CONCTSE ANNUAL REPORT 2003

MINERY ES

GENERAL VERTICAL mentalan

KIA KEBRANDAS REPORT

OPERA IONS OVERVIEW

a za Bosa R
S SCHEMENS (ST a yana matu wa mshindi wa 1972 ya Kas

mente de la construcción de la construcción de la construcción de la construcción de la construcción de la con
Construcción de la construcción de la construcción de la construcción de la construcción de la construcción de

en de la

enada
Ma

an di

Modern Artichard Co
Entromental Personance
Tomman

January and the communication of the communication

GARSSANNIA ENTRE COMME

The ristance to series certains a chickensive optique d'augé suivant le periodique incomposing effected to desire them from de Gora Resource Burance which is angree wh he reprincipaux and the fineral Compa G Assuming Operational Prevention (196 STED AND THE UNITED STATES

Matte of August Ceneral Meeting The Property Contractor of Littlessines Collective Residents South Entrance of the Hyan Responsible P 22 Aug 34 (press sent mandales) Progression Contract Program Kanadan da Bagayaya Program accussod

March March 1980 Report Follows a sa mga mga mga mga mga mga mga mga mga mg GROOM EXPERIMENT ta an an air an t-ainm ARTICLE IN STRUCTURE

ILUKA -SUPPLYING THE WORLD

Iluka Resources Limited was formed in 1999 when shareholders approved a name change following the merger of Westralian Sands and diversified miner RGC. The Company's head office is located in Perth. Western Australia.

Iluka is a teader in the global production, processing and sales of titanium minerals and zircon. Titanium minerals are used in the production of titanium dioxide pigment for use in protective coatings such as house and car paints, sunscreens, plastics, paper and textiles. Zircon is used in the ceramics industry where its opacity and hardness gives whiteness and durability to tifes. sanitary-ware and table-ware. It is also used in refractory, foundry and offier industrial applications.

The Company's key assets include:

Western Australia - míning operations at Eneabba and Capel and mineral processing and synthetic rutile production facilities at Narnoulu (on the outskirts of Geraldton) and North Capel. Some product is sold locally and the majority is exported through the ports of Geraldton and Bunbury to customers in the USA, Europe and Asia.

USA - mining and mineral processing operations at Old Hickory (Virginia) and Green Cove Springs (Florida) and a new mining operation in Georgia. Some product is exported through the ports of Chesapeake, Virginia, Manatee, Florida and Brunswick, Georgia. The majority is transported by rail to major USA based customers.

Victoria - planning to establish mining and processing operations in the Murray Basin is well advanced and subject to a final investment decision, the Company expects to commence the main construction phase in the second quarter of 2004 with production starting around mid-2005. It is expected that product will be exported through the port of Portland to customers in the USA. Europe and Asia.

Queensland - Iluka has a 50.63% interest in Consolidated Rutile Limited (CRL) which has mining operations at North Stradbroke Island (offshore from Brisbane) and mineral processing facilities at Pinkenba, Brisbane. Product is exported through the port of Brisbane to customers in the USA, Europe and Asia.

In addition, Iluka has a 50% interest in Narama Coal, an open cut coal mine located in the Hunter Valley in New South Wales, operated by joint venture (JV) partner Xstrata (the JV supplies the Bayswater power station under a 20 year coal supply contract which ends in 2012). Iluka also receives a 1.25% royalty on EO.B iron ore sales from the BHP Billiton operated Pilbara Mining Area C as well as a once-off capacity payment of A\$1 million for each one million tonne increase in capacity above five million tonnes per annum.

Beka customer shipment departing the port of Busbury, Western Australia.

VARA 144 A

1989 - Johann Stone, Amerikaansk konge

a katika kacamatan ing Kabupatèn Kabupatèn Kabupatèn Kabupatèn Kabupatèn Kabupatèn Kabupatèn Kabupatèn Kabupatèn

2013. AN ISA NINARY

399999

Iluka's 2003 results were underpinned by bperational improvements and a strong sales performance. Against this, the average Australian-US dollar exchange rate was 67 cents in 2003, an increase of 12 cents compared with 55 cents in 2002 which had a significant influence on the full year. result as a large portion of the Company's costs are borne in Australian dollars and the majority of sales are made in US dollars.

1988 - Andrew Maria Maria Maria Maria Maria Maria Maria Maria Maria Maria Maria Maria Maria Maria Maria Mari

1995 - Jan Andrews II

MAN AN SANAHAN DIAMANGKAN
MANGGALAN SANAHAN SANAHAN Kanadan Marejeo (

a manazarta ya mwaka wa 1958
Wakatifu wa 1959, mwaka wa 1958 ha Kabupatèn Bangguna

a de la composición de la componentación de la composición de la composición de la composición de la composici
La composición de la composición de la composición de la composición de la composición de la composición de la San Sila Ang Ang Bandara Kanadan masa sa sa sa sa sa sa sa sa sa sa sa sa E MANARA MANARA E L'ARANGEN (MANARA)
1992 : 1993 : 1993 : 1994 : 1994 : 1994 : 1995 : 1996 : 1997 : 1997 : 1997 a mangalang pangalang na 1998 - John Barn Ba 1998 - Johann Barbott, fransk forsk

EN ESTATUS EN LA CANADA ESTATUS EN LA CANADA ESTATUS EN LA CANADA ESTATUS EN LA CANADA ESTATUS EN LA CANADA ES
EN LA CANADA ESTATUS EN LA CANADA ESTATUS EN LA CANADA ESTATUS EN LA CANADA ESTATUS EN LA CANADA ESTATUS EN LA Maria Maria Maria ( Kabupatén Ing Padésa in dia kaominina mpikambana ny kaominina mpikambana ny kaominina mpikambana ny kaominina mpikambana ny kaominin ESTER E SERVETA DE LA

a katalog na matanggan ng mga katalog ng mga katalog ng mga katalog ng mga katalog ng mga katalog ng mga katal
Na matanggang na matanggang ng mga katalog ng mga katalog ng mga katalog ng mga katalog ng mga katalog ng mga a di pangangan sa panggunan ng mga matanggunan ng mga matanggunan ng mga matanggunan ng mga matanggunan ng mga
Mga matanggunan ng mga matanggunan ng mga matanggunan ng mga matanggunan ng matanggunan ng matanggunang matang star maga mata m e de la componenza del composición.
Constituída de la composición

Tan a shekara ta 1999 a tsa a tsa a tsa a tsa a tsa a tsa a tsa a tsa a tsa a tsa a tsa a tsa a tsa a tsa a a katika katika katika katika katika katika katika katika katika katika katika katika katika katika katika kat
Katika katika katika katika katika katika katika katika katika katika katika katika katika katika katika katik EN ET ALAMAN (NY A

a mara matsa II SAN MARA SAN SA SAN MANA EUNIO EN EN EN H a Carlotta ( a katika matangan sa mga mga mga mga mga mga mga mga mga mg Kara

en en en stadium.
Videologia en la stadium e andre della W. W ang managang kalendarya.
Kabupatèn Pangalang Kabupatèn US SAN SAN UNIVERSITA

a sa mga mga mga mga mga mga mga mga mga mg

ang mang en een meer van

Manazarta ( e andre Signal

en 1910.
Sederakan

ana n

a Maria
1977 - Johann Alban

2003 was a year where improving business fundamentals in the form of higher US dollar operational efficiency improvements were negated by the impact of a progressive appreciation in the average Australian-US dolfar exchange rate during the year and reduced tax benefits as the Group moved

The stronger Australian dollar substantially reduced the value of the Company's US dollar denominated sales in 2003, resulting in a A\$49 million reduction in net revenue compared with 2002. This impact was partially offset by a gain of A\$30 million, consisting of A\$15.5 million from the Company's favourable 2003 hedging position and A\$14.5 million from a revaluation of US dollar denominated borrowings.

The result was a net profit after-tax and outside equity interests of A\$85.2 million, a decrease of A\$23.8 million (21.8%) compared with a profit of A\$109 million in 2002. Earnings per share were 36.6 cents, a decrease of 12 cents per share compared with 2002 which reflects both lower earnings and the increased number of shares on issue following the acquisition of Basín Minerals during 2002. Return on equity decreased to 9.6% compared with 13.2% in 2002.

Group Full Year Dividend

KEY FOCUS AREAS IN 2003

At the commencement of 2003, a number of key operational challenges were identified. These included further improvements in environmental management, health and safety, the successful implementation of the business improvement program, achieving a performance turnaround in the USA operations, expanding the USA operations into Georgia and progressing plans to develop the Murray Basin. Satisfactory progress was made in all of these areas which helped underpin Iluka's 2003 operational performance and which should also create a platform for further performance improvements in 2004 and bevond.

Losses in the USA reduced during the year and the USA operations are currently running profitably. The new mine and mineral concentrating facilities in Georgia were commissioned in February 2004.

Planning for the Douglas project in the

Murray Basin is well advanced with the

2003 and a definitive feasibility study is

first quarter of 2004. Subject to the

satisfactory outcome of this study,

completion of a pre-feasibility study in mid-

scheduled for completion at the end of the

construction of the mine, processing plant

and associated infrastructure is expected

to commence during the second quarter

of 2004.

2003 Comparative Shareprice Performance

-ASX 200 - <<<<<<>ASX 200 Materials - <<<</>-------------------------------

Work is also continuing on development plans for mining and processing operations at the KWR deposits, located near Ouyen, Victoria, approximately 350 kilometres north of the Douglas project.

The successful development of the Murray Basin is of critical importance to Buka's future as it represents both a major capital investment and an essential part of Iluka's medium to long term rutile and zircon. production and product market share.

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

BOARD MATTERS

The composition of the Board of Directors remained unchanged during 2003. However Professor John de Laeter has advised of his intention to retire as a Director at the Company's Annual General Meeting in May 2004. On behalf of the Board, I wish to thank Professor de Laeter for his valued contribution and wise counsel as a Director over the past 10 years.

In March 2004, the Company appointed Dr Robert Every as a Director. Dr Every (58) is the Managing Director and Chief Executive Officer of OneSteel Limited. He has considerable experience as both a senior manager and a Director of listed companies in Australia and New Zealand.

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

These internal improvements are expected to continue through 2004 and 2005 and are critical in enabling the Company to not only weather the impact of declining grades in Western Australia, the higher Australian dollar and increasing tax charges, but also to grow profitability which remains our clear objective.

Heavy mineral sample from exploration activities in the Marray Basin, Victoria.

The Company's shareprice performance in 2003, when measured against the Australian Stock Exchange (ASX) 200 Companies and the ASX 200 Materials Companies indicies, was disappointing. The Board believe that the most appropriate way of improving the relative shareprice performance is to focus on internal improvements as well as delivering on our expansion plans in the USA and the Murray Basín. We also contínue to review merger and acquisition opportunities from time to time but do so against a disciplined value hurdle.

OUTLOOK FOR 2004

From an operational perspective the most significant issue faced by Iluka over the next few years is the gradually deteriorating grade and assemblage in Western Australia (mainly in the mid-west). This will result in progressively more ore being mined to produce heavy mineral concentrate, which in turn will contain less high value mineral such as rutile and zirconand more lower value ilmenite. Another key operational challenge will be lower rutile and zircon production from CRL in 2004 as the Ibis dredge will be shut down for six weeks during the second quarter of 2004. for modifications prior to mining through low-grade reserves during the balance of the year as part of the transition to the higher-grade Enterprise deposit.

shelters from previous years.

The combined impact of the operational issues and adverse exchange rates in isolation has the potential to considerably reduce 2004 earnings compared with the 2003 results.

However, the Company anticipates being able to effectively manage most of the impact of these issues and improve the quality of its earnings in 2004. This view is based on:

From a financial perspective, the Company will face two key issues in 2004. The first is exposure to foreign exchange fluctuations as approximately 60% of Australian sales are denominated in US dollars. Hedging in place will mitigate some of the effects of a higher Australian dollar against the US dollar but if the Australian dollar remains above 75 US cents for a prolonged period, it will impact adversely on Iluka as well as many other Australian exporters whose sales are largely denominated in US dollars. The second is a significant increase in tax charges in 2004 as Illuka no longer has tax

· demand for Buka's high titanium dioxide content products and the price outlook in US dollars remaining positive despite an increasingly competitive market for titanium mineral products;

· a very positive outlook for zircon with demand continuing to be in excess of industry supply capability and zirconprices in US dollars expected to increase significantly during 2004;

achieving significant additional benefits from the business improvement program, including additional cost reductions, operational efficiencies and further progress towards best practice activities, which will more than offset the grade and assemblage issues in Western Australia:
the completion of the Old Hickory optimisation project in Virginia during 2003 and the start up of the Lulaton project in Georgia in February 2004 together with the ongoing cost reductions and operational improvements which should restore the profitability of the USA operations in 2004: and
receiving royalty revenue from Mining Area C in 2004 as both iron ore production and sales expand following the start up of production in late 2003.

In summary, the improvements made during 2003 and the ongoing business improvement benefits in 2004, together with the positive mineral sands price outlook, should enable the Company to meet its operational challenges and improve the quality of its earnings. However, profitability in the coming year will be influenced by the Australian-US dollar exchange rates. Based on the exchange rate prevailing at the time this report was prepared, achieving a 2004 profit after tax result which is similar to the 2003 result would be a good outcome.

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 12 May 2004 at the Hyatt Regency Hotel in Perth.

Ian Mackenzie Chairman 24 March 2004

MANAGING DIRECTOR'S REPORT

ENVIRONMENT, HEALTH AND SAFETY

The Company's overall environmental management, health and safety (EHS) performance continued to improve in 2003. as evidenced by further improvements in all of the performance indicators used throughout Buka's operations. Despite the improvement, the overall level of performance in these key areas still has scope for further improvement and will continue to be a key area of management focus in 2004 and beyond.

A comprehensive overview of Iluka's EHS performance in 2003 can be found on pages 14 to 20 of this report. The overview incorporates performance indicators drawn from the Global Reporting Initiative which is aligned with the reporting requirements of the Minerals Council of Australia's Operational Framework for Sustainable Development.

production levels.

PRODUCTION, SALES AND FINANCIAL PERFORMANCE

Group operational performance was significantly better in 2003 compared with 2002, with higher production levels for most products as well as the delivery of benefits from cost management, operating practices and planning initiatives implemented as part of the business improvement program.

The improved production performance in the period was underpinned by higher production and processing levels at the Western Australian and USA mineral sands operations. As a result Group production of limenite, synthetic rutile (SR) and zircon increased compared with 2002

Group rutile production was lower compared with 2002, reflecting lower grades at the mid-west operations and the three month repair shutdown of the Yarraman dredge at CRL's operations on North Stradbroke Island.

The Company achieved a strong mineral sands sales performance in 2003 assisted by record zircon sales. In terms of the global market for mineral sands, Iluka continued to be the leader in zircon with its market share increasing to 37% compared with 33% in 2002. Iluka's share of the high TiO, content market decreased to 30% in 2003 compared with 33% in 2002, primarily as a result of lower SR sales in 2003.

Group Net Profit

Group Earnings Per Share

This outcome was anticipated as the record SR sales in 2002 were partially underpinned by sales from inventory. Coal production and sales from the Company's 50% interest in the Narama Coal joint venture were in line with contractual requirements.

Buka's 2003 sales revenue from continuino operations was A\$786.0 million, a reduction of 6% which reflects both the stronger Australian dollar and lower synthetic rutile sales volumes compared with 2002. It was made up of A\$752.9 million from titanium minerals and zircon sales (a decrease of A\$52.2 million) and coal sales of A\$33.1 million (an increase of A\$1.4 million).

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

The Company's 2003 profit of A\$85.2 million was A\$23.8 million lower (21.8%) compared with 2002. The 2003 result included a significant contribution (after tax and outside equity interests) from cost reductions implemented during the year as part of the business improvement program.

Capital expenditure in 2003, including exploration, was A\$163.7 million, an increase of A\$12.3 million compared with 2002. The increase was primarily due to expenditure on the Eulaton and Murray Basin projects and a number of de-bottlenecking projects implemented as part of the business improvement program. Cash flow from operating activities increased by A\$39.1 million to A\$179 million compared with 2002, mainly as a result of a higher level of management focus as well as improvements to cash management. activities. This together with the exchange revaluation of US dollar denominated borrowings resulted in debt decreasing by A\$85.4 million to A\$384.1 million at the end of the year and enabled the Company to reduce its gearing ratio to 28.7% compared with 33.8% at the end of 2002.

Heavy mineral concentrate stockpile at Eneabba, Western Aestralia.

Group Return On Equity

PROGRESS WITH STRATEGIC OBJECTIVES

The Company's core mineral sands strategic objectives remained unchanged from 2002. The objectives in 2003 were to:

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

Good progress was made during the year in pursuit of each of these objectives, starting with the challenges of maximising production and profitability from existing operations. This was supported by further refinements to management processes and systems, more effective planning to improve uptime and product quality and the implementation of SAP in the corporate office and Australian operations to improve the quality of information and reporting.

The initial benefits from the business improvement program were particularly evident in the improved production and mineral processing performance of both the Western Australian and USA operations in 2003. Although the USA operations didrecord a loss as a result of a A\$3.9 million (pre-tax) write-down following a revaluation of inventory in the first half, the profitability of the operations improved during the year with a positive result achieved in the second half. A return to full year profitability is expected in 2004.

The A\$66 million expansion of Iluka's operations into southern Georgia USA, which included the construction of a new mine, mineral concentrator with a 1,000 tonne per hour feed-rate capacity and associated infrastructure, was completed in February 2004. In addition, a project to expand the feed-rate of the mobile concentrator (MCL) in Florida from 350 to 500 tonnes per hour was also completed in February 2004.

Group Gearing Ratio

In mid-2003, CRL committed to invest A\$25 million to upgrade the Ibis plant and dredge as part of their plans to mine the Enterprise deposit. The Enterprise deposit is the most significant remaining mineral sands resource on North Stradbroke Island. Mining operations at the Ibis deposit will finish in the first quarter of 2004 and the plant modifications, upgrades and commissioning activities are expected to be completed in the second quarter of 2004. The transitional dredging phase to access the Enterprise deposit is expected to take 12 months and be completed during the second quarter of 2005.

The Company also continued to pursue its development plans in the Murray Basinwith the completion in mid-2003 of a pre-feasibility study for the development of the Douglas project. This provided the confidence to commit to a detailed feasibility study (DFS) to complete the detailed engineering and design work and further refine timing and capital cost estimates.

Subject to a final investment decision, Iluka expects to invest approximately A\$190 million to develop the Douglas mine, mineral separation plant and associated infrastructure. Construction is expected to commence in the second quarter of 2004 with mining commencing in late 2004 and commissioning of the wet concentrator and minerals separation plant commencing in the first half of 2005.

Construction of the Estaton miserals concentrator (MC2) is Georgia, USA.

Work is also continuing on development plans for a start up in mid-2007 of mining and mineral concentrating operations at the KWR deposits, located near Ouyen.

Buka's successful exploration efforts in 2003 in the Atlantic and the Western Australian Basins enabled it to offset the majority of the reserves depleted during the year. After production of 2.53 million tonnes and allowing for adjustments, the Company's heavy mineral reserves at the end of 2003 (expressed as in-situ tonnes of heavy mineral) were 39 million tonnes, a reduction of 0.62 million tonnes compared with the reserves position at the end of 2002. The Company's year end reserves position takes into account the results of a revision of CRL's reserves position following 2003 mining depletion and the completion of a mining optimisation study for the Enterprise deposit on North Stradbroke Island (Iluka's share of the reduction in CRL's reserves was 1.05 million tonnes).

Additional heavy mineral resources (approximately 12 million tonnes) were discovered in the Murray Basin during the year which more than offset the small reductions in resource estimates in Virginia and Western Australia. However, the Company's overall heavy mineral resource position decreased by 75 million tonnes of heavy mineral by year end, primarily as a result of a decision to relinquish the Sri Lankan exploration tenements.

The relinquishment decision was driven by resource quality and accessibility considerations and will not have a material impact on Iluka's future operations, as these resources were predominately low quality ilmenite.

Planning to expand Iluka's synthetic rutile (SR) production capacity continued during 2003. Good progress was made on the development of a new high-grade SR technology to enable the Company to upgrade a wider quality range of ilmenites compared with the existing Becher SR process. The new technology involves a circulating fluid bed followed by acid leaching. Apart from more effectively removing impurities, it is also expected to produce a higher grade SR product containing around 95% TiO. The Company's preliminary estimate of the investment required to develop a 250,000 tonne per annum plant is in the order of A\$400 million. However this estimate remains subject to the completion of feasibility studies and an evaluation of potential plant location sites. Current location options include the east-coast of Australia or overseas in closer proximity to potential customers in the USA and Europe.

CONCLUSION

The delivery of major development projects will be a major focus area in 2004, including the final commissioning of the Lulaton project in Georgia, USA and modifications to and commissioning of the Ibis dredge. These projects will make a significant contribution to the ongoing profitability of the USA and CRL operations, respectively. In addition, subject to a final investment decision, construction activities should commence in the Murray Basin in the second quarter of 2004.

Capital management will be a key focus area in 2004 and beyond. Despite planned capital expenditure in the next two years being significantly higher than previous periods due primarily to the development of the Murray Basin (approximately A\$190 million), Iluka is confident that this program can be funded from operating cash flows and undrawn debt facilities.

The operational focus in 2004 will continue to be on achieving safe, on-grade and low cost production. This will be supported by ongoing refinements to environment, health and safety processes and systems and the business improvement program which will further deliver improvements in the critical areas of cost management and efficiency enhancements from de-bottlenecking mining and processing operations.

The Company's production performance in 2004 will be impacted by the gradual deterioration in mineral grades and assemblages in the mid-west and CRL's Ibis dredge upgrade shutdown and subsequent mining of low-grades during the transition to the Enterprise deposit. However the Company expects to be able to offset these production impacts and maintain overall production at levels similar to those achieved in 2003.

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

A solid production performance in 2004 will ensure that Iluka is able to capitalise on the positive outlook for demand and US dollar prices for its high titanium dioxide content products and zircon. Together with business improvement activities, it will also play an essential role in mitigating some of the impact of any further strengthening of the Australian-USA dollar exchange rates during 2004.

K M (Wike) Folwell Managing Director and Chief Executive Officer 24 March 2004

$07$

$0.70$

0.60

$155$ $0.65$

Five year Pentonialane
h namaliyasi provance Detais.	2803	2002.	2002	2000	1999.
Communa Crerations
Revenue from operations (A\$m)	786.0	836.8	772.7	721.4	661.1
Earnings before interest, tax, depreciation and amortisation (EBITDA) (ASm)	231.3	236.4	242.5	232.9	1771
Earnings before interest and tax (EBIT) (ASm)	1157	128.4	148.8	146.0	98.2
Profit attributable to the members of Iluka Resources Limited (ASm)	85.2	109.5	1078	104.9	62.7
Consol Gazed Linky
Profit attributable to the members of Iluka Resources Limited (ASm)	85.2	109.0	63.7	90.5	80.2
Earnings per share (cents)'	36.6.	48.6	29.3	40.8	36.0
Dividend per share (cents)	22.0	22.0	22.0	22.0	20.0
Return on equity (20)	9.6	13.2 ^°	92	13.5	12.3
Gearing ratio (%)	28.7	33.8	32.3	20.7	29.2
Mnaacal Roston Details
Consolidamen Enter
	941.1	879.0	757.2	754.8	725.8
Equity (A\$m)
Net tangible assets per share (AS)	3.98	3.70	3.18	3.10	2.92
No of shares on issue	232.8	232.8	21/3	216.5	222.7

: Unerating profit after income fax attributable to members of Iluka Resources Limited, as a percentage of equity attributable to members of Iluka Resources Limited at year end.

4 Based on set debt as a percentage of net debt and equity. Shareholders as at 31 December

OPERATIONS OVERVIEW

PRODUCTION

Group production of titanium minerals in 2003 increased by 4% compared with 2002 despite lower Group rutile production levels. Group production of zircon increased by 12.5% over the same period. The main factors contributing to higher overall mineral sands production levels during the year were the improved mining and processing performance of the USA operations resulting in higher production levels at both USA locations, higher zircon and synthetic rutile production in Western Australia and increased ilmenite production from CRL. These more than offset the reduction in rutile production in the mid-west and lower rutile and zircon production from CRL. Coal production from the Narama Coal joint venture increased slightly compared with 2002.

Synthetic ratile kiln (SR2) Rerth Casel, Western Aistralia.

The main factors contributing to higher synthetic rutile and zircon production from the Western Australian operations were improvements to operating practices at the synthetic rutile kilns, mining of a higher grade zircon deposit in the mid-west and improved zircon recoveries. The increase in synthetic rutile production was achieved despite major kiln maintenance shutdowns at both locations during the year and throughput restrictions at the SR2 kiln at North Capel in late 2003 as a result of a build-up of solid material in the kiln. Rutile production was lower in response to lower grades being mined in the mid-west during the year. Good progress was also made with the progressive implementation of business improvement program initiatives during the year. By year end the business improvement program for the Western Australian operations was more than half completed with the balance of initiatives to be implemented during the first half of 2004. The improved mining and processing performance of the USA operations resulted in the increased production of all products at both sites. This result was underpinned by the completion of the final stages of commissioning of the Old Hickory optimisation project in Virginia and the relocation of the Green Cove Springs mobile concentrator (MC1) to an adjacent deposit during the first half of the year and was supported by the progressive implementation of business improvement program initiatives during the year. By year end all of the initiatives linked to the business improvement program for the USA. operations had been implemented.

CRL's rutile and zircon production during the year was impacted by difficult mining conditions and a three month shutdown of dredging operations at the Yarraman mine on North Stradbroke Island after the ladder section of the dredging equipment was

roun Praduction mmes	2063	2002	WA Productiv толлега
utile	141,641	167.774	Rutile – mid-wes
vnthetic Rutile	471,776	447.463	Synthetic Rutile
imenite	1,450,552	1,362.793	Synthetic Rutile
ircon	405.685	360.591	Ilmenite - mid-y
eucoxene/Hvti	13.702	11,320	Ilmente - south
oal	1.036.775	1.012.490	Zircon – mid we
e Ilmenite production includes linemie i sed to			Zircon – south v
manufacture synthetic ruthe as well as Hytr 70 in WA and Leucovene in the USA. Production and sales			Hvt 91 WA
aumbers include Thea's 50% interest rull/arama Coal	an an an 1970 an 1970 an 1970 an 1970 an 1970 an 1971 an 1972. Tha an 1970 an 1970 an 1970 an 1970 an 1970 an		NS Limente productio

311
	2003	2002
	25,698	21,684
	66,075	58,066
	198,293	144,672
	30,636	27,760
	43,486	34,303
includes leuroxene.

(1002CA) 707031117054304304304304304304304304304304304304		2003	2002 .
Rutile		46,230	55.830
Ilmenite	123,201		94.373
Zircon		30.433	39,152

damaged in mid-July. Repairs were completed early in the last quarter of 2003 and the dredge was successfully recommissioned shortly afterwards. The impact of the Yarraman shutdown was partially offset by benefits from the business improvement program, including the commencement of dry mining operations in the second half of the year, which enabled CRL to feed additional ore to the floating concentrators at both the Yarraman and Ibis mines. Ilmenite production increased in response to stronger demand and was underpinned by utilising limenite stockpiles on North Stradbroke Island. By year end most of the major initiatives linked to the business improvement program for CRL's operations had been implemented.

	2003.	2002
	69.922	90.260
- mid-west	215.278	209,959
- south-west	256.498	237.504
rest	397.861	403,930
-west	635.177	633.784
st.	245,492	202.347
est	55.639	57.029
	13,702	11,320

SUSTAINABILITY SECTION

EMPLOYEES

During 2003, the Company undertook a major organisational restructure as part of the business improvement program designed to reduce costs and drive improved productivity and efficiencies. throughout Iluka and CRL's operations. This process, which included both voluntary and involuntary redundancies together with natural attrition, resulted in a total of 273 permanent or fixed term employees. feaving Iluka and CRL during the year. Iluka's Australian operations (including corporate functions and the Murray Basin) accounted for 166 positions, the USA 66 positions and CRL 41 positions. At the end of 2003, Iluka employed 1,126 people. throughout its operations in Australia and the USA and a further 208 were employed by Consolidated Rutile Limited.

EMPLOYEE ASSISTANCE PROGRAM

Each of Iluka's operations has an employee assistance program in place for personal or work related matters. Access is available to employees and direct family members. During 2003, employee assistance was sought by 7% of the Group's employees which is comparable with previous years.

EQUAL OPPORTUNITY

Buka contínues to promote a culture of Equal Employment Opportunity (EEO) within its business and results are reflected in the employee survey with this issue rated as one of the best areas of performance. EEO policies and programs continue to be reviewed and improvements sought. Development will also continue on EEO compliance issues including training and awareness, as well as developing diversity management skills within leadership and management teams.

EMPLOYEE DEVELOPMENT

During 2003 a talent identification and development program commenced with the identification of development roles, succession potential and development planning for selected individuals.

A major review of training systems and compliance was also undertaken and a competency based training framework was developed and implemented during the year. Some of the key aspects of the training program include management development, business acumen, equal opportunity. performance management, development of supervisory and leadership skills and operator practices.

HEALTH AND SAFETY

Safety management remained a major focus during 2003. These efforts were rewarded by a significant decrease in the number of injuries during the year.

The key driver of improved safety in 2003 was a significantly higher level of safety awareness throughout the Company which was achieved through:

• the implementation of the EH&S Management System

North Capel operations, Western Australia

te Safety Performance in 2003
strosmande Mezsche	REIGHMONT	South-west Florida		*Aktomia*	- CRL	Exercized
Is÷	鳺	Я	2		7
IFR	-34	73	-7 Q		147
Пś	12	7	3	Τ.	6	-1
IIFR'	85	6.4	-5.8	-31	-10	72
LTIs - lost time min res
LITER - lost time injury frequency rate
MTs - madical treatment injuries

to provide a consistent platform for all operations in a continuous improvement model:

· refinement of personal risk management tools such as "Take Two" and "Job Safety Analysis" and extensive training in the correct use of these programs;
· implementation of behavioural programs such as "Safety Visits" and the "Positive Attitude Safety System" which provide a formal process to conduct interactive safety related conversations;
· ensuring contractors were well versed in and compliant with Iluka EHS requirements;
· improved tracking of corrective actions through the implementation of the Iluka Action Tracking System (IATS); and
· improved safety communications, training presentations and other initiatives to raise employee awareness of safety issues and procedures.

FIT FOR WORK POLICY

Iluka has a Fit for Work Policy in place at all sites and offices to manage work-related issues arising from health, fatigue and drugand alcohol usage. The policy includes education sessions fincluding the consequences of not meeting the Company's standards) and drug and alcohol screening. The testing of both employees and contractors is conducted on a random basis.

existing or future operations. Iloka's 2003 community relations program continued to focus on working closely with neighbours at existing and future operations, consulting with community groups, local governments and indigenous

During 2003 the Company continued to pursue a range of employee health initiatives throughout its operations and offices. Key elements included:

· voluntary influenza vaccinations as a preventative measure against one of the major non-work related illnesses contributing to employee sick leave;

skin cancer, noise and radiation monitoring and implementation of preventative measures; and

• the introduction of tool box topics including health issues such as smoking, diet and other health issues.

WORKING WITH COMMUNITIES

The Company's relationship with its neighbours, key stakeholders and the wider community is vital to its long-term operations. Its community relations program is focused on understanding, supporting and responding to landowner and community needs. The aim is to contribute economic and social benefits to those communities in which Iluka operates and to minimise any potential impacts from

organisations and providing support to community projects through sponsorship and donations.

Key aspects of community consultation activities during 2003 included:

· Western Australia preparation for the development of new mines at Cataby, Gingin and Yoganup West and the closure and rehabilitation of the Stratham West mine site;
Murray Basin, Victoria preparation for the development of the Mineral Separation Plant in Hamilton and the Douglas mine and approval of a water pipeline planning permit application;
CRL, Queensfand ongoing consultation with the Enterprise Project Stakeholder Reference Group, comprised of government, local community, business, conservation group and Quandamooka Land Council representatives: and
USA resolution of the planning approval appeal and preparation for commissioning and operations phases of the Lulaton project in Georgia and expansion of the mobile concentrator (MC1) in Florida.

COMMUNITY SUPPORT

The Company continued to provide financial support to a range of community activities in Western Australia, Queensland and the USA. A total of just over A\$440,000 was committed in Australia and the USA during 2003 and a further A\$50,200 was committed by CRL. Major activities included:

· Western Australia major sponsor of community events including the Sunshine Festival and Australia Day Family Concert in Geraldton, CapelFest, the Bunbury Eisteddfod, South-west High Schools Visions Art Exhibition and the Surf Life Saving junior development program in Bunbury as well as supporting the Gingin Aquatic Centre and South West Aquatic Centre. At a corporate level, the Company also continued to support West Australian Ballet, the Gravity Discovery Centre in Gingin, the Scitech Discovery Centre in Perth, the Mining Hall of Fame, Leeuwin Ocean Sailing Adventure and the Western Australian Youth Minister's Awards.
· Murray Basin, Victoria supported a range of environmental and conservation initiatives including a Carp Cull at Rocklands Reservoir, landcare volunteers and the Hamilton based Southern Aurora solar car team.
CRL, Queensland supported the Moreton Bay Dugong population research program being undertaken by the University of Queensland and youth events including Young Achievement Australia's Youth Business Skills Program and an international cultural exchange program organised by Teen Care Indigenous Youth Services.

CRL also provided funding to several organisations including the North Stradbroke Island Ambulance Service, Volunteer Marine Rescue, North Stradbroke Island Auxiliary Fire Service and Pinkenba State Primary School.

· Florida, USA supported the Bannerman Learning Centre's on-site learning cooperative reclamation program and annual community events including the Clay County Fair, St John's River Clean Up and Clay Envirothon.
· Virginia, USA supported local emergency services agencies including the American Red Cross for hurricane relief as well as community initiatives including Emporia's water quality monitoring program, a road clean-up program, Virginia's annual Peanut Festival and field days held by local schools.

COMMUNITY COMPLAINTS

The Company puts considerable effort into minimising the impact on local communities from its mining and processing activities through monitoring the impact of its activities and continually improving the performance of its existing and planned future operations. As part of the monitoring process, the communities residing near operations have been actively encouraged to lodge complaints with Iluka when they are impacted by issues such as dust, noise and odours. Despite increased activity levels at all existing sites plus the inclusion of the Murray Basin for the first time, a total of 46 complaints were received by the Company in 2003, a decrease of 17 compared with 2002.

An Ilaka sponsored bailet student in rehearsals with West Australian Bailet

Completing			Kanada yaiti ya kasa kana yingizi
Dust		10	miniminiminiminiminiminiminimeseessaaressaassassa
Odour	2	0
Roads		Л.		Э.	×.	2.
Noise		4
Other		э	7	1	4
2003 Total	ą	26.	7	$\Gamma_{\rm i}$	2	٦.
2002 Total	$1 -$	35	n/a	Q

The following are examples of actions taken in 2003 in response to community complaints:

Western Australia dust monitoring was established in the Eneabba town site and hydro-mulching of exposed areas at the mine sites increased following complaints in 2002. Combustion gas analysers were installed on both kilns at Narngulu to improve the performance of the afterburners and reduce odour emissions. At North Capel the process for logging and responding to local land owner concerns regarding odours was further refined. Noise monitoring stations were placed at nearby residences and further noise. preventative measures were also implemented. In addition, a number of potential engineering solutions were investigated to resolve the odour issue at the North Capel site. The preferred solution is an afterburner coupled with an additional oxides of sulphur (SOx) scrubber and a project manager has been appointed to conduct the feasibility work in 2004.
· Murray Basin, Victoria a review of auger holes on landholder property from previous exploration activities was undertaken and rehabilitation activities conducted.
· CRL, Queensland alternative parking arrangements were made for CRL vehicles at the Dunwich water taxí carpark.
Site Environmental Performance $\ln 2003$ ில்லி Performance Measure Mid-west Santones Level 5 incidents Level 4 incidents Level 3 incidents $\mathcal{K}_\mathrm{c}$ $\Delta$ NB There were no significant spills to report or incidents and/or fines for non-compliance with all applicable international declarations, conventions, treaties and national, state, regional and local regulations associated with environmental issues.

Workplace safety information about CRL's mineral products was distributed in response to an engairy regarding material stored at CRL's Dunwich barge foading facility.

· USA - haulage trucks in Florida were re-routed to internal mine service roads and new seals installed around truck tailgates. Additional training for haulage truck drivers in Virginia was conducted and speed monitoring initiatives implemented.

ENVIRONMENTAL PERFORMANCE

AIR EMISSIONS

Management of environmental and associated issues remained a key focus for the Company in 2003. These efforts were rewarded by a significant decrease in the number of environmental incidents recorded during the year. Iluka classifies environmental incidents according to severity. The key indicators of performance are fevel three (local environmental effect) level four (major environmental effect) and level five (massive environmental effect).

Periodic reviews of all air emissions are conducted by both internal and external independent experts. In all cases the results have confirmed that the emissions from Iluka's sites are well within relevant approved levels and national standards and do not pose a threat to the community or environment.

Sulphur is present in the coal used in the production of synthetic rutile and at North Capel, elemental sulphur is also added to remove impurities to meet customer specifications. Overall the SOx emissions for the Company decreased by 32% in 2003. compared with 2002, due mainly to operational improvements at the North Capel site. Accordingly, Group SOx emissions per tonne of product decreased by 41%.

The SOx produced from synthetic ratile production in the south-west accounted for approximately 90% of the SOx produced by Iluka. The next largest producer of SOx was the synthetic rutile process at Narngulu which produced 9% of the total. Mineral separation processes in Western Australia, CRL and USA produced less than 1% of the total SOx emissions.

Particulates are solid particles contained in gas emissions from processing activities and burning-off activities. Generally most of Iluka's particulates are produced by the synthetic rutile process in Western Australia and in 2003 it accounted for approximately half of Iluka's total particulates. Total particulates increased by 36% in 2003 due primarily to CRL burning larger than normal amounts of cleared timber and variations in the quality of coal used at North Capel. As a result, Group partículate emissions per tonne of product increased by 32%. In 2004, CRL expects to significantly reduce its timber burning requirements which should see Iluka's overall particulate levels return to around 2002 reported levels.

WATER MANAGEMENT

Water management is a key priority at all Iluka operations. The focus is on minimising water use and ensuring there are no adverse impacts on surface and groundwater. Whilst overall water use increased by 3% due mainly to production increases at the Eneabba mine sites, Group water use per tonne of product decreased by 2.7%.

Monitoring programs are also in place at all sites aim to ensure water discharge does not contaminate surface or groundwater. Water bodies are monitored for a range of variables including salinity, turbidity, pH fevels and dissolved metals. Rehabilitation work continues at sites where groundwater contamination has occurred or an impact on water levels has been detected.

ENERGY USE

Despite higher overall levels of production the amount of energy used by Iluka's operations decreased by 3% in 2003. compared with 2002. This was primarily a result of better management of electricity and diesel in the USA and the optimal use of pumping stations by CRL. The south-west and mid-west operations in Western Australia account for most of the Company's energy requirements (44% and 48% of the total energy consumption, respectively) through the use of coal in the production of synthetic rutile. Overall, Buka's energy usage per tonne of product decreased by 7.7%.

Illuka's dursery at Green Cove Springs, Florida, USA.

GREENHOUSE GAS

The figures used to calculate CO, equivalent emissions (CO2e) include both Iluka's direct greenhouse gas production through coal use in SR production and the use of other fuels in operations and indirect production through electricity consumption. The amount of CO2e produced in 2003 increased

by 26% compared with 2002. Part of the reason for the increase in 2003 was the inclusion for the first time of the USA operation's indirect CO₂e production figures. The balance of the increase was mainly due to more SR kiln re-starts (following shutdowns or production disruptions) in the mid-west and an increased amount of cleared timber being burnt off by CRL.

Oxides of Sulphur (SOx) Particulates $2002$ 2002. 2003 (tomes) $2003$ (to mes) $287$ $327$ Mid-west 249 $276$ Mid-west South west 2,934 4,415 South-west 184 154 CRL CRL 330 4. -4 58 Florida 34 28 Florida $93\,$ $\mathbf{3}$ $0.4$ Virginia Virginia 3,266 $4,774$ Total $821.4$ $527$ Total

Total	49.919	48,516
Игдија	347	1.19
Florida	1,500	1,502
CRI	25.329	25,687
South-west	5,274	5.289
Mid-west	17.469	14919
(mega ikres)	2003	2002

Energy Use (teratoliles)	2003	2002	Ē. 銚
Mid-west	5.323	5,416	نشنا Ćб
South-west	5,897	5.862	Еk
CRL	518	571	Db
Florida	424	530	Νż
Virginia	219	243	Fu
Total	12.381	12.622	ĽP.
			Pe

LAND USE

community assets, as appropriate. are tailored accordingly.

The amount of land disturbed in 2003 decreased by 2.5% compared with 2002 as a result of fewer new mine areas being opened. There was also a 52% reduction in rehabilitation areas due to the completion of rehabilitation activities during 2003. Bowever this trend will be reversed in 2004 and 2005 as a number of rehabilitation projects are scheduled to commence during this period.

Iluka contínues to operate in accordance with the Australian and New Zealand Minerals and Energy Council Strategic Framework for Mine Closure (2000). Examples of major closure projects underway at Iluka at the end of 2003 include the evaluation of the Green Cove Springs dredge and minerals concentrator in preparation for its decommissioning and closure in 2004.

ia di Resolu

ed (%)....

etricity

tural gas

.
Sel

el offici

trall

Iluka has in place measures to minimise disturbance and to re-establish disturbed areas as sustainable ecosystems and As mining takes place in a range of different environments including grazing and cropareas, timber plantations and in some areas of native vegetation, environmental management and rehabilitation strategies

A range of management and research programs are also in place to protect significant species and ecosystems. Detailed baseline flora and fauna studies are carried out before any operation begins to establish objectives, programs and targets for protecting and restoring native ecosystems and species. If significant species are identified, mine plans are altered to ensure there is minimal impact and comprehensive management programs are put in place to ensure their protection. Examples of significant species management programs include Oxleyan Pygmy Perch and Koala tracking at CRL, Gopher Tortoise relocation programs in Florida, a threatened ecological community at Yoganup West and remnant vegetation adjacent to the mine pit at the Yoganup Extended mine.

BY-PRODUCTS

Most mineral separation by-products are made up of material found in the ground as part of the mined ore which have been separated from the commercial product. The increase in the quantity of dry milltailings (silica and quartz) produced in 2003 was due to the naturally occurring composition of the ore being processed. Dry mill tailings are an environmentally inert material which is placed back into mine voids prior to the replacement of overburden and topsoil.

ces
	2003 60.5	2002 58.7
	155	15.6
	11.6	11.2
	10.6	103
	16	30
	ØΠ	11
Í ł ï Ĭ Ï Í j ļ Ï Ì	ł 0.1	0.1
:::: : ::::: ┋	┋ : ::::: ┋ ┋ į $\ddot{}$ ┋	$\ddot{}$ ‼ $\ddot{}$ ┋ ::::: $\ddot{}$ ::::: ::::: ┋ i

Total	1876	1.307
Virginia	63	241
Florida	147	50 ¹
CRL	179	121
South west	596	578
Mid-west	891	615
(KCO) e) และคนพบคนและคนของคนของคนของคนแน่งคนของคนของคนของ	2003	2002 MARKASHALLAMARKALLI

	1918.	Remot	Elistorileg	kenan
Withwest	210	-110	-193	73.
South-west	130.	104	120	183
CRL	98	68	140	124
FLORIDA	193	-53	212	368
VIRGINIA	90	41	74	-31
Total	72 I	385	739	779

In Western Australia ilmenite is upgraded to synthetic rutile (SR). The main by-product streams from SR processing are iron oxides, neutralised acid effluent (NAE), nonmagnetic fines (NMF), char and sinter and kiln and oversize material. The quantity of from oxide and NMF produced is dependent on the naturally occurring fron content of the feed ilmenite, which increased slightly in 2003, resulting in small increases in both by-products.

Buka contínues to investigate re-use or products including:

Char During 2003 Iluka provided approximately 1,100 tonnes of upg char to Norit NV in the Netherland The upgraded char has a high leve activation and is blended into Nori range of gas treatment activated carbon products.
· Neutralised acid effluent This contains calcium, magnesium, iron, manganese and sulphur and has been

converted into a sustained release oranulated sulphur fertiliser available for commercial use. The development of improved fertiliser products with more specific crop targeting commenced during the year. A new fertiliser aimed at providing all the sulphur and trace element supplement for canola will be released for the 2004 autumn planting season. If this approach is successful, other crops 115 Eist aufskundendeamaate uill i

and retains moisture and nutrients, particularly phosphorus. The trials, on one hectare plots, examined surface and ground water impacts, plant

growth (pasture), plant tissue analysis, sheep development on the pasture and animal tissue analysis. The trial monitoring will continue over five years.

-2003

$253$

239

492

$2002$

248

236

483

Synthetic Rutile Netroducts

(kilo tonnes)

Mid-west

South-west

Total

Iron Oxide shipping trials -Negotiations with a medium sized pigiron producer in China have resulted in a contract to supply from oxide. The contract is dependent on successful delivery and treatment of a 10,000 tonne shipment in 2004.

	with high sulphur requirements will be
it bv-	targeted and specifically formulated fertilisers will be developed.	WASTE MANAGEMENT
araded. ls. el of iťs	Soil conditioner trials - The residue ٠. from the neutralisation of used acid was trialled as a soil conditioner for improved rehabilitation treatment. This material (the base for the fertiliser developments) is very fine	The emphasis in 2003 was on implementing site-by-site waste reduction programs. Site waste management practices are shown below.

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 of 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. Buka is currently producing the natural heavy mineral products rutile, leucoxene, ilmenite and zircon.

events over many years.

.
Western Australia.

ISto.	Oemara TALLWASTE	Akologathon contagnizated Maste	Tyres:	Taber 2m Cardboard	Scrap Metal	Washe Grease .R OK	Batteries
Virginia	RF8T	RF8T	C	RE & L	RF.	RF 8 II	RF 8 C
Florida	REAT	T.,	RE 8 0	11	RE81	RFR	RF
Eneabba	T & O	ா	RU.	Т.	RE	RE & RU	RE.
Geraldton	T & A	ा	RH.	RF.	RF	RF.	RE.
South-west	108 RU	ി	£.	RF.	RF	$\mathbb{C}$	- 13
CRL	RE. RU & L	RE RU& C	C.	RE.	RE.	RE & C	RE & T
Jable Key	U.S. Disposal to Lang Edl RU = Reuse The product of the product of the product of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of t	T= Treatment off site Des Un site Treatment AND A 1990 DOMESTIC AND RESIDENT TO BE CONTROLLED AND RELEASED FOR

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

Heavy mineral concentrate stockpile near Capel,

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 buried beaches of the Murray Basin (formed about 5 million years ago).

MINERAL RESOURCE ASSESSMENT

Iluka uses the reverse circulation, air core drilling method 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 minerals 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 guidelines supplied in the JORC (1999) code.

ORE RESERVE ESTIMATION

Buka listed Ore Reserves are included in the fisted 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 long-term 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.

During 2003, successful exploration efforts in the Atlantic and the Western Australian Basins enabled the Company to offset the majority of the reserves depleted during the year. After production of 2.53 million tonnes and allowing for adjustments, the Company's heavy mineral reserves at the end of 2003 (expressed as in-situ tonnes of heavy mineral) were 39 million tonnes, a reduction of 0.62 million tonnes compared with the reserves position at the end of 2002. The Company's year-end reserves position also takes into account the results of a revision of CRL's reserves position following mining depletion in 2003 and completion during the year of a mining optimisation study for the Enterprise deposit on North Stradbroke Island (Iluka's share of the reduction in CRL's reserves was 1.05 million tonnes).

MINERAL RESOURCE, ORE RESERVE FLUCTUATIONS

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.

During 2003, additional heavy mineral resources (approximately 12 million tonnes) were discovered in the Murray Basin which more than offset the small reductions in resource estimates in Virginia and Western Australia. However, the Company's overall heavy mineral resource position decreased by 75 million tonnes of heavy mineral by year end, primarily as a result of a decision to relinquish the Sri Lankan exploration tenements. The relinquishment decision was driven by resource quality and accessibility considerations and will not have a material impact on Iluka's future operations, as these resources were predominately low quality ilmenite.

Titarium minerals are used extensively in the manufacture of paint.

							MM Assemblage		Reserve
Coustan	Province	012. Reserve	ार Tonnes	10 SPA 1994 fonnes.	HW. Grade	Im Brade	Zircoti Grade	Ruthe Grade	Change ha tomes
		Calegory	Miliens	Millions	(%)	W)	08	(20)	MHIORS
Alizzi dild	WA - mid-west	Proved	42.87	3.11	7.3	60	16	$\ell$
	WA-mid-west	Probable	178.87	10.64	59	50.	13	Ÿ.
Total	WA - mid-west		221.74	13.75	6.2	52	14	7.	1.13
	WA-south-west	Proved	25.59	3.15	12.3	86.	7	1
	WA south-west	Probable	82.81	6.93	84	80	9	1.
Total	WA - south west?		108.40	10.08	93	$82\,$	8	1.	(0.90)
	Murray Basin	Proved	35.20	3.52	10.0	35.	8	40.
	Murray Basin	Probable	12.20	113	93	42.	$15\,$	10
Total	Murray Basin		47.40	4.65	9.8	37.	10	10.
	CRL North Stradbroke Island*	Proved	292.99	2.62	09	44	$11\,$	14	(1.05)
	CRL North Stradbroke Island ⁴	Probable	100.53	0.81	08	43	$11\,$	13
Total	CRL North Stradbroke Island million million		393.52	3.43	0.9.	43.	11	14
USA	Florida/Georgia	Proved	41.40	0.80	-19	42	$13\,$	15
	Florida/Georgia	Probable	106.70	3.04	28	38	$\mathbb{1} \mathbb{1}$	10
Total	Florida/Georgia		148.10	3.84	26	39.	Ш	11	0.11
	Virginia	Proved	15.30	150	98	66.	18
	Virginia	Probable	18.53	173	93	70.	16
Total	Virginia		33.83	3.23	95	68	$17\,$		0.09
Total	Proved		453.35	14.70	32	56.	11	$\mathcal{I}^{\mathcal{P}}$	0.53
Total	Probable		499.64	24.28	49	58	$12\,$	6	(1.15)
Total	Grand Total		952.99	38.98	$ 41\rangle$	57	$12\,$	6	(0.62)

The resources and reserves have been complied by Tuka staff and reviewed by Mr Peber McGoddrick, a Corporate Member of the AustMM and full time employee of Duka Resources Limited with sufficient experience in this style of imperalisation to be repartied as a Coppetent Person as defined in the 1999 edition of the "Australian Code for Reporting of Militeral Resources and Ore Reserves". Mr McGoldrick has agreed to the mclusion in the rejoint of these matters based on their information in the form and confent in which it appears in this report.

Countsy	Province	Kesenke	10 SAMANI Tomes Millions	IIII le schi HM Toones Milicas	HM Tonno Militana	HM Tonnes Millions	HM Jounes Miliont
			2003.	2002	Met Difference	Mined 2003	Adusted 2013
Ansoroba	WA mid-west	Active Mines	3.38	5/3	(2.35)	(1.16)	(1.19)
	WA-mid-west	Other Deposits	1037	6.89	3.48		3.48
Total	WA mid-west		13.75	12.62	113	(1.16)	2.29
	WA - south west	Active Mines	0.87	1.60	(0.73)	(0.68)	(0.05)
	WA - south-west	Other Deposits	921	9.38	(017)	æ	(0.17)
Totall	WA south west		10.08	10.98	(0.90)	(0.68)	(0.22)
	Murray Basin	Active Mines		W		۰.	88
	Murray Basin	Other Deposits	4.65	4.65	W	÷.
Total	Murray Basin		4.65	4.65	82	m	X
	CRL North Stradbroke Island	Active Mines	076	0.88	(0.12)	(0.13)	0.01
	CRL North Stradbroke Island	Other Deposits	2.67	3.60	(0.93)		(0.93)
Total	CRL North Stradbroke Island ^k		3.43	4.48	(1.05)	(0.13)	(0.92)
USA	Florida/Georgia	Active Mines	0.56	0.66	(0.10)	(0.19)	0.09.
	Florida/Georgia	Other Deposits	3.28	3.07	021	w.	0.21
Total	Florida/Georgia		3.84	373	0.11	(0.19)	0.30
	Virginia	Active Mines	2.22	212	0.10	(0.37)	0.47
	Virginia	Other Deposits	ĪШ	1.02	(0.01)		(0.01)
Total	Virginia		3.23	3.14	0.09 ₁	(0.37)	0.46
Total	Active		7.79	10.99	(3.20)	(2.53)	(0.67)
Totall	Non-Active		31.19	28.61	2.58		2.58
Total	Reserves		38.98	39.60	(0.62)	(2.53)	1.91

DEFINITIONS

A "Mineral Resource" is a concerdration or occurrence of material of intrinsic economic interest or on the Earth's crust in such form and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a Maxeral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided, in order of increasing geological confidence, into Interred, Indicated and Measured categories.

An 'Inferred Mineral Resource' is that part of a Mineral Resource for which tonnage, grade and mineral content can be estimated with a low level of confidence.

An Tadicated Mineral Resource' is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content content can be estimated with a reasonable (evel of confidence.

A "Measured Mineral Resource" is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence.

An 'Ore Reserve' is the part of a Measured or Indicated Mineral Resource which can be economically mined. It indudes diluting materials and allowances for losses which may occur when the material is mined. Appropriate assessments, which may include feasibility studies, have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified. One Reserves are sub-divided in order of increasing confidence into Probable Ore Reserves and Proved Ore Reserves.

A 'Probable Ore Reserve' is the part of an Indicated and in some dircumstances Measured Mineral Resource which can be economically mined.

A 'Proved Ore Reserve' is the part of a Measured Mineral Resource which can be economically mined.

Canata Province Australia	WA - mid-west	Mineral Resource Category	Material Tonnes	10 Star HM Romes	188	Bu	HM Assemblage Arcen i i Kare		Resource Change

			Millions	Miklions	Grade (%)	Grade Ø	firade (M	Grade 1961.	HM Jornes Mittions
		Measured	401.09	21.15	5.3	50	11,	$\mathcal{I}$
	WA nud-west	Indicated	292.67	18.06	6.2	50,	13.	6.
	WA-mid-west	Inferred	147.86	5.27	3,6	55	$11\,$	\$.
Total	WA - mid west		841.62	44.48	53	$51\,$	$12\,$	$\mathcal{I}$	(5.25)
	WA south-west	Measured	250.53	21.27	85.	81	$\mathbf{B}$	1.
	WA south west	Indicated	224.67	17.84	19	78.	8	$\boldsymbol{2}$
	WA southwest	Inferred	194.16	15.16	78	78	Ž.	$\overline{2}$
Total	WA-south-west		669.36	54.27	81	79	8	$\mathbf{2}$	(2.08)
	Murray Basin	Measured	33.97	3.37	99	43.	9.	S.
	Murray Basin	Indicated	142.59	18.41	12.9	45	9,	$13\,$
	Murray Basin	Interred	296.15	27.95	94	53	10.	$1\mathbb{I}$
Totali	Murray Basin CRL North		472.71	49.73	10.5	49	10.	Щ	12/4
	Stradbroke Island*	Measured	588.02	5.01	-0.9	44	IJ	$14\,$
	CRL North Stradbroke Island* [[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[	Indicated	217.15	1.69	0.8	44	11	$13\,$
	CRL North Stradbroke Island"	Interred	3.24	0.04	12	46.	10	$12\,$
Total	CRL North
	Stradbroke Island"		808/41	6/4	0.8	44	HU.	$13\,$	0.22
psa	Florida/Georgia	Measured	202.21	5.07	2.5	42.	12.	$12\,$
	Florida/Georgia	Indicated	184.48	4.10	2.2.	41	$12\,$	$12\,$
	Florida/Georgia	Interred	152.25 538.94	4.23 13.40	2.8	46.	13.	B
Total	Florida/Georgia Virginia	Measured	60.33	4.69	2.5 78	43 $68\,$	12 $\perp$ 7	$\mathbf{11}$	0.36
	Virginia	Indicated	4.80	0.24	5.0	65	16
	Virginia	Interred	0.18	0.01	5.6	$68\,$	20 ₁
Total	Virgínia		65.31	4.94	76	68	$1\%$		(1.44)
Sa Lanka	Sri Lanka (Iluka)	Indicated			2000	÷	2
Total	Sri Lanka (Iluka)						89	g	(39.73)
	Sri Lanka (CRL) ⁴	Indicated			B	S.	88	÷,
	Sri Lanka (CRL) ⁴ 8888	Interred			ş		S,
Total	Sri Lanka (CRL) ⁴				ż		ň.		(40.04)
Total	Measured		1,536.15	60.56	39	61	$\overline{10}$	S.	$0.79\,$
Total	Indicated		1,066.36	60.34	$5\,I$	56	10	8,	(79.33)
Total	Interred		793.84	52.66	66	$60\,$	9.	Ÿ.	3.32
Total	Grand Total		3,396.35	173.56	31	- 59	10	T,	(75,22)
Motes:	All mineralogy is reported as a percentage of in situ HM content.

CORPORATE INFORMATION

EXECUTIVE GENERAL MANAGERS

MARK HIMBES .
TRIEF FINANCIAL ORFICER

Mr Hughes (46) joined Iluka in early 2001 as the Chief Financial Officer after 12 years with Río Tinto working in various senior financial roles in London and Australia.

Key Accountabilities - To drive financial governance processes which include accounting, financial reporting, taxation, investor relations and financial risk management, to ensure an optimum capital structure including cost-effective funding for existing and future business needs and to drive the processes for strategic planning, procurement and supply, information technology and business development, including mergers and acquisitions.

.
PRESIDENT ILUXA USA AND EXECUTIVE GENERAL MANAGER SALES AND MARKETING

DR STEVE WARD

Dr Ward (48) joined Iluka in 1999 as the Zircon Business Manager before taking up the senior marketing position in 2001 and responsibility for the USA operations in mid-2002.

Key Accountabilities - To improve the

bottom line business performance of the

implement profitable growth opportunities

for the USA operations. Also accountable

for global sales and marketing of mineral

existing USA assets and to create and

sands products.

BILL BISSET EXECUTIVE GENERAL MANAGER AUSTRALIAN OPERATIONS

Mr Bisset (41) joined Iluka in late 2002 after 17 years in sand mining/guarrying 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 Buka's interests in the Murray Basin and to create and implement further profitable growth opportunities in Australia. Also accountable for engineering and maintenance, operations planning, land access and management in Australia and the governance of the environment, health and safety performance throughout Buka.

GEORF ALLAN

EXECUTIVE GENERAL MANAGER HOMAN RESOURCES

Mr Allan (59) 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 Buka has a capable and committed workforce to meet existing and future business needs.

CORPORATE GOVERNANCE STATEMENT

Ileka Resources Limited's Directors are appointed by shareholders to act on their behalf in the interest of the Company.

The Directors have undertaken, through a code of conduct, 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. The Company and its controlled entities are referred to as the Group in this statement.

ROLE OF THE BOARD OF DIRECTORS

Responsibilities of the Board include:

· appointment, performance assessment and, if necessary, removal of the Managing Director;
· ratifying the appointment and/or removal and overseeing the performance assessment for the members of the senior management team:
· ensuring there are effective management processes in place:
· approving major corporate initiatives;
· ensuring the significant risks facing the Group have been identified and appropriate control, monitoring. accountability and reporting mechanisms are in place;
· contributing to the development of and approving the corporate strategy;
reviewing and approving business plans, the annual budget and financial plans, including available resources and major capital expenditure initiatives;
· overseeing and monitoring:
organisational performance and the achievement of the Group's strategic goals and objectives; and
progress of major capital expenditures and other significant corporate projects including any acquisitions or divestments.
· reporting to shareholders and the broader investment community; and
· monitoring compliance with external regulations and internal codes of conduct.

The Chairman is an independent nonexecutive Director appointed by the Board. The Chairman is responsible for leading the Board, ensuring that the Board activities are organised and efficiently conducted and for ensuring Directors are properly briefed at meetings. The Managing Director is responsible to the Board for implementing Group strategies and policies and the dayto-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.

The Board is currently developing a Charter to take into account the best practice recommendations of the Australian Stock Exchange's Corporate Governance Council. When adopted, the Charter will be placed on the Company's website www.iluka.com.

This statement outlines the principal corporate governance practices followed throughout the financial year.

BOARD MEMBERS

Details of the Members of the Board, their date of appointment, experience, expertise and qualifications are set out in the Directors' Report under the heading "Directors' Profiles".

nominated by the Remuneration &

Mr Bourke (41) joined Iluka in 2001 as Group Manager of Planning after six years in engineering and planning roles with WMC Resources. He was appointed to his current position in mid-2002.

Key Accountabilities - To deliver company-wide services in technology (key focus areas are a new synthetic rutile plant, product quality and by-product revenue options), geology and exploration. Also accountable for engineering services on expansion projects at CRL (Qld) and Georgia (USA) and the business improvement program.

· monitoring financial performance including approval of the annual and half year financial reports and liaison with the Company's auditors;

The Directors in office were considered and Nomination Committee based on the skills and experience they could bring to Board deliberations on current and emerging

issues. Details of the Remuneration and Nomination Committee are set out below.

In addition, the Board seeks to ensure that:

· at any point in time, its membership represents an appropriate balance. between Directors with experience and knowledge of the Group and Directors with an external or fresh perspective; and
the size and composition of the Board is conducive to effective discussion and efficient decision making.

DIRECTORS' INDEPENDENCE

The Directors have recognised and applied specific principles in relation to Directors' independence, as recommended by the Australian Stock Exchange Corporate Governance Council. These state that to be deemed independent, a Director must be a non-executive and:

not a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company;
within the last three (3) years not employed in an executive capacity by the Company or a controlled entity, or been a Director after ceasing to hold any such employment;
within the last three (3) years not a principal of a material professional adviser or a material consultant to the Company or a controlled entity, or an employee materially associated with the service provided;
not a material supplier or customer of the Company or a controlled entity, or an officer of or otherwise associated directly or indirectly with a material supplier or customer;
· must have no material contractual relationship with the Company or a controlled entity other than as a Director of the Group;
. not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the Director's ability to act in the best interests of the Company; and
is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the Director's ability to act in the best interests of the Company.

The Board has reviewed and considered the positions and associations of each of the eight Directors in office at the date of this report and considers that seven of the Directors are indenendent.

Mr Richard Tastula served as Interim Managing Director in early 2002 during the recruitment period for a Managing Director. Not withstanding this the Board considers Mr Tastula an independent Director given the clearly temporary nature of this executive assignment.

Mr Mike Folwell, Managing Director & CEO, is not considered to be independent.

TERM OF OFFICE

The Company's Constitution specifies that all Directors, with the exception of the Managing Director, must retire from office no later than the third annual general meeting following their last election. The Board has resolved that to enable continual renewal of its membership, Directors will offer their resignation after three terms, (a term being three years from election at an annual general meeting). The Board will then elect to accept or reject the resignation.

INDEPENDENT PROFESSIONAL ADVICE

BOARD PROCESS AND PERFORMANCE REVIEW

Periodically the Board carries out a formal review of its performance in meeting its key responsibilities. This review is carried out by external consultants when appropriate. The results and any action plans arising are documented together with specific goals. which are agreed for the coming year. This assessment was last undertaken during the period of December 2003 to January 2004.

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.

CORPORATE REPORTING

The Managing Director and CFO have made the following certifications to the Board:

that the Company's financial reports are complete and present a true and fair view, in all material respects, of the financial condition and operational results of the Company and Group; and
the above statement is founded on a sound system of internal control and risk management which implements the policies adopted by the Board and that the Company's risk management and internal control is operating efficiently and effectively in all material respects.

BOARD COMMITTEES

To assist in the execution of its responsibilities, the Board has established two Committees, both comprised wholly of non-executive Directors. Both of these Committees have formal Charters, approved by the Board, and periodically review their respective performances.

The Company Secretary provides secretarial services for each of the Committees. Regular reports of the Committees' activities are given to the Board and minutes are circulated to all Directors.

REMUNERATION AND NOMINATION COMMITTEE

The Remuneration and Nomination Committee consists of the following nonexecutive Directors, Ms V.A. Davies (Chairman), Mr G.D. Campbell, Mr I.C.R Mackenzie and Mr R.A. Tastula.

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 responsibilities include:

reviewing the appropriateness of the size and composition of the Board and 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 those reporting directly to him; and
· reviewing the remuneration of the nonexecutive members of the Board.

The Board and the Remuneration and Nomination Committee review their Charter annually.

Fees paid to non-executive Directors of the Company are based on advice received from independent external remuneration consultants. This advice takes into consideration the level of fees paid to Directors by similar sized Australian corporations, the size and complexity of the Company's operations and the responsibilities and work requirements of Board members. Particulars of emoluments paid to or for the account of Directors during 2003 are contained in the Directors' Report.

At the Annual General Meeting in May 1999, the shareholders approved the Directors' participation in a defined benefit superannuation retirement plan. With effect from 1 July 2003, the Directors resolved to cease their participation in this category of

NON-EXECUTIVE DIRECTORS' REMUNERATION

the plan and now participate in an accumulation category with contributions equivalent to the superannuation quarantee levy. Fees were adjusted accordingly.

Board fees are not paid to the Managing Director since the responsibilities of Board membership are considered in determining the remuneration provided as part of his normal employment conditions.

MANAGING DIRECTOR AND SENIOR EXECUTIVES' REMUNERATION

Each member of the senior executive team has entered into a formal employment contract at the time of their appointment covering a range of matters including their duties, rights, responsibilities and any entítlements on termination.

Executive remuneration and where appropriate other terms of employment are reviewed annually by the Committee having regard to personal and corporate performance, contribution to long term growth, relevant comparative information and independent expert advice.

In determining the remuneration payable to senior executives, the Committee takes account of advice from the Company's human resources specialists and advice received from independent remuneration consultants. Senior executives' remuneration is made upof three (3) components:

· base salary and benefits this element reflects the size of the job and the level of skill and experience of the individual and also includes superannuation and other ancillary benefits;
short-term incentive the amount paid is determined by annual performance. against business targets for the Company and the business or service unit for which the executive is responsible. Targets are set for the year and recommended by the Committee to the Board and the quantum of the incentive is then determined and recommended by the Committee to the Board on the basis of

demonstrated performance against those targets at the end of the year; and

long-term incentive - this is delivered through the Directors', Executives' and Employees' Share Acquisition Plan, which was approved by shareholders in 1999 and links the executive's reward directly to the growth in the Company's total shareholder return. This aspect of the reward program focuses the executive on the future performance of the Company over the next three years.

Iluka needs to remain competitive in each of these components of its remuneration program in order to secure, retain and motivate top quality executives from a highly competitive market. In recent years, the emphasis in executive remuneration, consistent with most other comparable companies, has been shifting towards the variable elements of the reward program being the short and longterm incentives related to individual and Company performance.

ALIDIT COMMITTEE

The Audit Committee consists of the following non-executive Directors, Professor J.R. de Laeter (Chairman), Mr W.H.J. Barr, Mr I.C.R Mackenzie, Mr D.M. Morley and Mr R.A. Tastula.

The Audit Committee has appropriate financial expertise and all members have a working knowledge of the industry in which the Group operates. The Board and the Audit Committee review the Audit Committee's Charter annually.

The responsibilities of the Audit Committee include assisting the Board to fulfil its 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 financial information prior to release to shareholders;
reviewing the accounting policies adopted within the Group:
reviewing the quality of the internal and external audit functions: and
reviewing and approving audit plans including identified risk areas.

In fulfilling its responsibilities, the Audit Committee:

· receives regular reports from management and the internal and external auditors:
· meets with the internal auditors at least four times a year, or more frequently if necessary;
· meets with the external auditors at least three times a year, or more frequently if necessary;
· reviews any significant disagreements between the auditors and management, irrespective of whether they have been resolved; and
· provides the internal and external auditors with a clear line of direct communication at any time to either the Chairman of the Audit Committee or the Chairman of the Board.

The Audit Committee has authority, within the scope of its responsibilities, to seek any information it requires from any employee or external party.

Periodically the Chairman of the Committee meets with both the internal and external auditors independently from management. The Audit Committee is responsible for recommending to the Board the appointment and dismissal of the internal and external auditors and their remuneration.

EXTERNAL AUDITORS

The Company's current external auditors are PricewaterhouseCoopers. The effectiveness, performance and independence of the external auditors is reviewed by the Audit Committee.

If it becomes necessary to replace the external auditors for performance or independence reasons, the Audit Committee will then formalise a procedure and policy for the selection and appointment of new auditors.

There are proposals to amend the Corporation's Act to require external auditors to make an annual independence. declaration, addressed to the Board of Directors, declaring that the auditors have maintained their independence in accordance with the Corporation's Act 2001 and the rules of the professional accounting bodies.

PricewaterhouseCooper's existing policy requires that its audit teams provide such a declaration and a declaration was provided to the Audit Committee for the financial year ended 31 December 2003.

PrícewaterhouseCoopers has a policy for the rotation of the lead audit partner for their clients. In accordance with this policy, the lead audit partner will be rotated at the conclusion of the audit for the year ending 31 December 2005. This policy and its application to the Company will be reviewed in light of the changing regulatory environment such as proposed legislative amendments.

INTERNAL AUDITORS

The internal audit function assists the Board by undertaking an objective evaluation of the Company's risk and internal control framework. The Audit Committee is responsible for approving the program and scope of internal audit reviews to be conducted each financial year.

An assessment of the quality and focus of the internal audit function is undertaken periodically as part of the review of Audit Committee effectiveness. The internal audit function for the Company is undertaken by KPMG.

INTERNAL CONTROLS AND MANAGEMENT. OF RISKS

The management of risk is important in the creation of shareholder value and is a highpriority for the Board and management.

The Company is in the process of developing a more comprehensive framework to safequard the Company's assets and

CODE OF CONDUCT

The Company has developed a Statement of its Vision, Values and Behaviours and 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.

SHARE DEALINGS The Board has adopted a Code of Conduct for Directors which establishes guidelines for their conduct in matters such as ethical standards and conflicts of interests. The

ceramic lifes and other household products.

interests and ensure that business risks are identified and properly managed. There are currently procedures and limits in place to manage financial risk associated with exposures to foreign currencies and financial instruments. To assist in discharging its responsibility, the Board has in place a control framework which includes

· a comprehensive annual business plan, approved by the Directors,

incorporating financial and non-financial key performance indicators;

· requiar reporting to the Board on a number of key areas including safety, health, environment, treasury, insurance and legal matters;

adoption of clearly defined guidelines for capital expenditure including annual budgets, detailed appraisal and review procedures, fevels of authority and due difigence requirements where businesses are being acquired or

divested; and

the following:

· a comprehensive insurance program, including risk assessment surveys and plans to mitigate risks.

Information on compliance with significant environmental regulations is set out in the Directors' Report.

ETHICAL STANDARDS AND COMPANY

DIRECTORS' CODE OF CONDUCT AND

Code is based on that developed by the Australian Institute of Company Directors and is available on the Company's website at www.iluka.com.

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 selling Iluka 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.

SHAREHOLDERS

The shareholders of the Company elect Directors at a General Meeting in accordance with the Constitution.

In recent years the Annual General Meetings have been held in major cities around Australia where there are large numbers of shareholders. 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 Company also arranges shareholder briefings in afternative cities after the Annual General Meeting each year.

CONTINUOUS DISCLOSURE AND SHAREHOLDER COMMUNICATION

Buka Resources Limited is committed to complying with the continuous disclosure obligations of the Corporation's Act and the Australian Stock Exchange Listing Rules.

The Company Secretary has been nominated as the person responsible for communication with the Australian Stock Exchange (ASX). This role includes responsibility for ensuring compliance with the continuous disclosure requirements in the ASX listing rules and overseeing and coordinating information disclosure to the ASX.

Buka keeps shareholders and the market informed through the Annual Report, Half Yearly Report, quarterfy releases covering production figures and exploration activity and by disclosing material developments to the ASX and the media as they occur.

From time to time, briefings and site visits are arranged to give those who provide advice to investors 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. All briefing materials 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.

Titanium minerals are used in the manufacture of a range of confectionery.

SHAREHOLDER INFORMATION

Ifuka Resources Limited - ABN: 34 008 675 018

Registered Office: Level 23, 140 St George's Terrace PERTH WA 6000 Postal Address: GPO Box U1988, PERTH WA 6845 Australia Telephone: +61 8 9360 4700

Facsimile: +61 8 9360 4777

Internet address: www.iluka.com

This site contains information on Iluka'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 on the Australian Stock Exchange Limited. The Company is listed as "Iluka" with an ASX code of "ILB".

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 sponsored 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 Report. Alternatively shareholders can elect not to receive a Concise Annual Report or Financial Report by writing to the share registrar and quoting their shareholder number.

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.

March 26	Closing of books for final dividend entitlements
Aoríl 13	Payment of final dividend
Mav 10	Closure time for acceptance of proxies for AGM
Mav 12	Annual General Meeting - Hyatt Regency Hotel - Perth
Mav 13	Shareholder briefing - InterContinental Hotel - Sydney
Mav 14	Shareholder briefing - Westin Hotel - Melbourne
August 26	Announcement of half year results
September 20	Anticipated payment of interim dividend
December 31	Financial vear end

· Annual Financial Report - April 2004

• Concise Annual Report - April 2004

• Half Year Report - September 2004

Copies of the reports will be available at Iluka's website at www.iluka.com.

PAYMENT OF DIVIDENDS

PUBLICATIONS

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.

Statement of Shareholdings.
(As at 12 March 2004)
Number of holders of strares: m	24,595

Number of shares on issue:	232,814,349

Voting rights, on a show of hands, BL. are one vote for every registered holder and on a poll, are one vote for each share held by registered holders.

Distribution of shareholdings: IV. Starctofdog	Minber of Tolders
$1 - 1,000$	10,960
$1.001 - 5000$	10,735
$5.001 - 10,000$	1817
$10,001 - 100,000$	1.003
100.00 and over Number of shareholders holding less than a marketable parcel:	80 1,546

Substantial shareholders: Ч.
Mame	Number of strates in which a
Perpetual Trustees Australia Linuted [1000000000000000000000000000000000000	relevant interest is held 27,475,030	ta Haidhig 11.80%
Commonwealth Bank Australia	24,769,608	10.64%
Franklin Resources Inc.	19,728,167	8.47%
Deutsche Bank AG	15,734,091	676%

vi Top 20 Shareholders	No. of strates	26 Holdino
J.P. Morgan Nominees Australia Limited	34,434,660	14.79
National Nominees Limited	27,658,603	11.88
Westpac Custodian Nominees Limited	22,575,957	9.70
RBC Global Services Australia Nominees Pty Ltd (Pipooled A/C)	14,404,149	619
Citicorp Nominees Pty Ltd (CFS WSLE Imputation Fund A/C)	8,766,656 7,651,042	3.77
Citicorp Nominees Pty Limited Citicorp Nominees Pty Limited (CFS Imputation Fund A/C)	5.036,484	3.29 2.16
RBC Global Services Australia Nominees Pty Limited (PIIC A/C)	3,780,741	1.62	,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Citicorp Nominees Pty Limited (CFS W/Sale GBL Res Fund A/C)	3,213,279	1.38
AMP Life Limited	3,197,195	1.37
Cogent Nominees Limited Citicorp Nominees Pty Limited (CFS WSLE Aust Share Fund A/C)	2,506,636 2,134,988	1.08 0.92
ANZ Nominees Limited	1,882,041	0.81 00000000000000000000000000000000000
Tasman Asset Management Ltd
(Tyndall Australian Share Wholesale Portfolio A/C) UBS Private Clients Australia Nominees Pty Ltd	1,629,793 1,442,634	0.70 0.62
Iluka Administration Limited (ex RGC Employee Share A/C)	1,259,165	0.54
Cogent Nominees Pty Limited (SMP A/Cs)	1,254,057	0.54
Australian United Investment Company Limited	1,250,000	0.54
Iluka Administration Limited (Employee Share A/C)	1,037,836 TATATATATATATATATATAT	0.45
HSBC Custody Nominees (Australia) Limited	919,820	0.40

$3\,$

CONCISE ANNUAL FINANCIAL REPORT 2003

DIRECTORS' REPORT

STATEMENT OF FINANCIAL PERFORMANCE OF THE CONSOLIDATED ENTITY 42

$38₁$

'AΔ

$46$

$-51$

-52

. . . . . . . . . . . . . . . . .

STATEMENT OF FINANCIAL POSITION OF THE CONSOLIDATED ENTITY WELL INTEREST WELL AND 43

STATEMENT OF CASH FLOWS OF THE U CONSOLIDATED ENTITY

DISCUSSION AND ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DIRECTORS' DECLARATION

INDEPENDENT AUDIT REPORT

$\mathbf{37}$

DIRECTORS' 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 33 December 2003

DIRECTORS

The following individuals were Directors of Buka Resources Limited during the whole of the financial year and up to the date of this report.

Ian Colin Robert Mackenzie (Chairman)

William Henry John Barr

Grahame David Campbell

Valerie Anne Davies

John Robert de Laeter Keith Michael Folwell

Donald Marshall Morley

Richard August Tastula

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.

DIVIDENDS - ILUKA RESOURCES LIMITED

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 9.2 cents paid on 19 September 2003, makes a total dividend for the year of 22 cents franked to 9.2 cents (2002; 22 cents franked to 2 cents).

REVIEW OF OPERATIONS AND RESULTS

Revenue from ordinary activities for the year ended 31 December 2003 was \$812.0 million (2002: \$930.2 million including revenue from discontinued operations of \$57.9 million).

Profit from ordinary activities before income tax expense for the year ended 31 December 2003 was \$90.8 million (2002; \$102.1 million including a loss from discontinued operations of \$1.4 million).

Overall profit attributable to members of Iluka Resources Limited for the consolidated entity for the year ended 31 December 2003 was \$85.2 million (2002: \$109.0 million including a loss from discontinued operations of \$0.5 million). The basic earnings per share of the consolidated entity for the year were 36.6 cents (2002: 48.6 cents).

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

The Directors have not become aware of any other matter or circumstance 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 affairs of the economic entity in subsequent financial years.

LIKELY DEVELOPMENTS

Information on likely developments in the operations of the consolidated entity and the expected results of operations has 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 (61) was appointed to the Board in July 1999. He is Chairman of the Bank of Western Australia Limited (Bankwest) and a Director of the MG Kailis Group. Mr Mackenzie was previously Managing Director of Romatex Limited, Managing Director and Chief Executive Officer of Bunnings Limited and Executive Chairman of Wesfi Limited. Mr Mackenzie is a member of the Remuneration and Nomination Committee and Audit Committee.

MIKE FOLWELL, BBUS, MAICD (MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER)

Mr Folwell (49) was appointed as Managing Director and Chief Executive Officer in May 2002. He is also Chairman of Consolidated Rutile Limited. Previously he was Managing Director of Pivot Limited, a leading Australian fertiliser company. Before joining Pivot, he held senior management positions with Shell, 80C and Pioneer International where he held the position of Executive General Manager Australia/Asia (the largest division within Pioneer before its takeover by the UK-based Hanson Group) from 1996 to 2008.

W. H. JOHN BARR, AM, MAICD

Mr Barr (66) 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 subsidiary since the company's inception in 1974 until his retirement in 1994. He is Chairman of Utilities of Australia Pty Ltd. a major infrastructure investment fund and recently retired as a Director of Oxiana Limited. Mr Barr is a member of the Audit Committee.

DONALD MORLEY, BSC, MBA, FAUSIMM

Mr Morley (64) 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 (60) was appointed to the Board in December 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). He is a Director of the Macro Engineering Council Limited and Worley Group Limited. Mr Campbell is a member of the Remuneration and Nomination Committee.

VALERIE DAVIES, MAICD

The Remaneration and Nomination Committee, consisting of four non-Ms Davies (52) was appointed to the Board in July 1997. She is Principal of executive Directors, advises the Board of remuneration nolicies and practices. One.2.One Communications Pty Ltd and a Director of Integrated Group generally, and makes specific recommendations on remuneration packages Limited and Gold Corporation. Previous directorships include TAB (WA), and terms of employment for executive Directors, senior executives and non-Relationships Australia and ScreenWest. Ms Davies has also been a member executive Directors. of the Boards of Management of the Asia Research Centre and Fremantle Hospital & Health Service. She is a past recipient of the Telstra "WA Executive remuneration and terms of employment are reviewed annually by 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 (70) was appointed to the Board in March 1994. He is Emeritus Professor of Physics at Cartin University of Technology, Until recently, Remuneration packages are set at levels that are intended to attract, retain he was a member of the Prime Minister's Science and Engineering Council and and motivate top quality executives capable of managing the consolidated of the Australian Science, Technology and Engineering Council (ASTEC). He is entity's operations. Patron of the Western Australian Foundation for the Museum of Contemporary Science and Technology (Scitech), Chairman of the Perth Hockey Stadium Remaneration and other terms of employment for the Managing Director and Council and the Gravity Discovery Centre Foundation. Professor de Laeter is senior executives are formalised in agreements. Chairman of the Audit Committee.

Remuneration of non-executive Directors is determined by the Board within the maximum amount approved by the shareholders from time to time. Non-RICHARD TASTULA, AWASM, FAUSIMM, FAICD executive Directors are eligible to participate in the Buka Resources Limited Directors, Executives and Employees Share Acquisition Plan and are also entitled Mr Tastula (60) was appointed to the Board in February 1996 and has extensive to defined superannuation benefits as approved by shareholders at the 1999. experience in the mining industry. He was previously Managing Director of Annual General Meeting. With effect from 1 July 2003 the Directors resolved to Homestake Gold of Australia Umited and a Vice President of Homestake Mining cease their participation in this category of the plan and now participate in an Company, He is Chairman of Titan Resources NL and the Australian Prospectors. accumulation category with contributions equivalent to the superameterion. and Miners Hall of Fame. Mr Tastula is a member of the Audit Committee and quarantee levy. Non-executive Directors fees were adjusted accordingly. the Remuneration and Nomination Committee.

MEETINGS OF DIRECTORS

The numbers of meetings of the Company's Board of Directors and of each board committee held during the year ended 31 December 2003, and the numbers of meetings attended by each Director were:

	Board of Directors' meetings		Audit Committee meetings		Remuneration and Nomination Committee meetings
	Number attended	Number held	Number attended	Number held	Number attended	Number held
I C R Mackenzie	10	10	6	6	4	4
M Folwell	10	10	٠	$\sim$	۰
M H J Barr	9	10	6	6	۰
G D Campbell	10	10	$\bullet$	$\sim$	4	4
/ A Davies	10	10	$\star$	$\tilde{\phantom{a}}$	4	4
l R de Laeter	9	10	5	6	٠
) M Morley	10	10	6	6	٠
र A Tastula	10	10	6	6	4	4

$300$

liuka

DIRECTORS' AND EXECUTIVES' EMOLUMENTS

the committee having regard to performance against goals set out at the start of the year. Relevant comparative information is sought from independent expert advice. In addition to a base salary and fringe benefits, remuneration packages provide for superannuation, retirement and termination entitlements and performance-related payments. Executives are also eligible to participate in the Buka Resources Limited Share Plans.

The Board undertakes an annual review of its performance, that of the individual Directors, and the performance of the Board committees against goals set at the start of the year. Performance related incentives available to executives are based on certain performance criteria and include achievement of operating profit, sales revenue, environment, health and safety and completion of major projects. Incentives are not payable to non-executive Directors.

DIRECTORS' REPORT

for the year ended 31 December 2003

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.

NON-EXECUTIVE DIRECTORS OF ILUKA RESOURCES LIMITED

	Directors' base fee		Super- annuation	Other benefits	Total
Name	S	\$	\$	\$	S
I C R Mackenzie, Chairman	142,500	$\sim$	19,700	6,250	168,450
W H J Barr	63,500	$\sim$	8,740		72,240
GD Campbell	37,500	۰	8,740	26,000	72,240
V A Davies	42,400	12,500	12,480	19,200	86,580
J R de Laeter	63,500	12,500	10,580	٠.	86,580
R A Tastula	63,500	$\sim$	8,740	$\cdot$	72,240
D M Morley	63,500	$\sim$	8,740	$\bullet$	72,240

EXECUTIVE DIRECTORS OF ILUKA RESOURCES LIMITED

Name	Base salary	Incentive	Superannuation	Other benefits	Total
K M Folwell Managing Director and Chief Executive Officer	722,481	346.500	10,519	12,863	1.092,363

OTHER EXECUTIVES OF ILUKA RESOURCES LIMITED

Name	Base salary Φ	Motor vehicle \$	Incentive S	Superannuation \$	Options \$	Other benefits \$	Total S
S Ward * President
USA/EGM Marketing	427,542		158,479	33,158	59,720	254,142	933,041
M A Hughes Chief Financial Officer	338,239	26,760	123,765	47,433	59,720	2,568	598,485
W R Bisset EGM Australian Operations	427,481	٠	٠	10,519	٠	2,000	440,000
M J Boarke EGM Technical Services	242,285	36,128	41,782	33,920		2,000	350,115
GR Allan EGM Human Resources**	243,878	٠	٠	10,519	٠	31,477	285,874

* Other benefits include a tax equalisation benefit whilst residing in the USA as an expatriate

** Appointed Executive General Manager (EGM) 17 February 2003

The amounts disclosed for remuneration of executive officers in this report include the assessed fair values of options granted during 2002 at the date the options were granted, allocated equally over the period from grant date to vesting date. Fair values have been assessed using the Black-Scholes option pricing model. Factors taken into account by this model include the exercise price, the term of the option, the current price and expected price volatility of the underlying share, and the risk-free interest rate for the term of the option.

DIRECTORS' INTEREST IN SHARES AND OPTIONS (HELD DIRECTLY OR INDIRECTLY)

Name	Tiuka Shares
I C.R Mackenzie	35,292
K M Folwell	33,478
W H J Barr	20,000
D M Morley	15,000
G D Campbell	52,635
V A Davies	22,163
JR de Laeter	39,058
R A Tastula	12,142

DIRECTORS' REPORT

for the year ended 31 December 2003

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 defending 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.

EMPLOYEE INCENTIVE OPTION SCHEME

No options were issued to Directors during the year (2002; Nil).

During the year no shares (2002: Nil) were issued pursuant to the Company Employee Incentive Option Scheme.

During 2002, 308,000 options were granted to executives, of which 100,000 were subsequently cancelled. The number of unissued ordinary shares in the Company under option at year end was 200,000 (2002: 200,000).

ENVIRONMENTAL REGULATIONS

Ilaka 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 2003 or 2002.

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 one to five in order of increasing severity). A severity rating of three relates to an incident of local significance which may result in medium environmental disturbance. The severity ratings of four and five 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 three or greater, reported to the Board of Directors during 2003 and 2002.

2003 Incidents Severity Rating	Three	Four	Five
Western Australian Operations Jnited States Operations	- 9	The Contract Contract A
	10	frequencies and the
2002 Incidents Severity Rating	Three	Four	Five
Western Australian Operations	29
Jnited States Operations	4
Consolidated Rutile Operations	4
	37

liuka

There were no level four or five environmental incidents during 2003 which was an improvement on 2002. There was also a significant reduction in level three incidents during the period from 37 to 10 through the introduction of the Iluka Environmental Health & Safety Management System and greater awareness by operational staff through training programs.

The level four incident for 2002 occurred on 16 November 2002 at Yoganup mine site at the Company's south-west operations. The wall of a clay fines solar drying dam subsided slightly, 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 the breach was due to inadequate dam wall construction and poor operating procedures. The material was non-toxic, however the incident caused some localised impact on the vegetation communities, which has since recovered following clean-up activities. The action following the incident included an immediate inspection of all dam walls to ensure they met minimum standards. A Company standard for solar drying dam wall construction has been developed and all dams are inspected before use.

ROUNDING OF AMOUNTS

The Company is of a kind referred to in Class Order 98/0108, issued by the Australian Securities & Investments Commission, relating to the rounding off of amounts in the Directors' report. Amounts in the Directors' report have been rounded off in accordance with that Class Order to the nearest hundred thousand dollars, or in certain cases, to the nearest dollar.

This report is made in accordance with a resolution of Directors.

I C R Mackenzie Chairman

K M Folwell Managing Director and Chief Executive Officer

Perth 24 March 2004

STATEMENT OF CONSOLIDATED FINANCIAL PERFORMANCE

for the year ended 31 December 2003

Basic earnings per share Diluted earnings per share

	Consolidated
	2003 \$M.	2002 \$M
levenue from ordinary activities	812.0	930.3
ixpenses from ordinary activities, excluding borrowing costs expense.	712.2)	(805,
nterest and finance costs	24.3	(27.5)
xchange gains on foreign currency borrowings.	15.3	5.1
otal borrowing costs	Mark and and s ex (9.0)	(22.5)
rofit from ordinary activities before related income tax expense'		102.
ncome tax (expense) benefit	(3.5)	8.
let profit	87.3	110.
let profit attributable to outside equity interest	(2.1)	(1.5)
let profit attributable to members of Iluka Resources Limited	the contracts 1999 85.2	109.8
let decrease in foreign currency translation reserve	. $\epsilon_{\rm max}$ (0.7)
'otal revenues, expenses and valuation adjustments attributable to nembers of Iluka Resources Limited recognised directly in equity	(0.7)
'otal changes in equity attributable to members of Iluka Resources Limited ther than those resulting from transactions with owners as owners	84.5	109.8

STATEMENT OF CONSOLIDATED FINANCIAL POSITION

As at 31 December 2003

	2002 \$M	CUUZ \$M
	812.0	930.2	Current assets
ts expense	(712, 2)	(805.6)	Cash assets
	(24.3)	(27.5)	Receivables
	15.3	$5.0\,$	Inventories
	$\sim$ and a second second $\sim$ $\sim$ $\sim$		Current tax assets
	(9.0) $\sim 10^{-10}$	(22.5)	Other
c expense	$-90.8$ .	102.1	Total current assets
	(3.5)	$8.1\,$	Non-current assets
	$87.3$ .	110.2	Receivables
	(2.1)	(1.2)	Inventories
Limited	$\sim$ - $\sim$ بالمعاملة 85.2	109.0	Property, plant and equipment
	$\mathcal{D}(\mathcal{A})$ is a set of $\mathcal{A}$ $\sim$ (0.7)	$\sim$	Deferred tax assets Intangible assets
	$\sim$		Other
ributable to lly in equity	$\sim$ $\sim$ forest and a (0.7)	$\star$	Total non-current assets
a Resources Limited	$\gamma_1+\gamma_2+\gamma_3$ , $\gamma_4$		Total assets
ers as owners	the control $\sim$ $\sim$ $\sim$ 84.5	109.0	Current liabilities
			Payabies
	Cents	Cents	Interest bearing liabilities
	36, 6	48.6	Current tax liabilities
	36.6	48.6	Provisions
			Other
			Total current liabilities
			Non-current liabilities
			Interest bearing liabilities
			Deferred tax liabilities
			Provisions
			Other
			Total non-current liabilities
			Total liabilities
			Net assets
			Equity
			Parent entity interest
			Contributed equity
			Reserves
			Retained profits
			Total parent entity interest
			Outside equity interest in controlled entities
			Total equity

Consolidated
2003 \$M	2002 SM

5.2	21.3
208.4	229.9
114,6.	130.0
$-1.2$	0.3
81.0	26.9
410.4	468.4

$_{1.6}$	2.6
$2.1\,$	2.0
1,198.8	1,211.8
$-22.2$	32.6
15.6	17.6
90.3	46.5
1,330.6	1,313.1
1,741.0	1,721.5

110,4	104.4
105.3	76.2
0.3	3.1
$-28.3$	67.2
54.8	12.4
299.1	263.3

278.8	393.3
20.6	26.4
136.8	147.4
64.6	12.1
500.8	579.2
799.9	842.5
941.1	879.0


610.4	610.4
$-27.1$	27.8
249.2	187.3
886.7	825.5
54.4	53.5
941.1	879.0

STATEMENT OF CONSOLIDATED CASH FLOWS

for the year ended 31 December 2003

	Consolidated
	2003 \$M	2002 \$M
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)	799.8	827.3
Payments to suppliers and employees (inclusive of goods and services tax)	(611.0)	(676.9)
	188.8	150.4
Interest received	0.7	$1.2\,$
Borrowing costs	(24.9)	(27.5)
Income taxes paid	$(0.7)$ .	(7.7)
Goods and services tax received	23.2	32.9
Payments for exploration expenditure	$(13.5)$ .	(16.6)
Receipts from other operating activities	5.4	7.2
Net cash inflow from operating activities	179.0	139.9
Cash flows from investing activities
Payment for purchase of controlled entities - Basin Minerals (net of cash acquired)		(56.6)
Payments for investment in controlled entities - Consolidated Rutile Limited		(2.7)
Payments for property, plant and equipment	(157.3)	(152.9)
Payments for purchase of patents and trademarks		(17.6)
Proceeds from sale of property, plant and equipment and land held for resale	$-19.5$	6.3
Proceeds from disposal of group entities		20.3
Net cash outflow from investing activities	(137.8)	(203.2)
Cash flows from financing activities
Proceeds from borrowings	344.5	310.2
Repayment of borrowings	(348.8)	(199.9)
Dividends paid	(51.2)	(49.3)
Dividends paid to outside equity interests in controlled entities	(1.2)	(4.3)
Net cash outflow from financing activities	(56.7)	56.7
Net decrease in cash held	$(15.5)$ .	(6.6)
Cash at the beginning of the financial year.	21.3	28.2
Effects of exchange rate changes on cash	(0.6)	(0.3)
Cash at the end of the financial year	5.2	21.3

DISCUSSION AND ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2003

The following discussion and analysis is provided to enhance an understandit of the concise annual financial report.

STATEMENT OF CONSOLIDATED FINANCIAL PERFORMANCE

2003 was a year where improving business fundamentals in the form of higher US dollar selling prices, cost reductions and operational efficiency improvements were negated by the impact of a progressive appreciation in the average Australian-US dollar exchange rate.

Sales revenue of \$786.0 million represents a decrease of 6% from the prior year (excluding discontinued operations revenue in 2002 of \$57.7 million). The decrease primarily reflects the impact of the strengthened Australian dollar which more than offset improved zircon volumes and pricing.

Net profit after tax and outside equity interests (OEI) was \$85.2 million, a decrease of \$23.8 million (21.8%) compared with a profit of \$109.0 million in 2002. Earnings per share were 36.6 cents, a decrease of 12 cents per share compared with 2002 which reflects both lower earnings and the increased number of shares on issue following the acquisition of Basin Minerals during 2002. Return on equity decreased to 9.6% compared with 13.2% in 2002.

The key areas of focus for understanding year on year performance are (i) the exchange impacts on revenue, (ii) hedging results, (iii) taxation charges and (iv) the business improvement program;

(i) Exchange Impacts on Revenue and Profit Underlying sales performance benefited from increases in volume of 2% over prior year and significant pricing improvements primarily in relation to zircon. However, thes favourable impacts were offset by the progressive strengthening of the Australian dollar against the US dollar throughout the course of the year which reduced the translated value of US denominated revenues. On a prehedge basis, this strengthening negatively impacted net pr after fax and outside equity inferests by approximately \$49. million versus 2002.
(ii) Hedging Results

The exchange impacts on revenue were partially offset by a net hedging gain of \$30.0 million (after tax and OEI). This gain consists of \$15.5 million from derivative hedging, with the balance of \$14.5 million reflecting revaluation of foreig denominated borrowings. These gains in 2003 contrast to the losses incurred in the prior year representing the closout of "out of the money" positions originating from the RGC acquisition.

(iii) Taxation Charges

The recognition in 2003 of previously unbooked timing differences resulted in an effective rate of tax relative to pretax earnings of 3.9%. Whilst this represents a low effective tax charge, it is higher than the prior year when a significant quantum of prior year tax benefits resulted in a net tax credit.

(iv) Business Improvement Program

2003 saw the commencement of Buka's business improvement program which targeted cost savings and efficiency gains across all facets of Iluka's business. Areas of focus under this program have included separation technologies, mine planning, tailings management and

	I v.

processing, storage, transport and handling efficiencies, process de-bottlenecking, maintenance efficiencies, employment cost, organisational redesign and contract renegotiation.

STATEMENT OF CONSOLIDATED FINANCIAL POSITION AND CASH FLOWS

During 2003 consolidated equity increased by \$62.1 million to \$941.1 million. This increase consists of the increment from net profit of \$85.2 million less \$23.1 million attributable to dividend appropriations and minor reserve movements.

Debt decreased by \$85.4 million to \$384.1 million at the end of the year which represents a gearing ratio of 28.7% compared with 33.8% at 2002. Whilst this decrease is in part due to exchange revaluation of US dollar denominated borrowings, it also reflects increased focus on cash management as highlighted by cash flows from operating activities of \$179.0 million which represents an increase of \$39.1 million over 2002.
Net cash outflows from investing activities of \$137.8 million represents the capital spend program of \$157.3 million, less proceeds from asset sales of \$19.5 million. This resultant net outflow is significantly less than prior year due primarily to the 2002 outflows associated with the Basin Minerals acquisition net of PT Koba Tin divestment. Net cash outflows from financing activities of \$56.7 million primarily relates to dividend payments.

During 2003 Ilaka made significant progress towards its key objectives.

OTHER OPERATIONAL ISSUES

5e	In particular;
	٠	The Murray Basin is on track for a final investment decision in the second quarter of 2004,
⊿it .0	٠	The business improvement program is successfully driving economies through all aspects of Buka's business and is meeting and/or exceeding pre-program expectations,
	٠	The USA operation significantly increased throughput during 2003 and is well on track to return to profitability in 2004,
a h	٠	2003 saw the successful implementation of a SAP IT platform which is a fundamental plank in Iluka's progress toward best practice in terms of processes and business disciplines,
ġΠ зē	٠	Consolidated Rutile Limited's (CRL) project to upgrade the IBIS dredge to enable it to access the Enterprise deposit in 2005 is underway.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2003

SUMMARY OF SIGNIFICANT NOTE₁ ACCOUNTING POLICIES

This concise annual financial report relates to the consolidated entity consisting of Buka Resources Limited and the entities it controlled at the end of, or during, the year ended 31 December 2003. The accounting policies adopted are consistent with those of the previous year, except as described below

(a) CHANGE IN ACCOUNTING POLICY FOR PROVIDING FOR DIVIDENDS

The above policy was adopted with effect from 1 January 2003 to comply with AASB 1044 Provisions, Contingent Liabilities and Contingent Assets released in October 2001. In previous periods, in addition to providing for the amount of any dividends declared, determined or publicly recommended by the Directors on or before the end of the period but not distributed at balance date, provision was made for dividends to be paid out of retained profits at the end of the period where the dividend was proposed, recommended or declared between the end of the period and the completion of the financial report.

For comparison purposes, for the consolidated entity, had the new accounting policy been applied to 31 December 2002 accounts, current provisions would have reduced by \$27.9 million to \$39.3 million. retained profits would have increased by \$27.7 million to \$215.0 million and dividends paid would have reduced by \$27.7 million to \$23.4 million.

RECLASSIFICATION OF ASSETS AND LIABILITIES $(b)$

During the year certain balances have been reclassified to better reflect the underlying nature of these assets or liabilities. Details of these reclassifications are as follows:

Amounts previously described as deferred maintenance costs and reflected in current and non-current other assets have been reclassified to property, plant and equipment as they represent asset additions or are costs incurred which demonstrably extend the useful life or functionality of an existing asset. These assets are appropriately capitalised and depreciated over their useful lives.

Deferred gains on foreign exchange derivatives previously reflected in current and non-current provisions have been reclassified to current and non-current other liabilities in accordance with the adoption of the new accounting standard AASB 1044 Provisions, Contingent Liabilities and Contingent Assets as it is considered that these deferred gains on foreign exchange derivatives do not meet the definition of provisions under the standard.

Annual leave and sick leave and related on-costs expected to be settled within twelve months of the reporting date have been reclassified from current provisions to current payables as a result of the adoption of the new accounting standard AASB 1044 Provisions, Contingent Liabilities and Contingent Assets. The Directors do not believe there are any significant uncertainties relating to the fiming of future payments of employee benefits and therefore they do not meet the definition of a provision under the new standard.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2003

NOTE 2. SEGMENT INFORMATION PRIMARY REPORTING - BUSINESS SEGMENTS 2003

Sales to external customers

Other revenue

Total segment revenue

Segment result

Interest and finance costs

Exchange gains on foreign currency borrowings

Unallocated revenue less unallocated expenses

Profit from ordinary activities before income tax expense

Income tax expense

Profit from ordinary activities after income tax expense

Segment assets

Unallocated assets

Total assets

Total liabilities

Segment liabilities

Unallocated liabilities

Acquisition of property, plant and equipment and other non-current segment assets

Depreciation and amortisation expense

Other non-cash expenses

SECONDARY REPORTING - GEOGRAPHICAL SEGMENTS

2003

Australia - Western Australian operations Australia - Queensland operations (CRL) Australia - New South Wales coal operations Australia - Murray Basin operations Australia - unallocated USA operations

Segment revenue is derived from sales to external customers domiciled in various geographical regions. Details of segment revenue by location of customers is as follow

· North America - South America - Europe - Asia · Middle East · Australia

Titanium Minerals and Zircon \$M	Coal ŜM.	Inter-segment eliminations/ unallocated ŜM.	Consolidated \$М


752.9	33.1		786.0
24.8		1.2	26.0
777.7	33.1	1.2	812.0
118.0	9.4		127.4
			(24.3)
			15,3
			(27.6)
			90.8
			(3.5)
			87.3
1,677.0	30.7		1,707.7
			33.3
			1,741.0
389.4	5.5		394.9
			405.0
			799.9
160.3	3.4		163.7
112.8	2.7	$_{0.1}$	115.6
15.6	0.7		16.3
Segment revenues from sales to external customers \$M	Segment result \$M	Segment assets \$M	Acquisitions of property, glant and equipment and other non-current segment assets \$M

584.3	116.4	1,040.9	72,5
-62.2	4,4	176.6	20.7
		30.7	3,4
		226,4	17,2
	(36.6)	- 33,3
106.4	(2.8)	233.1	49.9
786.0	90.8	1,741.0	163.7
\$M
307.3 $-0.3$ 192,4 119,2 $-24.6$

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2003

	Titanium Minerals and Zircon \$M	Coal \$M	Discontinuing operations - Tin \$M	Inter-segment eliminations/ unaflocated \$M	Consolidated \$M
NOTE.2. SEGMENT INFORMATION (continued) PRIMARY REPORTING - BUSINESS SEGMENTS
2002
Sales to external customers	805.1	31.7	57.7		894.5
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	134.4	9.5	(1.4)	$\omega$	142.5
Interest and finance costs					(27.5)
Exchange gains on foreign currency borrowings					5.0
Unallocated revenue less unallocated expenses					(17.9)
Profit from ordinary activities before income tax expense					102.1
Income tax benefit					8.1
Profit from ordinary activities after income tax expense.					110.2
Segment assets	1,657.9	31.0			1.688.9
Unallocated assets					32.6
Total assets					1,721.5
Segment liabilities	339.7	4.1			343.8
Unallocated liabilities					498.7
Total liabilities					842.5
Acquisition of property, plant and equipment,
intangibles and other non-current segment assets	308.3	0.2	1.4		309.9
Depreciation and amortisation expense	102.6	2.7	2.7	Ŷ.	108.0
Other non-cash expenses	19.0	0.6	٠	÷	19.6

SECONDARY REPORTING - GEOGRAPHICAL SEGMENTS	Segment revenues from sales to external customers \$M	Segment result \$M	Segment assets \$M	property, plant and equipment, intangibles and other non-current segment assets SM
2002
Australia · Western Australian operations	611.5	133.4	906.3	96.7
Australia - Queensland operations (CRL)	88.1	8.5	272.3	4.5
Australia - New South Wales coal operations	31.7	9.5	31.0	0.2
Australia - Murray Basin operations	٠	$\cdot$	207.0	144.9
Australia - unallocated	$\sim$	(40.4)	32.6
USA operations	165.5	(7.5)	272.3	62.2
Indonesia*	57.7	(1.4)	÷	1.4
	894.5	162.1	1.721.5	309.9

Acquisitions of

* Discontinued operations

Segment revenue is derived from sales to external customers domiciled in various geographical regions. Details of segment revenue by location of customers is as follows:

- North America	246.5
~ South America	1.9
~ Europe	247.8
- Asia	271.1
~ Middle East	28.4
~ Australia	98.8
	894 S

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2003

Revenue from operating activities
Sale of goods
Revenue from outside operating activities
Interest
Rovalty income
Other revenue
Proceeds on sale of property, plant and equipment and land held for resal

Proceeds on sale of PT Koba Tin

NOTE 3. REVENUE

Revenue from ordinary activities

NOTE 4. DIVIDENDS

ORDINARY SHARES

Final dividend of 12 cents per fully paid share recognised as a liability at 31 December 2002 but adjusted against retained profits at the beginning of the financial year on the change in accounting policy for providing for dividends Interim dividend paid of 10 cents franked to 9.2 cents at 30%

(2002: 10 cents franked to 2 cents at 30%)

Final dividend of 12 cents per fully paid share recognised as a liability at 31 Dece Unfranked - 12 cents per share

Total dividends provided for or paid

DIVIDENDS NOT RECOGNISED AT YEAR END

In addition to the above dividends, since year end the Directors have recomme the payment of a final unfranked dividend of 12 cents per fully paid ordinary sh The aggregate amount of the proposed dividend expected to be paid on 13 Apr out of retained profits at 31 December 2003, but not recognised as a fiability at end as a result of the change in accounting policy for providing for dividends

Franking credits available for subsequent financial years based on a tax rate of

The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:-

(a) franking credits that will arise from the payment of the current tax liability

(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date

(d) franking credits that may be prevented from being distributed in subsequent financial years.

The franking credits available to the consolidated entity include \$18.4 million (2002: \$35.7 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 50.6% owned at 31 December 2003 $(2002; 50.1\%)$ .

Report

$2003$

liuka

Resou

rces Linited and Cont

Consolidated
2003	2002
SM	SM

786.0	894.5

0.7	1.2
0.5
4.9	3.7
19.9	6.3
	24.5
26.0	35.7
812.0	930.2

	Consolidated
	2003	2002
	\$M	\$10


	23.3	23.4
ember 2002	51.0	23.4
		27.7
	ù. Ω, 51.0	51.1
anded hare. ril 2004 it year	27.9
if 30%	20.6	37.2

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2003

NOTE 5. EARNINGS PER SHARE

Basic earnings per share

Diluted earnings per share

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.

WEIGHTED AVERAGE NUMBER OF SHARES USED AS THE DENOMINATOR

Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share

	\$M	SМ
Net profit	. $-87.3$	110
Net profit attributable to outside equity interest	The Corp. $\sim$ $\sim$ $\sim$ (2.1)
Earnings used in calculating basic and diluted earnings per share	1.11111111111111111111111111111111111 *Profession* 85.2	109

NOTE 6. 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. Alternatively, you can view our report online at www.iluka.com.

Consolidated
2003	2092
Cents	Cents
٠.
6,6	48.6
36.6	48.6

Consolidated
2003	2092
Number	Number

232,814,349	224,445,102

232,814,349	224,457,923

Consolidated
2003 \$M	2002 SМ
$-87.3$	110.2
(2.1)	(1.2)
85.2	189.0

DIRECTORS' DECLARATION

for the year ended 31 December 2003

The Directors declare that in their opinion the concise annual financial report of the consolidated entity for the year ended 31 December 2003 as set out on pages 38 to 50 complies with accounting standard AASB 1039 Concise Financial Reports.

The financial statements and specific disclosures included in this concise annual financial report have been derived from the full financial report for the year ended 31 December 2003.

The concise annual 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 6, is available on request.

This declaration 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 24 March 2004

INDEPENDENT AUDIT REPORT

to the markens of Bulca Resources Limited

AUDIT OPINION

In our opinion, the concise annual financial report of Iluka Resources Limited for the year ended 31 December 2003 complies with Australian Accounting Standard AASB 1039: Concise Financial Reports.

This opinion must be read in conjunction with the rest of our audit report.

SCOPE

THE CONCISE ANNUAL FINANCIAL REPORT AND DIRECTORS' RESPONSIBILTY

The concise annual financial report comprises the consolidated statement of financial position, consolidated statement of financial performance, consolidated statement of cash flows, discussion and analysis of and notes to the financial statements, and the directors' declaration for Iluka Resources Limited (the company) for the year ended 31 December 2003.

The directors of the company are responsible for the preparation and presentation of the financial report in accordance with Australian Accounting Standard AASB 1039: Concise Financial Reports.

AUDIT APPROACH

We conducted an independent audit of the concise annual financial report in order to express an opinion on it to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards, in order to provide reasonable assurance as to whether the concise financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected.

We also performed an independent audit of the full financial report of the company for the financial year ended 31 December 2003. Our audit report on the full financial report was signed on 24 March 2004, and was not subject to any qualification.

In conducting our audit of the concise annual financial report, we performed procedures to assess whether in all material respects the concise annual financial report is presented fairly in accordance with Australian Accounting Standard AASB 1039: Concise Financial Reports.

We formed our audit opinion on the basis of these procedures, which included:

testing that the information included in the concise annual financial report is consistent with the information in the full financial report; and
examining, on a test basis, information to provide evidence supporting the amounts, discassion and analysis, and other disclosures in the concise annual financial report which were not directly derived from the fall financial report.

When this audit report is included in an annual report, our procedures include reading the other information in the annual report to determine whether it contains any material inconsistencies with the concise annual financial report.

INDEPENDENCE

In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.

Pricariul daux doques

$d=0$

John O'Connor Partner

Perth 24 March 2004

EXPLORATION MAPS

LOCATION OF ILUKA'S MINERAL RESOURCES

LOCATION OF ILUKA'S AUSTRALIAN OPERATIONS AND MINERAL RESOURCES

LEGEND.

Wine Site - Iluka Mine Site - CRL Mineral Resource - Iluka Dry Mill - Poposed - Iluka Dry Mill and Synthetic Rutile Plant - Iluka Dry Mill - Iluka B Dry MIII - CRL

ka
Kat

liaka
S

LOCATION OF ILUKA'S USA OPERATIONS AND MINERAL RESOURCES

AI assistant

ILUKA RESOURCES LIMITED — Annual Report 2004

65116_rns_2004-03-25_78e6f2fd-13c7-4d0b-aa98-b6a6d02b30c4.pdf

MINERY ES

KIA KEBRANDAS REPORT

OPERA IONS OVERVIEW

GARSSANNIA ENTRE COMME

ILUKA -SUPPLYING THE WORLD

The Company's key assets include:

VARA 144 A

2013. AN ISA NINARY

KEY FOCUS AREAS IN 2003

2003 Comparative Shareprice Performance

BOARD MATTERS

OUTLOOK FOR 2004

MANAGING DIRECTOR'S REPORT

ENVIRONMENT, HEALTH AND SAFETY

PRODUCTION, SALES AND FINANCIAL PERFORMANCE

PROGRESS WITH STRATEGIC OBJECTIVES

CONCLUSION

OPERATIONS OVERVIEW

PRODUCTION

SUSTAINABILITY SECTION

EMPLOYEES

EMPLOYEE ASSISTANCE PROGRAM

EQUAL OPPORTUNITY

EMPLOYEE DEVELOPMENT

HEALTH AND SAFETY

FIT FOR WORK POLICY

WORKING WITH COMMUNITIES

COMMUNITY SUPPORT

ENVIRONMENTAL PERFORMANCE

WATER MANAGEMENT

ENERGY USE

GREENHOUSE GAS

LAND USE

BY-PRODUCTS

EXPLORATION

GEOLOGY OVERVIEW

MINERAL RESOURCE ASSESSMENT

ORE RESERVE ESTIMATION

MINERAL RESOURCE, ORE RESERVE FLUCTUATIONS

DEFINITIONS

CORPORATE INFORMATION

EXECUTIVE GENERAL MANAGERS

MARK HIMBES .TRIEF FINANCIAL ORFICER

GEORF ALLAN

CORPORATE GOVERNANCE STATEMENT

ROLE OF THE BOARD OF DIRECTORS

DIRECTORS' INDEPENDENCE

TERM OF OFFICE

INDEPENDENT PROFESSIONAL ADVICE

BOARD PROCESS AND PERFORMANCE REVIEW

CORPORATE REPORTING

BOARD COMMITTEES

REMUNERATION AND NOMINATION COMMITTEE

MANAGING DIRECTOR AND SENIOR EXECUTIVES' REMUNERATION

ALIDIT COMMITTEE

EXTERNAL AUDITORS

INTERNAL AUDITORS

SHAREHOLDERS

CONTINUOUS DISCLOSURE AND SHAREHOLDER COMMUNICATION

SHAREHOLDER INFORMATION

COMPANY SECRETARY

Ian Gregory

STOCK EXCHANGE LISTING

CHANGE OF ADDRESS

UNCERTIFICATED SHARE REGISTER

CONCISE ANNUAL REPORT MAILING LIST

PAYMENT OF DIVIDENDS

CONCISE ANNUAL FINANCIAL REPORT 2003

DIRECTORS' REPORT

DIRECTORS' REPORT

DIRECTORS

PRINCIPAL ACTIVITIES

DIVIDENDS - ILUKA RESOURCES LIMITED

REVIEW OF OPERATIONS AND RESULTS

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

LIKELY DEVELOPMENTS

DIRECTORS' PROFILES

ILUKA RESOURCES LIMITED Annual Report 2004

MARK HIMBES .
TRIEF FINANCIAL ORFICER

SUMMARY OF SIGNIFICANT NOTE₁ ACCOUNTING POLICIES