Sydney - Thursday - April 22: (RWE Aust Business News) -...

Sydney - Thursday - April 22: (RWE Aust Business News) - Demand
for high value mineral sands products recovered in Iluka's (ASX:ILU) main
geographical markets in the March quarter of 2010.
After adjusting supply in 2009 to better match lower short term
demand in the context of the global economic crisis, Iluka has met
increased demand by increasing production, where practicable, and by
supplying from inventory.
Its current tight supply position in zircon and high grade
titanium dioxide reflects both strong demand recovery and a slightly
slower than expected ramp up of Murray Basin rutile production.
Iluka achieved higher March quarter production relative to the
preceding December quarter for zircon (up 31.8 per cent), rutile (up 23.4
per cent) and synthetic rutile (up 1.5 per cent).
Compared with the previous corresponding quarter, which was
before Iluka took steps to curtail production, rutile production is 36.4
per cent higher while zircon production is 38.9 per cent lower and
synthetic rutile production 37.8 per cent lower.
Lower synthetic rutile production reflects Iluka's decisions to
idle two of its synthetic rutile kilns.
Zircon sales in the March quarter exceeded production.
On the basis of sales and orders year-to-date, Iluka's 2010
opening zircon inventories are expected to be reduced to minimal levels
by mid year.
As Iluka has advised previously, a large proportion of first half
zircon sales are being drawn from lower margin inventory and from
residual production from the mid west of Western Australia.
In response to higher demand, full production has recommenced at
the Virginia operations following production cuts implemented in the
second half of 2009.
Production from Murray Basin Stage 2 and Jacinth-Ambrosia will
increase in the second quarter and is expected to be at planned levels in
the second half of the year.
Production of rutile and synthetic rutile in the March quarter
exceeded underlying sales levels, due mainly to shipment timing.
Given a slower than targeted ramp up of Murray Basin rutile in
the March quarter, and the absence of any significant levels of rutile or
synthetic rutile inventories at the beginning of the year, Iluka's
potential high grade titanium dioxide sales volumes are currently
constrained by production.
Production from the mid Western Australia mining operations will
be replaced by higher margin production from Jacinth-Ambrosia in South
Australia.
Iluka expects that approximately $5 million of the $10m-15
million 2010 restructuring costs announced at the time of the 2009
results will be incurred.
Remaining expected restructuring costs for 2010 are associated
with the probable idling of synthetic rutile kiln 3 in the second half of
2010.
Zircon demand across all of Iluka's main markets has rebounded
strongly.
Iluka believes that first quarter sales reflect underlying
consumption, as evidenced by a widespread customer requirement for
increased and early delivery of product to meet rising end user demand.
Rutile and synthetic rutile demand increased during the first
quarter, reflecting buoyant demand from the United States and Europe for
high grade feedstocks as some customers undertake initial restocking.
While Iluka sales are below budget for the quarter, with an
attendant impact on revenues, this is a timing difference which has
already, in large part, been made up in the second quarter.
Iluka expects sales to remain constrained by production for the
remainder of 2010 and into 2011.
It is evident that the market for high grade titanium dioxide is
tight and it is Iluka's view that prices for uncontracted volumes should,
as circumstances allow, reflect these market conditions.
ENDS rx