Iluka facing sales hit

Mineral sands producer Iluka Resources is likely to face lower sales of synthetic rutile in 2020, after disclosing that two customers had failed to take up their agreed volumes.

Iluka told the market it might not meet all of the 175,000 tonnes of synthetic rutile subject to take-or-pay sales in 2020.

The company said it had issued a notice of default to one of its customers that failed to take its agreed 20,000t scheduled to ship in May.

The customer, which has only taken 17,000t out of its contracted 80,000t of synthetic rutile for the year, subsequently issued a notice to Iluka, referencing a range of matters.

Iluka said it had disputed the validity of the notice, but was “continuing to endeavor to negotiate an appropriate commercial outcome”.

Further, Iluka said it has been notified that another customer may not take its contracted amount of synthetic rutile for at least three months.

The customer said in a notice to Iluka that a circumstance had occurred, which could impact the scheduled September shipment of 12,000t.

Iluka has sold 78,000t of synthetic rutile this year, representing 55 per cent of its scheduled offtake volumes for 2020.

To put this in context, the company sold 207,000t of synthetic rutile in 2019, while total rutile and synthetic rutile sales reached 407,000t, generating revenue of $583 million.

Iluka opened 3 per cent lower on the ASX this morning. Its shares were down 0.8 per cent at 12:45pm AEST to trade at $8.42.