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Iluka cuts jobs and production

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AAP

2013-01-17

Mineral sands miner Iluka will cut production resulting in job losses after tough trading conditions led to a loss of nearly one-third in revenue in 2012 compared to the previous year.

Iluka's Eneabba operations in mid-west Western Australia will be idled, costing 65 jobs.

Those employees were told on Wednesday and Thursday.

Other operations is South Australia, Victoria and in the US will be idled or operate on reduced rosters.

The company blamed difficult economic conditions globally, saying the ageing WA mine had been reactivated in 2011 when demand for zircon and titanium dioxide was high.

"With recent challenging economic conditions globally, demand for these products has reduced," Iluka's general manager of Australian operations Steve Wickham said in a statement.

He said in the statement that Iluka informed customers and employees throughout 2012 that it would take appropriate measures - such as cutting production and costs - to more closely match mineral sands production to demand.

That worked in the first half of the year when it lifted margins and revenue by 16.2 per cent to $662.8 million, despite a near one-third drop in sales.

However it appears to have ran out of options in the second half with full year sales revenue falling 30.4 per cent to $1.07 billion.

Revenue fell 58 per cent in the December quarter to $182.5 million.

It blamed a "cyclical low" for the current lack of demand for its products, which are used in ceramics and paints.

The result is not a surprise, after Iluka told the market shortly before Christmas that sales volumes would be at the bottom end of guidance after sales of rutile - used to make titanium dioxide - had nearly stopped.

Prices have fallen by 25-35 per cent as demand has dried up - due to weak property markets, especially in China and the US.

The company's shares have responded positively, climbing 47 cents, or more than 5.0 per cent, to $9.85 by midday.

However they are nearly 50 per cent weaker than the year-high $18.88 the ASX100 company hit in January, last year, when prices were still booming.

It said it would provide specific guidance on production levels and costs when it reports its financial results next month but signalled more production cuts were planned.

"Iluka commences 2013 with inventory levels which are capable of being drawn down to meet demand before restoring production settings to match more typical underlying demand conditions," it said in a statement.

Iluka is the world's largest supplier of zircon with more than one-third market share and rutile.

Sales volumes of its products were 52.9 per cent lower at 488,900 tonnes.

Overall production was 30.5 per cent down, at 811,800 tonnes.

Greg Roberts