Iluka Resources Limited ABN 34 008 675 018

Financial Report - 31 December 2010

For personal use only

Page
Directors' report 1
Remuneration report 12
Financial report 32
Directors' declaration 85
Independent auditor's report to the members 86
 Iluka Resources Limited
Directors' report
31 December 2010

The Directors present their report on the consolidated entity consisting of Iluka Resources Limited and the entities it
controlled at the end of, or during, the year ended 31 December 2010.
DIRECTORS
The following individuals were Directors of Iluka Resources Limited during the whole of the financial year and up to the date
For personal use only
of this report except as noted below:

George John Pizzey (Chairman)

Robert Lindsay Every (was Chairman and a Director until his resignation on 20 May 2010)
Donald Marshall Morley
Gavin John Rezos
David Alexander Robb
Jenny Seabrook
Wayne Geoffrey Osborn (was appointed a Director on 26 March 2010)
Stephen John Turner (was appointed a Director on 26 March 2010)

PRINCIPAL ACTIVITIES
The activities of the consolidated entity consist of exploration, mining, concentration and separation of mineral sands,
production of ilmenite, rutile, synthetic rutile and other titaniferous concentrates and zircon, and sales of these products
throughout the world.
SIGNIFICANT CHANGES
During the year the following significant changes occured:
Murray Basin Stage 2 and Jacinth-Ambrosia operations were both commissioned and ramped up during the first half of
2010 and reached name plate capacity mid year.
There were no other significant changes in the state of affairs of the Group during the financial year.

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 Iluka Resources Limited
Directors’ report
31 December 2010
(continued)

REVIEW OF OPERATIONS

Reported earnings

Iluka recorded a profit after tax for the year ended 31 December 2010 of $36.1 million (reflecting a second
half profit after tax of $42.7 million), compared with a net loss after tax of $82.4 million for the previous
corresponding period reflecting higher sales volumes, higher zircon pricing and contribution from the new,
For personal use only

higher margin operations in the second half of the year.

Mineral sands EBITDA was $250.2 million, a 231 per cent increase compared with the previous
corresponding period. Mineral sands EBIT increased to $31.6 million (2009: loss $100.6 million), with higher
depreciation charges of $218.6 million, compared to $176.2 million in the previous corresponding period,
reflecting the transition to the new operations and the start of depreciation on approximately $800 million of
assets during 2010.

Mining Area C iron ore royalty earnings (“MAC”) increased by 51.2 per cent to $75.9 million as a result of a
7.2 per cent increase in sales volumes and a 56 per cent increase in the average realised AUD iron ore
price, offset partially by capacity payments being $3.0 million lower than the previous corresponding period.

Group EBIT was $86.1 million, compared to a loss in 2009 of $144.1 million which included a significant non-
cash charge of $67.6 million.

The profit before tax was $39.9 million (2009 loss: $166.8 million). A net tax expense of $3.8 million was
recognised in respect of the profit for the period.

Earnings per share for the period were 8.6 cents compared to (20.2) cents in the previous corresponding
period. Total shares on issue at 31 December 2010 of 418.7 million were unchanged during the period.

Net debt at 31 December 2010 was $312.6 million, with a gearing ratio (net debt/net debt + equity) of 21.8
per cent. This compares with net debt at 31 December 2009 of $382.1 million and a gearing ratio of 25.9 per
cent.

During the second half of 2010, net debt reduced by $126.4 million as capital expenditure reduced to $21.2
million and operating cash flows increased to $119.7 million from $43.9 million in the first half of 2010. The
stronger operating cash flows reflect both the transition to higher margin operations and the benefit of higher
zircon prices. Undrawn facilities at 31 December 2010 were approximately $250 million and cash at bank
was $30.1 million.

Dividend

Directors have determined a final dividend of eight cents per share, unfranked. The dividend is unfranked as
Iluka does not have franking credits currently available for distribution. The dividend is payable on 6 April
2011 for shareholders on the register as at 9 March 2011. Directors have decided to suspend the Dividend
Reinvestment Plan until further notice.

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 Iluka Resources Limited
Directors’ report
31 December 2010
(continued)

Income statement analysis

$ million 2010 2009 % change

Mineral sands revenue 874.4 576.0 51.8

For personal use only

Cash costs of production (543.8) (453.6) (19.9)

Inventory movement (2.9) 33.4 n/a

Restructure and idle capacity cash charges (13.2) (50.1) 73.6

Rehabilitation and holding costs for closed sites (10.4) - n/a

Government royalties (17.1) (13.7) (24.8)

Marketing and selling (24.1) (10.2) (136.3)

Asset sales and other income 7.4 14.2 (47.9)

Product, technical development & major projects (5.6) (4.2) (33.3)

Exploration (14.5) (16.2) 10.5

Mineral sands EBITDA 250.2 75.6 230.9

Depreciation and amortisation (218.6) (176.2) (24.1)

Mineral sands EBIT 31.6 (100.6) n/a

Mining Area C 75.9 50.2 51.2

Currency hedging and foreign exchange 8.9 (0.1) n/a

Corporate and other (30.3) (26.0) (16.5)

Significant non-cash items - (67.6) n/a

Group EBIT 86.1 (144.1) n/a

Net interest costs (30.9) (18.4) (67.9)

Interest capitalised (Jacinth-Ambrosia and Murray Basin) - 12.5 n/a

Rehabilitation unwind and other finance costs (15.3) (16.8) 8.9

Profit (loss) before tax 39.9 (166.8) n/a

Tax (expense) benefit (3.8) 61.5 n/a

Profit (loss) from continuing operations 36.1 (105.3) n/a

Profit from discontinued operations (CRL) - 22.9 n/a

Profit (loss) for the period 36.1 (82.4) n/a

Average AUD/USD (cents) 92.0 79.3 (16.0)

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 Iluka Resources Limited
Directors’ report
31 December 2010
(continued)

Mineral sands production and sales

2010 2009 % change

Production volumes (kt)

Zircon 412.9 263.1 56.9
For personal use only

Rutile 250.1 141.4 76.9

Synthetic rutile 347.5 405.0 (14.2)
Ilmenite – saleable 469.0 342.1 37.1
Ilmenite – upgraded to synthetic rutile 215.9 496.7 (56.5)
Total saleable production 1,479.5 1,151.6 28.5

Cash costs of production $543.8m $453.6m (19.9)

Unit cash cost – total saleable product $367/t $394/t 6.9

Unit cash cost – zircon/rutile/synthetic rutile $538/t $560/t 3.9

Sales volumes (kt)

Zircon 478.7 222.6 115.0
Rutile 240.0 138.7 73.0
Synthetic rutile 362.5 396.7 (8.6)
Ilmenite – saleable 373.7 376.4 (0.7)
Total sales 1,454.9 1,134.4 28.3

Revenue $874.4m $576.0m 51.8

Unit revenue – total saleable product $601/t $508/t 18.3

Unit revenue – zircon/rutile/synthetic rutile $809/t $760/t 6.4

Mineral sands operational results

Revenue EBITDA EBIT

2010 2009 2010 2009 2010 2009

Eucla/Perth Basin 468.7 385.6 119.9 47.9 33.8 (79.3)

Murray Basin 281.4 124.8 113.9 13.2 0.9 (18.5)

United States 124.3 65.6 40.2 30.7 23.2 13.4

Exploration & other* - - (23.7) (16.2) (26.2) (16.2)

Total 874.4 576.0 250.3 75.6 31.7 (100.6)

* 2010 values includes central marketing and product development costs allocated to operations in prior periods

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 Iluka Resources Limited
Directors’ report
31 December 2010
(continued)

Mineral sands revenue

Mineral sands revenue increased by $298.4 million (51.8 per cent) compared with the previous
corresponding period due to significantly higher zircon and rutile sales volumes.

Zircon demand reflected a strong recovery in demand in China to above pre global economic crisis levels, a
recovery in European demand and robust North American demand. Zircon sales volumes increased by 115
For personal use only
per cent to 478.7 thousand tonnes (2009: 222.6 thousand tonnes). Sale of Murray Basin Stage 2 and
Jacinth-Ambrosia production commenced during the June quarter, with sales of material from these two new
operations constituting the majority of Australian product sales in the second half.

Rutile sales volumes of 240.0 thousand tonnes represent a 73.0 per cent increase from 2009 (138.7
thousand tonnes), following the start of production from Murray Basin Stage 2 in the first half of 2010.
Substantially all of the group’s rutile production in the second half of 2010 was from Murray Basin.

Synthetic rutile sales volumes of 362.5 thousand tonnes were 8.6 per cent lower than 2009 (396.7 thousand
tonnes) which reflects Iluka’s decision to idle synthetic rutile capacity during 2009 and reduce production.

Ilmenite sales of 373.7 thousand tonnes were similar to 2009 levels (376.4 thousand tonnes), with Iluka’s
focus, in terms of Australian ilmenite production, being to provide the maximum practicable proportion of
suitable ilmenite produced as a feed source for its synthetic rutile operations.

Higher average prices for zircon and rutile largely offset the effects of an increase in the average AUD:USD
exchange rate from 79.3 cents in 2009 to 92.0 cents in 2010. The significant increases in higher value
zircon and rutile sales volumes, however, lead to an 18.3 per cent increase in the average revenue per tonne
of product sold from $508 to $601 as the proportion of zircon, rutile and synthetic rutile increased from 66 per
cent of total sales to 74 per cent.

Cash costs of production

Cash costs of production of $543.8 million were 19.9 per cent higher than the previous corresponding period,
with unit cash costs of production per tonne of zircon/rutile/synthetic rutile lower at $538/tonne, compared to
$560/tonne in the previous corresponding period. The transition of mining operations from Western Australia
to the new operations of Jacinth-Ambrosia and Murray Basin Stage 2 results in a different mix of production
and cash cost profiles when compared to previous periods, with costs in the first half of 2010 including those
necessary to establish higher concentrate stockpiles associated with the new operations.

In the second half of 2010, unit cash costs of production per tonne of zircon/rutile/synthetic rutile were
$502/tonne, compared to $583/tonne in the first half, reflecting the transition to the higher cash margin
operations and concentrate levels that were largely unchanged during the half.

Inventory movement

Inventory values are comparable year on year, however, the composition of the balance has changed as a
result of an increase in concentrate and intermediate stockpiles of approximately $40 million during the first
half of 2010 associated with the start of operations at Jacinth-Ambrosia and Murray Basin Stage 2. Finished
goods inventory reduced by approximately $40 million due mainly to the sale of material on hand in Virginia
at the end of 2009.

Restructure and idle capacity cash charges

The charges relate mainly to redundancy and other costs associated with the idling during the year, as
planned, of the remaining mining operations at Eneabba in Western Australia and the planned idling of the
second synthetic rutile kiln at Narngulu in Western Australia.

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 Iluka Resources Limited
Directors’ report
31 December 2010
(continued)

Rehabilitation and holding costs for closed sites

Reassessments of rehabilitation costs for closed sites are expensed (or credited) to profit and loss. The
charge for the year relates to reassessments at several former operations, with the majority being for Florida.

Government royalties and marketing costs

For personal use only
Government royalties increased with higher sales volumes and prices. Marketing and selling costs similarly
reflect higher sales volumes, together with the costs for certain port related activities that were previously
reported as production costs.

Depreciation and amortisation

The increase of $42.4 million includes an $81.3 million increase in the Murray Basin following the completion
of commissioning of the Kulwin mine in March 2010, offset by a $41.1 million reduction in Eucla/Perth Basin
where the asset configuration and level of operations were significantly different to those in the previous
corresponding period due to the start of depreciation at Jacinth Ambrosia in February 2010 and the idling of
the majority of the Western Australian productive capacity over the course of the current and previous
corresponding period.

Mining Area C

Iron ore sales volumes increased 7.2 per cent to 43.3 million dry metric tonnes. The average AUD realised
price upon which the royalty is payable increased by 56 per cent from the previous corresponding period,
following the move away from sales at contracted benchmark prices by BHP Billiton during the year. The
EBIT contribution of $75.9 million includes $5.0 million of annual capacity payments for production increases
in the year to 30 June (2009: $8.0 million), reflecting a full year of production following an expansion of the
Area C operation by BHP Billiton in early 2009.

Corporate and other

Corporate costs were $4.3 million higher than the previous corresponding period, due mainly to increases in
insurance and incentive costs. Costs for the period include $7.2 million for support activities that were
centralised after the 2009 restructure and which are no longer included in regional costs, one-off restructure
costs of $7.7 million were incurred in 2009.

Interest

The increase in net interest costs reflects higher average net debt than the previous corresponding period,
increases in Australian variable interest base rates and higher margins in the first half of the year.
Capitalisation of interest in respect of the Jacinth- Ambrosia and Murray Basin Stage 2 projects ceased in
the second half of 2009.

Tax expense

An income tax expense of $3.8 million, at an effective tax rate of 9.5 per cent, compares to a benefit in 2009
of $61.5 million reflecting the pre-tax loss for the year. The effective tax rate is influenced by benefits in
respect of Investment Allowance and Research & Development concessions in Australia, together with the
tax expense on earnings in the United States being at 20 per cent, compared with 30 per cent for Australian
earnings.

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 Iluka Resources Limited
Directors' report
31 December 2010
(continued)

DIRECTORS' PROFILES
George John Pizzey, BE (Chem), FellDip (Management), FTSE, FAICD, FAIM, Chairman
Mr Pizzey was appointed to the Board in November 2005. He has extensive experience in mining and mineral processing.
For personal use only
Mr Pizzey was Chairman of Alcoa of Australia Limited and held a number of senior executive positions with Alcoa Inc
(USA). He is a Director of Alumina Limited, Amcor Limited and St Vincent’s Medical Research Institute. He was formerly
the Chairman of the London Metal Exchange UK and a Director of WMC Resources Limited and Ivanhoe Grammar School.

Directorships of Listed Entities (last 3 years)

Alumina Limited (appointed June 2007)
Amcor Limited (appointed September 2003)

David Alexander Robb, BSc, GradDip (Personnel Administration), FAIM, FAICD, Managing Director
Mr Robb commenced as Managing Director on 18 October 2006. Mr Robb was previously Managing Director, Wesfarmers
Energy as well as Executive Director, Wesfarmers Limited. Prior to joining Wesfarmers he held senior positions with British
Petroleum in Australia and overseas, including chief executive responsibilities for a national service business in the US for
oil, chemicals, consumer goods, marine and aviation businesses in Malaysia and as director responsible for oil marketing
throughout South East Asia.

Directorships of Listed Entities (last 3 years)

Consolidated Rutile Limited (appointed October 2006 resigned May 2009)

Donald Marshall Morley, BSc, MBA, Hon. FAusIMM, Chairman of the Audit and Risk Committee
Mr Morley was appointed to the Board in December 2002. He was formerly the Chief Financial Officer and a Director of
WMC Limited from which he retired in October 2002. He is Chairman of Alumina Limited and a Director of Spark
Infrastructure Limited.

Directorships of Listed Entities (last 3 years)

Alumina Limited (appointed 11 December 2002)
Spark Infrastructure Ltd (appointed November 2005)

Gavin John Rezos, BA, LLB, B.JURIS, MAICD

Mr Rezos was appointed to the Board in June 2006. He has extensive Australian and international investment banking
experience and is a former Investment Banking Director of the HSBC Group with regional roles during his HSBC career
based in London, Sydney and Dubai. Mr Rezos has held Chief Executive positions and executive directorships of
companies in the healthcare and technology areas in the UK, US and Singapore and was formerly a non-executive Director
of Amity Oil NL (Antares). He is Chairman of Alexium International Group Limited, a principal of Viaticus Capital Pty Ltd
and a Director of Rowing Australia. Mr Rezos is a member of the Audit and Risk Committee and the Remuneration and
Nomination Committee

Directorships of Listed Entities (last 3 years)

Alexium International Group Limited (appointed March 2010)
DFS International Holdings Limited (suspended) (appointed November 2008)

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 Iluka Resources Limited
Directors' report
31 December 2010
(continued)

DIRECTORS' PROFILES (continued)

Jennifer Anne Seabrook, BCom, ACA, FAICD
Ms Seabrook was appointed to the Board in May 2009. She is a Special Advisor to Gresham Partners Limited. She is also
For personal use only
a non-executive Director of the Bank of Western Australia Limited, M G Kailis Holdings Pty Limited, IRESS Market
Technology Ltd and Australia Post. Ms Seabrook is a member of the Takeovers Panel and Financial Advisory Group of the
Financial Services Institute of Australia (FINSIA) and a member of ASIC’s External Advisory Group. She was formerly a
Director of West Australian Newspapers Holdings Limited, BWA Managed Investments Limited, St Andrew’s
Superannuation Services Limited and Western Power. Ms Seabrook is a member of the Audit and Risk Committee and the
Remuneration and Nomination Committee.

Directorships of Listed Entities (last 3 years)

IRESS Market Technology Limited (appointed August 2008)
West Australian Newspaper Holdings Limited (appointed February 2006, resigned December 2008)

Wayne Geoffrey Osborn, DipEng, MBA, FTSE, MIE(Aust), MAICD, Chairman of the Remuneration and Nomination
Committee
Mr Osborn is a former Managing Director of Alcoa of Australia Limited. He is a non-executive Director of Leighton Holdings
Limited and Wesfarmers Limited, Chairman of Thiess Pty Limited, Chairman of the Australian Institute of Marine Science
and a Trustee of the Western Australian Museum. He was formerly a Director of the Australian Business Arts Foundation
and Vice President of the Chamber of Commerce and Industry, Western Australia.

Directorships of Listed Entities (last 3 years)

Leighton Holdings Limited (appointed 6 November 2008)
Wesfarmers Limited (appointed 24 March 2010)

Stephen John Turner BCom, ACA

Mr Turner is a founder of the London Stock Exchange listed company, International Ferro Metals Limited. He was the
Chief Executive Officer of International Ferro Metals Limited from 2002 to 2009 and continues as a non-executive director
of that company. He is also a director of South American Ferro Metals Limited and Chairman of Vantage Goldfields
Limited. Mr Turner has had responsibility for resource projects in Australia, Africa and the Pacific Islands. He was a
founding Director of the Australian subsidiary of PSG Investment Group, a South African investment bank. He is an
Australian Chartered Accountant. Mr Turner is a member of the Audit and Risk Committee.

Directorships of Listed Entities (last 3 years)

International Ferro Metals Limited (appointed 26 January 2002)
Vantage Goldfields Limited (appointed 22 October 2009)
South American Ferro Metals Limited (appointed 11 November 2010)
COMPANY SECRETARY
The Company Secretary is Mr Cameron Wilson LLB. Mr Wilson was appointed to the position of Company Secretary in
2004. Before joining Iluka Mr Wilson held a range of legal and commercial roles at WMC Resources Limited and prior to
that worked as a solicitor with a major legal practice.

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 Iluka Resources Limited
Directors' report
31 December 2010
(continued)

MEETINGS OF DIRECTORS
The numbers of meetings of the Company's Board of Directors and of each Board Committee held during the year ended
31 December 2010, and the numbers of meetings attended by each Director were:
For personal use only

Board of Audit and Remuneration

Directors' Risk and
meetings Committee Nomination
meetings Committee
meetings
Number Number Number Number Number Number
attended held attended held attended held

Director
D A Robb 10 10 - - - -
R L Every 5 10 21 6 2 4
D M Morley 10 10 6 6 - -
G J Pizzey 10 10 42 6 4 4
G J Rezos 9 10 43 6 4 4
J A Seabrook 10 10 6 6 24 4
W G Osborn 85 10 - - 26 4
S J Turner 85 10 47 6 - -

1. Dr Every attended the Audit and Risk Committee meeting by invitation but was not a member of the Committee. He
resigned from the Iluka Board on 19 May 2010.
2. Mr Pizzey accepted the role of Chairman of the Board, effective 19 May 2010. He resigned as Chairman of the
Remuneration and Nomination Committee at the August Committee Meeting but continued to attend as a member of the
Committee. Mr Pizzey attended the Audit and Risk Committee meeting by invitation but was not a member of the
Committee.
3. Mr Rezos stepped down from the Audit and Risk Committee on 26 March 2010. He was reappointed to the Committee
on 20 September 2010.
4. Ms Seabrook joined the Remuneration and Nomination Committee on 25 August 2010.
5. Mr Osborn and Mr Turner joined the Board on 26 March 2010.
6. Mr Osborn joined the Remuneration and Nomination Committee as a member on 25 August 2010 and assumed the
Chair of the Committee at the conclusion of that meeting.
7. Mr Turner joined the Audit and Risk Committee on 22 June 2010.

DIRECTORS SHAREHOLDING

Directors' shareholding is set out in note 21.

REMUNERATION REPORT
The remuneration report is set out on pages 12 to 30

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 Iluka Resources Limited
Directors' report
31 December 2010
(continued)

INDEMNIFICATION AND INSURANCE OF OFFICERS

The Company indemnifies all Directors of the Company named in this report and current and former executive officers of
the Company and its controlled entities against all liabilities to persons (other than the Company or a related body
For personal use only
corporate) which arise out of the performance of their normal duties as Director or executive officer unless the liability
relates to conduct involving bad faith. The Company also has a policy to indemnify the Directors and executive officers
against all costs and expenses incurred in defending an action that falls within the scope of the indemnity and any
resulting payments.

The terms of engagement of Iluka's external auditor includes an indemnity in favour of the external auditor. This
indemnity is in accordance with PricewaterhouseCoopers standard Terms of Business and is conditional upon
PricewaterhouseCoopers acting as external auditor. Iluka has not otherwise indemnified or agreed to indemnify the
external auditors of Iluka at any time during the financial year.

During the year the Company has paid a premium in respect of Directors' and executive officers' insurance. The contract
contains a prohibition on disclosure of the amount of the premium and the nature of the liabilities under the policy.
NON-AUDIT SERVICES
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's
expertise and experience with the Company and/or the consolidated entity are important.
The board of directors has considered the position and, in accordance with advice received from the Audit and Risk
Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence
for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by
the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for
the following reasons:

 fees paid to external auditors for non-audit services for the 2010 year were within the Company policy; and

 none of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants.

A copy of the auditors' independence declaration as required under section 307C of the Corporations Act 2001 is set out on
page 31.
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related
practices and non-related audit firms:
Consolidated
2010 2009
$000 $000

(a) Assurance services

Audit and audit related services
Fees paid to PwC
PwC Australia 550 562
Other PwC firms 50 52
Total remuneration for audit services 600 614

Other assurance services

PwC Australia 107 65
Total remuneration for other assurance services 107 65

(b) Taxation services

Fees paid to PwC
PwC Australia 27 67
Total remuneration for taxation services 27 67

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 Iluka Resources Limited
Directors' report
31 December 2010
(continued)

NON-AUDIT SERVICES (continued)

(c) Other services
Fees paid to PwC
For personal use only
PwC Australia 65 113
Other PwC firms - 34
Total remuneration for other services 65 147

ENVIRONMENTAL REGULATIONS
The Company's Australian operations are subject to various Commonwealth and State laws governing the protection of the
environment in areas such as air and water quality, waste emission and disposal, environmental impact assessments, mine
rehabilitation and access to, and use of, ground water. In particular, some operations are required to be licensed to
conduct certain activities under the environmental protection legislation of the state in which they operate and such licenses
include requirements specific to the subject site.

So far as the Directors are aware, there have been no material breaches of the Company's licenses and all mining and
exploration activities have been undertaken in compliance with the relevant environmental regulations.
DIVIDENDS
Since the end of the financial year the directors have determined the payment of a final ordinary dividend of eight cents per
share, unfranked. The dividend is unfranked as Iluka does not have franking credits currently available for distribution.
The dividend is payable on 6 April 2011 for shareholders on the register as at 9 March 2011.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
The Directors are not aware of any matter or circumstance not otherwise dealt with in the Directors' Report that has or may
significantly affect the operations of the economic entity, the results of those operations or the state of affairs of the
economic entity in subsequent financial years.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

In the opinion of the Directors, likely developments in and expected results of the operations of the consolidated entity have
been disclosed in significant events after balance date, disclosure of further material relating to those matters could result in
unreasonable prejudice to the interests of the company and the consolidated entity. That material has therefore been
omitted from the Directors' report.

ROUNDING OF AMOUNTS
The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities & Investments
Commission, relating to the 'rounding off' of amounts in the Directors' Report. Amounts in the Directors' Report have been
rounded off in accordance with that Class Order to the nearest hundred thousand dollars, or in certain cases, to the nearest
thousand dollars.
This report is made in accordance with a resolution of the Directors.

G J Pizzey
Chairman

Perth

24 March 2011

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 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

REMUNERATION REPORT
EXECUTIVE SUMMARY

Remuneration Principles

Iluka’s remuneration practices are designed to support the company’s objective – to create and deliver value for
For personal use only

shareholders. Accordingly, Iluka’s remuneration approach is designed to attract, retain and motivate experienced
executives and to ensure a focus by executives on shareholder value creation and delivery. Remuneration policy and
procedures are therefore designed to achieve remuneration outcomes which are:

Market competitive
- fixed remuneration which reflects skills, experience and performance and which is comparable and competitive
within the resources sector
- an appropriate balance between fixed and variable (at risk) components of executive remuneration

Performance Based
- executives focused on both short and long term business performance
- reward for achievement aligned to company and individual performance

Shareholder Aligned
- objectives set that support business profitability, sustainability and growth and thus improved shareholder returns
- executive share ownership, including trailing exposure to company performance

Transparent
- clear disclosure which takes account of market practice
- compliance with relevant legislative requirements

Components of Executive Remuneration

Total Fixed Remuneration (TFR) Competitively positioned to support attraction and retention strategies.

Short Term Incentive Plan (STIP) Strong link to financial performance and delivery of results requiring profitability and
sustainability performance exceeding 90 per cent of target before any award is
payable for these measures.

The STIP is designed to incentivise executives whilst promoting equity ownership

through an award partly in cash and partly in deferred equity.

Long Term Incentive Plan (LTIP) Provides alignment with shareholder interests through Return on Equity (ROE) and
Total Shareholder Return (TSR) measured over a three year period.

Executive Remuneration Mix

Executive Remuneration is made up of fixed (TFR) and at risk (STIP & LTIP) components. A significant portion of total
remuneration is at risk.

Target performance was exceeded in 2010, details of which are provided on pages 14-15.

12
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

Actual Executive Reward in 2010

Details of the remuneration received by the Managing Director and Key Executives prepared in accordance with statutory
requirements and accounting standards are detailed on page 27 of the Remuneration Report.
For personal use only

The table below sets out the actual earnings realised by the Managing Director and Key Executives for 2010. Actual
earnings include cash salary and fees, superannuation, non cash benefits received during the year and the full value of
incentive payments received relating to the 2010 performance year. The table does not include share based payments
which reflect the accounting value for share rights granted in the current and prior years which may or may not be
realised as they are dependent on the achievement of performance hurdles.

2010 Total
1 2 3 Retention
Base Super Other 2010 STIP 2008 LTIP Actual
Name Plan7
$ $ $ $ $ Earnings
$
$
D Robb4 1,451,941 48,059 38,206 1,672,772 653,542 10,660,000 14,524,520

P Beilby5,6 165,752 5,905 - - - 192,301 363,958

P Benjamin 410,092 36,908 6,487 355,034 184,735 - 993,256

C Cobb 407,833 36,180 - 366,335 - - 810,348

V Hugo 382,519 26,139 6,487 329,133 171,228 - 915,506

A Tate 462,423 28,514 - 410,873 206,955 - 1,108,765

H Umlauff 529,358 47,642 4,767 472,563 246,168 - 1,300,498

S Wickham 472,556 17,781 4,768 412,875 114,733 - 1,022,713

C Wilson 422,376 26,385 6,487 370,414 191,706 - 1,017,368

1 Includes non-monetary benefits (for example spouse travel, car park).

2 Represents total value of 2010 STIP which is awarded half in cash and half in deferred equity awarded in March 2011.
3 Represents the value of the 2008-10 LTIP award for which the performance period concluded 31 December 2010
calculated at a share price of $10.66 being the volume weighted average price of shares traded over the five days
following the release of the 2010 full year results.
4 Represents the value of the Managing Director’s 2008-10 performance and retention plan award calculated at a share
price of $10.66 being the volume weighted average price of shares traded over the five days following the release of the
2010 full year results..
5 Ceased employment 1 March 2010.
6 Represents the value of the retention plan award (awarded 1 March 2010) calculated at a share price of $3.67 being the
volume weighted average price of shares traded over the five days following the release of the 2009 full year results.
7 The Retention period for other key executives will conclude from 31 March 2011 and outcomes will be disclosed in the
2011 Remuneration Report.

13
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

Actual Executive Reward in 2009

The table below shows actual earnings realised by the Managing Director and Key Executives in 2009 for comparison
purposes.
For personal use only

2009 Total
Base Super Other2 2009 STIP
3
2007 LTIP
4
Actual
Name
$ $ $ $ $ Earnings
$
D Robb 1,431,078 68,922 51,489 521,685 -
2,073,174
P Beilby 382,263 34,404 - 46,532 -
463,199
P Benjamin 408,716 36,784 5,495 46,472 -
497,467
1
C Cobb 83,194 7,488 - - -
90,682
V Hugo 374,950 28,823 5,495 80,982 -
490,250
A Tate 450,306 40,528 - 131,157 -
621,991
H Umlauff 531,968 47,477 4,632 182,447 -
766,524
S Wickham 413,485 14,103 1,280 145,521 -
574,389
C Wilson 414,857 30,407 5,495 119,210 -
569,969
1 Appointed 12 October 2009, formerly Managing Director of Consolidated Rutile Limited
2 Includes non-monetary benefits (ie spouse travel, car park, etc)
3 Represents total value of 2009 STIP which is awarded half in cash and half in deferred equity
4 Represents the outcome of the 2007-09 LTIP for which the performance period concluded 31 December 2009

2010 Overview

Key Initiatives

As reported in the 2009 Remuneration Report, the company imposed a fixed remuneration freeze for Directors and
Executives and established a recruitment freeze for the 2009 calendar year.

The company has continued its focus on managing employee fixed costs to support financial performance initiatives in
2010 including:

 the Managing Director’s fixed remuneration was not increased in 2010 (last increase effective 1 January 2008);
 Director fees were not increased in 2010 (last increase effective 1 July 2008);
 the recruitment freeze established in 2009 (with the exception of critical roles) continued in 2010 with further
exceptions permitted in order to meet business requirement as profitability improved and in response to
pressures from a tightening labour market;
 employees participating in the 2009 short term incentive plan did not receive an increase to their fixed
remuneration in 2010; and
 the employee share plan was suspended for 2009 and 2010 but will be re-instated in 2011 now that the
company’s financial performance has improved.
Performance Based Reward
Profitability targets for the 2010 STIP were reviewed to ensure alignment with corporate objectives for the year.
Accordingly, for the 2010 performance year, an EBITDA rather than EBIT target was introduced to provide an increased
focus on cashflow during a period of elevated company debt levels after the high capital expenditure in 2008 and 2009.
Total Recordable Injury Frequency Rate and Level 2 and Above environmental incidents were introduced as new
sustainability targets for the 2010 STIP replacing All Injury Frequency Rate and Notifications to Government. The revised
targets provided a stronger alignment to Iluka’s internal health and safety priorities and facilitated improved
benchmarking.

14
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

Iluka’s performance for the 2010 financial year was achieved with earnings improvements across the group. Overall
financial performance met or exceeded stretch targets resulting in the 2010 STIP delivering above target awards to the
Managing Director and Executives. The outcome of the 2010 STIP was further supported by the achievement of
individual long term growth objectives including, for example, the delivery of two major projects (Jacinth-Ambrosia and
Murray Basin Stage 2) successful production ramp ups and establishment of improved product pricing dynamics.
For personal use only

Iluka reviews its incentive plans regularly to ensure that performance metrics are appropriately linked to short and long
term business requirements and shareholder value generation.

Shareholder Alignment

2008 Long Term Incentive Plan

The TSR target for the 2008 Long Term Incentive Plan was exceeded with the company achieving a TSR of 86.6 per
cent and ranked at the 100th percentile of the Materials Index and MidCap 50 comparator groups. Accordingly, share
rights granted in respect to this tranche will vest in full. This is the first time since the 2004 Long Term Incentive Plan that
there has been any payment of LTIP and demonstrates the alignment of company performance with LTIP awards.

No awards were made in respect to the ROE measure due to performance not achieving the minimum target.

Shares awarded under this plan are detailed on page 25.

Managing Director’s Retention Plan

The performance measure associated with the Managing Director’s Retention Plan, which was approved by
shareholders at the 2008 Annual General Meeting, required TSR of a minimum of 45 per cent over the three year
performance period from 1 January 2008. In terms of share price (i.e. absent any other contributor to TSR such
as dividends) full vesting of the Plan shares over the three year period required Iluka’s share price to reach a
minimum of $5.32 (calculated on the volume weighted average price (VWAP) of shares traded over the five days
following the release of the 2010 financial results). The VWAP was calculated for the five trading days from 25 February
to 3 March 2011 inclusive resulting in the volume weighted average share price of $10.66 exceeding the target of $5.32
by 100 per cent and resulting share price growth of 190 per cent for the performance period. Market capitalisation of the
company increased from $0.9 billion to $4.5 billion over the corresponding period.

Accordingly, Mr Robb was awarded 1,000,000 ordinary shares under this plan on 4 March 2011.

The graph below shows Iluka’s share price performance compared with the Materials and the Metals and Mining Indices
over the corresponding three year period.

300 Index (2008=100)
Iluka Materials Metals and Mining
250

200

150

100

50

0
1/2/2008 7/2/2008 1/2/2009 7/2/2009 1/2/2010 7/2/2010 1/2/2011

15
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

REMUNERATION REPORT

Board Oversight of Remuneration – Remuneration and Nomination Committee

The Remuneration and Nomination Committee (Committee) operates in accordance with its charter as approved by the
Board. The Committee is comprised solely of independent non-executive Directors and was chaired by Mr Pizzey until
For personal use only

August 2010. From August 2010, the Committee was chaired by Mr Osborn.

The Committee’s responsibility is to provide assistance and recommendations to the Board in support of the company’s
objective of creating and delivering value for shareholders and in fulfilling its corporate governance responsibilities
relating to the following:

 overall remuneration strategy of the company;

 remuneration of non-executive Directors;
 performance and remuneration of the Managing Director and key executives;
 selection and appointment of, and succession planning for, non-executive Directors;
 selection and appointment of, and succession planning for, the Managing Director;
 succession planning for key roles; and
 diversity strategy, policies and practices of the company.

The Committee will also make decisions on behalf of the Board where such authority has been expressly delegated by
the Board.

The Committee has the resources and authority appropriate to discharge its duties and responsibilities, including the
authority to engage external professionals on terms it determines appropriate. During the 2010 year, external advisers
mandated by the Committee provided input on several matters relating to remuneration. These advisers were:

 Ernst and Young, which provided advice in relation to executive remuneration, general remuneration trends and
Iluka’s management and employee share plans; and

 McKenzie Moncrieff, which provided legal advice in respect to share plans and executive contracts;

In November and December 2010 the Remuneration and Nomination Committee conducted an evaluation of its
performance.

Remuneration Practices

The remuneration of an executive or manager is linked to both annual business and individual performance outcomes
and to the company’s ability to generate competitive levels of shareholder value, as defined by total shareholder return
(TSR) and return on equity (ROE), on a longer term basis.

In accordance with the interests of transparent practices, Iluka discloses its current return on equity target range
measure which forms part of the long term incentive scheme.

Directors and key executives are prohibited from trading in financial products issued or created over the company’s
securities by third parties, or trading in associated products and entering into transactions which operate to limit the
economic risk of their security holdings in the company. This prohibition extends to Directors and key executives taking
out margin loans on their holdings of Iluka securities.

Relationship between reward and performance

As discussed in detail in the “Variable Remuneration” section of this report, the key performance measures underlying
the incentive plans in 2010 were:

 STIP: Profitability (ROC, EBITDA and NPAT), Sustainability (total recordable injury frequency rate, severity rate
and level two and above environmental incidents) and Growth (individual stretch objectives).

 LTIP: ROE and relative TSR

Performance against each of the above measures determines the quantum of STIP awards paid to executives and the
portion of LTIP awards that vest to executives.

For the 2010 performance year, the STIP delivered above target awards to the Managing Director and Executives
reflecting the achievement of profitability and growth objectives at stretch levels of performance.

16
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

At the end of 2010, the 2008 LTIP grant completed its performance period (1 January 2008 to 31 December 2010).
Performance was measured against both the ROE and relative TSR hurdles. Performance and resulting vesting was as
follows:

Component Performance target Actual performance Implication for vesting

For personal use only
ROE tranche (50%) 50% vesting for Threshold
Nil vesting and awards
of 10% with full vesting at 0.7%
lapse
target of 14%
Relative TSR tranche (50%) 50th percentile for 50%
th th
vesting and 75 percentile 100 percentile Full vesting of the TSR
for full vesting. tranche

Iluka’s five year performance

For statutory reporting purposes the company is also required to show the five year total shareholder return and five
years of earnings. In summary:

 During the period 1 January 2006 to 31 December 2010 the company completed a 4 for 7 renounceable share
rights entitlement at $2.55 per share in March 2008. A portfolio of shares bought at the prevailing market price of
$7.84 at the start of the performance period (closing price on 30 December 2005), assuming full take up of the
rights issue at $2.55 per share, generated a shareholder return of 54.5% per cent taking into account the
shareholder’s participation in the 2008 share rights entitlement. With aggregate dividend payments of $0.44 per
share, the total shareholder return was 59.2% per cent over the five year period.

 Earnings over the same five year period are set out in the table below:

31 Dec 06 31 Dec 07 31 Dec 08 31 Dec 09 31 Dec 10

Net profit after tax ($ million) 21 51.1 49.0 (82.4) 36.1
Earnings per share (cents) 9.1 21.6 14.2 (20.2) 8.6
Closing share price ($) 5.94 4.11 4.64 3.58 9.14
Dividends paid and declared (cents) 22 22 N/A N/A N/A

Remuneration Structure

This Remuneration Report discloses remuneration details for the Managing Director, non-executive Directors and Key
Management Personnel of the company and the Iluka group in 2010.

Remuneration for executives comprises two components:

 total fixed remuneration (TFR) which is made up of base salary and superannuation, together with other salary
sacrifice items such as novated leases and car parking. Employees are required to meet any fringe benefits tax
obligations applicable to benefits; and

 variable remuneration which is linked directly to performance of both the company and the individual executive and,
as such, is deemed to be “at risk”.

The remuneration structure is designed to reflect an appropriate balance between fixed and variable remuneration to
ensure that executive reward is aligned with the performance of the business.

Total Fixed Remuneration

Iluka’s total fixed remuneration structure is assessed against the median level of the market as defined by a comparator
group of Australian companies within the resources market. Individual TFR is determined within an appropriate range
centred at the market median by referencing job evaluation data and individual experience and performance levels of
executives. Allowance is also made for the competitive nature of the market for talent in the resources sector.

Superannuation Benefits

Iluka has appropriate superannuation and pension arrangements in countries where it operates. In Australia, the
company contributes superannuation at the minimum required rate to each executive’s nominated eligible fund.
Individuals may elect to make further voluntary contributions from pre-tax salary.

All Australian based executives are entitled to contribute to the Iluka Superannuation Plan. The plan is administered by
ING Australia Limited as part of a master trust of which over 90 per cent of employees are members. The plan is

17
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

primarily an accumulation style plan. A small number of employees have retained membership in a defined benefit sub-
plan, a legacy from the 1999 merger of Westralian Sands Limited with RGC Limited. The defined benefit sub-plan is
closed to new members. All executives as detailed on page 26 participate in the Iluka Superannuation Plan or a fund of
choice on an accumulation basis.

VARIABLE REMUNERATION
For personal use only

Performance and Incentives

The current performance and incentive arrangements were introduced for the 2007 performance year. The incentive
arrangements comprise a Short Term Incentive Plan (STIP) and a Long Term Incentive Plan (LTIP). These distinct plans
balance the short and long term aspects of business performance, reflect market practice and support business needs.

The incentive plans ensure a strong alignment between the incentive arrangements of executives and the creation and
delivery of shareholder value and support Iluka’s aim of attracting, retaining and motivating experienced executives.

The STIP and LTIP operate within the existing rules of the Directors, Executives and Employees Share Acquisition Plan
(DEESAP), as approved by shareholders at the company’s Annual General Meeting in May 1999.

At target levels of performance, the STIP represents two-thirds of potential variable remuneration, and the LTIP
represents one-third.

Only nominated managers and executives participate in the STIP and LTIP. The level of award opportunity is
determined by an individual’s role within the business and capacity to impact the results of the company. In 2011, it is
anticipated that 81 employees (representing 9% of employees and including all executives) will participate in the LTIP,
and 138 employees (representing 15% of employees and including all executives) will participate in the STIP.

Objectives, measures and targets for both the STIP and the LTIP are set on an annual basis and are subject to the
approval of the Board.

The target incentive opportunity for key executives under the STIP is 60 per cent of TFR and under the LTIP is 30 per
cent of TFR. At stretch levels of performance the incentive opportunity under the STIP increases to a maximum of 90
per cent of TFR.

The Short-Term Incentive Plan (STIP)

The STIP aims to provide an incentive to executives whilst also promoting equity ownership, providing awards partly in
cash and partly in deferred equity.

The STIP is linked to group and regional financial and operational performance and has a focus on return on capital
(ROC) as a key metric. A combination of financial and non-financial targets, including safety and individual growth
specific targets, are used to measure performance and determine outcomes. Each metric reflects the organisational unit
within which the individual is located (for example, regional versus corporate roles) and is measured independently.

The weighting of the growth measure is typically set at 30 per cent, however the Board has discretion at any time to vary
the growth weighting for any individual within a range from 20 per cent to 40 per cent in line with the process of objective
setting and performance assessment.

The process for the development and assessment of individual objectives is a rigorous one. Objectives are linked to
major business opportunities and risks as typically identified in Iluka’s Corporate Plan and to the priorities for the relevant
year. Specific and measurable deliverables and the timeframe for achievement are defined for each objective. The
deliverables and the timeframes are set at a stretch level of performance. Objectives are set in conjunction with the
Managing Director for all key executives, followed by review and approval by the Remuneration and Nomination
Committee. The process is designed to ensure a close alignment between the STIP and the company’s objective of
creating and delivering value for shareholders.

The STIP award is determined after the year-end based on an assessment of the extent to which the individual’s
objectives have been achieved. Outcomes are subject to rigorous one-up manager assessment and, for the Managing
Director and key executives, by the Board.

18
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

2010 STIP

The measures and weighting of objectives for the 2010 performance year were:

Profitability (ROC, EBITDA and NPAT) 60 per cent

For personal use only

Sustainability (total recordable injury frequency 10 per cent

rate, severity rate and level 2 and above
environmental incidents)

Growth (individual objectives) 30 per cent

STIP payments to the Managing Director and key executives were significantly higher in 2010 than in 2009, due primarily
to increased profitability, a strong relative share price performance and the achievement of growth objectives including
successful delivery of two major projects.

Half of the STIP award is paid in cash and half must be taken on a deferred basis in the form of ordinary restricted
shares in Iluka. Fifty per cent of the restricted shares do not vest until one year after the end of the performance period,
while the remaining fifty per cent does not vest until two years after the end of the performance period. This mandatory
deferral results in an employee having to remain with the company and continue to perform satisfactorily for the shares to
vest and, therefore, there is a significant trailing exposure to the value of the company’s shares.

The process for determining the number of restricted shares to be awarded to each participant is determined by dividing
the dollar value of the deferral component by the Volume Weighted Average Price (VWAP) of Iluka shares traded on the
ASX over the five trading days following release of the company’s full year results.

The deferred amount supports executive focus on both annual and multi-year performance, as well as representing a
tangible retention factor.

The Long-Term Incentive Plan (LTIP)

The LTIP provides a grant of equity in the form of share rights for Iluka shares that vest after three years subject to
performance over a three year period.

The grant is split into two separate tranches, with one tranche (50 per cent) being assessed based on return on equity
(ROE) relative to an internal target and the other (50 per cent) based on total shareholder return (TSR) performance
relative to a comparator group consisting of companies which in 2010 comprised the Materials Index and the ASX Mid
Cap 50 Index at the commencement of the performance period (excluding property trusts and duplication). The two
performance measures are applied as follows:

Return on Equity tranche:

The ROE tranche of the LTIP grant vests based on a prospective three year average ROE performance measure.
Vesting occurs on a straight line basis for performance between Threshold and Target. Targets are set giving
consideration to:

 the company’s ROE performance history;

 planned strategic and business plan activity throughout the performance period; and

 comparable company performance.

2010 ROE targets were 10 per cent for Threshold and 14 per cent for Target. These targets may be compared with a 10
year history for Iluka (to 2009) in which the average ROE was 5.7, or with a 10 year average for the ASX 200 (less
property trusts) of 8.85.

Targets are reviewed annually and set for a forward three year period. It can be expected that, as sustainable
performance improves, targets will be increased - within the bounds of feasible achievement - creating a “staircase”
effect over time. Similarly, because performance is measured over the three years as an average, a failure to achieve
targeted levels of performance in any one year increases the hurdle in the remaining years.

ROE performance assessment is also subject to maintenance of an acceptable level of gearing.

19
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

Total Shareholder Return tranche:

The TSR tranche of the LTIP grant vests based on TSR relative to a peer group of companies. The comparator group
consists of the companies which in 2010 comprised the Materials Index and the ASX Mid Cap 50 Index at the
commencement of the performance period (excluding property trusts and duplication). This comparator group was
chosen to provide a combination of companies from Iluka’s defined industry sector and companies of a similar market
For personal use only

capitalisation to Iluka. The combined group also ensures a sufficiently large peer group for performance measurement,
and provides less likelihood of TSR performance being skewed to specific sub industry sectors or specific stocks.

LTIP Vesting Schedule

Maximum
Performance Hurdle to Percentage of total grant
Measure percentage of total
be achieved that will vest
grant

50th percentile 25%

TSR 50%
75th percentile 50%

Threshold 25%
ROE 50%
Target 50%

Total Grant 100%

Vesting occurs on a straight-line basis for performance between threshold and target for both measures.

All offers and details of the maximum allocation for the Managing Director and key executives are shown on page 29. It
should be noted that the maximum allocations listed are subject to the respective performance criteria. If at the end of
the performance period the performance criteria have not been met there will be no entitlement to shares.

Previous Performance Incentive Programs: 2005 PIP

During 2005, Iluka operated the Performance Incentive Program (PIP) which has since been superseded by the STIP
and LTIP plans introduced in 2007.

At the end of the performance period in December 2005, performance criteria were assessed for each executive and an
incentive award determined based on the level of achievement. Half of the incentive award was paid in cash in March
2006. Executives received the remaining half of the award as rights to fully paid ordinary shares in Iluka Resources
Limited in annual instalments of 25 per cent over four years with each tranche of shares being subject to a four year
holding lock. Tranche one of the 2005 PIP vested in January 2007 with tranche two vesting January 2008 and tranche
three vesting January 2009. The final tranche of the 2005 PIP vested in January 2010.

Securities Trading

Iluka's policy in relation to employees holding Iluka securities is set out in the company's Securities Trading Policy, which
can be found on the company's website at www.iluka.com. The policy sets out the circumstances in which employees
may trade in company securities.

Remuneration Review

The company conducts a review of the remuneration of executives and staff on an annual basis. Guidelines for reviews
are considered by the Board following recommendation by the Remuneration and Nomination Committee. Review
guidelines are based upon the outcomes of direct and related market review data and external advice from the
company’s remuneration advisers. All employees and executives participate in an objective setting and performance
review process which is used in conjunction with market data to determine appropriate remuneration recommendations.

Individual progress against objectives is reviewed throughout the performance year with formal reviews occurring at half
year and at the conclusion of the performance year.

Recommendations by the Managing Director for STIP and LTIP award outcomes and remuneration for key executives
are submitted to the Remuneration and Nomination Committee in February of each year. In respect of all other eligible
participants, a one up manager approval process applies with final Managing Director approval prior to any award or
remuneration review being implemented.

20
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

Employee Share Plan

The Board believes that strong employee alignment with shareholder outcomes is a vital element of high performing
companies which create and deliver value for shareholders. Put simply, the company wants all employees to identify with
shareholder returns. Accordingly, the company also operates an employee share plan under the rules of the Iluka
Resources Limited Employee Share Plan. The Board may, from time to time, at its discretion, make written offers to
For personal use only

participate in the plan.

In 2007 and 2008, offers were made to eligible employees (permanent employees with a minimum of twelve months
service, who do not participate in the STIP) in Australia and the United States to receive ordinary shares in Iluka
Resources Limited to the value of A$1,000.

To satisfy the legislative requirements of both Australia and the United States, Australian employees received the shares
under a tax-exempt plan, with a three year sale restriction period (a holding lock is applied during the restriction period).
As US employees do not have access to a tax exemption plan, they were offered shares up to A$1,000 through a grant
of restricted shares. The shares will be held under the plan rules with a restriction period of three years. To enable US
employees to receive a tax deferral, strict forfeiture conditions apply.

Consistent with usual industry practice, shares acquired under the Employee Share Plan are not subject to performance
conditions as the primary objective of the plan is to encourage share ownership by all employees and, thereby, increase
the alignment of employee attitudes and actions with shareholder value creation and delivery.

The employee share plan was not offered to employees in 2009 or 2010 but will be re-instated in 2011.

Iluka Retention Plan

During 2007 and 2008, the resources sector experienced very high levels of competition for management and technical
talent, with resulting skill shortages and upward pressures on remuneration. These pressures were particularly prevalent
at the executive level and for highly skilled professionals critical to business operation.

The Board recognises that continuity of management and retention of key talent is critical to achieving the successful
delivery of major projects and other strategies in order to enhance shareholder returns. In that context, the Board
regularly reviews the market competitiveness of executive remuneration and its ability to retain key executives to achieve
long term business objectives.

Consequently, in March 2008, the Board approved the introduction of a Retention Plan limited to certain individuals
identified as critical to business outcomes over the medium term.

The Retention Plan offered participants a grant of share rights to ordinary shares in Iluka Resources Limited which vest
in full at the conclusion of a three year retention period. The grant of share rights rather than a cash payment provides a
strong alignment of the interests of participants with those of shareholders.

Where a participant voluntarily ceases employment during the retention period, all share rights awarded under the
Retention Plan are forfeited.

Retention Plan share rights awarded to executives and Key Management Personnel are included as rights granted in the
table on page 25.

In August 2009, the Board closed the Retention Plan.

Non-Executive Directors’ Remuneration

The remuneration of the non-executive Directors is determined by the Board on recommendation from the Remuneration
and Nomination Committee within a maximum aggregate amount approved by shareholders at an Annual General
Meeting. The current maximum amount of non-executive Directors’ fees as approved by shareholders is $1.1 million.
The total amount paid in 2010, including superannuation, was $956,565.

In 2009 and 2010, the Board decided not to increase their fees. :A review of Iluka’s non-executive Director fees was
conducted by Ernst & Young in 2011. The review took into account the nature of the Director’s work, their
responsibilities and survey data on comparative companies. Details of Director fees in 2010 and increased fees from 1
March 2011 are as follows:

21
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

From 1 March 2011 From 1 July 2008

to 28 February 2011
$ p.a $ p.a

 Non-executive Director Fees

Board Chairman (inclusive of Committee fees) 312,000 275,000
For personal use only

Board Member 125,000 100,000

 Board Member Committee Fees

Audit and Risk Committee Chair 35,000 35,000
Remuneration and Nomination Committee Chair 25,000 25,000
Audit and Risk Committee Member 17,500 17,500
Remuneration and Nomination Committee Member 12,500 12,500

The minimum required employer superannuation contribution up to the statutory maximum is paid into each Director’s
nominated eligible fund and is in addition to the above fees. Based on the above fee structure, the current total non-
executive Director remuneration, assuming no changes to the Board, is $1,074,500 per annum, excluding
superannuation, or $1,158,324 including superannuation .

Non-executive Directors are able to purchase company shares under the DEESAP utilising the funds that would
otherwise be payable to Directors as fees. These shares are acquired on market and all transaction costs are borne by
the relevant Director. Details of Directors’ share purchases are listed on page 25 of the Report. No performance
conditions are attached to these shares as they are purchased using sacrificed fees.

Executive Employment Agreements

Remuneration and other terms of employment for the Managing Director and key executives are formalised in service
agreements. The Managing Director and key executives are employed on a rolling basis with no specified fixed terms.
The Managing Director and relevant executives are on total fixed remuneration (TFR) arrangements, inclusive of
superannuation.

David Robb - Managing Director

Total Fixed Remuneration $1,500,000 for the year ended 31 December 2010.

2010 Short Term Incentive 90 per cent of TFR at target with up to 120 per cent of TFR for stretch
performance awarded 50 per cent as cash and 50 per cent as deferred equity.

Measure Weighting
Profitability (ROC, EBITDA, NPAT) 50 per cent
Sustainability (total recordable injury frequency rate, 10 per cent
severity rate, level 2 and above notifications
to government)
Growth (individual objectives) 40 per cent
Individual objectives and related deliverables are set each year by the Board
at what is assessed to be a stretch level of performance. These objectives
typically vary from year to year and in 2010 related to the company’s ongoing
response to the global economic crisis, major project development and certain
industry related and other initiatives.

2010 Long Term Incentive A grant of equity in the form of share rights of up to 30 per cent of TFR
measured over of a three year performance period.

Measure Weighting
ROE 50 per cent
TSR 50 per cent

22
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

Retention Arrangements At the 2008 AGM, shareholders approved the following retention
arrangements for Mr Robb.

Retention Offer 1,000,000 Share Rights offered in three equal tranches over a 3 year retention
For personal use only
period.

Performance Period The 12 month period commencing from the date which is 5 Business days
- Tranche 1 after the announcement of the full year results for the year ending 31
333,333 Share Rights December 2007 (ie, Tranche 1 performance period is 27 February 2008 to 25
February 2009).
The performance hurdle for tranche 1 of Mr Robb’s retention plan was
achieved with 333,333 share rights granted accordingly.

- Tranche 2 The 12 month period commencing from the date which is 5 Business days
333,333 Share Rights after the announcement of the full year results for the year ending 31
December 2008 (ie, Tranche 2 performance period is 25 February 2009 to 3
March 2010).
The performance hurdle for tranche 2 of Mr Robb’s retention plan was
not achieved and therefore, share rights relating to tranche 2 of the plan
were not awarded.

- Tranche 3 The 12 month period commencing from the date which is 5 Business days
333,334 Share Rights after the announcement of the full year results for the year ending 31
December 2009 (ie, Tranche 3 performance period is 3 March 2010 to 3
March 2011).
The performance hurdle for tranche 3 of Mr Robb’s retention plan was
achieved. In accordance with the terms and conditions of Mr Robb’s
retention offer (see Vesting Conditions), a total of 666,667 share rights
relating to tranches 2 and 3 of the plan have been awarded.

Vesting Conditions A tranche of Retention Incentive Share Rights will vest on the Vesting Date if
the TSR of the company calculated over the Performance Period for that
tranche is 15% (Annual Hurdle); or

30% TSR for the First and Second or Second and Third performance periods;
or

45% TSR measured over the First, Second and Third performance periods.

Vesting Date Subject to the performance criteria of each tranche being satisfied, each
tranche will vest the day after the last day of the Tranche 3 performance
period.

Forfeiture All entitlements under the retention plan are forfeited if Mr Robb resigns prior
to the end of the three year retention period.

Termination Arrangements At the 2007 AGM, shareholders approved the following termination payments
which may become payable to Mr Robb under the terms of the Executive
Employment Agreement entered into between Mr Robb and the company on
18 October 2006.

Employment can be terminated during the contract period by giving 12 months

With Notice notice or pay in lieu of notice plus a pro-rata short term incentive component.
All shares to which Mr Robb is entitled under the DEESAP will vest within
three months of termination.

Without Notice In the case of misconduct and in certain other circumstances, employment can
be terminated without notice and with no entitlement to any payment under the
executive incentive plan.

Voluntary Termination Employment may be terminated by giving six months notice. Any pro-rata
award under the executive incentive plan will be at the discretion of the Board.

23
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

Termination for other reasons  By Iluka on the ground of redundancy or by Mr Robb if, at the instigation
of the Board he suffers a material diminution in his status as Chief
Executive Officer and Managing Director, by giving 24 months notice (if
given in the first three years of employment) or 12 months notice
(thereafter) provided that Iluka may elect, or Mr Robb may require Iluka,
For personal use only
to pay Mr Robb an equivalent amount of TFR in lieu of notice.
 By Iluka if Mr Robb suffers illness, accident or other cause which renders
him unable to perform his duties, by giving Mr Robb six months TFR.
 In the circumstances described above, a termination payment equal to
the total incentive target for which there would have been an entitlement
under the executive incentive plan for the relevant year calculated on a
pro-rata basis for the relevant notice period given by the company.

Protection of Interests Mr Robb is restrained from engaging in certain activities during his
employment, and for a period following termination of his employment, in
order to protect Iluka’s interests. The Executive Employment Agreement
contains provisions relating to the protection of confidential information and
intellectual property.

Executive Service Agreements

Major provisions of the agreements relating to key executives included in this Remuneration Report are set out below.

Termination Notice
Termination Notice Termination
Executive Position Period by
Period by Iluka Payments*
Employee

P Benjamin General Manager Exploration 3 months 3 months 12 months

C Cobb General Manager Sales & Marketing 3 months 3 months 9 months

General Manager Product & Technical

V Hugo 3 months 3 months 12 months
Development

A Tate Chief Financial Officer 3 months 3 months 9 months

H Umlauff General Manager Project Management 3 months 3 months 12 months

S Wickham General Manager Australian Operations 3 months 3 months 9 months

General Manager Corporate Services &

C Wilson 3 months 3 months 12 months
Company Secretary

*Termination payments (other than for gross misconduct) are calculated on current total fixed remuneration at date of
termination and are inclusive of the notice period.

24
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

SHARE RIGHTS AND SHAREHOLDINGS OF KEY MANAGEMENT PERSONNEL

NUMBER OF SHARES NUMBER OF SHARE RIGHTS

Vested
Vesting Awarded as
For personal use only
Balance of as *Balance Balance *Granted shares Lapsed Balance
held at share Restricted Other held at held at during during during held at
Name 1/1/10 rights Shares changes 31/12/10 1/1/10 2010 2010 2010 31/12/10
Non-Executive Directors
R Every** 28,679 - - (28,679) - - - - - -

D Morley 40,876 - - - 40,876 - - - - -

W G Osborn - - - - - - - - - -
G Pizzey 16,351 - - - 16,351 - - - - -
G Rezos 63,602 - - - 63,602 - - - - -
J Seabrook 19,314 - - - 19,314 - - - - -
S J Turner - - - 50,000 50,000 - - - - -
Executive Director
D Robb 591,171 - 70,689 1,355 663,215 1,224,657 121,951 - (61,308) 1,285,300
Executives
P Beilby** 126,574 54,614 - (181,188) - 141,970 - (54,614) (87,356) -
P Benjamin 102,212 968 6,297 1,355 110,832 175,171 36,504 (968) (17,329) 193,378
C Cobb - - - - - - 34,146 - - 34,146
V Hugo 121,204 2946 10,973 (18,645) 116,478 117,894 33,252 (2,946) (16,062) 132,138
A Tate 41,988 - 17,772 - 59,760 174,433 40,163 - (19,414) 195,182
H Umlauff 108,057 - 24,722 (19,873) 112,906 146,437 46,911 - (23,092) 170,256
S Wickham 39,840 - 19,718 1,355 60,913 92,254 40,650 - (10,763) 122,141
C Wilson 81,048 2,691 16,153 - 99,892 178,202 36,504 (2,691) (17,983) 194,032
* Balances for the Executive Director and the Executives include restricted shares which will vest in future periods
subject to legislative requirements.
** Shares and Share Rights are reversed to show a zero balance at 31 December on cessation of employment.
No shares were forfeited during the year.

25
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

DETAILS OF REMUNERATION
Details of the remuneration of the directors and other Key Management Personnel (as defined in AASB 124 Related Party
Disclosures) of Iluka Resources Limited and the Iluka Resources Limited group are set out in the following tables. Other
key management personnel of the company and the group are the following executives who have authority for planning,
directing and controlling the activities of the company and the group.
For personal use only

KEY MANAGEMENT PERSONNEL – DIRECTORS

(i) Non-executive Directors

R L Every (Chairman)
D M Morley
W G Osborn
G J Pizzey (Chairman)
G J Rezos
J A Seabrook
S J Turner
(ii) Managing Director and Chief Executive Officer
D Robb
All above persons were Directors of Iluka Resources Limited for all of the financial year, as well as for the financial
year ended 31 December 2009, except W O Osborn and S J Turner who were appointed as Directors on 26 March
2010. R L Every was a Director in the prior year and retired on 20 May 2010.
KEY MANAGEMENT PERSONNEL - EMPLOYEES OTHER THAN DIRECTORS (‘the Executives’)
In addition to the Directors of the consolidated entity, the following employees met the definition of Key Management
Personnel for the year ended 31 December 2010 and are referred to as Executives:
P Beilby1 General Manager Murray Basin
P Benjamin General Manager Exploration
C Cobb General Manager Sales and Marketing
V Hugo General Manager Product & Technical Development
A Tate Chief Financial Officer
H Umlauff General Manager Project Management
S Wickham General Manager Australian Operations
C Wilson General Manager Corporate Services & Company Secretary
1 Ceased employment 1 March 2010.

Amounts in the ‘STIP cash’ column are dependent on the satisfaction of performance conditions as set out in the section
headed “Short Term Incentive Plan” above. Amounts in the ‘Share Based Payments’ column relate to the component of
the fair value of awards from prior years made under the various incentive plans attributable to the year measured in
accordance with AASB 2 Share Based Payments. All other elements of remuneration are not directly related to
performance.

26
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

2010

Short Term Employee Benefits

Non-
Cash, **STIP Super- **Share Based
2 Monetary Other 2,3 Total
For personal use only
Name Salary & Cash annuation Payments
1 Benefits $ $
Fees $ $ $
$

Non-executive Directors

R Every5 106,944 n/a 7,794 n/a 5,421 n/a 120,159

D Morley 136,237 n/a 6,076 n/a 12,150 n/a 154,463

W G Osborn6 90,456 n/a - n/a 8,141 n/a 98,597

G Pizzey 217,262 n/a - n/a 13,123 n/a 230,385

G Rezos 124,763 n/a - n/a 11,229 n/a 135,992

J Seabrook 121,951 n/a - n/a 10,976 n/a 132,927

S J Turner7 89,828 n/a - n/a 8,085 n/a 97,913

Executive Director

D Robb 1,451,941 836,386 38,206 - 48,059 1,359,631 3,734,223

Executives

P Beilby4 165,752 - - 315,000 5,905 261,039 747,696

*P Benjamin 410,092 177,517 6,487 - 36,908 361,570 992,574

C Cobb 407,833 183,167 - - 36,180 41,580 668,760

V Hugo 382,519 164,566 6,487 - 26,139 256,549 836,260

*A Tate 462,423 205,436 - - 28,514 369,704 1,066,077

*H Umlauff 529,358 236,282 4,767 - 47,642 366,074 1,184,123

*S Wickham 472,556 206,438 4,768 - 17,781 242,164 943,707

*C Wilson 422,376 185,207 6,487 - 26,385 364,455 1,004,910

1. STIP Cash includes cash that is sacrificed for the purchase of shares during the year.
2. STIP Cash and share-based awards for 2009 were made in March 2010.
3. Includes negative amounts for the reversal of prior year charges for the ROE component of the 2008 LTIP which did
not vest.
4. Ceased employment 1 March 2010. “Other” relates to redundancy payment and statutory leave entitlements on cessation
of employment.
5. Retired on 20 May 2010.
6. Appointed 26 March 2010. No payments were made to WG Osborn as consideration for his appointment.
7. Appointed 26 March 2010. No payments were made to SJ Turner as consideration for his appointment.

* 5 highest paid executives of the group, as required to be disclosed under the Corporations Act 2001.
** n/a denotes that Non-executive Directors are not eligible for these arrangements.

27
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

2009

Short Term Employee Benefits

For personal use only

**Non-
Cash, **STIP Super- **Share Based
4 Monetary Other 2,3, 4 Total
Name Salary & Cash annuation Payments
1 Benefits $ $
Fees $ $ $
$

Non-executive Directors

R Every 275,000 n/a n/a n/a 14,103 n/a 289,103

D Morley 135,000 n/a n/a n/a 12,150 n/a 147,150

G Pizzey 125,000 n/a n/a n/a 11,250 n/a 136,250

G Rezos 130,000 n/a n/a n/a 11,700 n/a 141,700

J Seabrook 117,500 n/a n/a n/a 10,575 n/a 128,075

Executive Director

D Robb 1,431,078 260,843 51,489 - 68,922 1,383,517 3,195,849

Executives

*P Beilby 382,263 23,266 - - 34,404 398,088 838,021

*P Benjamin 408,716 23,236 5,495 - 36,784 454,572 928,803

5
C Cobb 83,194 - - - 7,488 - 90,682

V Hugo 374,950 40,491 5,495 - 28,823 325,980 775,739

*A Tate 450,306 65,579 - - 40,528 564,725 1,121,137

*H Umlauff 531,968 91,224 4,632 - 47,477 473,032 1,148,333

S Wickham 413,485 72,761 1,280 - 14,103 255,266 756,895

*C Wilson 414,857 59,605 5,495 - 30,407 474,605 984,969

1. STIP Cash includes cash that is sacrificed for the purchase of shares during the year.
2. Includes negative amounts for the reversal of prior year charges for the ROE component of the 2007 LTIP which did
not vest.
3. The higher level of share based payments in 2009 compared with 2008 reflects the deferred equity component of the
2008 STIP which is charged as remuneration in 2009 and 2010 together with the full year charge for the Iluka
Retention Plan share rights granted in March 2008 which vest in March 2011.
4. STIP Cash and share-based awards for 2009 were made in March 2010.
5. Appointed 12 October 2009. C Cobb was formerly Managing Director of Consolidated Rutile Limited. No payments
were made to C Cobb as consideration for his joining Iluka.

* 5 highest paid executives of the group, as required to be disclosed under the Corporations Act 2001.
** n/a denotes that Non-executive Directors are not eligible for these arrangements.

28
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

SHARE - BASED COMPENSATION

STIP Restricted Shares awarded to the Managing Director and Executives yet to vest
For personal use only
2
Awarded %
Name 2008 STIP1 2009 STIP1 2010 STIP1
2008 2009 2010
D Robb 92,687 70,689 78,460 91 29 93
P Benjamin 18,091 6,297 16,653 84 12 88
C Cobb - - 17,183 - - 97
V Hugo 17,671 10,973 15,438 88 22 89
A Tate 20,994 17,772 19,272 87 30 92
H Umlauff 25,405 24,722 22,165 88 35 91
S Wickham 11,708 19,718 19,366 87 37 92
C Wilson 21,468 16,153 17,374 96 30 92

1 STIP restricted share fair value determined independently using the Black-Scholes model that takes into account the
share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the
risk free discount rate for the vesting period. STIP restricted shares are awarded in March of the following year (eg
2010 STIP Awards are made in March 2011)
2 The percentage achieved of the STIP maximum available incentive opportunity awarded for the financial year.

Maximum value of restricted shares and share rights

The maximum number of restricted shares and/or share rights that may vest in future years, together with the maximum
value of these shares/rights that will be recognised as share based payments in future years is set out below. The
maximum value for a year relates to the value of those restricted shares/rights that vest in that year. The amount to be
reported as share based payments in future years will be determined in accordance with AASB 2 Share Based Payments
over the vesting period.

Maximum Number Maximum Value ($)

Name Vesting Year Vesting Year
2011 2012 2013 2011 2012 2013
D Robb 1,250,647 137,386 121,951 1,914,031 540,468 376,829
P Benjamin 164,898 33,693 36,504 642,903 135,251 112,797
C Cobb - - 34,146 - - 105,511
V Hugo 110,282 33,310 33,252 421,008 132,550 102,749
A Tate 170,708 42,491 40,163 660,501 168,159 124,104
H Umlauff 144,951 51,613 46,911 547,328 203,492 144,955
S Wickham 84,093 39,587 40,650 320,517 155,892 125,609
C Wilson 174,511 38,621 36,504 680,066 152,844 112,797

29
 Iluka Resources Limited
Remuneration report
31 December 2010
(continued)

Fair Value
The fair value of each restricted share or share right and the vesting year for each incentive plan is set out below.

Fair Value per Share

Incentive Plan Vesting Year
$
For personal use only

2005 PIP (Tranche 4) 6.57 2010

*2007 STIP (Tranche 2) 4.09 2010
2008 LTIP 2.93 2011
*2008 STIP 4.66 2010 & 2011
2009 LTIP 4.06 2012
*2009 STIP 3.57 2011 & 2012
Retention Plan 4.09 2011
Retention Plan MD 1 0.90 2011
Retention Plan MD 2 1.19 2011
Retention Plan MD 3 0.90 2011
2010 LTIP 3.09 2013
*2010 STIP 10.66 2012 & 2013
* Awards under these plans are restricted shares, all other plans grant share rights.
The fair value is calculated in accordance with the measurement criteria of Accounting Standard AASB 2 Share-based
Payment.

The fair value of restricted shares is determined to be the volume weighted average price 5 days after results are
announced to the market. The fair value is recognised as an expense through the income statement on a straight-line
basis between the grant date and the vesting date for each respective plan.

The fair value of share rights is independently determined using a Black-Scholes share right pricing model that takes into
account the exercise price, the term of the share right, the impact of dilution, the share price at grant date and expected
price volatility of the underlying share, the expected dividend yield and the risk free interest rate of the term of the share
right.

The fair value of share rights at grant date of the Long Term Incentive Plan (LTIP) is independently determined using a
Monte Carlo simulation to model Iluka share prices against the comparator group performance at vesting date. The
Monte Carlo method is a procedure for repeatedly sampling random movements in a stock’s price to estimate the
average or mean share price.

30
For personal use only
 Iluka Resources Limited ABN 34 008 675 018
Financial Report - 31 December 2010
For personal use only

Page
Financial report
Consolidated income statement 33
Consolidated statement of comprehensive income 34
Consolidated balance sheet 35
Consolidated statement of changes in equity 36
Consolidated statement of cash flows 37
Notes to the consolidated financial statements 38
Directors' declaration 85
Independent auditor's report to the members 86

This financial report covers the consolidated financial statements for the consolidated entity consisting of Iluka Resources
Limited and its subsidiaries. The financial statements are presented in the Australian currency.
Iluka Resources Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and
principal place of business is:
Iluka Resources Limited
Level 23, 140 St George's Terrace
Perth WA 6000

A description of the nature of the consolidated entity's operations and its principal activities is included in the review of
operations in the Directors’ Report.
The financial statements were authorised for issue by the directors on 24 March 2011. The company has the power to
amend and reissue the financial statements.
Through the use of the internet, we have ensured that our corporate reporting is timely and complete. All press releases,
financial reports and other information are available at www.iluka.com

-32-
 Iluka Resources Limited
Consolidated income statement
For the year ended 31 December 2010

2010 2009
Notes $M $M
For personal use only
Revenue from continuing operations 5 964.6 602.6

Other income 6 8.4 39.5

Expenses 7 (885.8) (717.2)

Interest and finance charges (33.0) (8.4)

Rehabilitation and restoration unwind (14.3) (15.7)
Total finance costs 7 (47.3) (24.1)
Impairment charges 7 - (67.6)
Profit (loss) before income tax from continuing operations 39.9 (166.8)

Income tax (expense) benefit 8 (3.8) 61.5

Profit (loss) from continuing operations 36.1 (105.3)

Profit from discontinued operations 9 - 22.9

Profit (loss) for the year 36.1 (82.4)

Cents Cents
Basic and diluted earnings per share
Earnings per share from continuing operations attributable to owners 29 8.6 (25.9)
Earnings per share attributable to owners 29 8.6 (20.2)

The above income statement should be read in conjunction with the accompanying notes.

-33-
 Iluka Resources Limited
Consolidated statement of comprehensive income
For the year ended 31 December 2010

2010 2009
$M $M

Profit (loss) for the year 36.1 (82.4)

For personal use only

Other comprehensive income

Changes in fair value of foreign exchange cash flow hedges, net of tax (3.6) 83.5
Currency translation of US operation (6.9) (22.8)
Hedge of net investment in US operation, net of tax 6.7 23.6
Actuarial gains on defined benefit plans, net of tax 0.6 2.4
Other comprehensive (loss) income for the year (3.2) 86.7

Total comprehensive income for the year 32.9 4.3

Total comprehensive income for the year is attributable to:

Owners of Iluka Resources Limited 32.9 (1.1)
Non-controlling interest - 5.4
32.9 4.3

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

-34-
 Iluka Resources Limited
Consolidated balance sheet
As at 31 December 2010

1 January
2010 2009 2009*
Notes $M $M $M
For personal use only
ASSETS
Current assets
Cash and cash equivalents 10 30.1 86.3 97.6
Receivables 11 164.8 103.9 243.2
Inventories 12 201.0 205.5 249.7
Derivative financial instruments 3 - 15.9 -
Other assets - - 8.5
Total current assets 395.9 411.6 599.0

Non-current assets
Inventories 12 56.6 56.6 -
Property, plant and equipment 13 1,425.0 1,566.6 1,414.6
Deferred tax assets 14 55.3 53.7 31.0
Intangible assets 15 7.1 9.9 13.5
Total non-current assets 1,544.0 1,686.8 1,459.1

Total assets 1,939.9 2,098.4 2,058.1

LIABILITIES
Current liabilities
Payables 16 103.7 183.7 164.1
Interest bearing liabilities 17 29.5 44.7 36.8
Current tax liabilities - - 5.0
Provisions 18 54.9 28.1 61.4
Derivative financial instruments - - 104.0
Total current liabilities 188.1 256.5 371.3

Non-current liabilities
Interest bearing liabilities 17 313.3 423.7 276.5
Provisions 18 313.9 322.9 322.7
Derivative financial instruments - - 49.6
Total non-current liabilities 627.2 746.6 648.8

Total liabilities 815.3 1,003.1 1,020.1

Net assets 1,124.6 1,095.3 1,038.0

EQUITY
Contributed equity 19 1,108.3 1,114.4 998.1
Reserves 20(a) 20.4 22.0 (55.8)
Retained (losses) profits 20(b) (4.1) (41.1) 37.5
1,124.6 1,095.3 979.8

Non-controlling interests - - 58.2

Total equity 1,124.6 1,095.3 1,038.0

The above consolidated balance sheet should be read in conjunction with the accompanying notes.
* See note 1(a) for details regarding a change in accounting policy.

-35-
 Iluka Resources Limited
Consolidated statement of changes in equity
For the year ended 31 December 2010

Attributable to owners of Iluka Resources

Limited
Non-
Contributed Retained controlling Total
equity Reserves earnings Total interests equity
Notes $M $M $M $M $M $M
For personal use only

Balance at 1 January 2009 998.1 (84.3) 66.0 979.8 58.2 1,038.0

Adjustment on adoption of AASB 2008-8 1 - 28.5 (28.5) - - -

Restated total equity at the beginning
of the financial year 998.1 (55.8) 37.5 979.8 58.2 1,038.0

Loss for the year - - (82.2) (82.2) (0.2) (82.4)

Changes in fair value of foreign
exchange cash flow hedges, net of tax 20 - 77.9 - 77.9 5.6 83.5
Currency translation of US operation 20 - (22.8) - (22.8) - (22.8)
Hedge of net investment in US
operation, net of tax 20 - 23.6 - 23.6 - 23.6
Actuarial gains on retirement benefit
obligations, net of tax 20 - - 2.4 2.4 - 2.4
Transfer of asset revaluation reserve 20 - (1.2) 1.2 - - -
Total comprehensive income - 77.5 (78.6) (1.1) 5.4 4.3

Transactions with owners in their

capacity as owners:
Share placement, net of costs 19 113.5 - - 113.5 - 113.5
Transfer of shares to employees 19 2.8 (2.8) - - - -
Share based payments, net of tax 19 - 3.1 - 3.1 - 3.1
Dividends paid to CRL minorities - - - - (1.8) (1.8)
Disposal of subsidiary - - - - (61.8) (61.8)
116.3 0.3 - 116.6 (63.6) 53.0

Balance at 31 December 2009 1,114.4 22.0 (41.1) 1,095.3 - 1,095.3

Balance at 1 January 2010 1,114.4 19.9 (39.0) 1,095.3 - 1,095.3

Adjustment on adoption of AASB 2008-8 1 - 2.1 (2.1) - - -
Restated total equity at the beginning
of the financial year 1,114.4 22.0 (41.1) 1,095.3 - 1,095.3

Profit for the year - - 36.1 36.1 - 36.1

Changes in fair value of foreign
exchange cash flow hedges, net of tax 20 - (3.6) - (3.6) - (3.6)
Currency translation of US operation 20 - (6.9) - (6.9) - (6.9)
Hedge of net investment in US
operation, net of tax 20 - 6.7 - 6.7 - 6.7
Actuarial gains on retirement benefit
obligations, net of tax 20 - - 0.6 0.6 - 0.6
Transfer of asset revaluation reserve 20 - (0.3) 0.3 - - -
Total comprehensive income - (4.1) 37.0 32.9 - 32.9

Transactions with owners in their

capacity as owners:
Transfer of shares to employees 19 1.1 (1.1) - - - -
Share based payments, net of tax 19 - 3.6 - 3.6 - 3.6
Purchase of treasury shares, net of tax 19 (7.2) - - (7.2) - (7.2)
(6.1) 2.5 - (3.6) - (3.6)

Balance at 31 December 2010 1,108.3 20.4 (4.1) 1,124.6 - 1,124.6

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

-36-
 Iluka Resources Limited
Consolidated statement of cash flows
For the year ended 31 December 2010

2010 2009
Notes $M $M

Cash flows from operating activities

For personal use only
Receipts from customers 888.3 744.8
Payments to suppliers and employees (727.2) (663.0)
161.1 81.8
Interest received 1.1 1.5
Interest paid (30.5) (14.0)
Tax paid (1.5) (4.4)
Exploration expenditure (17.9) (20.0)
MAC royalty receipts 63.9 55.2
Other 2.5 2.1
Net cash inflow from operating activities 28 178.7 102.2

Cash flows from investing activities

Payments for property, plant and equipment (117.2) (521.6)
Sale of property, plant and equipment 9.0 9.9
Sale of CRL 9 - 84.2
Net cash (outflow) from investing activities (108.2) (427.5)

Cash flows from financing activities

Proceeds from borrowings - 309.8
Repayment of borrowings (116.4) (105.6)
Purchase of treasury shares (9.8) -
Dividends paid to CRL minority interests - (1.8)
Issue of ordinary shares 19(b) - 114.0
Share issue costs 19(b) - (0.5)
Net cash (outflow) inflow from financing activities (126.2) 315.9

Net (decrease) increase in cash and cash equivalents (55.7) (9.4)

Cash and cash equivalents at 1 January 86.3 97.6
Exchange rate changes on cash and cash equivalents (0.5) (1.9)
Cash and cash equivalents at 31 December 10 30.1 86.3

The above cash flow statement should be read in conjunction with the accompanying notes.

-37-
 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010

Notes to the consolidated financial statements

Page
1 Summary of significant accounting policies 39
2 Critical accounting estimates and judgements 49
For personal use only

3 Financial risk management 51

4 Segment information 55
5 Revenue from continuing operations 57
6 Other income 57
7 Expenses 58
8 Income tax 59
9 Discontinued operations 60
10 Cash and cash equivalents 60
11 Receivables 61
12 Inventories 61
13 Property, plant and equipment 62
14 Deferred tax assets 63
15 Intangible assets 64
16 Payables 64
17 Interest bearing liabilities 64
18 Provisions 67
19 Contributed equity 67
20 Reserves and retained earnings 69
21 Key management personnel 71
22 Remuneration of auditors 74
23 Retirement benefit obligations 74
24 Contingent liabilities 77
25 Commitments 78
26 Related party transactions 79
27 Controlled entities and deed of cross guarantee 80
28 Reconciliation of profit (loss) after income tax to net cash inflow from operating activities 82
29 Earnings per share 82
30 Share-based payments 83
31 Parent entity financial information 84

-38-
 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

1 Summary of significant accounting policies

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below.
For personal use only
These policies have been consistently applied to all the years presented, unless otherwise stated. These financial
statements are for the consolidated entity consisting of Iluka Resources Limited and its subsidiaries.

(a) Basis of preparation

This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other
authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the
Corporations Act 2001. The consolidated financial statements of Iluka Resouces Limited also comply with International
Financial Reporting Standards ("IFRS") as issued by the international Accounting Standards Board (IASB). These financial
statements have been prepared under the historical cost convention except for derivative financial instruments which have
been measured at fair value through profit and loss.
Change in Accounting policy
Accounting policy 1(l) Derivatives and hedging activities was amended from 1 January 2010 to comply with AASB 2008-8
“Amendments to Australian Accounting Standards - Eligible Hedged Items” which permits only the intrinsic value of an
option to be recognised in equity for hedge accounting purposes.

The impact of the change in accounting policy is summarised in the table below:

Notes Previous Ineffective Ineffective Revised

policy losses fair value policy
$M $M $M $M
Balance Sheet at 1 January 2009
Reserves (change is to hedging reserve) 20 (84.3) - 28.5 (55.8)
Retained profits 20 66.0 - (28.5) 37.5

Income statement - year ended 31 December 2009

Hedge revenue (losses) 5 (42.9) 16.6 - (26.3)
Ineffective (gains) losses from changes in fair value of
hedges 6 - (16.6) 37.8 21.2
Tax benefit 8 72.9 - (11.4) 61.5
Loss for the year ended 31 December 2009 (108.8) - 26.4 (82.4)

Other comprehensive income - year ended 31

December 2009
Change in fair value of cash flow hedges net of tax 109.9 - (26.4) 83.5

Balance Sheet at 1 January 2010

Reserves (change is to hedging reserve) 20 19.9 - 2.1 22.0
Retained profits 20 (39.0) - (2.1) (41.1)

Income statement - year ended 31 December 2010

Hedge revenue (losses) 5 13.8 (12.4) 10.8 12.2
Ineffective gains from changes in fair value of hedges 8 - 12.4 (10.8) 1.6

As a result of the above change in accounting policy earnings per share attributable to owners for the prior period increased
from (26.8) to (20.2) cents per share.

(b) Principles of consolidation

(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Iluka Resources Limited
(''Company'' or ''parent entity'') as at 31 December 2010 and the results of all subsidiaries for the year then ended. Iluka
Resources Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated
entity.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

1 Summary of significant accounting policies (continued)

Investments in subsidiaries are accounted for at cost. Subsidiaries are all those entities (including special purpose entities)
For personal use only
over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding
of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable
or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-
consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between consolidated entity companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the consolidated entity.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the income statements,
consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated balance
sheet respectively.

(c) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker has been identified as the Managing Director.

(d) Revenue recognition

Mineral sands
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net
of returns, trade allowances and duties and taxes paid.
Product sales are recognised as revenue when there has been a passing of risk to a customer, and:

 the product is in a form suitable for delivery and no further processing is required by, or on behalf of, the
consolidated entity;

 the quantity, quality and selling price of the product can be determined with reasonable accuracy; and

 the product has been despatched to the customer and is no longer under the physical control of the consolidated
entity, or the customer has formally acknowledged legal ownership of the product including all inherent risks, albeit
that the product may be stored in facilities the consolidated entity controls.
Gains and losses, including premiums paid or received, in respect of forward sales, options and other deferred delivery
arrangements which hedge anticipated revenues from future production, are deferred and included in sales revenue in
accordance with accounting policy 1(l).
Mining Area C royalty income and amortisation of royalty asset
Royalty income is recognised on an accrual basis. Royalty income is received on a quarterly basis and any under or over
accrual applicable to previously recognised royalty income is adjusted for based on the receipt of the royalty income
entitlement.

The royalty entitlement asset is an intangible asset and is amortised on a straight-line basis over its estimated useful life of
25 years of which 18 years is remaining.

(e) Interest and other

Interest income is recognised in the income statement as it accrues, using the effective interest method.

(f) Income tax

The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

1 Summary of significant accounting policies (continued)

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the
For personal use only
assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each
jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences
to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial
recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences
if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either
accounting profit or loss or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases
of investments and loans in controlled entities where the parent entity is able to control the timing of the reversal of the
temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforcable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation authority.
Current and deferred tax balances attributable to amounts recognised directly in equity are recognised directly in equity.
Tax consolidation legislation
Iluka Resources Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation
legislation as of 1 January 2004.
On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing
agreement which, in the opinion of the Directors, limits the joint and several liability of the wholly-owned entities in the case
of a default by the head entity, Iluka Resources Limited.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Iluka
Resources Limited for any current tax payable assumed and are compensated by Iluka Resources Limited for any current
tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Iluka
Resources Limited under the tax consolidation legislation. The funding amounts are determined by reference to the
amounts recognised in the wholly-owned entities' financial statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head
entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require
payment of interim funding amounts to assist with its obligations to pay tax instalments. The funding amounts are
recognised as current intercompany receivables or payables.

(g) Acquisitions of assets

The purchase method of accounting is used to account for all acquisitions of assets (including business combinations)
regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets
given, shares issued or liabilities incurred or assumed at the date of exchange. Acquisition related costs are expensed as
incurred.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate
at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Costs relating to the acquisition of new areas of interest are capitalised as either exploration and evaluation expenditure,
development properties or mine properties depending on the stage of development reached at the date of acquisition. Refer
Note 1(n) for more information.

A liability for restructuring costs is recognised as at the date of acquisition of an entity or part thereof when there is a
demonstrable commitment to the restructuring of the acquired entity and a reliable estimate of the amount of the liability can
be made.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

1 Summary of significant accounting policies (continued)

(h) Cash and cash equivalents

For personal use only

For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with
financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank
overdrafts. Bank overdrafts are shown within interest-bearing liabilities in current liabilities on the balance sheet.

(i) Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for
doubtful debts. Trade and other receivables are generally due for settlement no more than 90 days from the date of
recognition.
Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written
off. A provision for doubtful receivables is established when there is objective evidence that the consolidated entity will not
be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the
difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the
original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is
immaterial. The amount of the provision is recognised in the income statement.

(j) Inventories
Inventories are valued at the lower of weighted average cost and estimated net realisable value.

Weighted average cost includes direct costs and an appropriate portion of fixed and variable overhead expenditure,
including depreciation and amortisation.

Net realisable value is the amount estimated to be obtained from sale in the normal course of business, less any anticipated
costs to be incurred prior to sale.

A regular and ongoing review is undertaken to establish the extent of surplus obsolete or damaged stores, which are then
valued at estimated net realisable value.

(k) Foreign currency translation

(i) Functional and presentation currency
The consolidated financial statements are presented in Australian dollars, which is Iluka Resources Limited’s functional and
presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses including those from the translation at balance date of foreign currency
denominated monetary assets and liabilities are recognised in the income statement, except when deferred in equity as
qualifying cash flow hedges and qualifying net investment hedges.
(iii) Group companies
The results and financial position of the US entities that have a US dollar functional currency are translated into AUD as
follows:

 assets and liabilities are translated at the exchange rate at balance date;

 income and expenses for each month are translated at average exchange rates; and

 all resulting exchange differences are recognised in the foreign currency translation reserve.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

1 Summary of significant accounting policies (continued)

(l) Derivatives and hedging activities

For personal use only

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured to their fair value at balance date. The method of recognising the resulting gain or loss depends on whether
the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The consolidated
entity designates certain derivatives as either: (1) hedges of the fair value of recognised assets or liabilities or a firm
commitment (fair value hedge); or (2) hedges of highly probable forecast transactions (cash flow hedges).
At the inception of the transaction, the consolidated entity documents the relationship between hedging instruments and
hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The
consolidated entity also documents its assessment, both at transaction inception and on an ongoing basis, of whether the
derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in
fair values or cash flows of hedged items.
The fair values of various derivatives financial instruments used for hedging purposes are disclosed in note 3. Movements
in the hedging reserve in shareholders' equity are shown in note 20.
(i) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in
the income statement. To comply with AASB 2008-8 "Amendments to Australian Accounting Standards - Eligible Hedged
Items", which permits only the intrinsic value of an option to be recognised in equity for hedge accounting purposes, the
group amended its accounting policy from 1 January 2010. The effect of this change in accounting policy is disclosed in
note 1(a).
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item affects profit or
loss (for instance when the forecast receipt that is hedged takes place). However, when the forecast transaction that is
hedged results in the recognition of a non-financial asset (for example inventory), the gains and losses previously deferred
in equity are included in the measurement of the initial cost or carrying amount of the asset.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast
transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur,
the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.
(ii) Net investment hedges
Hedges of net investments in foreign operations are accounted for similarly to cashflow hedges. Any gain or loss on the
hedging instrument relating to the effective portion of the hedge is recognised in equity. The gain or loss relating to the
ineffective portion is recognised immediately in the income statement within other income or expenses. Gains or losses
accumulated in equity are included in the income statement on disposal of the foreign operation.
(iii) Derivatives that do not qualify for hedge accounting
For derivatives that do not qualify for hedge accounting, changes in the fair value are recognised immediately in the income
statement.

(m) Loans and receivables

Loans and receivables including amounts due from Group entities are included in current assets, except for those with
maturities greater than 12 months after the balance sheet date which are classified as non-current assets.

(n) Exploration, evaluation and development expenditure

Exploration and evaluation expenditure is accumulated separately for each area of interest in accordance with AASB 6
Exploration for and Evaluation of Mineral Resources. Such expenditure comprises net direct costs and an appropriate
portion of related overhead expenditure.
Expenditure is carried forward when incurred in areas for which the consolidated entity has rights of tenure and where
economic mineralisation is indicated, but activities have not yet reached a stage which permits a reasonable assessment of
the existence or otherwise of economically recoverable ore reserves and active and significant operations in relation to the
area are continuing. Each such project is regularly reviewed. If the project is abandoned or if it is considered unlikely the
project will proceed to development, accumulated costs to that point are written off immediately.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

1 Summary of significant accounting policies (continued)

Each area of interest is limited to a size related to a known mineral resource capable of supporting a mining operation.
For personal use only

Identifiable exploration assets acquired from another mining company are recognised as assets at their cost of acquisition,
as determined by the requirements of AASB 3 Business Combinations.
Projects are advanced to development status when it is expected that accumulated and future expenditure on development
can be recouped through project development or sale. Capitalised exploration is transferred to Mine Reserves once the
related ore body achieves JORC reserve status (reported in accordance with JORC, 2004) and has been included in the life
of mine plan.
Direct costs associated with the commissioning of plant and equipment are capitalised and included in property, plant and
equipment. Pre-commissioning costs in testing the processing plant are also capitalised.
Expenditure associated with the advance removal of mine overburden after the initial development of a mine is deferred and
charged to the income statement over its useful life, which typically does not exceed one year.
All the above expenditure is carried forward up to commencement of operations at which time it is amortised in accordance
with the policy stated in Note 1(o).

(o) Property, plant and equipment

Land and buildings are shown at historical cost, less subsequent depreciation for buildings. Land is not depreciated. All
other property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that
is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the consolidated entity and the cost of the
item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the reporting period in
which they are incurred.
Depreciation and amortisation of mine buildings, reserves and development and mine specific plant, machinery and
equipment is provided for over the life of the relevant mine or asset, whichever is the shorter. Mine specific plant, machinery
and equipment refers to plant, machinery and equipment for which the economic useful life cannot extend beyond the life of
its host mine. Depreciation and amortisation of mine buildings, reserves and development and other non mine specific plant
and equipment is determined on a straight-line basis as the consumption of economic benefits is not expected to vary over
the operational life of the asset. Depreciation of mine specific plant is determined on a unit of production basis to more
appropriately match depreciation charges with expected pattern of consumption of economic benefit of the asset. The
basis of depreciation of each asset is reviewed annually and changes to the basis of depreciation are made if the straight
line or units of production basis is no longer considered to represent the expected pattern of consumption of economic
benefits. The expected useful lives are as follows:

 Mine buildings the shorter of applicable mine life and 25 years

 Mine specific plant, machinery and equipment the applicable mine lives
 Reserves and development the applicable mine life
 Other non-mine specific plant and equipment 3-25 years

The reserves and life of each mine and the remaining useful life of each class of asset are reassessed at regular intervals
and the depreciation rates adjusted accordingly.

(p) Maintenance and repairs

Certain items of plant used in the primary extraction, separation and secondary processing of extracted minerals are subject
to major overhaul on a cyclical basis. Costs incurred during such overhauls are characterised as either in the nature of
capital or in the nature of repairs and maintenance. Work performed may involve:
(i) the replacement of a discrete sub-component asset, in which case an asset addition is recognised and the book value of
the replaced item is written off; and
(ii) demonstrably extending the useful life or functionality of an existing asset, in which case the relevant cost is added to the
capitalised cost of the asset in question.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

1 Summary of significant accounting policies (continued)

Costs incurred during a major cyclical overhaul which do not constitute (i) or (ii) above, are written off as repairs and
For personal use only
maintenance as incurred. Costs qualifying for capitalisation under (i) or (ii) above are subsequently depreciated in
accordance with Note 1 (o).
General repairs and maintenance which are not characterised as part of a major cyclical overhaul are expensed as
incurred.

(q) Non-current assets constructed by the consolidated entity

The cost of non-current assets constructed by the consolidated entity includes the cost of all materials used in construction,
direct labour on the project, project management costs, borrowing costs incurred during construction and an appropriate
proportion of variable and fixed overheads.

Borrowing costs included in the cost of non-current assets are those costs that would have been avoided if the expenditure
on the construction of the assets had not been made and are capitalised in accordance with the policy stated in Note 1(v).
Borrowing costs are not capitalised whilst assets are being commissioned.

(r) Intangible assets

Significant costs associated with patents and trademarks are deferred and amortised over the periods of expected benefit.

(s) Recoverable amount of non-current assets

AASB 136 Impairment of Assets requires that depreciable assets that are subject to amortisation are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell (FVLCS) and value-in-use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (Cash
Generating Units (refer note 2)). Non-financial assets that suffered an impairment are reviewed for possible reversal of the
impairment at each reporting date.

(t) Trade and other payables

These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of financial
year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(u) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred and are subsequently measured at
amortised cost. Any difference between the net proceeds and the redemption amount is recognised in the income
statement over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the consolidated entity has an unconditional right to defer settlement of
the liability for at least 12 months after the balance sheet date.

(v) Borrowing costs

Borrowing costs are recognised as expenses in the period in which they are incurred, except where they are included in the
costs of qualifying assets which take more than 12 months to prepare for their intended use.
The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest
rate applicable to the entity's outstanding borrowings during the year. No borrowing costs were capitalised in 2010 (2009:
$12.5 million at a rate of 3.2 per cent).
Borrowing costs include:

 interest on borrowings, including amounts paid or received on interest rate swaps; amortisation of deferred
borrowing costs; and

 finance lease charges.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

1 Summary of significant accounting policies (continued)

(w) Provisions for legal claims

For personal use only

Provisions for legal claims are recognised when there is a present legal obligation as a result of past events and it is more
likely than not that a settlement will be made, and the amount can be estimated reliably.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined
by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect
to any one item included in the same class of obligations may be small.

(x) Rehabilitation and mine closure costs

The consolidated entity has obligations to dismantle, remove, restore and rehabilitate certain items of property, plant and
equipment.
Under AASB 116 Property, Plant and Equipment, the cost of an asset includes the present value of the estimated costs of
dismantling and removing the asset and restoring the site on which it is located.
AASB 137 Provisions, Contingent Liabilities and Contingent Assets requires a provision to be raised for the present value
of the estimated cost of settling the rehabilitation and restoration obligations existing at balance date. Those costs that
relate to rehabilitation and restoration obligations arising from the production process are recognised in production costs.
A pre tax nominal discount rate of 6.0 per cent (2009: 6.0 per cent) has been used in calculating the rehabilitation and
restoration provisions of the consolidated entity. This rate does not reflect risks for which future cash flow estimates have
been adjusted.
As the value of the provision represents the discounted value of the present obligation to restore, dismantle and rehabilitate,
the increase in the provision due to the passage of time is recognised as a finance cost.
The provisions are reassessed annually and any changes are accounted for as set out in note 2(iii).

(y) Employee benefits

(i) Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to
be settled within 12 months of the reporting date are recognised as current payables. Non-accumulating sick leave, parental
leave and other ex-gratia leave is recognised as an expense when taken.
(ii) Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value
of expected future payments to be made in respect of services provided by employees up to the reporting date.
Consideration is given to expected future wage and salary levels, experience of employee departures and periods of
service. Expected future payments are discounted using market yields at the reporting date on national government bonds
with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
(iii) Termination Benefits
Liabilities for employee termination benefits associated with restructurings are brought to account when a detailed
restructuring plan has been developed.
(iv) Retirement benefit obligations
All employees of the consolidated entity are entitled to benefits on retirement, disability or death from the consolidated
entity’s superannuation plans. The consolidated entity has a defined benefit section and an accumulation type benefits
section within its plans. The defined benefit section provides defined lump sum benefits based on years of service and final
average salary. The accumulation type benefits section receives fixed contributions from consolidated entity companies
and the consolidated entity’s legal or constructive obligation is limited to these contributions.
A liability or asset in respect of defined benefit superannuation plans is recognised in the balance sheet, and is measured
as the present value of the defined benefit obligation at the reporting date plus actuarial gains (less actuarial losses) less
the fair value of the superannuation fund’s assets at that date and any unrecognised past service cost. The present value
of the defined benefit obligation is based on expected future payments which arise from membership of the fund to the
reporting date, calculated annually by independent actuaries using the projected unit credit method. Consideration is given
to expected future wage and salary levels, experience of employee departures and periods of service.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

1 Summary of significant accounting policies (continued)

Expected future payments are discounted using market yields at the end of the reporting period on national government
For personal use only
bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or
credited to equity in the period in which they occur.
Past service costs are recognised immediately in income, unless the changes to the superannuation fund are conditional on
the employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs
are amortised on a straight-line basis over the vesting period.
Future taxes that are funded by the consolidated entity and are part of the provision of the existing benefit obligation (eg
taxes on investment income and employer contributions) are taken into account in measuring the net liability or asset.
Contributions to the accumulation fund are recognised as an expense as they become payable.
(v) Share-based payments
Share-based compensation benefits are provided to employees via incentive plans, the Directors, Executives and
Employees Share Acquisition Plan and the Employee Share Ownership scheme. Information relating to these schemes is
set out in Note 30 with additional information in the Remuneration Report.

The fair value of entitlements offered has been determined by the Directors, in accordance with the measurement criteria
of Accounting Standard AASB 2 Share-based Payment. The fair value of restricted shares is determined to be the volume
weighted average price 5 days after results are announced to the market. The fair value is recognised as an expense
through the income statement on a straight-line basis between the grant date and the vesting date for each respective plan.

The fair value of share rights is independently determined using a Black-Scholes share right pricing model that takes into
account the exercise price, the term of the share right, the impact of dilution, the share price at grant date and expected
price volatility of the underlying share, the expected dividend yield and the risk free interest rate of the term of the share
right.

The fair value of share rights at grant date of the Long Term Incentive Plan (LTIP) is independantely determined using a
Monte Carlo simulation to model Iluka share prices against the comparator group performance at vesting date. The Monte
Carlo method is a procedure for repeatedly sampling random movements in a stock's price to estimate the average or mean
share price.

Shares provided under the Employee Share Ownership scheme are purchased on-market, with the purchase cost being
recognised as an employee benefits expense. A credit to the share based payments expense arises where unvested
entitlements lapse on resignation or the non fullfilment of market vesting conditions.
(vi) Cash settled incentive arrangements
The consolidated entity recognises a liability and an expense for cash settled components of incentive plans based on the
conditions of the particular plans.

(z) Leases
The group only has operating leases. Leases in which a significant portion of the risks and rewards of ownership are not
transferred to the group as lessee are classified as operating leases (note 25). Payments made under operating leases (net
of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

1 Summary of significant accounting policies (continued)

(aa) Contributed equity

For personal use only

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion
to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a
meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a
business, are not included in the cost of the acquisition as part of the purchase consideration.

(ab) Dividends
Provision is made for the amount of any dividend declared on or before the end of the financial year but not distributed at
balance date.

(ac) Earnings per share

(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any
costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during
the financial year, adjusted for bonus elements in ordinary shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Comparatives have been ammended to reflect changes to the accounting policy on Derivatives and hedging activities, refer
note (1a)

(ad) Rounding of amounts

The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments
Commission, relating to the ''rounding off'' of amounts in the Financial Report. Amounts in the Financial Report have been
rounded off in accordance with that Class Order to the nearest hundred thousand dollars, or in certain cases, the nearest
thousand dollars and the nearest dollar.

(ae) Parent entity financial information

The financial information for the parent entity, Iluka Resources Limited, disclosed in note 31 has been prepared on the
same basis as the consolidated financial statements.

(af) New accounting standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2010
reporting periods. The potential effect of these Standards is yet to be fully determined. However, it is not expected that the
new Standards will significantly affect the Group's financial position. The group does not intend to early adopt any new
standards.

(i) AASB 2009-10 Amendments to Australian Accounting Standards - Classification of Rights Issues AASB 132
(effective for annual reporting periods beginning on or after 1 February 2010)
In October 2009 the AASB issued an amendment to AASB 132 Financial Instruments: Presentation which addresses the
accounting for rights issues that are denominated in a currency other than the functional currency of the issuer.

(ii) AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9
and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

1 Summary of significant accounting policies (continued)

(effective for annual reporting periods beginning on or after 1 January 2013)
For personal use only
AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and
financial liabilities.

(iii) Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards
(effective for annual reporting periods beginning on or after 1 January 2011)
In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. The amendment clarifies and
simplifies the definition of a related party and removes the requirement for government-related entities to disclose details of
all transactions with the government and other government-related entities.

(iv) AASB 2009-14 Amendments to Australian Interpretation - Prepayments of a Minimum Funding Requirement
(effective 1 January 2011)
In December 2009, the AASB made an amendment to Interpretation 14 The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction. The amendment removes an unintended consequence of the interpretation
related to voluntary prepayments when there is a minimum funding requirement in regard to the entity's defined benefit
scheme. It permits entities to recognise an asset for a prepayment of contributions made to cover minimum funding
requirements.

(v) AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian
Accounting Standards arising from Reduced Disclosure Requirements
(effective 1 July 2013)
On 30 June 2010 the AASB officially introduced a revised differential reporting framework in Australia. Under this
framework, a two-tier differential reporting regime applies to all entities that prepare general purpose financial statements.

(vi) AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project and
AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project
(effective for annual periods beginning on or after 1 July 2010/1 January 2011)
In June 2010, the AASB made a number of amendments to Australian Accounting Standards as a result of the IASB's
annual improvements project.

(vii) AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets
(effective for annual reporting periods beginning on or after 1 July 2011)
In November 2010, the AASB made amendments to AASB 7 Financial Instruments: Disclosures which introduce
additional disclosures in respect of risk exposures arising from transferred financial assets. The amendments will affect
particularly entities that sell, factor, securitise, lend or otherwise transfer financial assets to other parties.

2 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under
the circumstances.
(a) Critical accounting estimates and assumptions
The consolidated entity makes estimates and assumptions concerning the future. The resulting accounting estimates will,
by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
(i) Impairment of assets
The recoverable amount of each Cash Generating Unit (CGU) is determined as the higher of value-in-use and fair value
less costs to sell. The group uses fair value less costs to sell. Where there is no binding sale agreement, fair value less
costs to sell is based on the best information available to reflect the amount the consolidated entity could receive for the
CGU in an arms length transaction and has been estimated on the basis of discounted present value of the future
cashflows.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

2 Critical accounting estimates and judgements (continued)

The estimates of future cash flows for each CGU are based on significant assumptions including:
For personal use only

 estimates of the quantities of mineral reserves and ore resources for which there is a high degree of confidence of
economic extraction and the timing of access to these reserves and ore resources
 future production levels and the ability to sell that production
 future product prices based on the consolidated entity's assessment of short and long term prices for each of the
key products
 future exchange rates for the Australian dollar compared to the US dollar using external forecasts by recognised
economic forecasters
 future cash costs of production, sustaining capital expenditure, rehabilitation and mine closure and
 the asset specific discount rate applicable to the CGU.
Given the nature of the consolidated entity's mining activities, future changes in assumptions upon which these estimates
are based, may give rise to material adjustments to the current or prior years. This could lead to a reversal of part, or all, of
impairment charges recorded in the current or prior years, or the recognition of additional impairment charges in the future.
Due to the nature of the assumptions and their significance to the assessment of the recoverable amount of each CGU,
relatively modest changes in one or more assumptions could require a material adjustment (negative or positive) to the
carrying value of the related non-current assets within the next reporting period.
The inter-relationships of the significant assumptions upon which estimated future cash flows are based, however, are such
that it is impracticable to disclose the extent of the possible effects of a change in a key assumption in isolation.

In addition, the Australian Federal Government has proposed introducing a carbon tax no earlier than 2012. This
introduction has the potential to significantly impact the assumptions used to determine the future cash flows generated
from the continuing use of the group's assets for the purpose of impairment testing. The group has not yet incorporated the
impact of a carbon tax into its assumptions at 31 December 2010 as insufficient market information exists.
Uncertainties exist around the following areas:

 the nature and timing of the proposed legislation

 the level of emissions the group is expected to emit
 abatement opportunities
 the price or range of prices of emission permits
 the number of permits required to be purchased
 the impact on costs charged by suppliers
 the ability to pass on the cost of the permits
 government assistance.
(ii) Exploration and evaluation expenditure

Expenditure with a value of $24.7 million (2009: $20.4 million) which does not form part of the CGU assessed for
impairment has been carried forward in accordance with Note 1 (n) on the basis that exploration and evaluation activities
have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically
recoverable ore reserves and active and significant operations in relation to the area are continuing. In the event that
significant operations cease and/or economically recoverable reserves are not assessed as being present, this expenditure
will be expensed to the Income Statement.
(iii) Rehabilitation and mine closure provisions

As set out in Note 1(x), these provisions represent the discounted value of the present obligation to restore, dismantle and
rehabilitate certain items of property, plant and equipment. The discounted value reflects a combination of management's
assessment of the cost of performing the work required, the timing of the cash flows and the discount rate of 6.0 per cent
(2009 6.0 per cent). Of the total provisions $347.4 million (2009: $332.5 million), $192.4 million (2009: $118.4 million) relate
to assets no longer in use or for obligations arising from the production process outputs.
A change in any, or a combination, of the three key assumptions used to determine the provisions could have a material
impact to the carrying value of the provision. In the case of provisions for assets which remain in use, adjustments to the
carrying value of the provision are offset by a change in the carrying value of the related asset. Where the provisions are
for assets no longer in use (closed sites) or for obligations arising from the production process, any adjustment is reflected
directly in the Income Statement.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

2 Critical accounting estimates and judgements (continued)

(iv) Income tax
For personal use only

The consolidated entity is subject to income taxes in Australia and the United States (US). Significant judgement is
required in determining the provision for income taxes in each jurisdiction. There are many transactions and calculations
for which the ultimate determination is not finalised until statutory tax returns are lodged with the appropriate authorities.
Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will
impact upon the current and deferred tax provisions in the period in which such determination is made which is usually the
subsequent financial year
A key assumption made regarding the income tax expense for the current year is the level of investment allowance and
research and development expenditure that will qualify for concessional tax deductions and the level of capital gains on
asset disposals that can be offset by available capital losses not previously recognised. The tax effect of these amounts is
$2.7 million and $nil million respectively (2009: $7.5 million and $1.1 million).

(b) Critical judgements in applying the entity's accounting policies

Recovery of deferred tax assets
Net deferred tax assets of $55.3 million (2009: $53.7 million) are carried in respect of the Australian and US operations,
including $60.9 million (2009: $51.6 million) attributable to tax losses. Management has assessed that it is probable that
the net deferred tax assets will be recoverable against future taxable profits to be generated in the relevant jurisdiction.

3 Financial risk management

The Group's activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk)
credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the financial performance of the Group. Financial risk
management is managed by a central treasury department under policies approved by the Board of Directors.

(a) Market risk

(i) Foreign exchange risk
Foreign exchange risk arises when commercial transactions and recognised assets and liabilities are denominated in a
currency other than Australian dollars.
The Group operates internationally and is exposed to foreign exchange risk arising predominantly from currency exposures
to the US dollar. Balance sheet translation risk is managed by borrowing in US dollars to provide a hedge for the net US
dollar investment in the US operation and the US dollar receivables from Australian sales.
The table below summarises financial assets and liabilities denominated in foreign currencies that form part of the balance
sheet carrying values.

2010 2009
US$M US$M
Cash and cash equivalents 10.4 17.1
Receivables 133.7 77.0
Payables (10.4) (13.7)
Interest bearing liabilities (155.0) (165.0)
(21.3) (84.6)

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

3 Financial risk management (continued)

Group sensitivity
For personal use only

At 31 December 2010, had the Australian dollar been higher/lower by 10 per cent against the US dollar compared to the
exchange rate at that date of US101.76 cents with all other variables held constant, the consolidated entity's post-tax profit
for the year would have been $5.6 million higher/$4.6 million lower (2009: $0.9 million higher/$0.8 million lower), mainly as a
result of foreign exchange gains/losses on translation of US dollar denominated trade receivables and payables and US
dollar denominated borrowings.
Equity would have been $4.9 million lower/$4.0 million higher (2009: $34.4 million lower/$34.6 million higher) had the
Australian dollar weakened/strengthened by 10 per cent against the US dollar, arising mainly from US dollar debt designated
as a natural hedge. The significant reduction in the sensitivity to movements in the Australian dollar/US dollar exchange rate
is due to all cash flow hedges being delivered by 31 December 2010, with no new cash flow hedges being taken out. The
sensitivity is based on the USD balances at 31 December 2010 rather than amounts which are more reflective of the Group's
objective to reduce balance sheet translation risk by borrowing in US dollars to provide a hedge for the net US dollar
investment in the US operation and the US dollar receivables from Australian sales.
(ii) Interest rate risk
Interest rate risk arises from the consolidated entity's borrowings. When managing interest rate risk the Group seeks to
mitigate its interest rate exposure by utilising a blend of floating and fixed rate debt. During 2010 and 2009, the consolidated
entity's borrowings at variable rates were denominated in Australian dollars and US dollars.
Borrowings at variable rates expose the consolidated entity to cash flow interest rate risk while borrowings at fixed rates
expose the consolidated entity to fair value interest rate risk.
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the
Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting
model.
At 31 December 2010, if interest rates for the full year were -/+1% from the year-end rate with all other variables held
constant, post-tax profit for the year would have been $2.1 million higher/lower (2009: $2.3 million higher/lower), mainly as a
result of lower/higher interest expense from net debt. The sensitivity is based on net debt at 31 December 2010 assuming
that the net debt balance stays constant throughout the year.

(b) Credit risk

The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate
credit history. The Group also maintains an insurance policy to assist in managing the credit risk of its customers and
therefore has no significant concentrations of credit risk. Of the total receivables balance of $131.0 million, $121.0 million is
covered by an insurance policy and is considered low risk. Derivative counterparties and cash transactions are limited to
high credit quality financial institutions and policies limit the amount of credit exposure to any one financial institution.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash or credit facilities to meet the operating requirements
of the business. This is managed through committed undrawn facilities and prudent cash flow management.
Maturities of financial liabilities
The tables below analyse the group financial liabilities and net settled derivative financial instruments into maturity
groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in
the table are the contractual undiscounted cash flows, except for interest rate swaps which are stated as notional principal
amounts. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

-52-
 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

3 Financial risk management (continued)

At 31 December 2010 Weighted Less Between Between Over 5 Total Carrying
For personal use only
average than 1 1 and 2 2 and 5 years contract- Amount
rate year years years ual cash (assets)/
flows liabilities
% $M $M $M $M $M $M

Non-derivatives
Interest bearing variable rate 4.8 11.5 11.5 241.1 - 264.1 238.9
Interest bearing fixed rate 6.2 34.9 3.1 80.2 - 118.2 106.1
Total non-derivatives 46.4 14.6 321.3 - 382.3 345.0

Derivatives
Interest rate swaps (net receivable) 1.2 1.2 0.5 - 2.9 -
Total derivatives 1.2 1.2 0.5 - 2.9 -

At 31 December 2009
Weighted Less than Between Between Over 5 Total Carrying
average 1 year 1 and 2 2 and 5 years contract- Amount
rate years years ual cash (assets)/
flows liabilities
% $M $M $M $M $M $M

Non-derivatives
Interest bearing variable rate 5.6 13.9 13.9 326.7 - 354.5 314.1
Interest bearing fixed rate 4.4 52.5 40.3 65.1 23.0 180.9 157.6
Total non-derivatives 66.4 54.2 391.8 23.0 535.4 471.7

Derivatives
Interest rate swaps (net receivable) 0.1 0.1 0.2 - 0.4 -
Total derivatives 0.1 0.1 0.2 - 0.4 -

Sales revenue of the consolidated entity is mainly denominated in US dollars. Given the predominately Australian dollar
cost base of the business, these US dollar sales create a foreign exchange exposure in terms of earnings and cash flow. In
the previous financial year the consolidated entity entered into forward exchange contracts and foreign currency options to
forward sell US dollars. At 31 December 2010 the Group has not entered into any forward exchange contracts or currency
options.
At 31 December 2009, the consolidated entity was due to receive an inflow of A$179.4 million and A$261.1 million and pay
an outflow of US$ 153.5 million and US$ 235.0 million in relation to forward exchange contracts and options respectively,
that matured within 1 year.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

3 Financial risk management (continued)

(d) Fair value estimation

For personal use only

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes. The fair value of interest rate swaps is calculated as the present value of the estimated future cash
flows. The fair value of forward exchange contracts is determined using forward exchange market rates at the balance
sheet date. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual
cash flows at the current market interest rate that is available to the consolidated entity for similar financial instruments.
The fair value of call options is determined using the Garman and Kohlhagen (Black Scholes) Formula at the end of the
reporting period.
At 31 December 2010, the Group does not hold derivative financial instruments. At 31 December 2009 the derivative
financial instruments measured and recognised at fair value, were valued at $15.9 million (Level 2 per AASB 7:27A).

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

4 Segment information

(a) Description of segments

For personal use only

Operating segments are reported in a manner that is consistent with the internal reporting provided to the Managing
Director, who is considered the chief operating decision maker, for the purpose of making decisions regarding the allocation
of resources and the monitoring of performance. These segments are unchanged from those at 31 December 2009.
Eucla/Perth Basin ("E/PB") comprises the integrated mineral sands mining and processing operations in Western
Australia and South Australia. Material is mined from various deposits in the South West and Mid West of Western
Australia (Perth Basin), together with the Jacinth-Ambrosia deposit in South Australia (Eucla Basin) which was
commissioned in the period. The mined material is processed at facilities in the South West and Mid West of Western
Australia to produce saleable products.
Murray Basin (“MB”) comprises the integrated mineral sands mining and processing operations in Victoria, including the
Murray Basin Stage 2 development which was commissioned in the period.
United States (“US”) comprises the integrated mineral sands mining and processing operations in Virginia, together with a
zircon retreatment operation in Florida which ceased in 2009.
Mining Area C (“MAC”) comprises a deferred consideration iron ore royalty interest over certain mining tenements
operated by BHP Billiton Iron Ore.
Where finished product capable of sale to a third party is transferred between operating segments, the transfers are made
at arms length prices. Any transfers of intermediate products between operating segments are made at cost.

(b) Segment information

2010 E/PB MB US MAC Total

$M $M $M $M $M

Total segment sales to external customers 468.7 281.4 124.3 - 874.4

Total segment result 21.8 (0.9) 22.7 75.9 119.5

Segment assets 981.4 771.8 63.3 27.7 1,844.2

Segment liabilities 343.1 71.8 37.4 - 452.3
Acquisition of property, plant and equipment and other non-current
segment assets 45.9 23.3 10.9 - 80.1

Depreciation and amortisation expense 86.1 113.0 17.0 0.4 216.5

2009 E/PB MB US MAC Total

$M $M $M $M $M

Total segment sales 397.1 124.8 65.5 - 587.4

Inter segment sales (11.4) - - - (11.4)
Total segment sales to external customers 385.7 124.8 65.5 - 576.0
Total segment result (93.5) (19.4) 12.8 50.2 (49.9)

Segment assets 1,022.6 785.4 107.3 15.8 1,931.1

Segment liabilities 377.7 86.2 33.7 - 497.6
Acquisition of property, plant and equipment and other non-current
segment assets 316.7 211.2 19.5 - 547.4

Depreciation and amortisation expense 124.2 31.9 17.3 0.4 173.8

Impairment (reversals) charges 38.5 29.1 - - 67.6

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

4 Segment information (continued)

Segment revenue is derived from sales to external customers domiciled in various geographical regions. Details of
For personal use only
segment revenue by location of customers are as follows:

2010 2009
$M $M

Continuing operations
Asia 386.3 269.9
Europe 178.2 134.8
North America 216.2 85.7
Australia 44.2 36.3
Other Countries 49.5 49.3
Segment sales to external customers 874.4 576.0
Hedging gains (losses) 12.2 (26.3)
Sale of goods 886.6 549.7

Revenue of $168.7 million is derived from an external customer from all mineral sands segments which individually account
for greater than 10 per cent of segment revenue (2009: revenues of $136.7 million and $96.9 million were derived from two
customers from all mineral sands segments).

Segment result is reconciled to the profit (loss) before income tax from continuing operations as follows:

Segment result 119.5 (49.9)

Hedging gains (losses) 12.2 (26.3)
Interest income 1.1 1.4
Other income 1.8 -
Ineffective gains of changes in fair value of cash flow hedges 1.6 21.2
Net foreign exchange (losses) gains (4.9) 5.0
Exploration and corporate restructure and non-recurring costs - (7.7)
Marketing & selling (5.4) -
Corporate and other costs (30.3) (18.3)
Depreciation (2.5) -
Product & technical development (5.7) -
Exploration and evaluation (14.5) (16.2)
Interest and finance charges (33.0) (8.4)
Impairment charges - (67.6)
Profit (loss) before income tax from continuing operations 39.9 (166.8)

Total segment assets and total segment liabilities are reconciled to the balance sheet as follows:

Segment assets 1,844.2 1,931.1

Derivative financial instruments - 15.9
Corporate assets 10.3 11.4
Cash and cash equivalents 30.1 86.3
Deferred tax assets 55.3 53.7
Total assets as per the balance sheet 1,939.9 2,098.4

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

4 Segment information (continued)

For personal use only
2010 2009
$M $M

Segment liabilities 452.3 497.6

Corporate liabilities 20.3 37.0
Interest bearing liabilities 342.7 468.5
Total liabilities as per the balance sheet 815.3 1,003.1

5 Revenue from continuing operations

2010 2009
$M $M

Sales revenue
Sale of goods 886.6 549.7
Other revenue
Interest 1.1 1.4
Royalty income 76.3 50.6
Other 0.6 0.9
78.0 52.9

964.6 602.6

6 Other income

2010 2009
$M $M

Net gain on sale of land 0.8 5.6

Net gain on disposal of property, plant and equipment 3.3 0.8
Sundry income 2.7 1.2
Net ineffective gains from changes in fair value of cash flow hedges 1.6 21.2
Insurance receipt in respect of WA gas outage - 5.7
Net foreign exchange gains - 5.0
8.4 39.5

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

7 Expenses
For personal use only
2010 2009
$M $M

From continuing operations

Cash cost of production 543.8 453.6
Depreciation 136.9 109.1
Amortisation 82.1 34.7
Inventory movement 2.9 (33.4)
Cost of sales of goods 765.7 564.0
Restructure, idle capacity and other non-recurring cash costs 13.2 57.8
Rehabilitation and holding costs for closed sites 10.4 -
Depreciation of non productive assets - 32.8
Government royalties 17.1 13.7
Marketing and selling 24.1 10.2
Corporate and other 30.3 18.3
Technical support, product development and major projects 5.6 4.2
Exploration and evaluation 14.5 16.2
Foreign exchange losses 4.9 -
885.8 717.2

Impairment charges on property, plant and equipment (refer note 13)

Mid West Mining - ore body fair value write-offs - 38.5
Murray Basin - ore body fair value write-offs - 29.1
- 67.6

Finance costs from continuing operations

Interest and finance charges paid/payable 32.0 19.8
Rehabilitation and restoration unwind 14.3 15.7
Amortisation of deferred borrowing costs 1.0 1.1
Interest capitalised - (12.5)
47.3 24.1

Expenses from continuing operations include:

Defined contribution superannuation 9.8 12.9
Defined benefits superannuation 0.6 1.9
Employee benefits (excluding share based payments) 127.0 176.5
Writedown of year end inventory to net realisable value 0.4 10.6
Share based payments (note 30) 4.1 6.2
Operating leases 8.1 8.6

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

8 Income tax
For personal use only
2010 2009
$M $M

(a) Income tax expense (benefit)

Current tax - (4.6)
Deferred tax (note 14) 7.6 (54.2)
Over provided in prior years (3.8) (2.6)
3.8 (61.4)

Income tax is attributable to:

Profit from continuing operations 3.8 (61.5)
Profit from discontinued operations - 0.1
Aggregate income tax (benefit) 3.8 (61.4)

(b) Numerical reconciliation of income tax expense (benefit) to prima facie tax
payable
Profit (loss) from continuing operations before income tax expense (benefit) 39.9 (166.8)
Profit from discontinued operation before income tax expense - 23.0
39.9 (143.8)
Tax at the Australian tax rate of 30% (2009: 30%) 12.0 (43.1)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Research and development and investment allowance (2.7) (7.5)
Gain on sale of CRL not assessable for tax - (6.7)
Other items 0.2 (0.9)
9.5 (58.2)
Difference in overseas tax rates (1.9) (0.6)
Over provision in prior years (3.8) (2.6)
Income tax expense (benefit) 3.8 (61.4)

(c) Tax expense (income) relating to items of other comprehensive income

Changes in fair value of foreign exchange cash flow hedges (note 20(a)) 1.5 (33.3)
Currency translation of US operation (note 20 (a)) 0.7 4.3
Actuarial gains (losses) on retirement benefit obligation - (0.7)
2.2 (29.7)

(d) Tax losses

Unused capital losses for which no deferred tax asset has been recognised relating to the wholly-owned Australian
controlled entities are approximately $94.7 million (2009: $95.6 million) (tax at the Australian tax rate of 30%: $28.4 million
(2009: $28.7 million)). The benefit of these unused capital losses will only be obtained if these entities derive future capital
gains sufficient to enable the benefit to be realised and these entities continue to comply with the conditions for
deductability imposed by tax legislation and no changes in tax legislation adversely effect these entities in realising the
benefit from the deduction for the losses.

(e) Franking Credits

Franking credits available for future years based on a tax rate of 30 per cent (2009: 30 per
cent) - (1.6)

The above amounts include adjustments that will arise from the payment of current income tax or receipt of income tax
receivable.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

9 Discontinued operations
On 27 May 2009 Iluka disposed of its shares in Consolidated Rutile Limited ("CRL") to Unimin Australia Limited for 45 cents
For personal use only
per share and a consideration of $84.2 million resulting in a profit from discontinued operations of $22.9 million. Details of
this disposal were disclosed in note 9 of the Group's annual report for the year ended 31 December 2009.

Financial performance and cash flow information

2010 2009
$M $M

Revenue - sale of goods - 21.8

Cash expenses - (16.6)
Depreciation and amortisation - (4.7)
Finance costs - (0.8)
Profit before income tax - (0.3)
Profit on sale - 23.3
Income tax expense - (0.1)
Profit after income tax - 22.9

Net cash (outflow) inflow from operating activities - (13.4)

Net cash inflow from investing activities - 81.7
Net cash inflow from financing activities - 7.5
Net increase in cash generated by the discontinued operation - 75.8

The post tax gain on sale of CRL for the year ended 31 December 2009 was $22.9 million.

10 Cash and cash equivalents

2010 2009
$M $M

Cash at bank and in hand 28.2 84.4

Deposits at call 1.9 1.9
30.1 86.3

Interest rates
Cash and deposits are at floating interest rates between 0.0 per cent and 4.25 per cent (2009: 0.0 per cent and 3.75 per
cent) on US dollar and Australian dollar denominated deposits, and a weighted average interest rate of 2.49 per cent (2009:
2.87 per cent).

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

11 Receivables
For personal use only
2010 2009
$M $M

Trade receivables 130.9 85.8

Other debtors 23.1 9.5
Prepayments 6.8 3.9
Goods and services tax (GST) 4.0 4.7
164.8 103.9

No trade receivables are impaired and $1.9 million are between 0 and 28 days aged. Due to the short-term nature of these
receivables, their carrying amount approximates fair value.

12 Inventories

2010 2009
$M $M
Current
Consumable stores
- at cost 27.8 30.2
Work in progress
- at cost 83.1 44.1
Finished goods
- at cost 86.8 95.1
- at net realisable value 3.3 36.1
90.1 131.2

Total current inventories 201.0 205.5

Non-current
Work in progress
- at cost 56.6 56.6
56.6 56.6

Represents material not scheduled to be processed to finished product during 2011.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

13 Property, plant and equipment

Plant, Mine Project
Land & Machinery & Reserves & Exploration & Development
For personal use only

Buildings Equipment Development Evaluation Expenditure Total

$M $M $M $M $M $M

At 1 January 2009
Cost 89.1 1,586.8 783.3 17.2 175.4 2,651.8
Accumulated depreciation* (10.4) (802.3) (424.5) - - (1,237.2)

Opening written down value* 78.7 784.5 358.8 17.2 175.4 1,414.6
Additions 9.0 59.9 60.4 4.7 421.8 555.8
Disposals (11.1) (78.4) (52.4) - - (141.9)
Write-offs and impairment charges - - (67.6) - - (67.6)
Depreciation/amortisation 0.7 (129.9) (47.4) - - (176.6)
Foreign exchange differences (0.1) (16.3) (1.3) - - (17.7)
Transfers/reclassifications (1.4) 4.2 10.8 (1.5) (12.1) -
Closing written down value* 75.8 624.0 261.3 20.4 585.1 1,566.6

At 31 December 2009
Cost 85.0 1,379.6 754.7 20.4 585.1 2,824.8
Accumulated depreciation* (9.2) (755.6) (493.4) - - (1,258.2)
Year ended 31 December 2010
Opening written down value 75.8 624.0 261.3 20.4 585.1 1,566.6
Additions 2.1 27.6 37.4 6.9 13.2 87.2
Disposals (4.8) (0.3) - (1.4) - (6.5)
Depreciation/amortisation (2.7) (125.0) (88.5) - - (216.2)
Foreign exchange differences (0.1) (5.7) (0.3) - - (6.1)
Transfers/reclassifications 20.8 452.2 126.5 (1.2) (598.3) -
Closing written down value 91.1 972.8 336.4 24.7 - 1,425.0

At 31 December 2010
Cost 103.1 1,670.1 459.9 24.7 - 2,257.8
Accumulated depreciation* (12.0) (697.3) (123.5) - - (832.8)
Net written down value* 91.1 972.8 336.4 24.7 - 1,425.0

*Includes cumulative impairment charges (refer note 7)

Mine reserves and development

Included in mine reserves and development are amounts totalling $50.1 million (2009: $223.2 million) which have not been
depreciated as mining of the related area of interest has not yet commenced. An additional $12.1 million relates to assets
under construction which are currently not being depreciated as the assets are not ready for use.
Plant, machinery and equipment
Included in plant, machinery and equipment are amounts totalling $6.5 million for the consolidated entity (2009: $3.9 million)
which relate to assets under construction. These amounts are not currently being depreciated as the assets are not ready
for use.
Project development expenditure
Project development expenditure in 2009 of: $585.1 million related to Murray Basin Stage 2 and Jacinth-Ambrosia projects.
These projects were commissioned during the period.
Impairment (charges)
The impairment charge in 2009 of $67.6 million represents the write-off of fair values for deposits from acquisitions in 1998
(Mid West) of $38.5 million and 2002 (Murray Basin) of $29.1 million that are now considered unlikely to be mined.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

14 Deferred tax assets

For personal use only

2010 2009
$M $M

Deferred tax asset amounts recognised in profit or loss

Employee benefits 6.3 6.8
Rehabilitation provisions 101.6 97.9
Tax revenue losses 62.4 51.6
Other 6.6 4.9
176.9 161.2

Deferred tax liability amounts in profit or loss off-set in accordance with AASB 112
Depreciation/amortisation (103.7) (100.8)
Foreign currency exchange (3.6) (4.7)
Receivables (6.4) (2.6)
Inventory (7.2) -
Other (2.4) (0.3)
Net amount recognised in profit or loss 53.6 52.8

Deferred tax asset amounts recognised directly in equity

Cash flow hedges - (1.5)
Share issue costs 1.7 2.6
Actuarial gains/losses on retirement benefit obligations - (0.2)
1.7 0.9

Net deferred tax assets 55.3 53.7

Movements:
Balance at 1 January 53.7 31.0
Credited (charged) to the income statement (note 8) (7.6) 54.2
Over (under) provision in prior years 2.9 1.8
Credited (charged) directly to equity (note 20) 4.8 (33.3)
Cash payment of franking deficits tax 1.5 -
Balance at 31 December 55.3 53.7

Deferred tax assets of $77.0 million (2009: $8.4 million) and deferred tax liabilities of $19.6 million (2009: $9.1 million) are
expected to be recovered in less than 12 months.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

15 Intangible assets
Royalty
For personal use only
entitlement
Patent asset Total
$M $M $M

At 1 January 2009
Cost 17.2 10.0 27.2
Accumulated amortisation (11.6) (2.1) (13.7)
Net written down value 5.6 7.9 13.5
Amortisation charge 2009 (3.2) (0.4) (3.6)
Closing written down value 2.4 7.5 9.9

At 31 December 2009
Cost 17.2 10.0 27.2
Accumulated amortisation (14.8) (2.5) (17.3)
Net written down value 2.4 7.5 9.9
Amortisation charge 2010 (2.4) (0.4) (2.8)
Closing written down value - 7.1 7.1

At 31 December 2010
Cost - 10.0 10.0
Accumulated amortisation - (2.9) (2.9)
Net written down value - 7.1 7.1

16 Payables

2010 2009
$M $M

Trade payables 36.0 102.6

Accrued expenses 58.6 71.3
Employee benefits 9.1 9.8
103.7 183.7

17 Interest bearing liabilities

2010 2009
$M $M

Current
Senior Notes 1996 29.5 44.7
29.5 44.7

Non-current
Syndicated Term Loan Facility 238.9 314.1
Senior Notes 1996 - 33.6
Senior Notes 2003 76.6 79.3
Deferred borrowing costs (2.2) (3.3)
313.3 423.7

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

17 Interest bearing liabilities (continued)

(a) Financing arrangements

For personal use only

2010 2009
$M $M

Total facilities
Senior Notes - 1996 (i) 29.5 33.6
Senior Notes - 2003 (ii) 76.6 124.0
Working Capital Facility (iii) 39.3 55.0
Syndicated Term Loan Facility (iv) 445.0 445.0
590.4 657.6

Used at balance date

Senior Notes - 1996 (i) 29.5 33.6
Senior Notes - 2003 (ii) 76.6 124.0
Working Capital Facility (iii) - -
Syndicated Term Loan Facility (iv) 238.9 314.1
345.0 471.7

Unused at balance date

Working Capital Facility (iii) 39.3 55.0
Syndicated Term Loan Facility (iv) 206.1 130.9
245.4 185.9

(i) Senior Notes - 1996 Series

The remaining tranche of US$30.0 million matures in December 2011 and carries a fixed interest rate of 7.6%.
(ii) Senior Notes - 2003 Series

The notes have an average fixed interest rate of 5.3% and mature in two tranches; being June 2013 US$40.0 million and
June 2015 US$20.0 million.

The translation exposure on the June 2013 US$40 million notes has been eliminated through a cross currency swap at
AUD/USD 0.7025. The cross currency swap also converts the fixed USD interest payments of 5.25% to an AUD variable
interest rate exposure. As at 31 December 2010, the cross currency swap bears an average variable interest rate of 5.7%
(2009: 5.1%). The swap requires settlement of interest receivable and payable on a semi-annual basis on dates which
coincide with the interest payable dates on the underlying notes.
(iii) Working Capital Facility

This is a multi currency facility which requires the company to have sufficient credit risk insurance to enable it to be drawn.
The facility matured on 12 March 2011 and subsequent to year end has been extended to 12 March 2012 with a limit of
US$50.0 million. Drawings under the facility are at the discretion of the working capital facility provider based on the
acceptance of credit insured receivables.
(iv) Syndicated Term Loan Facility

The Syndicated Term Loan Facility has maturity dates of March 2012 (A$100 million) and March 2013 (A$345 million). As
at 31 December 2010, A$238.9 million was outstanding at an average interest rate of 4.8% (2009: $314.1 million at 4.4%).

-65-
 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

17 Interest bearing liabilities (continued)

(b) Interest rate risk exposure and maturities of interest bearing liabilities
For personal use only

Fixed interest rate

2010 Effective Floating 1 year or 1 to 5 More Total
floating interest less years than 5
average rate years
interest
rate
% $M $M $M $M $M

Interest-bearing liabilities 4.8 238.9 29.5 76.6 - 345.0

Interest rate swaps (notional principal) 5.7 56.9 - (56.9) - -
295.8 29.5 19.7 - 345.0

Fixed interest rate

2009 Effective Floating 1 year or 1 to 5 More Total
floating interest less years than 5
average rate years
interest
rate
% $M $M $M $M $M

Interest-bearing liabilities 4.4 314.1 44.7 90.5 22.4 471.7

Interest rate swaps (notional principal) 5.1 56.9 - (56.9) - -
371.0 44.7 33.6 22.4 471.7

The contractual repricing date of the floating rate interest bearing liabilities at the balance dates will be reset within 1 year or
less.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

18 Provisions
For personal use only
2010 2009
$M $M

Current
Employee benefits 7.4 7.9
Rehabilitation and mine closure 40.2 17.6
Other provisions 7.3 2.6
54.9 28.1

Non Current
Employee benefits 3.3 3.3
Rehabilitation and mine closure 307.2 314.9
Retirement benefit obligations (note 23) 3.4 4.7
313.9 322.9

The current provision for employee benefits represents amounts for which the Group does not have an unconditional right
to defer settlement. The Group does not expect a significant amount of the provision will be paid in the next 12 months.

(a) Movements in provisions

Movements in rehabilitation and mine closure and other provisions during the financial year are set out below:

Rehabilitation
and mine Other
closure provisions
$M $M

Balance at 1 January 332.5 2.6

Change in provisions* 15.8 9.1
Foreign exchange rate movements (2.1) -
Unused amounts reversed - 0.1
Rehabilitation and restoration accretion expense 14.3 -
Amounts used during the year (13.1) (4.5)
Balance at 31 December 347.4 7.3

* Changes in provision for rehabilitation and mine closure either form part of additions in plant, machinery and equipment or
mine reserves and development in note 13. Costs relating to closed sites are expensed directly to profit and loss.
Other provisions includes $5.4 million in relation to restructure costs.

19 Contributed equity

2010 2009 2010 2009

Number of Number of Paid up value Paid up value
shares shares $M $M

(a) Share capital

Ordinary shares Issued and paid up 418,700,517 418,700,517 1,120.0 1,120.0

Treasury shares (3,220,149) (1,904,380) (11.7) (5.6)

Total consolidated contributed equity 1,108.3 1,114.4

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

19 Contributed equity (continued)

(b) Movements in ordinary share capital

For personal use only

Number of Issue
Date Details shares price $M

1 January 2009 Opening balance 380,700,517 1,006.5

7 May 2009 Share placement 38,000,000 $3.00 114.0
Transaction costs on share placement net of tax - (0.5)
31 December 2009 Balance 418,700,517 1,120.0

1 January 2010 Opening balance 418,700,517 1,120.0

31 December 2010 Balance 418,700,517 1,120.0

(c) Treasury shares

Treasury shares are shares in Iluka Resources Limited held for the purpose of issuing shares under the Directors,
Executives and Employees Share Acquisition Plan (see note 30 for further information).
Number of
Details shares $M

Balance at 1 January 2009 2,812,532 8.4

Employee share issues (908,152) (2.8)
Balance at 31 December 2009 1,904,380 5.6
Acquisition of shares, net of tax 1,721,133 7.2
Employee share issues, net of tax (405,364) (1.1)
Balance at 31 December 2010 3,220,149 11.7

(d) Dividends
Directors have determined a final dividend of eight cents per share, unfranked. The dividend is unfranked as Iluka does not
have franking credits currently available for distribution. The dividend is payable on 6 April 2011 for shareholders on the
register as at 9 March 2011.

(e) Dividend reinvestment plan

The Company has a dividend reinvestment plan (DRP). Under the plan, the directors can invite eligible holders of ordinary
shares to elect to have all or part of their dividend entitlements satisfied by the issue of new ordinary shares rather than by
being paid in cash. The Directors have decided to suspend the Dividend Reinvestment Plan until further notice.

(f) Capital risk management

The group's objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can
continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure
to reduce the cost of capital.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The consolidated entity monitors capital on the basis of the level of net debt and compliance with bank covenants, including
the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings
(including 'interest-bearing liabilities' as shown in the balance sheet) less cash and cash equivalents. Total capital is
calculated as total equity as shown in the balance sheet, excluding hedge reserve and foreign currency translation reserve
plus net debt. The consolidated entity manages net debt on a group basis with all debt being drawn by the parent entity.
All debt has the same covenants.

-68-
 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

20 Reserves and retained earnings

For personal use only
2010 2009
$M $M

(a) Reserves
Asset revaluation reserve 16.0 16.3
Hedging reserve - 3.6
Share-based payments reserve 6.9 4.4
Foreign currency translation reserve (2.5) (2.3)
20.4 22.0

Movements:
Asset revaluation reserve
Balance at 1 January 16.3 17.5
Transfer to retained earnings on disposal (0.4) (1.7)
Deferred tax 0.1 0.5
Balance at 31 December 16.0 16.3

Hedging reserve
Balance 1 January 3.6 (74.2)
Revaluation 7.1 84.8
Transfer to profit or loss (12.2) 26.3
Deferred tax 1.5 (33.3)
Balance 31 December - 3.6

Share based payments reserve

Balance at 1 January 4.4 3.9
Transfer of shares to employees (1.1) (2.8)
Share based payments 4.1 6.2
Deferred tax (0.5) (3.1)
Balance at 31 December 6.9 4.2

Foreign currency translation reserve

Balance at 1 January (2.3) (3.1)
Translation differences of US operation (7.6) (27.1)
Hedge of net investment in US operation 6.7 23.6
Deferred tax 0.7 4.3
Balance 31 December (2.5) (2.3)

(b) Retained earnings (accumulated losses)

Movements in retained earnings were as follows:

2010 2009
$M $M

Balance 1 January (41.1) 66.0

Net profit (loss) for the year 36.1 (82.2)
Adjustment on adoption of AASB 2008-8* - (28.5)
Actuarial gains/ (losses) on retirement benefit obligation, net of tax 0.6 2.4
Transfer from asset realisation reserve 0.3 1.2
Balance 31 December (4.1) (41.1)

*Refer to note 1(a) for explanations of a change in accounting policy and retrospective adjustments recognised on 1
January 2010.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

20 Reserves and retained earnings (continued)

(c) Nature and purpose of reserves
For personal use only

(i) Asset revaluation reserve

The asset revaluation reserve records revaluations of non-current assets prior to the adoption of AIFRS. Transfers are
made to retained earnings on disposal of previously revalued assets.
(ii) Hedging reserve
The hedging reserve is used to record gains or losses (net of tax) on a hedging instrument in a cash flow hedge that are
recognised directly in equity, as described in note 1(l). Amounts are reclassified to profit or loss when the associated
hedged transaction affects profit or loss.
(iii) Share-based payments reserve
The employee share-based payments reserve is used to recognise the fair value of equity instruments granted but not yet
issued to employees under the group's various equity based incentive schemes.
(iv) Foreign currency translation reserve
Exchange differences arising on translation of the net investment in foreign operations, including US dollar denominated
debt used as a hedge of the net investment, are taken to the foreign currency translation reserve net of applicable income
tax, as described in note (1k). US$50.0 million of debt (2009: US$80.0 million) is designated as a hedge of the net
investment in the US operations. The reserve is recognised in profit and loss when the net investment is disposed of.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

21 Key management personnel

(a) Key Management Personnel

For personal use only

Key Management Personnel of the consolidated entity comprise Directors of Iluka Resources Limited as well as other
specific employees of the consolidated entity who met the following criteria: ‘personnel who have authority and responsibility
for planning, directing and controlling the activities of the consolidated entity, either directly or indirectly’.

The Key Management Personnel for the parent entity are the same as for the consolidated entity. Therefore, disclosure and
balances in this note relate to both the parent entity and the consolidated entity.

Key Management Personnel - Directors

The following persons were Directors of Iluka Resources Limited during the financial year:

(i) Managing Director and Chief Executive Officer

D A Robb

(ii) Non-executive Directors

R L Every
D M Morley
G J Pizzey
G J Rezos
J A Seabrook
W G Osborn
S J Turner
All above persons were Directors of Iluka Resources Limited for all of the financial year, as well as for the financial year
ended 31 December 2009, except W G Osborn & S J Turner who were appointed as Directors on 26 March 2010. R L
Every was Chairmain & Director until his resignation on 20 May 2010.

(b) Key Management Personnel - Employees Other Than Directors ('the Executives')
In addition to the Directors of the consolidated entity, the following employees met the definition of Key Management
Personnel for the year ended 31 December 2010 and are referred to as Executives:
P Beilby1 General Manager Murray Basin
P Benjamin General Manager Exploration
C Cobb General Manager Sales and Marketing
V Hugo General Manager Project and Technical Development
A Tate Chief Financial Officer
H Umlauff General Manager Project Management
S Wickham General Manager Australian Operations
C Wilson General Manager Corporate Services & Company Secretary
1 Ceased employment on 1 March 2010

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

21 Key management personnel (continued)

Key Management Personnel Compensation (Consolidated and Parent Entity)

For personal use only

2010
Post
Short term employment Share based Termination
benefits $ benefits $ payments $ benefits $ Total $
Non-Executive directors 901,311 69,125 - - 970,436
Executive Director 2,326,533 48,059 1,359,631 - 3,734,223
Executives 4,640,518 225,454 2,263,135 315,000 7,444,107

Total 7,868,362 342,638 3,622,766 315,000 12,148,766

2009
Post
Short term employment Share based Termination
benefits $ benefits $ payments $ benefits $ Total $
Non-Executive directors 782,500 59,778 - - 842,278
Executive Director 1,743,410 68,922 1,383,517 - 3,195,849
Executives 3,458,297 240,013 2,946,268 - 6,644,578

Total 5,984,207 368,713 4,329,785 - 10,682,705

The company has taken advantage of the relief provided by the Corporations Regulation 2M.6.04 and has transferred the
detailed remuneration disclosures to the remuneration report. The relevant information can be found on pages 12-30 of the
remuneration report
Share rights and shareholdings of Key Management Personnel
The numbers of shares in the company and share rights for ordinary shares in the company are set out below for each key
management personnel, including their personally related entities. No shares were granted as compensation during the
reporting period.

NUMBER OF SHARES NUMBER OF SHARE RIGHTS

Balance Awarded Balance Balance Vested as Balance
held at 1 Vesting of as held at 31 held at 1 Granted shares Lapsed held at 31
January share Restricted Other December January during during during December
Name 2010* rights Shares changes 2010* 2010 2010 2010 2010 2010
Non-Executive Directors
R Every 28,679 - - (28,679) - - - - - -
D Morley 40,876 - - - 40,876 - - - - -
G Pizzey 16,351 - - - 16,351 - - - - -
G Rezos 63,602 - - - 63,602 - - - - -
J Seabrook 19,314 - - - 19,314 - - - - -
W Osborn - - - - - - - - - -
S Turner - - - 50,000 50,000 - - - - -
Executive Director
D Robb 591,171 - 70,689 1,355 663,215 1,224,657 121,951 - (61,308) 1,285,300
Executives
P Beilby 126,574 54,614 - (181,188) - 141,970 - (54,614) (87,356) -
P Benjamin 102,212 968 6,297 1,355 110,832 175,171 36,504 (968) (17,329) 193,378
C Cobb - - - - - - 34,146 - - 34,146
V Hugo 121,204 2,946 10,973 (18,645) 116,478 117,894 33,252 (2,946) (16,062) 132,138
A Tate 41,988 - 17,772 - 59,760 174,433 40,163 - (19,414) 195,182
H Umlauff 108,057 - 24,722 (19,873) 112,906 146,437 46,911 - (23,092) 170,256
S Wickham 39,840 - 19,718 1,355 60,913 92,254 40,650 - (10,763) 122,141
C Wilson 81,048 2,691 16,153 - 99,892 178,202 36,504 (2,691) (17,983) 194,032

* Balances for the Executive Director and the Executives include restricted shares which will vest in future periods subject
to legislative requirements.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

21 Key management personnel (continued)

(c) Transactions with Key Management Personnel

For personal use only

No loans existed at the commencement of the year and no loans were made during the year ended 31 December 2010.

Ms Seabrook is a Special Advisor to Gresham Partners Limited, a company associated with Gresham Advisory Partners
Limited. Services provided by Gresham Advisory Partners Limited during the year of $116,279 were provided under normal
commercial terms and conditions. Services in the prior year of $745,000 were provided prior to the appointment of Ms
Seabrook as a director under normal terms and conditions.

There were no other transactions that were required to be disclosed which occurred between the consolidated entity and
Key Management Personnel that were outside of the nature described below

(a) Occurrence was within a normal employee, customer or supplier relationship on terms and conditions no more
favourable than those it is reasonable to expect the consolidated entity would have adopted if dealing at arms length with an
unrelated individual.
(b) Information about these transactions does not have the potential to adversely affect decisions about the allocation of
scarce resources made by users of the financial report, or the discharge of accountability by the Key Management
Personnel, and
(c) The transactions are trivial or domestic in nature.

Therefore, specific details of other transactions with Key Management Personnel are not disclosed.

-73-
 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

22 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related
For personal use only
practices and non-related audit firms:

2010 2009
$000 $000

(a) Assurance services

Audit and audit related services
Fees paid to PwC
PwC Australia 550 562
Other PwC firms 50 52
Total remuneration for audit services 600 614

Other assurance services

PwC Australia 107 65
Total remuneration for assurance services 707 679

(b) Taxation services

Fees paid to PwC
PwC Australia 27 67
Total remuneration for taxation services 27 67

(c) Other services

Fees paid to PwC
PwC Australia 65 113
Other PwC firms - 34
Total remuneration for other services 65 147

23 Retirement benefit obligations

(a) Superannuation plans

Australia
All employees of the consolidated entity who do not elect an alternate fund under the Superannuation Fund Choice
Legislation are entitled to benefits on leaving service, retirement, disability or death from the Iluka Section of the ING Master
Trust ("Master Trust") a sub-plan of the ING Masterfund. Within the Iluka Plan, the vast majority of members are entitled to
accumulation (ie defined contribution) benefits only. The plan also provides defined lump sum and pension benefits based
on years of service and final average salary for a small number of members. The accumulation contribution section
receives fixed contributions from consolidated entity companies and the consolidated entity’s legal or constructive obligation
is limited to these contributions.
USA
All employees of the US operations are entitled to benefits from the US operations' pension plans on retirement, disability or
death. The US operations have two defined benefit plans and one defined contribution plan. One of the defined benefits
plans provides a monthly benefit based on a set amount per month per year of service. The other defined benefit plan
provides a monthly benefit based on average salary and years of service. The defined contribution plan receives an
employee's elected contribution and an employer's match-up to a fixed percentage and the entity's legal or constructive
obligation is limited to these contributions.
The following sets out details in respect of the defined benefit sections only of the Australian and US plans.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

23 Retirement benefit obligations (continued)

(b) Balance sheet amounts

For personal use only

2010 2009
$M $M

Defined benefit plan obligation - present value 17.5 19.7

Defined benefit fund plan assets - fair value (14.1) (15.0)
Net liability in the balance sheet 3.4 4.7

Present value of the defined benefit obligation, which is partly funded:

Balance at 1 January 19.7 27.6
Current service cost 0.5 0.7
Interest cost 1.0 1.2
Contributions by plan participants 0.1 0.1
Actuarial gains and losses (0.3) (1.3)
Exchange rate changes (1.7) (4.0)
Benefits paid (1.8) (4.6)
Balance at 31 December 17.5 19.7

Fair value of plan assets:

Balance at 1 January 15.0 16.2
Expected return on plan assets 0.9 0.8
Actuarial gains and losses 0.4 1.7
Exchange rate changes (1.3) (2.4)
Contributions by group companies 0.8 3.2
Contributions by plan participants 0.1 0.1
Benefits paid (1.8) (4.6)
Balance at 31 December 14.1 15.0

The major categories of plan assets are as follows:

Cash 0.4 0.5
Equity instruments 8.8 8.7
Debt instruments 3.7 4.4
Property 0.2 0.6
Other assets 1.0 0.8
14.1 15.0

The assets are invested with professional investment managers. The number of shares (if any) of Iluka Resources Limited
held by the managers is decided solely by the investment managers.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

23 Retirement benefit obligations (continued)

(c) Amounts recognised in income statements
For personal use only

2010 2009
$M $M

Current service cost 0.5 0.8

Interest cost 1.0 1.2
Expected return on plan assets (0.9) (0.9)
Past service cost - 0.8
Total included in employee benefits expense 0.6 1.9

Actual return on plan assets 1.4 3.0

(d) Principal actuarial assumptions

The principal actuarial assumptions used (expressed as weighted averages) were as follows:

2010 2009
% %

Australia
Discount rate 4.7 5.7
Expected return on plan assets 5.0 5.0
Future salary increases 3.5 3.5
Expected rate of inflation 1.5 1.5

USA
Discount rate 6.0 6.0
Expected return on plan assets 7.5 7.5
Future salary increases 3.5 3.5
Expected rate of inflation 3.0 3.0
The expected rate of return on plan assets has been based on historical and future expectations of returns for each of the
major categories of asset classes as well as the expected and actual allocation of plan assets to these major categories.

(e) Employer contributions

Australia
Employer contributions to the defined benefits section of the plan are based on recommendations by the section's actuary.
The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the
time they become payable. To achieve this objective, the actuary has adopted a method of funding benefits known as the
aggregate funding method. This funding method seeks to have benefits funded by means of a total contribution which is
expected to be a constant percentage of members’ salaries over their working lifetimes.
Using the funding method described above and particular actuarial assumptions as to the defined benefits plan's future
experience, the actuary recommended payment of employer contributions ranging between 12.5 per cent and 12.9 per cent
(2009: 12.5 per cent to 12.9 per cent) of salaries, dependent on the defined benefit category of membership.
An actuarial valuation of the Plan as at 30 June 2010 is currently underway. The economic assumptions being used by the
actuary to make funding recommendations are, for defined benefit members: a long term investment earning rate of 5.0 per
cent (2009: 5.0 per cent) (net of fees and taxes), a salary increase rate of 3.5 per cent (2009: 3.5 per cent), and an
indexation rate of 1.5 per cent (2009: 1.5 per cent). As at 31 December 2010 only 5 members remain in the plan.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

23 Retirement benefit obligations (continued)

USA
For personal use only

Employer contributions to the defined benefits section of the plan are based on recommendations by the plan's actuary..

The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the
time they become payable. To achieve this objective, the actuary has adopted a method of funding benefits known as the
Projected Unit Credit (PUC) method. Under the PUC method, unfunded past service is amortised over 10 years and future
benefit accruals are funded during participants’ working lifetime with cost varying based on the age of participants.
Actuarial gains/losses are amortised over 5 years.

Using the funding method described above and particular actuarial assumptions as to the defined benefits plans future
experience the actuary recommended in the actuarial review, the payment of US$0.6 million (2009: US$0.7 million) for the
salaried defined benefit plan and US$0.1 million (2010: US$0.1 million) for the hourly defined benefit plan.

Total employer contributions expected to be paid by the consolidated entity for the year ending 31 December 2011 are
US$0.7 million.

(f) Net financial position of plans

In accordance with AAS 25 Financial Reporting by Superannuation Funds the plans' net financial position is determined as
the difference between the present value of the accrued benefits and the net market value of plan assets.
Australia
The net financial position of the plan determined from information supplied by the Master Trust at 31 December 2010 was a
surplus of $0.4 million (2009: deficit $0.6 million).
USA
The net financial position of the US plans has been determined as at the date of the most recent financial report of the
superannuation fund (31 December 2010) and in accordance with IAS 19 Employee Entitlements, and a deficit of $3.6
million as at 31 December 2010 (2009: $5.2 deficit million) was reported.

(g) Historic summary

2010 2009 2008 2007 2006
$M $M $M $M $M

Defined benefit plan obligation 17.5 19.7 27.6 20.4 21.5

Defined benefit fund plan assets (14.1) (15.0) (16.2) (17.9) (17.4)
Deficiency of net market value of assets over the
present value of employees' accrued benefit payments 3.4 4.7 11.4 2.5 4.1

24 Contingent liabilities

2010 2009
$M $M

Performance commitments and guarantees (a) 103.6 84.6

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

24 Contingent liabilities (continued)

(a) The consolidated entity has negotiated a number of bank guarantees in favour of various government authorities and
For personal use only

service providers to meet its obligations under exploration and mining tenements.

(b) There is some risk that native title, as established by the High Court of Australia's decision in the Mabo case, exists
over some of the land over which the consolidated entity holds tenements or over land required for access purposes. It is
impossible at this stage to quantify the impact (if any) which these developments may have on the operations of the
consolidated entity.

(c) In the course of its normal business, the consolidated entity occasionally receives claims arising from its operating
activities. In the opinion of the Directors, all such matters are covered by insurance, or, if not covered, are without merit or
are of such a kind or involve such amounts that would not have a material adverse effect on the operating results or
financial position of the consolidated entity if settled unfavourably.

25 Commitments

(a) Capital commitments

2010 2009
$M $M

Property, plant and equipment:

Amounts contracted for and payable within 1 year 9.9 25.3

(b) Exploration and mining lease commitments

Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities, payable:

Within one year 22.9 24.9

Later than one year but not later than five years 42.2 36.7
Later than five years 59.1 56.6
124.2 118.2

These costs are discretionary. If the expenditure commitments are not met then the associated exploration and mining
leases may be relinquished.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

25 Commitments (continued)
(c) Lease commitments
For personal use only

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:

2010 2009
$M $M

Within one year 18.8 10.5

Later than one year but not later than five years 27.7 28.9
Later than five years 4.7 8.8
51.2 48.2

(d) Other commitments

Commitments for payments in relation to non-cancellable contracts are payable as follows:

Within one year 41.3 77.4

Later than one year but not later than five years 122.4 134.9
Later than five years 20.0 41.7
183.7 254.0

The commitments include $170.7 million (2009: $189.3 million) in respect of the consolidated entity for term contracts for
coal, gas, electricity and water used in the production process.

26 Related party transactions

(a) Directors and specified executives

Disclosures relating to Directors and Key Management Personnel are set out in Note 21.

(b) Controlled entities and controlling entities

Details of material controlled entities are set out in note 27. The ultimate Australian controlling entity and the ultimate
parent entity in the wholly-owned group is Iluka Resources Limited.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

27 Controlled entities and deed of cross guarantee

The following companies are all incorporated in Australia and are parties to a Deed of Cross Guarantee under which each
For personal use only
company guarantees the debts of the others: Iluka Resources Limited, Westlime (WA) Limited, Ilmenite Pty Limited,
Southwest Properties Pty Limited, Western Mineral Sands Pty Limited and Yoganup Pty Limited, Iluka Corporation Limited,
Associated Minerals Consolidated Limited, Iluka Administration Limited, Iluka (NSW) Limited, Iluka Consolidated Pty
Limited, Iluka Exploration Pty Limited, Gold Fields Asia Limited, Iluka International Limited, NGG Holdings Limited, Caroda
Pty Limited, Iluka Midwest Limited, Western Titanium Limited, The Mount Lyell Mining and Railway Company Limited,
Colinas Pty Limited, Renison Limited, Iluka Finance Limited, The Nardell Colliery Pty Limited, Glendell Coal Limited and
Lion Properties Pty Limited.

By entering into the Deed, the wholly-owned entities represent a closed group and have been relieved from the
requirements to prepare a Financial Report and Directors' Report under Class Order 98/1418 (as amended by Class Order
98/2017) issued by the Australian Securities and Investments Commission ("ASIC"). As there are no other parties to the
Deed of Cross Guarantee that are controlled by Iluka Resources Limited, they also represent the extended Closed Group.

In addition to the members of the extended closed group, the Iluka Group also includes the following Australian companies:
Aston Coal Interests Pty Ltd (Iluka interest 93.4%), Iluka International (Brazil) Pty Ltd (Iluka interest 100.0%). The group's
activities in the United States are undertaken by Iluka Resources Inc which is 100% owned.
2010 2009
$M $M

Condensed income statement of Extended Closed Group

Revenue from ordinary activities 840.4 538.9
Other expenses from ordinary activities (769.6) (636.3)
Finance costs (46.9) (23.3)
Impairment charges - (67.6)
Income tax benefit 2.7 65.0
Profit (loss) for the year 26.6 (123.3)

Condensed statement of comprehensive income

Profit (loss) for the year 26.6 (123.3)
Other comprehensive income
Changes in fair value of foreign exchange cash flow hedges, net of tax (3.6) 72.9
Actuarial gains (losses) on defined benefit plans, net of tax 0.6 (2.0)
Total other comprehensive income (3.0) 70.9

Total comprehensive income for the year 23.6 (52.4)

Summary of movements in consolidated retained earnings

Retained earnings at the beginning of the financial year (11.9) 111.4
Profit (loss) for the year 26.6 (123.3)
Retained earnings at the end of the financial year 14.7 (11.9)

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

27 Controlled entities and deed of cross guarantee (continued)

(a) Condensed balance sheet of Extended Closed Group

For personal use only

2010 2009
$M $M

Current assets
Cash and cash equivalents 19.2 75.7
Receivables 156.0 90.7
Inventories 193.9 171.2
Derivative financial instruments - 15.9
Total current assets 369.1 353.5

Non-current assets
Receivables 15.3 80.7
Inventories 56.6 56.6
Other financial assets 42.4 42.6
Property, plant and equipment 1,389.1 1,517.3
Deferred tax assets 44.8 36.4
Intangible assets 7.1 9.9
Total non-current assets 1,555.3 1,743.5

Total assets 1,924.4 2,097.0

Current liabilities
Payables 96.1 174.1
Interest-bearing liabilities 29.5 44.7
Provisions 41.7 20.1
Total current liabilities 167.3 238.9

Non-current liabilities
Interest-bearing liabilities 313.3 423.7
Provisions 297.9 307.6
Total non-current liabilities 611.2 731.3

Total liabilities 778.5 970.2

Net assets 1,145.9 1,126.8

Equity
Contributed equity 1,108.3 1,114.4
Reserves 22.9 24.3
Retained profits 14.7 (11.9)
Total equity 1,145.9 1,126.8

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

28 Reconciliation of profit (loss) after income tax to net cash inflow from operating activities
For personal use only
2010 2009
$M $M

Profit (loss) for the year 36.1 (82.4)

Depreciation and amortisation 219.0 176.6
Unrealised ineffective (gains) losses of changes in fair value of cash flow hedges - (26.4)
Exploration capitalised (4.3) (3.3)
Interest capitalised - (12.5)
Net gain on disposal of property, plant and equipment (4.1) (6.8)
Net gain on disposal of CRL - (22.9)
Net exchange differences on borrowings (5.7) (17.5)
Rehabilitation and restoration accretion expense 14.3 15.7
Non-cash share based payments expense 3.8 6.2
Amortisation of deferred borrowing costs 1.0 1.1
Other 0.8 (0.6)
Impairment charges - 67.6
Change in operating assets and liabilities
Decrease (increase) in receivables (62.0) 129.1
Decrease (increase) in inventories 2.6 (59.5)
Decrease (increase) in derivatives 10.8 -
Decrease (increase) in deferred tax assets 4.5 (68.5)
Increase (decrease) in payables (38.7) 43.5
Increase (decrease) in current tax liabilities - (5.9)
Increase (decrease) in provisions 0.6 (31.3)
Net cash inflow (outflow) from operating activities 178.7 102.2

29 Earnings per share

2010 2009
Cents Cents

(a) Basic and diluted earnings per share

(Loss) profit from continuing operations attributable to owners 8.6 (25.9)
Profit from discontinued operation - 5.7
Profit attributable to the owners 8.6 (20.2)

(b) Reconciliations of earnings used in calculating earnings per share

(Loss) profit for the year from continuing operations 36.1 (105.5)
Net profit (loss) attributable to non-controlling interests - 0.2
Profit from continuing operations attributable to owners 36.1 (105.3)
Profit from discontinued operation - 22.9
Profit attributable to owners used in calculating basic earnings per share 36.1 (82.4)

Weighted average number of shares used in calculating basic and diluted earnings per
share 418,700,517 405,582,708

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 Iluka Resources Limited
Notes to the financial statements
31 December 2010
(continued)

30 Share-based payments
The Share Based Payment expense in the profit and loss account of $4,100,000 (2009: $6,245,000) results from
several schemes summarised below. Further information on each scheme is contained in the Remuneration
For personal use only
Report.

Share Expense Share Expense

Grant Vesting Fair rights at 2010 rights at 2009
Schemes date date value 31 Dec 10 $M 31 Dec 09 $M
Jan-11
2009 STIP (i) Jan-10 Jan-12 3.58 336,834 0.9 - -
Jan-10
2008 STIP (i) Jan-09 Jan-11 4.66 840,325 0.7 856,314 2.7
Jan-09
2007 STIP (i) Jan-08 Jan-10 4.09 - - 296,435 0.5
2.59/
2010 LTIP (ii) Jan-10 Jan-13 3.58 941,056 1.1 - -
3.49/
2009 LTIP (ii) Jan-09 Jan-12 4.64 645,311 0.7 734,743 0.9
2.29/
2008 LTIP (ii) Jan-08 Jan-11 3.56 683,621 (0.9) 767,633 0.8
2.79/
2007 LTIP (ii) Jan-07 Jan-10 5.84 - - 318,878 (0.5)
Iluka Retention Plan Share
Rights (i) (iv) Mar-08 Mar-11 4.09 922,230 1.1 1,060,000 1.4

MD Retention Share Rights (ii) Mar-08 Mar-11 1.00 1,000,000 0.5 1,000,000 0.3

2006 PIP and prior plans (i) (v) various various - - 41,763 0.1

Total share based payments 4.1 6.2

(i) The fair value at grant date is independently determined using the Black-Scholes model that takes into
account the share price at grant date, the expected price volatility of the underlying share, the expected
dividend yield and the risk free discount rate for the term of the right.

(ii) The fair value at grant date is independently determined using the Monte-Carlo simulation to model share
prices at vesting date by repeatedly sampling random movements in a share’s price. This repeated
random sample in conjunction with certain known and historical data (e.g. rates, dividend yields and
volatility) makes it possible to form a complete probability distribution of a share’s price at a particular time
in the future and hence estimate the average or mean share price at this time.

(iii) Information on the Managing Director’s Share Rights is disclosed in the remuneration report.

(iv) The Iluka Retention Plan share rights were offered on various dates with the majority offered in March
2008 at $4.09 per share. The fair value per share disclosed in the table is the weighted average value for
all outstanding rights.

(v) Prior to the introduction of the PIP in 2005, the company operated Long term Incentive Plans pursuant to
the terms of the Directors’, Executives’ and Employees’ Share Acquisition Plan (Plan). The Plan was
approved by shareholders at the Annual General Meeting of the company in May 1999. From year to
year the Board invited the Managing Director and other employees determined by the Board to hold an
executive position, to participate in the Plan as a means of providing those employees with an incentive to
enhance the performance of the company. The terms of the annual offer included an allocated maximum
number of shares (maximum allocation) that will be acquired or retained under the Plan on behalf of the
employee if certain performance criteria, as determined by the Board, are satisfied. All shares relating to
the 2005 PIP expired in 2010.

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 Iluka Resources Limited
Notes to the consolidated financial statements
31 December 2010
(continued)

31 Parent entity financial information

Parent entity
For personal use only
2010 2009
$M $M

Balance sheet
Current assets 66.3 147.6
Non-current assets 2,267.1 2,095.5

Total assets 2,333.4 2,243.1

Current liabilities 68.3 107.3

Non-current liabilities 1,096.0 953.3

Total liabilities 1,164.3 1,060.6

Net Assets 1,169.1 1,182.5

Shareholders' equity
Contributed equity 1,120.0 1,120.0
Reserves 21.7 23.2
Retained earnings 27.4 39.3
1,169.1 1,182.5

Profit (loss) for the year (12.2) 10.4

Total comprehensive income (15.8) 83.3

(a) Contingent liabilities of the parent entity

The parent had contingent liabilities for performance commitments and guarantees of $29.0 million as at 31 December
2010 and $31.1 million as at 31 December 2009.
(b) Contractual commitments for the acquisition of property, plant or equipment
As at 31 December 2010, the parent entity had contractual commitments for the acquisition of property, plant or equipment
totalling $6.5 million (31 December 2009 - $2.2 million).

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 Iluka Resources Limited
Directors' declaration
31 December 2010

In the Directors’ opinion:

(a) the financial statements and notes 32 to 84 are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
(ii) giving a true and fair view of the consolidated entity's financial position as at 31 December 2010 and of its
For personal use only
performance for the financial year ended on that date, and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable; and note 1(a) confirms that the financial statements also comply with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed
group identified in note 27 will be able to meet any obligations or liabilities to which they are, or may become,
subject by virtue of the deed of cross guarantee described in note 27.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.

G J Pizzey
Chairman

D A Robb
Managing Director
Perth
24 March 2011

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For personal use only
For personal use only