ILUKA RESOURCES LIMITED — Annual Report 2010

Feb 24, 2011

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2010 Full Year Results Iluka Resources Limited

25 February 2011

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Disclaimer – Forward Looking Statements

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This presentation contains information that is based on projected and/or estimated expectations, assumptions and outcomes.

These forward-looking statements are subject to a range of risk factors associated, but not exclusive, with potential changes in:

• exchange rate assumptions

• product pricing assumptions

• mine plans and/or resources

• equipment life or capability

• current or new technical challenges

• market conditions

• management decisions

While Iluka has prepared this information based on its current knowledge and understanding and in good faith, there are risks and uncertainties involved which could cause results to differ from projections. Iluka shall not be liable for the correctness and/or accuracy of the information nor any differences between the information provided and actual outcomes, and furthermore reserves the right to change its projections from time to time.

All currency referred to is Australian denominated unless otherwise indicated.

2

Full Year Overview

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• Completion and ramp up of two new operations

• substantial contribution from 2[nd] half of 2010

• Positive pricing dynamics for zircon

• favourable market conditions continuing in 2011

• Last year of price constrained titanium dioxide contracts

• step change in high grade titanium dioxide prices achieved for 1[st] half 2011

• Production cash costs higher than initial guidance

• 2010 restructure, extended kiln operation and higher rehabilitation provision costs

• Markedly stronger EBITDA

• Net debt at year end at $312.6 million

• $260.1 million at 31 January 2011

• Dividends reinstated

• 8 cents full year dividend unfranked

3

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Main Features of Full Year Results Comparison with 2009

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Mineral Sands Sales Volumes		28.3% - all high value product sales volumes up, post GEC
USD Product Pricing		Zircon prices up 30%; contract TiO2,pricing higher but still constrained
		Higher pricing offset higher AUD/USD
Mineral Sands Revenue		51.8% to $874.4 million
(pre hedging)
Cash Production Costs		19.9% - $543.8 million versus $453.6 million
		Higher production and new operations ramped up
Unit Cash Production Costs		3.9% to $538/tonne (Z/R/SR)
EBITDA		205.9% to $304.7 million
D&A		24.0% to $219.0 million
Reported Earnings		$36.1 million NPAT versus $82.4 million loss
Capital Expenditure (cash)		77.5% to $117.2 million
Operating Cash Flow		$163.6 million
Net Debt		18.2% to $312.6 million
Gearing		21.8% versus 25.9%
Dividend		8 cents per share (unfranked)

4

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Health, Safety and the Environment Iluka’s No. 1 Priority

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Total Recordable Injury Frequency Rate

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20
18
16.41
16
14
13.50
12
10 9
8
8 7 7
6 5 5 5 5
4
4 3 3
2 1
0
Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10
Recordable Injuries Total Recordable Injury Frequency Rate ("TRIFR")
Target Rate
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5

Summary Group Results

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$m	1H 2010	2H 2010	2010	2009	% change pcp
Mineral Sands Revenue (pre hedging)	378.6	495.8	874.4	576.0	51.8
EBITDA	115.4	189.3	304.7	99.6	205.9
Depreciation and amortisation	(101.7)	(117.3)	(219.0)	(176.6)	24.0
EBIT	13.9	72.2	86.1	(144.1)	n/a
Net interest and financing costs	(25.6)	(20.6)	(46.2)	(22.7)	(103.5)
Significant non-cash items	-	-	-	(67.6)	n/a
Profit / (Loss) before tax	(11.7)	51.6	39.9	(166.8)	n/a
Tax Benefit / (Expense)	5.1	(8.9)	(3.8)	61.5	n/a
Profit / (Loss) from continuing operations	(6.6)	42.7	36.1	(105.3)	n/a
Profit / (Loss) from discontinued operations	-	-	-	22.9	n/a
Net Profit / (Loss) after tax	(6.6)	42.7	36.1	(82.4)	n/a
Net Debt	(439.0)	(312.6)	(312.6)	(382.1)	18.2
Average A$:US$ exchange rate	89.39	94.47	92.00	79.34	(16.0)
Financial Ratios
EPS cents per share	(1.6)	10.2	8.6	(20.2)	n/a
Return on equity % (annualised)	(0.6)	3.8	3.2	(7.5)	n/a
Interest cover (EBITDA / net interest expense) times	6.3	5.4	11.7	5.8	101.7
Gearing/ net debt(net debt + equity)%	28.8	21.8	21.8	25.9	15.8

6

EBITDA 2010 versus 2009

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ILUKA GROUP EBITDA 2010 vs 2009

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A$m
400
26.5 25.7
350 16.2
53.1
(28.2)
300
(50.8) 304.7
115.6
250
200
47.0
150
100
99.6
50
0
2009 EBITDA Sales volumes Sales mix Sales price Unit cost Restructure Other MAC FX 2010 EBITDA
reduction
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7

Mineral Sands and Group EBITDA

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$m
350
300
304.7
250
200
189.3
150
250.2
115.4
100
99.6
154.9
50 95.3
75.6
0
2009 1H 2010 2H 2010 2010
Mineral Sands EBITDA Group EBITDA
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• Strong 2[nd] half mineral sands EBITDA - up 64%

• Higher margin J-A and MB production

• Higher 2[nd] half zircon sales price

8

Net Profit After Tax 2010 versus 2009

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ILUKA GROUP NPAT 2010 vs 2009

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A$m
18.6
100
11.3
37.1 18.0
47.3
(29.7)
50
(19.7)
(19.8)
80.9
(22.9) 36.1
(35.6)
0
2009 Sales mix Sales D&A MAC FX CRL
costs
32.9
-50
(82.4)
-100
2009 Sales Sales Sales Unit cost Restructure D&A Other MAC Tax & FX Significant CRL 2010
volumes mix prices reduction interest items
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9

Mining Area C Royalty 2010 vs 2009

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	2010	2009	% change
Annual Production to 30 Jun MDMT	42.5	37.8	12.4
Sales Volume to 31 Dec MDMT	43.2	40.3	7.2
Royalty Income $m	71.3	42.6	67.4
Capacity Payments $m	5.0	8.0	(37.5)
Iluka EBIT$m	75.9	50.2	51.2

• Higher iron ore sales volumes

• Average AUD realised price increased by 56% from pcp

• 60 per cent higher Q2 2010 versus Q1 2010

• reflects greater proportion of spot sales

• Royalty income: 1[st] half - $30.7 million; 2[nd] half $40.6 million

• $5.0 million of annual capacity payments to 30 June 2010 (2009: $8.0 million)

10

Mineral Sands Operating Cash Flow

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$m
200
163.6
150
119.7
100
86.5
50 43.9
0
2009 1H 2010 2H 2010 2010
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• Stronger operating cash flow

• up 89.1%

• 1[st] half 2010 operating cash flow reflects:

• increase in J-A concentrate stocks

• increased debtors (shipment timing)

• 2[nd] half 2010 operating cash flow reflects:

• increased Z and R sales volumes

• further increase in working capital

11

Note: excludes MAC royalty, exploration, net interest and tax

Net Debt Movement

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ILUKA GROUP NET DEBT - 2010
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A$m
400
382.1
350
(9.8)
(35.7)
300 (81.5) 9.0 8.8 312.6
250
(1.5)
(29.4)
163.6
200
(17.9)
150
63.9
100
50
0
Opening net Operating MAC royalty Exploration Interest Tax Capex Capex Asset sales Share FX on debt Closing net
debt cash flow (J-A&MB2) (other) purchase debt
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12

Net Debt and Gearing

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Net Debt (A$m) Gearing (%)
500 35
30
400
25
300
20
15
200
10
100
5
0 0
H1 09 H2 09 H1 10 H2 10
Net Debt Gearing
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13

Iluka Sales – Zircon

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Zircon Sales

• Sales back to 2008 levels

• China above 2008 levels

• 47% of Iluka’s 2010 sales

• Recovery in Europe and North America

• Customer requirements exceed supply

0 100 200 300 400 500 kt
		2008 2008	1H 2009 2H 2009 2009			2009	1H 2010 2H 2010 2010 2010
	Asia (ex. China) China
Sales Volumes kt	2008 1H 2009 2H 2009 2009 1H 2010 2H 2010 2010
Asia (ex. China) China Europe Americas Other	73 11 36 47 27 41 68 163 15 104 119 91 103 194 173 5 17 21 60 66 126 71 9 20 29 34 47 80 1 2 4 6 5 6 10
Total	481 42 181 223 216 263 479

14

Excludes CRL

Zircon Market Conditions

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• Strong recovery in demand in all main markets

• Global consumption estimated at 1.3 million tonnes

• unmet demand

• China imports running at above pre GEC levels

• estimated 2010 imports of ~595k tonnes

• Since Q2, Iluka unable to satisfy customers’ full demand

• allocating volumes

• Global ceramics and zirconium chemicals capacity not fully utilised

• Industry inventories through the supply chain at historically low levels

15

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Zircon Constrained Market Supply

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• Inner Mongolia zirconia chemical plant which could not commission due to lack of zircon

• Similar examples elsewhere in China

• New milling capacity unable to be fully utilised

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Zircon

Price and Supply Trends

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• Iluka actions:

• 3 price increases in 2010 – year end exit price above US$1,000/tonne (FOB)

• 1 January price increase of ~20%

• Iluka working with customers in tight supply situation:

• supply point and logistics flexibility

• semi-processed material made available

• debottlenecking and tailings retreatment opportunities

• Market deficit will moderate but tight conditions expected to persist for some years

• 2011 likely to be impacted by low raw material inventories despite some higher production

• Market conditions support further price increases

17

Iluka Sales – Rutile and Synthetic Rutile

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• Strong recovery in North American pigment demand

• Minimal sales of high grade titanium dioxide to China, given sulphate-orientated nature of pigment market

0 100 200 300 400 500 600 700 kt		Rutile and Synthetic Rutile Sales	Rutile and Synthetic Rutile Sales	Rutile and Synthetic Rutile Sales	Rutile and Synthetic Rutile Sales
		2008 2008	1H 2009 2H 2009 2009 2009	1H 2010 2H 2010 2010 2010
Sales Volumes kt	2008 1H 2009 2H 2009 2009 1H 2010 2H 2010 2010
Asia (ex. China) China Europe Americas Other	223 89 118 207 89 138 228 11 1 12 14 2 9 11 159 16 54 70 56 33 88 158 38 89 127 121 138 259 112 42 76 118 0 17 17
Total	663 186 349 535 268 335 603

18

Excludes CRL

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High Grade Titanium Dioxide Market Dynamics

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• Demand recovery for high grade titanium dioxide feedstocks

• Most chloride pigment producers restored operations to full or near full capacity

• demand for high grade feedstocks as replacement for lower grade feedstocks

• hence increased demand for rutile and synthetic rutile

• Evidence of industry insufficient high quality supply

• Major pigment producers increased their pricing by an average of 10% in 2010

• one indication this month of a further ~10% price increase (~ US$200/t)

• Iluka ended 2010 with minimal rutile and SR inventories

19

Recent TiO2 Industry Comments

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“…provided global demand for TiO2 products remains strong, we expect the low level of worldwide TiO 2 inventories to continue for several years and anticipate further implementation of TiO2 selling price increases.”

Top 5 Pigment producer, February 2011

“…we do have pricing momentum in this industry. We’ve also got raw material pressures in this industry as well .”

Top 5 Pigment producer, February 2011

“ TiO 2 pricing actions announced in the past few days include a $300/m.t., or 10%, price increase in Asia, effective April 1 (DuPont), and a EUR175/m.t., or 8%, increase in Europe, also effective April 1(Huntsman). TiO2 buyers are becoming less resistant to sharp price increases as they are increasingly concerned about product availability amid sold-out conditions, particularly for high quality TiO2 grades.”

North America Equity Research, February 2011

Robust TiO 2 demand….Tight markets….Raw material costs trending up offset with price

Top 5 Pigment producer, January 2011

20

High Grade Titanium Dioxide Trends

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• 2011 1[st] year of unconstrained contract price negotiations

• small proportion of SR volume still affected by residual “cap and collar” contract

• unable to fully meet all customer requirements

• rutile and SR pricing set for 6 months period only

• volume arrangements for 12 months, subject to 2H price agreement

• weighted average rutile and SR pricing up ~30% to 40% in 1[st] half (versus 2010)

• Iluka working with customers in constrained market conditions

• supply point and product quality flexibility

• Expectations of improved profitability for raw material suppliers and customers downstream

• Potential to reactivate idled capacity (SR)

• 2011 assumes SR2 kiln operating for full year and SR3 for part year (R&D)

• kiln feedstock optimisation

• timing linked to feedstock decisions and pricing environment

21

2011 Areas of Focus

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• Operate the business safely and in a sustainable manner

• Maximise high margin production from existing operations

• Determine best means to cost-effectively increase production

• Support pricing momentum as market conditions allow

• Invest in product and technical development

• Increase investment in exploration in existing and new provinces

• Continue market and business development activities

• Balance sheet

• debt expected to reduce rapidly

• capital management

• flexibility to pursue opportunities

22

Supplementary Slides

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Key Physical & Financial Parameters 2011 Physical Trends

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	2010 2011 Guidance 2012 Commentary
Production (kt) Zircon Rutile1 Synthetic rutile Ilmenite – saleable Total	413 ~500 Expected to be ~500kt 250 ~250 Expected lower production (~200kt) due to transition to new deposits at WRP, following completion of mining at Douglas and Echo in early 2012 347 ~220 Assuming 2ndkiln activated in early 2012, then ~320kt expected in that year 469 ~430 Impacted by internal requirements for synthetic rutile production; expected to be no higher than 2011 1,479 1,400

1 Rutile production volumes predominantly comprise a rutile product with a titanium content of 92 – 96 per cent together with a proportion of material with a titanium dioxide content below 92 per cent

Refer Iluka ASX Release 25 February 2011 for further detail in relation to key physical and financial parameters

Key Physical & Financial Parameters 2011 Financial Trends

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	2010	2011	2012 Commentary
		Guidance
Cash Costs A$m
Production costs	544	~540	Expected to be lower, but dependent on mine move and kiln operation, and cost inflation
Z/R/SR unit costs	538	~560	Expected to be lower, dependent on production cost factors above but offset by higher total Z/R/SR production
A$/tonne
Other cash costs	92	~115	Expected to be flat – refer explanatory comments over page
Restructure, rehab	24	~5	2010 costs related to idling of mining operations and kilns
& idle costs
Non cash costs
Depreciation &	219	~195	Expected to reduce to ~$150m
amortisation
Other	15	~15	Expected to be at a similar level
Capital Expenditure	117	~100	Expected to be at a similar level, dependent on project cost inflation, expansion decisions and
			investment opportunities
Operating Cash Flow	164	
Net Debt	313	
Gearing (nd/nd+e)%	22	

Refer Iluka ASX Release 25 February 2011 for further detail in relation to key physical and financial parameters

Mineral Sands Results

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$m	1H 2010	2H 2010	2010	2009	% change pcp
Mineral Sands Revenue (pre hedging)	378.6	495.8	874.4	576.0	51.8
EBITDA
Eucla / Perth Basins	46.2	73.7	119.9	47.9	150.3
Murray Basin	39.0	74.9	113.9	13.2	762.9
US Operations	20.2	20.0	40.2	30.7	30.9
Exploration and Other	(10.1)	(13.6)	(23.7)	(16.2)	(46.3)
Total Mineral Sands EBITDA(pre hedging)	95.3	154.9	250.2	75.6	231.0
Depreciation and Amortisation	(101.5)	(117.1)	(218.6)	(176.6)	23.8
Mineral Sands EBIT(pre hedging)	(6.2)	37.8	31.6	(100.6)	n/a

26

1[st] and 2[nd] Half 2010 EBITDA

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$m	1H 2010	2H 2010	2010
Mineral Sands Revenue (pre hedging)	378.6	495.8	874.4
EBITDA
Mineral Sands	95.3	154.9	250.2
Currency Hedging and Foreign Exchange	(1.4)	10.3	8.9
Mining Area C	35.5	40.4	75.9
Corporate and Other	(14.0)	(16.3)	(30.3)
Total EBITDA	115.4	189.3	304.7
Depreciation and Amortisation	(101.5)	(117.5)	(219.0)
Total EBIT (before significant items)	13.9	72.2	86.1
Mineral Sands EBITDA / Revenue Margin	25.2	31.2	28.6
Capital Employed	1,460.7	1,382.0	1,382.0

27

2010 Cash Flow and Net Debt

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$m	1H 2010	2H 2010	2010	2009	% change pcp
Opening Net Debt	(382.1)	(439.0)	(382.1)	(215.7)	(77.1)
Operating Cash Flow	43.9	119.7	163.6	86.5	89.1
MAC Royalty	19.8	44.1	63.9	55.2	15.8
Exploration	(7.6)	(10.3)	(17.9)	(20.0)	10.5
Net Interest	(12.3)	(17.1)	(29.4)	(12.5)	(135.2)
Tax	(1.5)	-	(1.5)	(4.4)	65.9
Capital Expenditure	(94.9)	(22.3)	(117.2)	(521.6)	77.5
Asset Sales	5.3	3.7	9.0	94.1	(90.4)
Share Issues Net of Costs	-	-	-	113.5	n/a
Share Purchases	-	(9.8)	(9.8)	-	n/a
Dividends Paid to CRL Minorities	-	-	-	(1.8)	n/a
CRL Net Debt Eliminated on Sale	-	-	-	9.4	n/a
Exchange Revaluation of Net US Debt	(9.6)	18.4	8.8	35.8	75.4
(Increase) / Decrease in Net Debt	(56.9)	126.4	69.5	(166.4)	n/a
Closing Net Debt	(439.0)	(312.6)	(312.6)	(382.1)	18.2

28

Cash Costs of Final Products Produced 2010 vs 2009

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	2010	2009	% change
Z/R/SR1Production (kt)	1,010.5	809.5	24.8
Saleable Ilmenite (kt)	469.0	342.1	37.1
Final Product Produced (kt)	1,479.5	1,151.6	28.5
Total Cash Cost (A$m)	543.8	453.6	(19.9)
Cash Cost / tonne of High Value Core Products1(A$/t)	538.0	560.0	3.9
Cash Cost / tonne of Saleable Product2(A$/t)	367.0	394.0	6.9

1 zircon / rutile / synthetic rutile and other minor by-products

2 includes saleable ilmenite

29

Debt Maturity Profile

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A$m
DEBT MATURITY PROFILE (as at 31 December 2010)
500
400
300
200
100
0
2011 2012 2013 2014 2015
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Syndicated Facility Drawn USPP Notes Working Capital Facility Undrawn Syndicated Facility Undrawn

30

Capital and Exploration Expenditure (Cash)

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A$m	2010	2009	% change
Capital Expenditure	(117.2)	(521.6)	77.5
Exploration	(17.9)	(20.0)	10.5
Total	(135.1)	(541.6)	75.1

31

2010 Production Volumes

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(kt)	2010	2009	% change
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 - Upgradeable	215.9	496.7	(56.5)

32

Eucla / Perth Basins 2010 vs 2009

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Financials
		2010	2009	% change
Sales Revenue	$m	468.7	385.6	21.6
Total Cash Production Costs	$m	(306.6)	(316.9)	3.2
Depreciation and Amortisation	$m	(86.1)	(127.2)	32.3
Inventory Movements	$m	(9.5)	23.6	n/a
Cost of Goods Sold	$m	(402.2)	(420.5)	4.3
Other Costs1	$m	(32.7)	(44.4)	26.3
EBIT	$m	33.8	(79.3)	n/a
EBITDA	$m	119.9	47.9	150.3
EBITDA / Sales	%	25.6	12.4	106.4

1 Restructuring costs, Government royalties, marketing costs and asset sales

Key Operational Parameters

Key Operational Parameters
	2010	2009	% change
Production (kt)
Zircon	197.1	145.7	35.3
Rutile	51.7	66.9	(22.7)
Synthetic Rutile	347.5	405.0	(14.2)
Ilmenite	160.7	146.6	9.6
Cash Production Costs $m	306.6	316.9	3.2

33

Includes Western Australian production, as well as Jacinth-Ambrosia production from 1st half 2010

Murray Basin 2010 vs 2009

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Financials
		2010	2009	% change
Sales Revenue	$m	281.5	124.8	125.6
Total Cash Production Costs	$m	(183.9)	(87.6)	(109.9)
Depreciation and Amortisation	$m	(113.0)	(31.7)	(256.5)
Inventory Movements	$m	32.3	(5.7)	n/a
Cost of Goods Sold	$m	(264.6)	(125.0)	(111.7)
Other Costs1	$m	(16.0)	(18.3)	12.6
EBIT	$m	0.9	(18.5)	n/a
EBITDA	$m	113.9	13.2	762.9
EBITDA / Sales	%	40.5	10.6	282.1

1 Restructuring costs, Government royalties, marketing costs and asset sales

Key Operational Parameters

Key Operational Parameters
	2010	2009	% change
Production (kt)
Zircon	157.6	69.9	125.5
Rutile	198.4	74.5	166.3
Ilmenite	56.8	12.5	354.4
Cash Production Costs $m	183.9	87.6	(109.9)

34

US Operations 2010 vs 2009

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Financials
		2010	2009	% change
Sales Revenue	$m	124.3	65.6	89.5
Total Cash Production Costs	$m	(53.3)	(49.1)	(8.5)
Depreciation and Amortisation	$m	(17.0)	(17.3)	1.7
Inventory Movements	$m	(25.7)	15.5	n/a
Cost of Goods Sold	$m	(96.0)	(50.9)	(88.6)
Other Costs1	$m	(5.1)	(1.3)	(292.3)
EBIT	$m	23.2	13.4	73.1
EBITDA	$m	40.2	30.7	30.9
EBITDA / Sales	%	32.3	46.8	(30.9)

1 Restructuring costs, Government royalties, marketing costs and asset sales

Key Operational Parameters

Key Operational Parameters
	2010	2009	% change
Production (kt)
Zircon	58.2	47.5	22.5
Ilmenite	251.5	183.0	37.4
Cash Production Costs $m	53.3	49.1	(8.5)

35

China Zircon Imports

Iluka Analysis of Chinese Import Data – to end December 2010

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Cumulative Year To Date Monthly
kt
kt
700 80
70
600
60
500
50
400
40
300
30
200
20
100 10
0 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Other Indonesia South Africa Australia
Other Indonesia South Africa Australia
2007 2008 2009 2010
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10
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• Iluka estimates China’s total imports of zircon-sand equivalent material for 2010 was ~595 thousand tonnes

• Based on sales from bonded warehouses, including Iluka’s own sales, consumption is estimated at closer to ~645 thousand tonnes

• Relative to previous years, including 2008, this is a very strong level of imports and consumption, particularly in a market that Iluka believes was supply constrained for most of the year

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Iluka Resources Limited

For further information, contact:

Robert Porter General Manager, Investor Relations robert.porter@iluka.com +61 3 9600 0807 / +61 (0) 407 391 829 www.iluka.com

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