Iluka Resources (ASX:ILU) share price slips despite 'excellent' full-year results

Here's how Iluka Resources performed through 2021.

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Key points

  • The Iluka Resources share price slipped 1.5% first thing this morning, opening at $10.82 
  • Its fall followed the release of the company's full year earnings and news of a mineral resource estimate from 2 of its Wimmera heavy metals deposits 
  • Over 2021, the company's underlying net profits surged 108% while its mineral sands revenue increased 57% 

The Iluka Resources Ltd (ASX: ILU) share price is in the red after the company released its earnings for 2021.

At the time of writing, the Iluka Resources share price is $10.94, 0.45% lower than its previous close.

Iluka Resources share price falls as profit surges

While Iluka Resources' underlying NPAT substantially increased in 2021, its reported NPAT dropped from $2.41 billion to $366 million.

That's mainly due to a $2.24 billion payday recorded during 2020 on the demerger of Deterra Royalties Ltd (ASX: DRR). Iluka Resources retained a 20% holding in Deterra.

The company said higher exchange rates between the United States dollar and the Australian dollar impacted its revenue last year.

Still, Iluka Resources experienced increased volumes across all markets.

Global zircon production dropped while the ceramics industry's growth continued.

Iluka sold 355 kilotons of zircon last year – up from 240 kilotons in 2020. During the final quarter of 2021, the company's weighted average zircon price was US$1,590 a tonne – a 23% increase on the final quarter of 2020.

At the same time, demand continued to outstrip supply for high-grade titanium feedstocks.

Iluka Resources sold 513 kilotons of high-grade titanium feedstocks – up from 278 kilotons. 2021 also saw the company report a rutile price of US$1,264 per tonne, a 4% increase on that of 2020.

The company's unit cost of production for the period came to $777 per tonne, 15% less than that of 2020.

Meanwhile, its unit cost of goods sold was $916 per tonne ­– 11% lower than in the prior period. That reflects the company's move to lower-cost products.

What else happened in 2021?

The company also continued to advance its position in rare earths – its Eneabba project in Western Australia and its Wimmera project in Victoria – in 2021.

The company progressed the development of Eneabba in 2021, completing phase 1 and securing an offtake agreement. 

In 2021, Iluka Resources received encouragement from Australian Government ministers to continue pushing to get Eneabba up and running. However, the news saw the Iluka Resources share price slide lower.

Meanwhile, the Wimmera project is the subject of a feasibility study.

Today, the company announced the inaugural mineral resource estimates for 2 of Wimmera's heavy mineral deposits – WIM100 and WIM50.

The WIM100 deposit contains an indicated mineral resource estimate of 340 megatons grading 4.7% heavy minerals for 16 megatons of contained heavy minerals.

It also contains an inferred mineral resource estimate of 100 megatons grading 3.4% heavy minerals for 3.4 megatons of contained heavy minerals – totalling 440 megatons grading 4.4% heavy minerals for 19 megatons of contained heavy minerals.

Meanwhile, the WIM50 deposit contains an inferred mineral resource estimate of 360 megatons grading 4.1% heavy minerals for 15 megatons of contained heavy minerals.

What did management say?

Iluka Resources managing director Tom O'Leary commented on the company's earnings for 2021, saying:

Iluka delivered an excellent result in 2021 underpinned by strong operating performance, increasing demand, and observable supply-side challenges across the mineral sands industry.

In zircon, tile manufacturers in many geographies maintained high levels of demand after rebounding to pre-pandemic levels of production in the first half of the year. This occurred despite increasing challenges from raw material cost inflation, supply chain disruptions and some dampening sentiment from deleveraging in the Chinese property market…

Tightness is also a feature of the high-grade titanium feedstock market, with demand in all regions continuing to outstrip supply…

Ongoing logistics issues due to port fires and other disruptions in South Africa continue to impact industry production.

What's next?

In 2022, the company will be focusing on supplying key accounts and balancing sustainable pricing outcomes with reinvestment in its mineral sands market.

Additionally, it is expecting the first production from the restarted SR1 kiln at its Cataby project to occur in the final quarter of next year, and a final investment decision for its Balranald deposit around the same time.

The company also plans to finalise Wimmera's processing solution and scale-up to inform its economic feasibility.

The feasibility study for Eneabba's phase 3 is expected to be finalised in the first quarter of 2022 with a final investment decision to be made thereafter.

Over 2022 in Australia, Iluka Resources expects to produce 280 kilotons of zircon – 40 kilotons less than in 2021, 65 kilotons of rutile – 2 kilotons less than in 2021, and 230 kilotons of synthetic rutile – 31 kilotons more than in 2021.

It expects its Australian operation's unit cash costs of production to come to $820 per tonne – up from $636 in 2021. While its unit cost of goods sold is predicted to increase from $774 per tonne to $930 per tonne.

Its capital expenditure is expected to increase from $54 million to $220 million.

At Sierra Rutile, the company's predicting it will produce 144 kilotons of rutile – 15 kilotons more. It's also expected to produce 5 kilotons of zircon – a 1 kiloton increase.

It expects it will record unit cash costs of production of US$970 per tonne with capital expenditure of US$30 million.

Looking to the group, its outlook includes cash costs of production to be $660 ­– up from $559.

Additionally, today the company's chair Greg Martin announced his intent to retire from the board at April's annual general meeting.

Martin's seat will be filled by non-executive director, Rob Cole.

Iluka Resources share price snapshot

So far, 2022 has been good to the Iluka Resources share price.

It has gained 5% since the start of this year. It is also 48% higher than it was this time last year.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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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