Shareholders in mineral sands producer Iluka Resources can hang around for the rest of the year in the knowledge that could very well get a New Year present of a capital return in 20912.
The company’s AGM was told yesterday that that the company wants to return surplus cash to shareholders, once it has cleared its net debt of $247 million by the end of 2011.
"Where this company generates surplus cash and there is not deemed to be an opportunity for its effective utilisation in the near to medium term, the approach will be to distribute that cash to shareholders in the most appropriate and effective manner," CEO, David Robb told investors at the meeting.
So some sort of return is now on the cards for 2012.
And if you have been a shareholder longer than a year you may as well hang around because you’ve seen the shares jump from a low of $15.29 to a high last Friday of $15.28. And why abandon some extra cream for the sake of selling now if that cream will be around in a year’s time?
But the good news from the AGM must have been too much for investors to take, the shares fell to a low of $14.72 before bouncing to end up 8c at $15.16, 12c off its 52 week high of $15.28.
But that was better than the 0.7% drop in the wider market in another day of illogical trading.
Not even a good performing stock like Iluka has been able to withstand some of the nervy selling and silly stories doing the rounds this week which have sent the market south by more than 2%.
Chairman, John Pizzey told the meeting that "We expect significantly improved financial results over 2011 and 2012, and beyond.
"The company’s cash flow generation is much stronger. This has enabled debt to be reduced.
"Our net debt has reduced from $312 million at the 31 December 2010 to $247 million at the end of April."
Iluka shareholders also heard that the company will boost production of zircon and high grade titanium ore after achieving price increases in the first half of calendar 2011.
Managing director David Robb said on Wednesday Iluka also would use surplus cash to pursue organic growth, rather than acquisitions, as there were few attractive opportunities within the mineral sands industry.
"Iluka will invest in internal opportunities within its existing business, to develop both physical and human resources and to enhance the intellectual and technical capabilities of the business."
"Iluka is building a strong balance sheet which better enables us to contemplate acquisitions than has been the case previously.
"Quite apart from cash flow, we now have stronger internal capabilities and more time to think about, to identify, to screen and to assess such opportunities."
Mr Robb said Iluka had achieved materially higher prices for titanium in the first half of calendar 2011, after moving away from "cap and collar" contracts, which limited price rises to a few per cent each year.
"Supply is tight, especially of high grade titanium products," Mr Robb said.
"In this environment, a fundamental change in contractual pricing arrangements is now occurring."
Mr Robb said Iluka had entered into supply contracts for rutile and synthetic rutile for six months, as opposed to the previous norm of 12 months or more.
That resulted in price rises of 30% to 40% for the first six months of 2011.
He said there was "considerable headroom" for sustained increases in zircon prices.
