ILUKA RESOURCES LIMITED — AGM Information 2004

May 11, 2004

ILUKA RESOURCES LIMITED ANNUAL GENERAL MEETING PERTH, 12 MAY 2004

CHAIRMAN'S ADDRESS

As Iluka's shareholders reside all over Australia, the Company has continued its past practice of inviting shareholders to submit questions prior to the commencement of this meeting. A total of 51 questions were received from shareholders covering the following key themes:

• Company strategy, mineral reserves position and future development plans:
• Company profitability, dividend outlook and share price performance $\bullet$
• Progress with Murray Basin development plans; $\bullet$
• Proposed increase in non-Executive Directors' fees; and $\bullet$
• Location of meetings.

Whilst it is not possible to answer every question in detail in the time available, the Managing Director and I will endeavour to answer most of the questions during our addresses.

Overview of 2003

Turning to our performance in 2003, the Company benefited from improved business fundamentals in the form of higher US dollar selling prices, cost reductions, operational efficiency improvements and increased production levels.

Unfortunately as the majority of our sales are in US dollars, these benefits were largely negated by the impact of a progressive appreciation in the average Australian-US dollar exchange rate during the year. This alone reduced the 2003 net profit result by \$19 million compared with 2002, after the benefits from hedging were taken into account.

The 2003 results were also impacted by a \$21 million reduction in tax benefits compared with 2002, as the Company moved towards tax paying status.

Whilst on balance the 2003 results represent a decrease in earnings and profitability compared with 2002, two important issues need to be highlighted.

Firstly, Iluka's financial performance in 2003 was significantly better compared with the reported performance of a number of major competitors.

Iluka's stronger relative performance was underpinned by a strong sales performance (US dollar sales revenues from continuing operations were higher in 2003 compared with 2002), operational efficiency improvements and the benefits of prudent hedging decisions undertaken during the past 18 months.

The second issue is that the results do not highlight the progress made during 2003 in dealing with a number of key operational challenges. Good progress was made in improving the Company's environmental management, health and safety performance, achieving significant cost reductions through the business improvement program, achieving a performance turnaround in the USA operations, expanding the USA operations into Georgia and progressing plans to develop the Murray Basin.

These improvements not only helped underpin Iluka's 2003 operational performance but they should also create a platform for further performance improvements in 2004 and beyond.

Progress with specific growth opportunities

During 2003, the Company continued to pursue a number of mineral sands growth opportunities, both in Australia and in the USA.

In mid-2003, a decision was made to invest \$25 million to upgrade the Ibis plant and dredge as part of a plan to mine Consolidated Rutile Limited's (CRL) Enterprise deposit. The Enterprise deposit is the most significant remaining mineral sands resource on North Stradbroke Island.

Mining operations at the Ibis deposit finished at the end of the first quarter of 2004 and the plant modifications, upgrades and commissioning activities are expected to be completed by the end of May. The transitional dredging phase to access the Enterprise deposit is expected to take 12 months and be completed during the second quarter of 2005.

Good progress was made during 2003 on the A\$66 million expansion of Iluka's operations into Lulaton in southern Georgia USA. Construction of a new mine, mineral concentrator with a 1,000 tonne per hour feed-rate capacity and associated infrastructure, commenced in the second half of 2003 and the construction phase was completed in February 2004. Commissioning has been completed and the facilities are now fully operational.

In addition, a project to expand the feed-rate of the mobile concentrator (MC1) in Florida from 350 to 500 tonnes per hour commenced in late 2003 and was completed in February 2004.

Whilst progress with these developments is an important element of the Company's short-term plans, the successful development of the Murray Basin remains the most significant element of Iluka's future. It represents both a major capital investment and the mineral assemblage, which is high in rutile and zircon, is an essential part of Iluka's planned medium to long-term mineral sands production and sales.

Based on current projections, the Company expects production from the Murray Basin will enable Iluka to increase its overall high TiO₂ content production and maintain overall zircon production at current levels by replacing the anticipated decline in zircon production from the Western Australian operations.

Technical work on the Douglas project in the Murray Basin progressed according to plan with the completion of a pre-feasibility study in mid-2003. A detailed feasibility study commenced in the second half of 2003 to complete the detailed engineering and design work and further refine timing and capital cost estimates.

This work was completed in late April and a final review of the project will be completed in the very near future which leaves the Company well placed to make a final investment decision within the next few weeks.

In parallel, work also continued on development plans for a start up in mid-2007 of mining and mineral concentrating operations at the KWR deposits. located near Ouven, Victoria, approximately 350 kilometres north of the Douglas project.

On your behalf, I wish to thank Mike Folwell, his management team and Iluka's employees and contractors for their efforts and contributions during 2003. It was particularly pleasing to see the improvements in operational performance in terms of production and cost efficiencies delivered by the business improvement program as well as the significant improvement in environment, health and safety performance.

Board Matters

The composition of the Board of Directors remained unchanged during 2003.

However, Professor John de Laeter will retire as a Director at the conclusion of this meeting. He has made very insightful contributions in the areas of research and development and technology in general. He has also chaired the Audit Committee since 1996.

John, on behalf of the Board and shareholders. I wish to express our sincere appreciation to you for your contribution to the Company over the past 10 years.

In March 2004, the Company was fortunate to gain the services of Dr Robert Every as a non-executive Director. Dr Every is the Managing Director and Chief Executive Officer of OneSteel Limited and has considerable experience as both a senior executive and a Director of listed companies in Australia and New Zealand.

Share Price Performance and Dividend Outlook

Before I ask the Managing Director to address you on the Company's operations. I would like to comment on the performance of Iluka's share price and dividend outlook.

The Company's share price performance in 2003 and year to date, when measured against the Australian Stock Exchange (ASX) 200 Companies and the ASX 200 Materials Companies indices, has been disappointing.

However, it should be noted that within the mineral sands industry, Iluka has performed well against its competition, particularly Rio Tinto and Ticor. Both of these companies reported significant reductions in the profitability of their mineral sands businesses in 2003.

It is also worth noting that the mineral sands business is not as cyclical as commodities such as nickel or copper.

The demand for Iluka's titanium based products tends to be relatively stable. Zircon supply is currently very tight and US dollar prices have increased accordingly.

The Board believe that the most appropriate way of improving the relative share price performance is to focus on internal improvements as well as delivering on our expansion plans in the USA and the Murray Basin. The Board also continues to review merger and acquisition opportunities from time to time but do so against a disciplined value hurdle.

With respect to dividends, the Company expects to return to paving Australian tax and franked dividends in its own right, during 2005.

This together with the release of the balance of CRL's franking credits via the payment of a 16 cent per share special dividend to its shareholders in May, this year, means that Iluka should have the capacity to pay a substantially franked interim dividend in September this year and a fully franked 2004 final dividend in April 2005.

I would now like to introduce Iluka's Managing Director, Mike Folwell who will talk about performance in more detail.

MANAGING DIRECTOR'S ADDRESS

Good morning ladies and gentlemen. It is a great pleasure to have the opportunity to speak to you this morning.

The Chairman has described the Company's 2003 financial results and the progress made with key growth initiatives. I would now like to highlight some of achievements which underpinned Iluka's performance and then describe our current strategy to continue the Company's growth in the longer-term.

Production Performance

I am pleased to advise that the Company's overall environmental management, health and safety (EHS) performance continued to improve in 2003 as evidenced by further improvements in all of the key EHS performance indicators used throughout Iluka's operations.

In terms of 2003 Group production levels, titanium minerals output increased by 4% compared with 2002 and zircon production increased by 12.5% over the same period.

The main factors contributing to higher overall mineral sands production levels during the year were the improved mining and processing performance of the USA operations, higher zircon and synthetic rutile production in Western Australia and increased ilmenite production from CRL.

Coal production from the Narama Coal joint venture increased slightly compared with 2002.

The main factors contributing to higher synthetic rutile and zircon production from the Western Australian operations were improvements to operating practices at the synthetic rutile kilns, mining of a higher grade zircon deposit in the mid-west and improved zircon recoveries. The increase in synthetic rutile production was achieved despite major kiln maintenance shutdowns at both locations during the year. Rutile production was lower in response to lower grades being mined in the mid-west during the vear.

The improved mining and processing performance of the USA operations resulted in increased production of all products at both sites. This result was underpinned by the completion of the final stages of commissioning of the Old Hickory optimisation project in Virginia and the relocation of the Green Cove Springs mobile concentrator (MC1) to an adiacent deposit during the first half of the year.

CRL's rutile and zircon production during the year was impacted by difficult mining conditions and a three month shutdown of dredging operations at the Yarraman mine on North Stradbroke Island after the ladder section of the dredging equipment was damaged in mid-July. Repairs were completed early in the last quarter of 2003 and the dredge was successfully recommissioned shortly afterwards.

The impact of the Yarraman shutdown was partially offset by the commencement of dry mining operations in the second half of the year, which enabled CRL to feed additional ore to the floating concentrators at both the Yarraman and Ibis mines. Ilmenite production increased in response to stronger demand and was underpinned by the utilisation ilmenite stockpiles on North Stradbroke Island.

Sales revenue in 2003 from continuing operations was \$786 million, a reduction of 6% which mainly reflects the stronger Australian dollar compared with 2002. Revenue was made up of \$752.9 million from titanium minerals and zircon sales (a decrease of \$52.2 million) and coal sales of A\$33.1 million (an increase of \$1.4 million).

On a regional basis, minerals sands sales revenues from the Western Australian operations decreased by \$27.2 million to \$584.3 million and USA sales revenues increased by \$0.9 million to \$106.4 million. CRL's sales revenues (100% level) decreased by \$25.9 million to \$62.2 million during the period primarily as a result of lower rutile and zircon sales volumes.

The Company's net profit of \$85.2 million was underpinned by the Western Australian operations, aided by contributions from CRL and Narama Coal. The USA operations recorded a loss as a result of a \$3.9 million (pre-tax) writedown following a revaluation of inventory in the first half. However, the profitability of the operations did improve during the year and a positive result was achieved in the second half.

With respect to the outlook for 2004, the Company's operational focus will continue to be on achieving safe, on-grade and low cost production. This will be supported by ongoing refinements to environment, health and safety processes and systems and the business improvement program which is targeting \$35 million in cost savings. The cost reductions will mainly be in the Western Australian mining and processing operations and corporate and administrative functions.

The delivery of major development projects and capital management will also be a major focus area in 2004, particularly with respect to the Douglas project in the Murray Basin.

As planned, the definitive feasibility study for the Douglas project was completed in late April this year.

Management expects to submit the final investment decision proposal for the Douglas project to the Board within the next few weeks.

It is worth noting that the technical work completed to date, has provided the Company with sufficient confidence to commit \$43 million for the construction of a water pipeline and road and site works, in advance of a final investment decision.

The early construction of these infrastructure items is essential in enabling the Company to meet the balance of the Douglas project's construction schedule and commence commissioning of the wet concentrator and minerals separation plant in the first and second quarters of 2005, respectively.

In terms of the 2004 production outlook, the Company's Australian operations will be impacted by

• the deteriorating grade and assemblage in Western Australia (mainly in the mid-west), which will result in progressively more ore being mined to produce heavy mineral concentrate, which in turn will contain less high value mineral such as rutile and zircon and more lower value ilmenite; and

lower rutile and zircon production from CRL as the Ibis dredge shuts down $\bullet$ for six weeks during the second quarter of 2004 for modifications prior to mining through low-grade reserves during the balance of the year as part of the transition to the higher-grade Enterprise deposit.

However, the Company expects to be able to offset these production impacts and maintain overall production at levels similar to those achieved in 2003.

The key offsetting factors include the ongoing benefits from the business improvement program throughout Iluka's operations and higher production levels from the USA operations based on a full 12 months of production from the expanded Old Hickory operations and the contribution post-commissioning from the new Lulaton operation in Georgia.

Mineral Reserves

The Company's exploration activities in 2003 were mainly focused on provingup mineral reserves and resources adiacent to existing operations in the USA and Western Australia and in the Murray Basin around the Douglas and KWR projects. The Company also expanded its international green-field exploration activities during 2003 with one area of interest being the east coast of Madagascar.

Iluka's successful exploration efforts in the Atlantic and the Western Australian Basins enabled it to more than offset the 2.53 million tonnes of heavy mineral reserves depleted during the year as a result of mining activities.

Despite Iluka's exploration success in its own right, the Company's heavy mineral reserves at the end of 2003 (expressed as in-situ tonnes of heavy mineral) were 39 million tonnes, a slight reduction compared with the reserves position at the end of 2002. The reduction was entirely the result of a revision of CRL's reserves position following 2003 mining depletion and the completion of a mining optimisation study for the Enterprise deposit on North Stradbroke Island. Iluka's share of the reduction in CRL's reserves was 1.05 million tonnes.

With respect to the Company's overall reserves position, I note that from time-to-time industry commentators choose to focus on the size of Iluka's ongoing reserves position (approximately 10 to 12 years) relative to some of our competitors and other resource companies.

It should be noted that Iluka has set itself a target of maintaining an ongoing reserves base capable of underpinning mining operations for 10 to 12 years as the costs of proving up the reserves across a range of deposits in Australia and the USA much bevond ten vears represents a considerable preinvestment and is considered to be unnecessary expenditure.

It should also be noted that the Company has been able to maintain a 10 year plus reserves base for some time through new exploration successes and the conversion of mineral resources to reserves and expects to continue to do $SO₁$

Strategy

I would now like to conclude by talking briefly about Iluka's ongoing strategy before handing the meeting back to the Chairman.

The key objectives of our current mineral sands strategy are to:

• maximise the value from existing assets including the turnaround of the profitability of the USA operations; and
• arow the existing mineral sands business initially through the expansion of USA operations into southern Georgia, the development of the Murray Basin and developing medium term options through exploration and technology development.

The initial benefits from the business improvement program were particularly evident in the improved production and mineral processing performance of both the Western Australian and USA operations in 2003 and to a lesser extent, CRL's operations. It was also a key factor in the USA operations profitability turnaround in the second half of 2003.

The program delivered \$24 million in 2003 from cost savings throughout the Iluka Group and as mentioned earlier, a further \$35 million in cost savings is being targeted in 2004.

The business improvement program is being supported by further refinements to management processes, systems and planning to improve uptime and product quality as part of a continuous improvement process.

Progress was also made in growing the existing mineral sands business through a combination of marketing and resource development initiatives as well as the development of new technology.

This work has enabled the Company to complete the expansion into Georgia. USA in the early part of 2004. In addition, the CRL Enterprise project is well advanced and a final investment decision for the Douglas project is expected within the next few weeks.

Work is also continuing on the development of a new high-grade synthetic rutile (SR) technology to enable the Company to upgrade a wider quality range of ilmenites compared with the existing Becher SR process. The new technology involves a circulating fluid bed followed by acid leaching. Apart from more effectively removing impurities, it is also expected to produce a higher grade SR product containing around 95% TiO₂.

The Company's preliminary estimate of the investment required to develop a 250,000 tonne per annum plant is in the order of \$400 million. However this estimate remains subject to the completion of feasibility studies and an evaluation of potential plant location sites. Current location options include the east-coast of Australia or overseas in closer proximity to potential customers in the USA and Europe.

In terms of mineral sands market opportunities, zircon continues to be a major strategic focus for Iluka. Unlike the TiO₂ market which is in oversupply. particularly with respect to TiO₂ slag feedstock, the market for zircon is very tight as current industry supply capability struggles to keep up with demand.

As the global leader in zircon production. Iluka believes that from an industry perspective it is important that zircon supply supports the forecast growth in demand. This represents a significant opportunity for the Company. Already, Iluka has increased its zircon sales by some 10% on an annualised basis in 2003 to take advantage of the market and we are currently pursuing a number of initiatives designed to expand Iluka's zircon production capacity over different time horizons.

In the short-term the Company is focussing on developing its Murray Basin zircon resources, commencing with the Douglas deposit, as well as further improving product recoveries to increase zircon production from its five existing zircon production sites, which produced approximately 400,000 tonnes of zircon in 2003 or approximately 37% of world production.

Historically between 15% and 30% of zircon has been discarded during the production process and Iluka is exploring options to reduce these losses. New processing technology may enable the recovery of zircon from old intermediate stockpiles and parts of the Eneabba ore body, which previously were considered untreatable. If successful, Iluka may be able to maintain zircon production from this facility for a number of years.

In order to meet longer term requirements, the Company is also actively exploring for zircon-rich mineral resources and assessing the feasibility of recovering zircon from mineral resources which to date have not been considered viable due to technology limitations and market opportunities.

I would now like to hand over to the Chairman to complete his address.

CHAIRMAN'S ADDRESS (continued)

Outlook for 2004

Looking forward to the balance of 2004 and beyond, the Company continues to be well positioned in terms of its leadership, management capability, financial resources and opportunities, to be able to pursue its mineral sands strategy and to generate additional shareholder value in the medium to longer term.

As you have heard from the Managing Director, we expect to build on our achievements in 2003 during the coming year with a particular emphasis on further improving the efficiency and profitability of the existing operations through the business improvement program as well as the development of our Murray Basin resources.

In terms of its financial performance in 2004, the Company expects to effectively manage the operational challenges outlined by the Managing Director and improve the quality of its earnings. This view is based on a range of factors including:

• strong demand for Iluka's high titanium dioxide content products and higher US dollar prices for most products. Overall 2004 production is fully sold despite an increasingly competitive market for titanium mineral products;
• industry zircon supply capability continues to struggle b keep up with demand which has enabled significant zircon price increases in US dollars to be achieved and the outlook remains very positive for zircon;

• achieving significant additional benefits from the business improvement $\bullet$ program, including additional cost reductions, operational efficiencies and further progress towards best practice activities, which will more than offset the grade and assemblage issues in Western Australia;
• a significant improvement in production and profitability from the USA operations which will be underpinned by the Virginia operations and the recently commissioned Lulaton project in Georgia together with the ongoing cost reductions: and
• receiving royalty revenue from Mining Area C as both iron ore production and sales expand following the start up of production in late 2003.

However, despite the operational efficiency improvements, increased US dollar mineral sands revenues and additional earnings in the form of iron ore rovalties, the Company's full year earnings will be influenced by:

• foreign exchange fluctuations as approximately 60% of Australian sales $\bullet$ are denominated in US dollars. Hedging in place will mitigate some of the effects of a higher Australian dollar against the US dollar but if the Australian dollar returns to above 75 US cents for a prolonged period, it will impact adversely on Iluka as well as many other Australian exporters whose sales are largely denominated in US dollars; and
• a significant increase in tax charges in 2004 as the Company no longer has tax shelters from previous years.

Whilst at this stage the impact of foreign exchange fluctuations is difficult to quantify, the Company expects its 2004 earnings before interest and tax (EBIT) will be higher compared with 2003.

However, as a result of increased taxation charges, the net profit after tax (NPAT) result for 2004 is expected to be similar to the 2003 result.

The meeting is now open for questions.