ILUKA RESOURCES LIMITED — Interim / Quarterly Report 2003

Jul 16, 2003

Notice to the Australian Stock Exchange

17 July 2003

JUNE OUARTER 2003 PRODUCTION REPORT

Iluka Group production and sales for the quarter ended 30 June 2003 and year to date are summarised in the following table.

Product (tonnes)	Quarter 2 2003	Quarter 2 2002	Year to date 2003	Year to date 2002
Rutile
Production	36,227	40,817	75,188	82,586
Sales	49,216	54,839	76,390	80,042
Syn Rutile
Production	116,703	93,190	235,227	188,488
Sales	95,331	161,186	200,283	253,476
Ilmenite
Production	359,027	313,520	707,774	636,820
Sales	208,150	139,393	331,432	293,159
Zircon 1
Production	107,666	84,391	196,421	167,111
Sales	109,971	95,601	179,482	149,441
Leucoxene/Hyti
Production -2	3,014	2,328	6,340	5,233
$Sales-3$	3,104	4,408	17,674	28,494
Coal
Production	303,360	276,175	592,710	498,530
Sales	240,842	273,915	515,000	517,433

Notes

1- Includes zircon flour

2- Hyti 91 only

3- Sales include Leucoxene, Hyti 91 and Hyti 70

4- Production and sales numbers include Iluka's 50% interest in Narama Coal and 100% of Consolidated Rutile Limited

Overview of Group Production and Sales

• Group production of synthetic rutile, ilmenite, zircon and coal increased in the second quarter of 2003 compared with the corresponding period in 2002. The main drivers in the quarter were the improved production performance of the Western Australian operations and SR plants and the improved performance of both USA operations compared with their respective performance in the second quarter of 2002. This more than offset lower overall production levels from CRL during the quarter.
• Group sales of zircon and ilmenite increased in the second quarter of 2003 compared $\bullet$ with the corresponding period in 2002. Conversely sales of SR, leucoxene/hyti, rutile and coal decreased compared with the same period in 2002. The decrease in sales was primarily a result of timing differences in shipping in the south-west, USA and CRL as well as two planned shipments from the mid-west in late June being deferred to O3 as a result of adverse weather conditions.

Production for the quarter and year to date from each of Iluka's key regional operations are summarised in the following table.

Product (tonnes) & Location	Quarter 2 2003	Quarter 2 2002	Year to date 2003	Year to date 2002
Rutile
WA	16,661	25,943	37,084	47,422
USA	9,238	922	13,642	7,066
Syn Rutile
WА	116,703	93,190	235,227	188,488
$\mathbf{I}$ lmenite $^{-1}$
WA	259,333	242,306	525,349	492,366
USA	71,283	46,995	124,598	98,864
Zircon
WA	81,071	60,260	147,426	118,008
USA	19,632	14,435	32,265	29,418
Hyti 91
WA	3,014	2,328	6,340	5,233
Coal
NSW	303,360	276,175	592,710	498,530

Notes

1- Ilmenite includes Hyti 70 in WA and Leucoxene in the US

2- NSW refers to Iluka's 50% interest in the Narama Coal Joint Venture

3- Ilmenite production numbers for WA include ilmenite used to manufacture synthetic rutile

Consolidated Rutile Limited production (100%) for the quarter and year to date is summarised in the following table (for more details see CRL's quarterly production report dated 16 July).

Product (tonnes)	Quarter 2 2003	Quarter 2 2002	Year to date 2003	Year to date 2002
Rutile	10.328	13.952	24.462	28.098
Ilmenite	28,411	24,219	57.827	44.891
Zircon	6.963	9,696	16,730	19,685

Review of Regional Performance in the Quarter

WA

With the exception of rutile, production levels in Q2 generally reflect the inproved performance of both mining/mineral processing operations in the mid-west and south-west compared with the same period in 2002. In the case of rutile, production decreased in response to lower mineral assemblage and lower recovery rates.

USA

The improved O2 production performance was underpinned by the expanded Old Hickory operations in Virginia reaching full capacity on a sustainable basis during the quarter. Output from the Florida operations also improved following the relocation and successful recommissioning of the mobile concentrator (MC1) at a new ore body in the Green Cove Springs area in Q1 this year.

Old

Production of rutile and zircon in Q2 was lower compared with the same period in 2002. This was in response to lower production from both the Yarraman and Ibis mines due primarily to difficult mining conditions (including hard cutting) at both sites.

NSW

Coal production and sales were in line with contractual requirements.

	Quarter 2 2003	Quarter 2 2002	Year to date 2003	Year to date 2002
Sales Revenue
l WA	145.0	175.3	263.2	273.5
USA	31.2	24.3	50.5	41.9
Qld	15.4	22.8	28.6	42.4
NSW	7.5	8.2	16.3	15.7
Total A\$m	199.1	230.6	358.6	374.0
Capital Expenditure
Total A\$m	27.2	43.2	55.6	70.3
Exploration
Total A\$m	4.9	1.5	7.3	5.4

Iluka's sales revenue, capital and exploration expenditure for the quarter and year to date is summarised in the following table.

Notes

1- All revenues shown are net of hedging

2- All financials remain subject to audit confirmation

3- All financials reflect a 50% interest in Narama Coal and 100% interest in CRL. (Actual interest in CRL is 50.66%)

Exploration Results and Highlights

• Drilling in the Murray Basin has been concentrated on the Company's NSW tenements $\bullet$ with the initial reconnaissance of the two newly acquired tenements (purchased from Consolidated Broken Hill) now complete. The two drilling rigs were stood down in June for the planned mid year break whilst laboratory data is received and assessed.
• Drilling in Western Australia continued to focus on and about the Company's $\bullet$ operational sites.
• Work on the Atlantic coastal plain in the USA concentrated on areas near existing $\bullet$ operations in Florida and Virginia.
• A comprehensive review of the regional Geology of the Atlantic coastal plain has $\bullet$ generated a more detailed model of the region's exploration potential. Results of this work have identified several new "grassroots" exploration targets for follow up.
• Drilling Activity
• $\circ$ Perth Basin 28,793 metres
• $\circ$ Murray Basin 32,758 metres
• $\circ$ USA 7,343 metres
• Tenement applications and relinquishments $\circ$ Nil

2003 Half Year Outlook

The Company expects the first half profit result will be similar to the pre-tax result achieved in the corresponding period in 2002.

However, as previously advised Iluka will be required to provide for a tax expense for this period which will impact on the first half profit result. In addition, the first half results will be impacted by a write-down of US\$2 million for the USA operations based on a revision of the valuation of work in progress stock to accurately reflect current values.

Murray Basin Development Update

Iluka has completed a pre-feasibility study (PFS) for the development of the Douglas minerals sand project (acquired from Basin Minerals during 2002) in the Murray Basin in south west Victoria. The study has focused on refining the original plan to develop the Douglas stage-1 mine near Horsham and a large-scale minerals separation plant near Hamilton to produce finished products in 2005.

Technical work on this option is continuing and the timing of the start up of construction work and first production from the mine is currently planned for late 2003 and late 2004 respectively. As part of this process Iluka is currently participating in the planning approval appeal process for the mineral separation plant. A final decision on the planning approval is expected within the next two months.

In parallel to the PFS, Iluka has also investigated opportunities to optimise mineral processing operations in the Murray Basin, taking into account both short and long-term processing requirements. This work has focused on zircon and rutile processing with the objectives of accelerating the start up of mining and reducing or deferring capital expenditure on processing plant and equipment.

Iluka's management expects to finalise its assessment of these opportunities in time to provide a more detailed analysis at the half year results presentation in August. Management also intends to a take an investment proposal to the Iluka Board later this year.

Mike Folwell Managing Director