The Iluka Resources (ASX:ILU) share price is falling today. Here’s why

The Iluka Resources share price is sliding after news the company’s subsidiary is taking a half-year break. Here’s the lowdown.

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The Iluka Resources Limited (ASX: ILU) share price is on the slide today. This comes after news was released that a subsidiary of the company is taking a 6-month break from its operations due to business challenges. At the time of writing, the Iluka Resources share price is trading for $7.64, down 6.37%.

The mineral sands producer’s subsidiary, Sierra Rutile, plans to begin a 6-month break on 19 November 2021.

Sierra Rutile is wholly owned by Iluka. It produces rutile, ilmenite, and zircon in the West African nation of Sierra Leone.

Let’s take a closer look at the news that could drive the Iluka share price this morning.

Breathing space

According to Iluka, Sierra Rutile has been struggling with business challenges recently. Particularly, since the beginning of the COVID-19 pandemic.

Sierra Rutile plans to use the 6-month pause to evaluate whether it can continue its operations in its current mining area.

As well as announcing Sierra Rutile’s pause, Iluka also stated its subsidiary has retracted its production outlook of 145,000 tonnes of rutile over 2021.

During its operational pause Sierra Rutile will be working to reduce its cost base. It hopes that doing so will make it profitable again.

Sierra Rutile also plans to use the break to attract new third party investors who can help it continue its current developments.

If it can reduce its cost base and find new investors, Sierra Rutile says it might be able to avoid or lift the pause on its mining operations.

Currently, Sierra Rutile is at the feasibility stage of developing the Sembehun group of deposits – located between 20 to 30 kilometres from its current operations.

According to Iluka’s announcement, collectively, the Sembehan deposits are the world’s largest and best quality natural rutile resource.

Furthermore, Sierra Rutile has notified the Sierra Leone Government of its plan to pause its operations. Iluka states its subsidiary will also be working closely with the Government to avoid or minimise its operational pause.

Iluka Resources share price snapshot

The Ilkua Resources share price has been performing well on the ASX lately.

Currently, the Iluka Resources share price is up 23.8% year to date. It’s also gained 96.6% since this time last year.

The company has a market capitalisation of around $3.4 billion, with approximately 422 million shares outstanding.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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