Iluka to mothball Jacinth-Ambrosia mine in South Australia, axe 33 jobs

A SOUTH Australian mine will be mothballed for up to two years to “free cashflow at a time of low industry returns”, resulting in 33 direct jobs being axed and more indirect job losses expected.

A worker pours into casting moulds molten mineral sands from Iluka Resources mine Jacinth-Ambrosia. File photo supplied by Iluka.

A SOUTH Australian mine will be mothballed for up to two years to “free cashflow at a time of low industry returns”, resulting in 33 direct jobs being axed and more indirect job losses expected.

Publicly listed company Iluka will suspend mining and concentrating activities at its Jacinth-Ambrosia minerals sands mine in Eucla Basin in the far north of the state.

Jacinth-Ambrosia is a globally significant source of zircon and, at peak production, has the ability to supply 25 to 30 per cent of the world’s zircon demand.

The suspension will start on April 16 and run for 18 to 24 months.

The remaining 46 positions are to be retained or redeployed, managing director David Robb said.

The decision will increase the company’s free cash flow at a time of low industry returns.

“The suspension is consistent with Iluka’s shareholder focused objective in that it will improve cash flow available for shareholders at a time of subdued market demand while also contributing to an improvement in zircon market dynamics as demand recovers.”

Shares are trading more than one per cent higher at $6.77 at 10.45 AEST.

“Inevitably, there will be further job losses associated with contractors and support services to the operation.”.

The company expects a net cash cost benefit of about $30 million this year after $16 million in idle, restructure and rehabilitation costs.

In 2017 the net cash cost benefit will be $45 million after costs of $25 million.

Mr Robb said Iluka will work with the state government and regional bodies to co-ordinate transition arrangements.

he said the operations had in the past been altered to reduce production and was currently operating at capacity to maintain operating efficiency.

“In balancing its finished product supply to demand, Iluka has been prepared to build and hold stocks of heavy mineral concentrate with a view to drawing that inventory down over time,” Mr Robb said.

It will continue to supply customers by processing the existing concentrate inventory of 800,000 tonnes (currently at Jacinth-Ambrosia) at its plants in Victoria and Western Australia.

Some operations will be maintained “in such a manner” so it can be reactivated rapidly with global market recovery.

Since Iluka is moving the concentrate from the mine, its South Australian royalty payment obligations will be unaffected by this decision.

Iluka will release its financial results this Friday.