Australian Securities Exchange Notice

1 August 2016

ILUKA ACQUISITION OF SIERRA RUTILE LIMITED

Iluka Resources Limited (Iluka) has made a joint announcement with Sierra Rutile Limited (SRL), issued on the London Stock Exchange and the Australian Securities Exchange, in relation to an all-cash offer to acquire the entire issued and to be issued shares of SRL and therefore its rutile mining operations in Sierra Leone.

Transaction Summary

The offer is 36 pence cash for each SRL share which values the entire issued and to be issued shares of SRL at approximately £215 million (A$375 million1). Iluka assumes SRL's debt of approximately US$60 million (A$80 million).

This announcement and the accompanying slide pack provide additional information for Iluka shareholders.

Iluka Company Statements

Greg Martin, Iluka's Chairman stated:

"The transaction is consistent with Iluka's approach to act in a counter-cyclical manner where appropriate, including via transactions where strategic rationale and financial merit can be demonstrated. It is a logical combination of complementary businesses at this point in the mineral sands cycle."

"The offer is cash based and entails Iluka absorbing SRL's modest debt of ~US$60 million which would represent a pro-forma post-acquisition gearing for Iluka (net debt/net debt + equity) of ~25 per cent. The acquisition of SRL along with current Iluka project progress provides the potential for enhanced portfolio flexibility which will in turn determine the level and phasing of Iluka's future capital expenditure. Iluka will continue to prioritise the maintenance of a strong balance sheet after an expected peak debt in 2018 as internal projects are also funded within that period."

"Iluka believes that a disciplined approach to both capital expenditure and cash distribution strongly influences shareholder value creation and delivery in a cyclical industry. Iluka's approach in both respects remains unchanged."

David Robb, Iluka's Managing Director said:

"SRL is a long life operation, with an established position in high grade chloride feedstock markets. Iluka is confident the application of its industry-specific technical expertise, together with its market access and reach will enhance the SRL business."

"The combination provides Iluka with additional, long life (20 years plus) resources of proven quality, with further potential through resource additions, reserve optimisation and exploration. The combination enhances Iluka's rutile portfolio position. This enhancement sits alongside Iluka's existing position as the largest global zircon producer."

"Due diligence has been conducted on the SRL operation and Iluka believes the offer represents an attractive risk/return profile for shareholders across a range of scenarios. The transaction is expected to be EPS accretive in the first full year (2017)."

1 Based on an AUDGBP exchange rate of 0.575 as of 29 July 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

Combined Portfolio Characteristics

Iluka's acquisition of SRL will:

• approximately double Iluka's rutile resource base;

• secure ownership of an operation, with a long history in the minerals sands industry, that currently produces ~130 thousand tonnes of rutile, with expansion potential up to 240 thousand tonnes/annum; and

• enable Iluka to implement certain operational improvement measures identified during due diligence to enhance production and lower unit cash costs of production.

The acquisition of SRL is not expected to limit the company's ability to fund major internal projects such as Cataby and Balranald.

The acquisition is conditional on approval of the statutory merger by a simple majority of SRL shareholders being obtained at a duly convened meeting.

It is expected that the Merger Circular will be published in August 2016 and that, subject to the satisfaction of all relevant conditions, the merger will become effective and the acquisition completed in September 2016 or before 30 November 2016 (or such other date as agreed between Iluka and SRL). The company will keep shareholders informed as permitted in accordance with applicable regulatory requirements.

Further Shareholder Sources of Information

Teleconference

• Iluka will be holding a teleconference for shareholders, media and equity market participants on Monday 1 August at 3.00 pm Australian Eastern Standard Time. Details below.

  Teleconference dial-in details

  Conference ID: 5741 5505

  Australia (toll-free) 1800 123 296	Hong Kong (toll-free) 800 908 865
  Japan (toll-free) 0120 477 087	Singapore (toll-free) 800 616 2288
  Canada 1855 5616 766	United States (toll-free) 1855 293 1544
  United Kingdom (toll-free) 0808 234 0757	Any other country or mobile phone +61 2 8038 5221

• Iluka will provide a transcript and audio recording of this teleconference on its website soon after the session.

  Further details on the transaction and the SRL operation can be found in the following:

• The joint announcement with SRL, containing appendices relating to, amongst other things, the conditions and further terms of the acquisition.

• Supplementary Information - below.

• Proposed Acquisition of SRL detailed slide materials available on Iluka's website.

  Investor and media enquiries

  Dr Robert Porter

  General Manager, Investor Relations and Corporate Affairs

  Direct (Melbourne): +61 (3) 9255 5008 Mobile: +61 (0) 407 391 829 Email: [email protected] Website: www.iluka.com

  SUPPLEMENTARY INFORMATION - ACQUISITION OF SIERRA RUTILE LIMITED

  Strategic Rationale

  • SRL is a producer and supplier of rutile globally, from Sierra Leone.

  • Iluka is a major zircon producer, with a strong position in rutile. As such the combination is of complementary products and market knowledge and extends Iluka's position as a high grade chloride feedstock supplier.

  • The acquisition involves a business with a long operating history and well established customer relationships in areas of the industry that Iluka knows well.

  • The acquisition provides Iluka with a long life (20 years plus) resource with additional potential upside through exploration and resource to reserve conversion.

  • The combination will provide enhanced opportunities for Iluka to increase rutile production as market demand conditions warrant, with the combination enhancing Iluka's market position in rutile and complementing its zircon market position.

  • Rutile and zircon assemblage in known global mineral sands ore bodies is believed by Iluka to be in structural decline.

  • The acquisition provides potential portfolio flexibility in relation to Iluka's internal production options.

    Financial Merit

  • Iluka believes the offer represents an attractive risk/return profile for shareholders across a range of scenarios.

  • Iluka has undertaken due diligence on SRL's operation. This has included on-site and other due diligence activities and comprehensive risk assessments.

  • Sales volume forecasts have been based on detailed marketing plans. Modelled product prices used are consistent with Iluka's view of the industry outlook and TZMI analysis.

  • Stress testing of returns and balance sheet outcomes under a range of economic/market/operating conditions has been conducted, in accordance with Iluka's rigorous evaluation approach.

  • The transaction is expected to be EPS accretive in the first full year and thereafter, with free cash flow and dividend per share impacts in any particular year subject to investment portfolio decision making and timing. Iluka's distribution framework remains unchanged.2

  • The offer is cash based and entails Iluka absorbing SRL's debt of ~US$60 million which would represent a pro- forma gearing post acquisition (net debt / net debt + equity) of ~25 per cent. Peak debt is expected in 2018 dependent on the phasing of Iluka internal projects.

    Iluka Expertise and Operational Improvement Potential

  • Iluka will bring its extensive operational and technical capabilities to bear in order to deliver a number of operational and resource conversion improvements to SRL. These opportunities have been identified as part of due diligence activities on SRL's operation. The improvement measures are expected to enhance production and unit cash cost performance. Further details on areas of operational improvement will be provided on conclusion of the transaction.

  • Iluka is able to draw upon the expertise and experience of its employees in relation to dredge and dry mining operations, including mine development and operation in Africa, to supplement existing SRL management expertise.

  • Iluka will also apply its capabilities in areas such as safety and environmental management and rehabilitation to the SRL operation.

  • Iluka's evaluation of the SRL opportunity has entailed assessments related to country risk, health related matters, internal security and personnel safety, as well as standards of current operating regime and interaction with the workforce and local communities. Iluka is satisfied with these assessments and looks forward to a close working relationship with the Government of Sierra Leone.

  • Key Iluka personnel that will be involved in integration and operational roles have been identified and are available to undertake assigned activities. Several of these personnel were involved in various elements of due diligence activities.

2 Iluka's distribution payment framework is to pay a minimum of 40% of free cash flow not required for investing or balance sheet activity.

DIS Statement regarding the disposal of a company or assets Part I

Not for release, publication or distribution, in whole or in part, directly or indirectly, in, into or from the United States or from any other jurisdiction where to do so would constitute a violation of the relevant laws or regulations of such jurisdiction.

This announcement contains inside information in relation to Sierra Rutile Limited.

FOR IMMEDIATE RELEASE 1 August 2016

Recommended proposal for the £215 million acquisition

of Sierra Rutile Limited by Iluka Resources Limited to be implemented by statutory merger under the BVI Companies Act

of

Sierra Rutile Limited with

Iluka Investments (BVI) Limited

Summary

• The Boards of Sierra Rutile Limited ("SRL") and Iluka Resources Limited ("Iluka") are pleased to announce that they have reached agreement on the terms of a recommended Acquisition of all of the issued and to be issued shares of SRL by Iluka. The Acquisition will be implemented by merging SRL with Iluka Investments (BVI) Limited ("Iluka Newco"), a wholly-owned BVI incorporated subsidiary of Iluka International (West Africa) Pty Ltd., which is an entity within the Iluka Group.

• Under the terms of the Acquisition, SRL Shareholders will receive 36 pence in cash for each SRL Share. The Acquisition represents:

  • a premium of 32.3 per cent. to 27.2 pence, being the 1 month volume-weighted average price of SRL Shares to 29 July 2016 being the Business Day immediately prior to the date of this announcement;

  • a premium of 34.7 per cent. to 26.7 pence, being the 3 month volume-weighted average price of SRL Shares to 29 July 2016;

  • a premium of 43.9 per cent. to 25.0 pence, being the 6 month volume-weighted average price of SRL Shares to 29 July 2016;

  • a premium of 80.0 per cent. to 20 pence, being the price at which SRL undertook a share placement on 14 April 2016;

  • a discount of 4.0 per cent. to the closing middle market price of 37.5 pence per SRL Share on 28 July 2016, being the Business Day immediately prior to the date on which SRL announced a possible offer from Iluka; and

  • a discount of 1.4 per cent. to the closing middle market price of 36.5 pence per SRL Share on 29 July 2016, being the Business Day immediately prior to the date of this announcement.

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