Mineral sands producer Iluka Resources says it increased full-year sales revenue by 63.4% in 2010, reflecting higher sales volumes and higher average prices for zircon.
Iluka told the ASX yesterday in its December 2010 production report that mineral sands sales revenue, after hedging, for the December quarter was $295 million, and $897.8 million for the 12 months to December 31.
The shares closed up more than 2%, or 20c, at $9.02.
Iluka reported sales revenue in calendar 2009 of $549.7 million and lost around $21 million.
Now, with the Chinese economy still doing very well, and other economies showing stronger growth, demand for zircon in particular was very strong in 2010 and the company is looking at a huge turnaround in earnings, and the prospect of more to come in 2011..
The company said cash production costs for the second half of 2010 were $281.7 million, with full year cash production costs of $544.2 million.
"Full year cash production costs were lower than the amount guided by the company earlier in the year of $560 million, with cost impacts of higher production being offset by improved operational efficiencies. In addition to direct cash production costs, Iluka expects full year restructure and idle capacity charges of approximately $13 million, with the company having reported $9.3 million as part of the half year results.
"Offsetting the lower than advised cash production costs are expected to be costs associated with updated rehabilitation "provisions for closed sites."
So strong in fact that Iluka says it could not fully meet strong customer demand for zircon products in 2010, despite increasing sales.
Zircon sales in calendar 2010 were 478,700 tonnes, up sharply from 222,600 tonnes in 2009.
Total zircon production rose to 412,900 tonnes in 2010, up from 263,100 tonnes in 2009, ahead of earlier guidance of around 400,000 tonnes.
Rutile production for the 12 months was 250,100 tonnes, up from 141,400 tonnes in 2009 and in line with guidance of 250,000 tonnes.
"The increase in year-on-year production volumes reflects a recovery in global demand for Iluka’s products, following appreciably lower demand in 2009, associated with global economic conditions, as well as Iluka’s decision in the prior period to match production to demand," the company said yesterday.
Sales were higher than production, reflecting a draw down in lower-margin Western Australian sourced inventory, predominantly in the first half of the year, Iluka said.
"Iluka finished the year in the position of being unable to satisfy fully strong customer demand for zircon products."
Full year rutile sales were 240,000 tonnes, up from 138,700 tonnes in 2009.
Synthetic rutile sales were 362,500 tonnes, up from 396,700 tonnes the year before.
"The increase in year-on-year production volumes reflects a recovery in global demand for Iluka’s products, following appreciably lower demand in 2009 associated with global economic conditions…", the company said in a statement.
Wet weather in Victoria in early 2011 has disrupted Iluka’s Murray Basin mining and concentrating operations.
"Significant rainfall in Victoria in the initial weeks of 2011 has disrupted Iluka’s Murray Basin mining and concentrating operations," the company said yesterday.
"Overburden removal and ore mining have been disrupted for varying periods at both the Kulwin operation and at Douglas.
"While processing of heavy mineral concentrate (“HMC”) at the Hamilton mineral separation plant has not been adversely affected due to the existence of a stockpile of HMC at the plant, trucking movements of HMC from mining operations at Kulwin and the satellite mine of Echo, to the mineral separation plant, have been reduced due to hazardous road conditions.
"The wet weather conditions, as at the date of the release of this report, are not expected to adversely affect budgeted production and dispatch of finished product in the first quarter of 2011", the company said.
And the company gave indications that the surge in revenue will continue into 2011.
It said it had benefited from "regular and industry wide price increases for zircon since the beginning of 2010, which meant that Iluka’s average received zircon price exited 2010 above US$1,000/tonne FOB, approximately 30 per cent higher than the zircon price at the beginning of the year.
"A further, substantial, zircon price rise was advised by Iluka to its customers during the fourth quarter and has become effective from 1 January 2011" while the company will receive higher prices for at least the first six months of this year for "all of Iluka’s high grade titanium dioxide (rather than the historical 12 month arrangement) and a “step change” in pricing relative to 2010 levels has been achieved."
