Iluka confirms all our fears…
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Back on 13 July 2012 (read here), we warned that Iluka Resources announced their 2012-2014 Key Physical and Financial Guidance previously released in February 2012 was “now redundant and as such no longer applicable”. Management had said volumes for the December 2012 half-year were indicating “lower ordering patterns or an unwillingness to commit to volumes except on an “as needed” basis”.
As with other miners described here at the blog over the last year, the boom appeared to be over and reports were confirming our earlier appraisal of the likely impact from a China – led slowdown. Iluka’s exposure is both direct and indirect and the grim conditions were confirmed yesterday with the release of the Iuka Resources September Quarterly report. Combined sales volumes of zircon, rutile, synthetic rutile and ilmenite at 306,300 tonnes, were down 29% on the September Quarter 2011. Revenue at $225m was down an extraordinary 58% from $533m recorded in the September Quarter 2011. This means the average selling price for Iluka’s mineral sands declined by 41% year on year. In response, the Iluka share price fell 6.6% to $9.00 and is back to trading where it was in February 2011. Essential reading indeed.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
upendra Maganti
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Why is this still showing a large discount in skaffold from july ?
Ron Coldebella
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What essential reading exactly? A more rational interpretation of events is that Iluka management did exactly what they are supposed to under the continuous disclosure regime. They told the market that that conditions were worsening and as a result, they decided to reduce the amount of product they were producing.
And it looks like they got it right – the market got worse, they made less money and their share price dropped which is what they would have expected to happen. What they didn’t do is chase volume by accepting lower prices. Check your numbers, you may find that the price that Iluka gets hasn’t changed
What is the issue exactly here? Need to talk about something other than the falling Iron Ore price at the moment (which appears to have returned to the non-existent floor price?).
Disclosure: Dont hold Iluka but willing to if a solid negative campaign is initiated, always good to be contrarian in this market,
Roger Montgomery
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Plenty of other posts to read too Ron.