Iluka to Expand in Inland China to Tap Growth Opportunities

Iluka Resources Ltd., the world’s biggest supplier of zircon to China, is opening new offices and distribution facilities in the country’s inland provinces to seize opportunities for growth.

“You need to push westwards away from the coastal provinces,” Chief Executive Officer David Robb said today in an interview. “Clearly the Chinese government has a strong policy of developing the interior, and we think it’s sensible to be aligned with that.”

The Chinese government’s move to spur investment in inland regions is helping growth in provinces such as Sichuan and Henan outpace coastal areas. Perth-based Iluka expects demand in China to rise, Robb said, even as the country’s economy slowed for a second straight quarter to 7.5 percent.

Iluka, among the 10 best performers this year on the S&P/ASX index of 52 resources companies, is also hiring more staff in China. Robb declined to specify how many facilities and offices Iluka plans to open or the number of employees it will recruit.

A Chinese government policy encouraging producers of pigment used in paints and plastics to use a more environmentally-friendly and efficient processing technique will open a new market for the company, Robb said. Rutile and synthetic rutile, used in chloride-processing technology, is currently sold mostly to customers in the U.S. and Europe, including DuPont Co.

“That is a very big opportunity for us,” said Robb.

Matthew Hodge, a Sydney-based analyst at Morningstar Inc. said he expects demand for the pigment-making products to increase.

“China is consuming at lower than Western world rates, so I would expect there is going to be growth there longer term,” he said.

Iluka’s net income fell to A$34.4 million ($31.1 million) in the six months ended June 30 from $A$274 million a year earlier on lower zircon prices, according to a statement today.

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