ILUKA RESOURCES LIMITED — Interim / Quarterly Report 2003

Jan 22, 2003

$\rightarrow$ ASX

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ILUKA RESOURCES LIMITED

To: Company Announcements Office Company: Australian Stock Exchange Fax No: 1300 300 021 Pages: 5

SHR₅

23 January 2003

Ian Gregory From: Fax No: (08) 9221 7744 email: ian.gregory@iluka.com

Subject: Iluka Resources December Quarter 2002 Production Report

Please find attached the December 2002 quarterly results for Iluka Resources Limited.

IAN GREGO Company Secretary

030123 FAX Iluka December 2002 Ortly:leg:nm

ILUKA RESOURCES LIMITED

Notice to the Australian Stock Exchange

23 January 2003

DECEMBER QUARTER 2002 PRODUCTION REPORT

Iluka Group production and sales for the quarter ended 31 December 2002 and vear to date results are summarised in the following table.

Product (tonnes)	Quarter 4 2002	Quarter 4 2001	2002 Full Year	2001 Full Year
Rutile
production	45,374	37,109	167,774	175,637
sales	71,699	53,481	172,124	174,314
Syn Rutile
production	131,717	126,689	447,463	460,157
sales	157,781	154,183	516,598	419,654
Ilmenite
production	372,035	347,569	1,362,793	1,438,500
sales	183,588	206,117	672,807	673,992
Zircon-1
production	97,515	82,491	360,591	345,913
sales	116,072	94,341	363,622	352,823
Leucoxene/Hyti
production-2	2,855	3,448	11,320	12,550
sales-3	7,279	5,658	47,467	30,875
Coal
production	238,752	239,993	1,012,490	1,203,074
sales	242,262	222,693	1,032,433	1,195,809

Notes

1- Includes zircon flour

2- Hyti 91 only

3- Sales include Leucoxene, Hyti 91 and Hytl 70

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

Overview of Group Production and Sales

• Group production of synthetic rutile, ilmenite, zircon and rutile increased in the fourth quarter of 2002 compared with the corresponding period in 2001. Conversely, coal and Leucoxene/Hyti production in the period under review were both slightly lower compared with the same period in 2001. The main factors influencing production in the quarter were the continued strong performance of the Western Australian operations and the improved operating performance of the USA operations.
• Group sales of SR, rutile, zircon, Leucoxene/Hyti and coal increased in the fourth $\blacksquare$ quarter of 2002 compared with the corresponding period in 2001. The main factors were the inclusion of SR, rutile and zircon shipments which moved from Q3 to Q4 as a result of a lack of shipping availability experienced in Q3 this year and the shipment of record sales volumes in December in line with the planned delivery schedules.

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Production for the quarter and year to date from each of Iluka's key regional

Product (tonnes) & Location	Quarter 4 2002	Quarter 4 2001	2002 Full Year	2001 Full Year
Rutile
WA	23,686	19,065	90,260	84,062
USA	7,967	3,500	21,684	29,577
Syn Rutile
WA	131,717	126,689	447,463	460,157
Ilmenite-1
WA	282,492	267,338	1,053,800	1,102,900
USA	64,620	52,800	215,620	234,322
Zircon
WA	70,017	57,400	259,376	225,800
USA	17,091	14,452	62,063	77,100
Hyti 91
WA	2,855	3,448	11,320	12,550
Coal
NSW	238,752	239,993	1,012,490	1,203,074

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

operations are summarised in the following table.

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 17 January).

Product (tonnes)	Quarter 4 2002	Quarter 4 2001	2002 Full Year	2001 Full Year
Rutile	13.721	14,544	55,830	61,998
Ilmenite	24,923	27,431	94,373	100,159
Zircon	10,407	10,639	39,152	43,012

Review of Regional Performance in the Quarter

WA

Production levels reflect the improved performance of both mining/mineral processing operations in the mid-west and south-west and the higher SR kiln availability levels.

USA

Production improved at both operations. In Virginia the new Concord mine achieved target output levels on a sustainable basis. The Dry Mill operated close to expanded design levels and minor modifications to enable the plant to reach full capacity will be made early in 2003. The improved output from operations in Florida reflected better mining conditions following the extremely wet Q3.

Qld

Production from the Yarraman mine continued to be restricted due to technical issues with the plant's tailings circuit. An upgrade program to enable the plant to achieve its original design specification is nearing completion. Lower production from Yarraman was partly compensated for by the performance of the Ibis mine which also benefited from supplementary mining of some additional minerals adjacent to the mine path. In addition, a two week shut down at the Pinkenba Processing Plant commenced on 20 December 2002.

NSW

Coal production and sales were in line with contractual requirements.

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Iluka's share of sales revenue, capital and exploration expenditure for the quarter and full year is summarised in the following table.
	Quarter 4 2002	Quarter 4 2001	2002 Full Year	2001 Full Year
Calas Davasus

	ZUUZ	ZUUL	rull tear	Full Year
Sales Revenue
WA	205.3	194.2	607.5	528.5
USA	36.9	40.3	105.7	135.0
Qld	27.6	28.9	88.2	90.1
NSW	7.7	6.7	31.7	34.9
Total A\$m	277.5	270.1	833.1	788.5
Capital Expenditure
Total A\$m	31.9	20.8	123.3	75.7
Exploration
Total A\$m	1.5	2.5	6.8	8.2

Notes

1- All revenues shown are net of hedging

2- All financials remain subject to audit confirmation

3- All financials reflect Iluka's 50% Interest in Narama Coal and 100% interest in CRL. (Actual interest in CRL is 50.15% in 2002 and 49% in 2001).

Exploration Results and Highlights

• Drilling in the Murray Basin focussed on tenements in NSW and South Australia.
• Resource models of the Douglas area were finalised for development planning.
• Two Exploration Licences (EL 5951 and 5577) in NSW were purchased from $\bullet$ Consolidated Broken Hill. EL 5951 is adjacent to the Company's prospective Euston area and initial drilling results have been very encouraging with existing mineralisation found to extend several kilometres onto the new tenement.
• Drilling in Western Australia continued to focus on and about the Company's operational sites.
• A Reverse Circulation drilling program at the Tarcoola project in South Australia was completed. The program consisted of six inclined holes totalling 800 metres. The drilling intersected olivine pyroxene granulite and gabbro containing ilmenite and magnetite and the results are being assessed.
• Work on the Atlantic coastal plain in the USA concentrated on areas near existing operations in Florida and Virginia. Additional drilling was also done in south-east Georgia.
• Drilling Activity
• o Perth Basin 12,264 metres
• o Murray Basin $-15,739$ metres
• o Tarcoola, South Australia 800 metres
• o $USA 2,538 metres$
• Tenement Relinquishments
• $o$ E 70/1725 Dandaragan - WA
• o EL 5542 Murray Basin - NSW
• $O$ EL 4081 Murray Basin - VIC
• Tenement applications
• o EL 5951 and EL 5577 Purchased CBH Tenement NSW
• $O$ EL 2037 Pooncarie - NSW

2003 Preliminary Outlook

Demand for the Company's products remains robust despite more volatile and uncertain economic conditions globally and increasingly competitive markets for both high TiO₂ feedstocks and sulphatable ilmenite.

The annual negotiations for titanium minerals contracts are almost complete and based on outcomes to date, it is anticipated that the final result will see essentially all titanium minerals committed for 2003. The prices achieved have been mixed as a consequence of the prevailing market dynamics, but have generally met the Company's expectations.

The outlook for zircon continues to be very positive. Demand for premium quality material is strong, inventories are low and prices are firm. 2003 price negotiations are currently in progress.

On a group basis the Company expects to produce slightly more ilmenite, synthetic rutile and zircon compared with 2002, mainly as a result of higher production levels from the expanded operations in Virginia and a modest increase from the WA operations. Rutile production is expected to decrease compared with 2002, primarily as a result of lower production from Consolidated Rutile Limited's operations during transition from the Ibis to the Enterprise deposit.

Inventories of most products are low and as a consequence sales will be very similar to production levels. On a group basis modest increases in ilmenite and zircon sales volumes are expected, whilst rutile and synthetic rutile sales volumes are expected to decrease. compared with 2002. The most significant change in 2003 will be a 5% to 8% reduction in synthetic rutile sales as the record 2002 sales of 516,000 tonnes were partly underpinned by high inventory levels.

2003 coal production and sales from the Company's 50% interest in the Narama Coal joint venture are expected to be in line with contractual commitments and remain at the same level as 2002.

In terms of its pre-tax earnings outlook for 2003 the Company is targeting modest growth from its continuing operations based on improved margins from additional production volumes of zircon, SR and ilmenite and a contribution from the initial phase of the business improvement program (due to the timing of the various components being reviewed and initiatives being Implemented, the benefits are expected to be progressively realised over the next 12 months).

The Company's 2003 results will however be impacted by an expected change to its tax position. As previously published in the 2001 Annual Report, the Company had significant unbooked deferred tax assets (i.e. tax credits applicable to tax losses and timing differences) of which the majority have been progressively utilised during 2002. As a result, the Australian operations will no longer have a significant tax expense shelter and the Company will need to provide for a tax expense in 2003. A tax expense in the range of 25% to 30% of profit before tax is anticipated in 2003.

Mike Folwell Managing Director

Investor and media enquiries:

Geoff Wedgwood, Group Manager External Affairs 0409 997 256