Iluka Resources Limited (ILU) Earnings Call Transcript & Summary

Good morning, everyone. My name is Rob Cole, and as Iluka's Chairman, I'd like to thank our shareholders, staff and guests for attending this meeting, both in person and online. This is an important event in our calendar and one that the Board looks forward to each year as it gives us a chance to hear directly from our shareholders and respond to your questions. Before we commence, please take a few seconds to familiarize yourselves with the evacuation procedures shown on screen, which would apply in the unlikely event of an emergency. Also, can you please ensure that your mobile phone has either been switched off or placed in silent mode. Iluka has operations in multiple locations around Australia. But our headquarters are located here in Perth on Whadjuk Noongar Country. With this in mind, I'd like to acknowledge the Whadjuk people of the Noongar nation as the traditional owners of the land on which we meet today and pay my respects to elders, past and present. I recognize their continuing connection to culture and contribution to this city. I also recognize the many traditional custodians that protect and preserve the rich cultural heritage in areas where Iluka's operations are located. I extend that respect to Aboriginal and Torres Strait Islander people here today and online. I'm advised that a quorum is present, and therefore, I formally declare the meeting open. To ensure everyone the best opportunity to vote, I now also declare the poll open on all of the resolutions to be considered at today's meeting. You can vote throughout the meeting. If you're voting through the online platform, you can also change your vote up until the time I declare voting closed. I'll give you a warning before closing the poll. I'd now like to introduce my fellow directors who are at the meeting today. Each director's experience and qualifications are outlined on Pages 64 to 67 of the Iluka 2022 Annual Report. I'd ask each director to stand when your name is called. First is Susie Corlett, who joined the Board in June 2019. Susie is a Member of the Audit and Risk Committee, the Nominations and Governance Committee and the Sustainability Committee. Susie is standing for reelection today. I'll introduce Susie before the resolution for her reelection, where Susie will address the meeting. Next is Marcelo Bastos. Marcelo is Iluka's longest-serving Director, who joined the Board in February 2014. Marcelo is a Member of the Audit and Risk Committee, the Nominations and Governance Committee and is Chair of the Sustainability Committee. Next is Lynne Saint, who joined the Board in October 2019. Lynne is Chair of the Audit and Risk Committee and a Member of the Nominations and Governance Committee and the People and Performance Committee. Lynne is also standing for reelection today. I'll introduce Lynne before the resolution for her reelection, where Lynne will address the meeting. Next is Andrea Sutton, who joined the Board in March 2021. Andrea is Chair of the People and Performance Committee and a Member of the Nominations and Governance Committee. Next, I would like to introduce Tom O'Leary, Iluka's Managing Director and Chief Executive Officer, who joined Iluka in September 2016; and Ben Martin, our General Counsel and Company Secretary. Also attending today and seated out there are members of Iluka's executive management team. And the final introduction is for Helen Bathurst, a partner of PricewaterhouseCoopers and the company's external auditor, who's at the venue today. Helen or her representative will be available to answer any questions shareholders may have on the conduct of the 2022 audit, the preparation and content of the auditor's report, the accounting policies adopted by the company in relation to the preparation of the financial statements and the independence of the auditor in relation to the conduct of the audit. Today's meeting is being held in a hybrid format, with participation being conducted at the venue itself and via the online platform. I'll now ask Ben Martin, our Company Secretary, to walk through the procedural matters of asking questions and voting.

Thanks, Chairman. Online shareholder participation at this meeting will be supported through the Computershare online platform. Shareholders and proxy holders will have the ability to ask questions, make comments and vote at the meeting using the online platform. Please ensure that you have registered as a shareholder or a proxy holder and not as a guest as guests are not entitled to ask questions, make comments or vote at this meeting. [Operator Instructions] To ask a question or make a comment, you may do so through the question facility on the platform. As the meeting is open, the Q&A icon located at the top of the screen is active. To send in a written question, simply select the Q&A icon, select the topic to which your question relates from the drop-down menu, type your question and press the Send button. All online questions will be addressed to the Chairman. If there is a duplication of questions, we'll group them together. And if questions are particularly long, we may need to summarize them in the interest of time. The Chairman will either answer the question or pass it to the most appropriate person to answer. If you prefer to ask a question verbally, you will need to follow the instructions on the online meeting platform. To avoid any feedback, please ensure you mute the online broadcast before you dial. If you have a question already prepared, please submit it now, and we will endeavor to cover as many questions as time allows when it comes to the relevant agenda item. For attendees here at the venue, please note that only shareholders or their proxy, attorney or authorized company representatives holding a green or yellow admission card are entitled to ask questions or make comments. All questions should be addressed to Rob Cole as the Chair of the meeting. When the floor is open for questions. Please make your way to the microphone with your admission card if you wish to ask a question or make a comment on the resolution. Please state your name and indicate whether you're speaking on behalf of a shareholding you own directly or beneficially and/or whether you are speaking as a proxy or representative for another shareholder or group of shareholders. Please also state your affiliation if you are not here today in your personal capacity. It is important that we give shareholders, as a whole, a reasonable opportunity to ask questions or make comments if they wish to do so. Therefore, I ask that speakers restrict themselves initially to no more than 2 questions at the microphone. If you have 2 questions, please ask them together and limit your questions to no longer than 2 minutes. Anyone wishing to speak more than once will be given a subsequent opportunity to do so if time permits, and in the meantime, they should kindly resume their seat. The Chairman will respond to shareholders' comments or questions submitted before the meeting first, followed by shareholders in the room, then from the online platform, and finally, any [ audio ] questions. I will now explain the online voting process. As the poll is open, the Vote icon located at the top of the screen is active. Selecting this icon will display the resolutions and present you with voting options. [Operator Instructions] Any appointed proxy who has been given discretion on how to vote should vote in the same manner. Any appointed proxy that has been directed to vote in a certain manner and has no discretionary votes to cast does not need to vote as those votes will automatically be counted in accordance with those directions. If you experience any difficulties with the online platform, the Computershare helpline number is, within Australia, 03-9415-4024, or outside Australia, +613-9415-4024. For shareholders and proxy holders here at the venue, at the time of registration for this meeting, those persons eligible to vote were given a green admission card. The voting boxes are on the back of this green admission card. If you are a proxy holder, a summary of your voting instructions has been attached to the green admission card you have received. By signing and lodging the voting card, you'll be taken to have voted in accordance with the instructions you have been given. The summary also shows any open votes that you have been given to vote as you consider appropriate. Computershare staff will collect all the voting cards after the resolutions have been put to the meeting. Alternatively, you may drop your completed voting card in one of the ballot boxes located at the exit if you need to leave the meeting early. There will be an opportunity for you to ask Computershare staff any questions about the completion of your voting card prior to the closing of the poll. Thank you for your attention.

Thanks, Ben. The voting today will be conducted by way of a poll on all items of business. Each person present, either in person online or by proxy, attorney or representative, has 1 vote for every ordinary share owned. Rod Somes from Computershare Investor Services has agreed to act as returning officer for the poll. As of the proxy close date, we've received proxies representing approximately 337.9 million shares or 79.31% of the company's issued shares. Details of the proxy received that's shown on the screen will also be shown again at each item of business before any discussion commences. I'm holding open proxies in my capacity as Chairman, and it's my intention to vote all available proxies in favor of all resolutions. The results of the poll will be announced later today to the Australian Securities Exchange and will be posted on Iluka's website. The notice of meeting for this year's Annual General Meeting was distributed to shareholders in March, and I propose that it be taken as read. So once again, hello, and welcome to the 2023 Annual General Meeting of Iluka Resources and thanks again for joining us. This is Iluka's 68th AGM, my fifth as a Director and Iluka's Chairman. Last year, I spoke briefly about being excited and humbled regarding my appointment. In delivering my first formal AGM address this morning, I'm again especially mindful of our company's prior history. For over 70 years, Iluka and its predecessors have been in the business of mining and processing, what are today called critical minerals in Australia. Those 7 decades have seen us at the forefront of many industry advancements. I've also seen several points where the company has repositioned itself and its investment proposition either through opportunity or necessity, including in the context of developments in the global economy. This record matters when considering Iluka's present position. Along with our proud history, we have a bright future. Never has this been more evident than the pathway established by the company over the past 12 months. As Tom and I outlined in our letter to shareholders in February, 2022 was an extraordinary year for Iluka, both in terms of business performance and the achievement of strategic milestones that provide a foundation for the continued sustained -- the delivery of sustainable value. Truth among these milestones is our diversification into rare earths, which Tom will speak to in a moment. But when put in proper context, much of what was delivered in 2022 was, in fact, part of a broader evolution that Iluka's been underway for some time. Little more than 3 years ago, we confronted a set of circumstances that would have resulted in the company looking quite different than it does today, with a less compelling future, had the company not taken decisive steps to evolve. Our iron ore royalty over BHP's Mining Area C, generally regarded as the best royalty asset in the world, was set for extensive growth via the development of the South Flank project. We had significant exposure to West Africa, where we had not demonstrated strong operational performance with the prospect of major capital allocation decisions on the horizon. Key plants of our Australian development pipeline and resource base, Balranald and Wimmera, required sustained investment in R&D in order to be commercialized. And our strategy for rare earth's diversification, while promising, would have left us reliant on a single customer geography with China, the dominant player in the supply chain. That was our situation in 2019. What did we do in response? We established Deterra Royalties as a new company on the ASX, with the Mining Area C royalty its cornerstone asset. This has enabled shareholders to realize substantial value. Deterra's market capitalization is currently around $2.4 billion, much higher than the value attributed to this asset when it was held within Iluka. And the company remains very well positioned for further growth as a dedicated royalty business of scale, essentially a unique offering in the Australian equities landscape. Iluka retains a 20% stake in Deterra, which adds materially to both our financial strength and dividend framework. We demerged our business in Sierra Leone, with Sierra Rutile now trading as a separately listed company. This has enabled Iluka and Sierra Rutile to focus on their respective strategies and capital allocation priorities, which in Iluka's case, are now located exclusively in Australia. We've progressed the Balranald project to final investment decision and the Wimmera project to the definitive feasibility study and reserve declaration. For Balranald, this has been achieved through Iluka's development of a new remotely operated underground mining technology. Thomas likened this to keyhole surgery for the mining of critical minerals. It's enabled Iluka to commercialize a deposit that, because of its depth, would otherwise be uneconomic, with environmental benefits including marked reductions in disturbance footprint and carbon intensity. More significantly, we are building Australia's first fully integrated rare earths refinery at Eneabba. In doing so, Iluka has foregone the short-term returns available from the export of monazite concentrate for the opportunity to build a multigenerational refining business. We're, in fact, leading the development of new supply chains, underpinned by a new Australian industry, one that places our company at the center of global electrification and the transition to a low carbon economy. This is occurring in strategic partnership with the Australian government, which has provided Iluka a $1.25 billion of nonrecourse loan to construct the refinery. Together with these initiatives represent a considerable evolution for our company in a short space of time. I think it's worth adding that we've carried this out while delivering average annual operating cash flows of $485 million per annum over the past 5 years, achieving a net cash position of $431 million as of last quarter, managing the myriad impacts of the COVID-19 pandemic and realizing total shareholder returns of 152% between the beginning of 2019 and the end of 2022. It's an impressive performance that's ultimately a testament to Iluka's people. And on behalf of the Board, I'd like to acknowledge that work and commitment, which we've observed right across the company. Tom and his team have done an excellent job, not just this past year but indeed over the past several years, delivering on Iluka's objective against an uncertain macroeconomic and geopolitical backdrop. They also, once again, repositioned our company, this time perhaps more substantially and with more potential than at any point in its past. And while much has been done, there's, of course, much more still to do. Iluka's undertaking activities that are significant globally and significant to our industry. And a period to 2025 promises to be particularly busy from an operational perspective on major project delivery and among our corporate support functions. In his farewell address last year, my predecessor spoke about the importance of Iluka's reputation given the trust invested in us by our stakeholders. As ever, the Board is particularly focused on its first and foremost responsibility to ensure the safety of our people. I'm pleased that we've had an improved safety performance thus far this year. We're following a mixed performance last year where we decreased our serious potential injuries but recorded an increase in TRIFR or TRIFR. It's also vitally important that we continue to be an industry leader on environmental rehabilitation. In October, our work in this area was further recognized by the government of Western Australia via a prestigious Golden Gecko award for environmental excellence. We received this for our bespoke seeding machine, the Flora Restorer, another internally developed innovation that's allowed us to more than double the annual area rehabilitated to native vegetation at Eneabba. In all, we rehabilitated 574 hectares of land in 2022 at a cost of $61 million. The decarbonization of Iluka's operations is technically complex and a subject of dedicated emphasis. A particular challenge relates to the use of coal as a reductant to produce synthetic rutile, for which there's no commercially feasible alternative. Works commenced on the identification and assessment of potential low-emission alternatives. And we're also in the process of identifying decarbonization pathways across the broader company. This includes continuing to implement renewable energy to power our operations. I alluded earlier [ 2 ] developments in the global economy. All these have always been relevant to Iluka's business. As Tom will cover shortly, at present, there are macro trends that are seeing increased attention paid to our country, our industry and our company. Much of the world's attention is focused on the safe, secure and sustainable supply of critical minerals for strategic purposes and to enable the energy transition. This plays directly to Iluka's hisory and strength, mining and processing critical minerals in Australia and the tremendous opportunities made possible by the company's evolution over the past 3 years. The result is that we face a bright future, one we are determined to seize, consistent with our objective to deliver sustainable value. I thank shareholders for their ongoing support in these endeavors, and will now hand over to Tom for his address.

Thanks, Rob, and good morning, everyone, and welcome. It's no exaggeration to say the past year has been momentous for Iluka. As Rob noted, we delivered record revenue, advanced our development pipeline, entered a strategic partnership with the Australian government and broke ground on Australia's first fully integrated rare earths refinery. I'd also like to echo the Chairman's comments on the importance of our sustainability outcomes, particularly in the areas of safety and environmental management. The performance milestones and other achievements that Rob has just outlined showcase our strengths and evolution as a company. They demonstrate our conviction that we can continue to deliver sustainable value by harnessing the mega trend shaping the global economy. The energy transition is underway and accelerating. The need to diversify critical mineral supply chains to achieve this transition is undeniable. And the urgency among allied and like-minded nations to bolster their sovereign capabilities, to strengthen international alliances and to establish new industries in support of national security is clear. Right now, countries are racing to win their share of the grand economy, and Iluka is determined to be a flag bearer for the possibilities at these economic and geopolitical shifts present to Australia. Rare earths are central to these possibilities. Four key rare earth elements: Neodymium, praseodymium, dysprosium and terbium, are essential to produce high-strength, permanent magnets. These magnets are, in turn, essential for the electric motors, use most notably in electric vehicles as well as in wind turbines and in defense applications. Other critical minerals like lithium enable electrification through the production of batteries to store energy. But magnet rare earths enable electrification via the motors that convert stored energy to kinetic energy for motion. Similarly, wind turbines also require magnet rare earths in the generators that convert motion to electricity. Rare earths are among the essential building blocks of an electrified lower carbon economy. We cannot decarbonize without them, which is why a secure, sustainable supply is a global priority. Given the rapid pace at which demand is set to increase over the coming decades, the supply of magnet rare earths is also only set to grow in importance. China currently accounts for 80% to 90% of all magnet rare earth oxides produced globally. For dysprosium and terbium, the key heavy rare earth oxide to China's dominance is almost 100%. And we should remember that the world's path to net zero cannot be [ traversed ] successfully without China arriving at the same destination. But Australia has its own ambitions for carbon reduction and industrial advancement. We should not be wholly dependent on others to achieve them nor should those ambitions be constrained by geopolitical tensions or a lack of national commitment. We need to align policy and commercial goals in a way that ensures Australia advances its national interest, that we develop our industrial base and that we build our economic resilience. Governments across the world are focused on these imperatives. The Australian government has been a leader, partnering with Iluka to build one of few rare earth oxide refineries globally here in Western Australia and commissioning of the Eneabba refinery scheduled of 2025. The U.S., Canada, the EU and others have all since taken concrete steps to boost domestic production of critical minerals, strengthen their supply chains and promote energy independence. The U.S. Inflation Reduction Act is emblematic of these efforts. But these initiatives aren't just defensive positions. They represent foundational investments in the future economic fortunes of those countries. We are fortunate to witness policy heading in a similar direction here in Australia. The Commonwealth's decision to develop a new critical minerals strategy has a potential to [ washer ] in a new era of sovereign capability, value addition, high-skilled jobs and economic growth. From a rare earths perspective, Australia's financing, foreign investment and domestic manufacturing policy frameworks should be calibrated to tilt the balance in support of these goals. Together, our natural endowment of key rare earth resources, strong safety and environmental standards and the ability to refine these materials domestically at Eneabba provide us with an important source of international influence. We have a [ one center ] generation opportunity to use that influence to pursue downstream industries and lift our sights beyond the mere extraction and even the refining of minerals, taking the further step to rare earth metallization would represent a crucial gateway set to the potential manufacturer of rare earth magnets in the future. We've always been a trading nation, and bulk agricultural and then commodity exports have enriched Australia for decades. But I think many would agree that as we reflect back, perhaps an opportunity was missed in the 1960s and '70s to establish lasting value addition in the Australian economy alongside the birth of the iron ore industry. Instead for a range of reasons, that opportunity was won by other nations with greater ambition and commitment. We've now arrived at a similar historic moment for critical minerals with the prospect of seeding the advanced manufacturing industries that will have increased longevity and strategic importance, and which could help underpin Australia's security and prosperity in the century ahead. And so far as rare earths are concerned, our ambition should not be limited to being the quarry of others. Refining, metallizing and eventually magnetizing these key products for ourselves and our international partners that need them is a rational and with appropriate policy settings and commitment and achievable ambition. Some argue this is unrealistic, citing the historical challenges of establishing heavy industry in an environment where Australia's proposed customers were already well established and dominant incumbents. The context of Australia's rare earths opportunity is different. Among allies and like-minded nations, key links in the value chain downstream of rare earth oxides have not been widely established. In some cases, they are absent entirely. Hence, the opportunity to establish downstream in Australia is enormous, and the global shift to electrification as well as the desire for diversification of supply chains will help support the industry's success. The alternative, though, is worth touching on. If Australia elects instead to export its rare earth feedstocks unrefined, that can only serve to strengthen the industry's existing major players, contrary to our policy objectives, particularly for heavy rare earths. There are some who advocated a phased approach, whereby unrefined concentrates are exported initially with the refinery to be established at some vague point in the future when cash flows or other circumstances might allow. History shows this second phase remains conspicuous by its absence, and exports of unrefined concentrates continue while downstream incumbents offshore simply keep getting stronger Similarly, if other countries established metallization capability with speed to market and Australia does not, it is those nations that will inevitably be the destination of investment to develop magnet industries. The tyranny of distance and transport costs to more populated markets, the next step in the value chain, was one key hurdle that constrained Australia's success in the downstream industries of the 20th century. This constraint has no application to a highly valuable critical minerals where quantities are measured in kilograms rather than millions of tons. Rare earth oxides, metals and magnets can readily bear the cost of transport. Iluka is already at the forefront of expanding the range of opportunities available to Australia. Our Eneabba refinery will produce separated neodymium, praseodymium, dysprosium and terbium, with the latter 2 heavy rare earth oxides a key competitive advantage for Iluka and for Australia over other sources of Western world supply. Remember, China [ have frozen ] accounts for practically all of the world's dysprosium and terbium oxide production, including that [ which it ] sources from Myanmar. Iluka's internal feedstocks for Eneabba include our unique rare earths stockpile, our Wimmera development in Western Victoria and our Balranald development in New South Wales. All of the operations and projects in the company's portfolio will contribute rare earths feedstocks to the refinery. In addition, Eneabba has been designed specifically with the size and capability to process a broad range of feedstocks provided by third parties, whereas previously, Australian rare earth resources would have to have been refined overseas, this is no longer the case. In strategic partnership with the Australian government, Iluka is catalyzing the development of Australia's rare earths industry by facilitating other emerging Australian mining companies into production with Iluka as their customer and with value addition taking place domestically. In October last year, Iluka concluded an agreement with Northern Minerals, just such an emerging rare earths industry -- company, for the future supply of concentrate from its planned rare earths mine at Browns Range in the Eastern Kimberley. Browns Range is at a positive global strategic importance in that it has an uncommon assemblage elevated in those heavy rare earths dysprosium and terbium. Beyond Browns Range, Western Victoria is a key source of Australian heavy rare earths and a critical minerals province of national significance. This is where Iluka's Wimmera deposit is located. Wimmera is now in definitive feasibility study following Iluka's declaration of a rare earths reserve back in February. And with that declaration, Iluka more than double for total ore reserves in the company's portfolio and confirm the economic viability of what is a potential multi-decade source of feedstocks for the Eneabba refinery. In closing, I'd like to convey my thanks and appreciation to Iluka's shareholders for their interest and enthusiasm regarding the company's activities. Both Iluka and Australia have undoubtedly benefited from our endowment of critical minerals over the last century. But today, we have a once-in-a-generation opportunity to unlock a critical new domestic industry. As a company and as a country, we should be ambitious in our aspirations for a greater legacy from our rare earth resources, a legacy that delivers new jobs and skills, makes a meaningful contribution to the world's switch to a lower carbon economy and helps to build our national economic resilience. Thank you.

Thanks, Tom. Transcripts of both my address and that of Tom's are available on the company's website and the ASX company announcement platform. We now come to the formal business of the meeting. Each of the agenda items will now be considered in turn, with an opportunity for shareholders to ask questions before voting on each item. As mentioned, all voting today will be conducted by way of a poll, which is already open. You may vote using your green voting card or through the online platform using your web browser or other online device. Now let's proceed to the first item of business. The first item on the agenda of the meeting is to receive and consider the annual financial report, the director's report and the auditor's report for the company and its controlled entities for the year ended 31 December 2022. During this item of the business, we'll also give shareholders as a whole a reasonable opportunity to ask questions or make comments about Iluka and its management. Shareholders may also ask questions of the auditor. Such questions must be relevant to the conduct of the auditor or the preparation and content of the auditor's report, the accounting policies adopted in preparing the financial statements and the auditor's independence. Please note that no resolution or vote is required on this item.I'll now open the meeting to questions or comments from shareholders. If you have a question that relates to the other items of business, including director reelection, remuneration or the grant of securities to the Managing Director, I'd ask that you hold your questions until we reach those agenda items. I'll first respond to comments or questions received before the meeting. The only submitted shareholder question is from [ Mr. David Samuel ], and it reads, "What steps are the Board taking to study and report to shareholders on how it intends to protect the company's business and assets in the event that hostilities breakout between the PRC, People's Republic of China, and in Taiwan and it's allies?" Okay, thank you for the question. Obviously, live conflicts in the region would be catastrophic generally, including for all businesses. It's very little -- Iluka, obviously, very little that Iluka can do to influence matters of of geopolitical level. What we can do, however, and what we are doing is ensure our businesses as well prepared as possible to succeed in the global macroeconomic and geopolitical circumstances of our time. And so we continue to ensure diversity of our customer base for our existing product suite of zircon and titanium feedstocks. We also continue to be deliberate and measured as to the locations for storage of inventories of products. And Iluka's diversification in rare earths comes at the time when we're seeing allied and like-minded nations assigning -- increasing priority to the development of sovereign capabilities and diversified supply chains. And rare earths are essential for the production of the electric motors, used most notably in electric vehicles as well as wind turbines and in defense applications. So China produces apparently more than 80% of the world's rare earth oxides. And for heavy rare earths, this increases to almost 100%. Iluka's production of refined rare earths in Australia is a game changer for the company but also for Australia's rare earths industry and for the diversification the global rare earths supply chain. So thank you for your question. Any questions or comments on this item of business from the floor? Yes?

Chairman, John Campbell, representing Australian Shareholders' Association. I have proxies from 89 shareholders and representing about 308,000 votes. It doesn't get me into your top 20. Congratulations to the Board and the management on the milestones achieved during 2022. I think particularly the [ divestment ] of Sierra Rutile is important to us. But more particularly, perhaps the [indiscernible] facility with the Export Finance Corporation and the equipment to build the rare earth refinery in Eneabba. I've got a couple of questions on it. First of all, you tell this -- kind enough to have a pre-AGM meeting with ASA. You told us that you are had a front-end engineering design feed study underway and nearing completion. Has that supported the capital cost of the refinery? And do you think it's going to be completed on time, on budget? And secondly, the technologies involved in separating the RE components are complex. Are you confident that the technology that you're using will achieve the result that's required?

Okay. Thanks, John. Yes, so we are in front-end engineering design process. It's an extensive process. It's underway. It involves cost and scope reviews and value optimization. It will take some time to complete, another straightforward exercise. We anticipate completing that exercise later in the year. And once we've gone through that process, we'll be in a position to [ deliver to ] the market in relation to capital cost, not in a position to [ disclose ] further at this stage. We need to go through that process. In relation to the technology, yes, this is proven technology. It's not a new thing to the world. Rare earth oxides are produced in vast volumes at the moment, and we've got access to proven technology.

Chairman, I do have some other questions. Shall I sit down and let someone ask or I can?

You're welcome to ask another question, if you wish.

It doesn't seem to be a lot of competition.

Yes. There are actually a few coming online, which is quite a few coming online. But you're welcome, John.

Well, first of all, on rehabilitation, are you confident that the provision that you've got is the solution in terms of [ modern ] requirements. And I think there's a feeling, I guess, that -- concern that mining companies generally don't put enough aside for rehab and the process gets delayed to the point that costs escalate and it becomes more expensive.

Not us. I'll say. I mean, we pride ourselves on environmental excellence. It's absolutely core to our operations. We carried it out in real time, and that's all stages, mining, processing, waste management and rehab. Rehabilitation is an area we are leading in the mining industry. And from a Board's perspective, you can't do that unless you very carefully made adequate provision. So I've got full confidence in the provisioning exercises we've undertaken. They get reviewed regularly. But I might ask Tom, if you want to elaborate. Tom?

[ One thing ] briefly, our rehabilitation efforts are, as Rob said, continuous, so during the mining process. But after closure, we actively rehabilitate. We don't leave sites there forever and come back to them maybe one day as some have historically in the past. So we spent about $60 million per annum on rehab. And in Rob's prepared remarks, he talked about the amount of land we rehabilitated over the last year. We do, as Rob said, pride ourselves on our rehabilitation. And actually, in the last year, it's highlighted in the annual report, we actually achieved closure of one site, which is pretty rare in Western Australia and Australia more generally, to meet all of the requirements and have the rehabilitation closed out by the state government. I'd also note that in respect of rehabilitation, we -- it's a focus area for our external auditors. So we check it internally, obviously, and then that's a focus here for our external auditors every year.

Final question then. The government is [ anticipating ] 30% reduction in carbon emissions from the [ 15 largest emitters ]. And I understand that single [indiscernible] plan has one of the interest. What is the the effect on that? I mean. As I said, [ 2030 ] is fairly short, [ based on ] time to renewable -- for alternatives to coal as we adapted to -- for refining to be developed. I -- how confident are you that, that can happen? And what are the consequences if it doesn't?

Okay. Thanks, John. So yes, I can confirm that our North Capel facility is a covered facility under the safeguard mechanism. We produce synthetic rutile from ilmenite down there. The process requires coal as a reductant, [ hasten ] to add that there is no commercially viable alternative to coal at present. We're extensively working on studies to -- with a view to identifying a breakthrough there. But as things stand at the moment, there's no commercially viable alternative. So it's analogous to the global challenge faced by the steel industry with metallurgical coal. It relies on to -- our North Capel facility relies on coal. And it is [ obviously see as ] one of the covered facilities. What our team, though, has been doing is working with the Commonwealth government to ensure that the pursuit of emissions reduction doesn't compete with or conflict with other important, obviously, objectives of emission, including supporting and building Australian critical minerals manufacturing capability. And synthetic rutile is on the list of critical minerals. So we've been working with them. The actual safeguard rule was only released on Friday. We're still studying it, but early indications that will be diversified as an emissions-intensive, trade-exposed manufacturing facility. So there's been recognition that were emissions-intensive, trade-exposed. If we [indiscernible] down here, the emissions will go offshore. And it's a manufacturing facility, I think, recognizing the national interest in building critical minerals manufacturing. So that -- from the early indications, that means we'll be entitled to some tailored emissions reduction profile subject to financial tests or financial impacts being exceeded. We won't simply have to comply with the straight-line reduction. There will be a tailored reduction. It will still impose a significant [ cost ] on the business. We're still in the process of studying it. But at this stage, it looks as though there will be at least some relief for us. It's a work in progress. Yes, sir.

Robert Heinemann, a shareholder. I'm interested in dividends, so ideally, I would like to see a steady dividend. So every 6 months, you get the same dividend or nearly increasing a bit. In the case of Iluka, the dividends tend to go way up and the way down and so on. The prices of the main products are going in rutile up a lot and down a lot. So that has a huge effect on the profit. The volume of sales also fluctuate quite a bit. And especially in the next few years, there's going to be a lot of development expenditure. So money that could be used for dividends will be used for developing different assets. So what I would like to see is if you have a really good year, you hold back the dividends a bit. If you have a bad year, maybe you borrow a bit of money or dip into reserves and and try to keep the dividend more or less steady, not 100% steady, but to some extent, but that's okay.

Thanks, Robert. So we've got a dividend framework. It's consistent, 40% of free cash flow not otherwise required for capital requirements of the company. We've also in publicly to channel through the shareholders, our dividends from Deterra, so there is we've got a consistent framework and it involves some consistency of dividend flow. For our company, we think that's appropriate, rather than adopting for a kind of fixed trajectory, fixed return to shareholders increasing every year or steady. The framework remains the same. And over time, I think it shows we've been pretty generous in dividend payments and always being mindful of the need, but fixing it, we don't believe makes sense for our company. We think the framework we've been applying does and it requires us to weigh up a number of different factors, including future growth, future shareholder value. Thank you for your question.

Like, I think a lot of your shareholders will be maybe retired people who need dividends to survive also pension funds and the superannuation fund which also want to have fairly steady income.

Yes, I understand it. The framework won't so absolutely have every shareholder. And I expect that there are shareholders who will have different expectations. What we believe is in the best interest of the company as a whole, balancing up all shareholders' interest. And we think our framework makes sense for the moment. Are there any more questions.

So Chairman, this is Peter Kipper, a shareholder. Just first of all, Mr. Larry's talk is very good. And one of the things we can't have, is shutting down synthetic plants. Which would be absolutely devastating because that's exactly what we need. So the last thing we'd want is to shut down coal from manufacturing. A couple of questions. We, Iluka, supporting Northern mining in any way like helping engineering studies or not just finance, but metallurgy or geology.

Sorry, I didn't get the first part of that.

Yes. The Northern mining in.

Northern Minerals.

Sorry. Yes. The Northern Territory, is Iluka's helping in geology or metallurgy in design . And the other thing was just comment in the quarterly report you, it missed because of the shipment was being late. Whilst presumably, that shipment was being made, it would have been nice to say at the quarterly report, that it has now been made or it will be made on .30th of whatever...

I might throw to Tom on both aspects in relation to the support we're providing. And if you can answer around shipment, you pick that one up as well?

Yes. Well, maybe I'll take that one first. Thanks, Peter. And thanks for your comments on speech. A lot of work goes into them and and it's a very exciting time for the company, and we're pretty excited about it. But the shipment, the synthetic rutile shipment did go or be a little late, and we'll be reporting that in the next quarterly report. The other question about Northern Minerals, as you alluded to, we have a financial interest there, and we're supporting them financially with shareholding and low note and so on, secured against the tenement. So we're supporting them in that way, but we're also engaging with them along the way, as you'd expect. But they have their own very competent people there to go about the development of their project, in fact, we were very unfortunate to lose one of our very good exploration geologists a little while ago, but fortunately, she was going to Northern Minerals. So it was quite good that we'll be confident about the work that she'll be doing there. But the -- yes, so I think we are engaging with them along the way, but we're confident that they've got good people to develop their project and they are looking to come to the market, I think, towards the end of the year with progress on it.

Okay. Any more questions from the floor.

Ben, are there any online questions or comments?

There are several online questions. And The first is from a shareholder, Mr. Kevin Daly. His question is, to what extent has management had any experience in actually building a rare earth processing plant?

Okay. Thank you, Mr. Daly. So we haven't built a rare earth oxide refinery before. Today obviously, in the numerous stages before a final investment decision in relation to the rare earth refinery, we had to ensure ourselves that we have the capability to build it, operate it safely, reliably and so on. So that was obviously something we needed to get completely satisfied with very early on. We've partnered very early on with a group called [ Krista ], who do have that capability, a lot of the capabilities in China, but they're a French-based organization and they were and have been an integrated part of our team as we led up to our final investment decision. So while we haven't built one ourselves, we've absolutely satisfied. We've got the capability to build it.

And Rob, the next question is again from Mr. Daly and on the theme of rare earth processing. The question is how much extra processing is involved in going from the rare earth element oxides to the rare earth elements themselves.

The next stage of metalization. I'm probably not the best person to answer, I'm going to throw that to the Managing Director to answer.

Just in some context, at the moment, Australia exports concentrates. So our one other rare earth company, Liners, exports concentrates to Malaysia, where it's processed at a refinery there. We produce concentrates at any aberrant have done for many years. And the next stage is building this refinery that we're doing. Building a refinery and processing those concentrates, I describe it as an order of magnitude step up in complexity and the capital cost associated with it. So going from concentrates, which is all that Australia does at the moment to refined rare earth oxides is an order of magnitude step, the next step beyond rare earth oxides. So to metallize them, as Rob alluded to, is not particularly complex, but unfortunately it's done in relatively few places globally. It's done in China extensively. It's done in Vietnam and Thailand in facilities owned by Chinese entities. So I think that's why I focused on it in my speech that it's important, I think, that we contemplate metallization because with it will come a greater diversity of customers that we can supply those products to. So the step itself is not complicated. It's not the order of magnitude step up that is concentrates to refined rare earth oxide. But I don't want to minimize that step. It's an important step, and we're certainly focused on going down that path in time.

Okay. One final question from the shareholder, Mr. Daly, and that is in the sustainability report, Mr. Bastos claimed in connection with rare earth elements that we can't decarbonize without them, the question I asked Mr. Bastos to elaborate on that, but I understand that it's appropriate that you reply.

I'm happy to field that on behalf of Mr. Bastos, if you're okay with that, Mr. Bastos. So what Marcelo is referring to is the global decarbonization is substantially linked to the global electrification movements at front, center in all the global efforts. As Tom talked about in his talk, rare earth are a pretty good component, permanent magnets. They are used in electric motors, wind turbines. And so in that sense, and there's no viable or feasible alternative at the moment. So in that sense, we can't decarbonize without rare earth elements. That was the sense that I could accurately convey that., thank you for the question..

Rob, there are a few more. Several from our shareholder, Mr. Stephen Mayne. His first question is, did any of the five main proxy advisers, Axion, Ownership Matters, Glass Lewis, ISS and ASA recommend a vote against any of today's resolutions. Which of the proxy advisers are covering us and have there been any material proxy protest vote.

Okay. Thank you for the question, Steven. The proxy adviser are a subscriber service and their reports proprietary information, and I don't propose to talk today about what their actual recommendations were, you'll see the votes coming through on the relevant resolution. What I will say if there has been anything controversial particularly topical coming out of the proxy adviser reports, you could anticipate we would have covered that in my address to the meetings or talks.

And the next question from Mr. Mayne, will you disclose the proxy votes before the debate on each resolution. So shareholders can ask questions about the reasons if there have been any protest votes. Also, why not disclose the proxies to the ASX with the formal addresses like others now do.

Okay. So to answer the first question, we already do, As I understand that I've misunderstood the question. We disclose before debate the results. In relation to pre-exposing to the ASX, we have thought about that, here's another view on that, but you don't want to discourage shareholders from attending by putting it up on the ASX showing results if it's an overwhelming majority and suggestions indicating to shareholders it's a fate of the company. But having said that, we'll take on board your feedback. We don't propose to be an early mover on that. We'll monitor market practice and if it becomes a more common market practice, we may well consider it. Thank you.

The next question from Mr. Mayne, is how much are we currently paying to the WA government in royalties? And what is the formula, is there a risk that the WA government could emulate the recent Queensland government move to dramatically increase the royalty rate for coal miners?

Okay. Tom, can I ask you to pick up those. I don't know what the -- off the top of my head, what the -- what we're paying for the WA government as royalties at the moment.

Yes. I think the royalties are set out in the annual report, and we're paying $46 million in royalties. That's excluding SRL, the Sierra Rutile. So they're Australian royalties. The second question is the risk that the WA government could emulate the recent Queensland government move to dramatically increase. I think that's a very low risk, and we're not spending a lot of time focused on it.

Okay. And the next question from Mr. Mayne is the history of the mergers in Australia is that one of the companies normally gets taken over within a couple of years. Does the Chair believe the demerger has added a takeover premium to our shares and who are our biggest competitors and likely predators. Could any of them bid for us? Or does the CEO believe that we are critical to Australia and the foreign takeover would be difficult to achieve politically.

Thanks again for the question, Steve. What I would say is I think through the process of demergers, we've made very disciplined decisions in both cases. And as I said in my speech, I think we have had a very substantial value for shareholders through that process. I think all the other things I talked to in my introductory speech indicate all the other steps we're creating to -- we are taking to create shareholder value, including a final investment decision on any other rare earth refinery, which is a game changer for the company. I think there's a lot more value for us to create in the future through that. And frankly, I don't propose to get into speculating around who may or may not be looking at us at the moment, have a book open on us at the moment and may be considering this, we're just going to focus on creating shareholder value. Thank you for the question.

And Rob, there are no further online questions on the site.

Thank you, Ben. I'll now move to the audio facility. Operator, are there any comments or questions from the audio facility, okay so there are no questions online from audio, thank you. That concludes this item of business. We'll now move on to the next item. Next item of the business is the reelection of Susie Corlett, which is resolution one in the notice meeting. Details of Susie's qualifications and experience is set out in the notice of meeting. Susie was appointed by the Board in June 2019 and is considered by the Board to be an independent director. Susie retires at this meeting in accordance with Article 17.2 of the company's constitution and being eligible, Susie offers herself for reelection. Having reviewed Susie's performance, the Board considers Susie's skills and experience, in particular in mining, exploration, investment banking and mining project finance, coupled with her international experience is valuable to the Board and I look as long-term sustainable success. The Board also considers Susie as an Independent Nonexecutive Director. She's a member of the Audit and Risk Committee, Nominations and Governance Committee and the Sustainability Committee. The Board, with Susie abstaining unanimously supports Susie's reelection. I'd now like to invite Susie to address the meeting.

Good morning. I have had the honor of serving on your Board for almost 4 years. I started in 2019. A time when the resource industry, indeed, the globe was on the cusp of a particularly challenging period, one that would require Iluka's board to make some significant decisions about how we do business going forward. Throughout my executive career as a geologist in mining operations and in global mining private equity and investment banking, I've seen many periods of greater uncertainty and rapid change. These experiences were valuable in deliberations over decisions that supported Tom and the rest of our exceptionally strong management team in safely and successfully navigating COVID, listing Deterra Royalties and subsequently Sierra Rutile. During this period, the company also advanced a range of technically challenging and innovative projects such as Wimmera and Balranald. In contributing to Board decision making, it was useful to tap into my reservoir of technical expertise and track record of disciplined capital allocation to major projects. Uncertain times also create opportunities. And one of the great lessons I learned from restructuring mining businesses in private equity was in capturing upside opportunity at the same time as protecting downside risk. I reflect on this learning often while serving on Iluka's Audit and Risk Committee. But most particularly, as the board weighed up long-term and risks and returns to shareholders in establishing a domestic rare earth industry in Australia, I serve as a Nonexecutive Director on two other listed boards, both of whom also focus on this safe and responsible production of critical minerals. These common goals align with my personal values and guide my contributions on the sustainability Committee at Iluka, it has been a privilege to serve on your Board. I'm seeking your support for my reelection. So I may continue to contribute to the ongoing success of this remarkable company. Thank you.

Thank you, Susie. The proxies received and [indiscernible] business is shown on the screen. I'll now open the meeting to any questions or comments from shareholders. As there are no comments or questions received in advance of the meeting, are there any questions or comments on this item of business from the floor, okay. Ben, are there any online questions or comments.