ILUKA RESOURCES LIMITED — Capital/Financing Update 2013

Feb 20, 2013

21 February 2013

This document provides an indicative guide to key physical and financial parameters expected for the Iluka business in the 2013 financial year.

The information contained within this document is developed in the context of continuing uncertain market conditions, including the nature and pace of demand recovery in 2013 for the company’s main products. As with 2012, many factors which may affect the business are outside of the company’s direct control.

Iluka does not undertake to update this information regularly in part or whole, but can be expected to comment on any material variations. Iluka does not provide pricing forecasts.

The following excludes the Mining Area C iron ore royalty which contributed $72 million in EBIT in 2012.

The information is provided to assist sophisticated investors with the modelling of the company, but should not be relied upon as a predictor of future performance.

Disclaimer – Forward Looking Statements

This briefing paper contains information which is based on projected and/or estimated expectations, assumptions and outcomes.

These forward-looking statements are not guarantees or predictions of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the company’s control, and which may cause actual results to differ from those expressed in the statements contained in this release. Factors that could cause actual results or performance to differ materially from those expressed or implied in the forwardlooking statements include, but are not limited to 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. Iluka does not undertake to update the projections provided in this document on a regular basis.

All currency is in nominal Australian dollar terms unless stated differently.

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Iluka Physical Trends

Production (kt)	2012	2013	Commentary
		Guidance
Zircon	343	~220	Lower production reflects partial processing of concentrate produced from
			Jacinth-Ambrosia (SA) and Woornack, Rownack and Pirro (VIC), as well
			as reduced zircon production associated with the idling of Eneabba (WA).
			Production levels also reflect Iluka’s intent to draw down on inventory of
			finished material before resuming more normal production.
Rutile and	220	~2001	Reflects:
synthetic rutile	248		 lower production as a result of reduced rutile output from the
			Woornack, Rownack and Pirro deposits, as well as reduced rutile
			production associated with the idling of the Eneabba mining
			operation.
			 an intention to keep SR3 kiln idled in 2013 and to idle SR2 until
			market demand warrants recommencement.
Saleable ilmenite	386	~330	The level of product available for sale is dependent on internal synthetic
			rutile feed requirements, and production settings during the year at
			various operations.
1Combinedrutile and	syntheticrutile.
Sales Volumes (kt)	2012	2013	Commentary
		Guidance
Sales (kt)			Sales are expected to be above production, but full year outcomes
			will be determined by the pace and strength of global demand
			recovery through 2013. Iluka will provide quarterly updates on sales
			trends with its quarterly production reports.
Zircon	213	Not guided	Iluka expects zircon demand to build through 2013 and for zircon sales to
			exceed both 2013 production and last year’s sales levels, with the
			difference in 2013 being met from inventory.
Rutile	105		Iluka expects high grade titanium dioxide demand to build through 2013
Synthetic rutile	170	Not guided	and for total rutile and synthetic rutile sales to be similar to last year’s sales level and exceed 2013 production, with the difference being met
			from inventory.
Saleable ilmenite	443	Not guided

Historical Iluka Sales Volumes – Zircon, Rutile and Synthetic Rutile

Annual Volume	2009	2010	2011	2012
Zircon (kt)	223	479	514	213
Rutile (kt)	139	240	266	105
Synthetic rutile (kt)	397	363	258	170
Total Z/R/SR (kt)	759	1,082	1,038	488

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Iluka Financial Trends

	2012	2013	Commentary
		Guidance
Cash Costs A$m
Production costs	583	~375	Materially lower cash production costs reflect the production and asset
			reconfiguration activities announced by the company. Refer below for
			one-off restructure costs.
Z/R/SR unit costs	719	Not guided	Higher unit costs reflect a ~50 per cent reduction in production year-on-
A$/tonne produced			year. More precise guidance not provided at this time for commercial
			reasons.
Revenue A$/t Z/R/SR	1,991	Not guided
sold
Other cash costs	133	~135	Includes government royalties, marketing, corporate, project product and
			technical development, exploration and other costs.
Restructure, idle	25	~901	This amount is an estimate based on planned asset reconfiguration
capacity, rehabilitation			activities, including redundancy costs and idling costs.
& holding costs	741	~600
Total Cash Costs
Non Cash Costs
Depreciation &	203	~175
amortisation
Other	28	~25	Rehabilitation unwind and other finance costs can be expected to be at
			a similar level to 2012.
Capital Expenditure	167	~100

1 ~$50 million of this estimate relates to restructure and redundancy costs associated with Iluka’s production curtailment measures announced on 21 February 2013. Refer to Iluka’s ASX release, 2013 Key Physical and Financial Parameters, 21 February 2013.

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Business Commentary – Explanatory Notes

Mining Area C Iron Ore Royalty

The guidance above relates to Iluka’s mineral sands business. It does not include the royalty from Iluka’s ownership of BHP Billiton’s Mining Area C iron ore royalty. This royalty contributed $72.3 million EBIT in 2012.

The key elements of this “in perpetuity” royalty include:

• the greater of (1) ongoing quarterly royalty payments of 1.25% of free-on-board sales revenue from the MAC royalty area (less all export duties and export taxes), or (2) A$0.25 per tonne of all ore produced from the MAC royalty area in that quarter; and

• when applicable, annual capacity payments of A$1 million per million tonne increase in the annual production level from the MAC royalty area during any 12 month period ending 30 June above the previous highest annual production level, paid within 30 days of the relevant amount of production being produced.

Cash costs of production include the following main components:

• mining and concentrating costs; transport of heavy mineral concentrate; mineral separation; synthetic rutile production and costs for externally purchased ilmenite and production overheads. This category also includes landowner royalty payments, but not Australian State Government royalties.

.

Other cash costs include:

• Australian State Government royalties ($19.6 million in 2012);

• marketing and selling costs (including marketing overhead costs and port costs - $30.2 million in 2012);

• product and technical and major development costs ($13.6 million in 2012);

• exploration expenditure expensed ($29.5 million in 2012); and

• corporate and overhead support costs ($45.7 million in 2012).

Restructure costs/plant idling costs will be incurred in 2013 associated with the intention to make further changes in asset configuration. While subject to finalisation, these costs are estimated at $90 million.

Rehabilitation and holding costs for closed sites - $9.8 million in 2012.

Other non-cash costs include the unwind of the discount on rehabilitation provisions which are recognised as a liability at net present value which is reported as a finance cost.

Other Matters (not part of guidance) – inventory movement represents movement in balance sheet inventory, including D&A component. Although Iluka does not guide on this component, it comprises the movement in work-in-progress and finished goods. http://www.iluka.com/docs/mineral-sands-briefingpapers/accounting-treatment-for-inventory-movements-november-2012.pdf?sfvrsn=4

For further information, please contact:

Dr Robert Porter General Manager, Investor Relations Phone: + 61 (0) 3 9225 5008 Please note in Perth on 21 February – please use mobile or 08 9360 4700 Mobile: +61 (0) 407 391 829 Email: robert.porter@iluka.com www.iluka.com

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