ILUKA RESOURCES LIMITED — Annual Report 2011

Mar 24, 2011

Iluka Resources Limited ABN 34 008 675 018 Financial Report - 31 December 2010

	Page
Directors' report	1
Remuneration report	12
Financial report	32
Directors' declaration	85
Independent auditor's report to the members	86

The Directors present their report on the consolidated entity consisting of Iluka Resources Limited and the entities it controlled at the end of, or during, the year ended 31 December 2010.

DIRECTORS

The following individuals were Directors of Iluka Resources Limited during the whole of the financial year and up to the date of this report except as noted below:

George John Pizzey (Chairman)

Robert Lindsay Every (was Chairman and a Director until his resignation on 20 May 2010)

Donald Marshall Morley

Gavin John Rezos

David Alexander Robb

Jenny Seabrook

Wayne Geoffrey Osborn (was appointed a Director on 26 March 2010)

Stephen John Turner (was appointed a Director on 26 March 2010)

PRINCIPAL ACTIVITIES

The activities of the consolidated entity consist of exploration, mining, concentration and separation of mineral sands, production of ilmenite, rutile, synthetic rutile and other titaniferous concentrates and zircon, and sales of these products throughout the world.

SIGNIFICANT CHANGES

During the year the following significant changes occured:

Murray Basin Stage 2 and Jacinth-Ambrosia operations were both commissioned and ramped up during the first half of 2010 and reached name plate capacity mid year.

There were no other significant changes in the state of affairs of the Group during the financial year.

REVIEW OF OPERATIONS

Reported earnings

Iluka recorded a profit after tax for the year ended 31 December 2010 of \$36.1 million (reflecting a second half profit after tax of \$42.7 million), compared with a net loss after tax of \$82.4 million for the previous corresponding period reflecting higher sales volumes, higher zircon pricing and contribution from the new, higher margin operations in the second half of the year.

Mineral sands EBITDA was \$250.2 million, a 231 per cent increase compared with the previous corresponding period. Mineral sands EBIT increased to \$31.6 million (2009: loss \$100.6 million), with higher depreciation charges of \$218.6 million, compared to \$176.2 million in the previous corresponding period, reflecting the transition to the new operations and the start of depreciation on approximately \$800 million of assets during 2010.

Mining Area C iron ore royalty earnings ("MAC") increased by 51.2 per cent to \$75.9 million as a result of a 7.2 per cent increase in sales volumes and a 56 per cent increase in the average realised AUD iron ore price, offset partially by capacity payments being \$3.0 million lower than the previous corresponding period.

Group EBIT was \$86.1 million, compared to a loss in 2009 of \$144.1 million which included a significant noncash charge of \$67.6 million.

The profit before tax was \$39.9 million (2009 loss: \$166.8 million). A net tax expense of \$3.8 million was recognised in respect of the profit for the period.

Earnings per share for the period were 8.6 cents compared to (20.2) cents in the previous corresponding period. Total shares on issue at 31 December 2010 of 418.7 million were unchanged during the period.

Net debt at 31 December 2010 was \$312.6 million, with a gearing ratio (net debt/net debt + equity) of 21.8 per cent. This compares with net debt at 31 December 2009 of \$382.1 million and a gearing ratio of 25.9 per cent.

During the second half of 2010, net debt reduced by \$126.4 million as capital expenditure reduced to \$21.2 million and operating cash flows increased to \$119.7 million from \$43.9 million in the first half of 2010. The stronger operating cash flows reflect both the transition to higher margin operations and the benefit of higher zircon prices. Undrawn facilities at 31 December 2010 were approximately \$250 million and cash at bank was \$30.1 million.

Dividend

Directors have determined a final dividend of eight cents per share, unfranked. The dividend is unfranked as Iluka does not have franking credits currently available for distribution. The dividend is payable on 6 April 2011 for shareholders on the register as at 9 March 2011. Directors have decided to suspend the Dividend Reinvestment Plan until further notice.

Income statement analysis

\$ million	2010	2009	% change
Mineral sands revenue	874.4	576.0	51.8
Cash costs of production	(543.8)	(453.6)	(19.9)
Inventory movement	(2.9)	33.4	n/a
Restructure and idle capacity cash charges	(13.2)	(50.1)	73.6
Rehabilitation and holding costs for closed sites	(10.4)	-	n/a
Government royalties	(17.1)	(13.7)	(24.8)
Marketing and selling	(24.1)	(10.2)	(136.3)
Asset sales and other income	7.4	14.2	(47.9)
Product, technical development & major projects	(5.6)	(4.2)	(33.3)
Exploration	(14.5)	(16.2)	10.5
Mineral sands EBITDA	250.2	75.6	230.9
Depreciation and amortisation	(218.6)	(176.2)	(24.1)
Mineral sands EBIT	31.6	(100.6)	n/a
Mining Area C	75.9	50.2	51.2
Currency hedging and foreign exchange	8.9	(0.1)	n/a
Corporate and other	(30.3)	(26.0)	(16.5)
Significant non-cash items	-	(67.6)	n/a
Group EBIT	86.1	(144.1)	n/a
Net interest costs	(30.9)	(18.4)	(67.9)
Interest capitalised (Jacinth-Ambrosia and Murray Basin)	-	12.5	n/a
Rehabilitation unwind and other finance costs	(15.3)	(16.8)	8.9
Profit (loss) before tax	39.9	(166.8)	n/a
Tax (expense) benefit	(3.8)	61.5	n/a
Profit (loss) from continuing operations	36.1	(105.3)	n/a
Profit from discontinued operations (CRL)	-	22.9	n/a
Profit (loss) for the period	36.1	(82.4)	n/a
Average AUD/USD (cents)	92.0	79.3	(16.0)

Mineral sands production and sales

	2010	2009	% change
Production volumes (kt)
Zircon	412.9	263.1	56.9
Rutile	250.1	141.4	76.9
Synthetic rutile	347.5	405.0	(14.2)
Ilmenite – saleable	469.0	342.1	37.1
Ilmenite – upgraded to synthetic rutile	215.9	496.7	(56.5)
Total saleable production	1,479.5	1,151.6	28.5
Cash costs of production	\$543.8m	\$453.6m	(19.9)
Unit cash cost – total saleable product	\$367/t	\$394/t	6.9
Unit cash cost – zircon/rutile/synthetic rutile	\$538/t	\$560/t	3.9
Sales volumes (kt)
Zircon	478.7	222.6	115.0
Rutile	240.0	138.7	73.0
Synthetic rutile	362.5	396.7	(8.6)
Ilmenite – saleable	373.7	376.4	(0.7)
Total sales	1,454.9	1,134.4	28.3
Revenue	\$874.4m	\$576.0m	51.8
Unit revenue – total saleable product	\$601/t	\$508/t	18.3
Unit revenue – zircon/rutile/synthetic rutile	\$809/t	\$760/t	6.4

Mineral sands operational results

	Revenue			EBITDA		EBIT
	2010	2009	2010	2009	2010	2009
Eucla/Perth Basin	468.7	385.6	119.9	47.9	33.8	(79.3)
Murray Basin	281.4	124.8	113.9	13.2	0.9	(18.5)
United States	124.3	65.6	40.2	30.7	23.2	13.4
Exploration & other*	-	-	(23.7)	(16.2)	(26.2)	(16.2)
Total	874.4	576.0	250.3	75.6	31.7	(100.6)

* 2010 values includes central marketing and product development costs allocated to operations in prior periods

Mineral sands revenue

Mineral sands revenue increased by \$298.4 million (51.8 per cent) compared with the previous corresponding period due to significantly higher zircon and rutile sales volumes.

Zircon demand reflected a strong recovery in demand in China to above pre global economic crisis levels, a recovery in European demand and robust North American demand. Zircon sales volumes increased by 115 per cent to 478.7 thousand tonnes (2009: 222.6 thousand tonnes). Sale of Murray Basin Stage 2 and Jacinth-Ambrosia production commenced during the June quarter, with sales of material from these two new operations constituting the majority of Australian product sales in the second half.

Rutile sales volumes of 240.0 thousand tonnes represent a 73.0 per cent increase from 2009 (138.7 thousand tonnes), following the start of production from Murray Basin Stage 2 in the first half of 2010. Substantially all of the group's rutile production in the second half of 2010 was from Murray Basin.

Synthetic rutile sales volumes of 362.5 thousand tonnes were 8.6 per cent lower than 2009 (396.7 thousand tonnes) which reflects Iluka's decision to idle synthetic rutile capacity during 2009 and reduce production.

Ilmenite sales of 373.7 thousand tonnes were similar to 2009 levels (376.4 thousand tonnes), with Iluka's focus, in terms of Australian ilmenite production, being to provide the maximum practicable proportion of suitable ilmenite produced as a feed source for its synthetic rutile operations.

Higher average prices for zircon and rutile largely offset the effects of an increase in the average AUD:USD exchange rate from 79.3 cents in 2009 to 92.0 cents in 2010. The significant increases in higher value zircon and rutile sales volumes, however, lead to an 18.3 per cent increase in the average revenue per tonne of product sold from \$508 to \$601 as the proportion of zircon, rutile and synthetic rutile increased from 66 per cent of total sales to 74 per cent.

Cash costs of production

Cash costs of production of \$543.8 million were 19.9 per cent higher than the previous corresponding period, with unit cash costs of production per tonne of zircon/rutile/synthetic rutile lower at \$538/tonne, compared to \$560/tonne in the previous corresponding period. The transition of mining operations from Western Australia to the new operations of Jacinth-Ambrosia and Murray Basin Stage 2 results in a different mix of production and cash cost profiles when compared to previous periods, with costs in the first half of 2010 including those necessary to establish higher concentrate stockpiles associated with the new operations.

In the second half of 2010, unit cash costs of production per tonne of zircon/rutile/synthetic rutile were \$502/tonne, compared to \$583/tonne in the first half, reflecting the transition to the higher cash margin operations and concentrate levels that were largely unchanged during the half.

Inventory movement

Inventory values are comparable year on year, however, the composition of the balance has changed as a result of an increase in concentrate and intermediate stockpiles of approximately \$40 million during the first half of 2010 associated with the start of operations at Jacinth-Ambrosia and Murray Basin Stage 2. Finished goods inventory reduced by approximately \$40 million due mainly to the sale of material on hand in Virginia at the end of 2009.

Restructure and idle capacity cash charges

The charges relate mainly to redundancy and other costs associated with the idling during the year, as planned, of the remaining mining operations at Eneabba in Western Australia and the planned idling of the second synthetic rutile kiln at Narngulu in Western Australia.

Rehabilitation and holding costs for closed sites

Reassessments of rehabilitation costs for closed sites are expensed (or credited) to profit and loss. The charge for the year relates to reassessments at several former operations, with the majority being for Florida.

Government royalties and marketing costs

Government royalties increased with higher sales volumes and prices. Marketing and selling costs similarly reflect higher sales volumes, together with the costs for certain port related activities that were previously reported as production costs.

Depreciation and amortisation

The increase of \$42.4 million includes an \$81.3 million increase in the Murray Basin following the completion of commissioning of the Kulwin mine in March 2010, offset by a \$41.1 million reduction in Eucla/Perth Basin where the asset configuration and level of operations were significantly different to those in the previous corresponding period due to the start of depreciation at Jacinth Ambrosia in February 2010 and the idling of the majority of the Western Australian productive capacity over the course of the current and previous corresponding period.

Mining Area C

Iron ore sales volumes increased 7.2 per cent to 43.3 million dry metric tonnes. The average AUD realised price upon which the royalty is payable increased by 56 per cent from the previous corresponding period, following the move away from sales at contracted benchmark prices by BHP Billiton during the year. The EBIT contribution of \$75.9 million includes \$5.0 million of annual capacity payments for production increases in the year to 30 June (2009: \$8.0 million), reflecting a full year of production following an expansion of the Area C operation by BHP Billiton in early 2009.

Corporate and other

Corporate costs were \$4.3 million higher than the previous corresponding period, due mainly to increases in insurance and incentive costs. Costs for the period include \$7.2 million for support activities that were centralised after the 2009 restructure and which are no longer included in regional costs, one-off restructure costs of \$7.7 million were incurred in 2009.

Interest

The increase in net interest costs reflects higher average net debt than the previous corresponding period, increases in Australian variable interest base rates and higher margins in the first half of the year. Capitalisation of interest in respect of the Jacinth- Ambrosia and Murray Basin Stage 2 projects ceased in the second half of 2009.

Tax expense

An income tax expense of \$3.8 million, at an effective tax rate of 9.5 per cent, compares to a benefit in 2009 of \$61.5 million reflecting the pre-tax loss for the year. The effective tax rate is influenced by benefits in respect of Investment Allowance and Research & Development concessions in Australia, together with the tax expense on earnings in the United States being at 20 per cent, compared with 30 per cent for Australian earnings.

DIRECTORS' PROFILES George John Pizzey, BE (Chem), FellDip (Management), FTSE, FAICD, FAIM, Chairman

Mr Pizzey was appointed to the Board in November 2005. He has extensive experience in mining and mineral processing. Mr Pizzey was Chairman of Alcoa of Australia Limited and held a number of senior executive positions with Alcoa Inc (USA). He is a Director of Alumina Limited, Amcor Limited and St Vincent's Medical Research Institute. He was formerly the Chairman of the London Metal Exchange UK and a Director of WMC Resources Limited and Ivanhoe Grammar School.

Directorships of Listed Entities (last 3 years) Alumina Limited (appointed June 2007) Amcor Limited (appointed September 2003)

David Alexander Robb, BSc, GradDip (Personnel Administration), FAIM, FAICD, Managing Director

Mr Robb commenced as Managing Director on 18 October 2006. Mr Robb was previously Managing Director, Wesfarmers Energy as well as Executive Director, Wesfarmers Limited. Prior to joining Wesfarmers he held senior positions with British Petroleum in Australia and overseas, including chief executive responsibilities for a national service business in the US for oil, chemicals, consumer goods, marine and aviation businesses in Malaysia and as director responsible for oil marketing throughout South East Asia.

Directorships of Listed Entities (last 3 years) Consolidated Rutile Limited (appointed October 2006 resigned May 2009)

Donald Marshall Morley, BSc, MBA, Hon. FAusIMM, Chairman of the Audit and Risk Committee

Mr Morley 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 Spark Infrastructure Limited.

Directorships of Listed Entities (last 3 years) Alumina Limited (appointed 11 December 2002) Spark Infrastructure Ltd (appointed November 2005)

Gavin John Rezos, BA, LLB, B.JURIS, MAICD

Mr Rezos was appointed to the Board in June 2006. He has extensive Australian and international investment banking experience and is a former Investment Banking Director of the HSBC Group with regional roles during his HSBC career based in London, Sydney and Dubai. Mr Rezos has held Chief Executive positions and executive directorships of companies in the healthcare and technology areas in the UK, US and Singapore and was formerly a non-executive Director of Amity Oil NL (Antares). He is Chairman of Alexium International Group Limited, a principal of Viaticus Capital Pty Ltd and a Director of Rowing Australia. Mr Rezos is a member of the Audit and Risk Committee and the Remuneration and Nomination Committee

Directorships of Listed Entities (last 3 years) Alexium International Group Limited (appointed March 2010) DFS International Holdings Limited (suspended) (appointed November 2008)

DIRECTORS' PROFILES (continued)

Jennifer Anne Seabrook, BCom, ACA, FAICD

Ms Seabrook was appointed to the Board in May 2009. She is a Special Advisor to Gresham Partners Limited. She is also a non-executive Director of the Bank of Western Australia Limited, M G Kailis Holdings Pty Limited, IRESS Market Technology Ltd and Australia Post. Ms Seabrook is a member of the Takeovers Panel and Financial Advisory Group of the Financial Services Institute of Australia (FINSIA) and a member of ASIC's External Advisory Group. She was formerly a Director of West Australian Newspapers Holdings Limited, BWA Managed Investments Limited, St Andrew's Superannuation Services Limited and Western Power. Ms Seabrook is a member of the Audit and Risk Committee and the Remuneration and Nomination Committee.

Directorships of Listed Entities (last 3 years) IRESS Market Technology Limited (appointed August 2008) West Australian Newspaper Holdings Limited (appointed February 2006, resigned December 2008)

Wayne Geoffrey Osborn, DipEng, MBA, FTSE, MIE(Aust), MAICD, Chairman of the Remuneration and Nomination Committee

Mr Osborn is a former Managing Director of Alcoa of Australia Limited. He is a non-executive Director of Leighton Holdings Limited and Wesfarmers Limited, Chairman of Thiess Pty Limited, Chairman of the Australian Institute of Marine Science and a Trustee of the Western Australian Museum. He was formerly a Director of the Australian Business Arts Foundation and Vice President of the Chamber of Commerce and Industry, Western Australia.

Directorships of Listed Entities (last 3 years) Leighton Holdings Limited (appointed 6 November 2008) Wesfarmers Limited (appointed 24 March 2010)

Stephen John Turner BCom, ACA

Mr Turner is a founder of the London Stock Exchange listed company, International Ferro Metals Limited. He was the Chief Executive Officer of International Ferro Metals Limited from 2002 to 2009 and continues as a non-executive director of that company. He is also a director of South American Ferro Metals Limited and Chairman of Vantage Goldfields Limited. Mr Turner has had responsibility for resource projects in Australia, Africa and the Pacific Islands. He was a founding Director of the Australian subsidiary of PSG Investment Group, a South African investment bank. He is an Australian Chartered Accountant. Mr Turner is a member of the Audit and Risk Committee.

Directorships of Listed Entities (last 3 years) International Ferro Metals Limited (appointed 26 January 2002) Vantage Goldfields Limited (appointed 22 October 2009) South American Ferro Metals Limited (appointed 11 November 2010)

COMPANY SECRETARY

The Company Secretary is Mr Cameron Wilson LLB. Mr Wilson was appointed to the position of Company Secretary in 2004. Before joining Iluka Mr Wilson held a range of legal and commercial roles at WMC Resources Limited and prior to that worked as a solicitor with a major legal practice.

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 2010, and the numbers of meetings attended by each Director were:

		Board of Directors' meetings		Audit and Risk Committee meetings
	Number	Number	Number	Number	Number	Number
	attended	held	attended	Remuneration and Nomination Committee meetings held attended - - - 6 2 4 6 - - 6 4 4 6 4 4 6 2 4 4 - 2 6 4 6 - -	held
Director
D A Robb	10	10	-
R L Every	5	10	2 1
D M Morley	10	10	6
G J Pizzey	10	10	4 2
G J Rezos	9	10	4 3
J A Seabrook	10	10	6
W G Osborn	8 5	10	-
S J Turner	8 5	10	4 7

1. Dr Every attended the Audit and Risk Committee meeting by invitation but was not a member of the Committee. He resigned from the Iluka Board on 19 May 2010.

2. Mr Pizzey accepted the role of Chairman of the Board, effective 19 May 2010. He resigned as Chairman of the Remuneration and Nomination Committee at the August Committee Meeting but continued to attend as a member of the Committee. Mr Pizzey attended the Audit and Risk Committee meeting by invitation but was not a member of the Committee.

3. Mr Rezos stepped down from the Audit and Risk Committee on 26 March 2010. He was reappointed to the Committee on 20 September 2010.

4. Ms Seabrook joined the Remuneration and Nomination Committee on 25 August 2010.

5. Mr Osborn and Mr Turner joined the Board on 26 March 2010.

6. Mr Osborn joined the Remuneration and Nomination Committee as a member on 25 August 2010 and assumed the Chair of the Committee at the conclusion of that meeting.

7. Mr Turner joined the Audit and Risk Committee on 22 June 2010.

DIRECTORS SHAREHOLDING

Directors' shareholding is set out in note 21.

REMUNERATION REPORT

The remuneration report is set out on pages 12 to 30

INDEMNIFICATION AND INSURANCE OF OFFICERS

The Company indemnifies 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.

The terms of engagement of Iluka's external auditor includes an indemnity in favour of the external auditor. This indemnity is in accordance with PricewaterhouseCoopers standard Terms of Business and is conditional upon PricewaterhouseCoopers acting as external auditor. Iluka has not otherwise indemnified or agreed to indemnify the external auditors of Iluka at any time during the financial year.

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.

NON-AUDIT SERVICES

The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's expertise and experience with the Company and/or the consolidated entity are important.

The board of directors has considered the position and, in accordance with advice received from the Audit and Risk Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• fees paid to external auditors for non-audit services for the 2010 year were within the Company policy; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.

A copy of the auditors' independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 31.

During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms:

	Consolidated
	2010 \$000	2009 \$000
(a) Assurance services
Audit and audit related services Fees paid to PwC PwC Australia Other PwC firms Total remuneration for audit services	550 50 600	562 52 614
Other assurance services PwC Australia Total remuneration for other assurance services	107 107	65 65
(b) Taxation services
Fees paid to PwC PwC Australia Total remuneration for taxation services	27 27	67 67

NON-AUDIT SERVICES (continued)

(c) Other services

Fees paid to PwC
PwC Australia	65	113
Other PwC firms	-	34
Total remuneration for other services	65	147

ENVIRONMENTAL REGULATIONS

The Company's Australian operations are subject to various Commonwealth and State laws governing the protection of the environment in areas such as air and water quality, waste emission and disposal, environmental impact assessments, mine rehabilitation and access to, and use of, ground water. In particular, some operations are required to be licensed to conduct certain activities under the environmental protection legislation of the state in which they operate and such licenses include requirements specific to the subject site.

So far as the Directors are aware, there have been no material breaches of the Company's licenses and all mining and exploration activities have been undertaken in compliance with the relevant environmental regulations.

DIVIDENDS

Since the end of the financial year the directors have determined the payment of a final ordinary dividend of eight cents per share, unfranked. The dividend is unfranked as Iluka does not have franking credits currently available for distribution. The dividend is payable on 6 April 2011 for shareholders on the register as at 9 March 2011.

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

The Directors are not aware of any matter or circumstance not otherwise dealt with in the Directors' 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 AND EXPECTED RESULTS

In the opinion of the Directors, likely developments in and expected results of the operations of the consolidated entity have been disclosed in significant events after balance date, disclosure of further material relating to those matters could result in unreasonable prejudice to the interests of the company and the consolidated entity. That material has therefore been omitted from the Directors' report.

ROUNDING OF AMOUNTS

The Company is of a kind referred to in Class Order 98/0100, 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 thousand dollars.

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

G J Pizzey Chairman

Perth

24 March 2011

REMUNERATION REPORT EXECUTIVE SUMMARY

Remuneration Principles

Iluka's remuneration practices are designed to support the company's objective – to create and deliver value for shareholders. Accordingly, Iluka's remuneration approach is designed to attract, retain and motivate experienced executives and to ensure a focus by executives on shareholder value creation and delivery. Remuneration policy and procedures are therefore designed to achieve remuneration outcomes which are:

Market competitive

• fixed remuneration which reflects skills, experience and performance and which is comparable and competitive within the resources sector
• an appropriate balance between fixed and variable (at risk) components of executive remuneration

Performance Based

• executives focused on both short and long term business performance
• reward for achievement aligned to company and individual performance

Shareholder Aligned

• objectives set that support business profitability, sustainability and growth and thus improved shareholder returns
• executive share ownership, including trailing exposure to company performance

Transparent

• clear disclosure which takes account of market practice
• compliance with relevant legislative requirements

Components of Executive Remuneration

Total Fixed Remuneration (TFR)	Competitively positioned to support attraction and retention strategies.
Short Term Incentive Plan (STIP)	Strong link to financial performance and delivery of results requiring profitability and sustainability performance exceeding 90 per cent of target before any award is payable for these measures.
	The STIP is designed to incentivise executives whilst promoting equity ownership through an award partly in cash and partly in deferred equity.
Long Term Incentive Plan (LTIP)	Provides alignment with shareholder interests through Return on Equity (ROE) and Total Shareholder Return (TSR) measured over a three year period.

Executive Remuneration Mix

Executive Remuneration is made up of fixed (TFR) and at risk (STIP & LTIP) components. A significant portion of total remuneration is at risk.

Target performance was exceeded in 2010, details of which are provided on pages 14-15.

Actual Executive Reward in 2010

Details of the remuneration received by the Managing Director and Key Executives prepared in accordance with statutory requirements and accounting standards are detailed on page 27 of the Remuneration Report.

The table below sets out the actual earnings realised by the Managing Director and Key Executives for 2010. Actual earnings include cash salary and fees, superannuation, non cash benefits received during the year and the full value of incentive payments received relating to the 2010 performance year. The table does not include share based payments which reflect the accounting value for share rights granted in the current and prior years which may or may not be realised as they are dependent on the achievement of performance hurdles.

Name	Base \$	Super \$	Other1 \$	2010 STIP2 \$	2008 LTIP3 \$	Retention Plan7 \$	2010 Total Actual Earnings \$
D Robb4	1,451,941	48,059	38,206	1,672,772	653,542	10,660,000	14,524,520
P Beilby5,6	165,752	5,905	-	-	-	192,301	363,958
P Benjamin	410,092	36,908	6,487	355,034	184,735	-	993,256
C Cobb	407,833	36,180	-	366,335	-	-	810,348
V Hugo	382,519	26,139	6,487	329,133	171,228	-	915,506
A Tate	462,423	28,514	-	410,873	206,955	-	1,108,765
H Umlauff	529,358	47,642	4,767	472,563	246,168	-	1,300,498
S Wickham	472,556	17,781	4,768	412,875	114,733	-	1,022,713
C Wilson	422,376	26,385	6,487	370,414	191,706	-	1,017,368

1 Includes non-monetary benefits (for example spouse travel, car park).

2 Represents total value of 2010 STIP which is awarded half in cash and half in deferred equity awarded in March 2011.

3 Represents the value of the 2008-10 LTIP award for which the performance period concluded 31 December 2010 calculated at a share price of \$10.66 being the volume weighted average price of shares traded over the five days following the release of the 2010 full year results.

4 Represents the value of the Managing Director's 2008-10 performance and retention plan award calculated at a share price of \$10.66 being the volume weighted average price of shares traded over the five days following the release of the 2010 full year results..

5 Ceased employment 1 March 2010.

6 Represents the value of the retention plan award (awarded 1 March 2010) calculated at a share price of \$3.67 being the volume weighted average price of shares traded over the five days following the release of the 2009 full year results.

7 The Retention period for other key executives will conclude from 31 March 2011 and outcomes will be disclosed in the 2011 Remuneration Report.

Actual Executive Reward in 2009

The table below shows actual earnings realised by the Managing Director and Key Executives in 2009 for comparison purposes.

Name	Base \$	Super \$	Other2 \$	2009 STIP3 \$	2007 LTIP4 \$	2009 Total Actual Earnings \$
D Robb	1,431,078	68,922	51,489	521,685	-	2,073,174
P Beilby	382,263	34,404	-	46,532	-	463,199
P Benjamin	408,716	36,784	5,495	46,472	-	497,467
C Cobb1	83,194	7,488	-	-	-	90,682
V Hugo	374,950	28,823	5,495	80,982	-	490,250
A Tate	450,306	40,528	-	131,157	-	621,991
H Umlauff	531,968	47,477	4,632	182,447	-	766,524
S Wickham	413,485	14,103	1,280	145,521	-	574,389
C Wilson	414,857	30,407	5,495	119,210	-	569,969

1 Appointed 12 October 2009, formerly Managing Director of Consolidated Rutile Limited

2 Includes non-monetary benefits (ie spouse travel, car park, etc)

3 Represents total value of 2009 STIP which is awarded half in cash and half in deferred equity

4 Represents the outcome of the 2007-09 LTIP for which the performance period concluded 31 December 2009

2010 Overview

Key Initiatives

As reported in the 2009 Remuneration Report, the company imposed a fixed remuneration freeze for Directors and Executives and established a recruitment freeze for the 2009 calendar year.

The company has continued its focus on managing employee fixed costs to support financial performance initiatives in 2010 including:

• the Managing Director's fixed remuneration was not increased in 2010 (last increase effective 1 January 2008);
• Director fees were not increased in 2010 (last increase effective 1 July 2008);
• the recruitment freeze established in 2009 (with the exception of critical roles) continued in 2010 with further exceptions permitted in order to meet business requirement as profitability improved and in response to pressures from a tightening labour market;
• employees participating in the 2009 short term incentive plan did not receive an increase to their fixed remuneration in 2010; and
• the employee share plan was suspended for 2009 and 2010 but will be re-instated in 2011 now that the company's financial performance has improved.

Performance Based Reward

Profitability targets for the 2010 STIP were reviewed to ensure alignment with corporate objectives for the year. Accordingly, for the 2010 performance year, an EBITDA rather than EBIT target was introduced to provide an increased focus on cashflow during a period of elevated company debt levels after the high capital expenditure in 2008 and 2009.

Total Recordable Injury Frequency Rate and Level 2 and Above environmental incidents were introduced as new sustainability targets for the 2010 STIP replacing All Injury Frequency Rate and Notifications to Government. The revised targets provided a stronger alignment to Iluka's internal health and safety priorities and facilitated improved benchmarking.

Iluka's performance for the 2010 financial year was achieved with earnings improvements across the group. Overall financial performance met or exceeded stretch targets resulting in the 2010 STIP delivering above target awards to the Managing Director and Executives. The outcome of the 2010 STIP was further supported by the achievement of individual long term growth objectives including, for example, the delivery of two major projects (Jacinth-Ambrosia and Murray Basin Stage 2) successful production ramp ups and establishment of improved product pricing dynamics.

Iluka reviews its incentive plans regularly to ensure that performance metrics are appropriately linked to short and long term business requirements and shareholder value generation.

Shareholder Alignment

2008 Long Term Incentive Plan

The TSR target for the 2008 Long Term Incentive Plan was exceeded with the company achieving a TSR of 86.6 per cent and ranked at the 100th percentile of the Materials Index and MidCap 50 comparator groups. Accordingly, share rights granted in respect to this tranche will vest in full. This is the first time since the 2004 Long Term Incentive Plan that there has been any payment of LTIP and demonstrates the alignment of company performance with LTIP awards.

No awards were made in respect to the ROE measure due to performance not achieving the minimum target.

Shares awarded under this plan are detailed on page 25.

Managing Director's Retention Plan

The performance measure associated with the Managing Director's Retention Plan, which was approved by shareholders at the 2008 Annual General Meeting, required TSR of a minimum of 45 per cent over the three year performance period from 1 January 2008. In terms of share price (i.e. absent any other contributor to TSR such as dividends) full vesting of the Plan shares over the three year period required Iluka's share price to reach a minimum of \$5.32 (calculated on the volume weighted average price (VWAP) of shares traded over the five days following the release of the 2010 financial results). The VWAP was calculated for the five trading days from 25 February to 3 March 2011 inclusive resulting in the volume weighted average share price of \$10.66 exceeding the target of \$5.32 by 100 per cent and resulting share price growth of 190 per cent for the performance period. Market capitalisation of the company increased from \$0.9 billion to \$4.5 billion over the corresponding period.

Accordingly, Mr Robb was awarded 1,000,000 ordinary shares under this plan on 4 March 2011.

The graph below shows Iluka's share price performance compared with the Materials and the Metals and Mining Indices over the corresponding three year period.

REMUNERATION REPORT

Board Oversight of Remuneration – Remuneration and Nomination Committee

The Remuneration and Nomination Committee (Committee) operates in accordance with its charter as approved by the Board. The Committee is comprised solely of independent non-executive Directors and was chaired by Mr Pizzey until August 2010. From August 2010, the Committee was chaired by Mr Osborn.

The Committee's responsibility is to provide assistance and recommendations to the Board in support of the company's objective of creating and delivering value for shareholders and in fulfilling its corporate governance responsibilities relating to the following:

• overall remuneration strategy of the company;
• remuneration of non-executive Directors;
• performance and remuneration of the Managing Director and key executives;
• selection and appointment of, and succession planning for, non-executive Directors;
• selection and appointment of, and succession planning for, the Managing Director;
• succession planning for key roles; and
• diversity strategy, policies and practices of the company.

The Committee will also make decisions on behalf of the Board where such authority has been expressly delegated by the Board.

The Committee has the resources and authority appropriate to discharge its duties and responsibilities, including the authority to engage external professionals on terms it determines appropriate. During the 2010 year, external advisers mandated by the Committee provided input on several matters relating to remuneration. These advisers were:

• Ernst and Young, which provided advice in relation to executive remuneration, general remuneration trends and Iluka's management and employee share plans; and
• McKenzie Moncrieff, which provided legal advice in respect to share plans and executive contracts;

In November and December 2010 the Remuneration and Nomination Committee conducted an evaluation of its performance.

Remuneration Practices

The remuneration of an executive or manager is linked to both annual business and individual performance outcomes and to the company's ability to generate competitive levels of shareholder value, as defined by total shareholder return (TSR) and return on equity (ROE), on a longer term basis.

In accordance with the interests of transparent practices, Iluka discloses its current return on equity target range measure which forms part of the long term incentive scheme.

Directors and key executives are prohibited from trading in financial products issued or created over the company's securities by third parties, or trading in associated products and entering into transactions which operate to limit the economic risk of their security holdings in the company. This prohibition extends to Directors and key executives taking out margin loans on their holdings of Iluka securities.

Relationship between reward and performance

As discussed in detail in the "Variable Remuneration" section of this report, the key performance measures underlying the incentive plans in 2010 were:

• STIP: Profitability (ROC, EBITDA and NPAT), Sustainability (total recordable injury frequency rate, severity rate and level two and above environmental incidents) and Growth (individual stretch objectives).
• LTIP: ROE and relative TSR

Performance against each of the above measures determines the quantum of STIP awards paid to executives and the portion of LTIP awards that vest to executives.

For the 2010 performance year, the STIP delivered above target awards to the Managing Director and Executives reflecting the achievement of profitability and growth objectives at stretch levels of performance.

At the end of 2010, the 2008 LTIP grant completed its performance period (1 January 2008 to 31 December 2010). Performance was measured against both the ROE and relative TSR hurdles. Performance and resulting vesting was as follows:

Component	Performance target	Actual performance	Implication for vesting
ROE tranche (50%)	50% vesting for Threshold of 10% with full vesting at target of 14%	0.7%	Nil vesting and awards lapse
Relative TSR tranche (50%)	50th percentile for 50% vesting and 75th percentile for full vesting.	100th percentile	Full vesting of the TSR tranche

Iluka's five year performance

For statutory reporting purposes the company is also required to show the five year total shareholder return and five years of earnings. In summary:

• During the period 1 January 2006 to 31 December 2010 the company completed a 4 for 7 renounceable share rights entitlement at \$2.55 per share in March 2008. A portfolio of shares bought at the prevailing market price of \$7.84 at the start of the performance period (closing price on 30 December 2005), assuming full take up of the rights issue at \$2.55 per share, generated a shareholder return of 54.5% per cent taking into account the shareholder's participation in the 2008 share rights entitlement. With aggregate dividend payments of \$0.44 per share, the total shareholder return was 59.2% per cent over the five year period.
• Earnings over the same five year period are set out in the table below:

	31 Dec 06	31 Dec 07	31 Dec 08	31 Dec 09	31 Dec 10
Net profit after tax (\$ million)	21	51.1	49.0	(82.4)	36.1
Earnings per share (cents)	9.1	21.6	14.2	(20.2)	8.6
Closing share price (\$)	5.94	4.11	4.64	3.58	9.14
Dividends paid and declared (cents)	22	22	N/A	N/A	N/A

Remuneration Structure

This Remuneration Report discloses remuneration details for the Managing Director, non-executive Directors and Key Management Personnel of the company and the Iluka group in 2010.

Remuneration for executives comprises two components:

• total fixed remuneration (TFR) which is made up of base salary and superannuation, together with other salary sacrifice items such as novated leases and car parking. Employees are required to meet any fringe benefits tax obligations applicable to benefits; and
• variable remuneration which is linked directly to performance of both the company and the individual executive and, as such, is deemed to be "at risk".

The remuneration structure is designed to reflect an appropriate balance between fixed and variable remuneration to ensure that executive reward is aligned with the performance of the business.

Total Fixed Remuneration

Iluka's total fixed remuneration structure is assessed against the median level of the market as defined by a comparator group of Australian companies within the resources market. Individual TFR is determined within an appropriate range centred at the market median by referencing job evaluation data and individual experience and performance levels of executives. Allowance is also made for the competitive nature of the market for talent in the resources sector.

Superannuation Benefits

Iluka has appropriate superannuation and pension arrangements in countries where it operates. In Australia, the company contributes superannuation at the minimum required rate to each executive's nominated eligible fund. Individuals may elect to make further voluntary contributions from pre-tax salary.

All Australian based executives are entitled to contribute to the Iluka Superannuation Plan. The plan is administered by ING Australia Limited as part of a master trust of which over 90 per cent of employees are members. The plan is primarily an accumulation style plan. A small number of employees have retained membership in a defined benefit subplan, a legacy from the 1999 merger of Westralian Sands Limited with RGC Limited. The defined benefit sub-plan is closed to new members. All executives as detailed on page 26 participate in the Iluka Superannuation Plan or a fund of choice on an accumulation basis.

VARIABLE REMUNERATION

Performance and Incentives

The current performance and incentive arrangements were introduced for the 2007 performance year. The incentive arrangements comprise a Short Term Incentive Plan (STIP) and a Long Term Incentive Plan (LTIP). These distinct plans balance the short and long term aspects of business performance, reflect market practice and support business needs.

The incentive plans ensure a strong alignment between the incentive arrangements of executives and the creation and delivery of shareholder value and support Iluka's aim of attracting, retaining and motivating experienced executives.

The STIP and LTIP operate within the existing rules of the Directors, Executives and Employees Share Acquisition Plan (DEESAP), as approved by shareholders at the company's Annual General Meeting in May 1999.

At target levels of performance, the STIP represents two-thirds of potential variable remuneration, and the LTIP represents one-third.

Only nominated managers and executives participate in the STIP and LTIP. The level of award opportunity is determined by an individual's role within the business and capacity to impact the results of the company. In 2011, it is anticipated that 81 employees (representing 9% of employees and including all executives) will participate in the LTIP, and 138 employees (representing 15% of employees and including all executives) will participate in the STIP.

Objectives, measures and targets for both the STIP and the LTIP are set on an annual basis and are subject to the approval of the Board.

The target incentive opportunity for key executives under the STIP is 60 per cent of TFR and under the LTIP is 30 per cent of TFR. At stretch levels of performance the incentive opportunity under the STIP increases to a maximum of 90 per cent of TFR.

The Short-Term Incentive Plan (STIP)

The STIP aims to provide an incentive to executives whilst also promoting equity ownership, providing awards partly in cash and partly in deferred equity.

The STIP is linked to group and regional financial and operational performance and has a focus on return on capital (ROC) as a key metric. A combination of financial and non-financial targets, including safety and individual growth specific targets, are used to measure performance and determine outcomes. Each metric reflects the organisational unit within which the individual is located (for example, regional versus corporate roles) and is measured independently.

The weighting of the growth measure is typically set at 30 per cent, however the Board has discretion at any time to vary the growth weighting for any individual within a range from 20 per cent to 40 per cent in line with the process of objective setting and performance assessment.

The process for the development and assessment of individual objectives is a rigorous one. Objectives are linked to major business opportunities and risks as typically identified in Iluka's Corporate Plan and to the priorities for the relevant year. Specific and measurable deliverables and the timeframe for achievement are defined for each objective. The deliverables and the timeframes are set at a stretch level of performance. Objectives are set in conjunction with the Managing Director for all key executives, followed by review and approval by the Remuneration and Nomination Committee. The process is designed to ensure a close alignment between the STIP and the company's objective of creating and delivering value for shareholders.

The STIP award is determined after the year-end based on an assessment of the extent to which the individual's objectives have been achieved. Outcomes are subject to rigorous one-up manager assessment and, for the Managing Director and key executives, by the Board.

2010 STIP

The measures and weighting of objectives for the 2010 performance year were:

Profitability (ROC, EBITDA and NPAT)	60 per cent
Sustainability (total recordable injury frequency rate, severity rate and level 2 and above environmental incidents)	10 per cent
Growth (individual objectives)	30 per cent

STIP payments to the Managing Director and key executives were significantly higher in 2010 than in 2009, due primarily to increased profitability, a strong relative share price performance and the achievement of growth objectives including successful delivery of two major projects.

Half of the STIP award is paid in cash and half must be taken on a deferred basis in the form of ordinary restricted shares in Iluka. Fifty per cent of the restricted shares do not vest until one year after the end of the performance period, while the remaining fifty per cent does not vest until two years after the end of the performance period. This mandatory deferral results in an employee having to remain with the company and continue to perform satisfactorily for the shares to vest and, therefore, there is a significant trailing exposure to the value of the company's shares.

The process for determining the number of restricted shares to be awarded to each participant is determined by dividing the dollar value of the deferral component by the Volume Weighted Average Price (VWAP) of Iluka shares traded on the ASX over the five trading days following release of the company's full year results.

The deferred amount supports executive focus on both annual and multi-year performance, as well as representing a tangible retention factor.

The Long-Term Incentive Plan (LTIP)

The LTIP provides a grant of equity in the form of share rights for Iluka shares that vest after three years subject to performance over a three year period.

The grant is split into two separate tranches, with one tranche (50 per cent) being assessed based on return on equity (ROE) relative to an internal target and the other (50 per cent) based on total shareholder return (TSR) performance relative to a comparator group consisting of companies which in 2010 comprised the Materials Index and the ASX Mid Cap 50 Index at the commencement of the performance period (excluding property trusts and duplication). The two performance measures are applied as follows:

Return on Equity tranche:

The ROE tranche of the LTIP grant vests based on a prospective three year average ROE performance measure. Vesting occurs on a straight line basis for performance between Threshold and Target. Targets are set giving consideration to:

• the company's ROE performance history;
• planned strategic and business plan activity throughout the performance period; and
• comparable company performance.

2010 ROE targets were 10 per cent for Threshold and 14 per cent for Target. These targets may be compared with a 10 year history for Iluka (to 2009) in which the average ROE was 5.7, or with a 10 year average for the ASX 200 (less property trusts) of 8.85.

Targets are reviewed annually and set for a forward three year period. It can be expected that, as sustainable performance improves, targets will be increased - within the bounds of feasible achievement - creating a "staircase" effect over time. Similarly, because performance is measured over the three years as an average, a failure to achieve targeted levels of performance in any one year increases the hurdle in the remaining years.

ROE performance assessment is also subject to maintenance of an acceptable level of gearing.

Total Shareholder Return tranche:

The TSR tranche of the LTIP grant vests based on TSR relative to a peer group of companies. The comparator group consists of the companies which in 2010 comprised the Materials Index and the ASX Mid Cap 50 Index at the commencement of the performance period (excluding property trusts and duplication). This comparator group was chosen to provide a combination of companies from Iluka's defined industry sector and companies of a similar market capitalisation to Iluka. The combined group also ensures a sufficiently large peer group for performance measurement, and provides less likelihood of TSR performance being skewed to specific sub industry sectors or specific stocks.

LTIP Vesting Schedule
Measure	Performance Hurdle to be achieved	Percentage of total grant that will vest	Maximum percentage of total grant
	50th percentile	25%	50%
TSR	75th percentile	50%
ROE	Threshold	25%	50%
	Target	50%
Total Grant			100%

Vesting occurs on a straight-line basis for performance between threshold and target for both measures.

All offers and details of the maximum allocation for the Managing Director and key executives are shown on page 29. It should be noted that the maximum allocations listed are subject to the respective performance criteria. If at the end of the performance period the performance criteria have not been met there will be no entitlement to shares.

Previous Performance Incentive Programs: 2005 PIP

During 2005, Iluka operated the Performance Incentive Program (PIP) which has since been superseded by the STIP and LTIP plans introduced in 2007.

At the end of the performance period in December 2005, performance criteria were assessed for each executive and an incentive award determined based on the level of achievement. Half of the incentive award was paid in cash in March 2006. Executives received the remaining half of the award as rights to fully paid ordinary shares in Iluka Resources Limited in annual instalments of 25 per cent over four years with each tranche of shares being subject to a four year holding lock. Tranche one of the 2005 PIP vested in January 2007 with tranche two vesting January 2008 and tranche three vesting January 2009. The final tranche of the 2005 PIP vested in January 2010.

Securities Trading

Iluka's policy in relation to employees holding Iluka securities is set out in the company's Securities Trading Policy, which can be found on the company's website at www.iluka.com. The policy sets out the circumstances in which employees may trade in company securities.

Remuneration Review

The company conducts a review of the remuneration of executives and staff on an annual basis. Guidelines for reviews are considered by the Board following recommendation by the Remuneration and Nomination Committee. Review guidelines are based upon the outcomes of direct and related market review data and external advice from the company's remuneration advisers. All employees and executives participate in an objective setting and performance review process which is used in conjunction with market data to determine appropriate remuneration recommendations.

Individual progress against objectives is reviewed throughout the performance year with formal reviews occurring at half year and at the conclusion of the performance year.

Recommendations by the Managing Director for STIP and LTIP award outcomes and remuneration for key executives are submitted to the Remuneration and Nomination Committee in February of each year. In respect of all other eligible participants, a one up manager approval process applies with final Managing Director approval prior to any award or remuneration review being implemented.

Employee Share Plan

The Board believes that strong employee alignment with shareholder outcomes is a vital element of high performing companies which create and deliver value for shareholders. Put simply, the company wants all employees to identify with shareholder returns. Accordingly, the company also operates an employee share plan under the rules of the Iluka Resources Limited Employee Share Plan. The Board may, from time to time, at its discretion, make written offers to participate in the plan.

In 2007 and 2008, offers were made to eligible employees (permanent employees with a minimum of twelve months service, who do not participate in the STIP) in Australia and the United States to receive ordinary shares in Iluka Resources Limited to the value of A\$1,000.

To satisfy the legislative requirements of both Australia and the United States, Australian employees received the shares under a tax-exempt plan, with a three year sale restriction period (a holding lock is applied during the restriction period). As US employees do not have access to a tax exemption plan, they were offered shares up to A\$1,000 through a grant of restricted shares. The shares will be held under the plan rules with a restriction period of three years. To enable US employees to receive a tax deferral, strict forfeiture conditions apply.

Consistent with usual industry practice, shares acquired under the Employee Share Plan are not subject to performance conditions as the primary objective of the plan is to encourage share ownership by all employees and, thereby, increase the alignment of employee attitudes and actions with shareholder value creation and delivery.

The employee share plan was not offered to employees in 2009 or 2010 but will be re-instated in 2011.

Iluka Retention Plan

During 2007 and 2008, the resources sector experienced very high levels of competition for management and technical talent, with resulting skill shortages and upward pressures on remuneration. These pressures were particularly prevalent at the executive level and for highly skilled professionals critical to business operation.

The Board recognises that continuity of management and retention of key talent is critical to achieving the successful delivery of major projects and other strategies in order to enhance shareholder returns. In that context, the Board regularly reviews the market competitiveness of executive remuneration and its ability to retain key executives to achieve long term business objectives.

Consequently, in March 2008, the Board approved the introduction of a Retention Plan limited to certain individuals identified as critical to business outcomes over the medium term.

The Retention Plan offered participants a grant of share rights to ordinary shares in Iluka Resources Limited which vest in full at the conclusion of a three year retention period. The grant of share rights rather than a cash payment provides a strong alignment of the interests of participants with those of shareholders.

Where a participant voluntarily ceases employment during the retention period, all share rights awarded under the Retention Plan are forfeited.

Retention Plan share rights awarded to executives and Key Management Personnel are included as rights granted in the table on page 25.

In August 2009, the Board closed the Retention Plan.

Non-Executive Directors' Remuneration

The remuneration of the non-executive Directors is determined by the Board on recommendation from the Remuneration and Nomination Committee within a maximum aggregate amount approved by shareholders at an Annual General Meeting. The current maximum amount of non-executive Directors' fees as approved by shareholders is \$1.1 million. The total amount paid in 2010, including superannuation, was \$956,565.

In 2009 and 2010, the Board decided not to increase their fees. :A review of Iluka's non-executive Director fees was conducted by Ernst & Young in 2011. The review took into account the nature of the Director's work, their responsibilities and survey data on comparative companies. Details of Director fees in 2010 and increased fees from 1 March 2011 are as follows:

Iluka Resources Limited Remuneration report 31 December 2010 (continued)

		From 1 March 2011	From 1 July 2008 to 28 February 2011
		\$ p.a	\$ p.a
	Non-executive Director Fees
	Board Chairman (inclusive of Committee fees)	312,000	275,000
	Board Member	125,000	100,000
	Board Member Committee Fees
	Audit and Risk Committee Chair	35,000	35,000
	Remuneration and Nomination Committee Chair	25,000	25,000
	Audit and Risk Committee Member	17,500	17,500
	Remuneration and Nomination Committee Member	12,500	12,500

The minimum required employer superannuation contribution up to the statutory maximum is paid into each Director's nominated eligible fund and is in addition to the above fees. Based on the above fee structure, the current total nonexecutive Director remuneration, assuming no changes to the Board, is \$1,074,500 per annum, excluding superannuation, or \$1,158,324 including superannuation .

Non-executive Directors are able to purchase company shares under the DEESAP utilising the funds that would otherwise be payable to Directors as fees. These shares are acquired on market and all transaction costs are borne by the relevant Director. Details of Directors' share purchases are listed on page 25 of the Report. No performance conditions are attached to these shares as they are purchased using sacrificed fees.

Executive Employment Agreements

Remuneration and other terms of employment for the Managing Director and key executives are formalised in service agreements. The Managing Director and key executives are employed on a rolling basis with no specified fixed terms. The Managing Director and relevant executives are on total fixed remuneration (TFR) arrangements, inclusive of superannuation.

Total Fixed Remuneration	\$1,500,000 for the year ended 31 December 2010.
2010 Short Term Incentive	90 per cent of TFR at target with up to 120 per cent of TFR for stretch performance awarded 50 per cent as cash and 50 per cent as deferred equity.
	Measure	Weighting
	Profitability (ROC, EBITDA, NPAT)	50 per cent
	Sustainability (total recordable injury frequency rate, severity rate, level 2 and above notifications to government)	10 per cent
	Growth (individual objectives)	40 per cent
	Individual objectives and related deliverables are set each year by the Board at what is assessed to be a stretch level of performance. These objectives typically vary from year to year and in 2010 related to the company's ongoing response to the global economic crisis, major project development and certain industry related and other initiatives.
2010 Long Term Incentive	A grant of equity in the form of share rights of up to 30 per cent of TFR measured over of a three year performance period.
	Measure	Weighting
	ROE	50 per cent
	TSR	50 per cent

David Robb - Managing Director

Retention Arrangements	At the 2008 AGM, shareholders approved the following retention arrangements for Mr Robb.
Retention Offer	1,000,000 Share Rights offered in three equal tranches over a 3 year retention period.
Performance Period - Tranche 1 333,333 Share Rights	The 12 month period commencing from the date which is 5 Business days after the announcement of the full year results for the year ending 31 December 2007 (ie, Tranche 1 performance period is 27 February 2008 to 25 February 2009). The performance hurdle for tranche 1 of Mr Robb's retention plan was achieved with 333,333 share rights granted accordingly.
- Tranche 2 333,333 Share Rights	The 12 month period commencing from the date which is 5 Business days after the announcement of the full year results for the year ending 31 December 2008 (ie, Tranche 2 performance period is 25 February 2009 to 3 March 2010). The performance hurdle for tranche 2 of Mr Robb's retention plan was not achieved and therefore, share rights relating to tranche 2 of the plan were not awarded.
- Tranche 3 333,334 Share Rights	The 12 month period commencing from the date which is 5 Business days after the announcement of the full year results for the year ending 31 December 2009 (ie, Tranche 3 performance period is 3 March 2010 to 3 March 2011). The performance hurdle for tranche 3 of Mr Robb's retention plan was achieved. In accordance with the terms and conditions of Mr Robb's retention offer (see Vesting Conditions), a total of 666,667 share rights relating to tranches 2 and 3 of the plan have been awarded.
Vesting Conditions	A tranche of Retention Incentive Share Rights will vest on the Vesting Date if the TSR of the company calculated over the Performance Period for that tranche is 15% (Annual Hurdle); or 30% TSR for the First and Second or Second and Third performance periods;
	or 45% TSR measured over the First, Second and Third performance periods.
Vesting Date	Subject to the performance criteria of each tranche being satisfied, each tranche will vest the day after the last day of the Tranche 3 performance period.
Forfeiture	All entitlements under the retention plan are forfeited if Mr Robb resigns prior to the end of the three year retention period.
Termination Arrangements	At the 2007 AGM, shareholders approved the following termination payments which may become payable to Mr Robb under the terms of the Executive Employment Agreement entered into between Mr Robb and the company on 18 October 2006.
With Notice	Employment can be terminated during the contract period by giving 12 months notice or pay in lieu of notice plus a pro-rata short term incentive component. All shares to which Mr Robb is entitled under the DEESAP will vest within three months of termination.
Without Notice	In the case of misconduct and in certain other circumstances, employment can be terminated without notice and with no entitlement to any payment under the executive incentive plan.
Voluntary Termination	Employment may be terminated by giving six months notice. Any pro-rata award under the executive incentive plan will be at the discretion of the Board.

Termination for other reasons

 By Iluka on the ground of redundancy or by Mr Robb if, at the instigation of the Board he suffers a material diminution in his status as Chief Executive Officer and Managing Director, by giving 24 months notice (if given in the first three years of employment) or 12 months notice (thereafter) provided that Iluka may elect, or Mr Robb may require Iluka, to pay Mr Robb an equivalent amount of TFR in lieu of notice.  By Iluka if Mr Robb suffers illness, accident or other cause which renders him unable to perform his duties, by giving Mr Robb six months TFR.  In the circumstances described above, a termination payment equal to the total incentive target for which there would have been an entitlement under the executive incentive plan for the relevant year calculated on a pro-rata basis for the relevant notice period given by the company.

Protection of Interests

Mr Robb is restrained from engaging in certain activities during his employment, and for a period following termination of his employment, in order to protect Iluka's interests. The Executive Employment Agreement contains provisions relating to the protection of confidential information and intellectual property.

Executive Service Agreements

Major provisions of the agreements relating to key executives included in this Remuneration Report are set out below.

Executive	Position	Termination Notice Period by Iluka	Termination Notice Period by Employee	Termination Payments*
P Benjamin	General Manager Exploration	3 months	3 months	12 months
C Cobb	General Manager Sales & Marketing	3 months	3 months	9 months
V Hugo	General Manager Product & Technical Development	3 months	3 months	12 months
A Tate	Chief Financial Officer	3 months	3 months	9 months
H Umlauff	General Manager Project Management	3 months	3 months	12 months
S Wickham	General Manager Australian Operations	3 months	3 months	9 months
C Wilson	General Manager Corporate Services & Company Secretary	3 months	3 months	12 months

*Termination payments (other than for gross misconduct) are calculated on current total fixed remuneration at date of termination and are inclusive of the notice period.

SHARE RIGHTS AND SHAREHOLDINGS OF KEY MANAGEMENT PERSONNEL

		NUMBER OF SHARES			NUMBER OF SHARE RIGHTS
		Vesting	Awarded					Vested as
	Balance	of	as		*Balance	Balance	*Granted	shares	Lapsed	Balance
	held at	share	Restricted	Other	held at	held at	during	during	during	held at
Name Non-Executive Directors	1/1/10	rights	Shares	changes	31/12/10	1/1/10	2010	2010	2010	31/12/10
R Every**	28,679
		-	-	(28,679)	-	-	-	-	-	-
D Morley	40,876	-	-	-	40,876	-	-	-	-	-
W G Osborn	-	-	-	-	-	-	-	-	-	-
G Pizzey	16,351	-	-	-	16,351	-	-	-	-	-
G Rezos	63,602	-	-	-	63,602	-	-	-	-	-
J Seabrook	19,314	-	-	-	19,314	-	-	-	-	-
S J Turner	-	-	-	50,000	50,000	-	-	-	-	-
Executive Director
D Robb	591,171	-	70,689	1,355	663,215	1,224,657	121,951	-	(61,308)	1,285,300
Executives
P Beilby**	126,574	54,614	-	(181,188)	-	141,970	-	(54,614)	(87,356)	-
P Benjamin	102,212	968	6,297	1,355	110,832	175,171	36,504	(968)	(17,329)	193,378
C Cobb	-	-	-	-	-	-	34,146	-	-	34,146
V Hugo	121,204	2946	10,973	(18,645)	116,478	117,894	33,252	(2,946)	(16,062)	132,138
A Tate	41,988	-	17,772	-	59,760	174,433	40,163	-	(19,414)	195,182
H Umlauff	108,057	-	24,722	(19,873)	112,906	146,437	46,911	-	(23,092)	170,256
S Wickham	39,840	-	19,718	1,355	60,913	92,254	40,650	-	(10,763)	122,141
C Wilson	81,048	2,691	16,153	-	99,892	178,202	36,504	(2,691)	(17,983)	194,032

* Balances for the Executive Director and the Executives include restricted shares which will vest in future periods subject to legislative requirements.

** Shares and Share Rights are reversed to show a zero balance at 31 December on cessation of employment.

No shares were forfeited during the year.

DETAILS OF REMUNERATION

Details of the remuneration of the directors and other Key Management Personnel (as defined in AASB 124 Related Party Disclosures) of Iluka Resources Limited and the Iluka Resources Limited group are set out in the following tables. Other key management personnel of the company and the group are the following executives who have authority for planning, directing and controlling the activities of the company and the group.

KEY MANAGEMENT PERSONNEL – DIRECTORS

(i) Non-executive Directors

R L Every (Chairman)

D M Morley

W G Osborn

G J Pizzey (Chairman)

G J Rezos

J A Seabrook

S J Turner

(ii) Managing Director and Chief Executive Officer

D Robb

All above persons were Directors of Iluka Resources Limited for all of the financial year, as well as for the financial year ended 31 December 2009, except W O Osborn and S J Turner who were appointed as Directors on 26 March 2010. R L Every was a Director in the prior year and retired on 20 May 2010.

KEY MANAGEMENT PERSONNEL - EMPLOYEES OTHER THAN DIRECTORS ('the Executives')

In addition to the Directors of the consolidated entity, the following employees met the definition of Key Management Personnel for the year ended 31 December 2010 and are referred to as Executives:

P Beilby1	General Manager Murray Basin
P Benjamin	General Manager Exploration
C Cobb	General Manager Sales and Marketing
V Hugo	General Manager Product & Technical Development
A Tate	Chief Financial Officer
H Umlauff	General Manager Project Management
S Wickham	General Manager Australian Operations
C Wilson	General Manager Corporate Services & Company Secretary

1 Ceased employment 1 March 2010.

Amounts in the 'STIP cash' column are dependent on the satisfaction of performance conditions as set out in the section headed "Short Term Incentive Plan" above. Amounts in the 'Share Based Payments' column relate to the component of the fair value of awards from prior years made under the various incentive plans attributable to the year measured in accordance with AASB 2 Share Based Payments. All other elements of remuneration are not directly related to performance.

Name Cash, Salary & Fees¹ **STIP Cash2 \$ Non-Monetary Benefits \$ Other \$ Superannuation \$ **Share Based Payments2,3 \$ Total \$ Non-executive Directors R Every5 106,944 n/a 7,794 n/a 5,421 n/a 120,159 D Morley 136,237 n/a 6,076 n/a 12,150 n/a 154,463 W G Osborn6 90,456 n/a - n/a 8,141 n/a 98,597 G Pizzey 217,262 n/a - n/a 13,123 n/a 230,385 G Rezos 124,763 n/a - n/a 11,229 n/a 135,992 J Seabrook 121,951 n/a - n/a 10,976 n/a 132,927 S J Turner7 89,828 n/a - n/a 8,085 n/a 97,913 Executive Director D Robb 1,451,941 836,386 38,206 - 48,059 1,359,631 3,734,223 Executives P Beilby4 165,752 - - 315,000 5,905 261,039 747,696 *P Benjamin 410,092 177,517 6,487 - 36,908 361,570 992,574 C Cobb 407,833 183,167 - - 36,180 41,580 668,760 V Hugo 382,519 164,566 6,487 - 26,139 256,549 836,260 *A Tate 462,423 205,436 - - 28,514 369,704 1,066,077 *H Umlauff 529,358 236,282 4,767 - 47,642 366,074 1,184,123 *S Wickham 472,556 206,438 4,768 - 17,781 242,164 943,707 *C Wilson 422,376 185,207 6,487 - 26,385 364,455 1,004,910

Short Term Employee Benefits

1. STIP Cash includes cash that is sacrificed for the purchase of shares during the year.

2. STIP Cash and share-based awards for 2009 were made in March 2010.

3. Includes negative amounts for the reversal of prior year charges for the ROE component of the 2008 LTIP which did not vest.

4. Ceased employment 1 March 2010. "Other" relates to redundancy payment and statutory leave entitlements on cessation of employment.

5. Retired on 20 May 2010.

2010

1. Appointed 26 March 2010. No payments were made to WG Osborn as consideration for his appointment.

2. Appointed 26 March 2010. No payments were made to SJ Turner as consideration for his appointment.

* 5 highest paid executives of the group, as required to be disclosed under the Corporations Act 2001.

** n/a denotes that Non-executive Directors are not eligible for these arrangements.

27

Name	Cash, Salary & Fees1	**STIP Cash4 \$	**Non Monetary Benefits \$	Other \$	Super annuation \$	**Share Based Payments2,3, 4 \$	Total \$
Non-executive Directors
R Every	275,000	n/a	n/a	n/a	14,103	n/a	289,103
D Morley	135,000	n/a	n/a	n/a	12,150	n/a	147,150
G Pizzey	125,000	n/a	n/a	n/a	11,250	n/a	136,250
G Rezos	130,000	n/a	n/a	n/a	11,700	n/a	141,700
J Seabrook	117,500	n/a	n/a	n/a	10,575	n/a	128,075
Executive Director
D Robb	1,431,078	260,843	51,489	-	68,922	1,383,517	3,195,849
Executives
*P Beilby	382,263	23,266	-	-	34,404	398,088	838,021
*P Benjamin	408,716	23,236	5,495	-	36,784	454,572	928,803
C Cobb5	83,194	-	-	-	7,488	-	90,682
V Hugo	374,950	40,491	5,495	-	28,823	325,980	775,739
*A Tate	450,306	65,579	-	-	40,528	564,725	1,121,137
*H Umlauff	531,968	91,224	4,632	-	47,477	473,032	1,148,333
S Wickham	413,485	72,761	1,280	-	14,103	255,266	756,895
*C Wilson	414,857	59,605	5,495	-	30,407	474,605	984,969

Short Term Employee Benefits

1. STIP Cash includes cash that is sacrificed for the purchase of shares during the year.

2. Includes negative amounts for the reversal of prior year charges for the ROE component of the 2007 LTIP which did not vest.

3. The higher level of share based payments in 2009 compared with 2008 reflects the deferred equity component of the 2008 STIP which is charged as remuneration in 2009 and 2010 together with the full year charge for the Iluka Retention Plan share rights granted in March 2008 which vest in March 2011.

4. STIP Cash and share-based awards for 2009 were made in March 2010.

5. Appointed 12 October 2009. C Cobb was formerly Managing Director of Consolidated Rutile Limited. No payments were made to C Cobb as consideration for his joining Iluka.

* 5 highest paid executives of the group, as required to be disclosed under the Corporations Act 2001.

** n/a denotes that Non-executive Directors are not eligible for these arrangements.

2009

Awarded %2 Name 2008 STIP1 2009 STIP1 2010 STIP1 2008 2009 2010 D Robb 92,687 70,689 78,460 91 29 93 P Benjamin 18,091 6,297 16,653 84 12 88 C Cobb - - 17,183 - - 97 V Hugo 17,671 10,973 15,438 88 22 89 A Tate 20,994 17,772 19,272 87 30 92 H Umlauff 25,405 24,722 22,165 88 35 91 S Wickham 11,708 19,718 19,366 87 37 92 C Wilson 21,468 16,153 17,374 96 30 92

SHARE - BASED COMPENSATION

STIP Restricted Shares awarded to the Managing Director and Executives yet to vest

1 STIP restricted share fair value determined independently using the Black-Scholes model that takes into account the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk free discount rate for the vesting period. STIP restricted shares are awarded in March of the following year (eg 2010 STIP Awards are made in March 2011)

2 The percentage achieved of the STIP maximum available incentive opportunity awarded for the financial year.

Maximum value of restricted shares and share rights

The maximum number of restricted shares and/or share rights that may vest in future years, together with the maximum value of these shares/rights that will be recognised as share based payments in future years is set out below. The maximum value for a year relates to the value of those restricted shares/rights that vest in that year. The amount to be reported as share based payments in future years will be determined in accordance with AASB 2 Share Based Payments over the vesting period.

		Maximum Number		Maximum Value (\$)
Name		Vesting Year			Vesting Year
	2011	2012	2013	2011	2012	2013
D Robb	1,250,647	137,386	121,951	1,914,031	540,468	376,829
P Benjamin	164,898	33,693	36,504	642,903	135,251	112,797
C Cobb	-	-	34,146	-	-	105,511
V Hugo	110,282	33,310	33,252	421,008	132,550	102,749
A Tate	170,708	42,491	40,163	660,501	168,159	124,104
H Umlauff	144,951	51,613	46,911	547,328	203,492	144,955
S Wickham	84,093	39,587	40,650	320,517	155,892	125,609
C Wilson	174,511	38,621	36,504	680,066	152,844	112,797

Fair Value

The fair value of each restricted share or share right and the vesting year for each incentive plan is set out below.

Incentive Plan	Fair Value per Share \$	Vesting Year
2005 PIP (Tranche 4)	6.57	2010
*2007 STIP (Tranche 2)	4.09	2010
2008 LTIP	2.93	2011
*2008 STIP	4.66	2010 & 2011
2009 LTIP	4.06	2012
*2009 STIP	3.57	2011 & 2012
Retention Plan	4.09	2011
Retention Plan MD 1	0.90	2011
Retention Plan MD 2	1.19	2011
Retention Plan MD 3	0.90	2011
2010 LTIP	3.09	2013
*2010 STIP	10.66	2012 & 2013

* Awards under these plans are restricted shares, all other plans grant share rights.

The fair value is calculated in accordance with the measurement criteria of Accounting Standard AASB 2 Share-based Payment.

The fair value of restricted shares is determined to be the volume weighted average price 5 days after results are announced to the market. The fair value is recognised as an expense through the income statement on a straight-line basis between the grant date and the vesting date for each respective plan.

The fair value of share rights is independently determined using a Black-Scholes share right pricing model that takes into account the exercise price, the term of the share right, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate of the term of the share right.

The fair value of share rights at grant date of the Long Term Incentive Plan (LTIP) is independently determined using a Monte Carlo simulation to model Iluka share prices against the comparator group performance at vesting date. The Monte Carlo method is a procedure for repeatedly sampling random movements in a stock's price to estimate the average or mean share price.

Iluka Resources Limited ABN 34 008 675 018 Financial Report - 31 December 2010

	Page
Financial report
Consolidated income statement	33
Consolidated statement of comprehensive income	34
Consolidated balance sheet	35
Consolidated statement of changes in equity	36
Consolidated statement of cash flows	37
Notes to the consolidated financial statements	38
Directors' declaration	85
Independent auditor's report to the members	86

This financial report covers the consolidated financial statements for the consolidated entity consisting of Iluka Resources Limited and its subsidiaries. The financial statements are presented in the Australian currency.

Iluka Resources Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

Iluka Resources Limited Level 23, 140 St George's Terrace Perth WA 6000

A description of the nature of the consolidated entity's operations and its principal activities is included in the review of operations in the Directors' Report.

The financial statements were authorised for issue by the directors on 24 March 2011. The company has the power to amend and reissue the financial statements.

Through the use of the internet, we have ensured that our corporate reporting is timely and complete. All press releases, financial reports and other information are available at www.iluka.com

Iluka Resources Limited Consolidated income statement For the year ended 31 December 2010

	Notes	2010 \$M	2009 \$M
Revenue from continuing operations	5	964.6	602.6
Other income Expenses	6 7	8.4 (885.8)	39.5 (717.2)
Interest and finance charges Rehabilitation and restoration unwind Total finance costs	7	(33.0) (14.3) (47.3)	(8.4) (15.7) (24.1)
Impairment charges	7	-	(67.6)
Profit (loss) before income tax from continuing operations		39.9	(166.8)
Income tax (expense) benefit Profit (loss) from continuing operations	8	(3.8) 36.1	61.5 (105.3)
Profit from discontinued operations	9	-	22.9
Profit (loss) for the year		36.1	(82.4)
Basic and diluted earnings per share		Cents	Cents
Earnings per share from continuing operations attributable to owners	29	8.6	(25.9)
Earnings per share attributable to owners	29	8.6	(20.2)

The above income statement should be read in conjunction with the accompanying notes.

Iluka Resources Limited Consolidated statement of comprehensive income For the year ended 31 December 2010

	2010 \$M	2009 \$M
Profit (loss) for the year	36.1	(82.4)
Other comprehensive income
Changes in fair value of foreign exchange cash flow hedges, net of tax Currency translation of US operation Hedge of net investment in US operation, net of tax Actuarial gains on defined benefit plans, net of tax Other comprehensive (loss) income for the year	(3.6) (6.9) 6.7 0.6 (3.2)	83.5 (22.8) 23.6 2.4 86.7
Total comprehensive income for the year	32.9	4.3
Total comprehensive income for the year is attributable to: Owners of Iluka Resources Limited Non-controlling interest	32.9 -	(1.1) 5.4
	32.9	4.3

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

Iluka Resources Limited Consolidated balance sheet As at 31 December 2010

	Notes	2010 \$M	2009 \$M	1 January 2009* \$M
ASSETS
Current assets
Cash and cash equivalents	10	30.1	86.3	97.6
Receivables Inventories	11 12	164.8 201.0	103.9 205.5	243.2 249.7
Derivative financial instruments	3	-	15.9	-
Other assets		-	-	8.5
Total current assets		395.9	411.6	599.0
Non-current assets
Inventories	12	56.6	56.6	-
Property, plant and equipment	13	1,425.0	1,566.6	1,414.6
Deferred tax assets	14	55.3	53.7	31.0
Intangible assets	15	7.1	9.9	13.5
Total non-current assets		1,544.0	1,686.8	1,459.1
Total assets		1,939.9	2,098.4	2,058.1
LIABILITIES
Current liabilities
Payables	16	103.7	183.7	164.1
Interest bearing liabilities	17	29.5	44.7	36.8
Current tax liabilities		-	-	5.0
Provisions Derivative financial instruments	18	54.9 -	28.1 -	61.4 104.0
Total current liabilities		188.1	256.5	371.3
Non-current liabilities
Interest bearing liabilities	17	313.3	423.7	276.5
Provisions	18	313.9	322.9	322.7
Derivative financial instruments		-	-	49.6
Total non-current liabilities		627.2	746.6	648.8
Total liabilities		815.3	1,003.1	1,020.1
Net assets		1,124.6	1,095.3	1,038.0
EQUITY Contributed equity	19	1,108.3	1,114.4	998.1
Reserves	20(a)	20.4	22.0	(55.8)
Retained (losses) profits	20(b)	(4.1)	(41.1)	37.5
		1,124.6	1,095.3	979.8
Non-controlling interests		-	-	58.2
Total equity		1,124.6	1,095.3	1,038.0

The above consolidated balance sheet should be read in conjunction with the accompanying notes.

* See note 1(a) for details regarding a change in accounting policy.

Iluka Resources Limited Consolidated statement of changes in equity For the year ended 31 December 2010

		Limited
	Notes	Contributed equity \$M	Reserves \$M	Retained earnings \$M	Total \$M	Non controlling interests \$M	Total equity \$M
Balance at 1 January 2009		998.1	(84.3)	66.0	979.8	58.2	1,038.0
Adjustment on adoption of AASB 2008-8	1	-	28.5	(28.5)	-	-	-
Restated total equity at the beginning of the financial year		998.1	(55.8)	37.5	979.8	58.2	1,038.0
Loss for the year Changes in fair value of foreign		-	-	(82.2)	(82.2)	(0.2)	(82.4)
exchange cash flow hedges, net of tax Currency translation of US operation Hedge of net investment in US	20 20	- -	77.9 (22.8)	- -	77.9 (22.8)	5.6 -	83.5 (22.8)
operation, net of tax Actuarial gains on retirement benefit	20	-	23.6	-	23.6	-	23.6
obligations, net of tax Transfer of asset revaluation reserve	20 20	- -	- (1.2)	2.4 1.2	2.4 -	- -	2.4 -
Total comprehensive income		-	77.5	(78.6)	(1.1)	5.4	4.3
Transactions with owners in their capacity as owners: Share placement, net of costs Transfer of shares to employees	19 19	113.5 2.8	- (2.8)	- -	113.5 -	- -	113.5 -
Share based payments, net of tax Dividends paid to CRL minorities Disposal of subsidiary	19	- - -	3.1 - -	- - -	3.1 - -	- (1.8) (61.8)	3.1 (1.8) (61.8)
		116.3	0.3	-	116.6	(63.6)	53.0
Balance at 31 December 2009		1,114.4	22.0	(41.1)	1,095.3	-	1,095.3
Balance at 1 January 2010 Adjustment on adoption of AASB 2008-8	1	1,114.4 -	19.9 2.1	(39.0) (2.1)	1,095.3 -	- -	1,095.3 -
Restated total equity at the beginning of the financial year		1,114.4	22.0	(41.1)	1,095.3	-	1,095.3
Profit for the year Changes in fair value of foreign		-	-	36.1	36.1	-	36.1
exchange cash flow hedges, net of tax Currency translation of US operation	20 20	- -	(3.6) (6.9)	- -	(3.6) (6.9)	- -	(3.6) (6.9)
Hedge of net investment in US operation, net of tax Actuarial gains on retirement benefit	20	-	6.7	-	6.7	-	6.7
obligations, net of tax Transfer of asset revaluation reserve	20 20	- -	- (0.3)	0.6 0.3	0.6 -	- -	0.6 -
Total comprehensive income		-	(4.1)	37.0	32.9	-	32.9
Transactions with owners in their capacity as owners:
Transfer of shares to employees Share based payments, net of tax	19 19	1.1 -	(1.1) 3.6	- -	- 3.6	- -	- 3.6
Purchase of treasury shares, net of tax	19	(7.2) (6.1)	- 2.5	- -	(7.2) (3.6)	- -	(7.2) (3.6)
Balance at 31 December 2010		1,108.3	20.4	(4.1)	1,124.6	-	1,124.6

Attributable to owners of Iluka Resources

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Iluka Resources Limited Consolidated statement of cash flows For the year ended 31 December 2010

	Notes	2010 \$M	2009 \$M
Cash flows from operating activities
Receipts from customers		888.3	744.8
Payments to suppliers and employees		(727.2)	(663.0)
		161.1	81.8
Interest received Interest paid		1.1 (30.5)	1.5 (14.0)
Tax paid		(1.5)	(4.4)
Exploration expenditure		(17.9)	(20.0)
MAC royalty receipts		63.9	55.2
Other		2.5	2.1
Net cash inflow from operating activities	28	178.7	102.2
Cash flows from investing activities
Payments for property, plant and equipment		(117.2)	(521.6)
Sale of property, plant and equipment		9.0	9.9
Sale of CRL	9	-	84.2
Net cash (outflow) from investing activities		(108.2)	(427.5)
Cash flows from financing activities
Proceeds from borrowings		-	309.8
Repayment of borrowings Purchase of treasury shares		(116.4) (9.8)	(105.6) -
Dividends paid to CRL minority interests		-	(1.8)
Issue of ordinary shares	19(b)	-	114.0
Share issue costs	19(b)	-	(0.5)
Net cash (outflow) inflow from financing activities		(126.2)	315.9
Net (decrease) increase in cash and cash equivalents		(55.7)	(9.4)
Cash and cash equivalents at 1 January		86.3	97.6
Exchange rate changes on cash and cash equivalents		(0.5)	(1.9)
Cash and cash equivalents at 31 December	10	30.1	86.3

The above cash flow statement should be read in conjunction with the accompanying notes.

Notes to the consolidated financial statements

		Page
1	Summary of significant accounting policies	39
2	Critical accounting estimates and judgements	49
3	Financial risk management	51
4	Segment information	55
5	Revenue from continuing operations	57
6	Other income	57
7	Expenses	58
8	Income tax	59
9	Discontinued operations	60
10	Cash and cash equivalents	60
11	Receivables	61
12	Inventories	61
13	Property, plant and equipment	62
14	Deferred tax assets	63
15	Intangible assets	64
16	Payables	64
17	Interest bearing liabilities	64
18	Provisions	67
19	Contributed equity	67
20	Reserves and retained earnings	69
21	Key management personnel	71
22	Remuneration of auditors	74
23	Retirement benefit obligations	74
24	Contingent liabilities	77
25	Commitments	78
26	Related party transactions	79
27	Controlled entities and deed of cross guarantee	80
28	Reconciliation of profit (loss) after income tax to net cash inflow from operating activities	82
29	Earnings per share	82
30	Share-based payments	83
31	Parent entity financial information	84

1 Summary of significant accounting policies

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. These financial statements are for the consolidated entity consisting of Iluka Resources Limited and its subsidiaries.

(a) Basis of preparation

This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001. The consolidated financial statements of Iluka Resouces Limited also comply with International Financial Reporting Standards ("IFRS") as issued by the international Accounting Standards Board (IASB). These financial statements have been prepared under the historical cost convention except for derivative financial instruments which have been measured at fair value through profit and loss.

Change in Accounting policy

Accounting policy 1(l) Derivatives and hedging activities was amended from 1 January 2010 to comply with AASB 2008-8 "Amendments to Australian Accounting Standards - Eligible Hedged Items" which permits only the intrinsic value of an option to be recognised in equity for hedge accounting purposes.

The impact of the change in accounting policy is summarised in the table below:

	Notes	Previous policy \$M	Ineffective losses \$M	Ineffective fair value \$M	Revised policy \$M
Balance Sheet at 1 January 2009
Reserves (change is to hedging reserve)	20	(84.3)	-	28.5	(55.8)
Retained profits	20	66.0	-	(28.5)	37.5
Income statement - year ended 31 December 2009
Hedge revenue (losses)	5	(42.9)	16.6	-	(26.3)
Ineffective (gains) losses from changes in fair value of
hedges	6	-	(16.6)	37.8	21.2
Tax benefit	8	72.9	-	(11.4)	61.5
Loss for the year ended 31 December 2009		(108.8)	-	26.4	(82.4)
Other comprehensive income - year ended 31 December 2009
Change in fair value of cash flow hedges net of tax		109.9	-	(26.4)	83.5
Balance Sheet at 1 January 2010
Reserves (change is to hedging reserve)	20	19.9	-	2.1	22.0
Retained profits	20	(39.0)	-	(2.1)	(41.1)
Income statement - year ended 31 December 2010
Hedge revenue (losses)	5	13.8	(12.4)	10.8	12.2
Ineffective gains from changes in fair value of hedges	8	-	12.4	(10.8)	1.6

As a result of the above change in accounting policy earnings per share attributable to owners for the prior period increased from (26.8) to (20.2) cents per share.

(b) Principles of consolidation

(i) Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Iluka Resources Limited (''Company'' or ''parent entity'') as at 31 December 2010 and the results of all subsidiaries for the year then ended. Iluka Resources Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.

Investments in subsidiaries are accounted for at cost. Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are deconsolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between consolidated entity companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the income statements, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated balance sheet respectively.

(c) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Managing Director.

(d) Revenue recognition

Mineral sands

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid.

Product sales are recognised as revenue when there has been a passing of risk to a customer, and:

• the product is in a form suitable for delivery and no further processing is required by, or on behalf of, the consolidated entity;
• the quantity, quality and selling price of the product can be determined with reasonable accuracy; and
• the product has been despatched to the customer and is no longer under the physical control of the consolidated entity, or the customer has formally acknowledged legal ownership of the product including all inherent risks, albeit that the product may be stored in facilities the consolidated entity controls.

Gains and losses, including premiums paid or received, in respect of forward sales, options and other deferred delivery arrangements which hedge anticipated revenues from future production, are deferred and included in sales revenue in accordance with accounting policy 1(l).

Mining Area C royalty income and amortisation of royalty asset

Royalty income is recognised on an accrual basis. Royalty income is received on a quarterly basis and any under or over accrual applicable to previously recognised royalty income is adjusted for based on the receipt of the royalty income entitlement.

The royalty entitlement asset is an intangible asset and is amortised on a straight-line basis over its estimated useful life of 25 years of which 18 years is remaining.

(e) Interest and other

Interest income is recognised in the income statement as it accrues, using the effective interest method.

(f) Income tax

The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or loss or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments and loans in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforcable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.

Current and deferred tax balances attributable to amounts recognised directly in equity are recognised directly in equity.

Tax consolidation legislation

Iluka Resources Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1 January 2004.

On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing agreement which, in the opinion of the Directors, limits the joint and several liability of the wholly-owned entities in the case of a default by the head entity, Iluka Resources Limited.

The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Iluka Resources Limited for any current tax payable assumed and are compensated by Iluka Resources Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Iluka Resources Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities' financial statements.

The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. The funding amounts are recognised as current intercompany receivables or payables.

(g) Acquisitions of assets

The purchase method of accounting is used to account for all acquisitions of assets (including business combinations) regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange. Acquisition related costs are expensed as incurred.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Costs relating to the acquisition of new areas of interest are capitalised as either exploration and evaluation expenditure, development properties or mine properties depending on the stage of development reached at the date of acquisition. Refer Note 1(n) for more information.

A liability for restructuring costs is recognised as at the date of acquisition of an entity or part thereof when there is a demonstrable commitment to the restructuring of the acquired entity and a reliable estimate of the amount of the liability can be made.

(h) Cash and cash equivalents

For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within interest-bearing liabilities in current liabilities on the balance sheet.

(i) Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Trade and other receivables are generally due for settlement no more than 90 days from the date of recognition.

Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful receivables is established when there is objective evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the provision is recognised in the income statement.

(j) Inventories

Inventories are valued at the lower of weighted average cost and estimated net realisable value.

Weighted average cost includes direct costs and an appropriate portion of fixed and variable overhead expenditure, including depreciation and amortisation.

Net realisable value is the amount estimated to be obtained from sale in the normal course of business, less any anticipated costs to be incurred prior to sale.

A regular and ongoing review is undertaken to establish the extent of surplus obsolete or damaged stores, which are then valued at estimated net realisable value.

(k) Foreign currency translation

(i) Functional and presentation currency

The consolidated financial statements are presented in Australian dollars, which is Iluka Resources Limited's functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses including those from the translation at balance date of foreign currency denominated monetary assets and liabilities are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

(iii) Group companies

The results and financial position of the US entities that have a US dollar functional currency are translated into AUD as follows:

• assets and liabilities are translated at the exchange rate at balance date;
• income and expenses for each month are translated at average exchange rates; and
• all resulting exchange differences are recognised in the foreign currency translation reserve.

(l) Derivatives and hedging activities

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at balance date. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The consolidated entity designates certain derivatives as either: (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or (2) hedges of highly probable forecast transactions (cash flow hedges).

At the inception of the transaction, the consolidated entity documents the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The consolidated entity also documents its assessment, both at transaction inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.

The fair values of various derivatives financial instruments used for hedging purposes are disclosed in note 3. Movements in the hedging reserve in shareholders' equity are shown in note 20.

(i) Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. To comply with AASB 2008-8 "Amendments to Australian Accounting Standards - Eligible Hedged Items", which permits only the intrinsic value of an option to be recognised in equity for hedge accounting purposes, the group amended its accounting policy from 1 January 2010. The effect of this change in accounting policy is disclosed in note 1(a).

Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item affects profit or loss (for instance when the forecast receipt that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example inventory), the gains and losses previously deferred in equity are included in the measurement of the initial cost or carrying amount of the asset.

When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

(ii) Net investment hedges

Hedges of net investments in foreign operations are accounted for similarly to cashflow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement within other income or expenses. Gains or losses accumulated in equity are included in the income statement on disposal of the foreign operation.

(iii) Derivatives that do not qualify for hedge accounting

For derivatives that do not qualify for hedge accounting, changes in the fair value are recognised immediately in the income statement.

(m) Loans and receivables

Loans and receivables including amounts due from Group entities are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non-current assets.

(n) Exploration, evaluation and development expenditure

Exploration and evaluation expenditure is accumulated separately for each area of interest in accordance with AASB 6 Exploration for and Evaluation of Mineral Resources. Such expenditure comprises net direct costs and an appropriate portion of related overhead expenditure.

Expenditure is carried forward when incurred in areas for which the consolidated entity has rights of tenure and where economic mineralisation is indicated, but activities have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable ore reserves and active and significant operations in relation to the area are continuing. Each such project is regularly reviewed. If the project is abandoned or if it is considered unlikely the project will proceed to development, accumulated costs to that point are written off immediately.

Each area of interest is limited to a size related to a known mineral resource capable of supporting a mining operation.

Identifiable exploration assets acquired from another mining company are recognised as assets at their cost of acquisition, as determined by the requirements of AASB 3 Business Combinations.

Projects are advanced to development status when it is expected that accumulated and future expenditure on development can be recouped through project development or sale. Capitalised exploration is transferred to Mine Reserves once the related ore body achieves JORC reserve status (reported in accordance with JORC, 2004) and has been included in the life of mine plan.

Direct costs associated with the commissioning of plant and equipment are capitalised and included in property, plant and equipment. Pre-commissioning costs in testing the processing plant are also capitalised.

Expenditure associated with the advance removal of mine overburden after the initial development of a mine is deferred and charged to the income statement over its useful life, which typically does not exceed one year.

All the above expenditure is carried forward up to commencement of operations at which time it is amortised in accordance with the policy stated in Note 1(o).

(o) Property, plant and equipment

Land and buildings are shown at historical cost, less subsequent depreciation for buildings. Land is not depreciated. All other property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the consolidated entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

Depreciation and amortisation of mine buildings, reserves and development and mine specific plant, machinery and equipment is provided for over the life of the relevant mine or asset, whichever is the shorter. Mine specific plant, machinery and equipment refers to plant, machinery and equipment for which the economic useful life cannot extend beyond the life of its host mine. Depreciation and amortisation of mine buildings, reserves and development and other non mine specific plant and equipment is determined on a straight-line basis as the consumption of economic benefits is not expected to vary over the operational life of the asset. Depreciation of mine specific plant is determined on a unit of production basis to more appropriately match depreciation charges with expected pattern of consumption of economic benefit of the asset. The basis of depreciation of each asset is reviewed annually and changes to the basis of depreciation are made if the straight line or units of production basis is no longer considered to represent the expected pattern of consumption of economic benefits. The expected useful lives are as follows:

	Mine buildings	the shorter of applicable mine life and 25 years
	Mine specific plant, machinery and equipment	the applicable mine lives
	Reserves and development	the applicable mine life
	Other non-mine specific plant and equipment	3-25 years

The reserves and life of each mine and the remaining useful life of each class of asset are reassessed at regular intervals and the depreciation rates adjusted accordingly.

(p) Maintenance and repairs

Certain items of plant used in the primary extraction, separation and secondary processing of extracted minerals are subject to major overhaul on a cyclical basis. Costs incurred during such overhauls are characterised as either in the nature of capital or in the nature of repairs and maintenance. Work performed may involve:

(i) the replacement of a discrete sub-component asset, in which case an asset addition is recognised and the book value of the replaced item is written off; and

(ii) demonstrably extending the useful life or functionality of an existing asset, in which case the relevant cost is added to the capitalised cost of the asset in question.

Costs incurred during a major cyclical overhaul which do not constitute (i) or (ii) above, are written off as repairs and maintenance as incurred. Costs qualifying for capitalisation under (i) or (ii) above are subsequently depreciated in accordance with Note 1 (o).

General repairs and maintenance which are not characterised as part of a major cyclical overhaul are expensed as incurred.

(q) Non-current assets constructed by the consolidated entity

The cost of non-current assets constructed by the consolidated entity includes the cost of all materials used in construction, direct labour on the project, project management costs, borrowing costs incurred during construction and an appropriate proportion of variable and fixed overheads.

Borrowing costs included in the cost of non-current assets are those costs that would have been avoided if the expenditure on the construction of the assets had not been made and are capitalised in accordance with the policy stated in Note 1(v). Borrowing costs are not capitalised whilst assets are being commissioned.

(r) Intangible assets

Significant costs associated with patents and trademarks are deferred and amortised over the periods of expected benefit.

(s) Recoverable amount of non-current assets

AASB 136 Impairment of Assets requires that depreciable assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell (FVLCS) and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (Cash Generating Units (refer note 2)). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

(t) Trade and other payables

These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(u) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred and are subsequently measured at amortised cost. Any difference between the net proceeds and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the consolidated entity has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(v) Borrowing costs

Borrowing costs are recognised as expenses in the period in which they are incurred, except where they are included in the costs of qualifying assets which take more than 12 months to prepare for their intended use.

The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the entity's outstanding borrowings during the year. No borrowing costs were capitalised in 2010 (2009: \$12.5 million at a rate of 3.2 per cent).

Borrowing costs include:

• interest on borrowings, including amounts paid or received on interest rate swaps; amortisation of deferred borrowing costs; and
• finance lease charges.

(w) Provisions for legal claims

Provisions for legal claims are recognised when there is a present legal obligation as a result of past events and it is more likely than not that a settlement will be made, and the amount can be estimated reliably.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

(x) Rehabilitation and mine closure costs

The consolidated entity has obligations to dismantle, remove, restore and rehabilitate certain items of property, plant and equipment.

Under AASB 116 Property, Plant and Equipment, the cost of an asset includes the present value of the estimated costs of dismantling and removing the asset and restoring the site on which it is located.

AASB 137 Provisions, Contingent Liabilities and Contingent Assets requires a provision to be raised for the present value of the estimated cost of settling the rehabilitation and restoration obligations existing at balance date. Those costs that relate to rehabilitation and restoration obligations arising from the production process are recognised in production costs. A pre tax nominal discount rate of 6.0 per cent (2009: 6.0 per cent) has been used in calculating the rehabilitation and restoration provisions of the consolidated entity. This rate does not reflect risks for which future cash flow estimates have been adjusted.

As the value of the provision represents the discounted value of the present obligation to restore, dismantle and rehabilitate, the increase in the provision due to the passage of time is recognised as a finance cost.

The provisions are reassessed annually and any changes are accounted for as set out in note 2(iii).

(y) Employee benefits

(i) Wages and salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised as current payables. Non-accumulating sick leave, parental leave and other ex-gratia leave is recognised as an expense when taken.

(ii) Long service leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

(iii) Termination Benefits

Liabilities for employee termination benefits associated with restructurings are brought to account when a detailed restructuring plan has been developed.

(iv) Retirement benefit obligations

All employees of the consolidated entity are entitled to benefits on retirement, disability or death from the consolidated entity's superannuation plans. The consolidated entity has a defined benefit section and an accumulation type benefits section within its plans. The defined benefit section provides defined lump sum benefits based on years of service and final average salary. The accumulation type benefits section receives fixed contributions from consolidated entity companies and the consolidated entity's legal or constructive obligation is limited to these contributions.

A liability or asset in respect of defined benefit superannuation plans is recognised in the balance sheet, and is measured as the present value of the defined benefit obligation at the reporting date plus actuarial gains (less actuarial losses) less the fair value of the superannuation fund's assets at that date and any unrecognised past service cost. The present value of the defined benefit obligation is based on expected future payments which arise from membership of the fund to the reporting date, calculated annually by independent actuaries using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.

Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in the period in which they occur.

Past service costs are recognised immediately in income, unless the changes to the superannuation fund are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are amortised on a straight-line basis over the vesting period.

Future taxes that are funded by the consolidated entity and are part of the provision of the existing benefit obligation (eg taxes on investment income and employer contributions) are taken into account in measuring the net liability or asset.

Contributions to the accumulation fund are recognised as an expense as they become payable.

(v) Share-based payments

Share-based compensation benefits are provided to employees via incentive plans, the Directors, Executives and Employees Share Acquisition Plan and the Employee Share Ownership scheme. Information relating to these schemes is set out in Note 30 with additional information in the Remuneration Report.

The fair value of entitlements offered has been determined by the Directors, in accordance with the measurement criteria of Accounting Standard AASB 2 Share-based Payment. The fair value of restricted shares is determined to be the volume weighted average price 5 days after results are announced to the market. The fair value is recognised as an expense through the income statement on a straight-line basis between the grant date and the vesting date for each respective plan.

The fair value of share rights is independently determined using a Black-Scholes share right pricing model that takes into account the exercise price, the term of the share right, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate of the term of the share right.

The fair value of share rights at grant date of the Long Term Incentive Plan (LTIP) is independantely determined using a Monte Carlo simulation to model Iluka share prices against the comparator group performance at vesting date. The Monte Carlo method is a procedure for repeatedly sampling random movements in a stock's price to estimate the average or mean share price.

Shares provided under the Employee Share Ownership scheme are purchased on-market, with the purchase cost being recognised as an employee benefits expense. A credit to the share based payments expense arises where unvested entitlements lapse on resignation or the non fullfilment of market vesting conditions.

(vi) Cash settled incentive arrangements

The consolidated entity recognises a liability and an expense for cash settled components of incentive plans based on the conditions of the particular plans.

(z) Leases

The group only has operating leases. Leases in which a significant portion of the risks and rewards of ownership are not transferred to the group as lessee are classified as operating leases (note 25). Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.

(aa) Contributed equity

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business, are not included in the cost of the acquisition as part of the purchase consideration.

(ab) Dividends

Provision is made for the amount of any dividend declared on or before the end of the financial year but not distributed at balance date.

(ac) Earnings per share

(i) Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

Comparatives have been ammended to reflect changes to the accounting policy on Derivatives and hedging activities, refer note (1a)

(ad) Rounding of amounts

The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the ''rounding off'' of amounts in the Financial Report. Amounts in the Financial Report have been rounded off in accordance with that Class Order to the nearest hundred thousand dollars, or in certain cases, the nearest thousand dollars and the nearest dollar.

(ae) Parent entity financial information

The financial information for the parent entity, Iluka Resources Limited, disclosed in note 31 has been prepared on the same basis as the consolidated financial statements.

(af) New accounting standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2010 reporting periods. The potential effect of these Standards is yet to be fully determined. However, it is not expected that the new Standards will significantly affect the Group's financial position. The group does not intend to early adopt any new standards.

(i) AASB 2009-10 Amendments to Australian Accounting Standards - Classification of Rights Issues AASB 132 (effective for annual reporting periods beginning on or after 1 February 2010) In October 2009 the AASB issued an amendment to AASB 132 Financial Instruments: Presentation which addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer.

(ii) AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)

(effective for annual reporting periods beginning on or after 1 January 2013) AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities.

(iii) Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards (effective for annual reporting periods beginning on or after 1 January 2011)

In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. The amendment clarifies and simplifies the definition of a related party and removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities.

(iv) AASB 2009-14 Amendments to Australian Interpretation - Prepayments of a Minimum Funding Requirement (effective 1 January 2011)

In December 2009, the AASB made an amendment to Interpretation 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. The amendment removes an unintended consequence of the interpretation related to voluntary prepayments when there is a minimum funding requirement in regard to the entity's defined benefit scheme. It permits entities to recognise an asset for a prepayment of contributions made to cover minimum funding requirements.

(v) AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements (effective 1 July 2013)

On 30 June 2010 the AASB officially introduced a revised differential reporting framework in Australia. Under this framework, a two-tier differential reporting regime applies to all entities that prepare general purpose financial statements.

(vi) AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project and AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (effective for annual periods beginning on or after 1 July 2010/1 January 2011)

In June 2010, the AASB made a number of amendments to Australian Accounting Standards as a result of the IASB's annual improvements project.

(vii) AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets (effective for annual reporting periods beginning on or after 1 July 2011)

In November 2010, the AASB made amendments to AASB 7 Financial Instruments: Disclosures which introduce additional disclosures in respect of risk exposures arising from transferred financial assets. The amendments will affect particularly entities that sell, factor, securitise, lend or otherwise transfer financial assets to other parties.

2 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.

(a) Critical accounting estimates and assumptions

The consolidated entity makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

(i) Impairment of assets

The recoverable amount of each Cash Generating Unit (CGU) is determined as the higher of value-in-use and fair value less costs to sell. The group uses fair value less costs to sell. Where there is no binding sale agreement, fair value less costs to sell is based on the best information available to reflect the amount the consolidated entity could receive for the CGU in an arms length transaction and has been estimated on the basis of discounted present value of the future cashflows.

2 Critical accounting estimates and judgements (continued)

The estimates of future cash flows for each CGU are based on significant assumptions including:

• estimates of the quantities of mineral reserves and ore resources for which there is a high degree of confidence of economic extraction and the timing of access to these reserves and ore resources
• future production levels and the ability to sell that production
• future product prices based on the consolidated entity's assessment of short and long term prices for each of the key products
• future exchange rates for the Australian dollar compared to the US dollar using external forecasts by recognised economic forecasters
• future cash costs of production, sustaining capital expenditure, rehabilitation and mine closure and
• the asset specific discount rate applicable to the CGU.

Given the nature of the consolidated entity's mining activities, future changes in assumptions upon which these estimates are based, may give rise to material adjustments to the current or prior years. This could lead to a reversal of part, or all, of impairment charges recorded in the current or prior years, or the recognition of additional impairment charges in the future.

Due to the nature of the assumptions and their significance to the assessment of the recoverable amount of each CGU, relatively modest changes in one or more assumptions could require a material adjustment (negative or positive) to the carrying value of the related non-current assets within the next reporting period.

The inter-relationships of the significant assumptions upon which estimated future cash flows are based, however, are such that it is impracticable to disclose the extent of the possible effects of a change in a key assumption in isolation.

In addition, the Australian Federal Government has proposed introducing a carbon tax no earlier than 2012. This introduction has the potential to significantly impact the assumptions used to determine the future cash flows generated from the continuing use of the group's assets for the purpose of impairment testing. The group has not yet incorporated the impact of a carbon tax into its assumptions at 31 December 2010 as insufficient market information exists.

Uncertainties exist around the following areas:

• the nature and timing of the proposed legislation
• the level of emissions the group is expected to emit
• abatement opportunities
• the price or range of prices of emission permits
• the number of permits required to be purchased
• the impact on costs charged by suppliers
• the ability to pass on the cost of the permits
• government assistance.

(ii) Exploration and evaluation expenditure

Expenditure with a value of \$24.7 million (2009: \$20.4 million) which does not form part of the CGU assessed for impairment has been carried forward in accordance with Note 1 (n) on the basis that exploration and evaluation activities have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable ore reserves and active and significant operations in relation to the area are continuing. In the event that significant operations cease and/or economically recoverable reserves are not assessed as being present, this expenditure will be expensed to the Income Statement.

(iii) Rehabilitation and mine closure provisions

As set out in Note 1(x), these provisions represent the discounted value of the present obligation to restore, dismantle and rehabilitate certain items of property, plant and equipment. The discounted value reflects a combination of management's assessment of the cost of performing the work required, the timing of the cash flows and the discount rate of 6.0 per cent (2009 6.0 per cent). Of the total provisions \$347.4 million (2009: \$332.5 million), \$192.4 million (2009: \$118.4 million) relate to assets no longer in use or for obligations arising from the production process outputs.

A change in any, or a combination, of the three key assumptions used to determine the provisions could have a material impact to the carrying value of the provision. In the case of provisions for assets which remain in use, adjustments to the carrying value of the provision are offset by a change in the carrying value of the related asset. Where the provisions are for assets no longer in use (closed sites) or for obligations arising from the production process, any adjustment is reflected directly in the Income Statement.

2 Critical accounting estimates and judgements (continued)

(iv) Income tax

The consolidated entity is subject to income taxes in Australia and the United States (US). Significant judgement is required in determining the provision for income taxes in each jurisdiction. There are many transactions and calculations for which the ultimate determination is not finalised until statutory tax returns are lodged with the appropriate authorities. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact upon the current and deferred tax provisions in the period in which such determination is made which is usually the subsequent financial year

A key assumption made regarding the income tax expense for the current year is the level of investment allowance and research and development expenditure that will qualify for concessional tax deductions and the level of capital gains on asset disposals that can be offset by available capital losses not previously recognised. The tax effect of these amounts is \$2.7 million and \$nil million respectively (2009: \$7.5 million and \$1.1 million).

(b) Critical judgements in applying the entity's accounting policies

Recovery of deferred tax assets

Net deferred tax assets of \$55.3 million (2009: \$53.7 million) are carried in respect of the Australian and US operations, including \$60.9 million (2009: \$51.6 million) attributable to tax losses. Management has assessed that it is probable that the net deferred tax assets will be recoverable against future taxable profits to be generated in the relevant jurisdiction.

3 Financial risk management

The Group's activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk) credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. Financial risk management is managed by a central treasury department under policies approved by the Board of Directors.

(a) Market risk

(i) Foreign exchange risk

Foreign exchange risk arises when commercial transactions and recognised assets and liabilities are denominated in a currency other than Australian dollars.

The Group operates internationally and is exposed to foreign exchange risk arising predominantly from currency exposures to the US dollar. Balance sheet translation risk is managed by borrowing in US dollars to provide a hedge for the net US dollar investment in the US operation and the US dollar receivables from Australian sales.

The table below summarises financial assets and liabilities denominated in foreign currencies that form part of the balance sheet carrying values.

	2010	2009
	US\$M	US\$M
Cash and cash equivalents	10.4	17.1
Receivables	133.7	77.0
Payables	(10.4)	(13.7)
Interest bearing liabilities	(155.0)	(165.0)
	(21.3)	(84.6)

3 Financial risk management (continued)

Group sensitivity

At 31 December 2010, had the Australian dollar been higher/lower by 10 per cent against the US dollar compared to the exchange rate at that date of US101.76 cents with all other variables held constant, the consolidated entity's post-tax profit for the year would have been \$5.6 million higher/\$4.6 million lower (2009: \$0.9 million higher/\$0.8 million lower), mainly as a result of foreign exchange gains/losses on translation of US dollar denominated trade receivables and payables and US dollar denominated borrowings.

Equity would have been \$4.9 million lower/\$4.0 million higher (2009: \$34.4 million lower/\$34.6 million higher) had the Australian dollar weakened/strengthened by 10 per cent against the US dollar, arising mainly from US dollar debt designated as a natural hedge. The significant reduction in the sensitivity to movements in the Australian dollar/US dollar exchange rate is due to all cash flow hedges being delivered by 31 December 2010, with no new cash flow hedges being taken out. The sensitivity is based on the USD balances at 31 December 2010 rather than amounts which are more reflective of the Group's objective to reduce balance sheet translation risk by borrowing in US dollars to provide a hedge for the net US dollar investment in the US operation and the US dollar receivables from Australian sales.

(ii) Interest rate risk

Interest rate risk arises from the consolidated entity's borrowings. When managing interest rate risk the Group seeks to mitigate its interest rate exposure by utilising a blend of floating and fixed rate debt. During 2010 and 2009, the consolidated entity's borrowings at variable rates were denominated in Australian dollars and US dollars.

Borrowings at variable rates expose the consolidated entity to cash flow interest rate risk while borrowings at fixed rates expose the consolidated entity to fair value interest rate risk.

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model.

At 31 December 2010, if interest rates for the full year were -/+1% from the year-end rate with all other variables held constant, post-tax profit for the year would have been \$2.1 million higher/lower (2009: \$2.3 million higher/lower), mainly as a result of lower/higher interest expense from net debt. The sensitivity is based on net debt at 31 December 2010 assuming that the net debt balance stays constant throughout the year.

(b) Credit risk

The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history. The Group also maintains an insurance policy to assist in managing the credit risk of its customers and therefore has no significant concentrations of credit risk. Of the total receivables balance of \$131.0 million, \$121.0 million is covered by an insurance policy and is considered low risk. Derivative counterparties and cash transactions are limited to high credit quality financial institutions and policies limit the amount of credit exposure to any one financial institution.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash or credit facilities to meet the operating requirements of the business. This is managed through committed undrawn facilities and prudent cash flow management.

Maturities of financial liabilities

The tables below analyse the group financial liabilities and net settled derivative financial instruments into maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows, except for interest rate swaps which are stated as notional principal amounts. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

3 Financial risk management (continued)

At 31 December 2010	Weighted average rate %	Less than 1 year \$M	Between 1 and 2 years \$M	Between 2 and 5 years \$M	Over 5 years \$M	Total contract ual cash flows \$M	Carrying Amount (assets)/ liabilities \$M
Non-derivatives Interest bearing variable rate Interest bearing fixed rate Total non-derivatives	4.8 6.2	11.5 34.9 46.4	11.5 3.1 14.6	241.1 80.2 321.3	- - -	264.1 118.2 382.3	238.9 106.1 345.0
Derivatives Interest rate swaps (net receivable) Total derivatives		1.2 1.2	1.2 1.2	0.5 0.5	- -	2.9 2.9	- -
At 31 December 2009	Weighted average rate %	Less than 1 year \$M	Between 1 and 2 years \$M	Between 2 and 5 years \$M	Over 5 years \$M	Total contract ual cash flows \$M	Carrying Amount (assets)/ liabilities \$M
Non-derivatives Interest bearing variable rate Interest bearing fixed rate Total non-derivatives	5.6 4.4	13.9 52.5 66.4	13.9 40.3 54.2	326.7 65.1 391.8	- 23.0 23.0	354.5 180.9 535.4	314.1 157.6 471.7
Derivatives Interest rate swaps (net receivable) Total derivatives		0.1 0.1	0.1 0.1	0.2 0.2	- -	0.4 0.4	- -

Sales revenue of the consolidated entity is mainly denominated in US dollars. Given the predominately Australian dollar cost base of the business, these US dollar sales create a foreign exchange exposure in terms of earnings and cash flow. In the previous financial year the consolidated entity entered into forward exchange contracts and foreign currency options to forward sell US dollars. At 31 December 2010 the Group has not entered into any forward exchange contracts or currency options.

At 31 December 2009, the consolidated entity was due to receive an inflow of A\$179.4 million and A\$261.1 million and pay an outflow of US\$ 153.5 million and US\$ 235.0 million in relation to forward exchange contracts and options respectively, that matured within 1 year.

3 Financial risk management (continued)

(d) Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward exchange contracts is determined using forward exchange market rates at the balance sheet date. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the consolidated entity for similar financial instruments. The fair value of call options is determined using the Garman and Kohlhagen (Black Scholes) Formula at the end of the reporting period.

At 31 December 2010, the Group does not hold derivative financial instruments. At 31 December 2009 the derivative financial instruments measured and recognised at fair value, were valued at \$15.9 million (Level 2 per AASB 7:27A).

4 Segment information

(a) Description of segments

Operating segments are reported in a manner that is consistent with the internal reporting provided to the Managing Director, who is considered the chief operating decision maker, for the purpose of making decisions regarding the allocation of resources and the monitoring of performance. These segments are unchanged from those at 31 December 2009.

Eucla/Perth Basin ("E/PB") comprises the integrated mineral sands mining and processing operations in Western Australia and South Australia. Material is mined from various deposits in the South West and Mid West of Western Australia (Perth Basin), together with the Jacinth-Ambrosia deposit in South Australia (Eucla Basin) which was commissioned in the period. The mined material is processed at facilities in the South West and Mid West of Western Australia to produce saleable products.

Murray Basin ("MB") comprises the integrated mineral sands mining and processing operations in Victoria, including the Murray Basin Stage 2 development which was commissioned in the period.

United States ("US") comprises the integrated mineral sands mining and processing operations in Virginia, together with a zircon retreatment operation in Florida which ceased in 2009.

Mining Area C ("MAC") comprises a deferred consideration iron ore royalty interest over certain mining tenements operated by BHP Billiton Iron Ore.

Where finished product capable of sale to a third party is transferred between operating segments, the transfers are made at arms length prices. Any transfers of intermediate products between operating segments are made at cost.

(b) Segment information

2010	E/PB \$M	MB \$M	US \$M	MAC \$M	Total \$M
Total segment sales to external customers Total segment result	468.7 21.8	281.4 (0.9)	124.3 22.7	- 75.9	874.4 119.5
Segment assets Segment liabilities Acquisition of property, plant and equipment and other non-current	981.4 343.1	771.8 71.8	63.3 37.4	27.7 -	1,844.2 452.3
segment assets	45.9	23.3	10.9	-	80.1
Depreciation and amortisation expense	86.1	113.0	17.0	0.4	216.5
2009	E/PB \$M	MB \$M	US \$M	MAC \$M	Total \$M
Total segment sales Inter segment sales	397.1 (11.4)	124.8 -	65.5 -	- -	587.4 (11.4)
Total segment sales to external customers Total segment result	385.7 (93.5)	124.8 (19.4)	65.5 12.8	- 50.2	576.0 (49.9)
Segment assets Segment liabilities Acquisition of property, plant and equipment and other non-current	1,022.6 377.7	785.4 86.2	107.3 33.7	15.8 -	1,931.1 497.6
segment assets	316.7	211.2	19.5	-	547.4
Depreciation and amortisation expense	124.2	31.9	17.3	0.4	173.8
Impairment (reversals) charges	38.5	29.1	-	-	67.6

4 Segment information (continued)

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

	2010 \$M	2009 \$M
Continuing operations
Asia	386.3	269.9
Europe	178.2	134.8
North America	216.2	85.7
Australia	44.2	36.3
Other Countries	49.5	49.3
Segment sales to external customers	874.4	576.0
Hedging gains (losses)	12.2	(26.3)
Sale of goods	886.6	549.7

Revenue of \$168.7 million is derived from an external customer from all mineral sands segments which individually account for greater than 10 per cent of segment revenue (2009: revenues of \$136.7 million and \$96.9 million were derived from two customers from all mineral sands segments).

Segment result is reconciled to the profit (loss) before income tax from continuing operations as follows:

Segment result	119.5	(49.9)
Hedging gains (losses)	12.2	(26.3)
Interest income	1.1	1.4
Other income	1.8	-
Ineffective gains of changes in fair value of cash flow hedges	1.6	21.2
Net foreign exchange (losses) gains	(4.9)	5.0
Exploration and corporate restructure and non-recurring costs	-	(7.7)
Marketing & selling	(5.4)	-
Corporate and other costs	(30.3)	(18.3)
Depreciation	(2.5)	-
Product & technical development	(5.7)	-
Exploration and evaluation	(14.5)	(16.2)
Interest and finance charges	(33.0)	(8.4)
Impairment charges	-	(67.6)
Profit (loss) before income tax from continuing operations	39.9	(166.8)

Total segment assets and total segment liabilities are reconciled to the balance sheet as follows:

Segment assets	1,844.2	1,931.1
Derivative financial instruments	-	15.9
Corporate assets	10.3	11.4
Cash and cash equivalents	30.1	86.3
Deferred tax assets	55.3	53.7
Total assets as per the balance sheet	1,939.9	2,098.4

Iluka Resources Limited Notes to the consolidated financial statements 31 December 2010 (continued)

4 Segment information (continued)

	2010 \$M	2009 \$M
Segment liabilities	452.3	497.6
Corporate liabilities	20.3	37.0
Interest bearing liabilities	342.7	468.5
Total liabilities as per the balance sheet	815.3	1,003.1

5 Revenue from continuing operations

	2010 \$M	2009 \$M
Sales revenue Sale of goods Other revenue	886.6	549.7
Interest	1.1	1.4
Royalty income	76.3	50.6
Other	0.6	0.9
	78.0	52.9
	964.6	602.6

6 Other income

	2010 \$M	2009 \$M
Net gain on sale of land	0.8	5.6
Net gain on disposal of property, plant and equipment	3.3	0.8
Sundry income	2.7	1.2
Net ineffective gains from changes in fair value of cash flow hedges	1.6	21.2
Insurance receipt in respect of WA gas outage	-	5.7
Net foreign exchange gains	-	5.0
	8.4	39.5

7 Expenses

	2010 \$M	2009 \$M
From continuing operations
Cash cost of production	543.8	453.6
Depreciation	136.9	109.1
Amortisation Inventory movement	82.1 2.9	34.7 (33.4)
Cost of sales of goods	765.7	564.0
Restructure, idle capacity and other non-recurring cash costs	13.2	57.8
Rehabilitation and holding costs for closed sites	10.4	-
Depreciation of non productive assets	-	32.8
Government royalties	17.1	13.7
Marketing and selling	24.1	10.2
Corporate and other Technical support, product development and major projects	30.3 5.6	18.3 4.2
Exploration and evaluation	14.5	16.2
Foreign exchange losses	4.9	-
	885.8	717.2
Impairment charges on property, plant and equipment (refer note 13) Mid West Mining - ore body fair value write-offs Murray Basin - ore body fair value write-offs	- - -	38.5 29.1 67.6
Finance costs from continuing operations
Interest and finance charges paid/payable	32.0	19.8
Rehabilitation and restoration unwind	14.3	15.7
Amortisation of deferred borrowing costs	1.0	1.1
Interest capitalised	-	(12.5)
	47.3	24.1
Expenses from continuing operations include:
Defined contribution superannuation	9.8	12.9
Defined benefits superannuation	0.6	1.9
Employee benefits (excluding share based payments) Writedown of year end inventory to net realisable value	127.0 0.4	176.5 10.6
Share based payments (note 30)	4.1	6.2
Operating leases	8.1	8.6

8 Income tax

	2010 \$M	2009 \$M
(a) Income tax expense (benefit)
Current tax Deferred tax (note 14) Over provided in prior years	- 7.6 (3.8) 3.8	(4.6) (54.2) (2.6) (61.4)
Income tax is attributable to: Profit from continuing operations Profit from discontinued operations Aggregate income tax (benefit)	3.8 - 3.8	(61.5) 0.1 (61.4)
(b) Numerical reconciliation of income tax expense (benefit) to prima facie tax payable
Profit (loss) from continuing operations before income tax expense (benefit) Profit from discontinued operation before income tax expense	39.9 -	(166.8) 23.0
Tax at the Australian tax rate of 30% (2009: 30%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income:	39.9 12.0	(143.8) (43.1)
Research and development and investment allowance Gain on sale of CRL not assessable for tax Other items	(2.7) - 0.2	(7.5) (6.7) (0.9)
	9.5	(58.2)
Difference in overseas tax rates Over provision in prior years Income tax expense (benefit)	(1.9) (3.8) 3.8	(0.6) (2.6) (61.4)
(c) Tax expense (income) relating to items of other comprehensive income
Changes in fair value of foreign exchange cash flow hedges (note 20(a)) Currency translation of US operation (note 20 (a)) Actuarial gains (losses) on retirement benefit obligation	1.5 0.7 -	(33.3) 4.3 (0.7)
	2.2	(29.7)

(d) Tax losses

Unused capital losses for which no deferred tax asset has been recognised relating to the wholly-owned Australian controlled entities are approximately \$94.7 million (2009: \$95.6 million) (tax at the Australian tax rate of 30%: \$28.4 million (2009: \$28.7 million)). The benefit of these unused capital losses will only be obtained if these entities derive future capital gains sufficient to enable the benefit to be realised and these entities continue to comply with the conditions for deductability imposed by tax legislation and no changes in tax legislation adversely effect these entities in realising the benefit from the deduction for the losses.

(e) Franking Credits

Franking credits available for future years based on a tax rate of 30 per cent (2009: 30 per cent) - (1.6)

The above amounts include adjustments that will arise from the payment of current income tax or receipt of income tax receivable.

9 Discontinued operations

On 27 May 2009 Iluka disposed of its shares in Consolidated Rutile Limited ("CRL") to Unimin Australia Limited for 45 cents per share and a consideration of \$84.2 million resulting in a profit from discontinued operations of \$22.9 million. Details of this disposal were disclosed in note 9 of the Group's annual report for the year ended 31 December 2009.

Financial performance and cash flow information

	2010 \$M	2009 \$M
Revenue - sale of goods	-	21.8
Cash expenses	-	(16.6)
Depreciation and amortisation	-	(4.7)
Finance costs	-	(0.8)
Profit before income tax	-	(0.3)
Profit on sale	-	23.3
Income tax expense	-	(0.1)
Profit after income tax	-	22.9
Net cash (outflow) inflow from operating activities	-	(13.4)
Net cash inflow from investing activities	-	81.7
Net cash inflow from financing activities	-	7.5
Net increase in cash generated by the discontinued operation	-	75.8

The post tax gain on sale of CRL for the year ended 31 December 2009 was \$22.9 million.

10 Cash and cash equivalents

	2010 \$M	2009 \$M
Cash at bank and in hand Deposits at call	28.2 1.9 30.1	84.4 1.9 86.3

Interest rates

Cash and deposits are at floating interest rates between 0.0 per cent and 4.25 per cent (2009: 0.0 per cent and 3.75 per cent) on US dollar and Australian dollar denominated deposits, and a weighted average interest rate of 2.49 per cent (2009: 2.87 per cent).

11 Receivables

	2010 \$M	2009 \$M
Trade receivables	130.9	85.8
Other debtors	23.1	9.5
Prepayments	6.8	3.9
Goods and services tax (GST)	4.0	4.7
	164.8	103.9

No trade receivables are impaired and \$1.9 million are between 0 and 28 days aged. Due to the short-term nature of these receivables, their carrying amount approximates fair value.

12 Inventories

	2010 \$M	2009 \$M
Current Consumable stores - at cost	27.8	30.2
Work in progress - at cost	83.1	44.1
Finished goods - at cost - at net realisable value	86.8 3.3	95.1 36.1
Total current inventories	90.1 201.0	131.2 205.5
Non-current Work in progress - at cost	56.6 56.6	56.6 56.6

Represents material not scheduled to be processed to finished product during 2011.

Iluka Resources Limited Notes to the consolidated financial statements 31 December 2010

(continued)

13 Property, plant and equipment

	Land & Buildings \$M	Plant, Machinery & Equipment \$M	Mine Reserves & Development \$M	Exploration & Evaluation \$M	Project Development Expenditure \$M	Total \$M
At 1 January 2009 Cost	89.1	1,586.8	783.3	17.2	175.4	2,651.8
Accumulated depreciation*	(10.4)	(802.3)	(424.5)	-	-	(1,237.2)
Opening written down value* Additions Disposals	78.7 9.0 (11.1)	784.5 59.9 (78.4)	358.8 60.4 (52.4)	17.2 4.7 -	175.4 421.8 -	1,414.6 555.8 (141.9)
Write-offs and impairment charges Depreciation/amortisation Foreign exchange differences Transfers/reclassifications	- 0.7 (0.1) (1.4)	- (129.9) (16.3) 4.2	(67.6) (47.4) (1.3) 10.8	- - - (1.5)	- - - (12.1)	(67.6) (176.6) (17.7) -
Closing written down value*	75.8	624.0	261.3	20.4	585.1	1,566.6
At 31 December 2009
Cost	85.0	1,379.6	754.7	20.4	585.1	2,824.8
Accumulated depreciation*	(9.2)	(755.6)	(493.4)	-	-	(1,258.2)
Year ended 31 December 2010 Opening written down value	75.8	624.0	261.3	20.4	585.1	1,566.6
Additions Disposals	2.1 (4.8)	27.6 (0.3)	37.4 -	6.9 (1.4)	13.2 -	87.2 (6.5)
Depreciation/amortisation Foreign exchange differences	(2.7) (0.1)	(125.0) (5.7)	(88.5) (0.3)	- -	- -	(216.2) (6.1)
Transfers/reclassifications Closing written down value	20.8 91.1	452.2 972.8	126.5 336.4	(1.2) 24.7	(598.3) -	- 1,425.0
At 31 December 2010
Cost	103.1	1,670.1	459.9	24.7	-	2,257.8
Accumulated depreciation*	(12.0)	(697.3)	(123.5)	-	-	(832.8)
Net written down value*	91.1	972.8	336.4	24.7	-	1,425.0

*Includes cumulative impairment charges (refer note 7)

Mine reserves and development

Included in mine reserves and development are amounts totalling \$50.1 million (2009: \$223.2 million) which have not been depreciated as mining of the related area of interest has not yet commenced. An additional \$12.1 million relates to assets under construction which are currently not being depreciated as the assets are not ready for use.

Plant, machinery and equipment

Included in plant, machinery and equipment are amounts totalling \$6.5 million for the consolidated entity (2009: \$3.9 million) which relate to assets under construction. These amounts are not currently being depreciated as the assets are not ready for use.

Project development expenditure

Project development expenditure in 2009 of: \$585.1 million related to Murray Basin Stage 2 and Jacinth-Ambrosia projects. These projects were commissioned during the period.

Impairment (charges)

The impairment charge in 2009 of \$67.6 million represents the write-off of fair values for deposits from acquisitions in 1998 (Mid West) of \$38.5 million and 2002 (Murray Basin) of \$29.1 million that are now considered unlikely to be mined.

14 Deferred tax assets

	2010 \$M	2009 \$M
Deferred tax asset amounts recognised in profit or loss
Employee benefits	6.3	6.8
Rehabilitation provisions	101.6	97.9
Tax revenue losses Other	62.4 6.6	51.6 4.9
	176.9	161.2
Deferred tax liability amounts in profit or loss off-set in accordance with AASB 112
Depreciation/amortisation	(103.7)	(100.8)
Foreign currency exchange	(3.6)	(4.7)
Receivables	(6.4)	(2.6)
Inventory Other	(7.2) (2.4)	- (0.3)
Net amount recognised in profit or loss	53.6	52.8
Deferred tax asset amounts recognised directly in equity
Cash flow hedges	-	(1.5)
Share issue costs	1.7	2.6
Actuarial gains/losses on retirement benefit obligations	-	(0.2)
	1.7	0.9
Net deferred tax assets	55.3	53.7
Movements:
Balance at 1 January	53.7	31.0
Credited (charged) to the income statement (note 8)	(7.6)	54.2
Over (under) provision in prior years	2.9	1.8
Credited (charged) directly to equity (note 20) Cash payment of franking deficits tax	4.8 1.5	(33.3) -
Balance at 31 December	55.3	53.7

Deferred tax assets of \$77.0 million (2009: \$8.4 million) and deferred tax liabilities of \$19.6 million (2009: \$9.1 million) are expected to be recovered in less than 12 months.

Iluka Resources Limited Notes to the consolidated financial statements 31 December 2010 (continued)

313.3 423.7

15 Intangible assets

	Patent \$M	Royalty entitlement asset \$M	Total \$M
At 1 January 2009
Cost	17.2	10.0	27.2
Accumulated amortisation	(11.6)	(2.1)	(13.7)
Net written down value Amortisation charge 2009	5.6 (3.2)	7.9 (0.4)	13.5 (3.6)
Closing written down value	2.4	7.5	9.9
At 31 December 2009 Cost	17.2	10.0	27.2
Accumulated amortisation	(14.8)	(2.5)	(17.3)
Net written down value	2.4	7.5	9.9
Amortisation charge 2010	(2.4)	(0.4)	(2.8)
Closing written down value	-	7.1	7.1
At 31 December 2010 Cost	-	10.0	10.0
Accumulated amortisation	-	(2.9)	(2.9)
Net written down value	-	7.1	7.1
16 Payables
		2010 \$M	2009 \$M
Trade payables Accrued expenses		36.0 58.6	102.6 71.3
Employee benefits		9.1	9.8
		103.7	183.7
17 Interest bearing liabilities
		2010 \$M	2009 \$M
Current
Senior Notes 1996		29.5 29.5	44.7 44.7
Non-current
Syndicated Term Loan Facility Senior Notes 1996		238.9 -	314.1 33.6

Senior Notes 2003 76.6 79.3 Deferred borrowing costs (2.2) (3.3)

17 Interest bearing liabilities (continued)

(a) Financing arrangements

	2010 \$M	2009 \$M
Total facilities
Senior Notes - 1996 (i)	29.5	33.6
Senior Notes - 2003 (ii)	76.6	124.0
Working Capital Facility (iii)	39.3	55.0
Syndicated Term Loan Facility (iv)	445.0	445.0
	590.4	657.6
Used at balance date
Senior Notes - 1996 (i)	29.5	33.6
Senior Notes - 2003 (ii)	76.6	124.0
Working Capital Facility (iii)	-	-
Syndicated Term Loan Facility (iv)	238.9	314.1
	345.0	471.7
Unused at balance date
Working Capital Facility (iii)	39.3	55.0
Syndicated Term Loan Facility (iv)	206.1	130.9
	245.4	185.9

(i) Senior Notes - 1996 Series

The remaining tranche of US\$30.0 million matures in December 2011 and carries a fixed interest rate of 7.6%.

(ii) Senior Notes - 2003 Series

The notes have an average fixed interest rate of 5.3% and mature in two tranches; being June 2013 US\$40.0 million and June 2015 US\$20.0 million.

The translation exposure on the June 2013 US\$40 million notes has been eliminated through a cross currency swap at AUD/USD 0.7025. The cross currency swap also converts the fixed USD interest payments of 5.25% to an AUD variable interest rate exposure. As at 31 December 2010, the cross currency swap bears an average variable interest rate of 5.7% (2009: 5.1%). The swap requires settlement of interest receivable and payable on a semi-annual basis on dates which coincide with the interest payable dates on the underlying notes.

(iii) Working Capital Facility

This is a multi currency facility which requires the company to have sufficient credit risk insurance to enable it to be drawn. The facility matured on 12 March 2011 and subsequent to year end has been extended to 12 March 2012 with a limit of US\$50.0 million. Drawings under the facility are at the discretion of the working capital facility provider based on the acceptance of credit insured receivables.

(iv) Syndicated Term Loan Facility

The Syndicated Term Loan Facility has maturity dates of March 2012 (A\$100 million) and March 2013 (A\$345 million). As at 31 December 2010, A\$238.9 million was outstanding at an average interest rate of 4.8% (2009: \$314.1 million at 4.4%).

17 Interest bearing liabilities (continued)

(b) Interest rate risk exposure and maturities of interest bearing liabilities

				Fixed interest rate
2010	Effective floating average interest rate %	Floating interest rate \$M	1 year or less \$M	1 to 5 years \$M	More than 5 years \$M	Total \$M
Interest-bearing liabilities Interest rate swaps (notional principal)	4.8 5.7	238.9 56.9 295.8	29.5 - 29.5	76.6 (56.9) 19.7	- - -	345.0 - 345.0
				Fixed interest rate
2009	Effective floating average interest rate %	Floating interest rate \$M	1 year or less \$M	1 to 5 years \$M	More than 5 years \$M	Total \$M
Interest-bearing liabilities Interest rate swaps (notional principal)	4.4 5.1	314.1 56.9 371.0	44.7 - 44.7	90.5 (56.9) 33.6	22.4 - 22.4	471.7 - 471.7

The contractual repricing date of the floating rate interest bearing liabilities at the balance dates will be reset within 1 year or less.

18 Provisions

	2010 \$M	2009 \$M
Current
Employee benefits	7.4	7.9
Rehabilitation and mine closure	40.2	17.6
Other provisions	7.3	2.6
	54.9	28.1
Non Current
Employee benefits	3.3	3.3
Rehabilitation and mine closure	307.2	314.9
Retirement benefit obligations (note 23)	3.4	4.7
	313.9	322.9

The current provision for employee benefits represents amounts for which the Group does not have an unconditional right to defer settlement. The Group does not expect a significant amount of the provision will be paid in the next 12 months.

(a) Movements in provisions

Movements in rehabilitation and mine closure and other provisions during the financial year are set out below:

	Rehabilitation and mine closure \$M	Other provisions \$M
Balance at 1 January	332.5	2.6
Change in provisions*	15.8	9.1
Foreign exchange rate movements	(2.1)	-
Unused amounts reversed	-	0.1
Rehabilitation and restoration accretion expense	14.3	-
Amounts used during the year	(13.1)	(4.5)
Balance at 31 December	347.4	7.3

* Changes in provision for rehabilitation and mine closure either form part of additions in plant, machinery and equipment or mine reserves and development in note 13. Costs relating to closed sites are expensed directly to profit and loss.

Other provisions includes \$5.4 million in relation to restructure costs.

19 Contributed equity

		2010 Number of shares	2009 Number of shares	2010 Paid up value \$M	2009 Paid up value \$M
(a)	Share capital
	Ordinary shares Issued and paid up	418,700,517	418,700,517	1,120.0	1,120.0
	Treasury shares	(3,220,149)	(1,904,380)	(11.7)	(5.6)
	Total consolidated contributed equity			1,108.3	1,114.4

19 Contributed equity (continued)

(b) Movements in ordinary share capital

Date	Details	Number of shares	Issue price	\$M
1 January 2009	Opening balance	380,700,517		1,006.5
7 May 2009	Share placement	38,000,000	\$3.00	114.0
	Transaction costs on share placement net of tax	-		(0.5)
31 December 2009	Balance	418,700,517		1,120.0
1 January 2010	Opening balance	418,700,517		1,120.0
31 December 2010	Balance	418,700,517		1,120.0

(c) Treasury shares

Treasury shares are shares in Iluka Resources Limited held for the purpose of issuing shares under the Directors, Executives and Employees Share Acquisition Plan (see note 30 for further information).

Details	Number of shares	\$M
Balance at 1 January 2009	2,812,532	8.4
Employee share issues	(908,152)	(2.8)
Balance at 31 December 2009	1,904,380	5.6
Acquisition of shares, net of tax	1,721,133	7.2
Employee share issues, net of tax	(405,364)	(1.1)
Balance at 31 December 2010	3,220,149	11.7

(d) Dividends

Directors have determined a final dividend of eight cents per share, unfranked. The dividend is unfranked as Iluka does not have franking credits currently available for distribution. The dividend is payable on 6 April 2011 for shareholders on the register as at 9 March 2011.

(e) Dividend reinvestment plan

The Company has a dividend reinvestment plan (DRP). Under the plan, the directors can invite eligible holders of ordinary shares to elect to have all or part of their dividend entitlements satisfied by the issue of new ordinary shares rather than by being paid in cash. The Directors have decided to suspend the Dividend Reinvestment Plan until further notice.

(f) Capital risk management

The group's objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The consolidated entity monitors capital on the basis of the level of net debt and compliance with bank covenants, including the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including 'interest-bearing liabilities' as shown in the balance sheet) less cash and cash equivalents. Total capital is calculated as total equity as shown in the balance sheet, excluding hedge reserve and foreign currency translation reserve plus net debt. The consolidated entity manages net debt on a group basis with all debt being drawn by the parent entity. All debt has the same covenants.

20 Reserves and retained earnings

		2010 \$M	2009 \$M
(a)	Reserves
	Asset revaluation reserve Hedging reserve Share-based payments reserve Foreign currency translation reserve	16.0 - 6.9 (2.5) 20.4	16.3 3.6 4.4 (2.3) 22.0
	Movements:
	Asset revaluation reserve Balance at 1 January Transfer to retained earnings on disposal Deferred tax Balance at 31 December	16.3 (0.4) 0.1 16.0	17.5 (1.7) 0.5 16.3
	Hedging reserve Balance 1 January Revaluation Transfer to profit or loss Deferred tax Balance 31 December	3.6 7.1 (12.2) 1.5 -	(74.2) 84.8 26.3 (33.3) 3.6
	Share based payments reserve Balance at 1 January Transfer of shares to employees Share based payments Deferred tax Balance at 31 December	4.4 (1.1) 4.1 (0.5) 6.9	3.9 (2.8) 6.2 (3.1) 4.2
	Foreign currency translation reserve Balance at 1 January Translation differences of US operation Hedge of net investment in US operation Deferred tax Balance 31 December	(2.3) (7.6) 6.7 0.7 (2.5)	(3.1) (27.1) 23.6 4.3 (2.3)

(b) Retained earnings (accumulated losses)

Movements in retained earnings were as follows:

	2010	2009
	\$M	\$M
Balance 1 January	(41.1)	66.0
Net profit (loss) for the year	36.1	(82.2)
Adjustment on adoption of AASB 2008-8*	-	(28.5)
Actuarial gains/ (losses) on retirement benefit obligation, net of tax	0.6	2.4
Transfer from asset realisation reserve	0.3	1.2
Balance 31 December	(4.1)	(41.1)

*Refer to note 1(a) for explanations of a change in accounting policy and retrospective adjustments recognised on 1 January 2010.

20 Reserves and retained earnings (continued)

(c) Nature and purpose of reserves

(i) Asset revaluation reserve

The asset revaluation reserve records revaluations of non-current assets prior to the adoption of AIFRS. Transfers are made to retained earnings on disposal of previously revalued assets.

(ii) Hedging reserve

The hedging reserve is used to record gains or losses (net of tax) on a hedging instrument in a cash flow hedge that are recognised directly in equity, as described in note 1(l). Amounts are reclassified to profit or loss when the associated hedged transaction affects profit or loss.

(iii) Share-based payments reserve

The employee share-based payments reserve is used to recognise the fair value of equity instruments granted but not yet issued to employees under the group's various equity based incentive schemes.

(iv) Foreign currency translation reserve

Exchange differences arising on translation of the net investment in foreign operations, including US dollar denominated debt used as a hedge of the net investment, are taken to the foreign currency translation reserve net of applicable income tax, as described in note (1k). US\$50.0 million of debt (2009: US\$80.0 million) is designated as a hedge of the net investment in the US operations. The reserve is recognised in profit and loss when the net investment is disposed of.

Iluka Resources Limited Notes to the consolidated financial statements 31 December 2010 (continued)

21 Key management personnel

(a) Key Management Personnel

Key Management Personnel of the consolidated entity comprise Directors of Iluka Resources Limited as well as other specific employees of the consolidated entity who met the following criteria: 'personnel who have authority and responsibility for planning, directing and controlling the activities of the consolidated entity, either directly or indirectly'.

The Key Management Personnel for the parent entity are the same as for the consolidated entity. Therefore, disclosure and balances in this note relate to both the parent entity and the consolidated entity.

Key Management Personnel - Directors

The following persons were Directors of Iluka Resources Limited during the financial year:

(i) Managing Director and Chief Executive Officer

D A Robb

(ii) Non-executive Directors

R L Every D M Morley G J Pizzey G J Rezos J A Seabrook W G Osborn S J Turner

All above persons were Directors of Iluka Resources Limited for all of the financial year, as well as for the financial year ended 31 December 2009, except W G Osborn & S J Turner who were appointed as Directors on 26 March 2010. R L Every was Chairmain & Director until his resignation on 20 May 2010.

(b) Key Management Personnel - Employees Other Than Directors ('the Executives')

In addition to the Directors of the consolidated entity, the following employees met the definition of Key Management Personnel for the year ended 31 December 2010 and are referred to as Executives:

P Beilby1	General Manager Murray Basin
P Benjamin	General Manager Exploration
C Cobb	General Manager Sales and Marketing
V Hugo	General Manager Project and Technical Development
A Tate	Chief Financial Officer
H Umlauff	General Manager Project Management
S Wickham	General Manager Australian Operations
C Wilson	General Manager Corporate Services & Company Secretary

1 Ceased employment on 1 March 2010

21 Key management personnel (continued)

Key Management Personnel Compensation (Consolidated and Parent Entity)

2010

	Short term benefits \$	Post employment benefits \$	Share based payments \$	Termination benefits \$	Total \$
Non-Executive directors Executive Director Executives	901,311 2,326,533 4,640,518	69,125 48,059 225,454	- 1,359,631 2,263,135	- - 315,000	970,436 3,734,223 7,444,107
Total	7,868,362	342,638	3,622,766	315,000	12,148,766

2009

	Short term benefits \$	Post employment benefits \$	Share based payments \$	Termination benefits \$	Total \$
Non-Executive directors Executive Director Executives	782,500 1,743,410 3,458,297	59,778 68,922 240,013	- 1,383,517 2,946,268	- - -	842,278 3,195,849 6,644,578
Total	5,984,207	368,713	4,329,785	-	10,682,705

The company has taken advantage of the relief provided by the Corporations Regulation 2M.6.04 and has transferred the detailed remuneration disclosures to the remuneration report. The relevant information can be found on pages 12-30 of the remuneration report

Share rights and shareholdings of Key Management Personnel

The numbers of shares in the company and share rights for ordinary shares in the company are set out below for each key management personnel, including their personally related entities. No shares were granted as compensation during the reporting period.

			NUMBER OF SHARES					NUMBER OF SHARE RIGHTS
Name	Balance held at 1 January 2010*	Vesting of share rights	Awarded as Restricted Shares	Other changes	Balance held at 31 December 2010*	Balance held at 1 January 2010	Granted during 2010	Vested as shares during 2010	Lapsed during 2010	Balance held at 31 December 2010
Non-Executive Directors R Every D Morley G Pizzey G Rezos J Seabrook W Osborn S Turner	28,679 40,876 16,351 63,602 19,314 - -	- - - - - - -	- - - - - - -	(28,679) - - - - - 50,000	- 40,876 16,351 63,602 19,314 - 50,000	- - - - - - -	- - - - - - -	- - - - - - -	- - - - - - -	- - - - - - -
Executive Director D Robb	591,171	-	70,689	1,355	663,215	1,224,657	121,951	-		(61,308) 1,285,300
Executives P Beilby P Benjamin C Cobb V Hugo A Tate H Umlauff S Wickham C Wilson	126,574 102,212 - 121,204 41,988 108,057 39,840 81,048	54,614 968 - 2,946 - - - 2,691	- 6,297 - 10,973 17,772 24,722 19,718 16,153	(181,188) 1,355 - (18,645) - (19,873) 1,355 -	- 110,832 - 116,478 59,760 112,906 60,913 99,892	141,970 175,171 - 117,894 174,433 146,437 92,254 178,202	- 36,504 34,146 33,252 40,163 46,911 40,650 36,504	(54,614) (968) - (2,946) - - - (2,691)	(87,356) (17,329) - (16,062) (19,414) (23,092) (10,763) (17,983)	- 193,378 34,146 132,138 195,182 170,256 122,141 194,032

* Balances for the Executive Director and the Executives include restricted shares which will vest in future periods subject to legislative requirements.

Iluka Resources Limited Notes to the consolidated financial statements 31 December 2010 (continued)

21 Key management personnel (continued)

(c) Transactions with Key Management Personnel

No loans existed at the commencement of the year and no loans were made during the year ended 31 December 2010.

Ms Seabrook is a Special Advisor to Gresham Partners Limited, a company associated with Gresham Advisory Partners Limited. Services provided by Gresham Advisory Partners Limited during the year of \$116,279 were provided under normal commercial terms and conditions. Services in the prior year of \$745,000 were provided prior to the appointment of Ms Seabrook as a director under normal terms and conditions.

There were no other transactions that were required to be disclosed which occurred between the consolidated entity and Key Management Personnel that were outside of the nature described below

(a) Occurrence was within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those it is reasonable to expect the consolidated entity would have adopted if dealing at arms length with an unrelated individual.

(b) Information about these transactions does not have the potential to adversely affect decisions about the allocation of scarce resources made by users of the financial report, or the discharge of accountability by the Key Management Personnel, and

(c) The transactions are trivial or domestic in nature.

Therefore, specific details of other transactions with Key Management Personnel are not disclosed.

22 Remuneration of auditors

During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms:

	2010 \$000	2009 \$000
(a) Assurance services
Audit and audit related services
Fees paid to PwC
PwC Australia Other PwC firms	550 50	562 52
Total remuneration for audit services	600	614
Other assurance services
PwC Australia	107	65
Total remuneration for assurance services	707	679
(b) Taxation services
Fees paid to PwC
PwC Australia	27	67
Total remuneration for taxation services	27	67
(c) Other services
Fees paid to PwC
PwC Australia	65	113
Other PwC firms	-	34
Total remuneration for other services	65	147

23 Retirement benefit obligations

(a) Superannuation plans

Australia

All employees of the consolidated entity who do not elect an alternate fund under the Superannuation Fund Choice Legislation are entitled to benefits on leaving service, retirement, disability or death from the Iluka Section of the ING Master Trust ("Master Trust") a sub-plan of the ING Masterfund. Within the Iluka Plan, the vast majority of members are entitled to accumulation (ie defined contribution) benefits only. The plan also provides defined lump sum and pension benefits based on years of service and final average salary for a small number of members. The accumulation contribution section receives fixed contributions from consolidated entity companies and the consolidated entity's legal or constructive obligation is limited to these contributions.

USA

All employees of the US operations are entitled to benefits from the US operations' pension plans on retirement, disability or death. The US operations have two defined benefit plans and one defined contribution plan. One of the defined benefits plans provides a monthly benefit based on a set amount per month per year of service. The other defined benefit plan provides a monthly benefit based on average salary and years of service. The defined contribution plan receives an employee's elected contribution and an employer's match-up to a fixed percentage and the entity's legal or constructive obligation is limited to these contributions.

The following sets out details in respect of the defined benefit sections only of the Australian and US plans.

14.1 15.0

23 Retirement benefit obligations (continued)

(b) Balance sheet amounts

	2010 \$M	2009 \$M
Defined benefit plan obligation - present value Defined benefit fund plan assets - fair value Net liability in the balance sheet	17.5 (14.1) 3.4	19.7 (15.0) 4.7
Present value of the defined benefit obligation, which is partly funded: Balance at 1 January Current service cost Interest cost Contributions by plan participants Actuarial gains and losses Exchange rate changes Benefits paid Balance at 31 December	19.7 0.5 1.0 0.1 (0.3) (1.7) (1.8) 17.5	27.6 0.7 1.2 0.1 (1.3) (4.0) (4.6) 19.7
Fair value of plan assets: Balance at 1 January Expected return on plan assets Actuarial gains and losses Exchange rate changes Contributions by group companies Contributions by plan participants Benefits paid Balance at 31 December	15.0 0.9 0.4 (1.3) 0.8 0.1 (1.8) 14.1	16.2 0.8 1.7 (2.4) 3.2 0.1 (4.6) 15.0
The major categories of plan assets are as follows: Cash Equity instruments Debt instruments Property	0.4 8.8 3.7 0.2	0.5 8.7 4.4 0.6

The assets are invested with professional investment managers. The number of shares (if any) of Iluka Resources Limited held by the managers is decided solely by the investment managers.

Other assets 1.0 0.8

23 Retirement benefit obligations (continued)

(c) Amounts recognised in income statements

	2010 \$M	2009 \$M
Current service cost	0.5	0.8
Interest cost	1.0	1.2
Expected return on plan assets	(0.9)	(0.9)
Past service cost	-	0.8
Total included in employee benefits expense	0.6	1.9
Actual return on plan assets	1.4	3.0

(d) Principal actuarial assumptions

The principal actuarial assumptions used (expressed as weighted averages) were as follows:

	2010 %	2009 %
Australia
Discount rate	4.7	5.7
Expected return on plan assets	5.0	5.0
Future salary increases	3.5	3.5
Expected rate of inflation	1.5	1.5
USA
Discount rate	6.0	6.0
Expected return on plan assets	7.5	7.5
Future salary increases	3.5	3.5
Expected rate of inflation	3.0	3.0

The expected rate of return on plan assets has been based on historical and future expectations of returns for each of the major categories of asset classes as well as the expected and actual allocation of plan assets to these major categories.

(e) Employer contributions

Australia

Employer contributions to the defined benefits section of the plan are based on recommendations by the section's actuary.

The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the time they become payable. To achieve this objective, the actuary has adopted a method of funding benefits known as the aggregate funding method. This funding method seeks to have benefits funded by means of a total contribution which is expected to be a constant percentage of members' salaries over their working lifetimes.

Using the funding method described above and particular actuarial assumptions as to the defined benefits plan's future experience, the actuary recommended payment of employer contributions ranging between 12.5 per cent and 12.9 per cent (2009: 12.5 per cent to 12.9 per cent) of salaries, dependent on the defined benefit category of membership.

An actuarial valuation of the Plan as at 30 June 2010 is currently underway. The economic assumptions being used by the actuary to make funding recommendations are, for defined benefit members: a long term investment earning rate of 5.0 per cent (2009: 5.0 per cent) (net of fees and taxes), a salary increase rate of 3.5 per cent (2009: 3.5 per cent), and an indexation rate of 1.5 per cent (2009: 1.5 per cent). As at 31 December 2010 only 5 members remain in the plan.

23 Retirement benefit obligations (continued)

USA

Employer contributions to the defined benefits section of the plan are based on recommendations by the plan's actuary..

The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the time they become payable. To achieve this objective, the actuary has adopted a method of funding benefits known as the Projected Unit Credit (PUC) method. Under the PUC method, unfunded past service is amortised over 10 years and future benefit accruals are funded during participants' working lifetime with cost varying based on the age of participants. Actuarial gains/losses are amortised over 5 years.

Using the funding method described above and particular actuarial assumptions as to the defined benefits plans future experience the actuary recommended in the actuarial review, the payment of US\$0.6 million (2009: US\$0.7 million) for the salaried defined benefit plan and US\$0.1 million (2010: US\$0.1 million) for the hourly defined benefit plan.

Total employer contributions expected to be paid by the consolidated entity for the year ending 31 December 2011 are US\$0.7 million.

(f) Net financial position of plans

In accordance with AAS 25 Financial Reporting by Superannuation Funds the plans' net financial position is determined as the difference between the present value of the accrued benefits and the net market value of plan assets.

Australia

The net financial position of the plan determined from information supplied by the Master Trust at 31 December 2010 was a surplus of \$0.4 million (2009: deficit \$0.6 million).

USA

The net financial position of the US plans has been determined as at the date of the most recent financial report of the superannuation fund (31 December 2010) and in accordance with IAS 19 Employee Entitlements, and a deficit of \$3.6 million as at 31 December 2010 (2009: \$5.2 deficit million) was reported.

(g) Historic summary

	2010 \$M	2009 \$M	2008 \$M	2007 \$M	2006 \$M
Defined benefit plan obligation	17.5	19.7	27.6	20.4	21.5
Defined benefit fund plan assets	(14.1)	(15.0)	(16.2)	(17.9)	(17.4)
Deficiency of net market value of assets over the
present value of employees' accrued benefit payments	3.4	4.7	11.4	2.5	4.1

24 Contingent liabilities

	2010 \$M	2009 \$M
Performance commitments and guarantees (a)	103.6	84.6

24 Contingent liabilities (continued)

(a) The consolidated entity has negotiated a number of bank guarantees in favour of various government authorities and service providers to meet its obligations under exploration and mining tenements.

(b) There is some risk that native title, as established by the High Court of Australia's decision in the Mabo case, exists over some of the land over which the consolidated entity holds tenements or over land required for access purposes. It is impossible at this stage to quantify the impact (if any) which these developments may have on the operations of the consolidated entity.

(c) In the course of its normal business, the consolidated entity occasionally receives claims arising from its operating activities. In the opinion of the Directors, all such matters are covered by insurance, or, if not covered, are without merit or are of such a kind or involve such amounts that would not have a material adverse effect on the operating results or financial position of the consolidated entity if settled unfavourably.

25 Commitments

(a) Capital commitments

2010 \$M	2009 \$M
9.9	25.3

(b) Exploration and mining lease commitments

Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities, payable:

Within one year	22.9	24.9
Later than one year but not later than five years	42.2	36.7
Later than five years	59.1	56.6
	124.2	118.2

These costs are discretionary. If the expenditure commitments are not met then the associated exploration and mining leases may be relinquished.

25 Commitments (continued)

(c) Lease commitments

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:

	2010 \$M	2009 \$M
Within one year	18.8	10.5
Later than one year but not later than five years	27.7	28.9
Later than five years	4.7	8.8
	51.2	48.2

(d) Other commitments

Commitments for payments in relation to non-cancellable contracts are payable as follows:

Within one year	41.3	77.4
Later than one year but not later than five years	122.4	134.9
Later than five years	20.0	41.7
	183.7	254.0

The commitments include \$170.7 million (2009: \$189.3 million) in respect of the consolidated entity for term contracts for coal, gas, electricity and water used in the production process.

26 Related party transactions

(a) Directors and specified executives

Disclosures relating to Directors and Key Management Personnel are set out in Note 21.

(b) Controlled entities and controlling entities

Details of material controlled entities are set out in note 27. The ultimate Australian controlling entity and the ultimate parent entity in the wholly-owned group is Iluka Resources Limited.

27 Controlled entities and deed of cross guarantee

The following companies are all incorporated in Australia and are parties to a Deed of Cross Guarantee under which each company guarantees the debts of the others: Iluka Resources Limited, Westlime (WA) Limited, Ilmenite Pty Limited, Southwest Properties Pty Limited, Western Mineral Sands Pty Limited and Yoganup Pty Limited, Iluka Corporation Limited, Associated Minerals Consolidated Limited, Iluka Administration Limited, Iluka (NSW) Limited, Iluka Consolidated Pty Limited, Iluka Exploration Pty Limited, Gold Fields Asia Limited, Iluka International Limited, NGG Holdings Limited, Caroda Pty Limited, Iluka Midwest Limited, Western Titanium Limited, The Mount Lyell Mining and Railway Company Limited, Colinas Pty Limited, Renison Limited, Iluka Finance Limited, The Nardell Colliery Pty Limited, Glendell Coal Limited and Lion Properties Pty Limited.

By entering into the Deed, the wholly-owned entities represent a closed group and have been relieved from the requirements to prepare a Financial Report and Directors' Report under Class Order 98/1418 (as amended by Class Order 98/2017) issued by the Australian Securities and Investments Commission ("ASIC"). As there are no other parties to the Deed of Cross Guarantee that are controlled by Iluka Resources Limited, they also represent the extended Closed Group.

In addition to the members of the extended closed group, the Iluka Group also includes the following Australian companies: Aston Coal Interests Pty Ltd (Iluka interest 93.4%), Iluka International (Brazil) Pty Ltd (Iluka interest 100.0%). The group's activities in the United States are undertaken by Iluka Resources Inc which is 100% owned.

	2010 \$M	2009 \$M
Condensed income statement of Extended Closed Group
Revenue from ordinary activities Other expenses from ordinary activities Finance costs Impairment charges Income tax benefit Profit (loss) for the year	840.4 (769.6) (46.9) - 2.7 26.6	538.9 (636.3) (23.3) (67.6) 65.0 (123.3)
Condensed statement of comprehensive income
Profit (loss) for the year Other comprehensive income Changes in fair value of foreign exchange cash flow hedges, net of tax	26.6 (3.6)	(123.3) 72.9
Actuarial gains (losses) on defined benefit plans, net of tax Total other comprehensive income	0.6 (3.0)	(2.0) 70.9
Total comprehensive income for the year	23.6	(52.4)
Summary of movements in consolidated retained earnings
Retained earnings at the beginning of the financial year Profit (loss) for the year Retained earnings at the end of the financial year	(11.9) 26.6 14.7	111.4 (123.3) (11.9)

27 Controlled entities and deed of cross guarantee (continued)

(a) Condensed balance sheet of Extended Closed Group

Current assets Cash and cash equivalents 19.2 75.7 Receivables 156.0 90.7 Inventories 193.9 171.2 Derivative financial instruments - 15.9 369.1 353.5 Total current assets Non-current assets Receivables 15.3 80.7 Inventories 56.6 56.6 Other financial assets 42.4 42.6 Property, plant and equipment 1,389.1 1,517.3 Deferred tax assets 44.8 36.4 Intangible assets 7.1 9.9 1,555.3 1,743.5 Total non-current assets 1,924.4 2,097.0 Total assets Current liabilities Payables 96.1 174.1 Interest-bearing liabilities 29.5 44.7 41.7 20.1 Provisions 167.3 238.9 Total current liabilities Non-current liabilities Interest-bearing liabilities 313.3 423.7 Provisions 297.9 307.6 611.2 731.3 Total non-current liabilities 778.5 970.2 Total liabilities 1,145.9 1,126.8 Net assets Equity Contributed equity 1,108.3 1,114.4 Reserves 22.9 24.3 Retained profits 14.7 (11.9) 1,145.9 1,126.8 Total equity	2010 \$M	2009 \$M

28 Reconciliation of profit (loss) after income tax to net cash inflow from operating activities

	2010 \$M	2009 \$M
Profit (loss) for the year	36.1	(82.4)
Depreciation and amortisation	219.0	176.6
Unrealised ineffective (gains) losses of changes in fair value of cash flow hedges	-	(26.4)
Exploration capitalised	(4.3)	(3.3)
Interest capitalised	-	(12.5)
Net gain on disposal of property, plant and equipment	(4.1)	(6.8)
Net gain on disposal of CRL	-	(22.9)
Net exchange differences on borrowings	(5.7)	(17.5)
Rehabilitation and restoration accretion expense	14.3	15.7
Non-cash share based payments expense	3.8	6.2
Amortisation of deferred borrowing costs	1.0	1.1
Other	0.8	(0.6)
Impairment charges	-	67.6
Change in operating assets and liabilities
Decrease (increase) in receivables	(62.0)	129.1
Decrease (increase) in inventories	2.6	(59.5)
Decrease (increase) in derivatives	10.8	-
Decrease (increase) in deferred tax assets	4.5	(68.5)
Increase (decrease) in payables	(38.7)	43.5
Increase (decrease) in current tax liabilities	-	(5.9)
Increase (decrease) in provisions	0.6	(31.3)
Net cash inflow (outflow) from operating activities	178.7	102.2

29 Earnings per share

	2010 Cents	2009 Cents
(a) Basic and diluted earnings per share
(Loss) profit from continuing operations attributable to owners Profit from discontinued operation Profit attributable to the owners	8.6 - 8.6	(25.9) 5.7 (20.2)
(b) Reconciliations of earnings used in calculating earnings per share
(Loss) profit for the year from continuing operations Net profit (loss) attributable to non-controlling interests	36.1 -	(105.5) 0.2
Profit from continuing operations attributable to owners Profit from discontinued operation	36.1 -	(105.3) 22.9
Profit attributable to owners used in calculating basic earnings per share	36.1	(82.4)
Weighted average number of shares used in calculating basic and diluted earnings per share	418,700,517	405,582,708

30 Share-based payments

The Share Based Payment expense in the profit and loss account of \$4,100,000 (2009: \$6,245,000) results from several schemes summarised below. Further information on each scheme is contained in the Remuneration Report.

Schemes	Grant date	Vesting date	Fair value	Share rights at 31 Dec 10	Expense 2010 \$M	Share rights at 31 Dec 09	Expense 2009 \$M
2009 STIP (i)	Jan-10	Jan-11 Jan-12	3.58	336,834	0.9	-	-
		Jan-10
2008 STIP (i)	Jan-09	Jan-11	4.66	840,325	0.7	856,314	2.7
2007 STIP (i)	Jan-08	Jan-09 Jan-10	4.09	-	-	296,435	0.5
2010 LTIP (ii)	Jan-10	Jan-13	2.59/ 3.58	941,056	1.1	-	-
2009 LTIP (ii)	Jan-09	Jan-12	3.49/ 4.64	645,311	0.7	734,743	0.9
2008 LTIP (ii)	Jan-08	Jan-11	2.29/ 3.56	683,621	(0.9)	767,633	0.8
2007 LTIP (ii)	Jan-07	Jan-10	2.79/ 5.84	-	-	318,878	(0.5)
Iluka Retention Plan Share Rights (i) (iv)	Mar-08	Mar-11	4.09	922,230	1.1	1,060,000	1.4
MD Retention Share Rights (ii)	Mar-08	Mar-11	1.00	1,000,000	0.5	1,000,000	0.3
2006 PIP and prior plans (i) (v)	various	various		-	-	41,763	0.1
Total share based payments					4.1		6.2

• (i) The fair value at grant date is independently determined using the Black-Scholes model that takes into account the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk free discount rate for the term of the right.
• (ii) The fair value at grant date is independently determined using the Monte-Carlo simulation to model share prices at vesting date by repeatedly sampling random movements in a share's price. This repeated random sample in conjunction with certain known and historical data (e.g. rates, dividend yields and volatility) makes it possible to form a complete probability distribution of a share's price at a particular time in the future and hence estimate the average or mean share price at this time.
• (iii) Information on the Managing Director's Share Rights is disclosed in the remuneration report.
• (iv) The Iluka Retention Plan share rights were offered on various dates with the majority offered in March 2008 at \$4.09 per share. The fair value per share disclosed in the table is the weighted average value for all outstanding rights.
• (v) Prior to the introduction of the PIP in 2005, the company operated Long term Incentive Plans pursuant to the terms of the Directors', Executives' and Employees' Share Acquisition Plan (Plan). The Plan was approved by shareholders at the Annual General Meeting of the company in May 1999. From year to year the Board invited the Managing Director and other employees determined by the Board to hold an executive position, to participate in the Plan as a means of providing those employees with an incentive to enhance the performance of the company. The terms of the annual offer included an allocated maximum number of shares (maximum allocation) that will be acquired or retained under the Plan on behalf of the employee if certain performance criteria, as determined by the Board, are satisfied. All shares relating to the 2005 PIP expired in 2010.

31 Parent entity financial information

	Parent entity
	2010 \$M	2009 \$M
Balance sheet
Current assets Non-current assets	66.3 2,267.1	147.6 2,095.5
Total assets	2,333.4	2,243.1
Current liabilities Non-current liabilities	68.3 1,096.0	107.3 953.3
Total liabilities	1,164.3	1,060.6
Net Assets	1,169.1	1,182.5
Shareholders' equity Contributed equity Reserves Retained earnings	1,120.0 21.7 27.4 1,169.1	1,120.0 23.2 39.3 1,182.5
Profit (loss) for the year	(12.2)	10.4
Total comprehensive income	(15.8)	83.3

(a) Contingent liabilities of the parent entity

The parent had contingent liabilities for performance commitments and guarantees of \$29.0 million as at 31 December 2010 and \$31.1 million as at 31 December 2009.

(b) Contractual commitments for the acquisition of property, plant or equipment

As at 31 December 2010, the parent entity had contractual commitments for the acquisition of property, plant or equipment totalling \$6.5 million (31 December 2009 - \$2.2 million).

In the Directors' opinion:

• (a) the financial statements and notes 32 to 84 are in accordance with the Corporations Act 2001, including:
• (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and
• (ii) giving a true and fair view of the consolidated entity's financial position as at 31 December 2010 and of its performance for the financial year ended on that date, and
• (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.
• (c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identified in note 27 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 27.

The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the Directors.

G J Pizzey Chairman

D A Robb Managing Director

Perth

24 March 2011