The March quarter is always a tough one for Iluka, with the Chinese New Year holiday depressing zircon demand, but COVID-19 meant its customers have been slow to return, with only around 50-60% of normal demand from Chinese buyers and flat demand from key ceramics customers in Spain and Italy - all have been coronavirus hotspots.

 

Zircon sales were off 62% year-on-year for the quarter and production of zircon, rutile and synthetic rutile was down 16% from the December quarter at 153,000 tonnes.

 

In response, Iluka has decided to scale back the Narngulu mineral separation plant to reduce zircon production.

 

If Narngulu remains at current levels zircon production for the year would fall from 280,000t to 170,000t.

 

"These are uncertain times, and this is not the time to be adventurous in making predictions," managing director Tom O'Leary said.

 

Iluka withdrew its 2020 guidance in February.

 

Operationally, the Jacinth-Ambrosia mine in South Australia operated at full capacity over the quarter producing 75,000t of heavy mineral concentrate, while in WA the Cataby operation improved throughput rates to produce 115,000t of HMC.

 

Iluka retains a high degree of revenue certainty due to take-or-pay contracts covering most of its titanium dioxide, rutile and synthetic rutile production - which combined delivered around 70% of its previous production guidance.

 

Titanium dioxide sales were down 31% to 98,000t, in line with expectations.

 

While its customers are exercising high levels of caution, O'Leary said they continue to operate at capacity, and several have reported concerns over potential feedstock supply disruptions from other mineral sands producers. 

 

The new Eneabba phase one development was a "shining light" during the quarter, and subsequently started production ahead of schedule on April 8, extracting and processing a strategic stockpile rich in rare earth-rich monazite and zircon. First sales are expected next quarter. 

 

Sierra Leone's rutile production fell from 44,000t to 36,000t, with production impacted by planned downtime, mining targeting lower grade blocks, and the impact of COVID-19 disruptions, which have impacted its ability to maintain specialised workers typically provided by expatriate workers.

 

Only around 63% of the usual ex-pat workforce is available, are stuck on site and are having to work revised rosters.

 

O'Leary said he had faith in the CEO and site management, but it was hard to predict the long-term impacts, however a recent delivery of spare parts averted a potentially major disruption.

 

Looking ahead, there are project delays for mining trials that could slow future growth. 

 

A trial of hydraulic mining at the Sembehun in Sierra Leone will likely not take place this year, delaying finalisation of the feasibility study.

 

O'Leary was relaxed about the delays at Atacama in Australia's Eucla Basin which was "not compelling" as a zircon-only operation, so the focus is now on trying to extract the ilmenite, which accounts for about 66% of the mineral assemblage.

 

"We've pushed that study into 2021 but that's not a big price to pay if the economics can be improved," he said.

 

A trial of an in-house underground mining method at the rutile-rich Balranald deposits in NSW's Murray Basin has also been delayed due to travel restrictions, but the company remains confident the trial will proceed in 2020.

 

Iluka had budgeted A$135 million in capital expenditure this year, and it will be significantly less. 

 

O'Leary said Iluka ended March with no debt and $548 million of facilities available.

 

Shares in the miner were steady at $7.23, valuing it at $3 billion.