Australian Securities Exchange Notice

21 January 2016

QUARTERLY PRODUCTION REPORT 31 DECEMBER 2015‌

OVERVIEW

• Annual production of zircon, rutile, synthetic rutile (Z/R/SR) was 690 thousand tonnes (kt) (2014: 535 kt).

• Sales volumes of Z/R/SR increased 6 per cent to 651 kt (2014: 616 kt). The sales outcome is consistent with Iluka's commentary on 16 December 2015.

• Z/R/SR sales revenue increased 17 per cent to $740 million (2014: $635 million). Mineral sands sales revenue, including ilmenite and by-product revenues, increased 13 per cent to $820 million (2014: $725 million), with ilmenite and by-product revenues of $80 million (2014: $90 million).

• Revenue per tonne of Z/R/SR sold increased by 10 per cent to $1,136 (2014: $1,030/t), despite lower weighted average received USD prices and a higher proportion of standard grade zircon and zircon in concentrate sales. The higher revenue per tonne therefore mainly reflects currency translation benefits associated with the lower AUD: USD (2015 average of 75.2 cents compared with 90.3 cents in 2014).

• Zircon sales were 2 per cent lower at 346 kt (2014: 352 kt). Sales in China were stable, with higher demand in Europe, the Middle East and India, offset by weaker sales in North America, associated with the idling of the Virginia operations and reduced activity in some end sectors.

• Combined rutile and synthetic rutile sales increased by 16 per cent to 305 kt (2014: 264 kt).

• Rutile sales were 134 kt (2014: 182 kt), with 2015 the first year of rutile allocation following completion of mining at Woornack, Rownack, Pirro (WRP), Murray Basin, Victoria.

• SR sales were 171 kt (2014: 82 kt), the majority underpinned by commercial arrangements which continue beyond 2016.

• Ilmenite sales were 300 kt (2014: 317 kt), reflecting higher utilisation of internal ilmenite as a feed source for SR production and lower sales of ilmenite from Virginia.

• Total cash cost of production, excluding ilmenite and by-product costs, increased by 8 per cent to $385 million (2014: $357 million), reflecting reactivation of mining at Tutunup South and SR kiln 2 production, offset by completion of mining at WRP.

• Unit cash cost of Z/R/SR produced, excluding by-product costs, decreased by 17 per cent to $558/tonne, compared with $668/tonne in 2014.

• Unit costs of goods sold per tonne of Z/R/SR decreased by 10 per cent at $780/tonne, compared with

  $862/tonne.

• Iluka's Group EBITDA margin structure remained above 30 per cent which, together with low capital expenditure for the year of $66 million, resulted in positive free cash flow.

• Iluka recorded a net cash position at year end versus net debt of $59.0 million at 31 December 2014. (Details to be provided as part of Iluka's Full Year Results on 19 February 2016).

Iluka Resources Limited • ABN 34 008 675 018 • Level 23 140 St Georges Terrace Perth WA 6000

GPO Box U1988 Perth WA 6845 • T +61 8 9360 4700 • F +61 8 9360 4777 • www.iluka.com

SUMMARY OF PHYSICAL AND FINANCIAL DATA

1

Total mineral sands production includes ilmenite available for upgrading to synthetic rutile and ilmenite that is available for sale. For

both commercial reasons and given the company's increased flexibility in utilising ilmenite production from multiple sources for upgrading to synthetic rutile, the company does not separate ilmenite production into saleable and upgradeable components.

2

Ilmenite and other revenue include revenues derived from other materials not included in production volumes, including activated

carbon products and iron concentrate. Iluka receives a royalty payment from its Mining Area C iron ore royalty. This is not reported as part of quarterly reports but is disclosed in the financial statements.

MARKET CONDITIONS

Market conditions for Iluka's mineral sands products remain subdued overall, in line with lower global growth, persistent low inflation and capacity adjustments in parts of the mineral sands value chain. For some customers, weak business profitability and cash flow impacted purchasing capability and product delivery timings.

Overall Iluka's zircon/rutile/synthetic rutile sales increased year-on-year, with high grade feedstocks higher (up 16 per cent), in large part associated with recommencement of synthetic rutile kiln 2, but with zircon marginally lower (down 2 per cent). US dollar denominated price outcomes eroded marginally over the course of the year although as conveyed on page 2, Australian dollar unit revenue per tonne of zircon/rutile/synthetic rutile benefited from a lower AUD:USD exchange rate and increased 10 per cent year- on-year. Summary price information is displayed in the table on page 4.

Evident as the year-end approached were industry examples of cash flow generation and inventory monetisation 'imperative selling' practices which resulted in some erosion of prices and Iluka customer deferral of purchases at year end, mainly for zircon. Sales of Iluka's high grade titanium dioxide products, which are more typically subject to longer term contractual obligations, remained in line with company expectations and the company is well advanced in terms of commercial arrangements for the sale of the majority of its high grade titanium dioxide volumes in 2016.

Iluka's approach to sales volume versus sales price trade-offs remains centred on following demand and in doing so effectively prioritises margins ahead of additional tonnes, that might be secured via lower prices, where practicable from a competitive and customer relationship perspective.

Zircon

Zircon demand year-on-year was broadly stable for the first three quarters, before slowing in the latter part of the year. Iluka's 2015 sales of 346 thousand tonnes were essentially in line with 2014. Implementation of Iluka's new Pricing and Payments Framework has created greater reliability in terms of sales volume outcomes and, in some cases, enabled Iluka to achieve sales increases to its preferred customers for whom quality and continuity of supply from a reliable and financially strong industry participant are of value.

2015 saw stable overall demand in China, the largest market, similar to 2014 levels, with ceramics demand steady for the year, although with some earlier than usual plant closures and destocking in the fourth quarter in advance of winter and the Chinese New Year. Demand in the smaller but still significant zirconium oxy chloride chemicals market continued to be low and towards the end of the year a number of large producers idled production lines or undertook maintenance outages. The fused zirconia market in China has been variable in terms of its performance, although Iluka's largest customers in this segment have performed solidly.

In Europe, the second largest market, Iluka achieved increased sales in 2015, with a recovery in demand in the ceramics and opacifier sectors, although still at lower than historical run rates. The Middle East market has shown signs of strengthened demand off a low base. Asia (excluding China) and India were variable: ceramics demand in Asia was stable, while the Indian ceramics market after a solid first half, was affected by a slowdown in exports and by a period in which domestic demand was satisfied by imports of mainly Chinese tiles.

The market which displayed the most marked reduction in sales for Iluka was the Americas. It was the sales results in this market which curtailed the expected increase in Iluka's 2015 zircon sales relative to 2014. Iluka's sales in the United States were affected by several factors, but primarily by the imminent idling of the Virginia operation and lower availability of the company's premium Virginia zircon, which saw some customers seek alternative sources of supply in advance of the operational wind down, as well as a marked demand reduction in sectors such as oil and steel, which adversely affected demand for zircon used in fused zirconia and refractory applications.

As was indicated in the half year results materials, the company had a higher proportion of both standard grade and zircon in concentrate sales in the second half, associated with Iluka's specific market sector targeting activities and end customer product requirements.

Titanium Dioxide Feedstocks

As Iluka indicated previously, the majority of its high grade titanium feedstock sales were contracted for the second half of the year and were delivered as planned.

Western chloride pigment producers, an important market for Iluka's high grade feedstocks, remained under pressure in 2015, with excess global pigment capacity leading to an erosion of pigment prices. Despite this, Iluka's combined synthetic rutile and rutile sales in 2015 increased by 16 per cent relative to 2014, with synthetic rutile production and sales largely underpinned by commercial off take arrangements. Iluka is well positioned for 2016 with the majority of its high grade feedstocks contracted for the year and with the opportunity for additional spot sales.

The titanium sponge market in China remained depressed, as did the welding electrode market. This is in contrast to the rest of Asia where sponge and welding were stable. In the United States, weakness in the oil sector and a reduction in large infrastructure projects, has reduced demand in these sectors of the market.

Iluka Mineral Sands Weighted Average Received Prices - US$/tonne FOB

Note 1: Iluka's synthetic rutile sales are, in large part, underpinned by commercial off take arrangements. The terms of these arrangements, including the pricing arrangements are commercial in confidence and as such not disclosed by Iluka. Synthetic rutile, due to its lower titanium dioxide content than rutile, typically is priced lower than natural rutile.

Zircon prices reflect the weighted average price for zircon premium and zircon standard, also with a weighted average price for all zircon materials, including zircon in concentrate and zircon tailings. The prices for each product vary considerably, as does the mix of such products sold period to period. For example, Iluka sold more zircon standard and zircon in concentrate in the second half of 2015 compared with the first half of 2015 and more in 2015 than 2014. In the case of rutile, Iluka sells a lower titanium dioxide product, HyTi. Sales volume for this product was more second half weighted in 2016 and, as such, influenced weighted average price dynamics.

PRODUCTION

Higher year-on-year production mainly reflects an increase in synthetic rutile (SR) production associated with the reactivation of SR kiln 2 in the South West of Western Australia in April, with marginally higher zircon production, offset by lower rutile production reflecting feedstock blending strategies at the Hamilton mineral separation plant to manage supply of rutile following the completion of mining at Woornack, Rownack, Pirro (WRP) and before the next planned mine in the Murray Basin.

The Jacinth-Ambrosia mining and concentrating operation continued at full utilisation rates through to the end of the year, reflecting the most efficient operating method, although this did result in a marginal further concentrate build at site. In December, both the Hamilton mineral separation plant in Victoria and the Narngulu mineral separation plant in Western Australia were idled over the Christmas period and will recommence processing of concentrate in January and February respectively. Mining at Tutunup South, Western Australia, recommenced in March as an ilmenite feed source for SR kiln 2 located nearby. Mining in the Murray Basin was completed at the WRP deposits in April following the end of the economic life of these deposits. Rehabilitation work has commenced and Murray Basin rutile and zircon production will be derived from the progressive drawdown and processing of heavy mineral concentrate stocks before the next planned mine development at Balranald, New South Wales.