Iluka Resources has diminished the value and written down the deferred tax assets of its Sierra Leone-based subsidiary Sierra Rutile (SRL).
The company will be hit by an impairment charge of $US290 million ($423 million) to the carrying value of SRL assets and as a consequence, its assets have been reduced to $US50 million.
Despite ramping up rutile production at SRL during the second half of 2019, its overall operational performance has been less than the original investment case.
Iluka acquired the West African company in December 2016 for $375 million and has generated $US71 million in operating cash flow since the acquisition.
Following an impairment assessment, Iluka has a planned outlook for SRL’s future, including a 2020 rutile production guidance of 170,000 tonnes, production cash costs of $US125 million.
It is also planning a range of operational initiatives to improve SRL’s productivity, including maintenance to increase mining and plant performance and assessment of potential extensions to current mining areas.
One of the areas it is focussing on is the Sembehan deposit, which is one of the largest and best quality rutile deposits in the world.
The company intends to increase capacity at Sembehan from 175,000 tonnes per annum to 240,000 tonnes per annum and is awaiting approval to extend infrastructure at the site.
Iluka managing director Tom O’Leary said when the company acquired SRL, it was to give it access to a 20-year plus rutile asset and while results have been disappointing, the company is determined to make improvements.
“While production from SRL has been improving over 2019, the acquisition has not lived up to the investment case,” O’Leary said.
“This is a disappointing outcome. We remain focussed on continuing to improve SRL’s existing operations, in relation to throughput, reliability, production and cost. The impairment does not detract from the potential we see in this world class deposit.”
The company expects to provide an update on the Sembehun development by mid 2020.