ILU - Iluka Resources

[Sean K]

Potential bottom for Iluka around $8 although, it might just be bouncing along with the general market. Resistance at $10.

 

[Dona Ferentes]

Key features
• Mineral sands revenue up 30%, reflecting higher prices across all of Iluka’s products
• Mineral sands EBITDA of $505 million, up 69%
• Mineral sands EBITDA margin improved to 53% from 41% in H1 2021
• NPAT of $369 million, up 186%
• Operating cash flow of $481 million and free cash flow of $350 million
• Demerger of Sierra Leone business completed – Sierra Rutile trading independently from 4 August
• Net cash position of $600 million at 30 June 2022, up from $295 million at 31 December 2021 - Sierra Rutile demerged with $106 million cash, including US$45 million rehabilitation trust
• Rare earths diversification confirmed – FID for Eneabba rare earths refinery
• Continued progress throughout development pipeline
• Dividends received from 20% holding in Deterra Royalties of $12 million
• Interim H1 2022 Iluka dividend of 25 cps, fully franked (double the 12c in pcp)

 

[rcw1]

Financial Review Article dated 24/08/22, 2.52pm written by Brad Thompson.
Iluka Resources is eyeing a premium for non-China supply of rare earths oxides as it prepares to start construction of Australia’s first fully integrated refinery, thanks to a $1.25 billion non-recourse loan from taxpayers.

The mineral sands miner is in the enviable position of not having to sign rare earths off-take agreements for now as funding for the plant at Eneabba in Western Australia is coming from the federal government’s critical minerals fund being administered by Export Finance Australia. Iluka intends to process rare earths for third parties and has left the door open to Lynas Rare Earths, the world’s biggest non-China supplier, to provide feedstock. However, that appears a long shot as Lynas is investing in its own downstream processing assets.

Iluka reported a near 30 per cent jump in first-half mineral sands revenue to $954.9 million and net profit after tax of $369 million, up from $129 million for the same period last year, on the back of strong prices for its zircon and high-grade titanium feedstocks.

The company’s share price had jumped more than 8 per cent to $10.24 by Wednesday afternoon.
Managing director Tom O’Leary maintained Iluka would not have gone ahead with the rare earths plant at Eneabba without government support even in light of the strong first-half results and balance sheet boost.

The Eneabba refinery will produce rare earth oxides praseodymium, dysprosium, neodymium and terbium, which are in demand for use in electric vehicles, clean energy generation, defence and other sectors as Australia, the United States and other Western nations look to reduce their dependence on China.

‘Nothing’s off the table’​

Iluka is looking to process large monazite-rich stockpiles left behind from mineral sands mining at Eneabba that it values at well over $1 billion. It will also refine rare earths for third parties at Eneabba and could eventually take feedstock from a long-life zircon-rare earths mine it plans to develop at Wimmera in Victoria.

Lynas has a world-class mine in WA where it is building downstream processing capacity to complement its refinery in Malaysia. Lynas is also working on a processing plant in Texas with funding support from the Pentagon. Mr O’Leary said nothing was off the table in terms of one day processing feedstock from Lynas, which is due to report its full-year results on Friday. “Our plant could certainly process Lynas feedstock. Whether Lynas would want to do that is really up to them,” Mr O’Leary said. “I’ve emphasised before that we’re a very collaborative company and always open to engagement with many parties. It may be that at some point Lynas might want to secure a more secure supply chain for its own production process, so nothing’s off the table from my perspective.” Mr O’Leary said there was keen interest in off-take from Eneabba, which is scheduled to start production in 2025, with the prospect of attracting a premium over Chinese-produced rare earths. “The extent to which customers are prepared to pay a premium? I think it is quite likely, and we are seeing an interest in that,” he said. “I think customers inevitably want to understand what they are getting for that, and they’ll want to see, for example, some ESG (environmental, social, and governance) certification in respect of the benefits they get from a Western supplier like ourselves. “Given that we are fully funded for the refinery, the key point is that we are not in a major rush to put those contracts in place.”
Mr O’Leary said Iluka could eventually operate standalone rare earths mines given the refinery would need feedstock for many decades.

Delivering for shareholders​

In the meantime, it looks set to push ahead with its mineral sands project pipeline at Balranald in NSW, Atacama in South Australia and Wimmera as it prepares to restart a synthetic rutile kiln at Capel in WA that has been idle since 2009. The restart will see both kilns at Capel operating and boost synthetic rutile production by 110,000 tonnes a year. Mr O’Leary said the “risk-sharing” loan agreement on Eneabba reflected the close alignment of Iluka’s strategy with the government’s objective of diversifying supply of rare earths oxides. “We have a very successful mineral sands business ,,, and that’s delivering for shareholders strongly at the present time,” he said. “We can’t simply risk value associated with that mineral sands business and our balance sheet entirely to implement government policy if you like and deliver on the critical minerals strategy given the potential risks associated with that diversification. “So, the risk-sharing arrangement that we’ve struck with government really addresses that risk and acknowledges that very significant contributions have been made here by the government and Iluka. “The government putting up the risk-sharing facility and Iluka putting up its stockpile of monazite feed for the refinery valued at well in excess of $1 billion as well our credibility and operating experience and marketing expertise.”

 

[Sean K]

Financial Review Article dated 24/08/22, 2.52pm written by Brad Thompson.
Iluka Resources is eyeing a premium for non-China supply of rare earths oxides as it prepares to start construction of Australia’s first fully integrated refinery, thanks to a $1.25 billion non-recourse loan from taxpayers.

The mineral sands miner is in the enviable position of not having to sign rare earths off-take agreements for now as funding for the plant at Eneabba in Western Australia is coming from the federal government’s critical minerals fund being administered by Export Finance Australia. Iluka intends to process rare earths for third parties and has left the door open to Lynas Rare Earths, the world’s biggest non-China supplier, to provide feedstock. However, that appears a long shot as Lynas is investing in its own downstream processing assets.

Iluka reported a near 30 per cent jump in first-half mineral sands revenue to $954.9 million and net profit after tax of $369 million, up from $129 million for the same period last year, on the back of strong prices for its zircon and high-grade titanium feedstocks.

The company’s share price had jumped more than 8 per cent to $10.24 by Wednesday afternoon.
Managing director Tom O’Leary maintained Iluka would not have gone ahead with the rare earths plant at Eneabba without government support even in light of the strong first-half results and balance sheet boost.

The Eneabba refinery will produce rare earth oxides praseodymium, dysprosium, neodymium and terbium, which are in demand for use in electric vehicles, clean energy generation, defence and other sectors as Australia, the United States and other Western nations look to reduce their dependence on China.

‘Nothing’s off the table’​

Iluka is looking to process large monazite-rich stockpiles left behind from mineral sands mining at Eneabba that it values at well over $1 billion. It will also refine rare earths for third parties at Eneabba and could eventually take feedstock from a long-life zircon-rare earths mine it plans to develop at Wimmera in Victoria.

Lynas has a world-class mine in WA where it is building downstream processing capacity to complement its refinery in Malaysia. Lynas is also working on a processing plant in Texas with funding support from the Pentagon. Mr O’Leary said nothing was off the table in terms of one day processing feedstock from Lynas, which is due to report its full-year results on Friday. “Our plant could certainly process Lynas feedstock. Whether Lynas would want to do that is really up to them,” Mr O’Leary said. “I’ve emphasised before that we’re a very collaborative company and always open to engagement with many parties. It may be that at some point Lynas might want to secure a more secure supply chain for its own production process, so nothing’s off the table from my perspective.” Mr O’Leary said there was keen interest in off-take from Eneabba, which is scheduled to start production in 2025, with the prospect of attracting a premium over Chinese-produced rare earths. “The extent to which customers are prepared to pay a premium? I think it is quite likely, and we are seeing an interest in that,” he said. “I think customers inevitably want to understand what they are getting for that, and they’ll want to see, for example, some ESG (environmental, social, and governance) certification in respect of the benefits they get from a Western supplier like ourselves. “Given that we are fully funded for the refinery, the key point is that we are not in a major rush to put those contracts in place.”
Mr O’Leary said Iluka could eventually operate standalone rare earths mines given the refinery would need feedstock for many decades.

Delivering for shareholders​

In the meantime, it looks set to push ahead with its mineral sands project pipeline at Balranald in NSW, Atacama in South Australia and Wimmera as it prepares to restart a synthetic rutile kiln at Capel in WA that has been idle since 2009. The restart will see both kilns at Capel operating and boost synthetic rutile production by 110,000 tonnes a year. Mr O’Leary said the “risk-sharing” loan agreement on Eneabba reflected the close alignment of Iluka’s strategy with the government’s objective of diversifying supply of rare earths oxides. “We have a very successful mineral sands business ,,, and that’s delivering for shareholders strongly at the present time,” he said. “We can’t simply risk value associated with that mineral sands business and our balance sheet entirely to implement government policy if you like and deliver on the critical minerals strategy given the potential risks associated with that diversification. “So, the risk-sharing arrangement that we’ve struck with government really addresses that risk and acknowledges that very significant contributions have been made here by the government and Iluka. “The government putting up the risk-sharing facility and Iluka putting up its stockpile of monazite feed for the refinery valued at well in excess of $1 billion as well our credibility and operating experience and marketing expertise.”

And, looks like it's making it's way through $10. Lots of chop between here and $11.

 

[Sean K]

Meandering sideways between $8-11 for some time now. I'm still pretty sure rare earths outside of China are going to be very valuable in the coming years.

 

[Sean K]

I've had this on.my short list for a longer term rare earths play, thinking that we're going to go off China big time in the coming years once the Taiwan thing inevitably happens. Been going sideways for yonks now. Perhaps there's no bad time to get into this between this zone, and trade the peaks and troughs as they come and go.

 

[mullokintyre]

ILU quarterly out makes good reading.

Revenue up, production up, costs down.
Nearly 200mill in net cash.
Kinda figures I like.
Will keep holding this one, and look to add more in the dips.
Mick

 

[mullokintyre]

ILU Annual out, makes just as good a reading as the last quarterly.

One of the most surprisng parts, given the level of inflation everyone and everythiing has experienced over the last year, was a 21% fall in the unit costs of production.
Everything else up, free cash flow up 48%.
And I get another divvy.
Maybe some of it due to removal of the SRX entity, but heck , its better than going the other way!
Mick

 

[finicky]

Iluka goes through these multi-year grinding downtrends and ever the herd follower I stop watching it or reading comments. The Eneabba project has got me sold but not a this share price. One I'll have to be prepared to miss out on but onto my top 10 buys in a crash it goes.

It sounds just brilliant - they've been stock-piling rare earth rich mineral sands concentrates from their zircon/titanium operations for decades! Transported it to this west coast set-up where they have a screening and beneficiation operation. The crucial missing 'bit' being an ultra expensive chemical refining plant. Now they have the final investment commitment from 2022 and crucially the fed govt is supporting with a $1.25B non recourse loan. The video on this page is compelling: https://iluka.com/operations-resource-development/resource-development/eneabba

Supported by the Australian Government​

Under the Australian Government’s $2 billion Critical Minerals Facility, Iluka has secured a $1.25 billion non-recourse loan for the development of the Eneabba rare earths refinery.

After years of being strung along by the highly paid dilutive management of Arafura (ARU) this is the only way I'd bite at a rare earths project: an already established, provenly competent producer with financial backing.

I can't buy a Quarterly (or Monthly) chart that is throwing candles with long tails or upper wicks so a steep decline is the only way I would get on.

Quarterly (3mth) chart

 

[divs4ever]

took some cash off the table last Tuesday , am unlikely to add more above $7

given it has loaded me up with some DRR and SRX shares it hasn't totally disappointed me

i like reading the reports , as a guide to manufacturing activity in the global economy

cheers

 

[mullokintyre]

From Evil Murdoch Press

Iluka Resources has hinted at rising costs in its plan to build a rare earth refinery in WA, as the company slashed its interim dividend after booking a 44 per cent drop in its half-year profit.
Iluka will pay a 3c-a-share dividend on Wednesday, effectively a simple pass-through of its share of distributions from ASX-listed royalty company Deterra.

The dividend came on the back of Iluka’s $203.8m half-year profit, which was down 44 per cent from the first half of 2022. This time a year ago Iluka declared a 25c-a-share interim dividend.
Iluka will not put a final cost on its rare earth refinery at Eneabba in WA until the company delivers its front-end engineering and design (FEED) study, expected by the end of the year.

Amid a wave of cost blowouts declared by other mining companies this reporting season, Iluka noted the “challenging project environment” in WA, and flagged scope changes that might also shift costs in the $1.3bn project.

“For the avoidance of doubt. We’re not looking to guide you to a higher or lower capex number,” managing director Tom O’Leary told analysts on Wednesday.

Looks suspiciously like we are being softened up for a cost blowout.
What a surprise.
mick

 

[divs4ever]

From Evil Murdoch Press

Looks suspiciously like we are being softened up for a cost blowout.
What a surprise.
mick

that is how i saw the report , however ILU is one of the companies i study as hints for the future global economy ( along with the BHP reports )

with ILU i also saw a mitigation attempt on skilled labour shortage , that might be a useful hint for other companies .and their share-holders

 

[Dona Ferentes]

Looks suspiciously like we are being softened up for a cost blowout.

...and so it came to pass.

"Work continues at all stages of Iluka’s development pipeline, with those projects currently in execute phase, Balranald and Eneabba, a particular focus. FEED for Eneabba is expected to conclude in late 2023. While the cost environment in Western Australia is presenting challenges for projects throughout the industry, Iluka is pursuing value optimisation measures, as well as operational efficiency improvements, to deliver a competitive, multi-generational refinery at an appropriate cost...."
.
..to make punters feel happy, there's a big spread about the next big thing in the AFR today...

Rare earths boom turns a pile of ‘worthless’ sand into $1.3b​

Three decades ago, somebody decided to hoard a worthless pile of sand. Now it’s a billion-dollar stockpile that will help wean Australia off Chinese rare earths

Rare earths boom turns a pile of ‘worthless’ sand into $1.3b

Three decades ago, somebody decided to hoard a worthless pile of sand. Now it’s a billion-dollar stockpile that will help wean Australia off Chinese rare earths.

www.afr.com

 

[Dona Ferentes]

.
Amd marked DOWN some more.

 

[mullokintyre]

View attachment 161498
.
Amd marked DOWN some more.
View attachment 161497

Everything except unit costs went up.
And not a lot to suggest things are going to slow the rout, much less change direction.
Would not buy again until I see some evidence of significant improvement.

 

[houtman]

Today's qtly review made grim reading, their notes on the Zircon outlook in part -

Ongoing global uncertainty, subdued economic activity and weakness in the China property market continue to provide headwinds to
the zircon market.
Recent monetary policy changes in China have, to date, provided limited stimulus to the real estate sector impacting the domestic
ceramic market. In general, Chinese industrial activity has also remained subdued, contributing to low buying activity in other zircon
segments.
European demand was slightly weaker during the quarter......
India was the only slightly bright point.

They also state -
While market conditions are
challenging, Iluka continues to maintain market discipline, including price stability.

so I presume they are stockpiling Zircon production, the production/sales figures also indicate stockpiling.

I don't hold, but on the watchlist for future.

 

[divs4ever]

Today's qtly review made grim reading, their notes on the Zircon outlook in part -

Ongoing global uncertainty, subdued economic activity and weakness in the China property market continue to provide headwinds to
the zircon market.
Recent monetary policy changes in China have, to date, provided limited stimulus to the real estate sector impacting the domestic
ceramic market. In general, Chinese industrial activity has also remained subdued, contributing to low buying activity in other zircon
segments.
European demand was slightly weaker during the quarter......
India was the only slightly bright point.

They also state -
While market conditions are
challenging, Iluka continues to maintain market discipline, including price stability.

so I presume they are stockpiling Zircon production, the production/sales figures also indicate stockpiling.

I don't hold, but on the watchlist for future.

yes India looks to best near term economy but don't ignore the rest of South-East Asia including Indonesia

but yes ILU does regularly stockpile zircon and rutile , it has gotten them out of several jams ( plant break-downs , bad weather etc etc. )

if you buy in be prepared for a bumpy ride ( but if you have good trading skills ...)

cheers

 

[finicky]

Haven't read the Quarterly yet but going by houtman's summary ILU looks an avoid and wait for better signs imo. I wouldn't want to be dependent on China as a primary customer in these times, if ever while the CCP is in charge. Certainly interested myself as my impression is that ILU has created a lot of wealth in its time for shareholders; I have particularly in mind the spin-off of the iron ore royalty 100% to shareholders on the record at the time in the form of Deterra (DRR)

I'm choosing to see the monthly chart as a double top now with one top in 2022 and the other in 2023 and the trough inbetween was broken the month before last and then confirmed last month. The target for that could be back to that multi-year consolidation range 2013-2020 - see an all data chart. The mid-point of that range being $5-$4.

DECADE MONTHLY

 

[finicky]

Edit: should have said, "the level of the trough inbetween the tops was broken last month and is being confirmed so far this month"

and Not Held

 

[Rabbithop]

I thought 5 will be gd entry for me...now may revise to 4 ...to catch a falling knife....