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Iluka Resources share price could fall on low quarterly production numbers

The Iluka Resources Limited (ASX: ILU) share price could be one of the early fallers in this morning’s trade after reporting first half 2019 revenue per tonne up 30% year-on-year (YoY) but a mixed result overall in its latest quarterly update.

What did Iluka announce to the market?

In its before-market quarterly review, Iluka provided an update on several key highlights including the following:

  • The company’s $270 million Cataby project has been commissioned and first production of heavy mineral concentrate achieved during the period.
  • Iluka’s June quarter zircon/rutile/synthetic rutile (Z/RISR) production was up 10% quarter-on-quarter (QoQ) to 169kt as the company returns to full capacity following a major maintenance outage during the March quarter.
  • Iluka reported first half 2019 revenue per tonne up 30% from H1 2018 with a 19% higher achieved zircon price and a 22% higher achieved rutile price during the half.
  • First half Z/RISR sales of 302kt (H1 2018: 439kt) as volumes fell across each major product
  • Iluka reported that zircon sales were affected by trade and geopolitical tensions impacting sentiment in key markets, while rutile and synthetic rutile sales fell due to available production and a tightening of market conditions.
  • On the balance sheet side, Iluka reported net debt of $142 million as at 30 June 2019, compared to $2 million net cash as at 31 December, while free cash flow came in at $65 million.
  • The company also formally entered into a strategic partnership with International Finance Corporation (IFC) in June 2019 while early works at Sierra Rutile have been delayed beyond 2019 to revisit and broaden optimisation studies at the site.

In terms of production, Iluka reported zircon production 0.6% higher, year to date (YTD), and rutile production down 2.4%% YTD. Synthetic rutile experienced the biggest shift of the company’s key commodities, with production falling 24.2% YTD compared to June 2018.

Mineral sands revenue fell 10.1% YTD compared to June 2018 figures while total cash costs of production rose by 12.0; however, Iluka still posted revenue per tonne of Z/RISR sold up 30.1%, compared to last year.

How has the Iluka share price performed in 2019?

While we wait and see the market’s reaction to the mixed quarterly result, Iluka’s share price has managed to climb 52.6% higher so far this year to significantly outperform the S&P/ASX 200 (INDEXASX: XJO) index.

While many of the ASX’s biggest mining stocks have seen their share prices rise amid a commodities rebound, Iluka has continued to outperform following decent half-year results and could be set to do the same again, come the August reporting season.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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