All images: Iluka Resources
BY: JESSICA CUMMINS
It’s been a year of delivery for Iluka Resources, with completion of its $275 million Cataby mineral sands project edging closer, and expansion plans moving forward across its Jacinth-Ambrosia and Sierra Leonean operations.
PERTH based major mineral sands company Iluka Resources has its hands full with construction works in the final stages at Cataby, and development works progressing on four expansion projects.
The miner finished the first half of the calendar year in a strong position, with net profit after tax of $126 million; underlying group EBITDA up 80 per cent to $279 million compared to the first half of 2017; strong free cash flow of $226 million; and a 21 per cent rise in mineral sands revenue to $607 million as a result of an improving global market.
The results were impressive, given just two years ago the miner posted a net loss of $20.9 million in the first half of 2016.
Iluka Resources managing director Tom O’Leary said the company was pleased with the direction the mineral sands market was now taking, which was having positive flow on effects to its finances.
“In the mineral sands market, we continue to see a strong, and we believe, sustainable price environment across our product suite,” Mr O Leary said at the release of the company’s half-year results in August.
“While our balance sheet is in a strong position, disciplined capital allocation remains foremost in our thinking as we move forward with the execution of the Cataby mine development in WA and the Lanti and Gangama expansions in Sierra Leone, as well as with the definitive feasibility studies at Jacinth-Ambrosia, Sembehun and other projects in Sierra Leone to support production of additional tonnages,” Mr O’Leary said.
“We are also focused on maintaining a sustainable pricing environment for our core products of zircon, rutile and synthetic rutile and have announced a 14 per cent increase in rutile prices for the second half and a 12 per cent increase in the Zircon Reference Price, effective from 1 October 2018 for a six month period.”
To ease potential zircon shortfalls, Iluka was also planning to sell additional zircon in concentrate (ZIC), and has increased zircon production guidance from 300,000t to 330,000t in 2018.
Cataby
Once Cataby comes online, the project is set to add 200,000t of synthetic rutile, 30,000t rutile, and 50,000t of zircon to annual production.
The project, 150km north of Perth, WA, is a chloride ilmenite deposit with an expected mine life of eight years.
Cataby was given the green light back in December 2017, after Iluka had secured offtake agreements for 85 per cent of its synthetic rutile production.
First production was now months away, scheduled to begin in the first half of 2019.
“We’re in the midst of some of the biggest months of the project, but I’m confident we’re on track,” Mr O’Leary said.
Stage one of the 18 month construction program included a 260 person mining village and bulk earthworks such as concreting, sealed roads, and the transport of buildings.
Reassembly of Iluka’s Newman concentrator was also progressing, and construction of mining unit equipment was well advanced.
The heavy mineral concentrate produced at the mine will be split for further processing with ilmenite being converted to synthetic rutile at Capel and rutile and zircon final products processed at Iluka’s Narngulu mineral separation plant in Geraldton.
Jacinth-Ambrosia
Work was also advancing on development plans at Iluka’s Jacinth-Ambrosia operation in South Australia – the world’s largest zircon mine.
The project, which was placed in care and maintenance in April 2016, reopened in December 2017 and has been performing well since.
Iluka has been examining options to “smooth the production profile” at the project to offset the outlook of declining grade over its remaining operating life.
The miner initially contemplated developing a second mining unit and increasing concentrator capacity by 30 per cent, however better than expected production performance since the restart – namely higher grade ore – has led to a change of scope.
Iluka’s revised plan was to develop the Ambrosia deposit in the second half of 2019, rather than in 2022.
In a statement, Iluka said the higher grade ore encountered had resulted in an increase in Heavy Mineral Concentrate (HMC) inventory, which together with the acceleration of the mine move to Ambrosia and impending zircon production from Cataby, would enable zircon production levels to be maintained broadly at previously guided levels “without incurring the capital cost associated with introducing a second mining unit and increasing the concentrator capacity”.
“A Definitive Feasibility Study (DFS) for the Ambrosia mine move is close to completion and Iluka will provide further guidance on capital estimates following the study, with current estimates of ~$60 million,” Iluka stated.
Sierra Rutile
Expansions were on the cards at Iluka’s Sierra Rutile operation in Sierra Leone too.
Iluka entered the African market with its acquisition of London-listed Sierra Rutile in December 2016.
The multi-mine operation comprises the Lanti dredge mine, Lanti mine, Gangama mine and undeveloped Sembehun mine.
Iluka was currently implementing a number of expansion and improvement projects, which included drilling programs to improve the resource and support mine planning; initiatives to improve productivity and product recovery rates; and developing the Lanti deposit to an in pit mining operation, which was completed in December 2017.
Lanti and Ganagama
In December last year, Iluka’s board approved plans to double the capacity at both the Gangama and Lanti operations from 500-600 tonne per hour to between 1000t and 1200t per hour.
The main engineering, procurement and construction (EPC) contract has been awarded and the contractor has mobilised to site with civil construction commencing recently.
Procurement was progressing with orders placed for all long lead items and the earth moving fleet, and commissioning for both dry operations scheduled for mid-2019.
Sembehun mine
In March, Iluka also began a DFS for the Sembehun mine development.
Sembehun was the final phase of the Sierra Rutile expansion, which at the time of acquisition, accounted for 70 per cent of the ore reserves in Sierra Leone.
However, since commencing DFS works, the company said it was becoming clear the PFS undertaken previously by an external engineering firm, had underestimated costs.
“Iluka has been progressing Definitive Feasibility Studies, which we expect to complete by this years end; disappointingly the preliminary estimate indicates a 40 to 60 per cent increase in real terms to the $US300 million total capital cost guided,” Mr O’Leary said.
The majority of the increase is related to the Sembehun development and associated mineral separation plant upgrade.
“As part of the Sembehun DFS and separately the separation plant upgrade DFS, we’re continuing to assess options for reducing capital costs and maximising returns,” he said.
An Environmental and Social Impact Assessment was currently progressing with submission expected in late 2018.
Subject to board approval, early works construction was expected to commence in 2019 with commissioning of the operation planned for 2021, and an expected mine life of 20 years.
Organic Growth
Moving forward, exploration will be a key component of Iluka’s growth platform.
June quarter results outlined expenditure for the first half of the year was $4.4 million.
In the coming quarter, the company will continue drilling at the Pejebu exploration target, which is close to the Lanti mine in Sierra Rutile.
In August, Iluka said the target could potentially add between 180,000 and 275,000 tonnes of in-situ rutile, and could possibly extend existing operations by up to two years.
“Mineral Resource estimation for the Pejebu exploration target and near mine opportunities is expected to be complete in Q4 2018,” it stated.
“Resource development at Sembehun will continue with 75,000 meters of drilling planned through to 2021.
“Both developments may add to Iluka’s production optionality in Sierra Leone.”
Meanwhile, in Australia, the company was set to benefit from a farm-out agreement entered with Western Areas.
Under the terms of the deal, Western Areas has the option to acquire up to a 75 per cent interest in base and precious metals rights, and all additional basement-hosted mineral and rare earth elements across five tenements in the Western Gawler region in South Australia.
Western Areas will need to spend $2.75 million within the first three years to acquire a 51 per cent interest, and will need to spend a further $3 million to earn an additional 24 per cent interest.
As part of the deal, Iluka will retain all rights to mineral sands elements of the tenements.
