Iluka Resources Ltd. (ILU), the world’s biggest zircon producer, will cut spending, suspend a mine and reduce production and jobs to lower costs after reporting a 58 percent drop in fourth-quarter sales amid weak demand.
The company plans to idle the Eneabba mining operation in Western Australia in March, which will result in 65 job cuts, the Perth-based company said today in a statement. It will also reduce operations at the Murray Basin mine, Hamilton mineral separation plant and Virginia mining and mineral processing plant.
“Market conditions remained relatively subdued throughout the December quarter,” Iluka said in today’s statement.
The World Bank this week cut its growth outlook for China, the world’s largest zircon consumer, to 8.4 percent this year from 8.6 percent as investment slows. Iluka said today mineral sands sales fell 58 percent in the fourth quarter after trimming output on lower demand and prices. The company will detail its reduced capital spending and further production cuts for 2013 when it reports its full-year financial result next month, it said.
Iluka shares rose 7 percent to A$10.04 at 11:24 a.m. in Sydney trading as the benchmark stock index rose 0.6 percent.
Sales of mineral sands in the three months ended Dec. 31 were A$182.5 million ($193 million) compared with A$434 million a year earlier, the Perth-based company said in today’s statement.
Sales of zircon, used to glaze ceramic tiles, fell 58 percent to 213,800 metric tons last year, exceeding the company’s own reduced guidance of 205,000 tons in December.
Eneabba mine, which began operations in 1975, produced 25,000 tons of zircon last year, compared with Iluka’s total zircon production of 343,200 tons in 2012. It also produced 140,000 tons of ilmenite, used in Iluka’s synthetic rutile operations, and 25,000 tons of rutile, also used in ceramics.
“With recent challenging economic conditions globally, demand for these products has reduced,” Steve Wickham, general manager of Iluka’s Australian operations, said in a separate statement. “As a mature ore body, Eneabba is more exposed to these prevailing market conditions.”
To contact the reporter on this story: Soraya Permatasari in Melbourne at email@example.com