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Impairments Hit Improving Iluka

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Iluka Resources shares rose strongly on Tuesday, up 5% at one stage after it reported an improved performance in 2017.

The beach sands miner trimmed its full-year loss by nearly a quarter to $171.6 million (thanks to previously announced impairments) and lifted revenue by 39% to more than $1 billion for the first time, thanks a surge in world prices for rutile.

Underlying earnings before interest, tax, depreciation and amortisation jumped 140% to $361 million, thanks to higher prices and production and gave a better idea of the size of the rebound in the company’s performance last year.

Iluka lifted product sales 27% to 889,000 tonnes as it implemented three price hikes for zircon over the period, increasing the weighted average realised price by 40% to $US1128 a tonne for zircon standard and premium in the fourth quarter of 2017.

Rutile prices in the second half of $US825 a tonne were 13% higher than at the start of the year.

The bottom line results were weighed down by a $106 million post-tax impairment of the Hamilton mineral separation plant, a $30 million post-tax impairment relating to its Metalysis investment and a $125 million post-tax increase to rehabilitation provisions, mainly in the US. All had been previously flagged by the company so they were not a concern yesterday.

Iluka declared a final dividend of 25 cents a share fully franked and also announced the introduction of a dividend reinvestment plan for shareholders. That was after a 6 cents a share interim

The 31 cents a share is 10 times the 3 cents paid in 2016 as the company struggled with low demand, weak prices and impairments.

That saw the shares end the day up 3.6% at $10.55. Managing director Tom O’Leary said the company was pleased to report higher revenues in the full year on the back of higher prices and volumes.

“The increases in our operating and free cash flow were a highlight of the year and have enabled a significant reduction in net debt and a return to moderate gearing levels following the Sierra Rutile acquisition,” he said.

“The result also enabled Iluka to deliver an interim dividend to shareholders of 6¢ per share at the half-year; and now a final dividend of 25¢ per share, both fully franked.

“Our reported loss is disappointing; but the underlying financial performance is encouraging, with group EBITDA doubling from last year, reflecting the improvement in mineral sands markets. We expect supply to remain tight in 2018.

“Operationally, we have seen strong production performance from our Sierra Rutile operations over the year.

“This has been accompanied by the successful restart of the company’s major zircon mine, Jacinth-Ambrosia, and the finalisation of off-take agreements supporting the approval of the Cataby development. Delivery at Sierra Rutile, Jacinth-Ambrosia and Cataby is Iluka’s core focus for 2018.”

Iluka is expecting full-year zircon, rutile and synthetic rutile production of 705,000t tonnes, down from 825,000 tonnes in 2017.

View More Articles By Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.



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