Iluka Resources Limited

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1 Iluka Resources Limited Citi Titanium Feedstock US Conference Call 21 March 2011 Dr Victor Hugo, GM Product & Technical Development Dr Robert Porter, GM Investor Relations

2 Disclaimer Forward Looking Statements This presentation contains forward-looking statements that are subject to risk factors associated with exploring for, developing, mining, processing and sale of minerals. Forward-looking statements include those containing such words as anticipate, estimates, should, will, expects, plans or similar expressions. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a range of variables and changes in underlying assumptions which could cause actual results or trends to differ materially. These include, but are not limited to: price and currency fluctuations, actual supply versus demand, production results, reserve and resource estimates, loss of market, industry competition, environmental risks, physical risks, legislative and regulatory developments, economic and financial market conditions in various countries and regions, political risks, project delay or advancement, approvals and cost estimates. Specific Risks & Sensitivities The information contained in this presentation is subject to, but not exclusively to, the following: Changes in exchange rate assumptions Changes in product pricing assumptions Major changes in mine plans and/or resources Changes in equipment life or capability Emergence of previously underestimated technical challenges Environmental or social pressures which impact license to operate All currency referred to is Australian denominated unless otherwise indicated. Commentary in relation to inducement analysis contains indicative inducement pricing levels. Actual pricing outcomes may vary materially from the prices indicated. Iluka makes no undertaking or warranty to update any of the information contained in this presentation. 2

3 Iluka Resources Overview Market capitalisation Industry Sector Objective ~A$4.6 billion (418.7 million shares on issue) Materials (minerals sands exploration, project development, operations and marketing; iron ore royalty deriving from BHP Billiton s Mining Area C, Western Australia To create and deliver shareholder value Recent Deliverables Capital efficient transformation of the asset base - recent delivery of two new globally significant, high margin production sources - Murray Basin (full production mid 2010) and Jacinth-Ambrosia (full production mid 2010) Supply discipline through global economic crisis - especially as market leader in zircon Marketing and pricing outcomes in zircon and high grade titanium dioxide markets Investment Proposition: Improved Financial Characteristics ( vs ) Significantly lower capital expenditure cash flow generation and balance sheet flexibility Higher production / sales of higher value products (rutile and zircon) Higher EBITDA / revenue margin and return on capital Increased contribution from low risk Mining Area C royalty stream 3

4 Titanium Dioxide Feedstock Market

5 Titanium Dioxide End Use Demand Titanium Market Segments ~6,050kt (2008) Pigment End Use (2009) Metal, 4% Other, 6% Fibres, 2% Ink, 3% Specialties, 3% Rubber, 2% Food / Pharmac., 1% Paper, 9% Plastics, 23% Paint, 57% Pigment, 90% Iluka s Ti feedstock sales are roughly in line with market segment demand Source: Iluka and TZMI 5

6 Titanium Demand Overview Pigment is largest end use market of titanium feedstocks. Historically, pigment per capita demand increases with living standards, measured by GDP per capita. Impact of China has accelerated global pigment demand growth China 2 nd largest global pigment market. China has domestic titanium sources but is reliant on imports for high grade pigment, which accounts for ~30% of Chinese demand. high grade pigments needed for automotive, whitegoods and other specialty applications. China imports pigment from North America, Taiwan, Australia and Europe. Titanium metal market displays favourable dynamics with applications in aeronautics and other specialty manufactured goods. titanium metal properties include strong and lightweight. Titanium Market Characteristics End use industries Pigment (91%), Metal (4%), Other (5%) (2009) Current demand (kt) ~5,900kt ( average) Historical demand CAGR 3% p.a. ( ) - China 15% p.a., Rest of World 2% p.a. Forecast pigment demand CAGR DuPont (Sept. 09) = 5 to 10% (over ) TZMI (Jun. 10) = 5.1% (over ) Historical Price CAGR (%) 3.8% ( ) (Average Chl. Ilm, Rutile, SR, Chl. Slag) 6

7 TiO 2 Pigment Production Process Chloride Process (55% of Capacity) Ti Feedstock Chlorination Distillation TiCl 4 Oxygenation Finishing Unique Market ~ 10% Cl 2 +Coke Sulphate Process (45% of Capacity) Waste Ti Metal Common Market ~ 80% Ti Feedstock Acid Digestion Purification TiOH 4 Calcination Finishing Unique Market ~ 10% H 2 SO 4 Waste

8 Titanium Feedstock Market Segmentation Titanium Feedstock (TiO 2 grade) High Grade Chloride Sulfate Feedstocks Chloride Feedstocks 55% Sulfate Ilmenite Sulfate Ilmenite Chinese Moma Chloride Ilmenite Iluka Moma Ukraine 60% Chloride Ilmenite * Leucoxene and HyTi Iluka Bemax 70% 80% Sulfate Slag Sulfate Slag QIT Sorel Slag Chinese Chloride Slag Chloride Slag RBM Namakwa 85% 90% SREP 91% Slag Iluka QMM Rutile/HyTi Iluka SR Std & Prem Iluka TiWest UGS QIT 95% SRL TiO 2 Grade Note: Producer examples only (not necessarily exhaustive). * Leucoxene is included with ilmenite as these generally feed the same pigment plants and is a very small part of the chloride market. 8

9 Titanium Pigment Production Value of High TiO 2 Feedstocks Less waste generated from non -TiO 2 impurities Less chlorine and coke costs per tonne of TiO 2 Lower freight costs per tonne of TiO 2 Lower levels of deleterious impurities (e.g. Mn, Mg, Ca) which impact on process Able to debottleneck chloride plants without capital expenditure on capacity Chlorinators often the bottleneck Value in use calculation important to pricing of feedstocks 9

10 Titanium Demand Pigment Demand Forecasts Global GDP per Capita and Pigment per Capita Global Pigment Demand 1.2 Pigment (kg) / Capita 8000 Pigment kt GDP / Capita (US$) % CAGR % CAGR Historically, pigment per capita demand increases with living standards, measured by GDP per capita. Impact of China has accelerated global pigment demand growth. Industry Pigment Forecasts Period CAGR DuPont (September 2009) to 10% TZMI (June 2010) % 10 Source: IMF, DuPont, TZMI and Iluka

Chloride Titanium Supply & Demand Demand 2012-20 3.

11 Chloride Titanium Supply & Demand Demand % CAGR Pigment producers typically require blend of feedstocks Higher titanium feedstocks (e.g. rutile and synthetic rutile) typically provide greater production efficiencies, less waste Substitutability between products not straightforward - limit to technical switching to lower TiO 2 feedstocks) Iluka advantaged vis a vis rutile and synthetic rutile position - both products in tight supply Source: Iluka 11

12 Titanium Feedstock Market Conditions 12

13 Titanium Market Iluka has committed over A$600m of shareholder funds for two new world class operations - Jacinth-Ambrosia (zircon); Murray Basin Stage 2 (zircon and rutile) Historical returns inadequate; higher returns necessary to generate shareholder value and support further investment in the industry Iluka has idled synthetic rutile capacity given inadequate returns 2 of 4 kilns idled over 2008/2009, reducing SR capacity by ~300k tonnes 1 kiln operation from mid ~ 220kt of SR production Re-activation of an additional kiln in 2012 is under consideration Re-activation of further capacity dependent on pricing outcomes 13

14 Titanium Market The high grade titanium market has tightened significantly in 2010 and into 2011 Low stock position for all high grade feedstock Evident tightness of some products - influenced by lack of availability of new material production sources (e.g rutile) - delays in project ramp up Customers are very concerned over availability of high grade feedstocks Significant pigment price increases reported globally Favourable factors for higher than historical titanium prices - tight market supply conditions - recovery in pigment demand - China demand for imported chloride pigment - recovery in niche markets (including titanium sponge/metal) - emerging unconstrained pricing environment 14

15 New Titanium Market Conditions End of Cap and Collar Contractual Arrangements Vast majority of Iluka s legacy titanium ore contracts have had cap and collar pricing Volume commitments with pricing increases/decreases constrained Increases linked to CPI or low percentage increases typically low single digits All Iluka rutile legacy cap and collar contracts concluded in December 2010 Only 1 legacy SR contract remains until December

16 Iluka Approach to Titanium Dioxide Contracting Volume requirements of customers not able to be met Volume commitments on all products in 2011 to be for a maximum of 1 year Iluka achieved weighted average 30 40% increase for rutile and SR prices 1 st half of 2011 Pricing for 2 nd half to be determined in May/June Iluka working with customers in constrained supply environment 16

Zircon Market Dynamics Zircon Pricing and Contractual Arrangements Average zircon price reflects quality differentials Prices exited 2010 at greater than US$1000/t FOB 20% price increase for 1 st

17 Zircon Market Dynamics Zircon Pricing and Contractual Arrangements Average zircon price reflects quality differentials Prices exited 2010 at greater than US$1000/t FOB 20% price increase for 1 st Quarter 2011 Iluka engaging with customers re 2 nd Quarter arrangements Continued tight supply conditions expected Further upward price momentum Internet Online Sales site now auction or sale Currently both zircon and rutile auction on site 17

2000 TO 2015 AN INDUSTRY TRANSFORMED:

2000 TO 2015 AN INDUSTRY TRANSFORMED: 2 TO 215 AN INDUSTRY TRANSFORMED: WHAT HAS CHANGED AND WHAT MIGHT HAPPEN NEXT? Bruce Griffin TZMI.COM About TZMI TZMI is a global, independent consulting and publishing company with offices in Australia,