Iluka Re­sources

It’s been a year of de­liv­ery for Iluka Re­sources, with com­ple­tion of its $275 mil­lion Cataby min­eral sands project edg­ing closer, and ex­pan­sion plans mov­ing for­ward across its Jacinth-Am­brosia and Sierra Leonean op­er­a­tions.

The Australian Mining Review - - NEWS - JES­SICA CUM­MINS

PERTH-based ma­jor min­eral sands com­pany Iluka Re­sources has its hands full with con­struc­tion works in the fi­nal stages at Cataby, and de­vel­op­ment works pro­gress­ing on four ex­pan­sion projects.

The miner fin­ished the first half of the cal­en­dar year in a strong po­si­tion, with net profit after tax of $126 mil­lion; un­der­ly­ing group EBITDA up 80 per cent to $279 mil­lion com­pared to the first half of 2017; strong free cash flow of $226 mil­lion; and a 21 per cent rise in min­eral sands rev­enue to $607 mil­lion as a re­sult of an im­prov­ing global mar­ket.

The re­sults were im­pres­sive, given just two years ago the miner posted a net loss of $20.9 mil­lion in the first half of 2016.

Iluka Re­sources manag­ing di­rec­tor Tom O’Leary said the com­pany was pleased with the di­rec­tion the min­eral sands mar­ket was now tak­ing, which was hav­ing pos­i­tive flow on ef­fects to its fi­nances.

“In the min­eral sands mar­ket, we con­tinue to see a strong, and we be­lieve, sus­tain­able price en­vi­ron­ment across our prod­uct suite,” Mr O’Leary said at the re­lease of the com­pany’s half-year re­sults in Au­gust.

“While our bal­ance sheet is in a strong po­si­tion, dis­ci­plined cap­i­tal al­lo­ca­tion re­mains fore­most in our think­ing as we move for­ward with the ex­e­cu­tion of the Cataby mine de­vel­op­ment in WA and the Lanti and Gangama ex­pan­sions in Sierra Leone, as well as with the de­fin­i­tive fea­si­bil­ity stud­ies at Jacinth-Am­brosia, Sem­be­hun and other projects in Sierra Leone to sup­port pro­duc­tion of ad­di­tional ton­nages,” Mr O’Leary said.

“We are also fo­cused on main­tain­ing a sus­tain­able pric­ing en­vi­ron­ment for our core prod­ucts of zir­con, ru­tile and syn­thetic ru­tile and have an­nounced a 14 per cent in­crease in ru­tile prices for the se­cond half and a 12 per cent in­crease in the Zir­con Ref­er­ence Price, ef­fec­tive from 1 Oc­to­ber 2018 for a six month pe­riod.”

To ease po­ten­tial zir­con short­falls, Iluka was also plan­ning to sell ad­di­tional zir­con in con­cen­trate (ZIC), and has in­creased zir­con pro­duc­tion guid­ance from 300,000t to 330,000t in 2018.

Cataby

Once Cataby comes on­line, the project is set to add 200,000t of syn­thetic ru­tile, 30,000t ru­tile, and 50,000t of zir­con to an­nual pro­duc­tion.

The project, 150km north of Perth, WA, is a chlo­ride il­menite de­posit with an ex­pected mine life of eight years.

Cataby was given the green light back in De­cem­ber 2017, after Iluka had se­cured off­take agree­ments for 85 per cent of its syn­thetic ru­tile pro­duc­tion.

First pro­duc­tion was now months away, sched­uled to be­gin in the first half of 2019.

“We’re in the midst of some of the big­gest months of the project, but I’m con­fi­dent we’re on track,” Mr O’Leary said.

Stage one of the 18 month con­struc­tion pro­gram in­cluded a 260 per­son min­ing vil­lage and bulk earth­works such as con­cret­ing, sealed roads, and the trans­port of build­ings.

Re­assem­bly of Iluka’s New­man con­cen­tra­tor was also pro­gress­ing, and con­struc­tion of min­ing unit equip­ment was well ad­vanced.

The heavy min­eral con­cen­trate pro­duced at the mine will be split for fur­ther pro­cess­ing with il­menite be­ing con­verted to syn­thetic ru­tile at Capel and ru­tile and zir­con fi­nal prod­ucts pro­cessed at Iluka’s Narn­gulu min­eral sep­a­ra­tion plant in Ger­ald­ton.

Jacinth-Am­brosia

Work was also ad­vanc­ing on de­vel­op­ment plans at Iluka’s Jacinth-Am­brosia op­er­a­tion in South Aus­tralia – the world’s largest zir­con mine.

The project, which was placed in care and main­te­nance in April 2016, re­opened in De­cem­ber 2017 and has been per­form­ing well since.

Iluka has been ex­am­in­ing op­tions to “smooth the pro­duc­tion pro­file” at the project to off­set the out­look of de­clin­ing grade over its re­main­ing op­er­at­ing life.

The miner ini­tially con­tem­plated de­vel­op­ing a se­cond min­ing unit and in­creas­ing con­cen­tra­tor ca­pac­ity by 30 per cent, how­ever bet­ter than ex­pected pro­duc­tion per­for­mance since the restart – namely higher grade ore – has led to a change of scope.

Iluka’s re­vised plan was to de­velop the Am­brosia de­posit in the se­cond half of 2019, rather than in 2022.

In a state­ment, Iluka said the higher grade ore en­coun­tered had re­sulted in an in­crease in Heavy Min­eral Con­cen­trate (HMC) in­ven­tory, which to­gether with the ac­cel­er­a­tion of the mine move to Am­brosia and im­pend­ing zir­con pro­duc­tion from Cataby, would en­able zir­con pro­duc­tion lev­els to be main­tained broadly at pre­vi­ously guided lev­els “with­out in­cur­ring the cap­i­tal cost as­so­ci­ated with in­tro­duc­ing a se­cond min­ing unit and in­creas­ing the con­cen­tra­tor ca­pac­ity”.

“A De­fin­i­tive Fea­si­bil­ity Study ( DFS) for the Am­brosia mine move is close to com­ple­tion and Iluka will pro­vide fur­ther guid­ance on cap­i­tal es­ti­mates fol­low­ing the study, with cur­rent es­ti­mates of ~$60 mil­lion,” Iluka stated.

Sierra Ru­tile

Ex­pan­sions were on the cards at Iluka’s Sierra Ru­tile op­er­a­tion in Sierra Leone too.

Iluka en­tered the African mar­ket with its ac­qui­si­tion of Lon­don-listed Sierra Ru­tile in De­cem­ber 2016.

The multi-mine op­er­a­tion com­prises the Lanti dredge mine, Lanti mine, Gangama mine and un­de­vel­oped Sem­be­hun mine.

Iluka was cur­rently im­ple­ment­ing a num­ber of ex­pan­sion and im­prove­ment projects, which in­cluded drilling pro­grams to im­prove the re­source and sup­port mine plan­ning; ini­tia­tives to im­prove pro­duc­tiv­ity and prod­uct re­cov­ery rates; and de­vel­op­ing the Lanti de­posit to an in pit min­ing op­er­a­tion, which was com­pleted in De­cem­ber 2017.

Lanti and Ganagama

In De­cem­ber last year, Iluka’s board ap­proved plans to dou­ble the ca­pac­ity at both the Gangama and Lanti op­er­a­tions from 500-600 tonne per hour to be­tween 1000t and 1200t per hour.

The main en­gi­neer­ing, pro­cure­ment and con­struc­tion (EPC) con­tract has been awarded and the con­trac­tor has mo­bilised to site with civil con­struc­tion com­menc­ing re­cently.

Pro­cure­ment was pro­gress­ing with or­ders placed for all long lead items and the earth mov­ing fleet, and com­mis­sion­ing for both dry op­er­a­tions sched­uled for mid-2019.

Sem­be­hun mine

In March, Iluka also be­gan a DFS for the Sem­be­hun mine de­vel­op­ment.

Sem­be­hun was the fi­nal phase of the Sierra Ru­tile ex­pan­sion, which at the time of ac­qui­si­tion, ac­counted for 70 per cent of the ore re­serves in Sierra Leone.

How­ever, since com­menc­ing DFS works, the com­pany said it was be­com­ing clear the PFS un­der­taken pre­vi­ously by an ex­ter­nal en­gi­neer­ing firm, had un­der­es­ti­mated costs.

“Iluka has been pro­gress­ing De­fin­i­tive Fea­si­bil­ity Stud­ies, which we ex­pect to com­plete by this years end; dis­ap­point­ingly the pre­lim­i­nary es­ti­mate in­di­cates a 40 to 60 per cent in­crease in real terms to the $US300 mil­lion to­tal cap­i­tal cost guided,” Mr O’Leary said.

The ma­jor­ity of the in­crease is re­lated to the Sem­be­hun de­vel­op­ment and as­so­ci­ated min­eral sep­a­ra­tion plant up­grade.

“As part of the Sem­be­hun DFS and sep­a­rately the sep­a­ra­tion plant up­grade DFS, we’re con­tin­u­ing to as­sess op­tions for re­duc­ing cap­i­tal costs and max­imis­ing re­turns,” he said.

An En­vi­ron­men­tal and So­cial Im­pact As­sess­ment was cur­rently pro­gress­ing with sub­mis­sion ex­pected in late 2018.

Sub­ject to board ap­proval, early works con­struc­tion was ex­pected to com­mence in 2019 with com­mis­sion­ing of the op­er­a­tion planned for 2021, and an ex­pected mine life of 20 years.

Or­ganic Growth

Mov­ing for­ward, ex­plo­ration will be a key com­po­nent of Iluka’s growth plat­form.

June quar­ter re­sults out­lined ex­pen­di­ture for the first half of the year was $4.4 mil­lion.

In the com­ing quar­ter, the com­pany will con­tinue drilling at the Pe­jebu ex­plo­ration tar­get, which is close to the Lanti mine in Sierra Ru­tile.

In Au­gust, Iluka said the tar­get could po­ten­tially add be­tween 180,000 and 275,000 tonnes of in-situ ru­tile, and could pos­si­bly ex­tend ex­ist­ing op­er­a­tions by up to two years.

“Min­eral Re­source es­ti­ma­tion for the Pe­jebu ex­plo­ration tar­get and near mine op­por­tu­ni­ties is ex­pected to be com­plete in Q4 2018,” it stated.

“Re­source de­vel­op­ment at Sem­be­hun will con­tinue with 75,000 me­ters of drilling planned through to 2021.

“Both devel­op­ments may add to Iluka’s pro­duc­tion op­tion­al­ity in Sierra Leone.”

Mean­while, in Aus­tralia, the com­pany was set to ben­e­fit from a farm-out agree­ment en­tered with Western Areas.

Un­der the terms of the deal, Western Areas has the op­tion to ac­quire up to a 75 per cent in­ter­est in base and pre­cious met­als rights, and all ad­di­tional base­ment-hosted min­eral and rare earth el­e­ments across five ten­e­ments in the Western Gawler re­gion in South Aus­tralia.

Western Areas will need to spend $2.75 mil­lion within the first three years to ac­quire a 51 per cent in­ter­est, and will need to spend a fur­ther $3 mil­lion to earn an ad­di­tional 24 per cent in­ter­est.

As part of the deal, Iluka will re­tain all rights to min­eral sands el­e­ments of the ten­e­ments.

Al­lim­agesIlukaRe­sources.

Sierra Ru­tile min­ing op­er­a­tions in Sierra Leone.

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