Iluka Resources has booked a first half profit due to higher mineral sands production and a jump in prices, and expects strong prices will continue amid tight supply.
Shares in Iluka had jumped 78 cents, or 5.03 per cent, to $16.28 by 1512 AEST after reaching $16.86 in earlier trade.
Net profit for the six months to June 30 was $145.9 million, compared with a $6.6 million net loss for the same period last year, although this loss was followed with a calendar 2010 net profit of $36.1 million.
Iluka said a full half year contribution from new higher margin operations, Murray Basin in Victoria and Jacinth-Ambrosia in South Australia, was also behind the return to profitability.
Analysts at investment bank UBS said the result was 11 per cent ahead of its estimate of $131 million, seemingly due to accounting for higher stockpile levels.
This was a timing issue, resulting in a greater than expected profit in the first half and a likely lower profit in the second half, UBS said.
Iluka has increased its stockpile to maintain concentrate levels at the Murray Basin operations ahead of a switch from one deposit to another in the first quarter of 2012, so as to sustain continuity of supply to customers.
Managing director David Robb said the transition from the Kulwin deposit to the Woornack, Rownack and Pirro deposits was on track, with site preparation well advanced.
Not including any future exploration success, the Murray Basin operations were currently slated to last until the mid 2020s, Mr Robb said.
Iluka was also meeting all targets at its recently commissioned Tutunup mine in Western Australia, a small, $30 million operation that produces ilmenite to feed the company’s synthetic rutile kiln, he said.
Iluka said successful online tenders for zircon and rutile in the year so far, including this month, had been consistently higher than contracted prices and were well in excess of the volume offered for sale.
However, Mr Robb said quarterly contract price increases for zircon may moderate.
“You can’t keep achieving lifts of the magnitude that occurred in the third quarter because accumulatively it just becomes impossible,” he told AAP.
“Given all of the global confidence challenges at the moment, it’s reasonable to expect people may take their foot off the accelerator for a while.”
Tight supply and strong demand for mineral sands was likely to continue for several years, with few new projects expected to come on stream worldwide, he said.
Iluka declared an interim dividend of 20 cents per share, unfranked.
