The Iluka Resources Ltd (ASX: ILU) share price is being hit hard on Wednesday.
In morning trade, the $2.3 billion ASX 200 mining stock is down 9% to $4.84.
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Why is this ASX 200 mining stock crashing?
This mineral sands company's shares have come under pressure today after it released its fourth quarter update.
According to the release, production of zircon/rutile/synthetic rutile (Z/R/SR) in the fourth quarter of FY 2024 was 129kt. This comprises 45kt of zircon sand, 15kt of zircon-in-concentrate (ZIC), and 58kt of synthetic rutile.
This meant that Z/R/SR production was 496kt for FY 2024. While this is down 22.4% year on year, it exceeds the guidance issued in February of 455kt. This outperformance was due to increased ZIC and a strong synthetic rutile kiln performance.
Sales and earnings
Z/R/SR sales in the fourth quarter of FY 2024 were 136kt. Management advised that this reflects subdued demand in key markets and seasonality. Full year Z/R/SR sales were 475.2kt, down 3.8% on FY 2023's sales volumes.
This ultimately led to an 8.9% decline in mineral sands revenue to $1,128 million for the 12 months.
And with the ASX 200 mining stock revealing a 3% increase in its total cash cost of production, its earnings will be even lower than revenue in FY 2024.
Iluka expects FY 2024 group earnings before interest and tax (EBIT), excluding the Deterra contribution, to be in the range of $330 million to $340 million. This will be down significantly on the group EBIT of $492.3 million recorded in FY 2023. Though, this includes a $27.3 million contribution from Deterra.
Outlook
Management is guiding to relatively flat production and higher costs in FY 2025.
The ASX 200 mining stock expects total Z/R/SR production of 495kt and unit cash costs of production of $1,370 per tonne.
Commenting on its outlook, management said:
Iluka's production outlook for 2025 assumes only the larger synthetic rutile kiln, SR2, is in operation. The company has an ability to increase synthetic rutile production by restarting the smaller swing kiln, SR1, to produce an additional 110ktpa of synthetic rutile, should market conditions warrant.
Increase in cash costs of production from 2024 predominantly reflects an additional $25 million included for production of HMC from Balranald in H2 2025, which will be capitalised to inventory in 2025. There are no finished goods produced in 2025 from Balranald, resulting in a distortion to the unit cash costs of production metric.
All in all, it looks likely to be another tough 12 months for the miner and its shareholders.
