Member Info for Jager15

Looking into the report a bit further, the thing that stands out for me is zircon sales of 380kt far exceeded production of 312kt, resulting in a stock reduction of 68kt. We haven't seen a stock reduction like this since 2013. No wonder the market is tight and prices are rising.

ILU could have done even better if they were a bit more savy. They sold more in H1 when prices were lower (197kt vs 183kt) and also sold a higher ratio of Premium Grade in H1 (59% vs 53%). As a result, H1 Premium Grade sales were 20kt higher than in H2. If they'd reversed the H1 & H2 numbers and held back that 20kt of Premium Grade from H1 to H2, their average prices would have been higher and they would have pocketed an additional $4-5m in profit.

Contango, the Sheffield news is over a month old....its just taken Industrial Minerals a month to catch up (as usual). The key takeaway is "�The company does not currently expect a material impact on the Thunderbird project�s timeline,� Sheffield said." https://thewest.com.au/business/mining/sheffield-resources-falls-on-native-title-hurdle-for-thunderbird-mineral-sands-project-ng-b88697340z

BF, sadly I'm not an industry insider, just a heavily invested punter whose been in min sands for 10 years so seen it through boom / bust / boom / bust and now ..... boom ? To me the $608/tn could be a little low for 2017. If you assume simplistically 2017 prices rebounded to 2015 levels (based on ILU's advice), you get a figure closer to $625/tn using the numbers in KMR's 2016 results presentation. Note secondary zircon prices fell faster than primary zircon in 2016, so "should" have rebounded faster in 2017. Regarding shipping and FOB vs CIF, it depends on many factors as I assume you already know. The size of the cargo, number of grades, number of discharge ports, age and flag of the vessel and whether rates were locked in in previous years under long term contracts, or fixed on a spot basis. I've seen rates from Moma to China as low as $12/tn and as high as $30/tn, but as an average its probably lower than $20/tn.

Greeno, the $923 Zr price reported by ILU was the YTD Avg. If you add the $130/tn Q4 increase and pro-rata 25% for Q4, you get $956/tn as a full year avg. That's an 18% increase on FY 2016 which was $810/tn, but a long, long way from their current Reference Price of $1,230/tn. Lots of smoke and mirrors here.

B/F, I agree the timelines for new projects appear optimistic, their capital estimates are too low, their management inexperienced etc. Nevertheless, the experience of 2010/11 tells us at least some of these new projects will get up and survive just as KMR did. I also think the ilmenite inducement price is largely irrelevant and at current prices, Cataby, Thunderbird and Zulti South all generate between 60 &70% of their revenue from zircon.The ilmenite is just a by-product that helps carry the costs. In the end, the perception of the investment community is reality, whether the logic is flawed or not. They perhaps see better alternatives to KMR for their min sands investments, which is why the share price lags.

Skid, my personal take is the lack of SP growth is linked to the longevity of the ilmenite bull run. Most of the min sands stocks that have done well in the last 12 months like ILU have risen on the back of zircon prices rises, not ilmenite. Interestingly BSE closed today at 0.26, not significantly better than the 0.22 it closed at 12 months ago. The big concern is the current prices are starting to support a number of new projects. ILU approved Cataby (200kt pa TiO2), Sheffield is getting closer with Thunderbird (220kt pa), Zulti South is now more likely to get up (350kt TiO2) and BlueJay claim they could be producing 200kt next year. Add in at least another 15 projects that are on the radar (and a similar number that aren't but hope to be) and its easy to see ilmenite prices won't stay where they are for long. Below is one of the summaries which caught my eye from the TZMI Congress "Counting only the projects presented by existing producers and developers at the Congress plus a few notable others, we can identify ~3.4Mtpa in incremental TiO2 units from juniors which could theoretically hit the market on a 5-year timeframe, equivalent to ~47% of current feedstock supply." I suspect its concerns about the 2019/2020 outlook that's holding back KMR at the moment. If that doesn't change, there will be no significant upside in the near term.

The BSE acquisition also seemed to have a positive impact on the ILU share price...up 3.4% today, to break AUD 10 for the first time in 4 years (ie since Nov 2013). Will there be a flow on effect to KMR ?

....with an average 400,000 tonnes of ilmenite pa for 21 years. http://www.worldtitaniumresources.com/files/GMP_Mining_Jamboree_Feb_2014.pdf

I thought instead ot the usual "he said / she said" BS that dominates this board, a few here might have commented on this new development announced today. Base expect to have the Toliara Sands project in production in by mid-2021. https://www.baseresources.com.au/wp-content/files/171219_Transformational_Acquisition_of_Toliara_Sands_Project.pdf

(....with offtake agreement secured for 85% of synthetic rutile prodution). http://www.iluka.com/docs/default-source/asx-releases/iluka---cataby-project-approved From a KMR perspective, the main point of interest is that Cataby will produce ~370ktpa of chloride ilmenite, though since its for captive consumption it won't compete directly with KMR's production. It does however close the door for KMR to supply ilmenite to ILU, but that was probably never going to happen anyway.

Thanks for the clarification Skid. I thought there may be more to it.

I agreed with your assertion Skid (or do I call you Charles :) ). Supply pressures in 2017 were masked by high opening stocks, but going forward into 2018 there are no stocks, so Zr buyers will not be able to get the same volume they did this year . After TZMI, an ILU Zr customer told me this. "Iluka supplied us around 3000 tonnes in 2017 .....and now for 2018 only 600 Tonnes Total ! I am unable to comprehend the logic. " I think its going to become a scramble to obtain zircon.

ILU presented at TZMI yesterday morning and the share price fell 4.3% by yesterday afternoon. What did they say that the market didn't like ?

Actually I think the speaker line-up at TZMI is one of the weakest for many years. No presentations from Tronox, Rio, Base, Chemours etc ://congress.tzmi.com/en/programme.php Interesting that KMR chose not to present after the tumultuous turnaround ?

I think many here would like to see a dividend payment before a share buyback. A decent dividend might also put the share on a few more peoples radar.

Greeno, ILU's Q4 reference price is irrelevant to the Q3 and YTD results. If you calculate the average Q1 - Q3, Reference Price, you get a number of +/-$1,005/tn vs their FOB avg of $923/tn. that suggests loyalty rebates, shipping costs, warehousing costs, bagging costs and discounts for non-Premium Grade were +/-$80/tn. Buck, typically quality premiums/discounts narrow in tight markets. If ILU were achieving$1,500/tn, I'd be pretty disappointed if KMRwere only getting $1,122/tn....I'd expect closer to $1322/tn, so add another $15m to your revenue forecast.

Greeno, its interesting that their avg price is only up 14% when their Reference Price for the same period was up 19.5% ($920/tn to $1,100/tn). Maybe the difference is due to different weightings per quarter. Buck, I doubt you'll see $2,000/tn for zircon any time soon. The majors (ILUK, TRO & RIO) know the last time that happened there was significant demand destruction (zircon is apparently not as elastic as TiO2). On top of this, the higher prices also incentivised new mines like Tizir & Base, creating a double-whammy and hitting their sales hard. Most now talk about a new peak of +/-$1,500/tn which is the "sweet spot" at which they can limit demand destruction, not incentivise new mines and maximise profits.

Greeno, I doubt KMR will average or beat $1000/tn for the year. ILU only averaged $905/tn YTD, which suggests a Full Year average around $935./tn when you apply their $130/tn increase for Q4. KMR has traditionally achieved lower zircon prices than ILU. I'd be surprised if they achieve an average above $850/tn. However, $1000/tn next year looks likely.

Down in Oz, the ILU Q3 Report was met with ambivalence and had no impact on their share price today. I'm guessing positive market sentiment was offset by the news they would write-down their investment in Metalysis (suggesting the potential for a technological breakthrough in Ti metal production is a lot further away than was previously though). At this stage it doesn't seem like it will have any impact on KMR's share price.