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ILUKA RESOURCES LIMITED Annual Report 2003
65116_rns_2003-03-27_84684fff-2815-4df8-b760-942e5e252fba.pdf
Annual Report
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| Contents |
|---|
| ---------- |
| Chairman's Overview | Δ |
|---|---|
| Manading Director's Report | я |
| Operations Overview | 1R |
| Environment, Health and Safety | 20 |
| Community Relations | 22 |
| Exploration | 24 |
| Corporate Information | 28 |
| Directors' Profiles | 28 |
| Executive Management Team | 30 |
| Corporate Governance Statement | 32 |
| Concise Annual Financial Report | 37 |
Notice of Amual General Meeting
The 48th Annual General Meeting of Members of Iluka Resources Limited will be held in Ballroom 4, Westin Hotel, No.1 Martin Place, Sydney on Wednesday 14th May 2003 at 9.30am.
A separate Notice of Meeting and Proxy Form are enclosed.
Iluka Resources Limited ABN 34 008 675 018 Level 5, 553 Hay Street GPO Box U1988 Perth WA 6845 Telephone: +61 8 9223 4700 Facsimile: +61 8 9221 7744 Website: www.iluka.com
This Condise Annual Report provides a review of the financial results and operations of Iluka Resources Limited in 2002.
IIuka continued to be a leader in the global production and sales of titanium and stoon.
COVER - Heavy mineral concentrate stock pile at the Stratham West mine site in the south-west region of Western Australia.
RIGHT - Andrew Will from Buka's south-west operations team at the base of a heavy mineral concentrate stock nile at the Stratham West mine site.
About Iluka
Iluka Resources Limited employs approximately 1.500 people in mineral sands mining and processing operations. in Australia and the United States. The Company's head office is located in Perth, Western Australia.
Iluka is a leader in the global production and sales of titanium minerals and zircon. Most of Iluka's titanium mineral products are used to produce titanium dioxide pigment, a pure white, highly refractive and ultra-violet absorbing material used in protective coatings. such as house and car paints and sunscreens, as well as plastics, paper and textiles. The properties of zircon make it suitable for varied applications in refractory, foundry and other industrial applications. However, the largest user of zircon is the ceramics industry, where the opacity and hardness of zircon gives whiteness and durability to tiles, sanitary-ware and table-ware.
Iluka's mining and processing activities demand high standards of environmental management. The mining operations are based on a sequential process of excavation and rehabilitation. A number of Iluka's former mine sites are now productive farms, wildlife sanctuaries, recreation areas and residential districts. All production and processing operations are managed and monitored to minimise impacts on the environment and surrounding communities.
Recent Company Milestones
| 102 | Westfallan Sands accurred diversified miner RGC in December 1998 |
|---|---|
| and in the process secured additional mining and processing operations | |
| as well as extensive deposits of fitanium minerals and zircon in Australia | |
| and the USA. The acquisition also included a controlling interest in | |
| Consolidated Rutle Limited in Queensland, a 75 per cent interest in | |
| Koba Tin in Indonesia and a 50 per cent share of Narama Coal in | |
| New South Wales | |
- 1999 Shareholders agreed to change the name to Iluka Resources Limited to reflect the Company's increased diversity and global operations.
- 2003 Closure of Westlinie and sale of 75 per cent interest in Koba Tin-(completed April 2002)
- 2002 Acquisition of Basin Minerals Limited and the Douglas project in the Murray Basin, south-west Victoria.
Completion of the Old Hickory expansion project in Virginia, USA.
Ifuka Resources Limited Ownership Structure and Assets
| Business | Interest | Assets |
|---|---|---|
| WA Tifanium Minerals mmmmmm |
100% | Six open pit mine sites, two dry- separation plants, two synthetic rutile plants and a zircon finishing plant. |
| Iluka Resources Inc. USA. | 100% | Dredge mine and open pit mine -- Florida. |
| Open pit mine – Virginia. | ||
| Two dry separation plants and a zircon finishing plant. |
||
| Consolidated Rutile Limited | 50% | Two dredge mines - North Stradbroke Island |
| Drv separation plant Pinkenba, Brebane |
||
| Narama Coal | 50% | Hunter Valley open cut coal mine operated by joint venture partner Xstrata. |
| Basin Minerals Limited | 11100% mmmm |
Douglas mineral sands project and Murray Basin exploration interests. |
1999 - Jan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan Stefan
2002 in Summary
Iluka's 2002 results were underpinned by strong sales of titanium minerals and zircon in difficult and uncertain global trading conditions as a result of international events. The Company also made progress against its strategic objectives for its mineral sands business which will provide the base for future. growth. Key events in 2002 included:
- · further performance improvements in environmental management, health and safety;
- · record sales of synthetic rutile and increased production and sales of zircon;
- . the completion of the Old Hickory expansion project in Virginia and zircon finishing plants at Old Hickory and Geraldton in the mid-west;
- · a commitment to expand production into northern Florida and southern Georgia;
- . the acquisition of Basin Minerals Limited;
- · increased Heavy Mineral Reserves and Resources (net of production) and inclusive of the Basin Minerals acquisition);
- · a record consolidated net profit of A\$109 million; and
- · a full year dividend of 22 cents (franked to 2 cents), unchanged from the previous year
Group Production and Sales
| 2002 | 2001 |
|---|---|
| 167,774 | 175.637 |
| 172.124 | 174.314 |
| 447,463 | 460,157 |
| 516,598 | 419,654 |
| 1,362,793 | 1,438,500 |
| 672.807 | 673.992 |
| 360.591 | 345,913 |
| 363.622 | 352,823 |
| 11,320 | 12,550 |
| 47.467 | 30.875 |
| 1,012,490 | 1,203,074 |
| 1,032,433 | 1,195,809 |
| Financial Results | 2002 | 2001 |
|---|---|---|
| Revenue from operations. | A\$894 5 m | A\$900.8 m |
| Profit after tax continuing business | A\$109.5 m | A\$107.8 m |
| Profit (loss) after tax - discontinuing business | A\$0.5 m | A\$(44.1) m |
| Net profit | A\$109.0 m | A463.7 m |
| Earnings per share (Basic) | 48.6 cents | 29.3 cents |
| Dividend | $22.0$ cents | 22.0 cents |
| Gearing ratio | 33.8% | $32.3\%$ |
IIIIKa matite matik parti experientions in AOOA déago de a completa de la completa de la completa de la construction giola i rading condition.
ABOVE - Tan Mackervie, Chairman TOP RIGHT - Mining operations at Eneabba, in the mid-west region of Western Australia
Chairman's Överim
In the previous Annual Report the Company identified a number of key challenges in 2002 which included the appointment of a new Managing Director, a revised strategic focus and the development of Iluka's interests in the Murray Basin region of south-eastern Australia. I am pleased to report that considerable progress was made in these key areas during the year.
RESULTS IN 2002
The Company met its profit expectations in 2002 despite difficult and uncertain global trading conditions as a result of international events. Both mineral sands and coal production were in line with expectations. Mineral sands sales exceeded both volume and revenue expectations mainly as a result of record synthetic rutile sales and increased zircon prices and sales compared with 2001. Sales in 2002 also benefited from relatively high opening inventory levels. which were progressively drawn down. during the year. Coal sales were in line with contractual requirements. Prices for titanium minerals in US\$ declined slightly in 2002 compared with 2001 but this was to a large extent offset by a favourable realised exchange rate (due primarily to the expiry in 2002 of a
number of hedge positions inherited from the acquisition of RGC in 1998). US dollar prices for zircon increased in 2002 compared with 2001.
The financial result for the year was a consolidated net profit of A\$109 million. This was inclusive of a contribution of A\$9.9 million from previously un-booked tax losses which had to be brought to account and a write-off of A\$6.6 million of assets associated with a project to develop iron oxíde technology. Any comparison with the previous year is favourably affected by the write-down of Koba Tin and Westlime assets in last year's accounts. Earnings per share were 48.6 cents which reflects the issue of 15.5 million shares as part of the Basin Minerals acquisition as does the return on equity which was 13.2%.
The final dividend will be 12 cents per share which together with the interim dividend of 10 cents per share makes a 2002 total dividend of 22 cents per share (franked to 2 cents). This is unchanged compared with the 2001 total dividend of 22 cents.
The Company achieved a significant improvement in its environment and safety performance during 2002. However, despite the improvement, Iluka's overall safety performance needs to improve further to enable the Company to achieve industry bestpractice results. This important matter is dealt with in more detail on pages 20 to 21 of this report.
STRATEGY
A major review of the Company's mineral sands strategy was completed during the year and as a consequence Iluka's immediate strategic focus is on development and exploration activities in three major mineral sands provinces, namely the Western Australian Basin, Murray Basin in south-eastern Australia and the Atlantic Basin on the east coast. of the USA.
It was in this context that Iluka made a A\$139 million takeover offer in late June for Basin Minerals Limited to acquire Basin's extensive mineral sands interests in the Murray Basin, including the Douglas project in south-west Victoria. The successful takeover of Basin has enabled Buka to consolidate a substantial resource position in the region and through a combined development of the Douglas and the KWR projects, to expand its future
Australian litanium minerals and zircon production. The Company expects to be in a position during the second half of 2003 to commit to the stage-one development of the Douglas preject.
During the year, the Company completed a A\$42 million expansion of the Old Hickory operation in Virginia USA and committed to a A\$66 million. expansion of mining and processing operations into northern Florida and southern Georgia, USA.
In late 2002, Iluka and Rio Tinto Iron and Titanium Inc. agreed to end all litigation between the two companies with respect to the synthetic rutile enhancernent process (SREP), HYBRID and RUTILE patents. The agreement ends a dispute between Rio Tinto and RGC Mineral Sands over the SREP patent and ownership issues which date back to 1994.
The SREP patent is now jointly owned by the two companies and in return Iluka has made two payments to Rio Tinto consisting of US\$10 million in December 2002 and US\$5 million in March 2003.
MANAGEMENT ISSUES
The leadership of Iluka's senior management team changed during the first part of the year with Richard Tastula acting as the Interim Managing Director until Mike Folwell's appointment in May. Further changes also took place within the executive management team to reflect the growing international nature of Iluka's business and to better position. the Company to pursue its mineral sands strategy and identified growth opportunities in Australia and internationally. A key element of these changes has been to provide additional resources to support the Board's commitment to significantly improve Iluka's communications with the investment community and put in place best-practice disclosure procedures. In parallel, the Managing Director implemented a major business. improvement program which is designed to maximise the earnings. potential of Iluka's existing operations to provide the basis for future growth.
On behalf of the Directors. I wish to thank both Richard Tastula and Mike Folwell, their respective management teams and Iluka's employees and contractors for their efforts and contributions in 2002.
RIGHT - A scraper at work at
the Stratham West roine site in the south-west region of
Western Australia
BOARD MATTERS
The composition of the Board changed during the first half of 2002 with the appointment of Mike Folwell and the retirement of Ken Court. Mr Court had previously been Chairman of Westralian Sands and a Director of both Westralian Sands and Iluka for a period spanning 26 years. During his period as Chairman, the Company enjoyed an extended period of growth and strong financial performances. He was also largely responsible for the buy-back of a controlling interest held by ICI in 1994 which subsequently established Westralian Sands as a fully independent public company with a broad-based institutional shareholding.
More recently the Company has been fortunate in securing the services of Don-Morley as a Director of Iluka. Mr Morley is a former Finance Director of WMC and has an extensive background in the Australian and international mineral resource sector. He is also Chairman of Alumica Limited
OUTLOOK FOR 2003
Demand for Iluka's titanium mineral products remains robust despite more volatile and uncertain economic conditions globally and an increasingly competitive market for high titanium. dioxide content feed-stocks. The outlook for zircon continues to be very positive, with strong demand for premium quality material and firm prices.
Iluka will undertake a substantial capital expenditure program over the next two years. The first-phase will commence in 2003 and will underpin the developments in the Murray Basin and USA as well as new mine sites in Western Australia and North Stradbroke Island in north-eastern Australia.
The Company is targeting modest growth on a pre-tax basis from its continuing operations from improved margins and a contribution from the initial phase of the business improvement program.
The 2003 results will however be impacted by an expected change to its tax position as the majority of its unbooked deferred tax losses were brought to account during 2002. As a result, the Australian operations will no chder have a significant tax experise shelter and the Company will need to provide for a tax expense in 2003. Based on current projections. Iluka expects to return to paying Australian tax and franked dividends during 2004. However, if Consolidated Rutile Limited is successful with a proposal to release its franking credits to shareholders, Bukawill be in a position to pay a franked dividend of approximately 17 cents per share in 2003.
I look forward to reviewing the Company's performance and prospects with you in more detail at the Annual General Meeting to be held on 14 May 2003 at the Westin Hotel in Sydney and at shareholder information sessions in Meibourne and Perth on Thursday 15 and Friday 16 May, respectively.
lan Mackenzie CHAIRMAN 26 March 2003
Managing Director's Report
ENVIRONMENT, HEALTH AND SAFETY
A major review of Iluka's safety initiatives completed in early 2002 concluded that the Company's efforts needed to become more proactive. As a consequence, a major safety awareness campaign was undertaken during the year which resulted in an improved overall health and safety performance in 2002 compared with results in 2001. The performance improvement was primarily a result of people across the Company committing to further develop and reinforce the use of systems and processes to ensure the safety of all employees and contractors and the integrity of the environment in which Iluka operates.
The Company's environmental performance also improved in 2002. compared with the results in 2001 as evidenced by a reduction in the number of recorded environmental incidents.
Despite the improvement in both safety and environmental management performance, the Company's overall level of performance in these key areas. still has considerable scope for improvement and will continue to be a key area of management focus in 2003. and beyond.
LEFT - Svothetic rutte kën (SR2) at the North Capel site in the south-west region of Western Australia
IIuka mađe good progres during the year in pursuit of tion av at the figure of the order the state
STRATEGIC OBJECTIVES
During the first half of 2002 the Company completed a major strategic review of its mineral sands business and redefined its high level strategic objectives as follows:
Existing Business
· maximise the value from the existing assets
Grow the Mineral Sands Business
- · market strategy
- (1) build on existing customer base and relationships in titanium dioxide and zircon markets
- (2) maintain focus on chloride feedstock market through increased sales of rutile and synthetic rutile, seek value adding opportunities to upgrade ilmenite to synthetic rutile. and pursue Dupont demand for chloride imenite
- (3) continue to seek sulphate ilmenite sales to maximise potential of resources
-
(4) position Company to capture share of emerging markets
-
resource strategy
- (1) WA basin exploit full value with business improvement program, limited expansions and resource. optimisation
- (2) new developments in the top half of the industry margin curve
- (3) short term exploration focus on Atlantic, Murray and Western Australian basins
- (4) increase green-field exploration in the medium term to create new options for high margin operations.
- (5) continue to pursue acquisition opportunities
- technology strategy
- (1) develop ilmenite upgrading technologies to ensure capability to maximise value of ore bodies by pursuing NewGenSR development
- (2) manage environmental issues by progressing iron waste initiatives
Growth beyond Mineral Sands
Develop a framework for identifying and assessing opportunities outside the mineral sands industry
PROGRESS WITH STRATEGIC OBJECTIVES
The Company made good progress during the year in pursuit of its strategic objectives.
In recognition of the potential of Iluka's existing businesses to operate more efficiently, a major business improvement program was implemented. on a company-wide basis. The program is targeting an initial A\$40 million per annum increase in pre-tax earnings by the end of 2004 from both cost savings. and improved margins. A business process improvement project (involving the implementation of SAP) to deliver efficiencies and savings in support services and to improve the quality of management information was launched in Western Australia during the year and implemented in early March 2003. Planning also commenced on implementation in the USA at a future stage. In addition a project management system to improve major. capital project execution practices and eliminate cost over-runs on projects was implemented during the year.
The composition of the executive management team and senior management throughout the Company also changed during the year in response to internal restructuring and a targeted recruitment campaign. As a result, Iluka now has both an appropriate structure and the right mix of people and skills to deliver on its growth strategy.
For the first time since the merger with RGC, the Company's USA operations will be in a position to provide production growth through the completion of the Old Hickory expansion project and commitment to an expansion into Georgia/Florida. The average annual production capacity of Old Hickory will increase by 50% per year commencing in 2003 and the capacity of Georgia/Florida is expected to increase by approximately 20% per year by early 2004. The Company is also in the process of proving-up several deposits in the region to further extend mine life and has an extensive exploration program underway which may underpin further regional expansion. projects in the future.
Progress was made in positioning the Company to secure future sales opportunities with the completion of zircon finishing plants at the Old Hickory. (as part of the expansion project) and mid-west operations. At the same time Iluka also secured additional synthetic rutile and ilmenite sale contracts to match current production capacity.
Iluka's successful exploration efforts in the Murray Basin, the Atlantic Basin and the acquisition of Basin Minerals Limited enabled the Company to increase its estimated year-end Ore Reserves by 14% or 5 million tonnes of heavy mineral (net of production). Iluka's estimated heavy mineral Resources also increased by 13% or 29 million tonnes of heavy minerai.
The Company's exploration success in the Murray Basin together with the acquisition of Basin Mineral's interests also expanded and brought forward. Iluka's development plans for the region. As a result the Murray Basin is now Iluka's major production growth opportunity in the next two to three years. Detailed technical and engineering studies to underpin a significant capital investment for stageone commenced during the year. The completion of this work, including final capital cost estimates and optimisation. plans, is targeted for mid-2003 to enable a final investment commitment to be made by the end of the third quarter of 2003. Based on this schedule, the Company expects the project to enter the start-up and commissioning phase in the second half of 2004 and to be fully operational in early 2005.
A definitive feasibility study to support Consciidated Rutile Limited's plan to mine the Enterprise ore-body on North Stradbroke Island commenced during the year and is expected to be completed by April 2003. The study includes a proposal to dredge directly from the Ibis deposit to the Enterprise deposit without dismantling and relocating plant and equipment thereby saving both time and relocation costs.
Successful test work confirmed the effectiveness of the NewGenSR process for upgrading primary limenites and a pre-feasibility study for a commercial scale NewGenSR plant commenced during the year. The successful development of this technology will enable the Company to upgrade a wider quality range of ilmenites and has the potential to add further value to the Murray Basin developments as well as increase the options for new developments.
One area of disappointment during the year was the outcome of a feasibility study into the refurbishment of a synthetic rutile kiln at Capel to enable the production of an additional 50,000 tonnes of synthetic rutile per year by mid-2003. Unfortunately, the age and condition of the equipment plus the cost of modifications means that this project will not proceed as originally envisaged. However, the Company is still planning. to expand its synthetic rutile capacity and is considering a range of options. including modifications to increase output from existing kilns, a new kilnbased on current technology or a NewGenSR pilot plant.
LEFT - An artist's irroression of the proposed Mumay Basin minerals separation plant to be located near Harcitton in Victoria RIGHT - A hay crop grown on a former liska mine site near Capel in the south-west region of Western Australia.
PRODUCTION, SALES AND FINANCIAL PERFORMANCE
In terms of challenges faced by the Company during 2002, the most significant was in the area of mineral sands production. The first-half production performance was well below expectation mainly as a result of synthetic rutile plant maintenance shutdowns and delays in commissioning new equipment. A significant improvement in production performances at the Western Australian
sites was achieved in the second half of the year which, together with an improved production performance from the USA operations in the last quarter, enabled the Company to recover the production shortfall and achieve its overall production targets.
The Company achieved a strong overall sales performance in 2002 assisted by increased demand for both titanium minerals and zircon compared with 2001.
Record synthetic rutile sales made a significant contribution in enabling Iluka to increase its share of the high fitanium. dioxide chloride market to around 33% in 2002 compared with 29% in 2001. However, this result was partially underpinned by inventory sales and as a consequence the Company does not expect to be able to sustain this level of market share until new production. capacity, particularly synthetic rutile capacity, becomes available. Ituka continued to be the market leader in zircon despite market share decreasing 1% to 33% in 2002 compared with 34% in 2001, primarily a result of production. constraints.
Coal production and sales from the Company's 50% interest in the Narama Coal joint venture were in line with contractual requirements. Tin production and sales ceased at the end of the first quarter of 2002 following settlement on the sale of Iluka's 75% interest in PT Koba Tin to Malaysia. Smelting Corporation Berhad.
$\tilde{\mathcal{S}}$
Group Return On Equity
Iluka's 2002 sales revenue of A\$894.5 million was made up of A\$805.1 million from titanium minerals and zircon sales (an increase of A\$67.3 million), coal sales of A\$31.7 million (a decrease of A\$3.2 million) and tin sales of A\$57.7 million (a decrease of A\$67.5 million).
On a regional basis, mirterals sands sales revenues from the Western Australian operations increased by A\$98.4million to A\$611.5 million which was offset by USA sales revenues. decreasing by A\$28.9 million to A\$105.5 million. Consolidated Rutile Limited's sales revenues (100% level) decreased by A\$3.8 million (2.2%) to A\$88.1 million during the period.
The Company's 2002 profit from continuing operations was A\$109.5 million compared with a profit of A\$107.8 million on the same basis in 2001. However, the Group profit performance in 2002 of A\$109 million represents a substantial improvement on the 2001 result of A\$63.7 million. The key difference was a loss of A\$44.1 million from discontinued business in 2001.
Cash flow from continuing operations in 2002 was A\$123.5 million, a decrease of A\$9.4 million compared with the 2001 result of A\$132.9 million. The decrease was primarily due to the timing of shipments and payments to suppliers.
Capital expenditure in 2002, including exploration, was A\$151.4 million, an increase of A\$38.7 million compared with 2001. The increase was primarily due to the expansion of mining and processing operations at the Old Hickery site in Virginia, USA.
Debt increased by A\$80.5 million to A\$469.5 million at the end of the year. This debt primarily consists of syndicated bank debt of A\$151.4 million and unsecured private placement notes of US\$150 million (A\$264.6 million). Gearing was 33.8% at the end of 2002 compared with 32.3% at the end of 2001.
During the year the Company continued its policy of hedging a portion of its future US\$ requirements. As expected the 2002 hedging program showed the benefits of the expiry of a number of hedge positions inherited from the RGC. merger. As a consequence, the opportunity cost of foreign exchange. derivatives (after tax) included in the Statement of Financial Performance for 2002 was A\$12.7 million, which compares favourably with the opportunity cost of A\$33.8 million in 2001. This opportunity cost includes both sales revenue adjustments from hedging as well as net written option. position speculative losses.
in the mid-west region of Western Australia
ABOVE - Components of the minerals concentrator plant (MC1) being transported from the Green Cove Springs site
in Florida USA to an adiacent minerals decosit
CONCLUSION
In order to grow its mineral sands business Iluka needs to successfully address the challenges of maximising production and profitability from its existing operations as well as increasing its market share through new value adding developments. Solving these challenges will not only improve the value of existing operations but also increase the range of future development options available to the Company.
Against this background the operational focus in 2003 will be on achieving safe. on-grade and low cost production. This will be supported by further refinements. to environment, health and safety processes and systems, more effective planning to improve uptime and product quality and the business improvement program which will drive specific initiatives to deliver a "bottom line" improvement. The implementation of the business process improvement project (including the implementation of SAP) is also a key factor as it will improve the quality of information and reporting as well as enabling comprehensive external and internal performance benchmarking.
The Murray Basin remains Iluka's most significant mineral sands growth opportunity in the short-term. The completion of technical and engineering studies to underpin the final investment commitment and subsequent construction phase of this project will continue to be a major priority for the Company in 2003.
In paralle! Iluka will also continue to review merger and acquisition opportunities for either immediate growth or short term development opportunities as well as pursuing technology developments such as NewGenSR.
The Company already has a major investment in the mineral sands industry. and needs to consider opportunities for growth beyond its existing business in the longer term in order to develop a range of investment options and not be constrained by the overail growth potential of the mineral sands industry. Work will also commence in 2003 on planning for growth beyond the mineral sands business. The initial stage of this work involves the development of an investment framework for identifying and assessing opportunities outside the Company's current core mineral sands business activities.
Markuell
K M (Mike) Folwell MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER 26 March 2003
Five Year Performance
| Financial performance details | 2002 | 2001 | 2000 | 1999' | 1998' | |
|---|---|---|---|---|---|---|
| Ostanova provinci pri provinci provinci pri provinci pri provinci pri provinci pri pri pri pri pri pri pri p | ||||||
| Revenue trom operations (A\$m) | 836.8 | 772.7 | 721.4 | 661.1 | 192.4 | |
| Earnings before interest, tax, depreciation and amortisation (EBITDA) (ASm) |
224.7 | 242.5 | 232.9 | $177 - 1$ | 610 | |
| Earnings before interest and tax (EBIT) (A\$m) |
129.8 | 148.8 | 146.0 | 98.2 | 40.3 | |
| Profit attributable to the members of ILika Resources Limited (A\$m) |
109.5 | 107.8 | 104.9 | 62.7 | 22.7 | |
| Eamings per share (cents) | 48.8 | 49.7 | 47.3 | 28.2 | 25.1 | |
| Consolidated entity | ||||||
| Prefit attributable to the members of Iluka Resources Limited (A\$m). |
109.0 | 63.7 | 90.5 | 80.2 | 2.8 | |
| Earnings per share (cents) s | 48.6 | 29.3 | 40.8 | 36.0 | 3.1 | |
| Dividend per share (cents) | 22.0 | 22.0 | 22.0 | 20.0 | 18.0 | |
| Return on equity $^{3}$ (%) | 13.2 | 9.2 | 13.5 | 12.3 | 0.6 | |
| Gearing ratio* (%) | 33.8 | 32.3 | 29.7 | 29.2 | 47.1 | |
| Financial position details | ||||||
| or a near a coin | ||||||
| Equity (A\$m) | 8790 | 7572 | 754.8 | 725.8 | 704.0 | |
| Net tangible assets per share (A\$) | 3.78 | 3.18 | 31 | 292 | 277 | |
| No of shares on issue | 232.8 | 217.3 | 216.5 | 222.7 | 222.7 | |
| No of shareholders' | 22.509 | 19.410 | 18.236 | 18.543 | 18,126 |
Notes
$\mathfrak{f}$ Based on Consciidated without Goldfields linancial results.
$\hat{\boldsymbol{z}}$
based on operating profit after income lax attributable to members of libra Resources Limited, ofvided by the
Weighted average number of billy paid shares for the financial year.
Operating profit after income lax attributa $\bar{3}$ $\mathcal{E}_\mathrm{I}$
Resed on net debt as a percentage of net debt and equity
Stareholders as at 33/32/02 $\mathbb S$ .
LEFT - Ray mulch (for use in the rehabilitation of
former mine sites) being examined during a
harvesting operation in the mid-west region of
Westam Australia
A significant in invertencit in production in the second half of 2002 enables II:uka to achieve its full year production targets.
Operations Overview (Continuing Business)
Group production of titanium minerals in 2002 decreased by 4.7% compared with 2001 and group production of zircon increased by 4.2% over the same period. The main factors contributing to lower overall mineral sands production levels during the year were commissioning of new equipment, maintenance shutdowns. and low-grade material resulting in unplanned mine moves.
Coal production in 2002 was in line with the Narama Coal joint venture's contractual requirements although it was 15.8% lower compared with 2001 as there were no spot sales contracts in 2002.
Group Production
| Tonnes | 2002 | 2001 |
|---|---|---|
| Rutile | 167,774 | 175,637 |
| Synthetic Rutile | 447,463 | 460,157 |
| imenite | 1.362,793 | 1,438.500 |
| Zircon | 360,591 | 345,913 |
| Leucoxene/Hyti | 11,320 | 12.550 |
| Coał | 1.012,490 | 1,203,074 |
Notes
llmente production numbers include
linente used to manufacture synthetic
rutile and also includes Hyll 70 in WA and
Leucoxere in the USA $\mathbb{F}^2$
$\overline{2}$ Indudes zircon ficer
Production and sales numbers avoitale
Hoke's 90% interest in Narama Coal and TOOS of
Consolidated Pusite Limited 3
LEFT - Gall Schroder, Rehabilitation Operator, at
work at the Eneabba rursery where native plants are grown for use in the rehabilitation of former
mine sites in the mid-west region of Western Australia
REGIONAL MINERAL SANDS PRODUCTION
Western Australia
Production was constrained in the first half of the year by commissioning problems at the Yoganup-Extended mine, a shutdown of two mine sites to manage sulphate ilmenite stocks at the south-west operations and delays in commissioning mining unit-three at the mid-west operations. In addition three of the four synthetic rutile kilns undertook maintenance shutdowns during the period.
The commissioning issues were resolved by the start of the second half and together with an improved mining and processing performance at both sites, driven by mineral quality and highequipment availability levels, the first half production shortfall was recovered and individual site targets for production were either met or exceeded on a full year basis.
Highlights in 2002 included the commissioning and operation of a new zircon finishing plant in Geraldton and record levels of synthetic rutile production from the mid-west operations. A new char and sinter crushing plant was commissioned at the south-west operations and a A\$2 million. project to modify the synthetic rutile acid leaching process and increase production of synthetic rutile by 12,000 tonnes per year, commenced in late 2002 and is expected to be completed by April 2003.
USA
Production levels from the USA operations during 2002 were impacted by the temporary suspension of production at the Green Cove Springs operations in Florida during early 2002. following the market response to the terrorist attacks on 11 September 2001 as well as unseasonably wet weather in the third quarter which made dry mining activities difficult. In addition, production from the Old Hickory project in Virginia was affected by the cut-in and commissioning of the new facilities associated with the expansion project and a prolonged period of extreme. drought conditions and associated water shortages.
Highlights in 2002 included the completion of the Old Hickory expansion project which included a second mine and mining unit, additional minerals separation plant capacity, a concentration plant and zircon finishing circuit. In addition an expansion project into southern Georgia and northern Florida commenced in the second half of the year. This project involves the eventual de-commissioning of the dredge concentrator at the Green Cove Springs mine, the relocation of the mobile concentrator to an adjacent lease. area (which was completed during the first quarter of 2003) as well as a new 1,000 tonne per hour concentrator/mining unit and associated
infrastructure to develop the Georgia deposits, commencing with the Lulaton deposit in the second half of 2003.
Regional Mineral Sands Production
| Tonnes | 2992 | 2001 |
|---|---|---|
| Rutile - WA | 90.260 | 84.062 |
| Rutile - USA | 21,684 | 29.577 |
| Synthetic Rutile - WA | 447,463 | 460.157 |
| îlmenite – WA | 1,053,800 | 1.102,900 |
| îlmenite – USA | 215,620 | 234.322 |
| Zircon - WA | 259.376 | 225.800 |
| Zircon - USA | 62.063 | 77.100 |
| Hyd 91 - WA | 11.320 | 12.550 |
Notes
Breanite includes Hyli 70 in WA and Leucoxene in the USA
fimenite production numbers for WA include Invenite
used to manufacture synthetic ruble
Consolidated Rutile Limited Production (100%)
| Product (tonnes) | 2001 | |
|---|---|---|
| Rutile | 55.830 | 61.998 |
| ilmenite | 94.373 | 100.159 |
| Zircon | 43.012 |
Queensland
The combined production of rutile and zircon in 2002 was 9.5% lower compared with 2001 mainly as a result. of lower production from the Yarraman deposit in response to areas of high clay/fines content and restrictions resulting from face falls. Overall production would have been lower had it not been for the performance of the Ibisdeposit which achieved higher than expected production. This reflected higher head feed grades and plant availability levels together with the benefits of supplementary dry mining carried out during the latter half of the year.
Highlights in 2002 included the relocation of the Ibis dredge and concentrator through a canal constructed ahead of the main dredging operations in order to bypass. environmentally sensitive areas. The refecation was carried out without incident and ahead of schedule with mining recommending within 4.5 days. In addition a project to improve the performance of the Yarraman plant's tailing circuit was completed in late 2002. resulting in an improvement in the processing of higher clay/fines. content material and subsequent increase in production.
ABOVE LEFT - The Yamaman dredge mining operation on
North Stradbroke Island, near Brisbane, Australia RIGHT - Dry mining operations on North Stradbroke Island
Ervironment, Fealth and Safety
The following is a summary of the Company's 2002 environmental management, health and safety performance. More detail on Iluka's performance and detailed plans will be provided in the Company's Sustainability Report which will be published in the second quarter of 2003.
On a Group basis Iluka's environmental management performance in 2002 improved compared to the 2001 results. A total of 38 level three and above incidents were recorded in 2002. compared with 103 in 2001.
The Company did however record a level four environmental incident in 2002 at the Yoganup mine site at Iluka's south-west operations. The wall of a clay fines solar drying dam was breached resulting in the release of clay fines and water into adjacent vegetation. on Iluka's property and the discharge of turbid water into a local creek. An investigation into the incident concluded that the breach was due to the failure of the wall which in turn was caused by the inadequate construction of the dam wall and poor operating procedures.
Iluka's safety performance on a group basis continued to improve in 2002 compared with 2001. The key safety performance indicator of lost time injury frequency rate (LTIFR) decreased from 13.3 to 6.3, a 53% improvement. compared with the 2001 result.
This improvement is the result of a Company-wide focus on improving Iluka's safety and health culture and the more rigorous application of measures such as personal risk management by using the Take Two program, task risk management through the use of Job-Safety Analysis and improved housekeeping practices. In addition, management and supervisory staff. spent more time in the field discussing environmental, health and safety issues with staff and being more active in investigations and ensuring all injuries, no matter how minor, are reported and managed without delay.
Significantly improved injury management processes were introduced at Iluka's Australian operations. These processes included the development of physical capability statements for the majority of positions with detailed restricted and alternate duties.
New measures were also put in place to more effectively manage employee health issues including skin cancer prevention, flu vaccinations, occupational noise surveys and noise exposure reduction plans.
Community Relations
During 2002, Iluka continued to interact with local communities utilising a rangeof communication mediums including meetings with individual landowners and residents, community meetings, operational site tours, community newsletters dealing with specific project areas or proposals and public displays.
A full-time Community Relations Manager was appointed to support the Murray Basin Project team develop stage-one of the Douglas project in Victoria which includes a mine near Horsham and a minerals separation plant and associated infrastructure near Hamilton. The Company is working closely with neighbours and the local community in both locations and has established a Community Consultative Committee to promote communication with the wider community in the region. Similar work is taking place with neighbours, communities and local government in respect to Iluka's proposed operations in Ouyen, Victoria.
In Western Australia, community consultation commenced at Gingin and Cataby in the mid-west and at Wagerup in the south-west to secure support for and approval of Iluka's plans to open new mine sites in these areas in the next one to three years. The Company also continued to work with the Eneabbal Progress Association to consider options for the town's future in ten years time. when Iluka's mining operations in the area are expected to close down.
In Queensland, Consolidated Rutile Limited (CRL) and the Quandamcoka Land Council continued negotiations towards a Good Will Agreement covering operations on North Stradbroke Island. The Interpretive Centre focated ie Dunwich en North Stradbreke Island. was completed in October 2002 and site visits by educational groups. recommenced at a rate of approximately. two to three tour groups per week averaging 25 people per group. In addition CRL's community consultation program continued with the key activity being the Enterprise Project Stakeholder Reference Group which provided a forum for discussion about the development of the Enterprise deposit and in particular the pre-mineenvironmental assessment process.
In the USA, community consultation commenced in southern Georgia and northern Florida as part of the planned expansion of operations and establishment of new mine sites and Iluka's previous community relations efforts at the Old Hickory operations were acknowledged by being awarded the Virginia Aggregates Association's Community Impact Award in 2002 as well as an honourable mention in the Association's Reclamation Award.
The Company also continued to provide financial support to a range of community activities at its various sites and operations in Western Australia, Queensland and the USA. A total of more than A\$400,000 was committed during the vear in Western Australia and the USA and a further A\$80,000 by CRL.
In Western Australia, Iluka was the major sponsor of community festivals in midwest and south-west regions and continued to support teachers and students involved in a wetlands. restoration and research project at Newton Moore High Senior High School in Bunbury and the Capel Land Conservation District Committee which has taken on the task of improving the water quality and flow in the Capel River. The Company also continued to support the Sail Training Ship Leeuwin, Scitech Discovery Centre in Perth and the Western Australian Ballet.
In the USA, Iluka continued to provide financial support to local emergency services departments in the Dinwiddie and Sussex counties.
In Queensland, CRL continued to support community organisations, local schools and sporting clubs located on North Stradbroke Island or near the mineral processing operations at Pinkenba.
Exploration
GEOLOGY OVERVIEW
The Company is currently mining two types of heavy mineral deposit at its various operations around the globe. beach placer deposits and dunal deposits. All the Mineral Resources listed in the following table are found in one of these deposit types. Heavy minerals are defined as those minerals with a specific gravity greater than 2.9 tonnes/cubic metre. Iluka is currently producing the natural heavy mineral products of rutile, leucoxene, limenite and zircon.
Beach placer deposits are formed during major storm events when high energy storm waves rework the normal beach and dunal sands to concentrate the heavy minerals on the beach face. After the storm, normal beach building processes resume and the placer is buried and preserved. Mineralised dunes are formed on top of and adjacent to the beach placers by onshore winds blowing the exposed heavy mineral into the dunal sands. To obtain the size and thickness required for an economic deposit, the beach will have been subjected to multiple storm events over many years.
Iluka's Mineral Resources are contained in ancient inland deposits which range in age from the Pleistocene dunes of North Stradbroke Island (formed some 20,000 to 500,000 years ago) to the Pliocene age, (formed about 5 million) years ago) buried beaches of the Murray Basin, some 400 kilometres. inland near Mildura.
MINERAL RESOURCE ASSESSMENT
Iluka uses reverse circulation, air core drilling methods as its primary tool to obtain data for use in determining the Mineral Resource Estimate. In special circumstances the dead stick auger drilling method is also used. Both of these techniques are considered industry standards and have been employed for more than 20 years in the heavy minerais industry.
All holes are logged by either a company geologist or a technician under a geologist's supervision. Sample intervals vary depending on the geology of the deposit being evaluated but commonly are in one (occasionally up to three) metre increments. Heavy mineral float/sink assays using heavy liquids with nominal specific gravities of between 2.85 and 2.90 are performed in company operated laboratories. Duplicate samples are sent to different internal and external laboratories for audit purposes.
Bulk samples are composited from the borehole samples by the geologist to represent individual geological entities. These bulk samples are used for heavy mineral assemblage determinations. In situ heavy mineral assemblages are determined by a combination of magnetic fractionation, electrostatic separation, heavy liquid separation, visual inspection and XRF analyses.
Mineral Resource Estimates are based. on geological models containing these results and the geologist's interpretation of the deposit morphology. A range of heavy mineral cut-off grades are used to produce the Mineral Resource Estimates, with the actual cut-off grade applied reflecting both the different deposit types, past practice and operational history. Geological block models are generated using Datamine mining software. Mineral Resources are estimated from those models. Some Mineral Resources, predominantly in the Inferred category, are estimated using the simple sectional method.
Bulk density is determined from the Iluka Standard Formula which incorporates both the heavy mineral grade and clay content of the block being estimated. This formula is based on extensive test work, past operational history and reconciliations of mined deposits.
The different Mineral Resource categories quoted reflect the different levels of confidence in the geological understanding and estimation of the deposits as per the quidelines supplied in the JORC (1999) code.
RIGHT - Heavy mineral concentrare stock pile at Eneabba in the mid-west region of Western Australia
ORE RESERVE ESTIMATION
Iluka listed Ore Reserves are included in the listed Mineral Resources. Ore Reserves are a subset of the total Mineral Resource, on which economic, technical and environmental studies have been completed that demonstrate the economic viability of the mineralisation to support a mining operation. In general these studies are applied to Indicated Resources to produce Probable Ore Reserves and to Measured Resources to produce Proved Ore Reserves. Occasionally Measured Resources are used to produce Probable Ore Reserves where the detail and confidence in the mine planning is at a lower level than normal.
Ore Reserves are estimated by longterm planning and operations staff using the geological models that are used for
the Mineral Resource Estimates. The process of converting a Mineral Resource to an Ore Reserve includes a mine path optimisation step which takes account of mining and processing costs, recoveries, potential revenues, practical mine design, access issues and environmental restrictions.
MINERAL RESOURCE, ORE RESERVE FLUCTUATIONS
There have been significant increases to Iluka's Mineral Resources and Ore Reserves during the year, both through the acquisition of Basin Minerals Limited and through new discoveries in the Murray Basin. Additional increases have also resulted from ongoing exploration. efforts on the Atlantic Coastal Plain of the USA.
Ore Reserves are reduced each year for a number of reasons but primarily due to mining depletion. Changes to the Company's Ore Reserve Estimates can also be due to changes in the mine path at time of mining, planned mining method and process technology or unforeseen environmental or statutory constraints. These reductions in the Company's Ore Reserves are generally replaced by new Ore Reserves estimated from existing and/or new Mineral Resources.
Iluka tracks these changes in order to ensure sufficient work is completed to maintain a long-term Ore Reserve and Mineral Resource base for each operating site.
Ilaka Reserves Breakdown by Province and Category at 31 December 2002
Summary of Reserves
| Reserve | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| In Situ | HM Assemblage 3 | Change | |||||||
| Ore | Ore | HM | НM | In: | Zircon | Rutile | НM | ||
| Reserve | Tonnes | Tomnes | Grade | Grade | Grade | Grade | Tonnes | ||
| Country | Province | Category | (000) | (5000) | (%) | ${^{[06]}}$ | (%) | ${^{06}}$ | (1000) |
| Australia | WA - Mid-West 1 | Praved | 43,422 | 3,587 | 6.5 | 58 | 13 | 8 | |
| WA - Mid-West' | Probable | 161.002 | 9.029 | 5.5 | 42 | 19 | 8 | ||
| Total | WA - Mid-West! | 204.424 | 12,616 | 5.8 | 47 | 17 | 8 | (1,378) | |
| WA - South-West | Proved | 31.342 | 3.544 | 11.3 | 86 | 7 | |||
| WA - South-West | Probable | 91.081 | 7,439 | 8.1 | 80 | 8 | |||
| Total | WA - South-West | 122,423 | 10,983 | 9.0 | 82 | s | 4. | (118) | |
| Murray Basin | Proved | 35,200 | 3.520 | 10.0 | 35 | 8 | 10 | ||
| Murray Basin | Probable | 12.200 | 1.135 | 9.3 | 42 | 15 | 10 | ||
| Total | Murray Basin CRL North |
47,400 | 4.655 | 9.8 | 37 | 10 | 10. | 4,655 | |
| Stradbroke Island" CRL North |
Proved | 207.571 | 1.580 | 0.8 | 43 | 12 | 14 | ||
| Stradbroke Island s | Probable | 360.077 | 2,907 | 0.8 | 45 | 11 | 13 | ||
| Total | CRL North Stradbroke Island |
567,648 | 4.487 | 0.8 | 44 | 80 I | A | (249) | |
| USA | Florida/Georgia | Proved | 17.135 | 398 | 2.3 | 31 | 14 | 14 | |
| Florida/Georgia | Probable | 118.061 | 3.331 | 2.8 | 34 | 11 | 10 | ||
| Total | Florida/Georgia | 135,196 | 3.729 | 2.8 | 36 | -11 | 10 | 2.629 | |
| Virginia | Proved | 16,629 | 1.540 | 9.3 | 69 | 19 | З | ||
| Virginia | Probable | 16.750 | 1.602 | 9.6 | 69 | 18 | 3 | ||
| Total | Virginia | 33.379 | 3.142 | 9.4 | 69 | 18 | ä. | (578) | |
| Total Total |
Proved Probable |
351,298 759,172 |
14,169 25,443 |
3.8 3.3. |
58 54 |
41 14 |
7 7 |
1.172 3,790 |
|
| Total | Grand Total | 1.110.470 | 39.612 | 35 | 56. | 13 | 7. | 4,962 | |
| Notes |
- Imerate is combined limente 1 and limente 2, for the Mid-West Province.
A# Reserve estimates are adjusted to reliect laka ownership of 50.17% as at December 31, 2002. $\hat{Z}$
- As minoralogy is reported as a percentage of in situ FM content
The resources and reserves twee boen compled by laxa stall ander the supervision of Mr Peter McGodnok, a Corporas Member of the Australian and the employee of finite
Resources Emiled with sufficient experience in this styl
Iluka Reserves Depleted by Province at 31 December 2002
Summary of Reserves Depleted
| HM Tonnes ('000) | ||||||
|---|---|---|---|---|---|---|
| Country | Province | Ore Reserve Category | Remaining | Depleted in 2002 | ||
| Australia | WA - Mid-West | Proved | 3,587 | |||
| WA - Mid-West | Probable | 9.029 | ||||
| Total | WA - Mid-West | 12,616 | (1,210) | |||
| WA - South-West | Proved | 3,544 | ||||
| WA - South-West | Probable | 7.439 | ||||
| Total | WA - South-West | 10,983 | (616) | |||
| Murray Basin | Proved | 3.520 | ||||
| Marray Basin | Probable | 1.135 | ||||
| Total | Murray Basin | 4,655 | ||||
| CRL North Stradbroke Island 1 | Proved | 1.580 | ||||
| CRL North Stradbroke Island ® | Probable | 2,907 | ||||
| Total | CRL North Stradbroke Island | 4,487 | (718) | |||
| USA | Florida/Georgia Florida/Georgia |
Proved Probable |
396 3,331 |
|||
| Total | Florida/Georgia | 3.729 | (250) | |||
| Virginia | Proved | 1,540 | ||||
| Virginia | Probable | 1.602 | ||||
| Total | Virginia | 3.142 | (231) | |||
| Total | Proved | 14,169 | ||||
| Total | Probable | 25,443 | ||||
| Total | Reserves | 39.612 | (3.025) |
Notes
- All Reserve estimates are adjusted to relied fairca ownership of 50.17% as at December 34, 2002.
Iluka Resource Breakdown by Province and Category at 31 December 2002
Summary of Resources
Entimation de Thomas de la Consta
| In Situ | HM Assemblage® | MGSORILG | |||||||
|---|---|---|---|---|---|---|---|---|---|
| HM | НM | ∦m, | Zircon | Change HM |
|||||
| Mineral | Material | Plutile | |||||||
| Resource | Tonnes | Tonnes | Grade | Grade | Grade | Grade | Tonnes | ||
| Country | Province | Category | (°000) | (1000) | (%) | ( %) | ${^{[0]}_{0}}$ | (%) | (°000) |
| Australia | Mid-West 3 | Measured | 357,185 | 19,974 | 5.6 | 47 | 10 | 8 | |
| Mid-West 1 | Indicated | 378.959 | 23,017 | 6.1 | 48 | 14 | 6 | ||
| Mid-West | Inferred | 130.402 | 6.740 | 5.2 | 52 | 8 | 4 | ||
| Total | Mid-West ® | 866.546 | 49.731 | 5.7 | 48 | 11 | 6. | 2.765 | |
| South-West | Measured | 302,747 | 25,506 | 8.4 | 80 | 9 | 1 | ||
| South-West | Indicated | 200.805 | 15,946 | 7.9 | 80 | 7 | 3 | ||
| South-West | Inferred | 189,383 | 14.894 | 7.9 | 79 | 7 | 3 | ||
| Total | South-West | 692.935 | 56,346 | B.1 | 80 | $\mathbf{B}$ | Ż | 5,906 | |
| Murray Basin | Measured | 30.725 | 3,327 | 12.8 | 59 | 13 | Ą | ||
| Murray Basin | Indicated | 132,081 | 16,927 | 12.8 | 45 | 11 | 11 | ||
| Murray Basin | Inferred | 200,155 | 16.735 | 8.3 | 49 | 10 | 9 | ||
| Total | Murray Basin | 362,961 | 36,989 | 10.4 | 48 | 10 | 9. | 22,970 | |
| CRL North | Measured | 0.9 | 43 | 11 | 舓 | ||||
| Stradbroke Island" CRL North |
404.761 | 3.618 | |||||||
| Stradbroke Island" | Indicated | 341.120 | 2,836 | 0.8 | 45 | 11 | 13 | ||
| CRL North | |||||||||
| Stradbroke Island 2 | Inferred | 7.071 | 62 | 0.9 | 41 | 12 | 15 | ||
| CRL North | |||||||||
| Total | Stradbroke Island | 762,952 | 6,516 | 0.9. | 44 | 11. | 14 | 85 | |
| USA | Florida/Georgia | Measured | 136,237 | 3,587 | 2.6 | 38 | 11 | 10 | |
| Florida/Georgia | Indicated | 249,943 | 5,732 | 2.3 | 38 | 12 | 12 | ||
| Florida/Georgia | Inferred | 123.764 | 3.722 | 3.0 $2.6^{\circ}$ |
44 40 |
13 $12$ and $12$ |
8 30. |
||
| Total | Florida/Georgia | 509,943 | 13,041 | (2, 673) | |||||
| Virginia | Measured | 43.682 | 3,762 | 8.6 | 68 | 18 | 3 | ||
| Virginia | Indicated | 20,699 | 1,406 | 6.8 | 59 | 19 | 4 | ||
| Total | Virginia Virginia |
Inferred | 17,347 81,728 |
1,215 6,383 |
7.0 7.8 |
64 66 |
17 ĴВ. |
3 S. |
|
| Sri Lanka | Sri Lanka (Huka) | Indicated | 764.000 | 39.728 | 5.2 | 40 | $\overline{2}$ | 4 | (606) |
| Total | Sn Lanka (Iluka) | 764,000 | 39,728 | 5.2 | 40. | ż | 4 | ||
| Sri Łaráa (CRL) r | Indicated | 503,506 | 34,072 | 6.8 | 64 | З | 4 | ||
| Sri Lanka (CRL) 2 | Inferred | 88,264 | 5,968 | 6.8 | 65 | 3 | 4 | ||
| Total | Sri Lanka (CRL) 2 | 591,770 | 40.040 | 6.8 | 64 | 3 | 4 | 918 | |
| Total | Measured | ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, | 1,275,337 | 59,774 | $\Lambda$ , $\tau$ | 62 | 10 | 5 | 11,490 |
| Total | Indicated | KANANG KANANG KAN | 2,591,113 | 139,664 | 5.5 | 53. | 7 | ø | 12,769 |
| Total | Interred | 756,386 | 49.336 | 6.5 | 60. | B. | 5 | 5,107 | |
| Total | Grand Total | ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, | 4.622.835 | 248.775 | 54. | 56 | B. | 5. | 29.366 |
Notes
$\mathfrak{f}$ Breenite is combined fimentie 1 and limente 2, for the Mid-West Province.
All Resource estimates are adjusted to reflect fluka ownership of 50.17% as at December 31, 2002 $\bar{z}$
$\bar{3}$ All mineralogy is reported as a percentage of in situ HM content.
Definitions
A Moeral Resource' is a concertration or cocurrence of material of intimate economic Planets or on the Earth's crust in such form and quantity that there are reasonable prospects for
eventual aconomic extraction. The locat
An 'Interred Mineral Resource' is that part of a Mineral Resource for which tomage, grade and mineral content can be estimated with a low level of confidence.
An 'Indicated Mineral Pescurce' is that part of a Mineral Pescurce for which tomage, densities, shape, physical characteristics, grade and mineral content can be estimated with a
reasonable level of confidence.
A Measured Mueral Recorde' is that part of a Mineral Recorde for which tomage, densities. shape, physical characteristics, grade and mineral content can be estimated with a
high lavel of confidence.
right the Racone" is the economically mineable part of a Measured of autoated Mineral Resource. It includes blang materials and attentiones for losses which may occur when the
An Une Racone" is the economically mineable pa
A 'Probable Ore Reserve' is the economically mineable part of an Indicated, and in some circumstances Measured Mineral Resource.
A 'Proved Ore Reserve' is the economically mineable part of a Measured Mineral Resource
The Iluka Board is committed to pt të atë a të nga shtatuar nga një disas të m and Keeping investors fully information
Corporate Information
Director's Profiles
lan Mackenzie. BSc, BCom, MBA, FAICD (Chairman).
Mr Mackenzie (60) was appointed to the Board on 1 July 1999. He is Chairman of the Bank of Western Australia Limited (BankWest) and a Director of MG Kailis Holdings Limited. His former business roles include Managing Director of Bunninas Ltd. Romatex Ltd (South) Africa) and Chairman of Wesfi Limited. He is a past president of the Institute of Company Directors (WA Division). Mr. Mackenzie is a member of both the Audit and Remuneration and Nomination Committees of the Board.
Mike Folwell. BBus, MAICD (Managing Director and Chief Executive Officer)
Mr Folwell (48) was appointed as Managing Director and Chief Executive Officer in May 2002.
He is Chairman of Consolidated Rutile Limited. Previously he was Managing Director of Pivot Limited, a business which under his leadership emerged from difficult trading conditions to become a profitable and productive leading Australian fertiliser company.
Before joining Pivot. Mr Folwell held senior management positions with Shell, BOC and Pioneer International where he held the position of Executive General Manager Australia/Asía - the fargest division within Pioneer before its takeover by the UK-Based Hanson Group. At Pioneer, he ran the Company's Asian and Australian quarrying and manufacturing businesses from 1996 to 2000, and was responsible for business revenue of A\$2.5 billion.
W H John Barr, AM
Mr Barr (65) was appointed to the Board in July 1994. He has had a long involvement with the Australian minerals. and metals industry having been Managing Director of Metallgesellschaft's Australian subsidíary. He is also a Director of Oxiana Resources NL, Bulong Nickel Pty Ltd, Bulong Operations Pty Ltd and is Chairman of Utilities of Australia Pty Ltd. Mr Barr is a member of the Audit Committee.
Donald Morley, BSc, MBA, FAusilviM
Mr Morley (63) was appointed to the Board in December 2002. He was formerly the Chief Financial Officer and a Director of WMC Limited from which he retired in October 2002. He is Chairman of Alumina Limited and a Director of the Centre for Independent Studies. Mr Morley is a member of the Audit Committee.
SEATED LEFT TO BIGHT - Mike Frauell Makes Davies ken Mackenzie, John Barr. STANDING LEFT TO RIGHT - Don Morley, Richard Tastula. John de Laeter, Grahame Campbell.
Grahame Campbell, BE, MEng So, HON FIE Aust, FAICD, OP Eng.
Mr Campbell (59) was appointed to the Board in 1998. He has wide experience in business with particular reference to the mining industry and is a past president of the Association of Consulting Engineers (Australia) and the Australian Pipeline Industry Association. He is a Director of the Macro Engineering Council Limited, the State Rail Authority of New South Wales and Worley Group Limited. Mr Campbell is a member of the Remuneration and Nomination Committee.
Valerie Davies, MAICD
Ms Davies (51) was appointed to the Board in July 1997 and has extensive experience in the communication. industry, actively consulting to business. and industry on strategic initiatives. A Director of Integrated Group Limited and Gold Corporation, Ms Davies is a past recipient of the WA Telstra "Business Woman of the Year" Award. Ms Davies is Chairman of the Remuneration and Nomination Committee.
John de Laeter,
AO, BSc (Hons), PhD, DSc (West Aust), Hon D Tech (Curtin), FTSE, Hon FAIP
Professor de Laeter (69) was appointed to the Board in March 1994. He is Emeritus Professor of Physics at Curtin University of Technology. Until recently, he was a member of the Prime Minister's Science and Engineering Council and of the Australian Science, Technology and Engineering Council (ASTEC).
He is Patron of the Western Australian Foundation for the Museum of Contemporary Science and Technology (Scitech) and Chairman of the Perth Hockey Stadium Council and the Gravity Discovery Centre Foundation. Professor de Laeter is Chairman of the Audit Committee.
Richard Tastula, AWASM, FAUSIMM, FAIOD
Mr Tastula (59) was appointed to the Board in February 1996 and has extensive experience in the mining industry. He was previously Managing Director of Homestake Gold of Australia Limited and a Vice President of Homestake Mining Company. He is Chairman of Titan Resources NL and Acting Chancellor of Curtin University of Technology. Mr Tastuía is a member of the Audit Committee and the Remuneration and Nomination Committee.
Executive Management Team
Iluka's Executive Management Team as at 26 March 2003.
Mike Folwell -Managing Director and Chief Executive Officer
Mark Hughes -Chief Financial Officer
Mr Hughes joined Iluka in early 2001 as the Chief Financial Officer after 12 years with Rio Tinto working in various senior financial roles in London and Australia.
Key Accountabilities - To ensure an optimum capital structure including costeffective funding for existing and future business needs and to drive the processes for strategic planning, procurement and supply, informationtechnology and business development, including mergers and acquisitions. Also accountable for financial governance which includes accounting, financial reporting, taxation, investor relations and financial risk management. Age 45 years.
TOP ROW - Mike Folwell, Mark Hughes, Steve Ward.
MIDDLE ROW - Michael Bourke, Bill Bissel, Gaolf Altan. SCTTOM ROW - Ian Gregory, Geoffrey Wedgwood.
,一个人的人,我们的人,我们的人,我们的人,我们的人,我们的人,我们的人,我们的人,我
Dr Steve Ward - President Itika USA and Executive General Manager Sales and Marketing
Dr Ward joined Iluka in 1999 as the Zircon Business Manager before taking up the senior marketing position in 2001 and responsibility for the US operations. in mid-2002.
Key Accountablities - To improve the bottom line business performance of the existing US assets and to create and implement profitable growth opportunities for the US operations. Also accountable for global sales and marketing of mineral sands products. Age 47 years.
Michael Bourke - Executive General Manager Technical Services
Mr Bourke joined Iluka in 2001 as Group Manager of Planning after six years in a similar role with WMC Resources and previous experience in the sugar, timber and alumina industries. He was appointed to his current position in mid-2002.
Key Accountabilities - To provide group wide support in the key areas of technology, engineering and maintenance, geology, operations planning and business improvement. Age 40 years.
lan Gregory - Company Secretary
Mr Gregory joined Ifuka in 1999 after 16 years in similar positions, four of those being in the resource sector
Key Accountabilities -- To manage the company secretariat function and coordinate the Company's legal affairs. Age 48 years.
Bill Bisset - Executive General Manager Australian Operations
Mr Bisset joined Iluka in late 2002 after 17 years in sand mining/quarrying and processing/manufacturing operations in Australia and Asia.
Key Accountabilities - To improve the bottom line business performance of the existing Australian operations, the timely and profitable development and operation of Iluka's interests in the Murray Basin and to create and implement further profitable growth opportunities in Australia. Also accountable for the governance of the environment, health and safety performance throughout Iluka. Age 40 years.
Geoff Alian - Executive General Manager of Human Resources
Mr Allan joined Iluka in early 2003. having previously provided strategic human resource advice as a consultant to the Company.
Key Accountabilities - To drive the processes for recruitment, employee development, performance management and remuneration to ensure that Iluka has a capable and committed workforce to meet existing and future business. needs. Age 58 years.
Geoffrey Wedgwood - Group Manager External Affairs
Mr Wedgwood joined Iluka in mid-2002. after 10 years in the resource sector, including the past six years with Woodside Petroleum Ltd.
Key Accountabilities - To establish and drive best-practice processes for managing relationships and communicating with key external stakeholders including investors, media, government, focal communities and indigenous groups. Also accountable for internal communications and issues. management processes. Age 42 years.
Corporate Governance Statement
The Iluka Board is committed to protecting shareholders' interests and keeping investors fully informed about the performance of the Company's businesses.
The Directors have undertaken to perform their duties with honesty, integrity, care and diligence, according to the law and in a manner that reflects the highest standards of governance.
Responsibilities of the Board include:
- · appointment of the Managing Director:
- · assessment of Iluka's management performance, measured against clearly identified objectives;
- · preservation of the integrity and credibility of luka's businesses;
- · prudent management of shareholders' funds;
- · evaluation of opportunities for valuecreating growth;
- involvement in the plarining and review of the Company's strategic direction:
- · approval of short and long term business plans:
- · ensuring that there are effective environmental, health and safety procedures in place; and
- · approval of accounts.
The Managing Director is responsible to the Board for the day-to-day management of the Company.
The relationship between the Board and management is a partnership that is crucial to the Company's long term success. The separation of responsibilities between the Board and management is clearly understood and respected.
This statement outlines the principal corporate governance practices followed throughout the financial year.
Shareholders
The shareholders of the Company elect Directors at the Annual General Meeting in accordance with the Constitution. All Directors, apart from the Managing Director, are subject to re-election by rotation within three years.
The Arinual General meetings are held in major cities around Australia. Shareholders have the opportunity to express their views, ask questions about Company business and vote on other items of business for resolution by shareholders at the Annual General Meeting. The Cornpany also arranges shareholder briefings in alternative cities after the Annual General Meeting each year.
Communication with Shareholders
Iluka Resources Limited is committed to complying with the continuous disclosure obligations of the Corporation's Act and the Australian Stock Exchange Listing Rules.
Iluka keeps the market informed through the annual report, half yearly report, quarterly releases covering production figures and exploration activity and by disclosing material developments to the Australian Stock Exchange (ASX) and the media as they occur.
From time to time, briefings and site visits are arranged to give those who advise shareholders a better understanding of the Company's operating facilities.
In conducting briefings, Iluka takes care to ensure that any price sensitive information released is made available to all shareholders (institutional and private). and the market at the same time. These announcements are lodged with the ASX and then posted on the Company's website www.iluka.com. This information is also released by email to all persons. who have requested their name be added to the contact database.
Composition of the Board
The composition of the Board is reviewed on an annual basis to ensure that the Board has the appropriate mix of expertise and experience.
The Board currently cornorises an independent non-executive Chairman, an executive Managing Director and six additional independent non-executive Directors.
Independant Directors have no relationship with management or the Company that would interfere with the exercise of their independent judgement. and are free from any interest and any business or other relationship which could materially interfere with their ability. to act in the best interests of the Company.
The Board as currently constituted has the range of skills, knowledge and experience necessary to govern the Cornpany and understand the economic sectors in which the Company operates.
Board Committees
To assist in the execution of its responsibilities, the Board has established two committees comprised wholly of non-executive Directors. Both of these committees have formal Charters, approved by the Board.
The office of the Company Secretary provides secretariat services for each of the Committees.
Reqular reports of the convinitiees' activities are given to the Board and minutes are circulated to all Directors.
Audit Committee
The responsibilities of the Audit Committee include assisting the Board fuifil its fiduciary responsibilities by:
- · considering the effectiveness of the accounting and internal control systems and management reporting, which are designed to safeguard company assets;
- · serving as an independent and objective party to review the financial information:
- reviewing the accounting policies adopted within the Group;
- · reviewing the quality of the internal and external audit functions; and
- · reviewing and approving internal audit plans including identified risk areas.
The present members of the Audit Committee are Professor J.R. de Laeter (Chairman), Mr W.H.J. Barr, Mr I.C.R. Mackenzie, Mr R.A. Tastula and Mr D.M. Morley.
Periodically the Chairman of the Committee meets with both the internal and external auditors independently from management.
The Charter of the Audit Committee can be viewed at the Company's website www.iluka.com
The Board and the Audit Committee review the Audit Committee's Charter annually.
The Audit Committee is responsible for recommending to the Board the appointment and dismissal of the external auditors and their remuneration. Remuneration and Nomination Committee
The Remuneration and Nomination Committee recommends appropriate remuneration packages for senior executives and Directors and advises the Board on the appointment and retirement of Directors. The Committee's responsibilities include:
- reviewing the appropriateness of the p. size and composition of the Boardand the criteria for Board membership:
- ensuring that a proper succession. plan is in place and nominating a panel of candidates with appropriate expertise and experience for consideration by the Board. The services of an independent external consultant may be sought in this process if deemed appropriate;
- reviewing remuneration arrangements for the Managing Director and his direct reports; and
- reviewing the remuneration of the non-executive members of the Board.
The present members of the Remuneration and Nomination Committee are Ms V.A. Davies (Chairman), Mr G.D. Campbell, Mr I.C.R. Mackenzie and Mr R.A. Tastula.
The Committee seeks independent external advice on the structure of remuneration packages, in order to retain and attract executives of sufficient calibre to facilitate the efficient and effective management of the Company's operations.
Independent Professional Advice
All Directors have the right of access to relevant Company information and the Company's executives and, subject to prior consultation with the Chairman, may at the Company's expense, seek independent professional adviceregarding their responsibilities.
Board Process and Performance Review
Each year the Board carries out a formal review of its performance in meeting its key responsibilities. This review is periodically carried out by external consultants.
The purpose of the review is to identify any areas of weakness and mechanisms for improving the functioning and performance of the Board, its relationship with management and to focus on specific performance objectives for the year ahead.
internal Controls and Management of Risks
The management of risk is important in the creation of shareholder value and is a high priority for the Board and management.
The Company has a framework in place to safeguard the Company's assets and interests and ensure that business risks. are identified and properly managed. This includes procedures and limits to manage financial risk associated with exposures to foreign currencies and financial instruments. To assist in discharging this responsibility the Board has in place a control framework which includes the following:
MARITANIA
· a comprehensive annual business plan, approved by the Directors. incorporating financial and nonfinancial key performance indicators;
- requiar reporting to the Board on a number of key areas including safety, health, environment, insurance and legal matters;
- adoption of clearly defined quidelines for capital expenditure including annual budgets, detailed appraisal and review procedures, levels of authority and due diligence requirements where businesses are being acquired or divested; and
- a comprehensive insurance program, including risk assessment. surveys and plans to mitigate risks.
Ethical Standards
The Company has developed a Code of Conduct for management and staff which establishes procedures and guidelines to ensure that the highest ethical standards, corporate behaviour and accountability are maintained. The Code operates in conjunction with a formal Corporate Policies and Procedures Manual.
Directors' Share Dealings
The Board has adopted a written Code of Conduct for Directors which establishes quidelines for their conduct in matters such as ethical standards and conflicts of interests. The Code is based on that developed by the Australian Institute of Company Directors.
The Directors' Code of Conduct includes the following:
Directors must consult with the Chairman of the Board, or in his absence, the Managing Director, before dealing in shares or other securities of the Company; and
dealings (whether purchases or sales) in the Company's shares or other securities by related persons. may not be carried out other than the period commencing two days and ending 30 days following the date of announcement of the Company's annual or half yearly results or a major announcement. leading, in the opinion of the Board, to a fully informed market.
However, Directors are prohibited from buying or seiling lluka shares at any time if they are aware of price sensitive information that has not been made public. In accordance with the Corporations Act and the Listing Rules of the Australian Stock Exchange, Directors advise the Company of any transactions conducted by them in shares in the Company, which then informs the ASX of the details of the transaction.
Share Plans
The Company has in place two share acquisition plans for the benefit of its employees and officers which were approved by shareholders at the Company's 1999 Annual General Meeting, namely a "Directors, Executives and Employees Share Acquisition Plan" and an "Employee Share Plan". Please refer to note 32 of the 2002 Financial Report which can be viewed at the Company's website www.iluka.com
Shareholder briornation
Illuka Resources Limited ABN: 34 008 675 018
Registered Office: Level 5, 553 Hay Street Perth WA 6000 Australia
Postal Address: GPO Box £1988 PERTH WA 6845 Australia Telephone: +61 8 9223 4700 Facsimile: +61 8 9221 7744 Website: www.iluka.com
This site contains information on Tuka's products, marketing, operations, public releases, financial and quarterly reports. It also contains links to other sites, including the share registry.
Company Secretary
Ian Gregory
Share Register Enquiries
Shareholders who require information about their shareholdings, dividend payments or related administrative matters should contact the Company's share registry at:
Computershare Investor Services Pty Ltd Level 2 Reserve Bank Building 45 St Georges Terrace Perth WA 6000
Postal Address: GPO Box D182 Perth WA 6840 Telephone: +61 8 9323 2000 Facsimile: +61 8 9323 2033 Website: www.computershare.com
Each enquiry should refer to the shareholder number which is shown on issuer sponsored holding statements and dividend statements.
Stock Exchange Listing
The Company's shares are listed in the Australian Stock Exchange Limited. The Company is listed as "I laka" with an ASX code of "ILU".
Change of Address
Shareholders who have changed their address should give written advice of the change, quoting the relevant shareholder number, to the Company's share registry.
Uncertificated Share Register
The share register was converted on 27 April 1998. Information regarding the Company's issuer sponscred holdings is available from the Company's Share Registry.
Concise Annual Report Mailing List
All shareholders are entitled to receive a Concise Annual Report. In addition, shareholders can elect to receive a Financial and Resource Report. Alternatively shareholders can elect not to receive a Concise Annual Report or Financial and Resources Report by writing to the Share Registrar and quoting their shareholder number.
Publications
- · Annual Financial Accounts --April 2003
- Annual Concise Report April 2003
- Financial Data Book May 2003 e.
- Sustainability Report May 2003
- Half Year Report -- September 2003
Copies of the reports will be available at luka's website at www.iluka.com.
Payment of Dividends
Australian shareholders may have their dividends paid directly into any bank, building society or credit union in Australia. For this purpose a form is available from the Company's Share Registry.
Tax File Numbers (TFN)
The Company is obliged to deduct tax from dividend payments, other than those which are fully franked, to shareholders registered in Australia who have not quoted their TFN to the Company. Forms for notifying TFN's have been sent to all shareholders. If you have not already quoted your TFN, you may do so by contacting the Share Registry.
2003 Financial Calendar
| February 28 | Arnouncement of 2002 full year results |
|---|---|
| Acril 9 | Closing of books for final dividend antibetrients. |
| April 28 | Payment of final dividend |
| May 12 | Closure time for acceptance of proxies for MSM |
| May 14 | AGM Mestri Hotel Sydney |
| May 15 | Snareholders briefing Westin Hotel Meibourne |
| May 16 | Shareholders mieting Duxton Iddel Perth |
| August 28 | Amouncement of half-year results |
| October 13 | Anticipated payment of interim dividend- |
| -December 31 | Financial vest end. |
Statement of Shareholdings
(As at 14 March, 2003)
- i. Number of holders of shares: 22,544
- ii. Number of shares on issue: 232,814,349
- iii. Voting rights, on a show of hands, are one vote for every registered holder and on a poll, are one vote for each share held by registered holders.
iv. Distribution of shareholdings:
| Shareholding | Number of holders |
|---|---|
| 1.000 | 11.032 |
| $1001 - 5000$ | 9.209 |
| 5.001 10.000 | 1.400 |
| 10.001 100.000 | 809 |
| 100.001 and over | 94 |
| Total number of shareholders | 22.544 |
| Number of shareholders holding less than a marketable parcel. | 1.732 |
y. Substantial shareholders:
| v. Substantial shareholders: | Number of shares | ||
|---|---|---|---|
| in which a relevant | |||
| Name | interest is held | % Holdina | |
| Contrionwealth Bank Australia | 21682006 | 9.98% | |
| Deutsche Bank AG. | 15 297 394 | 6.57% | |
| Perpetual Trustees Australia Limited | 11754653 | 5.05% | |
| Franklin Resources Inc | 11 722 271 | $-6.03%$ |
| vi. Top 20 Shareholders | No. of shares | % Holding | |
|---|---|---|---|
| J P Morgan Nominees Australia Limited | 30.006.829 | 12.89 | |
| National Nominees Limited | 24.266.409 | 10.42 | |
| Westpac Custoclan Nominees Limited | 16.554.140 | 7.11 | |
| Citicorp Nominees Pty Limited (CFS MSLE Imputation FND A/C) | 9880,299 | 4.24 | |
| Citicorp Nominees Fty Limited | 7.385.069 | 3.17 | |
| RBC Global Services Australia Nominees Pty Limited (Proceed A/C) | 7.014.716 | 301 | |
| Queensland Investment Corporation | 5.800.484 | 241 | |
| Commonwealth Custodial Services Limited | 5,548,511 | 2.38 | |
| Oticorp Nominees Pty Limited (CFS MSLE Aust Share FND A/C) | 5,287,818 | 2.27 | |
| Citicorp Nominees Pty Limited (CFS Imputation Fund A/C) | 5.104.092 | 2,19 | |
| RBC Clobal Services Australia Nominees Pty Limited (JBEMEP A/C) | 4 807 757 | 2.07 | |
| INQ Life Limited | 4 555 585 | 1.96 | |
| RBC Global Services Australia Nominees Pty Limited (RA A/C) | 4,235,620 | 1.62 | |
| AMP Life Limited | 3 537 797 | 1.52 | |
| Cogent Nominees Pty Limited | 3.000.695 | 1.29 | |
| Citicorp Nominees Pty Limited (CPS W/SALE CBL RES Fund A/C) | 2,591,590 | 4. H.X | |
| Zurich Investment Management Limited (Zurich Aust Equities A/C) | 2,491,339 | 107 | |
| Zurich Australia Limited | 2,340,665 | 1.01 | |
| RBC Clobal Services Australia Norninees Pty Limited (RIIC A/C) | 1,649,743 | 0.71 | |
| ANZ Nominees Limited | 1.348.395 | 0.58 |
CONCISE ANNUAL FINANCIAL REPORT 2002
Contents
| Directors' Report |
|
|---|---|
| Statements of Financial Performance of the Consolidated Entity | |
| Statements of Financial Position of the Consolidated Entity | |
| Statements of Cash Flows of the Consolidated Entity | |
| Discussion and Analysis of the Financial Statements | |
Notes to the Financial Statements --------------------------------------- |
|
| Directors' Declaration | |
Independent Audit Report |
The Directors present their report on the consolidated entity consisting of Iluka Resources Limited and the entities it controlled at the end of, or during the year ended 31 December 2002.
DIRECTORS
The following individuals were Directors of Iluka Resources Limited during the whole of the financial year and up to the date of this report.
fan Colin Robert Mackenzie (Chaarnan) William Henry John Barr Grahame David Campbell Valerie Anne Davies John Robert de Laeter Richard August Tastula
On 1 May 2002 K M Folwell was appointed Managing Director and Chief Executive Officer. R A Tastula resigned as Interim Managing Director on 1 May 2002 and continued as a Director.
Donald Marshall Morley was appointed a Director on 4 December 2002 and continues in office at the date of this report.
Kenneth Walter Court was a Director from the beginning of the financial year until his resignation on 9 April 2002.
PRINCIPAL ACTIVITIES
The activities of the consolidated entity consist of the exploration, mining, concentration and separation of mineral sands, production of ilmenite, rutile, synthetic rutile and other titaniferous concentrates, zircon and coal and sales of these products throughout the world.
REVIEW OF OPERATIONS AND RESULTS
Revenue from ordinary activities for continuing operations for the year ended 31 December 2002 was A\$872.3 million (2001: A\$792.9 million).
Profit from ordinary activities before income tax expense for continuing operations for the year ended 31 December 2002 was A\$103.5 million (2001: A\$123.3 million), and profit attributable to the members of Iluka Resources Limited for continuing operations for the year was A\$109.5 million (2001: A\$107.8 million).
Loss attributable to the members of Ilaka Resources Limited for discontinuing operations for the year ended 31 December 2002. was A\$0.5 million (2001: A\$44.1 million).
Overall profit attributable to the members of Iluka Resources Limited for the consolidated entity for the year ended 31 December 2002 was A\$109.0 million (2001: A\$63.7 million). The basic earnings per share of the consolidated entity for the year was 48.6 cents (2001: 29.3 cents).
DIVIDENDS
The Directors have declared a final dividend of 12 cents per share unfranked which, with the interim dividend of 10 cents per share franked to 2 cents paid on 11 October 2002, makes a total dividend for the year of 22 cents franked to 2 cents (2001: 22) cents tranked to 2 cents).
CHANGES IN THE STATE OF AFFAIRS
Sale of PT Koba Tin
On 1 November 2001 the Company announced the sale of its 75%. stake in PT Koba Tin to Malaysia Smelting Corporation Berhad. The sale was completed on 9 April 2002. Sale proceeds consist of US\$13.7 million in cash and a deferred component, (contingent on-London Metal Exchange tin prices) which at settlement date was capped at US\$6.0 million over three years, since reduced to US\$4.0 million over the next two years. The deferred sales proceeds component has not been recognised in the accounts.
As at 31 December 2001, the carrying value of PT Koba Tin's assets were written down by A\$37.5 million to align their value with expected sale proceeds. After income tax expense and outside equity interests, this represents a loss attributable to the members of Iluka Resources Limited in 2001 of A\$26.8 million. In deriving this write down no allowance was made for the deferred sales. proceeds component as this represents a contingent asset.
Increased ownership of Consolidated Rutile Limited
The Company via its wholly owned subsidiary Iluka Corporation Limited increased its interest in Consolidated Rutile Limited to 50.1% in March 2002 via on-market purchases.
Write Off of Iron Oxide Residue Conversion Technology
During the year the Company completed a review of recoverable assets in accordance with Australian Accounting Standards AASB1010 and subsequently chose to write off A\$6.6 million of assets associated with a project to develop iron oxide residue. conversation technology. While Iluka intends to continue to fund. this project the decision to write-down the asset was made in recognition of the uncertainty associated with the timing and successful application of the technology.
Basin Minerals Limited ("Basin Minerals") Acquisition
On 29 May 2002, the Company made a joint announcement for the takeover of Basin Minerals. As part of the acquisition, Basin Minerals' shareholders were offered an option of accepting cash or shares in the parent entity, or any combination of the two. As a result of this offer the parent entity issued 15.5 million shares amounting to A\$76.4m and paid cash of A\$61.5m (2001: A\$1.2m). On 1 November 2002, the Company announced that it had acquired 100% of Basin Minerals' shares.
Unbooked Future Income Tax Benefits
During the year the Company reviewed its practice of recognising unbooked future income tax benefits attributable to tax losses and timing differences. As a result, additional unbooked tax losses of A\$9.9 million have been recognised compared with the previous practice.
EVENTS SUBSEQUENT TO BALANCE DATE
The Directors have not become aware of any other matter or directmstance not otherwise dealt with in the Directors' report or the financial report that has or may significantly affect the operations. of the economic entity, the results of those operations or the state of atfairs of the economic entity in subsequent financial years.
(continued)
LIKELY DEVELOPMENTS
Information on likely developments in the operations of the consolidated entity and the expected results of operations have not been included in this report because the Directors believe it would result in unreasonable prejudice to the consolidated entity.
DIRECTORS' PROFILES
Ian Mackenzie, BSc, BCom, MBA, FAICD (Chairman)
Mr Mackenzie (60) was appointed to the Board on 1 July 1999. He is chairman of the Bank of Western Australia Limited (Bankwest) and a Director of MG Kailis Holdings Limited. His former business roles include Managing Director of Bunnings Ltd, Romatex Ltd (South Africa) and Chairman of Wesfi Limited. He is a past president of the Institute of Company Directors (WA Division). Mr Mackenzie is a member of both the Audit and Remuneration and Nomination Committees of the Board.
Mike Folwell, BBus, MAICD (Managing Director and Chief Executive Officer)
Mr Folwell (48) was appointed as Managing Director and Chief Executive Officer in May 2002. He is Chairman of Consolidated Rutile Limited. Previously he was Managing Director of Pivot Limited, a business which under his leadership emerged from difficult trading conditions to become a profitable and productive leading Australian fertiliser company. Before joining Pivot, Mr Folwell held senior management positions with Shell, BOC and Pioneer International where he held the position of Executive General Manager Australia/Asia -- the largest division within Picneer before its takeover by the UK-Based Hanson Group.
W H John Barr, AM
Mr Barr (65) was appointed to the Board in July 1994. He has had a long involvement with the Australian minerals and metals. industry having been Managing Director of Metal@esellschaft's Australian subsidiary. He is also a Director of Oxiana Resources NL, Bulong Nickel Pty Ltd, Bulong Operations Pty Ltd and is Chairman of Utilities of Australia Pty Ltd. Mr Barr is a member of the Audit Committee.
Donald Morley BSc, MBA, FAusIMM
Mr Morley (63) was appointed to the Board in December 2002. He was formerly the Chief Financial Officer and a Director of WMC Limited from which he retired in October 2002. He is Chairman of Alumina Limited and a Director of the Centre for Independent Studies. Mr Morley is a member of the Audit Committee.
Grahame Campbell, BE, MEng Sc, HON FIE Aust, FAICD, CP Eng
Mr Campbell (59) was appointed to the Board in 1998. He has wide experience in business with particular reference to the mining industry and is a past president of the Association of Consulting Engineers (Australia) and the Australian Pipeline Industry Association. He is a Director of the Macro Engineering Council Limited, the State Rait Authority of New South Wales and Worley Group Limited. Mr Campbell is a member of the Remuneration and Nomination Committee
Valerie Davies, MAICD
Ms Davies (51) was appointed to the Board in 3uly 1997 and has extensive experience in the communication industry, actively consulting to business and industry on strategic initiatives A Director of Integrated Group Limited and Gold Corporation, Ms Davies is a past recipient of the WA Telstra "Business Woman of the Year" Award. Ms Davies is Chairman of the Remuneration and Nomination Committee
John de Laeter, AO, BSc (Hons), PhD, DSc (West Aust), Hon D Tech (Curtin), FTSE, Hon FAIP
Professor de Laeter (69) was appointed to the Board in March 1994. He is Emeritus Professor of Physics at Curtin University of Technology. Until recently, he was a member of the Prime Minister's Science and Engineering Council and of the Australian Science, Technology and Engineering Council (ASTEC). He is Patron of the Western Australian Foundation for the Museum of Contemporary Science and Technology (Scitech) and Chairman of the Perth Hockey Stadium Council and the Gravity Discovery Centre Foundation. Professor de Laeter is Chairman of the Audit Committee
Richard Tastula, AWASM, FAusIMM, FAICD
Mr Tastula (59) was appointed to the Board in February 1996 and has extensive experience in the mining industry. He was previously Managing Director of Homestake Gold of Australia Limited and a Vice President of Homestake Mining Company. He is Chairman of Titan Resources NL and Acting Chancellor of Curtin University of Technology. Mr Tastala is a member of the Audit Committee and the Remuneration and Nomination Committee.
DIRECTORS' AND EXECUTIVES' EMOLUMENTS
The Remuneration and Nomination Committee, consisting of four non-executive Directors, advises the Board of remuneration policies and practices generally, and makes specific recommendations on remuneration packages and other terms of employment for executive Directors, other senior executives and non-executive Directors.
Executive remuneration and other terms of employment are reviewed annually by the committee having regard to performance. against goals set out at the start of the year, relevant comparative information and independent expert advice. In addition to a base salary, remuneration packages include superannuation, retirement and termination entitlements, performance-related bonuses and tringe benefits. Executives are also eligible to participate in the Iluka Resources Limited Share Plans.
Remuneration packages are set at levels that are intended to attract and retain executives capable of managing the consolidated entity's operations.
Remuneration and other terms of employment for the Managing Director and senior executives are formatised in agreements.
Remuneration of non-executive Directors is determined by the Board within the maximum amount approved by the shareholders from time to time. Non-executive Directors are eligible to participate in the Iluka Resources Limited Directors, Executives and Employees Share Acquisition Plan and are also entitled to superannuation benefits as approved by shareholders at the 1999. Annual General Meeting.
The Board undertakes an annual review of its performance and the performance of the Board committees against goals set at the start of the year. Performance related incentives are available to executives. Incentives are not payable to non-executive Directors.
Details of the nature and amount of each element of the emoluments of each Director of the parent entity and each of the five officers of the parent entity and the consolidated entity receiving the highest emoluments are set out in the following tables.
(continued)
NON EXECUTIVE DIRECTORS OF ILUKA RESOURCES LIMITED
| Name | Directors' base fee S |
Committee fees S |
Super- annuation S |
Other benefits s |
Total S |
|---|---|---|---|---|---|
| I C R Mackenzie. Chairman | 118.750 | 25,000 | 6.250 | 150.000 | |
| W 针 J Bam | 55,000 | 10,800 | $\cdots$ | 65.800 | |
| G D Campbell | 29,000 | $\cdots$ | 10.800 | 26.000 | 65.800 |
| K W Court er | 16.062 | $\sim$ | 3.906 | 3.467 | 23.435 |
| V A Davies | 35.800 | 13.000 | 13.333 | 19,200 | 81.333 |
| J R de Laeter | 55,000 | 13.000 | 13.333 | $\cdots$ | 81.333 |
| R. A. Tastala 38 | 296,289 | 30,231 | 326.520 | ||
| D M Morley 31 | 3.125 | $\cdots$ | 625 | $\cdots$ | 3.750 |
Refired 8 May 2002 133.
neared o way zouz
Interim Managing Director onlif 1 May 2002
Appointed 3 December 2002 $\frac{1}{2}$
(3)
EXECUTIVE DIRECTORS OF ILUKA RESOURCES LIMITED
| Name | Base salarv S |
Motor vehicle จ |
Incentive | Super- annuation S |
Other benefits S |
Total S |
|---|---|---|---|---|---|---|
| K M Folwell Managing Director^ |
458.207 | $\cdots$ | $\cdots$ | 6.727 | 156.847 | 621.781 |
| M H Macpherson Managing Director ^^ |
$\cdots$ | $\cdots$ | 168.000 | $\cdots$ | $\cdots$ | 168.000 |
Appointed as Managiag Director on 1 May 2002.
AA Resigned as Managing Director on 7 December 2001.
The other benefits disclosure for K M Folvell includes the granting of 33,478 ordinary shares with a market value of \$155.114 pursuant to his contract of employment. These shares have been granted under the Directors, Executives and Employees Share Acquisition Plan
The incentive disclosure for MT4 Macpherson relates to 2001 short term incentives paid in May 2002.
EXECUTIVES OF ILUKA RESOURCES LIMITED AND THE CONSOLIDATED ENTITY
| Name | Base salary S |
Motor vehicle \$ |
Incentive S |
Super- annuation \$ |
Other benefits Ŝ |
Sub Total \$ |
Options* s |
Total S |
|---|---|---|---|---|---|---|---|---|
| 터 Bohannan @ EGM - Australian Operations |
269.177 | 19,856 | 68.904 | 65.440 | 376.704 | 800.081 | $\cdots$ | 800.081 |
| S Ward President USA/EGM -- Marketing |
333.192 | 12.344 | 45.161 | 28.670 | 162.602 | 581.969 | 179.160 | 761.129 |
| M Hughes Chief Financial Officer |
298.040 | 26.760 | 54.099 | 41.907 | 3.294 | 424.100 | 179.160 | 603.260 |
| G Weaver 314 20 EGM -- Human Resources |
168.130 | 13.216 | 10.000 | 23.705 | 205.030 | 420.081 | $\cdots$ | 420.081 |
| M Bourke rs EGM -- Technical Services |
196.762 | 22.104 | 15.000 | 27.728 | 2.160 | 263.754 | $\cdots$ | 263.754 |
(1) Appointed Executive General Manager (EGM) 26 July 2002
(2) Resigned 22 November 2002
During the financial year options were granted to executive officers of the consolidated entity. The amounts disclosed for remuneration of executive officers in this report include the assessed fair values at the date the options were granted. Fair values have been assessed using the Black-Sondes option pricing model, Factors fallen into account by this model motide the exercise price, the term of the option. The current price and expected price volatility of the enderlying share, and the risk-heel interest rare for the term of the option
All incentives for executives relate to short term incentive payments made during 2002 for the year ended 31 December 2001.
(continued)
DIRECTORS' SHARE HOLDINGS (as at 26 March 2003)
| Name | Iluka Shares | ||
|---|---|---|---|
| EC R Mackenzie | 34.575 | ||
| K M Folwell | 33.478 | ||
| W H J Barr | 20.000 | ||
| D M Mortey | 10.000 | ||
| G D Campbel! | 49.654 | ||
| V A Davies | 19.961 | ||
| J R de Laeter | 29.058 | ||
| R A Tastula | 12.142 |
EMPLOYEE INCENTIVE OPTION SCHEME
No options were issued to Directors during the year (2001: Nil)
During the year nil (2001: 852,700) shares were issued pursuant to the Company Employee Incentive Option Scheme. The options were exercised at various dates between 12 January 2001 and 26 June 2001. The issue price of \$3.97 reflects the weighted average issue price in respect of the exercised options.
During the year 300,000 options were granted to executives, 100,000 of these options were subsequently cancelled. The number of unissued ordinary shares in the Company under option at year end was 200,000 (2001: nil).
DIRECTORS' MEETINGS
The number of Directors' meetings and meetings of committees held in the period each Director held office during the financial year, and the number of meetings attended by each Director are:
| Board of Directors' Audit Committee Meetings meetings |
Remuneration and Nomination Committee meetings |
|||||
|---|---|---|---|---|---|---|
| Number attended |
Number held |
Number attended |
Number held |
Number attended |
Number held |
|
| EC R Mackenzie | 14 | 14 | 6 | € | З | 3 |
| K M Folwell | 11 | 11 | $\cdots$ | $\cdots$ | ||
| W H J Barr | 12 | 14 | 6 | 6 | $\cdots$ | |
| G D Campbell | 13 | 14 | $\sim$ | $\cdots$ | З | 3 |
| K W Court | 4 | 4 | 3 | 3 | $\cdots$ | $\cdots$ |
| V A Davies | 14 | 14 | $\cdots$ | $\cdots$ | 3 | 3 |
| J R de Laeter | 12 | 14 | 5 | 6 | $\cdots$ | |
| R A Tastula | 14 | 14 | 6 | 6 | 3 | З |
| D M Mortey | 2 | 2 | $\cdots$ | $\cdots$ | $\cdots$ |
INDEMNIFICATION AND INSURANCE OF OFFICERS
The Company has a policy approved by shareholders to indemnify all Directors of the Company named in this report and current and former executive officers of the Company and its controlled entities against all liabilities to persons (other than the Company or a related body corporate) which arise out of the performance of their normal duties as Director or executive officer unless the liability relates to conduct involving bad faith. The Company also has a policy to indemnify the Directors and executive officers against all costs and expenses incurred in detending an action that falls within the scope of the indemnity and any resulting payments.
During the year the Company has paid a premium in respect of Directors and executive officers insurance. The contract contains a prohibition on disclosure of the amount of the premium and the nature of the liabilities under the policy.
(continued)
ENVIRONMENTAL REGULATIONS
Iluka Resources Limited is committed to operating at best practice environmental standards. The Company was not subject to any stop work orders under environmental laws and regulations during 2002 or 2001.
Environmental incidents are required to be reported to the Board of Directors on the basis of their impact on the environment using the company's internal severity rating scale (tiered 1 to 5 in order of increasing severity). A severity rating of 3 relates to an incident of local significance which may result in medium environmental disturbance. The severity ratings of 4 and 5 relate to incidents which may result in significant damage to the environment and widespread chronic damage respectively. The following tables detail the number of incidents rated at severity 3 or greater, reported to the Board of Directors during 2002 and 2001.
| 2002 Incidents Severity Rating | |||
|---|---|---|---|
| Western Australia Operations | -29. | л. | ining t |
| United States Operations | 4 | w. | يتونو |
| Consolidated Rutile Operations | 고 | $\cdots$ | , in |
| 37 | |||
| 2001 Incidents Severity Rating | З | ñ | |
| Western Australia Operations | 81 | ||
| United States Operations | IЗ | ||
| Consciidated Rutile Operations | |||
| PT Koba Tin | $\cdots$ | $\cdots$ | |
| 103 |
The only level four environmental incident for 2002 occurred on 16 November 2002, at the Yoganup mine site at the Company's south west operations. The wall of a clay fines solar drying dam was breached, resulting in the release of clay fines and water into adjacent vegetation on the company's property and the discharge of turbid water into a local creek. It was concluded that the breach was due to inadequate dam wall construction and poor operating procedures. The material was non-toxic, however the incident is expected to cause some localised impact on the vegetation community, which is expected to recover following clean-up activities. The action following the incident included an immediate inspection of all dam walls to ensure they meet minimum standards. A company standard for solar drying dam wall construction is being developed and all future dams are to be inspected before use.
ROUNDING OF AMOUNTS
The Company is of a kind referred to in Class Order 98/0100 issued by the Australian Securities and Investments Commission, relating to the rounding off of amounts in the Directors' report and financial report. Amounts in the Directors' report and financial report have been rounded off to the nearest hundred thousand dollars in accordance with that Class Order.
a sa mga mga mga mga mga mga mga mga mga mg
This report is made in accordance with a resolution of the Directors.
I C R Mackenzie Chairman
K M Folwell Managing Director and Chief Executive Officer
Perth 26 March 2003
Statements of Financial Performance of the Consolidated Entity
For the Year Ended 31 December 2002
| Continuing Operations 2002 Sm |
Discontinuing Operations 2002 Sm |
Total 2002 $\mathbb{S}^{\mathbf{m}}$ |
Continuing Operations 2001 \$m |
Discontinuing Operations 2001 \$ rn |
Total 2001 Sm. |
|
|---|---|---|---|---|---|---|
| Revenue from operating activities | 836.8 | 57.7 | 894.5 | 772.7 | 128.1 | 900.8 |
| Revenue from outside operating activities | 35.5 | 0.2 | 35.7 | 20.2 | 4.2 | 24.4 |
| Revenue from ordinary activities | 872.3 | 57.9 | 930.2 | 792.9 | 132.3 | 925.2 |
| Cost of goods sold | 626.4 | 54.2 | 660.6 | 542.3 | 141.8 | 684.1 |
| Other expenses from ordinary activities | 1149 | 51 | 120.0 | 100.4 | 50.8 | 151.2 |
| Borrowing costs expense | 27.5 | 275 | 26.9 | 26.9 | ||
| Expenses from ordinary activities | 768.8 | 59.3 | 828.1 | 669.6 | 192.6 | 862.2 |
| Profit/(loss) from ordinary activities before income tax expense |
103.5 | (1,4) | 102.1 | 123.3 | (60.3) | 63.0 |
| Income tax benefit/(expense) | 74 | 0.7 | 81 | (8.1) | 2.8 | (5.3) |
| Net profit/(loss) | 110.9 | (0.7) | 110.2 | 115.2 | (57.5) | 57.7 |
| Net (profit)/loss attributable to outside equity interest |
(1,4) | 0.2 | (1,2) | (7.4) | 13.4 | 6.0 |
| Net profit/(loss) attributable to the members of Tiuka Resources Limited |
109.5 | (0.5) | 109.0 | 107.8 | (44.3) | 63.7 |
| Net increase/(decrease) in foreign currency translation reserve |
(3.6) | 3.9 | 0.3 | |||
| Total revenues, expenses and valuation adjustments attributable to members of Iluka Resources Limited recognised directly in equity |
(3.6) | 3.9 | 0.3 | |||
| Total change in equity other than those resulting from transactions with owners as owners |
109.5 | (0.5) | 109.0 | 104.2 | (40.2) | 64.0 |
| Cents | Cents | |||||
| mmms |
Basic earnings per share
Diluted earnings per share
| Cents | Cents |
|---|---|
,,,,,,,,,, |
29.3 |
| 29.3 |
Statements of Financial Position of the Consolidated Entity
As at 31 December 2002
| Continuing Operations 2002 |
Discontinuing Operations 2002 |
Total 2002 |
Continuing Operations 2001 |
Discontinuing Operations 2001 |
Total 2003 |
|
|---|---|---|---|---|---|---|
| Sm | \$m | Sm | \$m | Sm. | Sn | |
| Current assets | ||||||
| Cash assets | 21.3 | 21.3 | 22.5 | 5.7 | 28.2 | |
| Receivable | 238.5 | ш. | 238.5 | 171.9 | 7.8 | 179.7 |
| Current tax assets | 0.3 | 0.3 | 0.4 | 1.3 | 1.7 | |
| Inventories | 129.9 | 129.9 | 174.9 | 25.4 | 200.3 | |
| Other assets | 28.1 | w. | 28.1 | 47.6 | 47.6 | |
| Total current assets | 418.1 | ₩ | 418.1 | 417.3 | 40.2 | 457.5 |
| Non-current assets | ||||||
| Receivables | 15.3 | 153 | 14.2 | 0.5 | 14.7 | |
| Other financial assets | 3.2 | $\overline{\phantom{a}}$ | 1.2 | |||
| inventories | 20 | 2.0 | 0.9 | 0.2 | 1.1 | |
| Property, plant and equipment | 1,196.6 | 1,196.6 | 1,041.7 | 14.0 | 1,055.7 | |
| Deterred tax assets | 32.6 | نبوذ | 326 | 7.8 | 7.8 | |
| Intangible assets | 176 | 17.6 | $\ddotsc$ | |||
| Other assets | 39.2 | w. | 39.2 | 27.7 | 27.7 | |
| Total non-current assets | 1,303.3 | ÷, | 1,303.3 | 1,093.5 | 14.7 | 1,108.2 |
| Total assets | 1,721.4 | w. | 1,721.4 | 1,510.8 | 54.9 | 1,565.7 |
| Current liabilities | ||||||
| Payables | 94.9 | 94.9 | 71.8 | 7.1 | 78.9 | |
| Interest bearing liabilities | 76.2 | 76.2 | 0.1 | 0.1 | ||
| Current tax liabilities | 31 | m. | 31 | 6.0 | -- | 6.0 |
| Provisions | 83.1 | 83.1 | 135.2 | 0.6 | 135.8 | |
| Total current liabilities | 257.3 | ÷ | 257.3 | 213.1 | 7.7 | 220.8 |
| Non-current liabilities | ||||||
| Interest bearing liabilities | 393.3 | m. | 393.3 | 388.9 | 388.9 | |
| Provisions | 165.4 | m. | 165.4 | 170.7 | 11.2 | 181.9 |
| Deferred tax liabilities | 26.4 | 26.4 | 14.7 | 2.2 | 16.9 | |
| Total non-current liabilities | 585.1 | щ. | 585.1 | 574.3 | 13.4 | 587.7 |
| Total liabilities | 842.4 | 842.4 | 787.4 | 21.1 | 808.5 | |
| Net assets | 879.0 | ennmin | 879.0 | 723.4 | 33.8 | 757.2 |
| Equity | ||||||
| Contributed equity | 610.4 | 534.0 | ||||
| Reserves | 27.8 | 27.8 | ||||
| Retained profits | 187.3 | 129.4 | ||||
| Shareholders' equity attributable to members of Rika Resources Ltd |
825.5 | 691.2 | ||||
| Outside equity interest in controlled entities | 53.5 | 66.G | ||||
| Total equity | 879.0 | 757.2 |
a sa mga mga mga mga mga mga mga mga mga mg
Statements of Cash Flows of the Consolidated Entity
For the Year Ended 31 December 2002
| Continuing Operations 2002 Sm |
Discontinuing Operations 2002 Sm |
Total 2002 \$m |
Continuing Operations 2001 \$m |
Discontinuing Operations 2001 \$m |
Total 2001 Sm. |
|
|---|---|---|---|---|---|---|
| Cash flows from operating activities | ||||||
| Receipts from customers (inclusive of goods and services tax) |
773.1 | 50.8 | 623.9 | 730.6 | 127.7 | 858.3 |
| Payments to suppliers and employees (inclusive of goods and services tax) |
(639.2) | (52.4) | (691.6) | (577.0) | (127.5) | (704.5) |
| Interest received | 1.2 | 12 | 1.5 | 0.1 | 1.6 | |
| Interest received from PT Koba Tin | 0.4 | (0.4) | ||||
| Borrowing costs | (27.5) | (27.5) | (26.9) | (26.9) | ||
| Income taxes paid GST received |
(7.6) | (0,1) | (T, T) | (4.1) 22.3 |
(2.0) | (6.1) 22.3 |
| Payments for exploration expenditure | 32.9 (16.6) |
32.9 (16.6) |
(19.3) | $\ddotsc$ |
(19.3) | |
| Receipts from other operating activities | 7.2. | 72 | 5.4 | 0.2 | 5.6 | |
| Net cash inflow/(outflow) from operating activities |
123.5 | (1,7) | 121.8 | 132.9 | (1.9) | 131.0 |
| Cash flows from investing activities | ||||||
| Payments for property, plant and equipment | (133.4) | (1.4) | (134.8) | (91.4) | (2.0) | (93.4) |
| Proceeds from sale of property, plant and equipment |
61 | 0.2 | 6.3. | 1.7 | 3.2 | 4.9 |
| Proceeds from sale of Westlime (WA) Limited property, plant and equipment. |
$\ddotsc$ | 1.3 | 1.3 | |||
| Loans to related parties | 0.3 | (0.3) | (1.6) | (1.3) | (2.9) | |
| Proceeds from disposal of group entities | 22.7 | (2.4) | 20.3 | 0.1 | $\overline{\phantom{a}}$ | 0.1 |
| Deposit received on sale of PT Koba Tin- | ×, | ÷ | 1.4 | 1.4 | ||
| Payments for controlled entities - Basin Minerals (net of cash acquired) |
(56.6) | (56.6) | (1.2) | (1.2) | ||
| Payments for controlled entities - Consolidated Rutile Limited |
(2.7) | (2.7) | (10.6) | (10.6) | ||
| Payment for purchase of patents and licences |
(17.6) | $\overline{\phantom{a}}$ | (17.6) | ä, | Ω. | |
| Net cash inflow/(outflow) from investing activities |
(181.2) | (3.9) | (185.1) | (103.0) | 2.6 | (100.4) |
| Cash flows from financing activities | ||||||
| Proceeds from borrowings | 310.2 | 310.2 | 102.5 | 102.5 | ||
| Dividends paid | (49.3) | ÷ | (49.3) | (47.8) | (47.8) | |
| Dividends paid to outside equity interests in controlled entities |
(4.3) | (4.3) | (6.1) | (6.1) | ||
| Repayment of borrowings | (199.9) | i. | (199.9) | (88.0) | (88.0) | |
| Proceeds from issue of shares | ÷. | 3.4 | 3.4 | |||
| Net cash inflow/(outflow) from financing activities |
56.7 | 56.7 | (36.0) | (36.0) | ||
| Net increase/(decrease) in cash held |
(1,0) | (5.6) | (6.6) | (6.1) | 0.7 | (5.4) |
| Cash at the beginning of the financial year | 22.5 | 57 | 28.2 | 28.2 | 4.7 | 32.9 |
| Effects of exchange rate changes on cash | (0.2) | (0.1) | (0.3) | 0.4 | 0.3 | 0.7 |
| Cash at the end of the financial year | 21.3 | mmy | 21.3 | 22.5 | 5.7 | 28.2 |
Discussion and Analysis of the Financial Statements
For the Year Ended 31 December 2002
The following discussion and analysis is provided to enhance an understanding of the concise financial report.
STATEMENTS OF FINANCIAL PERFORMANCE
The consolidated entity's 2002 results reflect a sound level of performance despite difficult and uncertain global trading conditions as a result of international events. Both mineral sands and coal production were in line with expectations. Mineral sands sales exceeded both volume and revenue expectations mainly as a result of record synthetic rutile sales and increased zircon sales compared with 2001. Sales were also partly underpinned by relatively high opening inventory levels which were progressively drawn down during the year. Coal sales were in line with contractual requirements.
The consolidated entity's 2002 total revenues (including proceeds from the safe of PT Koba Tin) increased by A\$5.0 million (0.5%) to A\$930.2 compared with 2001. Product sales revenues were A\$894.5 million and consisted of A\$805.1 million from titanium minerals and zircon sales (an increase of A\$67.3 million), coal sales of A\$31.7 million (a decrease of A\$3.2 million) and tin sales of A\$57.7 million (a decrease of A\$67.5 million).
On a regional basis, minerals sands sales revenues from the Western Australian operations increased by A\$98.4 million to A\$611.5 million which was offset by USA sales revenues decreasing by A\$28.9 million to A\$105.5 million. Consolidated Rutile Limited's sales revenues (100% level) decreased by A\$3.8 million (2.2%) to A\$88.1 million during the period.
The consolidated entity achieved a net profit of A\$109.0 million. which is inclusive of a contribution of A\$9.9 million from previously un-booked tax losses being brought to account and a write-off of A\$6.6 million of assets associated with a project to develop iron. exide residue conversion technology.
This result represents an increase of A\$45.3 million (71%). compared with a net profit of A\$63.7 million in 2001 after allowing for a A\$44.1 million loss associated with discontinued businesses in that period. For comparison purposes the consolidated entity's net profit from continuing operations was A\$109.5 million in 2002. compared with A\$107.8 million in 2001.
The basic earnings per share of the consolidated entity for the year was 48.6 cents (2001: 29.3 cents).
A final unfranked dividend of 12 cents per share will be paid on 28 April 2003 to all shareholders registered at 9 April 2003. Together with the interim dividend of 10 cents per share this makes a 2002. total dividend of 22 cents per share (franked to 2 cents) which is unchanged compared with the 2001 total dividend of 22 cents.
STATEMENTS OF FINANCIAL POSITION
Equity increased by A\$121.8 million to A\$879.0 million. The increase is reflective of the A\$109.0 million profit attributable to the members of the Company, after allowing for the distribution of interim and final dividends of A\$51.1 million. In addition the Company issued 15.5 million ordinary shares in satisfaction of the Basin Minera's acquisition amounting to A\$76.4 million.
As part of the acquisition, the consolidated entity acquired the underlying assets of Basin Minerals Limited and its subsidiaries. which are reflected in the statement of financial position. Total consideration amounted to A\$139.1 million which comprises. A\$76.4 million shares issued and cash consideration of A\$62.7 million
The increase in property, plant and equipment is predominantly attributable to assets acquired from Basin Minerals of A\$139.3. million
Intangible assets of A\$17.6 million represents patents and licences acquired during the year. On 31 December 2002, the consolidated entity agreed to end a litigation dispute with Rio Tinto with respect to SREP Hybrid and Rutile Patents. Under the terms of the agreement, the SREP patent will be jointly owned by the companies.
Provisions reduced during the year by A\$69.2 million in the main attributable to lower mark to market losses on foreign exchange. derivatives. The reduction relates to both settlement of the derivatives inherited from the RGC Limited acquisition in 1998 and the higher 2002 spot rate when compared to 2001.
Debt increased by A\$80.5 million to A\$469.5 million at the end of the year. This debt primarily consists of syndicated bank debt of A\$151.4 million and unsecured private placement notes of US\$150 million (A\$264.6 million). Gearing was 33.8% at the end of 2002 compared with 32.3% at the end of 2001.
STATEMENTS OF CASH FLOWS
The total cash outflow for 2002 was A\$6.6 million, compared to A\$5.4 million in 2001.
Net cash in low from operating activities declined by A\$9.2 million in 2002 due to the timing of shipments and payments to suppliers.
Net cash outflow from investing activities increased by A\$84.7 million, the major factors being the acquisition of Basin Minerals Limited for A\$56.6 million (net of cash acquired) and payment for the purchase of SREP patents and licenses of A\$17.6 million, offset by proceeds from the sale of PT Koba Tin for A\$20.3 million.
During the year the Company undertook a major capital expenditure program. The incremental expenditure in property, plant and equipment is attributable to the Georgia project, completion of the mid-west zircon finishing plant and the Old Hickery expansion.
Net cash inflow from financing activities of A\$56.7 million in 2002. compares to a net outflow of A\$36.0 million in 2001. A net increase in debt drawn from facilities of A\$95.8 million was required to meet the capital expenditure programs and the acquisition of Basin Minerals Limited.
For the Year Ended 31 December 2002
NOTE 1. SEGMENTAL ANALYSIS
| 2002 | |||||
|---|---|---|---|---|---|
| Continuing Operations |
Discontinued Operations |
||||
| Titanium Minerals and Zircon $_{\rm sm}$ |
Coat Sm |
Tin Sm |
Unaflocated Sm |
Consolidated Sm |
|
| Sales to external customers | 805.1 | 31.7 | 57.7 | 894.5 | |
| Total sales revenue | 805.1 | 31.7 | 57.7 | ÷. | 694.5 |
| Other revenue | 34.1 | 0.2 | 0.2 | 1.2 | 35.7 |
| Total segment revenue | 839.2 | 31.9 | 57.9 | 1.2 | 930.2 |
| Segment result | 138.4 | 9.5 | (1,4) | m. | 146.5 |
| Unallocated expenses | (44.4) | ||||
| Profit from ordinary activities before income tax income tax benefit |
102.1 8.1 |
||||
| Net profit | 110.2 | ||||
| Segment assets | 1 657.8 | 31.0 | 38 999999999999999999999999999999999999 | 1,688.8 | |
| Unallocated assets | 32.6 | ||||
| Totai assets | 1,721,4 | ||||
| Segment liabilities | 339.7 | 41 | 343.8 | ||
| Unallocated liabilities | 498.6 | ||||
| Total liabilities | 842.4 | ||||
| Acquisitions of property, plant and equipment, intangibles and other non-current segment assets |
308.3 | 0.2 | 14 | 309.9 | |
| Depreciation and amortisation expense | 92.2 | 27 | 27 | × | 97.6 |
| Other non-cash expenses | 3.6 | 0.5 | 41 |
SECONDARY SEGMENT - GEOGRAPHICAL SEGMENTS
| Sales to external customers Sm |
Segment assets Sm |
Acquisition of Property, plant and equipment, intangibles and other non-current segment assets Sm |
|
|---|---|---|---|
| Australia | 731.3 | 1,449.1 | 246.3 |
| United States | 105.5 | 272.3 | 62.2 |
| indonesia *. | 57.7 | 1999 - Jan Alexandro Alexandro Alexandro Alexandro Alexandro Alexandro Alexandro Alexandro Alexandro Alexandro | $-4.4$ |
| 894.5 | a alla sella sella sella sella sella sella sella sella sella sella sella sella sel 1.721.4 |
309.9 |
1Discoplinated operations
For the Year Ended 31 December 2002
NOTE 1. SEGMENTAL ANALYSIS (continued)
| 2001 | ||||||
|---|---|---|---|---|---|---|
| Continuing Operations |
Discontinued Operations |
|||||
| Titanium Minerals and Zircon Sm |
Coal \$m |
Tin Sm |
Lime Sm |
Unallocated Sm |
Consolidated Sm |
|
| Sales to external customers | 737.8 | 34.9 | 125.2 | 2.9 | u. | 900.8 |
| Total sales revenue | 737.8 | 34.9 | 125.2 | 2.9 | 900.8 | |
| Other revenue | 12.4 | $\ddotsc$ | 2.9 | 1.3 | 7.8 | 24.4 |
| Total segment revenue | 750.2 | 34.9 | 128.1 | 4.2. | 7.8 | 925.2 |
| Segment result | 156.2 | 12.8 | (49.9) | (10.4) | $\ddotsc$ | 108.7 |
| Unallocated expenses | (45.7) | |||||
| Profit from ordinary activities before income tax expense Income tax expense |
63.0 (5.3) |
|||||
| Net profit. | 57.7 | |||||
| Segment assets | 1,470.4 | 32.6 | 53.9 | 1.0 | 1,557.9 | |
| Unallocated assets | 7.8 | |||||
| Total assets | 1,565.7 | |||||
| Segment fiabilities | 373.3 | 4.4 | 18.7 | 0.2 | 396.6 | |
| Unallocated liabilities | 411.9 | |||||
| Total liabilities | 808.5 | |||||
| Acquisitions of property, plant and equipment, and other non-current segment assets. |
122.5 | 0.2 | 2.0 | 124.7 | ||
| Depreciation and amortisation expense | 90.9 | 2.8 | 19.4 | 0.1 | $\ddotsc$ | 113.2 |
| Other non-cash expenses | 5.3 | 0.6 | 5.9 |
SECONDARY SEGMENT - GEOGRAPHICAL SEGMENTS
| Sales to external customers Sm |
Segment assets Sm |
Acquisition of Property, plant and equipment and other non-current segment assets \$m |
|
|---|---|---|---|
| Australia | 641.2 | 1,260.2 | 72.7 |
| United States | 134.4 | 251.6 | 50.0 |
| Indonesia * | 125.2 | 53.9 | 2.0 |
| 900.8 | 1,565.7 | 124.7 |
.
The complete contract of the complete of the complete of the complete of the complete of the complete of the c
fOrscontinued operations
For the Year Ended 31 December 2002
NOTE 2. DIVIDENDS
| Consolidated | Parent Entity | |||
|---|---|---|---|---|
| 2002 Sm. |
2001 Sm. |
2002 Sm |
2001 Sm |
|
| Final dividend provided of 12 cents unfranked (2001: 12 cents franked to 1 cent at 30%). |
27.7 | 26.1 | -27.7 | 26.1 |
| Interim dividend paid of 10 cents franked to 2 dents at 30% (2001; 10 dents franked to 1 dent at 30%). |
23.4 | 21.8 | 23.4 | 21.8 |
| Total dividends paid or provided | 51.1 | -47.9 | $-51.1$ | 47.9 |
| Franking credits available for the subsequent financial year (2002: 30%; 2001: 30%) |
37.2 | 33.6 | 0.7 |
The above amounts represent the balances of the tranking accounts as at the end of the financial year, adjusted as applicable for:
- (i) franking credits that will arise from the payment of the current income tax provision;
- (ii) franking debits that will arise from the payment of dividends recognised as a liability at the end of the year;
- (iii) franking credits that will arise from the receipt of dividends recognised as receivables at the end of the year; and
- (iv) franking credits that may be prevented from being distributed in subsequent financial years.
The franking credits available to the consolidated entity includes \$35.7 million (2001: \$32.1 million) for the Consolidated Rutile Limited group. Distribution of franking credits by the Company is subject to receipt of fully franked dividends from Consolidated Rutile Limited which was 50.1% owned at 31 December 2002 (2001: 49%).
The new simplified dividend imputation system applied from 1 July 2002 for all taxpayers. Any frankable distribution made on or after 1 July 2002 is required to comply with the new rules. Under the new system, corporate tax entities are required to close off their franking account as at 30 June 2002 and convert tranking balances calculated on a tax gross-up basis into tax paid balances. This change in the basis of measurement does not change the value of franking credits to shareholders who may be entitled to tranking credits.
For the Year Ended 31 December 2002
NOTE 3. EARNINGS PER SHARE
| Consolidated | |||
|---|---|---|---|
| 2002 cents |
2001 cents |
||
| Basic earnings per share | 48.6 | 29.3 | |
| Diluted earnings per share | 48.6 | 29.3 | |
| 2002 Number |
2001 Number |
||
| Weighted average number of ordinary shares outstanding during. the financial year used in the calculation of basic earnings per share |
224.445.102 | 217.075.832 | |
| Weighted average number of ordinary shares and potential ordinary shares. of the entity used as the denominator in calculating diluted earnings per share. |
224.457.923 | 217.075.832 |
RECONCILIATION OF EARNINGS USED IN CALCULATING EARNINGS PER SHARE:
| Consolidated | ||||
|---|---|---|---|---|
| 2001 2002 $\$m$ Sm. |
||||
| Net profit. Net (profit)/loss attributable to outside equity interest |
110.2 57.7 6.0 (1.2) |
|||
| Earnings used in calculating basic and diluted earnings per share- | 63.7 109.0 |
Options granted to employees under the Executive Employment Agreement Plan are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share. The options have not been included in the determination of basic earnings per share.
NOTE 4. FULL FINANCIAL REPORT
Further financial information can be obtained from the full financial report which is available, free of charge, on request from the Company.
Directors' Declaration
The Directors declare that in their opinion the concise financial report of the consolidated entity for the year ended 31 December 2002 as set out on pages 43 to 50 complies with Accounting Standard AASB 1039: Concise Financial Reports.
The financial statements and specific disclosures included in this concise financial report have been derived from the full financial report for the year ended 31 December 2002.
The concise financial report cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report, which as indicated in Note 4, is available on request.
This declaration is made in accordance with a resolution of the Directors.
JM and
I C R Mackenzie Chairman
mal
K M Folwell Managing Director and Chief Executive Officer
Perth 26 March 2003
Independent Audit Report
To the Members of Iluka Resources Limited
AUDIT OPINION
In our opinion, the concise financial report of Iluka Resources Einited for the year ended 31 December 2002, set out on pages 43 to 51 complies with Australian Accounting Standard AASB 1039: Concise Financial Reports.
This opinion must be read in conjunction with the following explanation of the scope and summary of our role as auditor.
SCOPE AND SUMMARY OF OUR ROLE
The concise financial report - responsibility and content
The preparation and content of the concise financial report for the year ended 31 December 2002 are the responsibility of the Directors of Iluka Resources Limited (the Company).
THE AUDITOR'S ROLE AND WORK
We conducted an independent audit of the concise financial report. in order to express an opinion on it to the members of the Company. Our role was to conduct the audit in accordance with Australian Auditing Standards to provide reasonable assurance as to whether the concise financial report is free of material misstatement.
We have also performed an independent audit of the full financial report of the Company for the financial year ended 31 December 2002. Our audit report on the full financial report was signed on 26 March 2003 and was not subject to any qualification. Our audit did not involve an analysis of the prudence of business decisions made by the Directors or management.
In conducting the audit of the concise financial report, we carried out a number of procedures to assess whether in all material respects the concise financial report is presented in accordance with Australian Accounting Standards AASB 1039: Concise Financial Reports.
The procedures included:
- testing that the information included in the concise financial report is consistent with the information in the full financial report;
- selecting and examining evidence, on a test basis, as required by auditing standards, to support amounts, discussion and analysis, and other disclosures in the concise financial report which were not directly derived from the full financial report. We did not examine every item of available evidence; and
- reviewing the overall presentation of information in the concise financial report.
Our audit opinion was formed on the basis of these procedures.
INDEPENDENCE
As auditor, we are required to be independent of the Company and its controlled entities and free of interests which could be incompatible with integrity and objectivity. In respect of this engagement, we followed the independence requirements set out by the Institute of Chartered Accountants in Australia, the Corporations Act 2001 and the Auditing and Assurance Standards Board.
In addition to our statutory audit work, we were engaged to undertake other services for the Company and its controlled entities. In our opinion the provision of these services has not impaired our independence.
Andrew State (1986), single providence of the second control of the second control of the second control of the second control of the second control of the second control of the second control of the second control of th
Peramidas uloques
PricewaterhouseCoopers CHARTERED ACCOUNTANTS
(Mario)
J O'Corinor Partner
Perth 26 March 2003
Exploration Naps
Location of Iluka's Mineral Resources
