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#Company Reports / Reviews
Added 2 weeks ago

28-July-2020:  Quarterly Review to 30 June 2020

[I hold ILU shares]

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#Company Presentations
Added 3 months ago

12-May-2020:  Presentation to BoAML Conference

That's a link to the presentation that Tom O'Leary, MD of ILU, will be giving at the Bank of America Merrill Lynch 2020 Global Metals, Mining and Steel Conference - on Thursday (14th May 2020).

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#2020 AGM Address
Last edited 4 months ago

09-Apr-2020:  2020 AGM - Chairman's and Managing Director's Address


  • Iluka has, to date, maintained operational continuity across the company’s sites. Further, the company’s supply chains remain operational at this time and product is being moved as planned.   
  • Iluka’s response to the pandemic is becoming more ‘business as usual’ in Australia: infection risk minimisation and business continuity efforts now focussed on continuous improvement rather than implementing new measures. Given shifting emphasis of the response to the pandemic, Iluka’s attention is being directed at working through a range of potential scenarios considering longer term settings. 
  • Sierra Leone has far fewer reported cases (less than 10) of COVID-19 and the pandemic is at an earlier stage there than in other countries. While Sierra Rutile remains operational, the country has closed its borders.   
  • In the company’s 2019 Full Year Results on 20 February, Iluka foreshadowed potential impacts of COVID-19 on global demand and its markets. Given continued uncertainty in relation to the impacts and duration of the pandemic, the company has today withdrawn its 2020 guidance. 
  • Intention remains to undertake the demerger of the royalty business in 2020. 
  • There is no further update to the timeline for the demerger at this stage, given the impact of travel and social distancing restrictions currently in place around the world on the practicalities of executing a demerger process.
  • The demerger will proceed when it is practicable to do so, and the company will update the market in due course.
  • Seasonally low period for zircon sales has been exacerbated by widespread factory shutdowns that occurred in China in January and February.
  • Pace at which factories re-open and the Chinese economy normalises will be important influences on zircon sales for the remainder of the year, as will impacts on downstream zircon customers located in Europe, including Italy and Spain, where the pandemic has hit especially hard. 
  • The take-or-pay offtake agreements in place for Iluka’s high grade titanium feedstock production (rutile and synthetic rutile) provide a high degree of revenue certainty for sales of the company’s titanium dioxide feedstocks on link above for more...

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#FY2019 FY Results
Added 6 months ago

20-Feb-2020:  Iluka's financial year ends on December 31, and they've just released the following announcements, including their Full Year Results for FY2019:

Iluka Full Year Results to 31 December 2019

Annual Report 2019 including Appendix 4E

Iluka 2019 Full Year Results Presentation Slide Pack

Intention to demerger Iluka's royalty business

2019 Corporate Governance Statement and Appendix 4G

Community disruption at Sierra Rutile Operations

The results aren't bad, however the market appears to be most enthusiastic about the announcement of Iluka's intention to demerge their MAC (BHP's Mining Area "C") Royalty into a new listed business to be known as RoyaltyCo. [link above]  In the first half hour of trading today, Iluka has been up by between +9% and +10% (in that range, or above it) for most of that time.  This outcome was always a strong possibility, but there had been some scepticism concerning whether Iluka's management would actually take this step, particularly considering that various activist investors have been pushing for such an outcome for years, with zero success until today.  Previous CEOs (/MDs) at Iluka had been against a demerger (aka "spin-out") or divestment (sale) of the MAC Royalty because they believed that the passive income stream that it provided (that was not aligned with the drivers of their main mineral sands business) gave them a competitive advantage.  For instance, when mineral sands prices were down and Iluka chose to idle or reduce production as a result of those lower prices for what they produced, they always had that passive income coming in from BHP for every tonne of iron ore produced in Mining Area "C" which helped fund Iluka's investments through the mineral sands cycle and provided them with vital cashflow.  The counter-argument was around unlocking value for shareholders - that the ILU SP never really reflected the true value of BOTH the mineral sands business AND the MAC Royalty.  It looked for many years like the various attempts to break up the cozy relationship that SOL (Soul Patt's) and BKW (Brickworks) enjoy - with their large shareholdings in each other that precludes any takeover of either company by anyone else - i.e. that the status quo would continue due to management's resistance to any change.  The Iluka/MAC thing is totally different of course, but it just looked like another doomed attempt by activist investors to try to get a better outcome for shareholders while the company management held the opposite view - that the status quo was the most advantageous arrangement for the company.  In this case, Iluka's new management have had a change of heart and are willing to now go in a new direction, and that is certainly positive for existing ILU shareholders.  The income that is currently being derived from the MAC Royalty is going to materially increase when BHP's huge new "South Flank" project comes online next year because South Flank lies within Mining Area "C".

Disclosure:  I hold ILU shares.


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#ILU to demerge MAC Royalty
Last edited 6 months ago

20-Feb-2020:  Along with their FY2019 Full Year Results, Iluka (ASX:ILU) have this morning announced that they intend to demerge their MAC (Mining Area "C") Royalty into a separate listed company to unlock value for shareholders.  ILU is already up over +10% in early trade (in the first 10 minutes of the day) on the back of this announcement:

Intention to demerger Iluka's royalty business

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#Company Reports / Reviews
Added 6 months ago

29-Jan-2020:  Quarterly Review 31 December 2019

Things I found interesting:

Cash is building:  

Net cash as at 31 December 2019 of $43 million (31 December 2018: net cash $2 million), reflecting free cash flow of $140 million in 2019 while investing $198 million in capital expenditure. 

Review of Corporate and Capital Structure of Mineral Sands Operations and Mining Area C Royalty

As previously announced on 31 October 2019, Iluka has commenced a formal review (the Review) of the corporate and capital structure of Iluka’s two principal businesses – mineral sands operations and the Mining Area C royalty (MAC).   

Work continues on the Review, and as previously stated the company expects to provide an update on the Review at the announcement of the Full Year Results. 

2019 Full Year Results

Iluka is scheduled to release its 2019 Full Year Results on 20 February 2020.  An investment market conference call will take place on the day. 

Dial-in details for the conference call will be on the Events page of Iluka’s website in due course: 

. . . . . .

The value of the MAC (Mining Area C) royalty will increase materially when BHP's new South Flank mine comes online next year, because Iluka is entitled to a royalty on every tonne of iron ore produced by South Flank (which falls within Area C).  ILU are currently looking at a variety of options that include (but are not limited to):

  1. Divesting (selling) the royalty, which would likely result in a large special dividend to Iluka shareholders;
  2. Spinning off the royalty into another seperate listed business - which would result in Iluka shareholders being given shares in that new business, which they could sell or keep as they wish; or
  3. Keeping the royalty as a passive source of income that is entirely independent from their mineral sands business.

Option 3 has been Iluka's preferred option to date, but they're now at least prepared to entertain the idea of spinning the royalty out or selling it.  I suspect that may have been at least partly as a result of some activist investors (such as Sandon Capital - SNC) who have been pushing for a divestment or spin-off because they believe that the Iluka share price doesn't adequately reflect the value of the MAC royalty - but really just covers the Iluka mineral sands business.

South Flank construction began in July 2018 with first production of iron ore anticipated in 2021. The project is expected to produce ore for more than 25 years.

What is the MAC Royalty (that Iluka own) worth?  Joseph Kim from Montgomery Investment Management had a go at working it out in July 2019 - see here: - and his estimates vary from $1.5 billion up to $6 billion.  He believes it is likely to be between $1.5 billion and $2.2 billion - using a DCF (discounted cash flow) approach.  Iluka (at $9.54) has a current market capitisation (market cap) of just over $4 billion. 

I suspect that Gabriel Radzyminski at SNC is correct (along with others) in saying that the Iluka SP does NOT adequately reflect the combined value of both Iluka's Mineral Sands business AND the MAC Royalty.

Roll on Feb 20th !

Disclosure:  I hold ILU and SNC shares.

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#Company Reports / Reviews
Added 3 months ago
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#Company Reports / Reviews
Last edited 7 months ago
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