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Mining
Iluka Resources (ASX:ILU) continues to pull in strong prices for its zircon and rutile, saying it expects stable pricing in the tight market through the second half of 2023.
It comes as Rio Tinto (ASX:RIO) takes a bigger plunge into mineral sands with a $40 million investment in natural rutile and graphite play Sovereign Metals (ASX:SVM).
Iluka pulled in US$2088 in the June quarter for every tonne of zircon it shipped to customers along with US$1871/t for natural rutile and US$1267/t for synthetic rutile.
That along with higher sales volumes in the second quarter saw revenues lift from $256.7m to $455.6m, with 176,400t of zircon and rutile products and 40,200t of ilmenite sold to ILU’s customers.
Sales volumes were down 20% for the half, but production was up 26.4%, though higher costs were a bugbear, up 26.1% for the first half of the year to $1062/t.
All up costs were 27.3% higher at $311.3m against a 9.7% drop in revenue.
Iluka sees rutile and zircon pricing remaining stable in the second half of the year despite weakness in the global economy which is hurting end user demand in markets like paint pigments.
In ceramics market, China’s weak real estate activity has hurt, but European demand has been stable and India’s property market has been a standout.
“Demand from the pigment market remains soft as paints and coatings producers experience lower demand from customers,
following a two year period of elevated levels of do-it-yourself (DIY) projects and home building in North America and Europe,” Iluka noted.
“Despite lower levels of demand, pigment prices have been resilient, with pigment producers demonstrating their ability to reduce operating rates to meet demand.
“In past soft demand environments it has been typical for a number of pigment producers to maintain production at elevated levels, building excess stocks. In the current environment however, the majority of producers across the pigment industry have curtailed rates to match production to demand.”
Countering that, demand from the welding market on a rising infrastructure investment environment globally and titanium metal from growing aviation industry demand have propped up the rutile market.
While positivity has abounded in the iron ore space in recent days, Grange Resources (ASX:GRR) has put a dampener on proceedings with a weak quarterly report today.
The $640 million capped, Chinese controlled Tasmanian high grade iron ore producer has been a pretty good buy in recent years.
But its 2023 has been one to forget, with rising production costs and lower iron ore prices eating into its margins.
The weakest iron ore market this year was seen in April, something that flowed through badly into Grange’s results.
Costs fell from $141.75/t to $133.53/t at the Savage River mine and concentrate plant in Tassie in the June quarter as concentrate production rose from 594,000t to 665,000t.
But realised iron ore prices fell from US$156.21/t ($227.93/t) to US$108.12/t ($160.62/t), precipitating a drop in its cash and trade receivables from $279.29m and $66.69m to $242.34m and $43.20m.
That saw a sell-off in Grange stock. Unsurprising given lower profits tend to flow through to lower dividends. Grange’s impressive yield has been one of its selling points in recent years.
GRR CEO Honglin Zhao flagged that costs had been a concern through the second half of FY2023.
“The operations continued to deliver another strong quarter of mine material movement and concentrate and pellet production. Although the iron ore prices experienced a drop early in the quarter, they have moderately recovered. Input cost escalation pressures continued to be a challenge as we continue to operate in a cost-disciplined manner.” he said.
“We are continuing to complete the optimisation and definitive feasibility studies on the Southdown Magnetite Project and the Underground transition at the Savage River North Pit mine.
“These two significant projects are planned to be completed and the results released in the upcoming months.”
Grange’s woes have hardly been replicated across the rest of the materials sector, with fellow iron ore miners BHP (ASX:BHP), Mineral Resources (ASX:MIN), Fortescue Metals Group (ASX:FMG) and Champion Iron (ASX:CIA) among the big movers.
It’s come off the back of some real optimistic trading activity following a Chinese Politburo meeting that raised hopes for stimulus measures to reinvigorate its stuttering economy.
Lithium miners were also up with battery giant CATL reporting record profits in the China, while copper and nickel rose 1.8% and 4.8% overnight to US$8674/t and US$22,450/t respectively.
Pilbara Minerals (ASX:PLS) reported a second straight day of gains, rising 4.24% to $5.05.
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