David Robb - Managing Director Doug Warden - CFO and Head of Strategy and Planning Matt Blackwell - Head of Marketing

Paul Young - Deutsche Bank Clarke Wilkins - Citi Mark Busuttil - JP Morgan Angela Kean - SNL Metals & Mining Adam Orlando - Mergermarket Owen Birrell - Goldman Sachs Brendan Fitzpatrick - Morgan Stanley Glyn Lawcock - UBS Ben Crowley - Macquarie

Good morning, everybody. Welcome to the call. And thank you for your time today. With me I have Doug Warden, CFO and Head of Strategy and Planning; Adele Stratton, Financial Controller on the line from the U.S.; Matt Blackwell, Head of Marketing; and Rob Porter, General Manager, Investor & Corporate Affairs. Turning to slide two and the disclaimer, obviously I have to draw your attention to that disclaimer. And also please note that we are joined on this call by a transaction advisor chaperone in line with and as required by the Irish Takeover Code. Slide three: Key features of the results. So far, I would sum it up as 2015 unfolding largely as expected. We have a sense of steady as you go within the business. Quarterly volume trajectory we see as very positive, underpinning my comments at the beginning of the year about expected top-line growth. Important assets have been restarted and are operating well. And in fact, the synthetic rutile kiln 2, which started last quarter, has set new production records, quite consistently in the quarter. We are generating cash and paying dividends. And you would note the interim dividend of $0.06 of share fully franked equal to that paid as interim of last year. We do want to put our balance sheet to work that’s what we refer to as acting counter-cyclically where appropriate. And I believe there has been very pleasing progress in all areas in which we are investing for the future. Slide four: There are more green arrows appearing, which is pleasing. It is nice of course and has been helpful to the results to have currency tailwinds after four or five years of significant headwinds. And we are trending better than guidance on key parameters. The cost performance in particular is very pleasing. On the other hand, as you will see two thirds of the down the slide, earnings and returns are still lower than we would like but they are positive and they are improving. And as I mentioned, the dividend has been maintained at $0.06. Slide five, having dramatically improved the levels of our environment health and safety performance over the last few years, our challenge now is to sustain our performance and over time, do even better and that remains a continued focus across the business. Slide six. The 2015 interim dividend is consistent with our framework. That framework or distributions has been observed since 2010 and has resulted in a cumulative payout ratio of 68% or $635 million distributed to shareholders. Perhaps I would also just point to the fact that we’ve paid out twice as much as we have retained or thereabouts when you compare to $635 million with the $303 million retained. And with that short introduction, I’ll now handover to Doug Warden to run through the results in some more detail.

Thanks David. Although we’re showing our second half of 2014 in slide seven in the middle column, all my comments in terms of variances will relate to the first half of 2014. And given the seasonality of our business being predominantly heavily second half weighted in -- or heavily second half weighted in sales, I think this is appropriate. So, revenue up 2%, as David mentioned; some FX tailwinds certainly helped, more than offsetting some price weakness and slightly lower ilmenite volumes. At this stage of the cycle, we’ve maintained a pretty healthy margin -- EBITDA margin of 33%, which relative to others in our industry and more broadly in the resources sector, I think fares pretty well. D&A down on last half or half on half due to the closure of WRP in March of this year and the write-down of the U.S. assets in 2014 meant that there was no D&A in 2015 for the U.S. Just to highlight that the $84 million for the first half does look a bit high versus the full year guidance of $130 million, however I’d point out to you that there was about $30 million of D&A in respect of WRP, which will not occur in the second half due to its closure. Going the other way, obviously with the southwest recommencing in February for the mine at Tutunup South and April for the kiln, there will be slightly more D&A in the second half in the south. NPAT was up 74% to $20.4 million and free cash flow down 39% from $64 million in the first half 2014 to $39 million in the first half due largely to lower MAT cash receipts of about $14 million and some working capital impacts as well. There are some other puts and takes in the cash flow but they were predominantly the main items. ROC and ROE remained well below where we would like them to be but they do reflect bottom of the cycle pricing still not acceptable on our internal metrics. Turning to slide eight, Mining Area C. MAC income was up marginally but this was due to additional capacity payments half-on-half of $2 million and one-off receipt of U.S. $8 million, as a result of some modifications to the royalty agreement which we announced a short while ago. These two factors obviously offset the falling iron ore price, which resulted in lower royalty income for the half. Going forward, there will be a slight reduction in the royalty rate as we point out in slide eight, but it will apply across an increased revenue base. So, we’re not expecting there to be any negative impacts there. Turning to slide nine, the NPAT waterfall. I won’t go through every bar on this, but just to hit the high points, all the commentary is in the 4D for those who are interested. So, on price, you will note in our ASX release that we refer to zircon and retail prices for the first half being similar to the full year 2014 pricing. That might seem a little inconsistent with the $23 million pricing bar in the NPAT waterfall on slide nine, but I would point out that the pricing delta is the first half ‘14 versus first half ‘14 delta. And there was some price weakness in the second half of 2014. So when you take that into account, particularly with volumes being weighted to the second half in 2014, we are broadly in line with full year 2014 pricing. FX tailwinds, as we’ve mentioned $0.775 versus $0.921 where for first half last year which resulted in a $50 million NPAT impact to the positive. Slightly lower ilmenite volumes and lower prices, reflecting a higher proportion of lower quality products sold in the first half of ‘15 versus ‘14 and also lower volumes of iron oxide concentrate sold as a byproduct of our SR production, reflecting the softening in the iron ore market. Our restructure and idle costs: We idled the Concord mine in the US in April of last year that recommenced in July. Together with that, we had the WRP closure in March, as I’ve mentioned, due to the exhaustion of the ore body there. In mineral sands other, slightly higher marketing costs and the higher resource development costs. The marketing costs due to some old shipment, additional costs for high grade TiO2 and some reduced trading conditions there. On the resource development, we continued to work hard on exploration drilling, some increases there and also further technical work relating to our future projects being the other impact of higher costs there. And the D&A, as I’ve mentioned U.S. being written down to zero in 2014 therefore no D&A this year and the closure of WRP in March. Turning to slide 10, the debt movement chart, net debt at 30 June of $80 million compared to debt facilities of $950 million, so plenty of headroom as we’ve pointed out consistently. And the bars in the dashed box just to highlight, represents the $39 million of free cash flow for the half. So notwithstanding the low cycle conditions, we generated strong operating cash flow of $92 million which enabled us to continue to invest in exploration, technology and our projects, and still generate free cash flow of $39 million and declare a $0.06 dividend. The dividend payment that you see in that bar chart is obviously last year’s final dividend. Turning to slide 11, the unit cash costs and revenue. Slight improvement there, our per tonne of Z/R/SR when you exclude the byproduct impact of $52 a tonne lower than first half ‘14, reflecting the cessation of relatively high costs but I would point out high margin mining at WRP and better production from SR as Dave has mentioned, resulting in lower unit costs. Slide 12 on the inventory, up marginally with a $23 million increase in work in progress, partially offset by $5.5 million decrease in finished goods stock. We continue to monitor the inventory levels but we have maintained our demand following approach and given our strong balance sheet, remain comfortable where inventory is at, at these levels. That said, we’ll obviously look to draw down inventory over time as demand for our product grows. I would point out that as you’re aware, the inventory is carried at cost. So, if you think about a reasonable margin to apply to that inventory, less some transport and upgrade costs associated with the concentrate or the work in progress, we estimate there’s in the order of $1.2 billion of cash flow at current prices and exchange rates. Obviously, it’s important to bear in mind that there will be a normal level of inventory going forward. And I would point you to the period on that chart between 2008 and 2011 for some sort of a guide on what would be considered normal. Bear in mind also that we’ve got a slightly longer supply chain these days as we try and place product closer to our customers through various warehouses around the world and as we’ve moved away from FOB or pure FOB shipping as a model for marketing and sales. So, I’d say around 50% to 60% of the $1.2 billion of cash flow should be considered cash flow to be deliberate -- liberated I should say over time as market conditions improve. However, that’s not to say that we are keen to do that. And I don’t feel -- we don’t feel any pressure to do that given the balance sheet strength; it’s merely to point out the significant free cash flow that’s embedded within that inventory. Slide 13, the balance sheet, as we’ve mentioned continues to be very strong with net debt at 30 June of $80 million, representing gearing on a net debt plus equity basis of 5.4% and an additional $100 million in facilities added during the half. After taking into account cash on hand, we had undrawn facilities of $785 million at the half. And finally slide 14, sources and uses of cash. This is just a little bit of history since 2002. What I’d point out is a very strong track record in capital management since 2007. As you’d be aware, we raised equity to build J-A and Murray Basin stage two in 2008 and 2009 and since then from 2010 onwards, Iluka has generated in the order of $940 million of free cash flow. And as we mentioned earlier, paid $635 million in dividends and repaired the balance sheet from that period of 2008 and 2009. And with that, I’ll hand over to our Head of Marketing, Matthew Blackwell to take you through current market conditions.

Thank you, Doug. Good morning, all. David and Doug, I trust the line is okay there. You can hear me?

Yes, I’d speak up just a touch, Matt perhaps.

Thank you. I’ll start on slide 15. As you can see, sales volumes are up on the prior corresponding period, which is encouraging for us as the first half followed a very strong fourth quarter for Iluka. Within the half, the second quarter was solid, as we moved from roll-out to execution in the establishment of our pricing and payments framework. In zircon, the sales by region saw a decline in the U.S. as Iluka’s Virginia offering was lowered, in line with the planned idling of the operation. Now, this was more than offset by sales into Europe, the Middle East and India, and that last market helped by the introduction of a new grade of zircon. Volumes in China were consistent with the prior corresponding period. Sales by sector played out as we expected with demand in ceramics stable, the chemical sector continued to face pressures of oversupply, and sales to fused zirconia producers slightly softer, reflecting mixed performance in industrial end uses. Iluka sales to specialty applications grew and this is characterized by smaller sale lots, higher margins, as you would expect from a focus on the long tail. Turning now to slide 16, regionally demand remains mixed with some softness in the U.S. Europe is improving for us but it remains a market where others are slightly advantaged. China continues to be the largest market and one we believe with continued potential. Ceramics remained stable and we have been of the view for some time that the modernization, substitution and thrifting impacts has worked its way through and we expect demand to resume growing, albeit from a slightly lower basis. Modern tile designs, particularly those that are digitally printed, which contain a body, an engobe, an ink and a glaze, whilst having a generally lower zircon loading in the body than say a porcellanato tile of five years ago are less prone to substitution and thrifting and characterized by a base load of zircon due to the requirement to have that in the engobe, the glaze and more and more in the ink as well. As mentioned, fused zirconia customers who focus on supplying the refractory sector are cautious as to the medium term impacts from lower demand for steel. However, those who sell into the auto industry, continue to see reasonable demand as do those producing for ceramic pigments. Chemicals remain subdued, in contrast to specialty applications. And we continue to progress commercializations of new products for this sector. Turning now to titanium and high grade feedstocks. As flagged in the March quarterly, sales of high grade ore are largely second half weighted. This is a logical consequence of planning to bring on line SR2 at the end of the first quarter and ramp it up in early second quarter. The start-up of the operations, as mentioned by David, has exceeded expectations and positions us well for the second half and beyond. The shift between European and Asian sales reflects really customer mix and their individual shipping location requirements. You can expect this to rebalance in the second half. Bulk of high grade and low grade sales between now and the end of the year are already contracted. And finally, I’d say that you could probably expect the mix to trend towards SR as we continue to allocate rutile to our strategic accounts. Turning now to slide 18, while demand is uneven across the globe, we believe it is in aggregate stable, and certainly paint sales, the largest end market for titanium remains solid. We see positive signs for potential further growth in Ti demand. Indicators such as existing home sales in the U.S., support for the property market in China and low levels of scrap in the metals supply chain, we believe are all favorable. And although a small sector, record orders for planes with higher Ti metal content, bodes well for the metal sector going forward, probably an outlook that would be seemingly shared by Warren Buffett. Welding has been a particularly bright spot for us this year. Rutile is the preferred feedstock for those making flux cored wire which is used in heavy industrial applications such as ship-building. And we now offer a number of different rutile grades to this market. Turning to slide 19, I think everyone is aware of the depressed market for ilmenite in China. So, we saw and most recently we saw several unsuccessful attempts by local ilmenite producers to increase prices in the second quarter. It’s a market that we see as being challenged in the near-term. Sales of Iluka’s low grade ore or ilmenite into the Americas will increase in the second half as short term sales resume from Virginia. Turning to slide 20, we believe Iluka is well-positioned to respond to the changes in the market due to our range of low and high grade feedstocks. As our customers’ head grade requirements change, so can the grade in the material we ship to them. We’re working hard at enhancing our technical capabilities and customer service. The China Technical Centre is one element of this and we expect to have it in operation early in 2016. Now due to demand for our conventional SR products, we are unable to schedule a commercial scale run of ASSR production until early 2016. We remain committed to the commercialization of this high grade sulphate feedstock solution. Turn now to slide 21. And I will close by just saying that we will continue to focus on top line growth in a disciplined manner. We believe that volume recovery will underpin sustainable price recovery. We have invested in an extensive sales network and we intend to continue to leverage our position in markets and segments where we think they have the most growth potential. We’ll continue to work closely with our customers and design the products they need to deliver on our promise of customer value to them. So with that David, I’ll hand back to you.

Thank you, Matt. I’m sure there may well be some questions on some of the things that you’ve said, but just to finish up with a few more slides before we get to questions, slide 22. As I said at the outset of the call, progress is pleasing in all the areas in which we see the potential to create and deliver value for our shareholders. If I think about exploration, obviously consistency of spend there is important. That’s true for exploration generally. We do have to some extent an increase in Tier 1, ore body discovery focus, particularly as some of the project related support, drilling and so on declines. We are able to increase that Tier 1 focus and that brings with it increased international opportunities in Kazakhstan for example; we’re in a phase of certain aerial geophysics. In Brazil, as we usually find, there have been some HM intersections in our work there. And in terms of the non-mineral sands at Fowler prospect, we hope to be putting some holes in that in the second half of this year. Our feasibility studies are progressing to plan in terms of internal projects with Cataby in pre-executed planning, environmental impact statements taking up a lot of time, the public phase of that in Balranald, the work around the J-A satellites referred to there as Sonoran, has been completed to preliminary feasibility study stage, now on hold and in Sri Lanka, our scoping studies there are well advanced, the focus being on engineering and infrastructure and on some environmental assessments. There is a government election there today -- or yesterday, so obviously we await the outcome of that. Market development, I think you’ve had a good overview from Matt. In essence, I believe our marketing reach and our customer focus initiatives are working. And we remain excited about innovation and technology’s potential to deliver game changers for this industry. We certainly for example, in relation to Metalysis, remain encouraged. We see upside in terms of feedstock customization possibilities, particularly suited to SR as the feedstock and in Tapira in Brazil, fair to say that we have reached a position of strong alignment between ourselves and Vale about the way to take that investigation work forward, which is a positive. Slide 23, the potential acquisition of Kenmare. I have nothing new to say on this potential transaction. We are working with Kenmare to satisfy the pre-conditions to a firm intention offer, perhaps commonly thought of as a binding offer, under Rule 2.5 of the Irish Takeover Rules. And I would also draw your attention in the supplementary act, to a specific disclaimer slide in relation to that. Slide 24, the business characteristics that we see in the second half. Well, as I said, 2015 so far is unfolding largely as expected. So, no change to guidance, what we refer to as our key physical and financial parameters document. In fact, based on our year-to-date performance and full year expectations, we’re slightly ahead of that guidance but not enough to warrant a revision, but slightly ahead. And remember please that in that guidance, 2015 Z/R/SR production was up 27% on 2014 and we also indicated that 2015 sales may exceed that production. So, we feel comfortable, as I said, in relation to that guidance still. We do however have a typical second half weighting in terms of business profile. That gives us some reason to be cautious. We are very pleased with how well the business is running. As I mentioned and as Matt mentioned, the start-up of SR2 has led in turn to all time production records being set and our balance sheet is strong. Slide 25, in conclusion then, given all of the foregoing, there should be no surprise that our approach as listed here is unchanged. We try to be flexible in the short-term but maintain a consistent focus on the long-term. We believe now is the time to be securing and developing options conventional and innovative, organic and in-organic, consistent with our objective. I think we seek to have a bias towards the deployment of capital. I think that’s what shareholders pay us to do, prudently. And in doing that we do try and act counter-cyclically where appropriate. What I sometimes refer to as, marching to the beat of our own drum but doing so in a disciplined, diligent and patient manner. So, in summary, cautiously optimistic; the optimism coming from our year-to-date performance; the caution coming, obviously from the fact that global confidence is still fragile; and there are major economic adjustments being made and to be made. Chinese renminbi devaluation, U.S. interest rate rise and so on. We have a global exposure and those forces will be relevant to our performance. So with that, we’ll hand over for questions.

[Operator Instructions] Your first question comes from the line of Paul Young from Deutsche Bank. Please ask your question.

Dave, thanks for clarifying the guidance. The guidance has not changed for production, also demand recovery is intact. Just a question on the TiO2 mix. Can you provide the rough production split between SR and R for 2015, considering SR2 had such a great performance in the June quarter? And then the second question is on Kenmare, seeing as you did mention the K word. Can you provide an update on the discussions with the Mozambique government and actually why this is taking so long? And in particular, I’m interested in the written determination on any capital gains tax liability. I’m just [indiscernible] if you could discuss the technicalities around that.

Yes. Look on the SR/R split, we very deliberately don’t break it out in -- I guess right now as Matt mentioned, there is a mix shift occurring to SR. The out production I prefer I guess not to bank or certainly not to advertise. So, I’m not going to provide the granularity that you seek on the SR to R mix, we are in an evolving situation with all our customers about that. On Kenmare, as I said, there’s really nothing new I can say. The pre-conditions were clearly articulated in our note of 30 April in our release. We are working through them together with Kenmare. And as you correct point out, a couple of them relate very clearly to Mozambique government determinations and approvals. And we are working assiduously to secure those. These processes take time. There’s not a lot of precedent in the country. And therefore, timelines are really impossible to predict. But we are working on it.

Just back on the SR/R, is it safe to say that based on the performance of SR2 in the June quarter that production skew will be towards SR. And to further...

Sorry, Paul. I mean we’ve given you guidance obviously about rutile and syn rutile. And what I’ve said is that our guidance remains intact. Remember that the rutile production over the course of the whole year is really a function of how much WRP concentrate we choose to produce through Hamilton, following demand for that material, so the concentrate has been produced. The mine is not running anymore. The production, as I say, will be a function of how much we take through the Hamilton MSP. The SR performance, well, we’re off to great start but we’ve got a number of months to go in the year. So hence, overall, although we are encouraged by the year-to-date, we’re not upgrading the guidance, we are maintaining it.

Your next question comes from the line of Clarke Wilkins from Citi. Please ask your question.

Just a couple of questions. First off, just in regards to the projects that are in sort of in DFS. Can you just give an update on the timings, in terms of when Balranald’s going to be complete, et cetera? And where are you in the process I suppose, in terms of the CapEx side? If you don’t get those projects approved this year, do we look like a similar CapEx number for 2016 as what it would be for 2015 or will there be other sort of CapEx in 2016 that we should include? Also, just the other one was in regards to the ASSR, is the plan to put that through the kiln that’s running now to do that trial on the kiln or is there potential to restart another kiln to run that trial if the SR demand remains strong?

As to the first one, I’m not yet in a position to characterize the exact timing. We do have flexibility in relation to both projects but we’ve made it clear that we think timing is important in terms of generating the optimum return for shareholders. We are certainly thinking about some of the pre-execute decisions that you would make, long lead type commitments that have to be made, Clarke. But I’m not yet in a position to characterize precisely the timing of any of that. So unfortunately, it’s just a little early. We do have flexibility and we intend to use it hopefully to the advantage of our shareholders. On the kiln, we can; we now know, swing a kiln midstream, if you like, from producing SR to producing ASSR. So, whereas a little while ago, we perhaps thought that a campaign dedicated to ASSR and possibly even as you say in time, a kiln dedicated to ASSR, which obviously makes the commercialization of that product a bit harder, if you think about it, because you’ve got to be really confident there is enough demand to load a full kiln, we now don’t need that to be in place before starting a kiln. We can swing SR2 from conventional SR to ASSR. We know that. And so, I also wouldn’t refer to it as a trial really. We know customers like what they have had to-date; we know we can produce it; we know the economics. It’s really a case of getting a production window that enables us to produce meaningful quantities to get in the hands of customers for final qualification through their plants. So, it’s more than a trial.

So that could be reduced but it’s not limited to any one of the kilns being able to produce that product; it can be produced at other kilns if there was demand strong enough to keep running it purely producing the existing SR?

Absolutely and logically that would be SR1 given we now see merit as running the two side by side from a logistics overheads, efficiency manning point of view. The next cab off the rank, as we’ve said before Clarke is likely to be SR1 in the south west; next to SR2, rather than a restart of either of the kilns in the Midwest. We do have some infrastructure upgrading to do to run both simultaneously, particularly around the stack. And that’s the kind of thing that I was thinking about when I referred to long lead type decisions that we’re thinking about in preparation for any of the projects or indeed another kiln restart.

Your next question comes from the line of Mark Busuttil from JP Morgan. Please ask your question.

Just a couple of things from me. Firstly, what should hopefully be a fairly easy question but it’s on the depreciation expense. If you look at the second half of the year 46 million, kind of annualize that over a full year period, it’s sort of 90, which would be quite a big drop from the depreciation expense that you expected to incur this year. Is there any reason why we shouldn’t be using 90 million sort of as a go forward basis?

Sorry Mark, $46 million you’re referring to?

Yes. So, the $46 million to get you to your full year guidance of $130 million.

Sorry. Yes.

Any reason why for say 2016 and onwards we shouldn’t be looking at that and annualizing that?

Look, very much dependent on idle gear and new projects. So, with the current production settings, yes that’s probably a fair number. If we start Cataby or Balranald or restart U.S. obviously, which would require a write-back of the write-down, then that obviously changes things. But yes, in the current production settings or restart SR1 for that matter. Yes, current production setting is okay.

How I think about that is whether it’s good luck or good management, who knows. But we’ve ended up in a period that we would refer to as low cycle, if you like, in terms of industry conditions. And we’ve been in that period at a time where we’ve had a low capital appetite in the business; we’ve got lots of flexibility; the D&A is low because we’re not running as much as we would expect to at other times; and because we haven’t put a whole lot of fresh capital in for a while, but that lies ahead. So, I actually am pleased that we’ve managed to get that alignment between low demands on the business at a time of relatively moderate market conditions.

No, I mean I actually think it’s a reasonably positive thing. I think it’s going to result in some fairly sizeable upgrades to 2016. If I just move on to…

Well, that’s certainly not the intention.

Just moving on to one other thing. I was interested in your comments, so that your zircon sales in North America, are there product differences or differences in characteristics between the zircon that you produced out of Virginia and what you’ve produced from your other assets that means you can’t sort of supplement some of those sales in the U.S. with what you produce out of Eucla or the Murray Basin?

Matt, do you want to handle that one?

Sure, David. Mark, one of the things about the American market is it’s predominantly characterized by foundry and investment casting. And 8nvestment casting probably makes up a significant portion of the foundry market. Almost all investment casting zircon in the U.S. is calcined. And so, we don’t actually have a calcined product. On the foundry side, there were particular characteristics of the Virginia zircon which made it very good for foundry applications and fused zirconia. We have found with research that some of our other products have similar characteristics. And that’s all I can say on that at the moment. We’re very encouraged by some of the opportunities we have to replace VA with other material.

Your next question comes from the line of Angela Kean from SNL Metals & Mining. Please ask your question.

I’m just interested in knowing your take on the outlook for the mineral sands market for the second half and I guess heading into early 2016, some challenges obviously remain there. What sort of challenges is market -- the mineral sands market facing and where is demand going to pick up and where do you see the market in that period?

I’ll ask Matt to comment Angela but it’s not for us to speak about others. I think it is clear though that some projects have been committed to in headier days. They’re projects that have had or continue to have some operational difficulties and when you are producing a range of products of relatively low value, i.e. mainly ilmenite and where that is at the end of the product slate that is perhaps most challenged right now, then life is tough. It’s also obviously not a time to be sitting with a balance sheet that has a lot of debt on it. If I look at that overall picture though, the reference we’ve made consistently to demand being robust, medium to long term, driven by urbanization and consumerism and application diversity, those things are clearly intact. And China is holding up well for us. And zircon sales are up. And paint producers and their sales, volumes and revenues are fine. So, the end demand picture is better than what you see in certain individual business situations or what you see in some parts of the value chain. We’re comfortable with how we are positioned. And yes, perhaps that looks a little better than some other parts of the industry, but we are where we are and others are where they are. Matt, is there anything you want to add to that?

I don’t think so. David, I think you’ve covered it. But even if there is some short-term challenges for the pigment producers who we sell our Ti to, they remain positive about the longer term. And demand, as you said; the medium to long term, demand fundamentals for zircon and TiO2 remained very positive. And as we’ve seen in previous presentations, there is not a dearth of projects that are rutile and zircon rich coming on. So projects, as you mentioned David, induced at the height of the market, which have lower assemblages or lower value in the ground than perhaps will be needed going forward.

Yes. And look Angela, when I think about some of the lead indicators that we track, be that Chinese ore space sold or property prices in China; U.S. housing activity indicators, both new homes and remodeling, even European sentiment, they’re all in a better place than they were a year or two ago. So, as I said, cautious optimism is how we feel. And we’re positioning it on that basis. We are placing some bets consistent with that belief.

Your next question comes from the line of Adam Orlando from Mergermarket. Please ask your question.

I just have a couple of quick questions. Has Iluka deleveraged enough to Kenmare lenders satisfaction as described in the preconditions in that it will meet the 30 September cut-off date? And separately, as far as Iluka is aware, is an IPO for Metalysis an option still being considered for this year?

Sorry. Could you just repeat the first question about deleveraging, Adam?

Yes. So, has Iluka deleveraged enough to Kenmare lenders’ satisfaction, which I believe was a precondition that was set and that there was 30 September cut-off date?

There are no preconditions or deleveraging requirements of Iluka. The Kenmare lenders have in a note to their accounts, it’s spelled out, Note 21 I think, set out their expectation for a Kenmare deleveraging potentially in the future, if certain things don’t occur by a nominated date and that’s really a matter for Kenmare that question. But I’m not in a position to answer that question. To the second one, Metalysis, look, it’s an opportunity that we see still as tremendous blue sky potential. It could be revolutionary for this industry in relation to titanium metals and metal powder usage. And we think we have a very particular thing to bring to the table there in terms of feedstock knowledge and customization, as I mentioned. An IPO is a thing I know that that the board of Metalysis has been considering. Whether it actually goes that way or what the timing of that would be, I’m not in a position to say at the moment. We remain very supportive of that business and its potential. And we are pleased with the progress that’s being made in further developing the application of the technology to titanium metal.

And just getting back to Kenmare, have there been any surprise hurdles in you trying to satisfy the pre-conditions that have popped up that have taken you by surprise that could stall things a little bit?

Well, look I know where you come from Adam in asking all these questions about Kenmare, but I’m not in a position to answer them. We are as I said, we are working with Kenmare to satisfy them. And if there’s something that is -- needs to be disclosed to the market by either them or us, I’m sure that will happen.

Your next question comes from the line of Owen Birrell from Goldman Sachs. Please ask your question.

Look, I just wanted to just drill down into your advised, I mean to your reiteration of guidance. You’ve said that the bulk of your TiO2 sales has already been contracted but you’re still cautiously optimistic. Just wondering where the cautiousness comes from. Is it coming from the zircon side of the picture or is there some concern around these contracted TiO2 sales? And just a second question, you’re talking about the dire state of the Chinese sulphate pigment market and the impact this is having on your ASSR development. Just wondering what you’re seeing in terms of industry rationalization and profitability over in China and what gives you confidence that 2016 will be the time to recommence your scale trials?

Let me deal with the second one first, Owen. There is absolutely no correlation between current state of the Chinese sulphate pigment market and our ASSR timing. Customers would like -- potential customers would like very much to have that product now but we have contractual obligations to meet around conventional SR which take priority. We see no risk to those contracts. So, please don’t think that our caution is in that direction because nothing could be further from the truth. The caution relates simply to the fact that we are a company that is exposed to the fortunes of the world, given we sell globally and therefore global confidence, global policy decisions can have an impact on our business performance. And they are not a thing we can control and therefore we’re a little cautious. That’s all. There is nothing in my commentary around the maintenance of our guidance that is anything internal. It’s really just that we are as always somewhat hostage to global economic conditions. Sorry. The first part of your question, Owen, could you just repeat that?

Did you have any caution around the zircon markets?

No. Look, obviously China is important. If China’s adjustment process encounters a hiccup, then that would have an impact on our zircon sales but year-to-date, there is no indication of that. And as Matt has mentioned, our new pricing approach in zircon is having the desired effects that we sought to achieve when we formulated it and rolled it out. So, I if anyone’s fishing for a negative, I’m sorry I can’t help you.

Your next question comes from the line of Brendan Fitzpatrick from Morgan Stanley. Please ask your question.

Clarifying some of the comments from earlier in the presentation, when Doug was talking to slide nine and referencing the price, first half ‘14 versus first half ‘15, there was acknowledgment that the prices were higher in that first half ‘14 period and therefore we get the differential. It kind of suggests that if prices now are similar to the weighted average of ‘14 that they might be a little better first half ‘15 than they were in the second half ‘14 but I wasn’t sure if that’s the takeaway we should be making there. And the second one, on slide 15 there is a reference in one of the bullet points to a higher proportion of standard grade zircon being pursued as the company monetizes zircon concentrate in the second half. Is there a noticeable price differential on that product that’s being pursued?

Well, I’ll deal with the first one. No, prices are flat. No real improvement in first half ‘15 versus second half ‘14. It’s really just think about the stronger sales in second half typically means that your weighted average will be more influenced by the second half than the first half of any one year.

And Matt, do you want to deal with the second part of Brendan’s question?

Yes, sure. Brendan, the standard grade, we have some opportunity to monetize some zircon’s -- some stockpile material that we would characterize as standard rather than premium. And we have made a conscious choice to put some of that material into the market at the moment, given where the market is and is there a discount because that material comes from monetization of the stockpile, no. It’ll be priced consistent for Iluka standard grade. And that’s a pricing formula that comes off our reference price. So, it doesn’t attract a discount per se other than the fact that it’s standard and not premium.

Just wondering, have we ever been given a reference point to the price differentials that Iluka gets between standard and premium?

No.

Your next question comes from the line of Glyn Lawcock from UBS. Please ask your question.

Few questions just on the inventory, work in progress keeps climbing. Would we expect now that WRP has ceased for that to now reverse and just wondering your thoughts on timing to get the inventory back to the more normal levels, you had talked about two years, wondering if that was still the case? Secondly, just on Virginia. Now that Chemours is up and running on its own, just wondering, you made a comment probably six months ago that it was hard to engage DuPont, while they were going through the demerger process, I was wondering if discussions can now reopen, how they may be going about the future of Virginia? And then just finally, the second SR kiln restart, I thought from memory, you talked a little bit about maybe that being envisaged for 2016. Do I take from your comments about being able to interchange the ASSR and SR that’s maybe off the agenda for now as well for 2016?

I’ll have a shot at each one and then ask Doug and Matt to comment, perhaps more specifically. Look, the work in progress build, it is really a function of two things, one, we choose to operate as efficiently as we can and mixed blessing perhaps, Glyn. As I said, our assets are performing very well. As to the timing of the drawdown, that previous best guess which was Alan’s, I probably won’t ask Doug to in his first results as CFO to put his best guess on the table as to the timetable of it. It doesn’t really occupy our minds, Glyn, as I’ve said before, other than any physical constraints we might run into. In the current environment, the cost of funding that versus the benefit of producing it efficiently and at the lowest unit cost we can. And I draw your attention to our performance there. The trade-off is very clear to us. We’d rather produce it at the lowest possible cost rather than try and throttle it back just to create the objects of it stabilizing or going down. And that’s the reality. The WIP versus finished products balance is a thing that we can shift very quickly by taking more material through MSPs. So that’s literally a market-following issue.

Glyn, just to add there that yes it will obviously come down, the WIP, all other things being equal with WRP’s cessation. So, obviously the two big components of that are J-A and WRP. So, you’ll see a lightening there in respect of WRP as we lead that through the Hamilton MSP.

Virginia, I guess frankly Chemours management is probably most fixed on its share price rather anything else to anybody. Matt, do you want to comment on -- I mean we don’t give a running commentary, Glyn, as you know, about specific discussions that we’re having but Matt…

Yes, I was just going to say, we don’t sort of go into the details of each contractual discussion but needless to say, Chemours are an important customer and there is logic to them consuming domestic supply or North American supply, particularly as they bring on new capacity. That’s all I’d say to that.

Look, the SR restart, Glyn, yes look, there’s a couple of factors at work. One, as I said, we’re at that point where we need to think about long lead items and that’s clearly in mind now and that revolves mainly around infrastructure that we need to upgrade in the southwest for two kilns to run. We’ve produced more SR than we thought we might have out of SR2 so far. If that continues, then we’ll have more SR on hand and perhaps a bit more flexibility around SR1 timing but I would see it as decisions are close around the long lead prestart type capital for that. Whether that is immediately followed by a restart in 2016, we would obviously be looking to recreate the dynamic that we had with SR2 where there was some degree of commercial underpinning and confidence about off-take. So that’s more the driver Glyn than anything physical about its preparation.

Your next question comes from the line of Ben Crowley from Macquarie. Please ask your question.

Just quickly if we could just return to CapEx. Just wondering, so the first half spend was I think a little bit lower than probably most of us expected. Should we still be looking at the same full year guidance of $120 million?

Yes, Ben. I think if you look back over the last few years, it’s always been that way. I don’t know why it is, but CapEx like revenue, seems to be second half weighted and it normally is.

And then just the longer term CapEx guidance, we should still be thinking of that in the same terms as well?

Look, we know we have an update to give people around the sort of three to five-year horizon characterizations. We know that obviously that is heavily influenced by the timing of any project investments that we make and indeed by any other investments that we make. And I would hope that we can, as soon as we get a landing on some of those things, we would provide a further look forward into things like multi-year CapEx expectations, Ben. I know it’s a bit of a gap that’s in it. What we have said and our best estimate still is that an average over the next five years of circa $200 million to $250 million is the best view we can give you at the moment. It may well be that 2016 is lower than that and the peak is in the middle years of the five, just depending on timing. But we’ve said it will be lumpy but it will average 200 to 250 and I don’t have any information that suggests that is not still the best view, Ben.

Your final question comes from the line of Clarke Wilkins from Citi. Please ask your question.

Just a follow-up in terms of the U.S. Is it basically you finish processing and mining at the end of the year; does it basically stop there or is it going to be like the Murray Basin where we actually have I suppose the concentrate treated into next year and there is sales coming from the U.S. operations next year? And also the other one is just around the China side. Has there been any sort of pick-up of sort of interest in terms of the sulphate side from China given that obviously the collapse in domestic or the fall in domestic production on the back of the collapse in the iron ore price?

Look, Clarke, it’s likely I think there will be a trickle over into 2016. We’ll probably be doing some retreat activities on some tailings material that there may well be a bit of concentrate to go through the MSP in the early part of ‘16. So, yes to that. China, we know some sulphate ilmenite production has been taken out. It’s not material in the context of overall Chinese production, but there has been some rationalization and there is more talk of further to come. There is certainly a much heightened profile around environmental performance of all industries in China, not surprisingly. In fact, I have in front of me a very recent Chinese industry article about the chloride route technology and its development in China and that the vice secretary of the TiO2 Association in China quoted as saying that China has now the strictest environmental law in its history and that it has imposed new limits on additional sulphate route capacity. And as you know and we have referred to previously, there are a number of companies, some with significant capacity already built, chloride technology that they are trying to perfect. So, we think when that perfection is reached, that capacity will multiply quickly as it’s done in other areas. So, there is a government and indeed an industry goal of rapidly advancing chloride and cleaning up, if you like, sulphate. And we see both of those things as positive for TiO2 for us. So, yes, I hope that answers your question, Clarke.

Yes, that’s great. Just, sorry, back to the U.S. operations, is there -- not getting into contracts, but is there some contractual sales commitments where you have to sort of retain material that sells off in the U.S. or is it basically as the operations wind up, there is no legacy sales contracts or anything like that that have to be maintained or delivered into?

No, there isn’t. It’s really a function of -- I think we’ve used language previously, in fact when we announced the closure we spoke about optimizing the wind down, Clarke and trying to extract, if you like, the last dollar of value out of that operation. That’s all that it means.

And I think that’s the end of our questions and we’re a little over time. So, I hope that’s been useful for people, as I would say or just repeat, guidance maintained; we’re cautiously optimistic; and the caution relates not to anything Iluka specific but really to global economic conditions. We have created or secured commercially quite a number of options now and we are making pleasing progress in developing those options for future growth. And with that we’ll finish. Thank you for your time.