24/03/2008 - 14:38

Iluka restructures for expansion

24/03/2008 - 14:38


Save articles for future reference.

Iluka Resources Ltd's near $1 billion capital restructure despite tough capital markets hails a much needed positive for a company that has endured two tough years in the wilderness.

Iluka Resources Ltd's near $1 billion capital restructure despite tough capital markets hails a much needed positive for a company that has endured two tough years in the wilderness.
The company this month unveiled a $853 million capital restructure, made up of $353 million in equity and $500 million in debt, to underpin the company's next phase of future growth.
The funding will be directed towards two projects - Jacinth-Ambrosia in South Australia and an expansion to the Murray Basin operation in Victoria - which have been hailed the "future" of the company.
The restructure is somewhat of a coup for Iluka, which have managed to raise the capital amid the backdrop of a global credit crisis and its own corporate and operational woes.
When new managing director David Robb stepped into the top job in October 2006, he inherited a company with an ailing share price, ageing mines in Western Australia and a stoush with a contractor at its emerging Murray Basin project, one of the company's new growth initiatives.
But Iluka is no one-trick pony.
The company is, by a clear margin, the world's largest producer of zircon - used primarily in the manufacture of ceramics - and the second largest producer of titanium dioxide feedstock.
Its share register also boasts mining entrepreneur Robert Champion de Crespigny and Australia's second richest person James Packer, who bought into the company in 2005 through the Kolsen consortium.
Investors, however, have watched Iluka's price slowly sink from a high of close to $9.00 in late 2005 to a low of $3.32 last month.
Iluka and Mr Robb are putting in place measures to arrest the sliding share price - streamlining the group at a corporate and operational level - to position the company for an expected boon from China's growth story.
China's demand for commodities is no secret. Rising commodity prices over the past seven years, underpinned by China's unprecedented industrialisation has underpinned huge profits for many mining companies.
But Mr Robb has predicted the China story is starting to swing in the favour of Iluka.
"We are, in lots of ways many would argue, a late cycle product," he told analysts in a conference call last week.
"As an economy's development moves from being largely infrastructure and export driven to being more domestic demand driven, the trend we see in China today, that is the kind of demand that drives the demand for the products we produce."
Iluka and its Australian-based operations is well placed geographically to take advantage of the emerging markets in Asia and far from the power problems that are plaguing South African zircon producers.
A national power shortage in South Africa has forced the state-owned power utility, Eskom Holdings Ltd, to cut electricity supply to some of the biggest miners, including Exxaro, the world's second largest producer of zircon.
"The growth is coming in emerging Asian economies and shifting therefore from traditional markets of Europe and North America," Mr Robb said.
"We are already the largest exporter of zircon to China and yet we are underweight in that market relative to our global share, so there is plenty of head room for us to grow further there.
"I think that quite frankly it is just that my marketing team have preferred to go to Bologna rather than Beijing, it is a nicer trip, but we're addressing that," he quipped.


Subscription Options