Iluka: ahead of the pack

Mineral sands miner Iluka Resources has bucked the industry trend of struggling to stay afloat, instead using the current financial crisis as a means to increase production.

Mineral sands miner Iluka Resources has bucked the industry trend of struggling to stay afloat, instead using the current financial crisis as a means to increase production.

Iluka is the world’s largest producer of zircon, an ingredient in ceramics, and the price of its main product has risen from about $US750 a tonne to $US900 a tonne at a time when the Australian dollar has weakened to the company’s benefit.

The miner conducted a $353 million capital raising in April, giving it enough funding to complete its key growth projects in the Murray Basin in Victoria and the Eucla Basin in South Australia.

Iluka issued the new shares at $2.55, and its shares closed 19c higher at $4.30 on Friday, meaning it has significantly outperformed the rest of the mining sector in recent months. It has nearly universal “buy” recommendations on the stock.

In a time of falling metalliferous prices, Zircon is one of few commodities to remain in deficit, due to lowering production levels form South Africa and Indonesia.

Iluka this year drew on its inventory to ease the shortage, but now no longer has significant stockpiles of the product.

Zircon is generally priced on an annual basis under long-term supply agreements with big customers. But Iluka has started selling to smaller customers in emerging markets such as China in containers.

The company’s managing director David Robb said the credit crunch meant smaller customers were finding it harder and more expensive to obtain letters of credit, but Iluka was working around this with direct payments.

Robb said Iluka would consider acquisitions and expanding beyond mineral sands if it would improve shareholder returns, but was unlikely to move to full control of its listed subsidiary Consolidated Rutile.

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