AUSTRALIA Price Valuation A$ 7.52 Event 12-month target A$ month TSR % +3.4

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1 AUSTRALIA ILU AU Price (at 05:10, 19 Feb 2015 GMT) Neutral A$7.59 Valuation A$ DCF (WACC 9.0%, beta 1.5, ERP 5.0%, RFR 4.5%, TGR 3.9%) 12-month target A$ month TSR % +3.4 Volatility Index Medium GICS sector Materials Market cap A$m 3, day avg turnover A$m 13.2 Number shares on issue m Investment fundamentals Year end 31 Dec 2014A 2015E 2016E 2017E Revenue m , ,032.2 EBIT m Reported profit m Adjusted profit m Gross cashflow m CFPS CFPS growth % PGCFPS x PGCFPS rel x EPS adj EPS adj growth % PER adj x PER rel x Total DPS Total div yield % Franking % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x ILU AU vs ASX 100, & rec history Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, February 2015 (all figures in AUD unless noted) 20 February 2015 Macquarie Securities (Australia) Limited SR kiln restart in FY15 Event ILU has released production and financial guidance for FY15 including plans to recommence production of synthetic rutile with the restart of the SR2 kiln. Impact Z and SR production volumes higher. ILU expects to produce ~400kt of zircon in FY15, a 12% increase on 2014 and a ~30% increase on our expectation. The increase in production is primarily a result of a return to normal utilisation levels at J-A. Mining at WRP will finish in March, resulting in a ~20% fall in rutile production. SR kiln restart. However, the restart of the 200ktpa SR2 kiln in April is expected to deliver 140kt of synthetic rutile. The recommencement of SR production in April comes slightly ahead of our anticipated June 2015 restart. No guidance is provided on ilmenite production and as previously announced the production for the US operations will be wound down in Total costs up, unit costs lower. Total cost of Z/R/SR production is expected to be $410m, up from $357m in The increase in costs is largely attributed to higher SR production costs however these are offset by higher production volumes and Z/R/SR unit cost of production is expected to fall ~11% Y-on-Y to $635/t. Sales volumes not guided. No specific guidance was given on sales volumes but ILU expects that these may exceed forecast 2015 production volumes as was the case in 2014 with the continued draw down of inventories. Similarly no guidance was provided for the MAC royalty; we forecast $58m based on an average FOB price of US$58/wmt. Earnings and target price revision After incorporating ILU s FY15 guidance our FY15 earnings forecast jumps 61%. This is driven by higher zircon and SR volumes and reduced unit costs but also assumes a strong recovery in mineral sands prices. We note that if we roll forward ILU s achieved pricing in 2014, our forecast falls 65%. Our FY16 forecast remains largely unchanged and our FY17-FY18 forecast falls 10% with the rundown of processing in the Murray Basin. Price catalyst 12-month price target: A$7.50 based on a DCF methodology. Catalyst: Mineral sands prices will remain the key catalyst for ILU. Outside of this, completion of the KMR transaction could provide a positive catalyst. Action and recommendation Neutral. Recent commentary for ILU has suggested early signs of improvement in the Titanium Dioxide market and the restart of the SR kiln would appear to indicate some confidence in a recovery. However, whilst the TiO2 market may be improving, in our view a meaningful improvement in zircon pricing is also required to support a higher valuation. Please refer to page 5 for important disclosures and analyst certification, or on our website

2 FY15 Key physical and financial parameters analysis Z and SR production volumes higher, SR kiln restart ILU expects to produce ~400kt of zircon in FY15, a 12% increase on 2014 production and a ~30% increase on our expectation. The increase in production is primarily a result of a return to normal utilisation levels at J-A. The Virginian operations are expected to contribute ~40kt of zircon but could come in short dependent on the timing of the final decision to cease processing. Rutile production is expected to fall ~20% to ~140kt with the completion of mining at Woornack, Rownack and Pirro in March. However, the restart of the 200ktpa SR2 kiln in April is expected to deliver 140kt of synthetic rutile; feedstock for the SR kiln is already building with the recommencement of mining at Tutunup South. The recommencement of SR production in April comes slightly ahead of our anticipated June 2015 restart. No guidance is provided on ilmenite production. As previously announced, the US operations will be wound down in Fig 1 FY15 guidance summary and changes 2014 actual 2015 guidance Variance Macq Old Variance Macq New Zircon kt % % 407 Rutile kt % % 132 Synthetic Rutile kt nmf % 130 Total Z/R/SR kt % % 670 Total cash cost of production A$m % 666-7% 655 Unit cost of production A$/t % % 641 Total costs up, unit costs lower Total cost of Z/R/SR production is expected to be $410m, up from $357m in The increase in costs is largely attributed to higher SR production costs. However, these are offset by higher production volumes and Z/R/SR unit cost of production is expected to fall ~11% Y-on-Y to $635/t. Other cash costs including royalties, marketing and exploration are higher than 2014 driven by a higher royalty rate at J-A and capex of $120m, double from 2014 levels. Sales volumes not guided No specific guidance was given on sales volumes but ILU expects that these may exceed forecast 2015 production volumes as was the case in 2014 with the continued draw down of inventories. Similarly no guidance was provided for the MAC royalty; we forecast $58m based on an average FOB price of US$58/wmt. Fig 2 We model FY15 sales broadly in line with production FY14 actual sales (kt) FY14 average received prices (US$/t FOB) FY15e sales (kt) FY15e price assumption (US$/t FOB) Zircon 352 1, ,250 Rutile ,053 Synthetic Rutile Total Z/R/SR ,151 Earning changes Our FY15 earnings forecast jumps 61% on higher sales volumes, reduced unit costs and a strong recovery in mineral sands prices. Our FY16 forecast remains largely unchanged and our FY17- FY18 forecast falls 10% with the rundown of processing in the Murray Basin. Fig 3 Our FY15 earnings estimate assumes a ~20-35% improvement in prices YE Dec 2014A 2015E 2016E 2017E 2018E NPV/sh Reported profit (A$m) - old Reported profit (A$m) - new Change 0% 61% 4% -10% -10% -2% 20 February

3 Iluka (ILU-AU) Neutral Share price: A$7.78 Target price: A$7.50 Profit & Loss 2H14A 1H15E 2013A 2014A 2015E 2016E 2017E Price Assumptions 2H14A 1H15E 2013A 2014A 2015E 2016E Sales revenue A$m ,250 1,032 Zircon U$/t 1,250 1,042 1,311 1,057 1,250 1,250 add other income A$m Rutile U$/t 862 1,053 1, ,053 1,250 Total revenue A$m ,021 1,319 1,097 Synthetic rutile U$/t , ,150 less operating costs A$m (224) (279) (469) (441) (544) (610) (522) Ilmenite U$/t less corporate/other A$m (28) (27) (42) (48) (53) (54) (55) EBITDAX A$m Production 2H14A 1H15E 2013A 2014A 2015E 2016E less exploration expensed A$m (27) (14) (45) (45) (29) (48) (31) Zircon kt EBITDA A$m Rutile kt less dep. & amort. A$m (97) (68) (182) (191) (134) (135) (94) Synthetic rutile kt less other non-cash costs A$m Total Z/R/SR production kt EBIT A$m Ilmenite kt less finance costs A$m (18) 1 (50) (32) Pre-tax operating profit A$m Unit cost of production 2H14A 1H15E 2013A 2014A 2015E 2016E less tax expense A$m (9) (31) (6) (14) (79) (147) (128) Z/R/SR (incl of by-prod costs) A$/t Net operating profit A$m add non-recurring items A$m (82) - (40) (82) Reported profit A$m (74.2) (62) Sales 2H14A 1H15E 2013A 2014A 2015E 2016E Adjusted profit A$m Zircon kt Rutile kt EPS (adjusted) Acps Synthetic rutile kt EPS Grow th % (0.3 ) 8.5 (84%) (67%) 857% 85% (13%) Total Z/R/SR sales kt Ilmenite kt DPS (Ordinary & Special) Acps EFPOWA shares on issue m Reserves Region Country mt HM C Ilmenite vircon Rutile Eucla Basin AU % 2.48% 2.14% 0.17% Cashflow Analysis 2H14A 1H15E 2013A 2014A 2015E 2016E 2017E Murray Basin AU % 9.36% 2.48% 3.63% Cash receipts from operations A$m ,071 1,438 1,194 Perth Basin AU % 3.25% 0.55% 0.28% less operating costs A$m (287) (287) (603) (569) (583) (638) (598) Atlantic Seaboard USA % 2.87% 0.80% 0.00% less interest paid A$m (6) 1 (14) (13) less tax paid A$m (11) (31) (140) (28) (79) (147) (128) add other A$m Cashflow from operations A$m less expl & devlp A$m (14) (14) (23) (22) (29) (48) (31) less PP&E A$m (25) (63) (53) (48) (95) (225) (225) less acq./inv. A$m - - (5) (19) (10) - - add divestments A$m less dividends A$m (25) (54) (63) (42) (103) (171) (173) add equity/other A$m (2) - (2) (7) add debt movements A$m (41) - 84 (99) (23) - (100) Increase in cash A$m (6) Net debt at year end (cash) A$m 59 (9) (9) (301) (547) Balance Sheet 2H14A 1H15E 2013A 2014A 2015E 2016E 2017E Cash & cash eq. A$m Current assets A$m Fixed assets A$m 1,508 1,474 1,631 1,508 1,474 1,376 1,430 Total assets A$m 2,173 2,210 2,371 2,173 2,210 2,332 2,376 Current liabilities A$m Total liabilities A$m Shareholder equity A$m 1,435 1,453 1,567 1,435 1,453 1,591 1,741 Ratio analysis 2H14A 1H15E 2013A 2014A 2015E 2016E 2017E 0 ND/ND+E % 4.0% -0.6% 11.8% 4.0% -13.1% -38.7% -50.2% Interest cover x 4.4x 51.2x 6.8x 3.9x 67.4x 137.0x 251.8x WACC of 11% Dividend payout ratio % -73% 68% 0% 0% 0% 0% 0% Producing assets A$m A$/sh % NPV ROA % 2% 5% 2% 2% 7% 10% 8% Eucla/Perth Basin 2, % ROE % 0.5% 5.0% 1.6% 0.5% 7.6% 11.1% 8.1% Murray Basin % ROIC % 1.5% 4.9% 4.6% 3.1% 13.6% 27.1% 22.9% US Operations % Effective tax rate % 53% 30% 9% 42% 30% 30% 30% Mining Area C % EBITDA margin % 32% 35% 35% 32% 39% 46% 45% Developing assets EBIT margin % 8% 21% 13% 8% 26% 36% 36% Balranald % Free cash flow A$m % Exploration Assets % 248 Financial assets Valuation 2H14A 1H15E 2013A 2014A 2015E 2016E 2017E Corporate overheads (478) (1.14) -15% EV/EBITDA ratio x 23.5 x 18.0 x 10.4 x 12.0 x 7.8 x 5.1 x 6.3 x Cash from acq/div % P/E ratio x x 45.0 x 55.7 x x 17.6 x 9.5 x 10.9 x Net Debt (59) (0.14) -2% FCF yield % 6.2% 2.7% 1.4% 11.4% 7.1% 11.0% 7.6% Rehabilitation provisions (209) (0.50) -7% Dividend yield % 1.7% 1.5% 1.2% 2.4% 4.1% 5.7% 3.8% Risked NPV 3, Price/book x 2.2 x 2.2 x 2.0 x 2.2 x 2.2 x 2.0 x 1.8 x Shareprice prem/(disc) to NPV 3% - core NPV per share (A$) risked NPV per share (A$) unrisked NPV per share (A$) ,400 1,200 1, ,400 1,200 1, Z/R/SR production (kt) Zircon Rutile Synthetic rutile Balranald Z/R/SR Z/R/SR sales (kt) Zircon Rutile Synthetic rutile Balranald Z/R/SR 20 February

4 Fundamentals Macquarie Wealth Management Macquarie Quant View The quant model currently holds a reasonably negative view on. The strongest style exposure is Earnings Momentum, indicating this stock has received earnings upgrades and is well liked by sell side analysts. The weakest style exposure is Price Momentum, indicating this stock has had weak medium to long term returns which often persist into the future. 174/255 Global Alpha Model Sector Rank % of BUY recommendations 67% (10/15) Number of Price Target downgrades 4 Number of Price Target upgrades 6 Attractive Quant Rank within Country Rank within Sector Displays where the company s ranked based on the fundamental consensus Price Target and Macquarie s Quantitative Alpha model. The rankings are displayed relative to the sector and country. Macquarie Alpha Model ranking A list of comparable companies and their Macquarie Alpha model score (higher is better). Factors driving the Alpha Model For the comparable firms this chart shows the key underlying styles and their contribution to the current overall Alpha score % -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% Valuations Growth Profitability Earnings Momentum Price Momentum Quality Macquarie Earnings Sentiment Indicator The Macquarie Sentiment Indicator is an enhanced earnings revisions signal that favours analysts who have more timely and higher conviction revisions. Current score shown below. Drivers of Stock Return Breakdown of 1 year total return (local currency) into returns from dividends, changes in forward earnings estimates and the resulting change in earnings multiple % -50% 0% 50% 100% Dividend Return Multiple Return Earnings Outlook 1Yr Total Return What drove this Company in the last 5 years Which factor score has had the greatest correlation with the company s returns over the last 5 years. Capex to Sales FY0 Incremental Capex CPS Revisions 3 Month Capex Growth Operating Margin FY0 DPS Growth 5yr Historic Interest Cover Altman Z-Score -35% -36% -37% -32% Negatives Positives 30% 30% 37% 34% -40% -20% 0% 20% 40% How it looks on the Alpha model A more granular view of the underlying style scores that drive the alpha (higher is better) and the percentile rank relative to the sector and country Alpha Model Score Valuation Growth Profitability Earnings Momentum Price Momentum Quality Capital & Funding Liquidity Risk Technicals & Trading Normalized Score Percentile relative to sector(/255) Percentile relative to country(/240) For more details on the Macquarie Alpha model or for more customised analysis and screens, please contact the Macquarie Global Quantitative/Custom Products Group (cpg@macquarie.com) 20 February

5 Important disclosures: Recommendation definitions Macquarie - Australia/New Zealand Outperform return >3% in excess of benchmark return Neutral return within 3% of benchmark return Underperform return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield Macquarie Asia/Europe Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie First South - South Africa Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie - Canada Outperform return >5% in excess of benchmark return Neutral return within 5% of benchmark return Underperform return >5% below benchmark return Macquarie - USA Outperform (Buy) return >5% in excess of Russell 3000 index return Neutral (Hold) return within 5% of Russell 3000 index return Underperform (Sell) return >5% below Russell 3000 index return Volatility index definition* This is calculated from the volatility of historical price movements. Very high highest risk Stock should be expected to move up or down % in a year investors should be aware this stock is highly speculative. High stock should be expected to move up or down at least 40 60% in a year investors should be aware this stock could be speculative. Medium stock should be expected to move up or down at least 30 40% in a year. Low medium stock should be expected to move up or down at least 25 30% in a year. Low stock should be expected to move up or down at least 15 25% in a year. * Applicable to Asia/Australian/NZ/Canada stocks only Recommendations 12 months Note: Quant recommendations may differ from Fundamental Analyst recommendations Financial definitions All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 December 2014 AU/NZ Asia RSA USA CA EUR Outperform 51.80% 58.06% 45.07% 44.42% 60.54% 46.81% (for US coverage by MCUSA, 5.29% of stocks followed are investment banking clients) Neutral 31.80% 27.37% 30.99% 50.10% 35.37% 33.51% (for US coverage by MCUSA, 3.08% of stocks followed are investment banking clients) Underperform 16.39% 14.57% 23.94% 5.48% 4.08% 19.68% (for US coverage by MCUSA, 0.44% of stocks followed are investment banking clients) ILU AU vs ASX 100, & rec history (all figures in AUD currency unless noted) Note: Recommendation timeline if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, February month target price methodology ILU AU: A$7.50 based on a DCF methodology Company-specific disclosures: ILU AU: Macquarie and its affiliates collectively and beneficially own or control 1% or more of any class of Limited's equity securities. Important disclosure information regarding the subject companies covered in this report is available at Date Stock Code (BBG code) Recommendation Target Price 10-Jul-2014 ILU AU Underperform A$ Feb-2014 ILU AU Neutral A$ Jan-2014 ILU AU Neutral A$ Dec-2013 ILU AU Underperform A$ Oct-2013 ILU AU Underperform A$ Sep-2013 ILU AU Underperform A$ Jul-2013 ILU AU Underperform A$ Jun-2013 ILU AU Underperform A$ May-2013 ILU AU Underperform A$ Nov-2012 ILU AU Underperform A$ Oct-2012 ILU AU Neutral A$ Sep-2012 ILU AU Neutral A$ Jul-2012 ILU AU Outperform A$ May-2012 ILU AU Outperform A$17.20 Target price risk disclosures: ILU AU: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. Specifically, prices are denoted in US$ and costs in A$, making currency exposure significant. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures. The company is exposed to the Chinese market for zircon which is linked to Chinese residential construction activity. This has been slowing and the outlook remains uncertain. In addition, Europe forms a large portion of zircon and rutile sales and continued economic difficulties may impact rutile sales negatively. 20 February

6 Analyst certification: The views expressed in this research reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. The analyst principally responsible for the preparation of this research receives compensation based on overall revenues of Macquarie Group Ltd (ABN , AFSL No ) ( MGL ) and its related entities (the Macquarie Group ) and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations. General disclosure: This research has been issued by Macquarie Securities (Australia) Limited (ABN , AFSL No ) a Participant of the Australian Securities Exchange (ASX) and Chi-X Australia Pty Limited. This research is distributed in Australia by Macquarie Equities Limited (ABN , AFSL No ) ("MEL"), a Participant of the ASX, and in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth s services in New Zealand are provided by MENZ. Macquarie Bank Limited (ABN , AFSL No ) ( MBL ) is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. None of MBL, MGL or MENZ is registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any MGL subsidiary noted in this research, apart from MBL, is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia) and that subsidiary s obligations do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of that subsidiary, unless noted otherwise. This research is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice, you should consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. This research has been prepared for the use of the clients of the Macquarie Group and must not be copied, either in whole or in part, or distributed to any other person. If you are not the intended recipient, you must not use or disclose this research in any way. If you received it in error, please tell us immediately by return and delete the document. We do not guarantee the integrity of any s or attached files and are not responsible for any changes made to them by any other person. Nothing in this research shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. This research is based on information obtained from sources believed to be reliable, but the Macquarie Group does not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice. The Macquarie Group accepts no liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this research and/or further communication in relation to this research. The Macquarie Group produces a variety of research products, recommendations contained in one type of research product may differ from recommendations contained in other types of research. The Macquarie Group has established and implemented a conflicts policy at group level, which may be revised and updated from time to time, pursuant to regulatory requirements; which sets out how we must seek to identify and manage all material conflicts of interest. The Macquarie Group, its officers and employees may have conflicting roles in the financial products referred to in this research and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The Macquarie Group s employees or officers may provide oral or written opinions to its clients which are contrary to the opinions expressed in this research. Important disclosure information regarding the subject companies covered in this report is available at 20 February