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Iluka Resources flags US$290M impairment on struggling Sierra Rutile operation

Australian mineral sands explorer Iluka Resources Ltd. flagged a full-year impairment charge of US$290 million to the carrying value of its underperforming Sierra Rutile operation in Sierra Leone.

Iluka said Dec. 17 that Sierra Rutile has not lived up to the A$455 million investment Iluka made in December 2016 while noting that it does not have a defined development approach for the Sembehun deposit, which would boost rutile production capacity to about 240,000 tonnes per annum from 175,000 tpa.

Iluka expects a write-down of Sierra Rutile's deferred tax assets of about US$115 million. As a result, the operations' carrying value would be reduced to about US$50 million.

Iluka said the impairment charge will not affect studies for the Sembehun deposit as it continues to implement various measures to improve the operation.

Due to a decline in Australian dollar bond rates, the company also flagged an increase in rehabilitation costs to A$60 million, including a A$42 million increase to the provisions for open sites and a profit and loss expense of A$18 million for closed sites.

Iluka noted that Sierra Rutile's rutile production as of September was 93,000 tonnes, with full-year output anticipated at 135,000 tonnes.

In 2020, the operation is expected to produce 170,000 tonnes of rutile, 5,000 tonnes of zircon and 70,000 tonnes of ilmenite.

Cash costs of production for 2020 are estimated at US$125 million, while unit production cash costs are forecast at US$715 per tonne of zircon and rutile.