Iluka expects 2016 loss after impairments, cuts 90 jobs in company review

PERTH (miningweekly.com) – Mineral sands provider Iluka has warned of a A$220-million to A$230-million loss for the 2016 financial year, following a company-wide review.

“Our review has been aimed at generating shareholder value, and with the completion of the Sierra Rutile acquisition, Iluka has added a large, long-life asset with strong growth potential,” said MD Tom O’Leary on Tuesday.

“It’s against that backdrop that we’ve reviewed the likelihood of developing some of Iluka’s mineral deposits in Australia and the US. It has necessitated the write-down of some assets, particularly in the Murray basin, which have been idled for some time, and where the carrying value is not supported by planned activities.”

Iluka expected a noncash impairment of some A$201-million during the financial year, with the Murray basin assets accounting for A$156-million, and a further A$25-million on exploration and evaluation assets previously capitalised.

O’Leary said that the review of Iluka’s rehabilitation provision had also necessitated a A$45-million increase in the provision to A$528-million, particularly associated with Virginia, which was now regarded as a site to be permanently closed, rather than idled.

“We have also announced what we’ve described within Iluka as a 'sustainable business review' to remove cost from the business, and to ensure we’re focused on the key priorities identified. This has resulted in us making the difficult decision to make 90 roles redundant, largely within support functions, and a number of exploration and other activities have ceased or expenditure has been reduced.”

The business review would materially reduce nonproduction cash costs in 2017 and in subsequent years, he added.

Meanwhile, Iluka on Tuesday also reported that zircon, rutile and synthetic rutile production, of 667 000 t during the three months to December, was down from the 690 000 t produced in the previous corresponding period.

The lower production of zircon reflected Iluka’s intent to draw down finished goods and concentrate inventories over the year, which was mitigated in some respect by lower demand and also a decision to ensure that supply of product in the latter part of the year reflected underlying demand.

Rutile production was also 20.3% lower than the previous comparable period, reflecting the company’s continued approach to allocate rutile volumes in the context of completing mining activities in the Murray basin, and following the cessation of mining at the Woodmack, Rownack and Pirro deposits, in Victoria, in early 2015.

Synthetic rutile production increased by 27.9%, to reflect a full year of production from the synthetic rutile kiln 2, in Western Australia.

Sales volumes for the quarter increased by 4.4% year-on-year to 680 000 t, with Iluka saying that the higher sales volumes reflected the 11.8% increase in combined rutile and synthetic rutile volumes.

Meanwhile, sales revenue declined by 8.2% on the previous comparable period, to A$679-million, owing to lower received zircon prices over the year.