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Why the Iluka Resources share price crashed 9% lower today

One of the worst performers on the S&P/ASX 200 index on Wednesday has been the Iluka Resources Limited (ASX: ILU) share price.

In afternoon trade the mineral sands producer’s shares are down a sizeable 9% to $10.10.

Why is the Iluka share price crashing lower today?

Investors have been hitting the sell button en masse today following the release of the company’s first half update.

Although Iluka’s production improved in the second quarter, its half year production was still down significantly compared to the prior corresponding period. Total mineral sands production was down 20.2% to 448.5kt during the half, largely due to a sharp drop in ilmenite and synthetic rutile production.

The company also reported a material decline in zircon/rutile/synthetic rutile (Z/R/SR) sales volume during the half.  

Management advised that volumes were down across each major product. Noting that zircon sales were affected by trade and geopolitical tensions impacting sentiment in key markets, whereas rutile and synthetic rutile sales were lower due to the available production.

Another couple of disappointing figures that caught my eye were Iluka’s revenue and cash costs. Mineral sands revenue fell 10.1% during the period due to the lower sales volumes and cash costs increased by 12%. This is arguably the worst possible combination for a mining company.

And finally, the company’s balance sheet deteriorated during the half. Iluka finished the period with net debt of $142 million, compared to $2 million net cash at the end of December.

All in all, this first half performance just doesn’t appear to have lived up to expectations after a stellar share price rise since the start of the year. Even after today’s decline, the company’s shares are up 40% this year.

Also sinking lower today have been the Kogan.com Ltd (ASX: KGN) share price and the Regis Resources Limited (ASX: RRL) share price. These shares are down 5% and 10%, respectively, in afternoon trade after brokers cut their price targets following recent updates.

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Motley Fool contributor James Mickleboro 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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