Thoughts on ILU’s recent poor performance?
Hi Team, ILU has had a significant fall following the recent announcement, can you please share your view on the announcement and outlook moving forward. Regards Jeff
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Answer
Jeff,
Iluka (ILU) gave an investor presentation and quarterly review this week which has poorly received by the market with the stock dropping ~8% into Friday’s close. Mineral sands price tailwinds have started to ease with demand indicators over the past 3-4 weeks suggesting that the supply & demand balance has dialled back and prices are tracking lower. Fortuitously, ILU has built a healthy cash buffer (deleveraging via net cash) ahead of some major long term growth drivers – rare earths – Eneabba, Wimmera and mineral sands –Atacama.
ILU is well funded not least because of the “risk sharing” rare earth project funding with the Australian Government. The drop by ILU back towards the $8.50 region has clearly been disappointing, we never like to see stocks we own fall in price but at this stage we are holders however we are not considering averaging in the current environment where stocks are struggling to recover from sell-offs.
We like the rare earths upside for ILU but the mineral sands headwinds feel likely to persist short-term.
