon prices across the year.
Iluka’s titanium dioxide feedstocks are largely contracted on take or pay terms with the aim of
safeguarding shareholder returns on significant capital investments (particularly the Cataby
development). Iluka has taken appropriate steps, negotiation followed by the commencement of
litigation under Iluka’s long term contract with Chemours, to defend those returns.
OVERALL EIP SCORECARD OUTCOME FOR THE MD
Scorecard measure
Weight
Outcome
Group Scorecard
Individual Strategy MD
Outcome
OVERALL MD RESULT
75%
25%
12%
144%
Weighted
Outcome
9%
36%
45%
Threshold – Target - Stretch
The Individual strategy scorecard area outcomes for other Executive KMP ranged from 100 – 143% of target.
74
Iluka Resources Limited, Annual Report 2020
12
DIRECTORS’ REPORT
For the year ended 31 December 2020
EIP AWARDS FROM 2020 SCORECARD OUTCOMES
The following table presents the outcomes of the EIP award attributed to the 2020 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 2021.
Executive
KMP
Maximum EIP
opportunity
% of target
EIP earned
% of
maximum
EIP earned
Cash
Restricted
Rights
Performance
Rights
Total
T O’Leary
A Stratton
M Blackwell
S Tilka1
$2,940,000
$1,039,500
$1,080,750
$677,582
Former Executives
C Barbier2
J Andrews2, 3
$788,033
$475,885
45
45
43
43
34
39
30
30
29
29
23
26
$0
$0
$0
$0
$529,200
$186,071
$185,889
$118,796
$352,800
$124,047
$123,926
$74,315
$882,000
$310,118
$309,815
$193,111
$0
$123,730
$107,173
$0
$71,448
$0
$178,621
$123,730
1S Tilka’s maximum EIP opportunity and outcome reflects the change to a KMP role part way through the year.
2Represents the period that C Barbier and J Andrews were members of KMP.
3Under the demerger arrangements as set out in the demerger scheme booklet, the Board determined to deliver J Andrews’ 2020 pro-rata EIP
award in cash.
SUMMARY OF REALISED REMUNERATION PAID TO EXECUTIVE KMP IN 2020
This section uses non-IFRS information to explain the “realised remuneration” received by Executive KMP for 2020. This is a
voluntary disclosure intended to demonstrate the link between the remuneration received by Executive KMP and the
performance of Iluka over 2020 (in the case of Fixed Remuneration and EIP Restricted Rights) and over the period since the
award of the LTIPs (from 2016 & 2017 for Mr O’Leary and from 2017 for other Executive KMP).
Executive
KMP
Fixed
Remuneration
$1,400,000
$630,000
$655,000
$100,000
T O’Leary
A Stratton
M Blackwell
S Tilka3
Former Executives
C Barbier4
J Andrews5
Other
$12,463
$12,463
$12,463
$0
EIP
Cash
Restricted Rights
$0
$0
$0
$0
$529,200
$186,071
$185,889
$118,796
LTIP vesting
Performance
Rights1,2
$2,338,990
$51,388
$296,950
$77,082
Total
$4,280,653
$879,922
$1,150,302
$295,878
$479,167
$485,719
$21,877
$59,448
$0
$123,730
$107,173
$0
$84,039
$0
$679,665
$668,897
1 The estimated value of the 2016 Managing Director LTIP and 2017 LTIP awards (both of which reached the end of their performance periods
in 2020; see below under Legacy Arrangements) was calculated using the closing share price of $6.49 at 31 December 2020. The actual value
will be calculated using the closing price at the date of vesting (1 March 2021).
2 The estimated value of the LTIP vesting for Executive KMP other than T O’Leary, relates to the 2017 LTIP award only (which reached the end
of its performance period in 2020) and was calculated using the closing share price of $6.49 at 31 December 2020. The actual value will be
calculated using the closing price at the date of vesting (1 March 2021).
3 Represents the period that S Tilka was a member of KMP.
4 Represents the period that C Barbier was a member of KMP.
5 Represents the period that J Andrews was a member of KMP.
“Fixed Remuneration (FR)” includes base salary and superannuation earned in 2020.
“Other” payments include non-monetary benefits received in 2020, 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
2020 (awarded in March 2021 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” reflects previous awards of shares as a consequence of rights from prior years which reached the end of their
performance period in 2020 and vested in 2021. It does not include awards which may vest in future years subject to
performance conditions.
Iluka Resources Limited, Annual Report 2020
13
75
DIRECTORS’ REPORT
For the year ended 31 December 2020
LEGACY ARRANGEMENTS
MANAGING DIRECTOR 2016 LTIP OUTCOME
At the time of appointment the Managing Director received a 2016 Performance Rights LTIP initial grant. The Board
determined the performance period would commence on appointment (rather than the start of the 2016 year) and would be
tested over an extended period of 4 years and 3 months. Performance was measured against both ROE and relative TSR
performance targets as detailed in the table below. For all other Executives the performance period for the 2016 LTIP
concluded on 31 December 2019 and was reported in the 2019 Remuneration Report.
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
0%
50% vesting at 50th percentile
and full vesting for 75th percentile
60.7 percentile rank (58.64%
TSR)
71.43%
Based on the results of testing, the Board determined that 35.72% (164,807 Rights) of the award would vest.
2017 LTIP OUTCOME – APPLICABLE TO ALL EXECUTIVE KMP
In making the 2017 Performance Rights LTIP grant, the Board wanted to ensure ongoing alignment of the whole the
Executive team and set this award consistently with a 4 year performance period commencing on 1 January 2017, including
the Managing Director. The performance period ended on 31 December 2020. Performance was measured against both
ROE and relative TSR performance targets as detail in the table 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
0%
50% vesting at 50th percentile
and full vesting for 75th percentile
68.6 percentile rank (71.55%
TSR)
87.14%
Based on the results of testing, the Board determined that 43.57%1 of the award would vest.
1In the case of the Managing Director, this gave rise to 195,592 Rights.
76
Iluka Resources Limited, Annual Report 2020
14
DIRECTORS’ REPORT
For the year ended 31 December 2020
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
BOARD
Delegation and oversight of remuneration decisions to People and Performance Committee (PPC)
WITH ADVICE FROM:
PPC
Reports on, and recommends people and remuneration
strategy, frameworks and outcomes to the Board to support
the company’s purpose to deliver sustainable value.
Operating in accordance with a Charter as approved by the
Board, responsibilities include:
•
Overall remuneration strategy of the company;
•
•
•
•
Incentive plan offers and outcomes including all equity
offers to employees;
Succession planning for key roles;
Performance and remuneration for the Managing
Director and Executives, and remuneration of non-
executive; and
Diversity strategy, policies and practices of the company.
BASED ON:
MANAGEMENT
Propose appointments, succession
plans, policies, remuneration structures
and remuneration outcomes for the
PPC for review and recommendation to
the Board.
INDEPENDENT EXTERNAL ADVISORS
Engaged by the company to provide
information on remuneration related
issues including current market
practice, remuneration benchmarking
and market data.
REMUNERATION PRINCIPLES
Aligned with Iluka’s People Policy and form the basis of Iluka’s remuneration framework
(See section 2 for detail on principles).
EXTERNAL ADVICE PROVIDED TO PPC
External remuneration consultants were engaged by the PPC in 2020 to provide advice and market insights in relation to
executive remuneration arrangements. The remuneration consultants did not provide a ‘Remuneration Recommendation’ as
defined in the Corporations Act 2011 during the 2020 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
Unless the Board determines otherwise, 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.
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.
Iluka Resources Limited, Annual Report 2020
15
77
DIRECTORS’ REPORT
For the year ended 31 December 2020
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 2020, 2 members of Executive KMP have met the minimum shareholding
requirement (see below at Section 7). No adjustment has been made to the minimum shareholding
requirement as a result of the demerger of Deterra Royalties. It is anticipated that Executive KMP will
require additional time to meet the requirements.
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.
In December 2020 the Board approved an increase to the number of shares required to be held by the
Chairman and other NEDs, reflecting the lower share price following the demerger of Deterra Royalties.
As a result of this change as at 31 December 2020 no Board members meet the minimum shareholding
requirement.
MSR requirement
Chairman
Other NEDs
No of shares
55,000 (increased from 30,000)
22,000 (increased from 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.
78
Iluka Resources Limited, Annual Report 2020
16
DIRECTORS’ REPORT
For the year ended 31 December 2020
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
A Stratton
Chief Financial Officer and Head of Development
M Blackwell
Head of Projects and Sales and Marketing
S Tilka
General Manager, Australian operations
Former Executives
J Andrews
Head of Strategy, Planning and Business Development
C Barbier
Head of Marketing
Termination Notice Period by Iluka or Employee
6 months
6 months
3 months
3 months
3 months
3 months
If 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.
Iluka Resources Limited, Annual Report 2020
17
79
DIRECTORS’ REPORT
For the year ended 31 December 2020
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 2020 (including superannuation) was $1,217,559. There
were no increases to the non-executive directors’ fees in 2020.
2020 NON-EXECUTIVE DIRECTOR FEE POLICY
Board and Committee Fees
Board
Audit and Risk Committee
People and Performance Committee
Nomination Committee
Chair
Member
2019
$321,400
$ 36,100
$ 30,600
Nil
2020
$321,400
$36,100
$30,600
Nil
2019
$128,800
$ 18,100
$ 15,350
Nil
2020
$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.
2020 NON-EXECUTIVE DIRECTOR STATUTORY REMUNERATION DISCLOSURES
Outlined below are the fees paid to non-executive directors in 2020, prepared in accordance with the requirements of the
Corporations Act 2001 (Cth) and the relevant Australian Accounting Standards.
Name
Year
Current Non-Executive Directors
Board, Committee
Fees
Non-
Monetary
Benefits
Superannuation
Statutory Total
G Martin
M Bastos
R Cole
S Corlett
J Ranck
L Saint
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Former Non-Executive Directors
J Seabrook1
Total fees
2020
2019
2020
2019
$321,400
$321,400
$146,900
$146,900
$144,150
$144,150
$146,900
$85,692
$159,400
$172,975
$159,923
$27,677
$45,597
$176,412
$1,124,270
$1,075,206
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$21,348
$20,767
$13,956
$13,956
$13,694
$13,694
$13,956
$8,141
$15,143
$16,433
$15,193
$2,629
$0
$16,759
$93,289
$92,379
$342,748
$342,167
$160,856
$160,856
$157,844
$157,844
$160,856
$93,833
$174,543
$189,408
$175,115
$30,306
$45,597
$193,171
$1,217,559
$1,167,585
1 J Seabrook retired effective 9 April 2020.
80
Iluka Resources Limited, Annual Report 2020
18
DIRECTORS’ REPORT
For the year ended 31 December 2020
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
Year
FR1
EIP Cash2
Current Executives
T O’Leary
A Stratton
M Blackwell
S Tilka7
2020
2019
2020
2019
2020
2019
2020
2019
Former Executives
C Barbier8
J Andrews9
Total10
2020
2019
2020
2019
2020
2019
$1,400,000
$1,400,000
$630,000
$612,708
$655,000
$655,000
$100,000
N/A
$479,167
$312,569
$485,719
$553,125
$3,749,886
$3,533,402
N/A
$179,031
$0
$82,164
$0
$83,971
$0
N/A
$0
$39,399
$123,730
$74,671
$123,730
$459,236
Non-
Monetary
Benefits3
$12,463
$11,499
$12,463
$11,499
$12,463
$11,499
$0
N/A
$21,877
$67,217
$10,362
$11,499
$69,628
$113,213
Termination
Benefits4
Share Based
Payments5,6
Statutory
Total
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$49,086
$0
$49,086
$0
($73,871)
$1,590,547
$249,891
$258,970
$180,114
$465,032
$180,871
N/A
$131,041
$185,194
($78,418)
$204,440
$589,628
$2,704,183
$1,338,592
$3,181,077
$892,354
$965,341
$847,577
$1,215,502
$280,871
NA
$632,085
$604,379
$590,479
$843,735
$4,581,958
$6,810,034
1 Includes base salary and superannuation.
2 No cash payments made in relation to 2020, except for J Andrews (See footnote 9).
3 Represents car parking for KMP and car parking and immigration support for Christian Barbier
4 Includes cessation entitlements relating to payment in lieu of notice and accrued leave entitlements.
5 Amounts relate to the fair value of awards made under various incentive plans attributable to the year measured in accordance with AASB 2
Share Based Payments. The 2020 share based payments expense has been impacted as a result of the non-market ROE performance
conditions not being met for the 2016 and 2017 grants. Amounts previously recognised in relation to these awards have been reversed in
2020, reducing the expense.
6Additional rights were granted in the year in relation to the 2016 & 2017 LTIP and 2018 & 2019 EIP schemes due to the impact on the awards
from the demerger of Deterra. The granting of these additional rights to compensate for the demerger, led to the awards having the same or
lower fair value as the rights held just before the demerger and therefore no additional expense is recognised.
7 S Tilka became a KMP on 27 October 2020. Remuneration disclosures reflect the period he was a KMP.
8 C Barbier ceased to be KMP on 30 October 2020. Remuneration disclosures for 2020 reflect the period he was KMP.
9 J Andrews ceased to be a KMP on 30 October 2020. Remuneration disclosures for 2020 reflect the period he was a KMP. 2018 Performance
Rights were cancelled and 2019 EIP Restricted and Performance Rights grants were not granted to him. The amounts previously recognised
have been reversed in 2020, reducing the expense.
10 The total for 2019 disclosed in this report is different to the total disclosed in 2019 Annual Report. The difference is due to S Hay's and S
Wickham's remuneration figures being excluded in this report as they are no longer employees of Iluka.
Iluka Resources Limited, Annual Report 2020
19
81
DIRECTORS’ REPORT
For the year ended 31 December 2020
KMP SHARE–BASED COMPENSATION
EIP AND STIP RESTRICTED SHARES AND RESTRICTED SHARE RIGHTS
Name
2017 STIP1
2018 EIP1
2019 EIP1
2020 EIP2
2019 EIP
Additional
Rights3
% of maximum opportunity
awarded4
(restricted
shares)
(restricted
shares)
(restricted
rights)
(restricted
rights)
(restricted
rights)
2017
2018
2019
2020
T O’Leary
A Stratton
M Blackwell
S Tilka5
Former Executives
C Barbier5
J Andrews5
36,273
-
16,635
-
-
-
119,991
33,348
38,646
-
-
28,998
67,563
21,018
21,480
-
13,878
18,868
81,541
28,670
28,642
18,304
16,513
-
55,484
17,261
17,640
6,926
11,397
-
61
-
60
-
-
-
77
77
78
-
-
77
43
44
43
-
41
45
30
30
29
29
23
Nil
The terms and conditions of previous years’ incentive awards are outlined in the relevant year’s Remuneration Report,
available at www.iluka.com.’
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. 2019 EIP awards were made in
March 2020).
2 Represents the estimated number of restricted rights to be awarded under the 2020 EIP additional awards calculated using the closing share
price of $6.49 at 31 December 2020.
3 Relates to additional rights allocations in connection with the demerger of Deterra Royalties. See section 8.
4 The percentage achieved of the EIP or STIP maximum incentive opportunity awarded for the financial year.
5 Disclosures reflect period individuals were members of the KMP.
PERFORMANCE RIGHTS
Number of share rights
Value of share rights
Value of
rights
vested /
exercised
into shares
in 20206
$
$384,743
$0
$0
$0
$0
$0
$243,113
$83,678
$85,521
$0
$10,378
$0
Balance at
1 January
2020/KMP
start date1
739,047
40,406
152,154
32,925
Granted
during
20202
551,118
54,301
97,106
27,040
Name
T O’Leary
A Stratton
M Blackwell
S Tilka
Former Executives
Vested /
exercised
into shares
in 2020
Lapsed
during
20203
Balance at
31 December
2020/ KMP end
date4
Granted in
20205
$
(46,579)
-
-
-
(116,452)
(7,014)
(67,358)
-
1,127,134
87,693
181,902
59,965
C Barbier
J Andrews
46,463
20,360
10,378
-
-
-
(17,953)
(20,360)
38,888
-
1Balance at KMP commencement date of 27 October 2020 for S Tilka.
2Share rights granted in respect of the 2019 EIP, which form part of the share based payments for 2019 to 2022 inclusive. Additional share
rights were also granted in relation to Performance Rights awarded for the 2016 Managing Director LTIP, 2017 LTIP, 2018 EIP and 2019 EIP as
a result of the Demerger. This was to ensure that the value of the holdings were kept 'whole'.
3Share rights which lapsed during 2020 relate to the 2016 LTIP award and MD LTDR (Tranche 3) and 2018 share rights lapsed and 2019 EIP
entitlements not awarded to Julian Andrews on his departure.
4Balance at KMP end date for C Barbier.
5Value at point of grant.
6Value at point of vest.
82
Iluka Resources Limited, Annual Report 2020
20
DIRECTORS’ REPORT
For the year ended 31 December 2020
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
Fair Value per
Share or Right at
Grant Date1
$
2016 LTIP (MD grant)
October 2016
3.71/5.42
March 2017
7.44/5.66
March 2018
10.55
Vesting Year
Expiry year2
2021
2021
2020
2026
2027
2019,2020
March 2019
5.67/9.35
2020, 2021, 2022
2020,2021,2022
March 2020
6.83/9.19
2021, 2022, 2023
2021,2022,2023
March 2021
6.49
2022, 2023,
2024, 2025
2025
20173 LTIP
2017 STIP
2018 EIP4
2019 EIP5
2020 EIP6
1The fair value is calculated in accordance with the measurement criteria of Accounting Standard AASB 2 Share Based Payments.
2Rights granted under the LTIP 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 Represents the fair value of ROE and TSR tranches of 2017 LTIP.
4 Represents the 5 day WAP to the date of grant of restricted shares, and fair value of performance rights awarded under the 2018 EIP for which
the performance period concluded on 31 December 2018.
5Represents the 5 day WAP to the date of grant of restricted shares, and fair value of performance rights to be awarded under the 2019 EIP for
which the performance period concluded on 31 December 2019 .
6Represents the estimated fair value of restricted rights and performance rights to be awarded under the 2020 EIP for which the performance
period concluded on 31 December 2020, calculated using the closing share price of $6.49 at 31 December 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 2020 annual results.
Iluka Resources Limited, Annual Report 2020
21
83
DIRECTORS’ REPORT
For the year ended 31 December 2020
SHAREHOLDINGS OF EXECUTIVE KMP AND THEIR RELATED PARTIES
Name
Balance held
at
1 January
2020/ KMP
start date1,2
T O’Leary
A Stratton
M Blackwell
S Tilka5
Former Executives
C Barbier6
J Andrews
299,459
49,025
82,437
68,220
31,377
33,738
Number of shares
Vesting/
exercise of
share rights
pursuant to
LTDR and
LTIP
46,579
-
-
-
-
-
Awarded as
Restricted
Shares
pursuant to
EIP
123,047
38,279
39,120
6,926
13,878
N/A
Other
changes3
-
(5,765)
(35,314)
-
-
N/A
Balance held
at 31
December
2020/KMP
end date
469,085
81,539
86,243
75,146
45,255
33,738
Minimum
shareholding
met? 4
Yes
No
No
Yes
N/A
N/A
1 J Andrews ceased to be a member of KMP on 30 October 2020. 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 As at 31 December with share price of $6.49.
5 S Tilka became a KMP on 27 October 2020. The opening balance reflects the balance on the date he became a KMP and includes 10,893
restricted shares granted to Mr Tilka in March 2018 as his 2018 Restricted Share Plan award (which will be released to him in March 2021) and
12,718 restricted shares granted to Mr Tilka in March 2019 as his 2019 Restricted Share Plan award (which will be released to him in March
2022).
6 C Barbier ceased to be a member of KMP on 30 October 2020. The closing balance reflects the period he was a KMP.
SHAREHOLDINGS OF NON-EXECUTIVE DIRECTORS AND THEIR RELATED PARTIES
Name
Balance held
at
1 January
2020
30,000
14,379
12,000
5,588
12,762
-
20,540
G Martin3
M Bastos3
R Cole3
S Corlett
J Ranck
L Saint
Former Non-Executive Directors
J Seabrook4
Number of shares1
Net movement
Balance held at
31 December 2020
Minimum
shareholding met? 2
-
165
-
4,405
147
3,500
236
30,000
14,544
12,000
9,993
12,909
3,500
20,776
No
No
No
No
No
No
N/A
1 Non-executive directors do not receive share based compensation and movements in their shareholdings reflect on-market trades.
2Minimum shareholding requirements increased in December 2020.
3 Includes shares held indirectly through a nominee or agent (e.g. family trust).
4Reflects final balance as a director.
On-market Share Purchases
There were no Iluka shares acquired on market in 2020 by the company.
Transactions with Key Management Personnel
During the financial year there were no product or services purchases by KMP from the Group (2019: nil) and there are no
amounts payable at 31 December 2020 (2019: nil).
There have been no loans to KMP during the financial year (2019: nil).
84
Iluka Resources Limited, Annual Report 2020
22
DIRECTORS’ REPORT
For the year ended 31 December 2020
8.
IMPACT OF THE DEMERGER OF DETERRA ROYALTIES ON EXECUTIVE KMP
INCENTIVES
As outlined above, during 2020, Iluka undertook a demerger of Deterra Royalties by way of an in specie dividend and capital
return to existing Iluka shareholders. This transaction impacted on Iluka incentive awards on foot at the time of demerger,
including those held by Executive KMP.
In general, Iluka participants holding restricted share awards under the EIP and legacy Iluka plans were able to participate in
the demerger and received Deterra Royalties shares in line with other Iluka shareholders. For members of Iluka’s Executive
Team (including the Executive KMP), a holding lock was applied to these Deterra Royalties shares to align vesting with vesting
of the underlying Iluka restricted share award.
Restricted rights and performance rights under the EIP and legacy Iluka plans were not able to participate in the demerger
and, as a result of the transaction, the value of Iluka shares underlying each restricted right or performance right was reduced.
To address the reduction in value, the Board determined that additional allocations of rights (‘additional rights’) would need to
be made, in order to preserve the overall value of the incentives following the demerger, and to ensure that participants were
no better or worse off as a result of the demerger. A summary of the additional rights granted to Executive KMP during 2020
is outlined below.
Detailed information on the treatment of Iluka incentive awards on demerger of Deterra Royalties is set out in section 4 of the
demerger scheme booklet. The demerger scheme booklet and other details relating to the demerger are available in Iluka’s
demerger suite: https://iluka.com/deterra-royalties/demerger-suite.
Additional rights allocations
The additional rights were granted in December 2020 on substantially the same terms and conditions as the original awards.
The terms and conditions of the original awards are set out in the relevant Remuneration Reports1.
The calculation method used to determine the number of additional rights to be granted, (round down to the nearest whole
right) was as follows:
No. of
Restricted/Performance
Rights under the Award held
before the Demerger
(
X
Iluka 5-day post-
Demerger VWAP
+
Iluka 5-day post-Demerger VWAP
Deterra 5-day post-
Demerger VWAP ) –
No. of
Restricted/Performance
Rights under the Award
held before the Demerger
1The terms and conditions of the relevant plans are set out as follows:
•
•
•
•
Managing Director 2016 LTIP: 2016 Remuneration Report;
2017 LTIP: 2017 Remuneration report;
2018 EIP: 2018 Remuneration report; and
2019 EIP: 2019 Remuneration Report.
Iluka Resources Limited, Annual Report 2020
23
85
DIRECTORS’ REPORT
For the year ended 31 December 2020
SUMMARY OF TOP UP ALLOCATIONS
The table below sets out additional top up rights granted to Executive KMP in 2020 in relation to their existing awards.
Name
Plan
Current Executives
T O’Leary
A Stratton
M Blackwell
S Tilka
Former Executives
C Barbier
2016 LTIP
2017 LTIP
2018 EIP
2019 EIP
2017 LTIP
2018 EIP
2019 EIP
2017 LTIP
2018 EIP
2019 EIP
2017 LTIP
2018 EIP
2019 EIP
2017 LTIP
2018 EIP
2019 EIP
Number of original rights
Number of additional rights
Restricted Rights
Performance
Rights
Restricted Rights1
Performance
Rights1
253,375
246,493
76,148
42,877
9,978
23,414
14,758
57,662
27,134
15,083
14,966
10,898
7,061
16,318
12,192
10,378
67,563
21,018
21,480
8,433
13,878
208,074
202,422
62,534
35,211
8,195
19,228
12,120
47,353
22,283
12,387
12,291
8,950
5,799
13,401
10,013
8,523
55,484
17,261
17,640
6,926
11,397
The original value of the Share rights immediately prior to the demerger was $9,613,959. Following the allocation of the
additional rights, the total value of the Share rights, inclusive of the additional allocations was $9,214,4002.
1It was determined that as the granting of these additional rights to compensate for the demerger led to the awards having the same or lower
fair value as the rights held just before the demerger, no additional expense was to be recognised. The maximum value of an additional right is
the face value of an Iluka share at the time of vesting and the minimum value is nil.
2The value of the share rights prior to demerger was determined by using Iluka’s closing share price of $9.90 immediately prior to separation.
The value of the share rights inclusive of additional allocation was determined using Iluka 5 day VWAP of $5.21 immediately following
separation.
DEPARTING KMP REPLACEMENT AWARDS
Julian Andrews transferred to and was appointed as Managing Director and CEO of the newly demerged Deterra Royalties,
effective 2 November 2020. As a result of his appointment, and to create immediate alignment with the new entity, a number
of Mr Andrews’ existing Iluka awards/entitlements were cancelled or not granted to him. Instead, Deterra Royalties will provide
Mr Andrews’ with alternative incentive award arrangements following demerger. These awards will be outlined in Deterra
Royalties’ first Remuneration Report to be released later in 2021.
The table below sets out Mr Andrews’ Iluka awards which were impacted as a result of his appointment to Deterra Royalties.
Plan
Number of Restricted rights
J Andrews
2018 EIP award (lapsed)
2019 EIP award (not granted)
N/A
19,103
Number of performance
rights
20,360
13,413
86
Iluka Resources Limited, Annual Report 2020
24
AUDITOR'S INDEPENDENCE DECLARATION
For the year ended 31 December 2020
Iluka Resources Limited, Annual Report 2020
87
ILUKA RESOURCES LIMITED ABN 34 008 675 018
FINANCIAL REPORT
ILUKA RESOURCES LIMITED ABN 34 008 675 018
FINANCIAL REPORT - 31 DECEMBER 2020
31 December 2020
Financial statements
Consolidated statement of profit or loss
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Directors' declaration
Independent auditor's report to the members
89
90
91
92
93
94
145
146
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 25 February 2021. 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.
88
88
Iluka Resources Limited, Annual Report 2020
ILUKA RESOURCES LIMITED
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER 2020
For the year ended 31 December 2020
CONTINUING OPERATIONS
Revenue
Other income
Expenses
Write-down of Sierra Rutile Limited
Equity accounted share of profit - Deterra
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) after income tax from continuing operations
DISCONTINUED OPERATIONS
Profit after tax from discontinued operations
Profit/(loss) for the period, attributable to:
Equity holders of Iluka Resources Limited
Non-controlling interest
Earnings/(loss) per share from continuing operations attributable to the
ordinary equity holders of the parent
Basic earnings per share
Diluted earnings per share
Earnings/(loss) per share attributable to ordinary equity holders of the
parent
Basic profit/(loss) per share
Diluted profit/(loss) per share
Notes
2020
$m
2019
$m
-
-
-
5
6
7
8
23
16
12
23
24
20
20
20
20
990.6
1,232.9
-
21.2
(799.3)
-
0.1
(7.7)
(26.6)
(34.3)
2.4
(853.7)
(414.3)
-
(15.0)
(38.0)
(53.0)
-
(0.1)
178.3
(85.7)
(74.8)
-
103.5
(273.3)
(359.0)
2,306.5
-
2,410.0
2,411.9
(1.9)
-
-
-
Cents
59.3
-
(299.7)
(279.9)
(19.8)
-
-
Cents
24.5
24.4
(85.0)
(85.0)
570.4
568.0
(71.0)
(71.0)
The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes.
89
Iluka Resources Limited, Annual Report 2020
89
ILUKA RESOURCES LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
For the year ended 31 December 2020
Notes
2020
$m
2019
$m
Profit/(loss) for the period
2,410.0
(299.7)
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 for the year, net of tax
Total comprehensive income/(loss) for the year, attributable to:
Equity holders of Iluka Resources Limited
Non-controlling interest
[]
Total comprehensive income/(loss) for the year attributable to the equity
holders of the parent arises from:
Continuing operations
Discontinued operations
-
-
-
18
18
18
23
6.2
-
5.7
(4.2)
7.7
-
2,417.7
2,419.6
(1.9)
-
2.7
(2.6)
4.7
(3.9)
0.9
-
(298.8)
(279.0)
(19.8)
113.1
2,306.5
(338.3)
59.3
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
90
90
Iluka Resources Limited, Annual Report 2020
CONSOLIDATED BALANCE SHEET
ILUKA RESOURCES LIMITED
CONSOLIDATED BALANCE SHEET
As at 31 December 2020
AS AT 31 DECEMBER 2020
ASSETS
Current assets
Cash and cash equivalents
Receivables
Inventories
Derivative financial instruments
Current tax receivables
FY20 -0.1 CR
FY20 +0.1 DR
Total current assets
Non-current assets
Investments accounted for using the equity method
Derivative financial instruments
Property, plant and equipment
Deferred tax assets
Intangible asset - MAC Royalty (discontinued operation)
Inventories
Right of use assets
Total non-current assets
+0.1 DR
Total assets
LIABILITIES
Current liabilities
Payables
Derivative financial instruments
Current tax payable
Provisions
Lease liabilities
Total current liabilities
-0.1 CR
Non-current liabilities
Interest-bearing liabilities
Derivative financial instruments
Provisions
Financial liabilities at fair value through profit or loss
Lease liabilities
Total non-current liabilities
+0.1 DR
-0.1 CR
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings/(accumulated losses)
Non-controlling interests
Total equity
+0.1 DR
Notes
2020
$m
2019
$m
16
14
15
22
23
22
10
13
23
15
11
22
9
11
16
22
9
24
11
17
18
18
24
87.1
95.5
504.1
1.9
-
(0.1)
0.1
688.6
452.1
0.6
1,066.8
28.4
-
112.0
15.4
1,675.3
2,363.9
129.4
-
29.3
95.0
7.5
261.2
36.9
-
750.5
7.2
15.8
810.4
1,071.6
1,292.3
1,150.5
37.1
104.3
0.4
1,292.3
-
-
-
-
-
97.3
196.3
341.1
-
3.3
638.0
-
-
1,126.2
22.1
3.5
84.1
20.5
1,256.4
1,894.4
-
-
0.1
140.8
3.7
96.1
112.6
9.2
362.4
0.1
54.0
1.6
715.6
28.4
20.8
820.4
(0.1)
0.1
1,182.8
711.6
1,157.6
24.0
(472.0)
2.0
711.6
(0.1)
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
91
Iluka Resources Limited, Annual Report 2020
91
ILUKA RESOURCES LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
For the year ended 31 December 2020
Attributable to owners of
Iluka Resources Limited
Share
capital
$m
Other
reserves
$m
Retained
earnings
$m
Total
$m
NCI¹
$m
Total
equity
$m
Notes
18
18
1,154.0
42.6
(86.6) 1,110.0
- 1,110.0
-
-
-
-
-
4.8
4.8
0.1
(279.9)
(3.9)
(283.8)
(279.9)
0.9
(279.0)
(19.8)
-
(19.8)
(299.7)
0.9
(298.8)
(0.1)
-
-
-
Balance at 1 January 2019
Profit for the year
Other comprehensive income (loss)
Total comprehensive income
Transfer of asset revaluation reserve
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
18
18
space
Balance at 31 December 2019
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)
1,157.6
24.0
(472.0)
709.6
2.0
711.6
Balance at 1 January 2020
Profit for the year
Other comprehensive income (loss)
Total comprehensive income
Notes
18
18
Transfer of asset revaluation reserve
space
Transactions with owners in their capacity as owners:
Transfer of shares to employees, net of tax
Share-based payments, net of tax
Dividends paid
Transactions with non-controlling interests
Return of capital
18
18
24
23
Attributable to owners of
Iluka Resources Limited
Share
capital
$m
Other
reserves
$m
Retained
earnings
$m
Total
$m
NCI¹
$m
Total
equity
$m
1,157.6
24.0
(472.0)
709.6
2.0
711.6
-
-
-
-
2,411.9
2,411.9
-
11.9
7.7
(4.2)
11.9 2,407.7 2,419.6
(1.9) 2,410.0
7.7
(1.9) 2,417.7
-
(0.5)
0.5
-
-
-
1.7
-
1.2
-
(10.0)
(7.1)
-
-
(1.7)
3.7
-
(0.3)
-
-
3.7
(1,831.9) (1,830.7)
(0.3)
-
(10.0)
-
1.7 (1,831.9) (1,837.3)
-
-
-
0.3
-
-
3.7
(1,830.7)
-
(10.0)
0.3 (1,837.0)
space
Balance at 31 December 2020
¹Non-controlling interest - refer to note 23.
1,150.5
37.1
104.3 1,291.9
0.4 1,292.3
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
92
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Iluka Resources Limited, Annual Report 2020
ILUKA RESOURCES LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
For the year ended 31 December 2020
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
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
Notes
2020
$m
2019
$m
1,043.0
(846.3)
196.7
0.7
(3.2)
(164.7)
(10.0)
92.2
111.7
(71.2)
5.1
(66.1)
(304.5)
295.1
-
-
(32.6)
(9.3)
-
(51.3)
(5.7)
97.3
(4.5)
87.1
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
31
19
16
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
93
Iluka Resources Limited, Annual Report 2020
93
CONTENT OF THE NOTES TO FINANCIAL STATEMENTS
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
For the year ended 31 December 2020
CONTENTS OF THE NOTES TO THE FINANCIAL STATEMENTS
Page
95
95
95
97
97
97
100
101
101
103
105
107
109
111
113
114
115
116
116
118
119
121
122
123
123
126
128
128
131
132
135
135
136
137
138
139
141
142
143
144
144
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.
15.
Capital
16.
17.
18.
19.
20.
Risk
21.
22.
Segment information
Revenue
Other income
Expenses
Impairment of assets
Provisions
Property, plant and equipment
Leases
Income tax
Deferred tax
Receivables
Inventories
Net cash and finance costs
Contributed equity
Reserves and retained earnings
Dividends
Earnings/(loss) per share
Financial risk management
Hedging
Group structure
23.
24.
25.
Demerger of Deterra
Changes in ownership interests held in controlled entities
Controlled entities and deed of cross guarantee
Other notes
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
Contingent liabilities
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
94
94
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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 25.
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 previously held a royalty business,
with a cornerstone asset over BHP’s Mining Area C in Western Australia. Details of the demerger and its impact
on the financial statements are contained in note 23.
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 their related impacts on the financial statements (if
any), are detailed in note 35.
(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 2020 and the results of all subsidiaries for the year then ended. A list of controlled
entities (subsidiaries) at year-end is contained in note 25.
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.
95
Iluka Resources Limited, Annual Report 2020
95
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
The Group accounts for business combinations using the acquisition method when control is transferred to the
Group. Cost is measured as the fair value of the assets given, shares issued, or liabilities incurred or assumed at
the date of exchange. Transaction costs are expensed as incurred, except if related to the issue of debt or equity
securities.
(ii) Associates
Associates are all entities over which the Group has significant influence but not control or joint control. This is
generally the case where the Group holds between 20% and 50% of the voting rights. Investments in associates
are accounted for using the equity method of accounting from the date on which the investee becomes an
associate.
During the year, Deterra became an associate of the Group. The accounting implications are detailed in note 23.
The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy
described in note 8.
(iii) Employee Share Trust
The Group's Employee Share Schemes are administered through the Iluka 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.
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) Government grants
The Group received $13.6 million in government grant income during the reporting period under the Australian
Government's Jobkeeper Payment scheme. The scheme was a response by the Australian Government to assist
businesses impacted by the economic effects of COVID-19. It subsidised employee costs of eligible nominated
employees, provided the employer met certain eligibility criteria and elected to participate in the scheme.
Iluka was eligible following a significant decline in zircon demand and associated revenue in Q1. Given the
company's subsequent financial performance, Iluka has voluntarily decided to return amounts received under the
scheme. The income statement reflects no amounts associated with Jobkeeper. The balance sheet reflects cash
of $13.6 million, and an associated payable of $13.6 million in respect of Jobkeeper.
96
96
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
(d) Rounding of amounts
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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.
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
Net realisable value and classification of product inventory
Determining the fair value of Deterra
KEY NUMBERS
4 SEGMENT INFORMATION
(a) Description of segments
Note
7
8
11
14
23
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. The operating segments of the Group are:
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 mid-west 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) comprised a deferred consideration iron ore royalty interest over certain mining tenements
in Australia operated by BHP Group, which was demerged from the Group as outlined in note 23. The results of
the MAC operating segment have been reclassified in the current and prior reporting period as a discontinued
operation (refer to note 23).
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).
97
Iluka Resources Limited, Annual Report 2020
97
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
Cash, debt and tax balances are managed at a group level, together with exploration and other corporate
activities, and are not allocated to segments.
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 2020 (2019: $nil).
(b) Segment information
2020
JA/MW
$m
C/SW
$m
SRL
$m
MAC²
$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
389.0
20.6
(36.2)
1.7
242.0
609.6
270.2
44.6
300.4
8.5
(72.3)
0.2
116.8
860.2
284.8
80.0
223.1
7.8
(72.2)
4.0
(51.2)
138.7
139.2
20.9
-
-
-
-
-
-
-
-
34.5
6.1
(0.4)
2.2
(0.2)
135.7
255.0
0.8
947.0
43.0
(181.1)
8.1
307.4
1,744.2
949.2
146.3
2019
JA/MW
$m
C/SW
$m
SRL
$m
MAC²
$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
-
-
-
-
-
-
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)
(158.1)
(3.2)
32.4
1,703.6
976.7
273.0
¹Total segment result includes impairment charges, depreciation and amortisation expenses, and rehabilitation and holding
costs for closed sites that are also separately reported above.
²MAC operating segment results have been reclassified as a discontinued operation in the consolidated statement of profit or
loss in the current and prior reporting period. Segment assets of $23.7 million comprise MAC royalties receivable
of $20.2 million and the carrying amount of the MAC royalty entitlement asset of $3.5 million at 31 December 2019. Refer to
notes 14 and 23.
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:
2020
$m
316.7
211.4
341.6
76.7
0.6
947.0
2019
$m
403.1
218.2
398.0
135.6
38.2
1,193.1
China
Asia excluding China
Europe
Americas
Other countries
Sale of goods
98
98
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
The Group changed the classification of certain revenue included above (together with comparative amounts) to
more accurately report its geographical grouping.
Revenue of $144.1 million and $90.7 million was derived from two external customers of the mineral sands
segments, which individually account for greater than 10% of the total segment revenue (2019: revenues of
$187.7 million and $136.9 million from two external customers).
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
Major Projects, Engineering and Innovation
Depreciation
Interest and finance charges
Net foreign exchange gains
Equity accounted profit - Deterra
Gain on remeasurement of Put Option
Impairment - Sri Lankan exploration assets
Profit/(loss) before income tax from continuing operations
2020
$m
307.4
0.6
(0.2)
(11.5)
(54.6)
(62.3)
(3.4)
(6.0)
1.2
0.1
19.4
(12.4)
178.3
Total segment assets and total segment liabilities are reconciled to the balance sheet as follows:
Segment assets
Corporate assets
Investment in Deterra Resources Limited
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
1,744.2
50.1
452.1
86.9
-
28.4
2,361.7
949.2
54.0
29.3
36.9
1,069.4
2019
$m
32.4
-
1.8
(11.9)
(47.3)
(42.2)
(4.6)
(13.9)
-
-
-
-
(85.7)
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
99
Iluka Resources Limited, Annual Report 2020
99
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
5 REVENUE
Continuing operations
-0.1 CR
Sales revenue
Sale of goods
Freight revenue
Other revenue
Interest
(a) Sale of mineral sands
Notes
2020
$m
2019
$m
5(a)
5(b)
5(c)
-
0.1
947.0
43.0
0.6
990.6
1,193.1
38.6
1.2
1,232.9
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 $1.5 million relating to contracts in place at the end of the prior year (2019: $2.4 million).
Freight revenue of $0.7 million has been deferred at the end of the current year in relation to unfulfilled shipping
obligations.
(c) Interest income
Interest income is recognised in profit or loss as it accrues, using the effective interest method.
100
100
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
(d) Mining Area C royalty income and amortisation of royalty asset - discontinued operation
Iluka held a royalty over BHP’s Mining Area C (MAC) iron ore mine, which it demerged in the current reporting
period. Amounts previously recognised as revenue have been reclassified to discontinued operations - refer to
note 23.
6 OTHER INCOME
Other income includes a remeasurement gain of $19.4 million resulting from the revaluation of the put option
held by the IFC (refer to note 24), and other sundry income.
7 EXPENSES
Expenses
Cash costs of production
Depreciation and amortisation
Inventory movement - cash costs of production
Inventory movement - non-cash production costs
Cost of goods sold
Ilmenite concentrate and by-product costs
Depreciation (idle, corporate and other)
Restructure and idle capacity charges
Rehabilitation costs for closed sites
Government royalties
Marketing and selling costs, including freight
Corporate and other costs
Resource development costs
Net loss on disposal of property, plant and equipment
Impairment - Sri Lankan exploration assets
Write-down of Sierra Rutile Limited
Impairment recognised against property, plant and equipment
Write-down of inventory to net realisable value
Notes
7(f)
8
8
2020
$m
537.1
178.9
(142.3)
(39.9)
533.8
21.6
5.9
20.9
(7.2)
22.3
70.7
54.6
62.3
2.0
12.4
799.3
-
-
-
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
(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.
(799.3)
(1,268.4)
101
Iluka Resources Limited, Annual Report 2020
101
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
(b) Cost of goods sold
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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, monazite treatment, 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 9.
(f) Resource development costs
These costs relate to activities associated with developing our resources,
planning.
underground mining technology at Balranald that has been expensed as research and development costs.
including exploration and mine
Included in the costs is $34.3 million (2019: $6.0 million) relating to work on the innovative
(g) 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
2020
$m
2019
$m
202.6
4.1
12.8
3.0
13.0
-
194.7
6.2
11.3
4.8
2.7
39.1
(235.5)
(258.8)
102
102
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
8 IMPAIRMENT OF ASSETS
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
Assets are assessed for the presence of impairment indicators whenever events or changes in circumstances
suggest that their carrying amounts may not be recoverable. For the purposes of impairment indicator
assessments (and, if required, impairment testing) operating assets are grouped at the lowest levels for which
there are separately identifiable cash flows (Cash Generating Units - CGUs).
If an impairment indicator is found to be present for a CGU, then the Group estimates its recoverable amount and
compares it to its carrying amount. 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. If
necessary, an impairment charge is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount.
(a) Impairment indicator assessments
The Group assessed all CGUs for the presence of impairment indicators at the reporting date, including those
which may have arisen due to the global economic impact of the COVID-19 pandemic.
Impairment indicators were found to be present in the Cataby/South West and SRL CGUs, largely due to the
impact on Cataby of the contractual dispute with Chemours; and potential impact of COVID-19 interruptions and
current operational performance at Sierra Rutile, respectively. Impairment indicators were also found to be
present in respect of certain Sri Lankan exploration assets due to the expiration of certain exploration licences in
that country.
Accordingly, the Group performed impairment tests on the Cataby/South West and SRL CGUs, and the Sri Lankan
exploration assets - refer to (b), below. The Group did not note any conditions that suggest previously recognised
impairments can be reversed.
(b) Impairment testing
Cataby/South West and SRL CGUs
The Cataby/South West CGU has a net asset carrying value of $575.4 million at 31 December 2020 (2019: $462.5
million), including $276.3 million and $251.1 million of working capital and rehabilitation provision liabilities,
respectively. The SRL CGU has a net liability carrying value of $0.5 million at 31 December 2020 (2019: net asset
carrying value of $50.9 million), including $52.6 million and $99.5 million of working capital and rehabilitation
provision liabilities, respectively.
The Group estimated the recoverable amounts of the Cataby/South West and SRL CGUs, and determined that in
both instances the carrying amount of the CGU exceeds its recoverable amount. Accordingly, no impairment has
been recognised in respect of these CGUs in the current reporting period.
103
Iluka Resources Limited, Annual Report 2020
103
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
Key estimate: recoverable amount calculations - Cataby/South West and SRL CGUs
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 the COVID-19 pandemic. 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 recoverable amount 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 (2020 long term AUD:USD exchange rate of 0.75, unchanged
from 2019 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 (Australian operations: 10%; SRL: 12%, unchanged from
2019 assessment).
Sri Lankan exploration assets
Following the impairment indicator identified in (a) above, the Group estimated the recoverable amount of its Sri
Lankan exploration assets. The carrying amount of $21.2 million was found to exceed the recoverable amount of
$8.8 million, and accordingly the exploration assets were written down to their recoverable amount. An
impairment of $12.4 million is included in expenses, refer to note 7.
(c) Impairment of Sierra Rutile Limited CGU in the prior reporting period
The Group recognised a $414.3 million write-down in respect of its Sierra Rutile CGU in the prior reporting period
(comprising impairment of $375.2 million for property, plant and equipment, and write-down of $39.1 million for
consumables).
104
104
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
9 PROVISIONS
Current
Rehabilitation and mine closure
Employee benefits - long service leave
Workers compensation and other provisions
FY20 -0.1 CR
Non-current
Rehabilitation and mine closure
Employee benefits - long service leave
Retirement benefit obligations
-0.1 CR
FY20 +0.1 DR
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
Notes
9(a)
9(b)
9(c)
9(a)
9(b)
30
2020
$m
77.3
13.0
4.7
95.0
0.1
720.7
3.0
26.8
750.5
-
(0.1)
2019
$m
97.7
12.7
2.2
112.6
-
690.8
2.4
22.4
715.6
0.1
-
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 2020
Amounts spent during the year
Rehabilitation and mine closure provision discount unwind
Change in provision - additions to property, plant and equipment
Change in provision - credit for closed sites
Rehabilitation discount rate changes - for closed sites
Foreign exchange rate movements
Balance at 31 December 2020
Notes
$m
16(d)
10
7
788.5
(70.3)
14.4
86.6
(8.1)
12.2
(25.3)
798.0
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 and rehabilitating 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 16(d).
105
Iluka Resources Limited, Annual Report 2020
105
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
The total rehabilitation and mine closure provision of $798.0 million (2019: $788.5 million) includes $375.2
million (2019: $450.8 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 reduction in the expected
rehabilitation liability and an associated credit to profit or loss of $8.1 million (2019: charge of $3.2 million) which
is reported within the expense item Rehabilitation costs for closed sites in note 7.
Open site rehabilitation liabilities increased by $86.6 million, mainly associated with an increased mining
footprint at Cataby ($45.4 million) due to the progression of mining at this new operation, which commenced
mining in April 2019. The move to Ambrosia and subsequent return to Jacinth North has resulted in a larger open
area, increasing the rehabilitation liability for the site by $37.2 million to $125.3 million.
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. Rehabilitation and
mine closure provisions for Australia have been calculated by discounting risk adjusted cash flows at discount
rates of 1.3% (2019: 1.3%).
Iluka has re-set the risk free discount rates used in calculating rehabilitation provisions in the US and Sierra
Leone to 0.5% and 1.0%, respectively (2019: 2.5% and 2.5%, respectively), due to the continuing decline in
applicable US Treasury Bond Rates. The 5- and 10- year US Treasury Bond rates are used as a proxy for risk-free
discount rates. This has resulted in an increase of $12.2 million to the provision which is reported within finance
costs item ‘Rehabilitation discount rate changes’ in note 16(d), and relates entirely to closed sites.
(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.
106
106
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
(c) Workers compensation and other provisions
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
The Group commenced an internal efficiency review of its activities during the year, during which it identified a
number of changes to employee roles that are required to be made. The Group has recognised a provision for the
costs of implementing these changes, including costs that arise from roles being made redundant or being
consolidated, which is included in workers compensation and other provisions.
10 PROPERTY, PLANT AND EQUIPMENT
At 1 January 2019
Cost
Accumulated depreciation¹
Opening written down value
Additions
Disposals
Depreciation and amortisation
Exchange differences
Impairment of Sierra Rutile Limited
Transfers/reclassifications
Closing written down value
At 31 December 2019
Cost
Accumulated depreciation¹
Closing written down value
Plant
Year ended 31 December 2020
Additions
Disposals
Depreciation and amortisation
Exchange differences
Transfers
Impairment of assets
Closing written down value
Plant
At 31 December 2020
Cost
Accumulated depreciation¹
Closing written down value
Plant,
machinery &
equipment
$m
Mine
reserves &
development
$m
Exploration
&
evaluation
$m
Land &
buildings $m
Total
$m
256.4
(80.3)
176.1
10.3
(1.9)
(11.4)
(0.1)
(57.0)
55.6
171.6
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
109.1
(3.6)
(86.1)
(2.8)
(154.8)
(61.9)
458.6
165.0
-
(57.3)
0.8
(154.7)
(1.8)
478.1
-
-
-
0.3
(8.7)
8.1
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
1.1
(3.7)
(19.9)
(5.7)
1.2
-
144.6
38.1
(0.2)
(87.4)
(4.9)
(4.8)
-
399.4
106.9
-
(68.9)
(3.1)
3.6
(4.4)
512.2
-
(0.1)
-
0.8
-
(8.0)
10.6
146.1
(4.0)
(176.2)
(12.9)
-
(12.4)
1,066.8
301.1
(156.5)
144.6
2,382.1
(1,982.7)
399.4
1,283.6
(771.4)
512.2
42.7
(32.1)
10.6
4,009.5
(2,942.7)
1,066.8
¹Accumulated depreciation includes cumulative impairment charges.
107
Iluka Resources Limited, Annual Report 2020
107
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
(a) Property, plant and equipment
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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 and
rehabilitating the site on which it is located.
As set out in note 9, in the case of rehabilitation provisions for assets which remain in use, adjustments to the
carrying value of the provision are offset by a change in the carrying value of the related asset. Total additions in
the year include $86.6 million (2019: $94.9 million) relating to rehabilitation.
(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
If production has not yet
of the economically recoverable reserves (units of production methodology).
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 $26.9 million, $7.9 million and $0.6 million, respectively, relating to assets under construction which are
currently not being depreciated as the assets are not ready for use (2019: $33.0 million, $17.7 million and $10.1
million, respectively).
In addition, within property, plant and equipment, excluding exploration and land assets, are amounts totalling
$62.3 million which have not been depreciated in the year as mining of the related area of interest has not yet
commenced (2019: $61.2 million).
108
108
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
(e) Exploration, evaluation and development expenditure
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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 achieves JORC reserve status (reported in accordance with JORC, 2012) and
has been included in the life of mine plan.
All of the above expenditure is carried forward up to commencement of operations at which time it is amortised
in accordance with the reserves and development depreciation policy noted in (c) above.
(f)
Impairment of PPE
Refer to note 8 for details on impairment testing.
11 LEASES
(a) Amounts recognised in the statement of financial position
Right-of-use assets
Buildings
Plant, machinery and equipment
Lease liabilities
Current
Non-current
2020
$m
9.2
6.2
15.4
(7.5)
(15.8)
(23.3)
2019
$m
9.0
11.5
20.5
(9.2)
(20.8)
(30.0)
Additions to the right-of-use assets during the reporting period were $2.6 million (2019: $2.2 million). Right-of-use
assets are reflected net of incentives received. The maturity analysis of lease liabilities is included in note 21(d).
109
Iluka Resources Limited, Annual Report 2020
109
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
(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
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
2020
$m
2019
$m
1.3
7.5
8.8
1.3
1.8
9.3
1.7
6.7
8.4
1.5
2.0
8.2
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.
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 4.9% (2019: 4.3%).
Subsequent 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.
110
110
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
Right-of-use assets
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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.
12 INCOME TAX
Income tax expense comprises current and deferred tax and is recognised in profit or loss, as disclosed in (a)
below, except to the extent that it relates to items recognised directly in equity or other comprehensive income as
disclosed in (c) below.
(a) Income tax expense (benefit)
Current tax
Deferred tax
Under (over) provided in prior years
Income tax expense is attributable to:
Profit from continuing operations
Profit from discontinued operation
Aggregate income tax expense
(b) Reconciliation of income tax expense to prima facie tax payable
Profit/(loss) from continuing operations before income tax expense
Profit from discontinued operations before income tax expense
Tax at the Australian tax rate of 30% (2019: 30%)
Notes
13
23
23
2020
$m
98.4
(3.1)
0.2
95.5
74.8
20.7
95.5
178.3
2,327.2
2,505.5
751.7
2019
$m
111.6
188.6
(1.5)
298.7
(324.1)
25.4
(298.7)
(85.7)
84.7
(1.0)
(0.3)
111
Iluka Resources Limited, Annual Report 2020
111
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
Tax effect of amounts not deductible (taxable) in calculating taxable income:
Demerger gain
Research and development credit
Deferred tax losses not recognised (SRL)
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-assessable income
Non-deductible expenses
Other items
Difference in overseas tax rates¹
Under/(over) provision in prior years
Income tax expense
(680.7)
(3.2)
3.0
(4.5)
-
-
27.0
(8.0)
6.1
4.1
95.5
(0.2)
0.2
95.5
-
(1.3)
4.1
(7.2)
161.9
131.4
9.2
-
1.7
(1.3)
298.2
2.0
(1.5)
298.7
(297.7)
¹Sierra Rutile Limited did not recognise a tax benefit associated with the write-down of $414.3 million of assets
expensed in the prior year.
(2,601.0)
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$237.1 million at 31 December 2020 (31 December 2019: US$216.3 million).
Unused capital losses for which no deferred tax asset has been recognised are approximately $79.4 million
(2019: $90.7 million) (tax at the Australian rate of 30%: $23.8 million (2019: $27.2 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 in the prior year 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$502.3 million at 31 December 2020 (31 December 2019: US$500.7 million).
(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
2020
$m
-
(2.6)
(1.8)
(4.4)
2019
$m
(1.1)
(2.0)
(1.7)
(4.8)
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.
112
112
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
Key estimate: Tax balances
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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.
13 DEFERRED TAX
Deferred tax asset:
The balance comprises temporary differences attributable to:
Employee provisions
Provisions
Cash flow hedge reserve (in equity)
Other
Lease liabilities
Gross deferred tax assets
2020
$m
2019
$m
8.1
166.3
-
10.2
7.0
191.6
7.4
149.3
2.1
8.0
8.9
175.7
Amount offset to deferred tax liabilities pursuant to set-off provision
Net deferred tax assets
(163.2)
28.4
(153.6)
22.1
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
Transfers
Balance at 31 December
(138.7)
(17.3)
(0.2)
(0.5)
-
(6.5)
(163.2)
163.2
-
22.1
5.9
7.4
(2.6)
(4.4)
28.4
(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
113
Iluka Resources Limited, Annual Report 2020
113
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
Deferred tax policy
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
Deferred income tax is provided on all temporary differences at the balance sheet date between accounting
carrying amounts and the tax bases of assets and liabilities.
Deferred income tax liabilities are recognised for all taxable temporary differences, other than for the exemptions
permitted under accounting standards.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax
assets and unused tax losses, to the extent it is probable that taxable profit will be available to utilise these
deductible temporary differences, other than for the exemptions permitted under accounting standards. The
carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred
income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the balance sheet date.
Income taxes relating to items recognised directly in equity are also recognised in equity and not in the income
statement.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable
entity and the same taxation authority.
Deferred tax recognised
As at 31 December 2020, there were no carried forward tax losses recognised by SRL (2019: $nil million).
14 RECEIVABLES
Trade receivables
Other receivables
Prepayments
Mining Area C royalty receivable (discontinued operation)
FY20 +0.1 DR
2020
$m
55.0
26.6
13.9
-
95.5
0.1
2019
$m
130.9
29.3
15.9
20.2
196.3
-
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 43 days of the invoice being issued (2019: 41 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 $6.6 million overdue at balance date (2019: $9.4 million), of which $0.5 million is less than 28 days
overdue (2019: $3.6 million). Subsequent to the reporting date, a receivable paid $2.7 million in respect of an
overdue balance included in this amount. Due to the short-term nature of the Group’s receivables, their carrying
value is considered to approximate fair value.
114
114
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
(a) Trade receivables purchase facilities
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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). The trade receivables balance of $55.0 million excludes $39.1 million (31 December 2019: excludes $117.3
million) of receivables sold under the trade receivables purchase facility.
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 which reduces the exposure to credit risk. 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 specified in the insurance policy.
An asset of $12.0 million is included in other receivables, and a corresponding continuing involvement liability is
included in payables, comprising the maximum first loss specified under the trade receivables purchase facility
and deductible amounts specified by the insurance policy (2019: $16.7 million).
(b) Credit risk
At 31 December 2020 the trade receivables balance was $55.0 million, with $51.0 million covered by credit risk
insurance and a further $4.0 million by letters of credit. As a result, the Group had no uninsured receivables at the
reporting date (2019: $nil).
15 INVENTORIES
Current
Work in progress
Finished goods
Consumable stores
-0.1 CR
FY20 -0.1 CR
Total current inventories
Non-current
Work in progress
Total non-current inventories
Total inventories
2020
$m
156.6
312.6
34.9
504.1
-
(0.1)
112.0
112.0
2019
$m
110.5
208.7
21.9
341.1
(0.1)
-
84.1
84.1
616.1
425.2
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 $34.4 million (2019: $nil 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.
115
Iluka Resources Limited, Annual Report 2020
115
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
Inventories expected to be sold (or consumed in the case of stores) within 12 months after the balance sheet
date are classified as current assets; all other inventories are classified as non-current assets.
Key estimate: Net realisable value and classification of product inventory
The Group’s assessment of the net realisable value and classification of its inventory holdings requires the use
of estimates, including the estimation of the relevant future product price and the likely timing of the sale of the
inventory.
During the year, inventory write-downs of $13.0 million occurred for work in progress or finished goods (2019:
$41.8 million). If finished goods future selling prices were 5% lower than expected, an inventory write-down of
$1.5 million would be required at 31 December 2020 (2019: no write-down).
Inventory of $112.0 million (2019: $84.1 million) was classified as non-current as it is not expected to be sold
within 12 months of the balance sheet date.
CAPITAL
16 NET CASH 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
2020
$m
87.1
87.1
(38.0)
1.1
(36.9)
2019
$m
97.3
97.3
(55.7)
1.7
(54.0)
50.2
43.3
Cash and cash equivalents include cash on hand and deposits held at call with financial institutions with original
maturities of three months or less.
Cash and deposits are at floating interest rates between 0.0% and 3.0% (2019: 0.0% and 2.7%) 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.
116
116
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
(i) Multi Optional Facility Agreement
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
The Multi Optional Facility Agreement (MOFA) comprises a series of unsecured committed five year bilateral
revolving credit facilities with several domestic and foreign institutions, totalling A$500.1 million (2019: A$519.3
million). The facilities are denominated in both AUD and USD.
The table below details the facility expiries:
A$million
At 31 December 2020
At 31 December 2019
Total
facility
500.1
519.3
Facility Expiry
2021
-
-
2022
-
-
2023
-
2024
500.1
-
519.3
2025
-
-
Undrawn MOFA facilities at 31 December 2020 were A$462.1 million (2019: A$463.6 million).
(c) Interest rate exposure
Of the above interest-bearing liabilities, $38.0 million is subject to an effective weighted average floating interest
rate of 1.5% (2019: interest-bearing liabilities of $55.7 million at 3.1%). 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
(i) Amortisation of deferred borrowing costs
2020
$m
1.9
3.9
0.6
1.3
14.4
12.2
34.3
2019
$m
7.3
5.0
1.2
1.5
19.7
18.3
53.0
Fees paid on establishment of borrowing facilities are recognised as transaction costs and amortised over the
period until the next expected facility extension.
(ii) Rehabilitation and mine closure provision discount unwind
Rehabilitation and mine closure unwind represents the cost associated with the passage of time. Rehabilitation
provisions are recognised as the discounted value of the present obligation to restore, dismantle and rehabilitate
with the increase in the provision due to passage of time being recognised as a finance cost in accordance with
the policy described in note 9(a).
(iii) Rehabilitation provision discount rate changes
Any change in the discount rate for closed sites is recorded as a finance cost. Iluka has re-set the risk free
discount rates used in calculating rehabilitation provisions in the US and Sierra Leone to 0.5% and 1.0%,
respectively (2019: 2.5% and 2.5%) due to the continuing decline in applicable US Treasury Bond Rates. The 5-
and 10-year US Treasury Bond Rates are used as a proxy for risk-free discount rates.
117
Iluka Resources Limited, Annual Report 2020
117
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
17 CONTRIBUTED EQUITY
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
Balance on 1 January, comprising
Ordinary shares - fully paid
Treasury shares - net of tax
Movements in ordinary share capital
2018 Final Dividend - DRP
2019 Interim Dividend - DRP
2019 Final Dividend - DRP
Redemption of capital - Deterra Demerger
-
Movements in treasury shares, net of tax
Acquisition of treasury shares by trust
Employee share issues
-
2020
Shares
2019
Shares
2020
$m
2019
$m
422,584,778
(470,456)
422,114,322
422,395,677
(675,521)
421,720,156
1,160.4
(2.8)
1,157.6
1,158.6
(4.6)
1,154.0
-
-
184,903
-
-
103,439
85,662
-
-
-
-
270,527
-
(992,972)
1,198,037
-
-
-
1.2
(10.0)
-
-
1.7
-
1.0
0.7
-
-
-
(6.2)
8.0
-
Balance on 31 December, comprising
Ordinary shares - fully paid
Treasury shares - net of tax
422,569,752
422,114,322
422,769,681
(199,929)
422,584,778
(470,456)
1,150.5
1,151.7
(1.1)
1,157.5
1,160.4
(2.8)
(a) Ordinary share capital
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.
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
2019 final
(b) Treasury shares
Date issued
2 April 2020
Price per share
Number of ordinary
shares issued
6.97
184,903.0
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.
118
118
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
18 RESERVES AND RETAINED EARNINGS
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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
Balance at 1 January
(Loss)/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
Net profit/(loss) for the period
Dividends paid
Actuarial gains/(losses) on retirement benefit obligation, net of tax
Transfer from asset revaluation reserve
Balance at 31 December
-0.1 CR
Notes
18(a)
18(b)
18(c)
22(a)
18(d)
18(e)
2020
$m
11.3
(0.5)
10.8
(4.8)
-
0.7
7.8
(2.8)
0.9
0.2
(1.7)
3.7
2.2
39.1
14.9
(0.2)
(8.5)
-
-
45.3
(21.8)
(0.3)
-
(22.1)
37.1
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
(472.0)
2,411.9
(1,831.9)
(4.2)
0.5
104.3
-
(86.6)
(279.9)
(101.5)
(3.9)
0.1
(472.0)
(0.2)
119
Iluka Resources Limited, Annual Report 2020
119
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
(a) Asset revaluation reserve
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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 dollar denominated sales, as described in note 22. 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 17) 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). Both US and Sierra Rutile operations had net liabilities at
31 December 2020 and were not designated as a net investment hedge against USD dollar denominated debt.
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 per note 24, the Group reduced its shareholding in Sierra Rutile from 96.43% to 90%, and recognised
a loss on partial disposal of its investment in Sierra Rutile of $0.3 million. In 2019, the Group recognised a gain of
$6.7 million on part disposal of its investment in Sierra Rutile, and a loss on initial recognition of the related put
option held by the IFC of $28.5 million against other reserves in equity. Refer to note 24.
120
120
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
19 DIVIDENDS
Final dividend
for 2019 of 8 cents per share, fully franked
for 2018 of 19 cents per share, fully franked
-
Interim dividend
for 2019 of 5 cents per share, fully franked
-
Distributions
Demerger dividend
-
Total dividends
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
2020
$m
33.8
-
-
-
-
1,798.1
-
1,831.9
2019
$m
-
80.3
-
21.1
-
-
-
101.5
Of the total $33.8 million final dividend declared for 2019, shareholders respectively took up $1.2 million as
ordinary shares as part of the Dividend Reinvestment Plan. Refer to note 17(a).
Since balance date the directors have determined a final dividend for 2020 of 2 cents per share, fully franked. The
dividend is payable on 8 April 2021 for shareholders on the register as at 10 March 2021. The aggregate amount
of the proposed dividend is $8.5 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 2020 is $281.0 million (2019: $129.2 million). This
balance is based on a tax rate of 30% (2019: 30%).
121
Iluka Resources Limited, Annual Report 2020
121
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
20 EARNINGS/(LOSS) PER SHARE
Basic earnings/(loss) per share
From continuing operations
From discontinued operations
Total basic earnings/(loss) per share
Diluted earnings/(loss) per share
From continuing operations
From discontinued operations
Total diluted earnings/(loss) per share
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
2020
Cents
24.5
545.9
570.4
2019
Cents
(85.0)
14.0
(71.0)
24.4
543.6
568.0
(85.0)
14.0
(71.0)
Total earnings/(loss) per share (EPS) is the amount of post-tax earnings or loss attributable to each share. Total
basic and diluted EPS comprises EPS from continuing operations and discontinued operations. Discontinued
operations represent the earnings associated with the demerger of Deterra - refer to note 23.
Total basic EPS is calculated on the profit for the period attributable to equity holders of the parent of $2,410.0
million (2019: loss of $299.7 million) divided by the weighted average number of shares on issue during the year,
excluding treasury shares, being 422,478,404 shares (2019: 422,146,281 shares).
Total 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 comparative period.
122
122
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
RISK
21 FINANCIAL RISK MANAGEMENT
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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.
Foreign exchange risk is also managed through entering into forward foreign exchange contracts and collar
contracts detailed in note 22.
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.
2020
$m
26.8
33.0
(25.4)
(13.0)
(4.7)
16.7
2019
$m
45.0
75.4
(21.0)
(55.7)
(33.7)
10.0
123
Iluka Resources Limited, Annual Report 2020
123
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
(ii) Group sensitivity
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
The average US dollar exchange rate during the year was 0.6907 (2019: 0.6950). The US dollar spot rate at 31
December 2020 was 0.7690 (31 December 2019: 0.7000). Based on the Group's net financial assets at 31
December 2020, 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
5.2
0.3
Equity
$m
7.7
(29.7)
+10%
Weaken
Profit (loss)
$m
7.0
(0.2)
Equity
$m
(6.5)
18.1
31 December 2020
31 December 2019
(iii) Interest rate risk
Interest rate risk arises from the Group’s borrowings and cash deposits. During 2020 and 2019, the Group's
borrowings at variable rates were denominated in Australian dollars and US dollars. At 31 December 2020, 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 2020
31 December 2019
+1%
$m
0.4
0.6
-1%
$m
(0.4)
(0.6)
The sensitivity is calculated using the average month end debt position for the year ended 31 December 2020.
The interest charges in note 16(d) of $1.9 million (2019: $7.3 million) reflect interest-bearing liabilities in 2020
that range between $1.3 million and $159.7 million (2019: $40.1 million and $191.4 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 14.
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
16(b)(i)) of $462.1 million at balance date as well as cash and cash equivalents of $87.1 million and prudent cash
flow management.
124
124
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
(d) Maturities of financial liabilities
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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 2020
Non-derivatives
Payables
Lease liabilities
Interest-bearing variable rate
Total non-derivatives
Derivatives
%
4.9
1.5
129.4
7.5
-
136.9
-
3.9
-
3.9
-
7.8
38.0
45.8
Foreign exchange collar contracts
Put option
Total derivatives
(1.9)
-
(1.9)
(0.6)
7.7
7.1
-
-
-
-
9.3
-
9.3
-
-
-
129.4
28.5
38.0
195.9
129.4
23.3
38.0
190.7
(2.5)
7.7
5.2
(2.5)
7.2
4.7
Weighted
average
rate
Less than 1
year
Between
1 and 2
years
Between
2 and 5
years
Over 5
years
Total
contractual
cash flows
Carrying
amount
liabilities
$m
$m
$m
$m
$m
At 31 December 2019
Non-derivatives
Payables
Lease liabilities
Interest-bearing variable rate
Total non-derivatives
4.3
3.1
140.8
9.2
-
150.0
Derivatives
Forward foreign exchange
contracts
Foreign exchange collar
contracts
Put option
Total derivatives
0.6
3.1
-
3.7
-
8.6
-
8.6
-
1.6
28.4
30.0
-
6.0
55.7
61.7
-
-
-
-
-
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
Refer to note 22 for detail on derivative instruments.
125
Iluka Resources Limited, Annual Report 2020
125
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
22 HEDGING
Current assets/(liabilities)
Foreign exchange collar hedges
Foreign exchange forward contracts
Non-current assets/(liabilities)
Foreign exchange collar hedges
2020
$m
1.9
-
1.9
0.6
2019
$m
(3.1)
(0.6)
(3.7)
(1.6)
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 2020 and 31 December 2019, comprising the above hedging instruments and the put option liability
detailed in note 24. The fair value of hedging instruments is determined using valuation techniques with inputs
that are observable market data (a level 2 measurement). 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 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.
126
126
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
Cash flow hedges
For cash flow hedges, the portion of the gain or loss on the hedging instrument that is effective is recognised
directly in equity, while the ineffective portion is recognised in profit or loss. The ineffective portion was
immaterial in the current and prior periods. The maturity profile of these hedges is shown in note 21(d). The
recognition of the future gain or loss is expected to be consistent with this timing.
Foreign exchange collar contracts in relation to expected USD revenue, predominantly from contracted sales to
31 December 2022, remain open at the reporting date. The foreign exchange collar hedges cover US$98.4 million
of expected USD revenue to 31 December 2022 and comprise US$98.4 million worth of purchased AUD call
options with a weighted average strike price of 78.5 cents and US$98.4 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$94.7 million in foreign exchange collar contracts consisting of US$94.7 million of bought AUD call options
with weighted average strike prices of 78.4 cents and US$94.7 million of sold AUD put options with weighted
average strike prices of 68.6 cents expired during the year. US$63.6 million in foreign exchange forward
contracts expired during the year, at a weighted average rate of 70.7 cents.
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
To the extent possible, the Group designates US denominated debt as a hedge against the Group's net
investment in Sierra Leone, which has a US dollar functional currency. Sierra Rutile operations had net liabilities
at 31 December 2020 and were therefore not designated as a net investment hedge against USD dollar
denominated debt. No amounts in respect of the Group's net investment hedge were recognised in the foreign
currency translation reserve during the current reporting period (2019: $2.6 million reserve reduction).
127
Iluka Resources Limited, Annual Report 2020
127
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
GROUP STRUCTURE
23 DEMERGER OF DETERRA
The Group held a royalty over specific mining tenements in the Mining Area C (MAC) province in Western
Australia operated by BHP up until demerger of this business on 2 November 2020. The demerger resulted in the
formation of an independent ASX-listed company, Deterra Royalties Limited (Deterra), which is the largest
resource focused royalty company listed on the ASX. Subsequent to demerger, the Group retains a 20% equity
ownership interest in Deterra, which is equity accounted.
(a) Demerger - Deterra
The Group implemented the demerger on 2 November 2020 in accordance with the Demerger Booklet and ASX
Announcement released on 10 September 2020.
To effect the demerger, the Group first transferred all assets and liabilities comprising the MAC Royalty segment
to Deterra (at the time a wholly owned subsidiary of the Group) at their respective carrying amounts.
The Group recognised two fair value gains on demerger, as follows:
-
Carrying value of net assets of Deterra
Fair value of Deterra¹
Gross fair value gain
-
Less: transaction costs
-
Net fair value gain
-
¹ Based on the 5-day VWAP for Deterra shares - refer to key estimate below
$m
$m
Fair value gain on shares
Distributed²
80%
Retained³
20%
$m
Total
100%
-
1,808.1
1,808.1
(13.3)
-
452.0
452.0
-
2,260.1
2,260.1
-
(13.3)
1,794.8
452.0
2,246.8
² The Group remeasured distributed Deterra shares to their fair value on the distribution date.
³ The Group remeasured retained Deterra shares to their fair value on the date control of Deterra was lost.
The Group subsequently distributed 80% of its shares in Deterra to eligible shareholders, which is reflected in the
statement of changes in equity. The distribution was effected by a capital redemption of $10 million, with the
balance distributed as a dividend in the form of Deterra shares. Refer to note 18.
Key estimate: determining the fair value of Deterra
The fair value of Deterra on demerger, being $2,260.1 million, was calculated using the volume weighted
average price (VWAP) of Deterra shares as traded on the ASX over the first five trading days after demerger
($4.277 per share) multiplied by the number of Deterra shares (528,462,101 shares). Determining the fair value
of Deterra on this basis was deemed as the most appropriate and practical way of reliably estimating the fair
value of Deterra since it maximises the use of observable, externally available information. The fair value of the
20% investment retained by the Group of $452.0 million was determined by applying the same methodology.
128
128
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
(b) Discontinued operation – MAC Royalty income and amortisation of royalty asset
Until demerger, the Group recognised MAC Royalty income on an accrual basis. The intangible MAC Royalty
entitlement asset previously held by the Group (of $3.2 million) was amortised on a straight-line basis over its
estimated useful life.
The assets and liabilities comprising the MAC Royalty segment were classified as non-current assets held for
sale on the date the group announced the demerger, being 10 September 2020, and subsequently derecognised
(refer (b) and (c) below).
Related MAC Royalty income has similarly been reclassified as income from discontinued operations and is
included in the statement of comprehensive income on a net basis, and comprises:
-
MAC Royalty Income
MAC Royalty entitlement asset amortisation
Income tax expense attributable to discontinued operation
-
Net fair value gain (refer to (a), above)
-
Profit after tax from discontinued operations
(c) Equity accounted investment - Deterra
2020
$m
80.7
(0.3)
(20.7)
59.7
2,246.8
2019
$m
85.1
(0.4)
(25.4)
59.3
-
2,306.5
59.3
The Group accounts for its retained investment in Deterra as an equity accounted associate. It is able to exert
significant influence, but not control, over Deterra through the ability to exercise voting rights attached to its
ownership interest, together with its ability to appoint a board member to the Deterra board.
Initial recognition of equity accounted investment
The Group initially recognised its retained investment at its cost to the Group, which was equal to the carrying
value of the net assets of Deterra immediately prior to demerger. It then remeasured this retained interest to its
fair value (with reference to the fair value of Deterra as shown above). This fair value was allocated to the assets
acquired on a notional basis, with the value uplift attributed to the MAC Royalty rights.
It is necessary to notionally depreciate this equity accounted investment in accordance with the underlying
assets of Deterra, being the MAC Royalty rights.
Subsequent equity accounting
The Group recognises its share of the profits of Deterra, being 20% of its net profit after tax, as income in each
reporting period. The Group adjusts its share of the profit of Deterra by notionally depreciating the value
attributed to the MAC Royalty right (materially all of its initial value) over a period of 50 years on a straight-line
basis, which is aligned with the estimated life of mine of the mining operations in the MAC Royalty area.
The Group recognised $0.1 million in equity accounted profits (net of $1.3 million of notional depreciation) for the
year ended 31 December 2020. No dividends were declared or paid by Deterra from demerger to 31 December
2020.
The following is a summary of the financial
amended to include adjustments made by the Group in applying the equity method.
information presented in the financial statements of Deterra,
129
Iluka Resources Limited, Annual Report 2020
129
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
2020
$'000
188
25,092
363
1,114
26,757
10,029
29
332
10,390
382
11
65
458
279
16,386
6,961
23,626
13,063
-
33,341
-
115
(20,393)
13,063
20%
2,613
450,806
(1,319)
452,100
-
Summarised balance sheet of Deterra Resources Limited at 31 December 2020
-
Current assets
Cash and cash equivalents
Trade and other receivables
Income tax receivable
Prepayments
Total current assets
-
Non-current assets
Royalties intangible assets
Property, plant and equipment
Right-of-use assets
Total non-current assets
-
Current liabilities
Trade and other payables
Provisions
Lease liability
Total current liabilities
-
Non-current liabilities
Lease liability
Borrowings
Deferred tax
Total non-current liabilities
-
Net assets
-
Reconciliation to carrying amount
-
Opening net assets on 15 June 2020
Profit for the period
Other comprehensive income
Movements in other reserves
Dividend paid prior to demerger
Closing net assets
-
Group's share percentage
Group's share of net assets
-
Gain on retained interest in Deterra
Accumulated notional adjustments to share of equity accounted profits
-
Carrying amount at 31 December 2020
-
130
130
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
24 CHANGES IN OWNERSHIP INTERESTS HELD IN CONTROLLED ENTITIES
(a) Increase in International Finance Corporation (IFC) interest in Sierra Rutile Limited (SRL)
The Group entered into a strategic partnership with the IFC, a member of the World Bank Group, in 2019 in
relation to the Sierra Rutile operation. The IFC acquired 3.57% of Iluka Investments (BVI) Limited for a
consideration of US$20 million. The Group also entered into an arrangement whereby the IFC has the right to
dispose of their interest back to the Group at its fair value on the date of exercise of the put option.
Acquisition of a second tranche to increase the investment to 10% was to occur upon approval of construction of
early works on the Sembehun project. As advised on 17 December 2019, the terms of the second tranche were
subject to renegotiations in light of the delay in approval of the Sembehun project (refer to note 23 of the 2019
Annual Report).
Subsequent to these renegotiations during the reporting period, the IFC subscribed for its second tranche
investment in Sierra Rutile Limited (SRL) on 2 November 2020 for US$1, increasing its investment to 10%.
The second tranche was effected through the issue of additional shares by Iluka Investments (BVI) Limited. The
Group recognised a loss of $0.3 million in relation to this transaction, which is included in other reserves within
equity - refer to note 18.
(b) Put option held by the IFC
The put option was revalued to the present value of its expected redemption amount of $7.2 million (US$5.5
million). A remeasurement gain of $19.4 million (US$14.5 million) is included in other income in profit or loss. In
addition, unrealised foreign exchange gains of $1.8 million have been recognised in profit or loss in relation to the
put option.
131
Iluka Resources Limited, Annual Report 2020
131
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
25 CONTROLLED ENTITIES AND DEED OF CROSS GUARANTEE
The consolidated financial statements incorporate the following subsidiaries:
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
2019
2020
%
%
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
40
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
100
100
100
100
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
# Deterra Royalties (MAC) 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 Royalties (Australia) Pty Ltd
* 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
^ Puttalam Ilmenite (Private) Limited
Iluka Trading (Shanghai) Co., Ltd
Iluka Brasil Mineracao Ltda
132
132
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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
90
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
96.4
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.
# Deterra Royalties (MAC) Limited is a party to the Deed. A revocation deed was lodged with ASIC on 10
September 2020 to revoke the participation of Deterra Royalties (MAC) Limited in the Deed. The revocation deed
will take effect on 11 March 2021 provided that no party to the Deed goes into liquidation during that six month
period after lodgement with ASIC.
^ In August 2020, Iluka reduced its 100% interest in Puttalam Ilmenite (Private) Limited (formerly Iluka Lanka
Exploration (Private) Limited) to a non-controlling interest of 40%.
133
Iluka Resources Limited, Annual Report 2020
133
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
(a) Condensed financial statements of the extended closed group
Condensed statement of profit or loss and other comprehensive income
2020
$m
2019
$m
CONTINUING OPERATIONS
Revenue from ordinary activities
Expenses from ordinary activities
Finance costs
Equity accounted share of profit - Deterra
Income tax expense
Profit for the period
DISCONTINUED OPERATIONS
Profit after tax from discontinued operations
Net profit after tax for the period
Other comprehensive income
Changes in the fair value of cash flow hedges
Total comprehensive income for the period
Summary of movements in consolidated retained earnings
Retained earnings at the beginning of the financial year
Profit for the period
Dividends paid
Retained earnings at the end of the financial year
Condensed balance sheet
Current assets
Cash and cash equivalents
Receivables
Inventories
Derivative financial instruments
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
Investments accounted for using the equity method
Derivative financial instruments
Total non-current assets
756.8
(509.3)
(13.7)
0.1
(68.7)
165.2
2,306.5
2,471.7
9.5
2,481.2
397.0
2,471.7
(1,832.0)
1,036.7
2020
$m
52.2
90.4
452.7
1.9
597.2
956.2
28.0
-
112.0
902.1
15.1
452.1
0.6
2,466.1
962.1
(560.4)
(44.0)
-
(106.3)
251.4
59.3
310.7
(2.4)
308.3
187.8
310.7
(101.5)
397.0
2019
$m
69.3
161.9
300.4
-
531.6
933.2
17.5
3.5
84.1
721.8
20.0
-
-
1,780.1
Total assets
3,063.3
2,311.7
134
134
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
Condensed balance sheet
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
OTHER NOTES
26 CONTINGENT LIABILITIES
(a) Bank guarantees
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
2020
$m
2019
$m
222.8
-
27.7
53.9
7.5
311.9
36.9
-
504.2
15.7
556.8
81.8
3.7
94.4
62.9
9.2
252.0
54.0
1.6
433.7
20.4
509.7
868.7
761.7
2,194.6
1,550.0
1,150.5
7.5
1,036.6
2,194.6
1,157.5
(4.5)
397.0
1,550.0
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 2020, the total value of
performance commitments and guarantees was $120.5 million (2019: $125.3 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) 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 or deceptive conduct in 2012.
135
Iluka Resources Limited, Annual Report 2020
135
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
(c) Shareholder class action (continued)
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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 the
Applicant on behalf of Iluka shareholders for alleged breaches of Iluka’s continuous disclosure obligations, and
misleading or deceptive conduct in relation to disclosures made by Iluka to the market between April and July
2012.
The trial of the class action is scheduled to commence on 8 March 2021 in the New South Wales registry of the
Federal Court of Australia.
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.
(d) 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.
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
that arose prior to the Group acquiring its interest in SRL. 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 2020, 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.
(e) Other claims
In the course of its normal business, the Group occasionally receives claims arising from its operating or historic
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.
27 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
2020
$m
2019
$m
14.8
32.3
43.6
90.7
14.9
34.7
46.8
96.4
These costs are discretionary. If the expenditure commitments are not met then the associated exploration and
mining leases may be relinquished.
136
136
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
(b) Lease commitments
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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 11 and 35 for further information.
(c) Capital commitments
Capital expenditure contracted for and payable, but not recognised as liabilities is $35.1 million (2019: $26.5
million). All of the commitments relate to the purchase of property, plant and equipment. Of the total amount,
$34.4 million is payable within one year of the reporting date and $0.7 million is payable between one and five
years of the reporting date.
28 REMUNERATION OF AUDITORS
During the year the following fees were paid or payable for services provided by PricewaterhouseCoopers
Australia (PwC) as the auditor of the parent entity, Iluka Resources Limited, by PwC’s related network firms and
by non-related audit firms:
(a) Auditors of the Group - PwC and related network firms
Audit and review of financial reports
Group
Controlled entities
Other assurance services
Investigating Accountants report for Deterra Demerger
Other assurance services
Other services
Tax compliance and advisory services
Other advisory services
2020
$000
624
156
780
266
63
329
34
10
44
2019
$000
623
174
797
-
96
96
34
10
44
Total services provided by PwC
1,153
937
(b) Other auditors and their related network firms
Audit and review of financial statements
Other compliance and advisory services
101
4
105
96
15
111
Amounts for the remuneration of auditors in the comparative period have been restated to include fees which
accrued subsequent to the end of the comparative period.
137
Iluka Resources Limited, Annual Report 2020
137
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
29 SHARE-BASED PAYMENTS
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
Share-based compensation benefits are provided to employees via the Equity Incentive Plan (specifically, the
Executive Incentive Plan, Long Term Incentive Plan and Short Term Incentive Plan). Information relating to this
scheme 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 Executive Incentive Plan also
take into account the Company's predicted share prices against the comparator group performance at vesting
date.
A credit to the share-based payments expense arises where unvested entitlements lapse on resignation or the
non-fulfilment of the vesting conditions that do not relate to market performance. Payroll tax payable on the grant
of restricted shares or share rights is recognised as a component of the share-based payments expense when
paid.
The share-based payment expense recognised in profit or loss of $4.1 million (2019: $6.2 million) results from
several schemes summarised below.
Schemes
STIP (i)
2020
2019
2018
2017
LTIP - TSR (ii)
2017
2016 MD Grant
2016
2016
LTIP - ROE (ii)
2017
2016 MD Grant
2016
2016
EIP (iii)
MD LTDR (iv)
COO LTDR (v)
COO LTDR (v)
COO LTDR (v)
Restricted Share Plan
(vi)
Grant date
Vesting date
Mar-21
Mar-20
Mar-19
Mar-18
May-17
Oct-16
May-16
May-16
May-17
Oct-16
May-16
May-16
Mar-22/23
Mar-21/22/23
Mar-20/21
Mar-19/20
Mar-21
Mar-21
Mar-20
Mar-19
Mar-21
Mar-21
Mar-20
Mar-19
Mar-18/19/20/21
Mar-23/24/25
Oct-16
Mar-17
Mar-18
Mar-19
Mar-18/19/20
Mar-20
Mar-21
Mar-22
Fair
value
$
6.62
9.30
7.62
10.55
5.66
3.71
4.27
4.27
7.44
5.42
5.86
6.01
7.62
4.68
6.82
10.55
9.35
6.82
Shares /
rights at
31 Dec 20
Expense
2020
$m
Shares /
rights at
31 Dec 19
Expense
2019
$m
-
-
-
-
610,323
126,688
104,037
-
610,312
126,687
104,037
-
0.7
1.0
0.6
0.1
0.3
0.1
-
-
(2.0)
(0.5)
-
-
1,528,301
3.4
-
-
-
-
-
-
-
(0.1)
-
0.5
4.1
-
-
-
-
376,858
126,688
211,502
1,607
369,845
126,687
211,519
-
366,282
163,031
16,133
10,424
11,762
-
-
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
138
138
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
(i) Short Term Incentive Plan (STIP)
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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 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 granted on 1 March each year. The number of restricted
shares and performance rights to be awarded is 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 fair value at grant date for the Executive Incentive Plan (EIP) with market vesting conditions takes into
account the exercise price of $nil (2019: nil), the share price at grant date of $9.34 (2019: $9.14), the expected
share price volatility (based on historical volatility) of 33% (2019: 35%), the expected dividend yield of 0% (2019:
0%) the risk free rate of return of 1.7% (2019: 0.5%), and vesting dates for a period of three years commencing
one year after the grant date. 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. The fair value at grant date for the
Executive Incentive Plan (EIP) with non-market vesting conditions is calculated as volume weighted average
market price of Iluka shares for the five days following the end of performance year.
(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 nil (2019: 38,319)
share rights.
(vi) Restricted share plan
No (2019: 51,548) restricted shares were issued to any (2019: five) eligible employees who participated in the
plan. Shares issued in the comparative period were issued to participants based on a volume weighted average
price of $9.35 calculated over the five trading days following the release of the Company’s 2018 annual results.
30 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 prior
reporting period, the remaining net plan surplus was derecognised, as the Group has no further legal or
constructive obligation in relation to this plan.
139
Iluka Resources Limited, Annual Report 2020
139
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
(ii) USA
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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.
(iii) SRL
SRL does not operate any retirement benefit plan for its employees. For employees of the Sierra Leone based
subsidiary, the Group makes a contribution of 10% of the employees' basic salary to the National Social Security
and Insurance Trust ("NASSIT") for payment of pension to staff on retirement. These employees also contribute
5% of their basic salary to NASSIT.
The Sierra Leone based subsidiary also provides for end-of-term benefits based on the provisions contained in
the collective bargaining agreements negotiated with 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.
United States
Sierra Leone
Total
Net plan position
Deficit
Deficit
2020
$m
(17.7)
(9.1)
(26.8)
2019
$m
(15.7)
(6.7)
(22.4)
A net deficit of $26.8 million (2019: deficit $22.4 million) is included in non-current provisions in note 9. The table
below provides a summary of the net financial position at 31 December for the past five years.
Defined benefit plan obligation
Plan assets
Deficit
2020
$m
(51.8)
25.0
(26.8)
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)
(c) Defined benefits superannuation expense
In 2020, $2.3 million (2019: $2.4 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.
140
140
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
31 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
Changes in rehabilitation provisions for closed sites
Inventory NRV write-down
Demerger gain
Impairment of Sri Lanka
Put option revaluation gain
Change in operating assets and liabilities
Decrease in receivables
(Increase) in inventories
Increase/(decrease) in net current tax liability
Decrease in net deferred tax
(Decrease) in payables
(Decrease) in provisions
Net cash inflow from operating activities
2020
$m
2,410.0
184.8
(0.1)
(2.0)
5.6
14.4
12.2
4.1
0.6
-
(8.1)
13.0
(2,246.8)
12.4
(19.4)
93.4
(196.2)
(63.3)
(8.1)
(118.9)
24.1
111.7
2019
$m
(299.7)
163.2
1.6
4.1
0.3
19.7
18.3
6.2
1.2
375.2
3.2
41.8
-
-
-
(39.8)
(35.2)
(43.1)
199.0
(111.7)
17.9
322.2
141
Iluka Resources Limited, Annual Report 2020
141
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
32 KEY MANAGEMENT PERSONNEL
(a) Key Management Personnel
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
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 63 to 86.
The below provides a summary:
-
Short-term benefits
Post-employment benefits
Termination benefits
Share-based payments
Total
2020
$000
4,962
199
49
590
5,800
2019
$000
6,213
205
276
3,362
10,056
(b) Transactions with Key Management Personnel
There were no transactions between the Group and Key Management Personnel that were outside of the nature
described below:
(i)
(ii)
(iii)
occurrence was within a normal employee, customer or supplier relationship on terms and conditions no
more favourable than those it is reasonable to expect the Group would have adopted if dealing at arms
length with an unrelated individual;
information about these transactions does not have the potential to adversely affect the decisions about
the allocation of scarce resources made by users of the financial report, or the discharge of
accountability by the Key Management Personnel; and
the transactions are trivial or domestic in nature.
142
142
Iluka Resources Limited, Annual Report 2020
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
33 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 income
¹Profits have been appropriated to a profits reserve for future dividend payments.
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
2020
$m
2019
$m
197.5
2,078.0
2,275.5
69.6
620.7
690.3
106.5
1,481.1
1,587.6
40.6
439.2
479.8
1,585.2
1,107.8
1,151.5
15.3
626.9
(208.5)
1,585.2
1,160.3
2.6
153.4
(208.5)
1,107.8
2,244.9
(234.3)
(7.8)
2,237.1
(2.4)
231.9
(b) Contingent liabilities of the parent entity
The parent had contingent liabilities for performance commitments and guarantees of $12.4 million as at 31
December 2020 (2019: $10.6 million). In addition, the parent has a contingent liability related to the shareholder
class action, as detailed in note 26.
(c) Contractual commitments for the acquisition of property, plant or equipment
As at 31 December 2020, the parent entity had contractual commitments for the acquisition of property, plant or
equipment totalling $2.3 million (2019: $6.3 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.
143
Iluka Resources Limited, Annual Report 2020
143
NOTES TO FINANCIAL STATEMENTS
For the year ended 31 December 2020
(d) Parent entity financial information (continued)
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
(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.
34 RELATED PARTY TRANSACTIONS
The only related party transactions are with Directors and Key Management Personnel (refer note 32). 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.
35 NEW AND AMENDED STANDARDS
New standards and amendments adopted
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 2020.
The affected policies and standards are:
•
•
•
•
Conceptual Framework for Financial Reporting and AASB 2019-1 References to the Conceptual
Framework
AASB 2018-6 Definition of a Business
AASB 2018-7 Definition of Material
AASB 2019-5 Disclosure of the Effect of New IFRS Standards Not Yet Issued in Australia
The adoption of the above standards and amendments did not have a material impact on the current or prior
period.
Forthcoming standards and amendments not yet adopted
There are no 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.
144
144
Iluka Resources Limited, Annual Report 2020
DIRECTORS’ DECLARATION
For the year ended 31 December 2020
DIRECTORS' DECLARATION
In the directors' opinion:
ILUKA RESOURCES LIMITED
31 DECEMBER 2020
(a)
the financial statements and notes set out on pages 88 to 144 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 2020 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 23 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 23.
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
25 February 2021
145
Iluka Resources Limited, Annual Report 2020
145
INDEPENDENT AUDITOR'S REPORT
To the members of Iluka Resources Limited
For the year ended 31 December 2020
146
Iluka Resources Limited, Annual Report 2020
INDEPENDENT AUDITOR'S REPORT
To the members of Iluka Resources Limited
For the year ended 31 December 2020
Iluka Resources Limited, Annual Report 2020
147
INDEPENDENT AUDITOR'S REPORT
To the members of Iluka Resources Limited
For the year ended 31 December 2020
148
Iluka Resources Limited, Annual Report 2020
INDEPENDENT AUDITOR'S REPORT
To the members of Iluka Resources Limited
For the year ended 31 December 2020
Iluka Resources Limited, Annual Report 2020
149
INDEPENDENT AUDITOR'S REPORT
To the members of Iluka Resources Limited
For the year ended 31 December 2020
150
Iluka Resources Limited, Annual Report 2020
INDEPENDENT AUDITOR'S REPORT
To the members of Iluka Resources Limited
For the year ended 31 December 2020
Iluka Resources Limited, Annual Report 2020
151
INDEPENDENT AUDITOR'S REPORT
To the members of Iluka Resources Limited
For the year ended 31 December 2020
152
Iluka Resources Limited, Annual Report 2020
PHYSICAL, FINANCIAL AND
CORPORATE INFORMATION
In this section
FIVE YEAR PHYSICAL AND FINANCIAL SUMMARY
OPERATING MINES PHYSICAL DATA
ORE RESERVES/ MINERAL RESOURCES STATEMENT
SHAREHOLDER INFORMATION
CORPORATE INFORMATION
Eneabba, Western Australia
Iluka Resources Limited, Annual Report 2020
Iluka Resources Limited, Annual Report 2020
153
153
PHYSICAL, FINANCIAL AND CORPORATE INFORMATION
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 (excluding HYTI and TIC)
- Synthetic rutile
2020
2019
2018
2017
2016
185.2
172.6
227.4
585.2
455.9
239.6
162.1
115.8
517.5
256.1
1,319
1,217
1,220
322.1
184.1
196.2
702.4
318.6
274.0
200.1
206.7
680.8
170.8
1,487
1,380
1,142
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
Not disclosed Not disclosed Not disclosed Not disclosed Not disclosed
Average AUD:USD spot exchange rate (cents)
69.1
69.5
74.8
76.7
74.4
Unit revenue and cash cost ($/t)
Revenue per tonne Z/R/SR sold (A$/t)
Unit cash costs of production per tonne
Z/R/SR produced excluding by-products
Unit cost of goods sold per tonne of Z/R/SR
Summary financials ($m)
Z/R/SR revenue
Ilmenite and other revenue
Revenue from operations
Cash costs of production
Inventory movement – cash costs of production
Restructure and idle capacity charges
Government royalties
Marketing and selling costs
Asset sales and other income
Corporate and other costs
Major projects, exploration and innovation
Mineral sands EBITDA
Mining Area C EBITDA
Underlying Group EBITDA1
Rehabilitation and holding costs for closed sites
Demerger / SRL transaction costs
Depreciation and amortisation
Inventory movement – non-cash production costs
Gain on demerger of Deterra Royalties
Significant non-cash items
Net interest and finance charges
Income tax (expense) benefit
Net profit (loss) after tax for the period (NPAT)
Operating cash flow
Capital expenditure (capex)
Free cash (outflow) inflow2 ($m)
Net (debt) cash
154
Iluka Resources Limited, Annual Report 2020
1,625
1,654
1,415
1,079
918
1,032
753
889
606
750
841.0
1,128.7
1,179.0
106.0
64.4
65.1
439
743
959.1
58.4
947.0
1,193.1
1,244.1
1,017.5
(558.7)
(539.6)
(455.1)
142.3
(20.9)
(22.3)
(27.7)
(1.5)
(54.6)
(62.3)
342.0
81.1
423.1
7.2
(13.3)
(184.8)
39.9
2260.1
-
(7.1)
(95.5)
2410.0
183.8
(71.2)
36.3
50.2
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)
(275.8)
408.1
(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
(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
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
1.8
(182.5)
(506.3)
Capital and dividends
Ordinary shares on issue (millions)
Dividends per share in respect of the year (cents)
Franking level %
Opening year share price ($)3
Closing year share price ($)3
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’ equity4 %
Return on capital5 %
Gearing (net debt/net debt + equity) %
Financial position as at 31 December ($m)
Total assets
Total liabilities
Net assets
2020
422.8
2
100
4.70
6.49
41.2
36.1
570.4
8.5
283.7
311.3
n/a
2019
422.6
13
100
3.80
4.73
51.6
44.5
(71.0)
33.1
(24.5)
6.8
n/a
2018
422.4
29
100
5.09
3.87
48.2
43.8
72.2
72.1
31.8
54.0
n/a
2017
418.7
31
100
3.71
5.17
35.4
29.6
(41.0)
76.9
(20.1)
(11.6)
17.1
2016
418.7
3
100
3.12
3.69
20.7
14.2
(53.6)
11.3
(17.1)
(18.3)
31.5
2,361.7
1,894.5
2,211.9
1,947.0
2,442.3
(1,069.4)
(1,182.8)
(1101.9)
(1061.5)
(1339.3)
1,292.3
711.6
1,110.0
885.5
1,103.0
Shareholders’ equity
1,292.3
711.6
1,110.0
885.5
1,103.0
Net tangible asset backing per share ($)
3.0
1.6
2.1
1.7
2.2
Employees, as at 31 December
Full-time equivalent employees6
Iluka Ore Reserves and Mineral Resources
Mineral Resources In Situ HM million tonnes
Ore Reserves In Situ HM million tonnes
HM Grade (%) Ore Reserves
Assemblage7 (%)
Zircon
Rutile
Ilmenite
Sierra Rutile Ore Reserves and Mineral Resources
Mineral Resources In Situ Rutile million tonnes
Ore Reserves In Situ Rutile million tonnes
3,354
3,427
3,421
2,543
687
118.9
11.2
5.7
17
3
55
7.9
3.6
165.4
13
5.6
18
3
56
8.2
3.7
167.8
15.7
5.8
17
4
54
8
3.8
169.4
16.4
5.8
19
4
52
7.3
3.8
170.5
16.7
5.9
19
4
52
7.5
3.9
Notes:
(1) Underlying Group EBITDA excludes non-recurring adjustments including write-downs, Sierra Rutile Limited transaction costs, the gain on
the demerger of Deterra Royalties, and 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) Share prices prior to November 2020 have been adjusted by a factor of 0.51 for the capital reduction from the Deterra Royalties demerger.
(4) Calculated as NPAT for the year as a percentage of the average monthly shareholders’ equity over the year.
(5) Calculated as EBIT for the year as a percentage of average monthly capital employed for the year.
(6) 2016 data excludes Sierra Rutile Limited.
(7) 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 159
to 161 or Iluka’s website www.iluka.com for Ore Reserves and Mineral Resources Statement.
Iluka Resources Limited, Annual Report 2020
155
PHYSICAL, FINANCIAL AND CORPORATE INFORMATION
OPERATING MINES PHYSICAL DATA
12 Months to 31 December 2020
Mining
Overburden moved kbcm
Ore mined kt
Ore treated grade HM %
VHM treated grade %
Concentrating
HMC produced kt
VHM produced kt
VHM in HMC assemblage %
Zircon
Rutile
Ilmenite
HMC processed kt
Finished product¹ kt
Zircon
Rutile
Ilmenite (saleable/upgradeable)
Synthetic rutile produced kt
Jacinth-
Ambrosia/
Mid west
Cataby
/ South
west
Australia
Total
Sierra
Leone
Idle
Operations
Group
Total
2020
Group
Total
2019
3,146
10,349
4.0%
3.7%
357
318
89.0%
49.7%
8.0%
31.3%
232
114.9
24.5
67.7
-
12,164
13,343
5.7%
4.8%
520
454
87.4%
11.4%
6.8%
69.3%
483
58.8
27.9
342.4
227.4
15,310
23,692
4.9%
4.2%
876
772
88.1%
27.0%
7.3%
53.8%
715
173.7
52.4
410.1
227.4
254
8,928
3.4%
2.5%
306
200
65.4%
4.2%
43.4%
17.7%
293
6.6
120.2
45.8
-
-
-
-
-
-
-
-
-
-
-
-
4.9
-
-
-
15,564
32,620
4.4%
3.7%
1,182
971
82.2%
21.1%
16.6%
44.5%
1,008
185.2
172.6
455.9
227.4
12,602
29,124
3.9%
4.3%
1,087
911
83.8%
30.9%
18.7%
34.2%
961
322.1
184.1
318.6
196.2
Notes:
(1) Finished product includes material from heavy mineral concentrate (HMC) initially processed in prior periods
EXPLANATORY COMMENTS ON TERMINOLOGY
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 treated grade HM % refers to percentage of heavy mineral
(HM) in the ore processed through the mining unit.
VHM treated grade % refers to percentage of valuable heavy
mineral (VHM) - titanium dioxide (rutile and ilmenite), and zircon
in the ore processed through the mining unit.
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%.
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 synthetic rutile.
Iluka also purchases external ilmenite for its synthetic rutile
production process.
156
Iluka Resources Limited, Annual Report 2020
ORE RESERVES/ MINERAL RESOURCES STATEMENT
HM ORE RESERVES
Iluka HM Ore Reserve Breakdown by Country, Region and JORC Category at 31 December 2020
Summary of Ore Reserves for Iluka(1,2,3,6)
HM Assemblage(4)
Country
Australia
Region
Eucla Basin
Total
Total
Total
Total
Eucla Basin
Perth Basin
Perth Basin(5)
Proved
Probable
Grand Total
Ore
Reserve
Category
Proved
Probable
Proved
Probable
Ore
Tonnes
Millions
62
In Situ HM
Tonnes
Millions
1.9
HM
Grade
(%)
3.1
Ilmenite
Grade
(%)
27
Zircon
Grade
(%)
48
Rutile
Grade
(%)
4
Change HM
Tonnes
Millions
3
65
87
46
132
149
48
197
0.1
2.0
5.7
3.4
9.2
7.7
3.5
11.2
2.1
3.1
6.6
7.5
6.9
5.2
7.2
5.7
21
27
57
69
61
49
68
55
54
48
11
10
10
20
11
17
3
4
4
2
3
4
2
3
(0.6)
(1.3)
(1.8)
Notes:
(1) Competent Persons - Ore Reserves: A Walkenhorst (MAusIMM). The Ore Reserves were estimated in accordance with the JORC
Code (2012 Edition), other than the Ore Reserves for the South West deposits, which have not materially changed and were 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 31 December 2020 and have been depleted for all production conducted to this date.
Iluka Resources Limited, Annual Report 2020
157
PHYSICAL, FINANCIAL AND CORPORATE INFORMATION
ORE RESERVES/ MINERAL RESOURCES STATEMENT
RUTILE ORE RESERVES (SIERRA LEONE)
Iluka Rutile Ore Reserve for Sierra Rutile by JORC Category at 31 December 2020
Summary of Ore Reserves for Iluka(1,2,3,6,7)
In Situ Mineral Content(4)
Country
Sierra
Leone
Region
Sierra Leone
Total
Sierra Leone
Ore
Reserve
Category
Proved
Probable
Ore
Tonnes
Millions
29
239
268
In Situ
Rutile
Tonnes
Millions
0.4
3.2
3.6
Rutile
Grade
(%)
1.5
1.3
1.4
Ilmenite(5)
Grade
(%)
-
-
-
Zircon(5)
Grade
(%)
-
-
-
Change
Rutile
Tonnes
Millions
(0.1)
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 2020 and have been depleted for all production conducted to this date.
(7) The total Ore Reserves for Sierra Leone are stated. As of 31 December 2020, International Finance Corporation (IFC) held a 10% equity stake in
Iluka Investments (BVI) Limited, the holding company of Sierra Rutile Limited.
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”, 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 deposits.
Historical data focussed 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 [11.2*(3/100)] = 0.336 Mt of rutile.
The total reported Mineral Resources and Ore Reserves have been stated for Sierra Leone. As at 31 December 2020, International
Finance Corporation (IFC) held a 10% equity stake in Iluka Investments (BVI) Limited, the holding company of Sierra Rutile Limited.
The Mineral Resources and Ore Reserves for the Sierra Leone rutile deposits attributable to Iluka will be 90% of the stated estimates.
For the year ending 2020, HM Ore Reserves decreased by 1.8Mt HM associated with mining depletion and adjustments, down from
13.0Mt HM to 11.2Mt HM.
The main factors contributing to the movement in Iluka’s HM Ore Reserves during 2020 include the following:
•
•
The Eucla Basin Ore Reserves decreased by 0.6Mt HM associated with mining depletion, pit optimisation and re-design at
Jacinth and Ambrosia.
The Perth Basin Ore Reserves decreased by 1.3Mt HM as a result of mine depletion and adjustment at Cataby (-0.3Mt HM) and
MSP By-Product Stockpile (-0.1Mt HM) and write down of the Capel South (-0.5Mt HM), Elgin (-0.2Mt HM) and Scotts (-0.2Mt
HM) Deposits.
158
Iluka Resources Limited, Annual Report 2020
HM ORE RESERVES MINED AND ADJUSTED
Iluka HM Ore Reserves mined and adjusted by country and region at 31 December 2020
Summary of Ore Reserve Depletion(1)
Category
Active Mines
Non-Active
Sites
Active Mines
Non-Active
Sites
Country Region
Australia Eucla Basin
Total
Eucla Basin
Perth Basin
Total
Total
Total
Total
Perth Basin
Active Mines
Non-Active
Sites
Ore Reserves
In Situ
HM
Tonnes
Millions
2019
2.6
In Situ
HM
Grade
(%)
2019
3.0
In Situ
HM
Tonnes
Millions
Mined
2020
(0.4)
In Situ
HM
Tonnes(2)
Millions
Adjusted
2020
(0.2)
-
2.6
6.8
3.6
10.4
9.4
3.6
-
-
-
3.0
5.8
13.5
7.2
4.6
13.5
(0.4)
(0.6)
-
(0.6)
(1.0)
-
(0.2)
1.1
(1.7)
(0.7)
0.9
(1.7)
In Situ
HM
Tonnes
Millions
2020
2.0
In Situ
HM
Grade
(%)
2020
3.1
In Situ
HM
Tonnes(3)
Millions
Net Change
(0.6)
-
2.0
7.3
1.9
9.2
9.2
1.9
-
3.1
6.3
11.4
6.9
5.1
11.4
-
(0.6)
0.5
(1.7)
(1.3)
(0.1)
(1.7)
13.0
5.6
(1.0)
(0.8)
11.2
5.7
(1.8)
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 0.1Mt rutile associated with mining depletion and adjustments
at Gangama and Gbeni down from 3.7Mt rutile to 3.6Mt rutile.
Iluka Rutile Ore Reserves mined and adjusted for Sierra Rutile at 31 December 2020
Summary of Ore Reserve Depletion(1)
Country Region
Sierra
Leone
Sierra Leone
Total
Sierra Leone(4)
Category
Active Mines
Non-Active
Sites
In Situ
Rutile
Tonnes
Millions
2019
0.6
3.1
3.7
In Situ
Rutile
Grade
(%)
2019
1.3
1.3
In Situ
Rutile
Tonnes
Millions
Mined
2020
(0.1)
-
In Situ
Rutile
Tonnes(2)
Millions
Adjusted
2020
0.1
(0.0)
1.3
(0.1)
0.1
In Situ
Rutile
Tonnes
Millions
2020
In Situ
Rutile
Grade
(%)
2020
In Situ
Rutile
Tonnes(3)
Millions
Net Change
0.6
3.1
3.6
1.4
1.3
1.3
(0.1)
(0.0)
(0.1)
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.
(4) The total Ore Reserves for Sierra Leone are stated. As at 31 December 2020, International Finance Corporation (IFC) held a
10% equity stake in Iluka Investments (BVI) Limited, the holding company of Sierra Rutile Limited.
Iluka Resources Limited, Annual Report 2020
159
PHYSICAL, FINANCIAL AND CORPORATE INFORMATION
ORE RESERVES/ MINERAL RESOURCES STATEMENT
HM MINERAL RESOURCES
Iluka Mineral Resource breakdown by country, region and JORC category at 31 December 2020
Summary of Mineral Resources for Iluka(1,2,3,7)
HM Assemblage(4)
Country Region
Australia Eucla Basin
Total
Eucla Basin
Murray Basin
Total
Murray Basin
Perth Basin
Mineral
Resource
Category
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Total
USA
Total
Sri
Lanka
Total
Total
Total
Total
Perth Basin(5)
Atlantic Seaboard Measured
Indicated
Inferred
Inferred
Atlantic
Seaboard(6)
Sri Lanka
Sri Lanka(7,8)
Measured
Indicated
Inferred
Grand Total
Material
Tonnes
Millions
In Situ
HM
Tonnes
Millions
In Situ
HM
Grade
(%)
Ilmenite
Grade
(%)
Zircon
Grade
(%)
Rutile
Grade
(%)
Change
HM
Tonnes
Millions
191
89
65
345
16
88
91
195
471
312
203
986
27
47
16
91
136
136
5.1
8.3
3.2
16.6
4.4
18.5
10.5
33.4
28.2
16.7
10.0
54.9
1.3
2.5
0.5
4.4
9.5
9.5
705
536
511
1752
39.0
46.0
33.9
118.9
2.7
9.3
5.0
4.8
27.6
21.0
11.6
17.2
6.0
5.3
5.0
5.6
4.9
5.3
3.1
4.8
7.0
7.0
5.5
8.6
6.6
6.8
35
67
59
56
62
56
49
54
58
54
56
56
67
64
60
64
65
65
55
58
57
57
40
18
21
25
11
11
10
11
11
10
9
10
9
11
11
10
4
4
14
12
9
12
4
2
2
3
11
14
14
13
5
5
5
5
-
-
-
-
5
5
5
8
7
7
(0.8)
-
(0.7)
-
(45.1)
(46.5)
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) As of 31 December 2020, the total Mineral Resource for Coco stands at 340 million tonnes at 7.0% HM for 24 million tonnes of HM and the Iluka
Attributable Mineral Resource stands at 136 million tonnes at 7.0% HM for 9.5 million tonnes of HM reflecting Iluka’s 40% ownership.
(8) PQ Deposit removed due to inability to secure continuity of tenure.
160
Iluka Resources Limited, Annual Report 2020
RUTILE MINERAL RESOURCES (SIERRA LEONE)
Iluka Rutile Mineral Resources for Sierra Rutile by JORC category at 31 December 2020
Summary of Mineral Resources for Iluka(1,2,3,6)
In Situ Mineral Content
Country
Sierra
Leone
Region
Sierra Leone
Total
Sierra Leone(6)
Mineral
Resource
Category
Measured
Indicated
Inferred
Material
Tonnes
Millions
90
463
162
715
In Situ
Rutile
Tonnes
Millions
1.2
4.9
1.8
7.9
Rutile
Grade
(%)
1.4
1.1
1.1
1.1
Ilmenite(5)
Grade
(%)
0.9
1.0
0.7
0.9
Zircon(5)
Grade
(%)
0.1
0.1
0.1
0.1
Change
Rutile
Tonnes
Millions
(0.3)
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.
(6) The total Mineral Resources for Sierra Leone are stated. As of 31 December 2020, International Finance Corporation (IFC) held a 10% equity stake
in Iluka Investments (BVI) Limited, the holding company of Sierra Rutile Limited.
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 31 December 2020, Mineral Resources (excluding the Mineral Resources attributable to the Sierra Rutile)
decreased by 46.5Mt HM net of mining depletion and adjustments (exploration discovery, development and write-downs) down from
165.4Mt HM to 118.9Mt HM.
The change in Mineral Resources for 2020 was driven by the following:
•
•
•
Eucla Basin Mineral Resources decreased by 0.80Mt HM as a result of mining depletion and write-down at Ambrosia (-0.27Mt
HM) and Jacinth (-0.24Mt HM) and updated resource estimation at Atacama (-0.29Mt HM).
The Perth Basin Mineral Resources decreased by 0.66Mt HM as a result of re-estimation, mining depletion and write-down at
Cataby (-0.62Mt HM) and of mining depletion of the MSP By-Product Stockpile (-0.05Mt HM).
Sri Lanka Mineral Resources decreased by 45.1Mt HM resulting from write-off of the PQ Deposit (-30.7Mt HM) due to the
inability to secure tenement continuity and recognition of Iluka retaining a 40% ownership of the Coco Deposit (-14.3Mt HM).
The rutile Mineral Resources for Sierra Leone decreased by 0.26Mt rutile, associated with mining depletion for Gbeni (-0.06Mt of
rutile), mining depletion and write down for Gangama (-0.13Mt of rutile ), write-off of the Mogbwemo Tails (-0.09Mt of rutile) and
adjustments for Kamatipa (-0.01Mt of rutile) and Komende (0.02Mt rutile).
Iluka Resources Limited, Annual Report 2020
161
PHYSICAL, FINANCIAL AND CORPORATE INFORMATION
ORE RESERVES/ MINERAL RESOURCES STATEMENT
HM MINERAL RESOURCES MINED AND ADJUSTED
Iluka Mineral Resources mined and adjusted by country and region at 31 December 2020
Summary of Mineral Resource Depletion(1)
In Situ
HM
Tonnes
Millions
2019
4.2
13.3
17.4
-
33.4
33.4
13.7
41.9
55.6
-
4.4
4.4
-
54.6
54.6
17.9
147.5
In Situ
HM
Grade
(%)
2019
2.3
7.5
4.8
-
17.2
17.2
4.5
6.1
5.6
-
4.8
4.8
-
8.1
8.1
3.6
8.1
In Situ
HM
Tonnes
Millions
Mined
2020
In Situ
HM
Tonnes(2)
Millions
Adjusted
2020
In Situ
HM
Tonnes(4)
Millions
2020
In Situ
HM
Grade
(%)
2020
In Situ
HM
Tonnes(3)
Millions
Net Change
(0.4)
-
(0.4)
-
-
-
(0.6)
-
(0.6)
-
-
-
-
-
(1.0)
-
(0.1)
(0.3)
(0.4)
-
-
-
0.8
(0.8)
(0.1)
-
-
-
-
(45.1)
(45.1)
0.7
(46.2)
3.7
13.0
16.6
-
33.4
33.4
13.9
41.0
54.9
-
4.4
4.4
-
9.5
9.5
17.6
101.3
2.2
7.3
4.8
-
17.2
17.2
4.6
6.0
5.6
-
4.8
4.8
-
7.0
7.0
3.7
7.9
6.8
(0.5)
(0.3)
(0.8)
-
-
-
0.2
(0.8)
(0.7)
-
-
-
-
(45.1)
(45.1)
(0.3)
(46.2)
(46.5)
165.4
7.1
(1.0)
(45.5)
118.9
Category
Active Mines
Non-Active
Sites
Active Mines
Non-Active
Sites
Active Mines
Non-Active
Sites
Active Mines
Non-Active
Sites
Active Mines
Non-Active
Sites
Country Region
Australia Eucla Basin
Total
Eucla Basin
Murray Basin
Total
Murray Basin
Perth Basin
Total
USA
Total
Sri
Lanka
Perth Basin
Atlantic
Seaboard
Atlantic
Seaboard
Sri Lanka
Total
Sri Lanka(4,5)
Total
Total
Total
Active Mines
Non-Active
Sites
Mineral
Resources
Notes:
(1) Rounding may generate differences in last decimal place.
(2) Adjusted figure includes write-downs and modifications in mine design.
(3)
(4) As of 31 December 2020, the total Mineral Resource for Coco stands at 340 million tonnes at 7.0% HM for 24 million tonnes of HM and the Iluka
Net difference includes depletion by mining and adjustments.
Attributable Mineral Resource stands at 136 million tonnes at 7.0% HM for 9.5 million tonnes of HM reflecting Iluka’s 40% ownership.
(5) PQ Deposit removed due to inability to secure continuity of tenure.
162
Iluka Resources Limited, Annual Report 2020
RUTILE MINERAL RESOURCES MINED AND ADJUSTED (SIERRA LEONE)
Iluka Rutile Mineral Resources mined and adjusted for Sierra Rutile at 31 December 2020
Summary of Mineral Resource Depletion(1)
In Situ
Rutile
Tonnes
Millions
2019
1.7
6.5
8.2
In Situ
Rutile
Grade
(%)
2019
1.2
1.1
In Situ
Rutile
Tonnes
Millions
Mined
2020
(0.1)
-
In Situ
Rutile
Tonnes(2)
Millions
Adjusted
2020
(0.6)
0.5
1.1
(0.1)
(0.1)
In Situ
Rutile
Tonnes
Millions
2020
In Situ
Rutile
Grade
(%)
2020
In Situ
Rutile
Tonnes(3)
Millions
Net Change
1.0
7.0
7.9
1.3
1.1
1.1
(0.7)
0.4
(0.3)
Country Region
Sierra
Leone
Sierra Leone
Total
Sierra Leone(4)
Category
Active Mines
Non-Active
Sites
Notes:
(1) Rounding may generate differences in the last decimal place.
(2) Adjusted figure includes write-downs and modifications in mine design.
(3) Net difference includes depletion by mining and adjustments.
(4) The total Mineral Resources for Sierra Leone are stated. As of 31 December 2020, International Finance Corporation (IFC) held a 10% equity
stake in Iluka Investments (BVI) Limited, the holding company of Sierra Rutile Limited.
Iluka Resources Limited, Annual Report 2020
Sierra Rutile, Sierra Leone
163
PHYSICAL, FINANCIAL AND CORPORATE INFORMATION
ANNUAL STATEMENT OF MINERAL RESOURCES AND ORE RESERVES
The Annual Statement of Mineral Resources and Ore Reserves as at 31 December 2020 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 the 20 February 2017. Information
prepared and disclosed under the JORC Code 2004 Edition and 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
MINERAL RESOURCES AND ORE
RESERVES CORPORATE GOVERNANCE
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
his information in the form and context in which it appears.
The information in this report that relates to specific Mineral
Resources and Ore Reserves is based on and accurately
reflects reports compiled by Competent Persons as defined
in the JORC Code 2012 for each of the company regional
business units. Each of these persons is a full-time employee
of Iluka Resources Limited or its relevant subsidiaries, holds
equity securities in Iluka Resources Limited and is entitled to
participate in Iluka’s executive equity long term incentive plan,
details of which are included in Iluka’s 2020 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 2020. 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).
164
Iluka Resources Limited, Annual Report 2020
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.
SHAREHOLDER AND CORPORATE INFORMATION
As at 31 January 2021
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 422,769,681 shares on issue as at 31 January 2021. A total of 199,955 ordinary shares are restricted pursuant to
the Directors, Executives and employees share acquisition plan, equity incentive plan and employee share plan.
SHAREHOLDINGS
There were 21,247 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 and 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)
UBS NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD (AGENCY LENDING DRP A/C)
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
(NT-COMNWLTH SUPER CORP A/C)
NETWEALTH INVESTMENTS LIMITED (WRAP SERVICES A/C)
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
CITICORP NOMINEES PTY LIMITED (COLONIAL FIRST STATE INV A/C)
R O HENDERSON (BEEHIVE) PTY LIMITED
UBS NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD (DRP A/C)
ONE MANAGED INVT FUNDS LTD (SANDON CAPITAL INV LTD A/C)
CS THIRD NOMINEES PTY LIMITED (HSBC CUST NOM AU LTD 13 A/C)
NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT)
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMINEES PTY LTD (IB AU NOMS RETAILCLIENT DRP)
MR ANGUS MACKAY
Number of shares
168,425,483
99,059,272
42,794,729
20,180,003
11,911,286
10,435,936
7,225,969
2,762,644
2,055,698
1,250,195
1,164,725
1,080,000
608,260
581,030
558,155
553,635
542,679
505,804
501,906
481,250
SUBSTANTIAL SHAREHOLDERS
(AS PROVIDED IN DISCLOSED SUBSTANTIAL SHAREHOLDER NOTICES TO THE COMPANY)
Total holders
12,243
7,146
1,140
668
38
12
(less than $500) - 1,822
% units
39.84
23.43
10.12
4.77
2.82
2.47
1.71
0.65
0.49
0.30
0.28
0.26
0.14
0.14
0.13
0.13
0.13
0.12
0.12
0.11
Shareholder
Perpetual Investment Management Limited
Sumitomo Mitsui Trust Holdings, Inc.
BlackRock Group
Vanguard Group
Aware Super Pty Ltd
Schroder Investment Management Australia Limited
Shareholding
% of issued capital
52,080,085
40,106,390
33,198,095
25,373,149
21,589,552
21,142,530
12.32%
9.49%
7.85%
6.00%
5.11%
5.00%
Iluka Resources Limited, Annual Report 2020
165
CALENDAR OF KEY EVENTS
25 February
9 March 5:30pm (WST)
23 April
27 April 9:30am (WST)
29 April 9:30am (WST)
22 July
25 August
21 October
31 December
Announcement of financial results
Close of nominations
March quarterly review
Closure of acceptances of proxies for AGM
Annual General Meeting
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 Ltd
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.
166
Iluka Resources Limited, Annual Report 2020
CORPORATE INFORMATION
COMPANY DETAILS
REGISTERED OFFICE
WEBSITE
Iluka Resources Limited
ABN: 34 008 675 018
Level 17, 240 St Georges Terrace Perth
Western Australia, 6000
COMPANY SECRETARY
POSTAL ADDRESS
Sue Wilson, Company Secretary
Nigel Tinley, Joint Company Secretary
GPO Box U1988 Perth,
Western Australia, 6845 Australia
Telephone: +61 8 9360 4700
Facsimile: +61 8 9360 4777
www.iluka.com
The site contains information on Iluka’s
products, marketing, operations, ASX
releases and financial and quarterly
reports. It also contains links to other
sites, including the share registry.
NOTICE OF ANNUAL GENERAL MEETING
Iluka’s 66th Annual General Meeting of Shareholders will be held on Thursday, 29 April 2021 commencing at 9:30am (WST).
In line with the Federal Government’s proposed legislation to extend relief facilitating virtual meetings, and having regard to the
uncertainty and potential health risks associated with large gatherings during the COVID-19 pandemic, there will not be a physical venue
for shareholders to attend but shareholders will be able to participate in the meeting online. Shareholders are nevertheless encouraged
to lodge proxy votes in advance of the meeting to ensure that their voting instructions will be received and votes cast, and to monitor the
Company’s website and ASX platform in case any alternative arrangements become necessary.
CLOSE OF NOMINATIONS
All nominations for election as a director at the 66th Annual General Meeting of Shareholders must be received in writing no later than
5:30pm (WST) on Tuesday, 9 March 2021 in order to be valid under Iuka’s constitution.
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.
While these forward-looking statements reflect Iluka’s expectations at the date of this report, they are not guarantees or predictions of
future performance or statements of fact. 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.
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.
Except as required by applicable laws or regulations, Iluka does not undertake to publicly update or review any forward-looking
statements, whether as a result of new information or future events. Iluka cautions against reliance on any forward-looking statements
or guidance, particularly in light of the current economic climate and the significant volatility, uncertainty and disruption arising in
connection with COVID-19.
Information on likely developments in the Group’s business strategies, prospects and operations for future financial years and the
expected results that could result in unreasonable prejudice to the Group (for example, information that is commercially sensitive,
confidential or could give a third party a commercial advantage) has not been included below in this report. The categories of
information omitted include forward-looking estimates and projections prepared for internal management purposes, information
regarding Iluka’s operations and projects, which are developing and susceptible to change, and information relating to commercial
contracts.
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.
Iluka Resources Limited, Annual Report 2020
167
Tutunup South, Western Australia
Jacinth-Ambrosia, South Australia
168
Iluka Resources Limited, Annual Report 2020
Cataby, Western Australia
Narngulu, Western Australia
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Iluka Resources Limited, Annual Report 2020
www.iluka.com
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