4.17 The rest of May 2012
308 Between 10 and 14 May 2012 an exchange of emails shows that Iluka's views were orthodox. A report about a TZMI presentation in London included that:
Titanium feedstock
• TZMI remains fairly optimistic about titanium feedstock prices, in particular the higher-grade products such as rutile and [synthetic] rutile
• The painting season is Q2 and Q3 and the pigment guys are geared for offtake to increase. So should see good demand in the months ahead. At present inventory of feedstock is about 60 days compared with 55 normally; if falls below 50 days prices could be even stronger.
• Markets which are also still strong include South America, Middle East where demand is growing;
• TZMI thinks there could be ~20% hike in H2 higher-grade TiO2 prices as inventories still fairly low.
• China feedstock market could get a boost from plans to kick start social housing - this takes pain[t].
…
• TZMI see Iluka as really well-placed in high-grade rutile because it has the capacity to produce [synthetic] rutile
• TZMI believes TiO2 is still a suppliers market with rutile, for example, likely to see prices of +$3000/t
Zircon
• Zircon market remains weak because of China where tiling etc is being deferred because of slowdown in building and sales of residential buildings. Some sign that inventory has moved.
• TZMI expects Iluka and the other majors to remain disciplined on zircon and even thinks Iluka could reduce sales a bit more than guided so far - perhaps another 50kt down.
• TZMI believes that Iluka could have ~100kt of zircon inventory in China to ensure it is ready for increasing demand when it comes
• The sign that the Zr market is improving is when customers start taking bulk shipments; not obvious yet
• Note that zircon is more vulnerable in near-term than ilmenite because it is primarily consumed in tiles and accounts for 5%-25% of cost of tile. In case of ilmenite TiO2 is only about 5% of retail price of a tin of paint.
309 Mr Cobb responded to Mr Robb that Iluka needed to "be careful we don't fall into a trap of believing everything 'Dr Phil' [Mr Murphy of TZMI] prophesises" as he had heard pigment stocks were very high and customers were trying to get Iluka to take back H1 high grade ore so either Mr Cobb was "being bamboozled by … customers or Phil is wrong, and [he] will challenge Kronos and DuPont next week on the subject". Mr Cobb said he was "concerned that as the highest priced supplier of bulk HGO to pigment we will be the first to be chopped back on tonnage if they throttle back the plants - loosing [sic] large tonnage in H2 to push prices a few hundred dollars doesn't make sense we need our competitors pricing to catch up in H2".
310 In other words, Mr Cobb did not accept TZMI's view that titanium feedstock prices would increase by 20%. Mr Cobb did not want Iluka to increase prices of its titanium feedstock due to a view that if pigment producers reduced production, as the highest priced feedstock, Iluka's products would be the first to be reduced. This does not support Mr Bonham's case as: (a) the issue being considered is an increase in prices, (b) Mr Cobb's concern is conditional on pigment producers reducing production, (c) again, Mr Cobb did not take customers' statements at face value and was going to talk further to Kronos and DuPont, and (d) again, Iluka was not taking TZMI's more bullish views about titanium feedstock at face value.
311 Mr Porter was also cautious about the TZMI view about price increases for titanium feedstock saying that he doubted this related to high grade weighted ore prices and this was a "longer term game".
312 Mr Robb's response was:
Got to "know when to hold 'em, know when to fold 'em, know when to walk away and know when to run".
We are currently "holding 'em".
Time will tell if that's enough.
313 This response (referencing the song The Gambler) indicated only that Iluka would be holding its TiO2 prices and not increasing them as TZMI indicated would be possible. It does not suggest that Iluka considered its guidance about H2 sales of titanium feedstock to be a gamble. As Mr Robb said, the statement that "[t]ime will tell if that's enough" did not mean that he saw holding prices as a gamble against losing volume. The context was a posited increase in TiO2 prices which Iluka rejected. Iluka's position also confirms that, despite TZMI's views, Iluka did not consider there to be an opportunity to increase prices for its high grade ores at that time. TZMI's views (and Iluka's response) were inconsistent with the notion of a collapsing market for TiO2 products.
314 TZMI's views are also inconsistent with Mr Bonham's case that at all relevant times from 12 April 2012 a reasonably-based forecast of Iluka's expected sales for 2012 was no more than 188kt of rutile and 255kt of synthetic rutile. If TZMI had thought this at any time, it would have said so (compare TZMI's position on zircon from April 2012, discussed above and below). Rather, TZMI believed that Iluka would be able to materially increase prices for its TiO2 products. Mr Bonham's case on TiO2 thus involves characterising TZMI's state of mind as even more unreasonable than that of Iluka at this time. Mr Bonham's case fails to confront the problem that if his case on TiO2 is correct, then the leading market consultant in the industry held an even more optimistic view about the TiO2 market at the time than Iluka did.
315 As to zircon, TZMI's view that it considered Iluka's sales guidance of 400kt could be reduced a "bit more", by 50kt, was public information. TZMI was not suggesting that Iluka's guidance of 400kt was unreasonable. It simply held its own view that 350kt was more reliable. It is difficult to characterise a 50kt variance in views as indicating one view (TZMI's) was reasonable and another view (Iluka's) was unreasonable. Iluka's guidance was 12.5% above what TZMI may be inferred to have considered to be reasonable for zircon at this time. This is inconsistent with Mr Bonham's case that a reasonably-based forecast of Iluka's expected sales for zircon in 2012 had to be in the range of 231kt to 336kt. This range (based on Mr Murray's evidence - discussed below) involves a variance of 105kt or 31% to 45% of the total. Again, Mr Bonham's case fails to confront the problem that if his case on zircon is correct, then the leading market consultant in the industry also held a view at the time that lacked reasonable grounds. Mr Bonham's argument in respect of the views of analysts, that unlike Iluka they did not know about substitution and thrifting or its extent, cannot apply to TZMI given how well informed TZMI were about the industry. As discussed further below, even in respect of the views of analysts, this argument is dubious given that: (a) their reports refer to substitution and thrifting, and (b) the notion that J Capital (Mr Murray discussed below) alone were aware of the extent of substitution and thrifting at the time is inherently implausible.
316 A TZMI report about the TiO2 industry issued on 10 May 2012, reflecting public announcements to that time by pigment producers, included information that: (a) Kronos reports higher sales in Q1 - Kronos commented that it is not seeing any appreciable demand reduction from an increased use of extenders. Kronos plans to keeping running its plants at maximum rates during 2012 to satisfy the expected demand, (b) Huntsman reports higher sales, launches new product - improvement in demand is forecast, mainly in North America and some parts of Asia, but Huntsman remains cautious with its outlook for Europe, (c) DuPont reports strong demand in North America - DuPont commented that volumes were up 10% quarter-on-quarter, showing improvement in all regions in line with seasonal patterns and general economic stabilisation and DuPont indicated it has shifted to lower grade, lower priced feedstocks to reduce the impact of the feedstock price increases, and (d) Tronox announced record Q1 results - Tronox believe that any slack in orders since the fourth quarter of 2011 is largely attributable to temporary factors, namely destocking in China, the efforts of the Chinese government to tame inflation and uncertainty primarily in southern Europe. Tronox continue to expect this period to evolve into more sustained growth as these conditions are resolved.
317 None of this information is reconcilable with Mr Bonham's case about Iluka's TiO2 products.
318 An email exchange between Mr Porter, Mr Tate and Mr Robb on 12 May 2012 about Rio Tinto included Mr Cobb's observation that being the highest priced supplier "wasn't going to bring the greatest security", Mr Cobb also saying Iluka had always recognised this to be so. The evidence is unclear whether this related to zircon or TiO2. In any event, Mr Bonham's point was that "Iluka stood to lose sales and market share to its competitors by reason of its high prices and the absence of binding sales contracts". Again, this is an inaccurate over-simplification. Iluka had gained from shorter-term contracts due to its capacity to increase prices. It had premium grade products which most other suppliers did not.
319 Mr Cobb circulated his April 2012 sales and marketing report on 14 May 2012. This report said:
Zircon
• Customers deliveries improving, but remains lower volumes than 2011
• Increasing supply to China from Kalimantan and other Regions
• Opacifier prices increasing slightly in Europe - still at breakeven or loss
• Potential impact of Indonesian export ban on concentrates from May 2012
• Opacifier and ZOC [zirconium oxy chloride] demand remains subdued globally.
• All warehouses carrying high stocks, with new facility in Malaysia to open in May
TiO2
• Pigment customers report soft start to Q2
• High feedstock and pigment stocks in US and Europe
• All chloride customers looking to defer Q2 tonnage
• Chinese internal pigment prices have fallen on back of lower domestic demand
• Chinese sulphate pigment exports at low prices disrupting western markets
• Large scale Vietnamese ilmenite exports ahead of ban
320 The report said further:
Zircon
The start of Q2, 2012 has triggered the first substantial zircon volumes sold in 2012. However, the level of activity from January to April 2012 is still far lower than 2011 (yoy down 70%). Customers remain cautious and are maintaining lower levels of stock, replenishing just in time, and in smaller quantities than in the past…
In China, customers are still affected by the downturn in construction; however their availability of finance purchases appears to now have improved from Q1. There has been easing of monetary policy following the release of lower GDP growth figures in the first quarter (the worst in 11 quarters). The tight government controls over the housing market remains and is expected to continue for 2012 as they endeavour to drive down prices.
…
Titanium Dioxide Products
It has become increasingly apparent that the Chloride pigment industry is now suffering lower demand than anticipated entering Q2. Q1 demand was better than normal for this winter period in the Northern Hemisphere and there is still time for the paint season to take off in May and June. The major concern is the price differential between Chloride and Sulphate pigment and a corresponding increase in exports of cheap sulphate pigment from China to the west as the major paint manufacturers use it as leave to try to force down chloride pigment price. By contrast demand for Chloride pigment in China is now reported to be minimal.
All Iluka pigment customers have responded by throttling back production rates where possible. If the painting season does not improve in May and June then purchasing of the higher cost chloride feedstock will be minimised to reduce raw material costs. In the case of DuPont they are maximising the use of chloride ilmenite feedstock, including our residual LTC supply, to lower feedstock cost and ratchet down pigment yield while maintaining full production capacity through the plants.
321 This report also recorded that Iluka was offering rebates to some zircon customers in the interests of maintaining the price and avoiding a price and profitability collapse.
322 Around the same time Mr Robb (for his report to the board) was provided by Ms Diamond with the same information as in Mr Cobb's report of 14 May 2012. It is not "bizarre" that the information provided to Mr Robb did not mention substitution and thrifting. The information related only to sales and marketing in April 2012. Accordingly, Mr Bonham's reference to a "conspicuous lack of information included ... on substitution and thrifting" in Mr Robb's report to the board of 14 May 2012 is misplaced. The report was dealing with the market and demand in April 2012 only, as derived from Mr Cobb's report. There was no new information on substitution and thrifting to report.
323 Mr Bonham submitted that, given this information, the best that Iluka could hope for at this time was that TiO2 sales in H2 2012 might match sales in H1 2012. I disagree. While the paint industry was "now" suffering lower demand, Q1 demand for the northern hemisphere was better than usual, and there was "still time for the paint season to take off in May and June". The fact that all "chloride customers [were] looking to defer Q2 tonnage" should not be misunderstood. The customers were not cancelling their proposed orders for 2012 H2. I infer that they were seeking to defer delivery so they would not have to pay for stock they could not immediately use. Lower demand in H2 2012 was contingent on the paint season "not taking off" in May and June 2012. Importantly, Iluka had not yet negotiated its agreements for supply of customers for H2 2012. It would not know the position until it had done so. Given that those negotiations were imminent (or just starting) in mid-May 2012 it would have been odd, to say the least, for Iluka to issue further sales guidance in mid-May 2012. It must also be recalled that Iluka had the recent information from TZMI about the strong position of the pigment market, as well as TZMI's view that Iluka was in a position to increase prices. Mr Bonham's case, that this could all relate to the sulphate pigment market and does not take account of the capacity for cheaper chloride slag to be used in feedstocks, cannot be reconciled with the views of TZMI which, it must be inferred, did not consider Iluka's TiO2 guidance to warrant any comment (in contrast to is zircon guidance). It also cannot be reconciled with the public announcements of the pigment producers which are summarised in the TZMI report of 10 May 2012.
324 An email from Mr Robb of 14 May 2012 does not establish that Mr Robb considered that zircon demand would drop to 1,000kt in 2012. The email refers to Mr Tate's work on inventory histories. The email said that if Mr Tate's "supply/demand work is right, with these inventories" Iluka needed to contemplate a "big lift in resources devoted to creating/capturing new zircon demand" and/or a "short sharp shock to clear inventory (and deter investment in more zircon production)" such as a production shutdown. The email continued, saying:
Note, however, that a forecast of -400kt in Z demand in 2012 (from ~1.4mt to ~1mt) must mean:
1. China's zircon demand more than halving. If the issue is mainly in ceramics, i.e. half of China demand, then that would imply China ceramics-related demand will be zero in 2012. This seems unlikely.
2. Europe, 25% of global demand, going to zero for all of 2012. Again unlikely.
3. However, a combination of the above, plus extreme de-stocking through the chain, is possible.
My conclusion is that we can't know what's really going on without being able to separate out the effects of:
1. regional economic impacts
2. de-stocking
3. thrifting
4. substitution
325 In other words: (a) Mr Tate had done work to identify the zircon inventory of customers (that is, presumably how much zircon they had available), (b) if his inventory work was right, then estimated global demand for zircon in 2012 would go down from 1,400kt to 1,000kt, but (c) Mr Robb considered that possible but unlikely because it pre-supposed that China ceramics-related demand would be zero in 2012 and that Europe, 25% of global demand, would also fall to zero for all of 2012.
326 Contrary to the submissions for Mr Bonham, this email in fact reinforces that Iluka's position that demand would increase in H2 of 2012 was both genuinely held and reasonable in the circumstances. As such, and again contrary to Mr Bonham's submissions, the email did not acknowledge that "a combination of demand issues in China and Europe, plus 'extreme destocking', would explain this drop off in demand". That is a fundamental misreading of the email. As Mr Robb said, he was responding to a hypothesis he found unlikely to be correct. He clearly rejected the proposition that the demand for zircon would remain poor throughout 2012, saying the hypothesised events (zero demand in China, zero demand in Europe and extreme destocking, by which he meant throughout the entire supply chain) were unlikely. He also said that the levels of inventory were not sufficient to fill demand in any event. It is clear that, at this time, Mr Robb did not accept an estimated global zircon demand as low as 1,000kt or anything close to that figure (such as the posited internal "Iluka" view of 1,050kt advocated by Mr Bonham).
327 Further email exchanges around 14 May 2012 show that Iluka was keeping a close eye on its competitors and technological developments. They also disclose that Iluka was seeking new zircon markets given the permanent relative reduction in demand in China from thrifting technologies. Mr Cobb said that "the largest change in demand globally, other than economical factors, is the adoption in China of double charging or double pressing, where the opacifier is only used in a thin top layer of the tile and the main body is Zircon free. This technology will not be dropped whatever the Zircon price and the usage through the whole body has ceased in these applications for ever". Mr Cobb was not saying that overall demand would not increase over time including in 2012. Further, the notion that Mr Cobb had disregarded his own views in his estimate of global zircon demand in 2012 is unrealistic. Mr Cobb's email also makes clear that he remained of the view that Iluka should not sacrifice price for volume, saying that "I am sure if we were foolish enough to drop the price we could secure additional volume as the prices went into free fall".
328 Internal Iluka email exchanges about ilmenite between 14 and 16 May 2012 also do not expose the negative position Mr Bonham posits. The context was ilmenite, not all TiO2 feedstocks. The observation of Ms Diamond on 14 May 2012 that the market was seeing "a weakness enter into [chloride] pigment industry due to lower demand and [chloride] vs [sulphate] price differential (in spite of pigment producers Q1 announcements)" is not indicative of a material collapse of the market. The recipient of the email (Mr Stephen Hay) was also not overly concerned noting (sensibly) that the information would be considered in the review of market conditions proposed for June 2012. He also noted other factors: (a) "so long as demand is there we benefit from producing the higher grade SR products as a priority", (b) "[m]arketing are actively looking at ways to participate in the sulfate space", (c) "[l]ack of ilmenite from Vietnam may result in significant increase in ilmenite prices (if it takes hold)", (d) "Iluka can benefit from participation in, and perhaps some leadership of, the market", and (e) as to zircon, "still slower than expected but some encouraging signs in China and perhaps now even Europe ... But still a very long way to go until we could anticipate stock draw down and reversing production cuts".
329 It is also relevant that Ms Diamond referred to the public announcements of pigment producers. As submitted for Iluka:
Kronos reported that it planned to keep running its plants at maximum rates during 2012 to satisfy the expected demand. Huntsman forecasted improvement in demand in North America and some parts of Asia (but remained cautious with its outlook for Europe). Overall, it expected prices to continue to increase. DuPont, meanwhile, reported that demand in the first quarter was strongest in North America, with demand in Asia stabilising, and, importantly, destocking coming to an end.
330 Tronox announced record results for 2012 Q1, saying that it considered the slack in orders since Q4 2011 was temporary and "what won't change anytime soon is the combination of pigment producers operating near full capacity and global titanium ore demand at or exceeding supply". All of this information suggested a strong TiO2 market for 2012.
331 Iluka was entitled to give these public statements real weight. While it could not take private statements to it at face value because customers wanted to drive down the price, it was entitled to give real weight to customers' public statements about both actual and expected performance. These were statements to the world at large. They were not being made to Iluka in the context of ongoing negotiations about price. The statements of the pigment producers did not accord with the information they had been giving to Iluka, which reinforces Iluka's good sense in considering all of the information and weighting it according to its likely reliability. This common sense is reflected in Mr Cobb's subsequent email of 12 June 2012 about the TZMI TiO2 industry report issued 10 May 2012, where Mr Cobb characterised the report as "a good summation of the prosperity of our pigment customers despite their gloom and doom". Mr Cobb's view also cannot be reconciled with Mr Bonham's proposition that despite the optimism of pigment producers, Iluka would miss out on increased demand in H2 2012 because of it being the highest priced.
332 Contrary to the submissions for Mr Bonham, there is no suggestion in these public statements that pigment producers were referring to the sulphate pigment market only. Of the pigment producers, only Huntsman and Kronos also had sulphate pigment plants. Yet the same positive message was being given by DuPont and Tronox. There was simply no rational reason at the time for Iluka to anticipate that the public statements of its pigment customers were wrong or that, despite all previous dealings between it and its customers, Iluka would not benefit from markedly increased TiO2 sales in 2012 H2.
333 Mr Robb made a presentation to a conference on 16 May 2012 and his slides accompanying this presentation were issued to the ASX. The slides included the full disclaimers included in the 23 February 2012 announcement.
334 As to zircon, the slides said: (a) the zircon market was experiencing soft demand conditions (evidence of demand recovery across markets and Europe remains subdued but customer sand stocks almost exhausted), (b) Iluka has flexed production in line with demand and will hold inventory as needed, (c) prices were holding, (d) major customers were supportive of Iluka's approach (direct customers now holding low inventory levels of opacifier and bulk order interest resuming), (e) tile producers under inventory and margin pressure technology, thrifting, and (f) Iluka remains confident about medium term demand fundamentals.
335 As to TiO2, the slides said: (a) evidence of sustained feedstock cost flow through (next challenge further downstream (e.g. paint manufacturers/retailers) and painting season impact in 2Q/3Q 2012), and (b) chloride vs sulphate margins shifting, dependent on supply position (strong ilmenite prices, new Iluka SR products + more on way = processing + marketing flexibility, and balance between contract flexibility and supply/offtake security).
336 Mr Cobb had been involved in the preparation of this presentation, as had Mr Tate and Mr Porter.
337 Mr Cobb said that the presentation about market conditions reflected his views at the time including that: (a) there was evidence of demand recovery in Iluka's zircon markets, including low zircon sand inventory amongst Iluka's European customers and month-on-month sales volume increases, (b) major customers did not object to Iluka's position with respect to price, and direct customers were holding low levels of opacifier inventory, and (c) Iluka remained confident about medium-term demand fundamentals.
338 Mr Robb said at this time he considered that: (a) zircon markets were fragmented, tended to exhibit growth and new markets could be targeted by Iluka and he considered there was growth potential in emerging economies, (b) even in more depressed markets, customer stocks of zircon were close to if not already exhausted, meaning customers were likely to have a need to replenish stocks in the near term, (c) there had been an uptick in customer interest in bulk orders for zircon, (d) there had been encouraging data in March and April 2012 in relation to Iluka's bid system, which was used by customers to lodge "bids" to get zircon supply, (e) global growth in zircon demand was likely to be led by developing countries, which at that stage were some of the largest consumers of tiles, and (f) China's export of ceramic tiles had increased in March.
339 Mr Robb also considered that in relation to rutile and synthetic rutile, conditions were favourable in respect of the chloride segment of the market that Iluka supplied at the time, and there was the potential for growth in the other feedstock markets.
340 Mr Bonham focused on Mr Cobb's comments in the process of preparing the presentation as supporting his case. Mr Cobb's information was that: (a) while zircon demand was slow in China it had re-commenced, (b) global demand for zircon had reduced by about 200kt over the past 12 months, (c) the low demand for zircon in China was due to low quality tiles in low cost and rural housing which did not use Iluka's premium quality zircon.
341 Mr Cobb's estimated 200kt global demand reduction for zircon does not support a global demand in Mr Cobb's mind of 1,050kt for 2012. Mr Cobb was saying that the 200kt represented his total reduction of zircon demand in 2012 including for the effects of substitution and thrifting. Further, a proportion of this 200kt demand reduction (insofar as it related to substitution and thrifting) had already occurred in 2011, when Iluka achieved record sales of zircon. Global demand in 2011 had been estimated to be 1,469kt in 2011. A 200kt reduction in demand would see global demand in 2012 of 1,269kt which accords with Mr Cobb's evidence that he held the view throughout the first half of 2012 of a global demand for zircon in 2012 of 1,200kt to 1,250kt.
342 Mr Robb's view about Mr Cobb's meaning (that he was referring to the effects of substitution and thrifting only reducing demand by 200kt) is immaterial. Mr Cobb repeatedly made plain his view that his estimate of total global zircon demand in 2012, having regard to all factors including substitution and thrifting, was about 1,200kt to 1,250kt. Mr Bonham submitting that this "was not a realistic estimate having regard to the softened market and all of the information available by that time", does not make it so. Mr Cobb had around 35 years' experience in the mining industry. Amongst other things, between 2004 and 2009, he was the Managing Director and Chief Executive Officer of an ASX listed mineral sands mining company whose products were marketed by Iluka. During this period he worked closely with Iluka. He joined Iluka as Sales and Marketing Manager in 2009. Mr Cobb was well qualified and experienced to perform his role within Iluka including to estimate demand as reliably as possible.
343 Mr Bonham also submitted that Mr Porter's comments in the process of preparation of the presentation were illuminating. However, this involves taking Mr Porter's comments out of context. Mr Porter thought Mr Robb could give details of positive signs in the zircon market (low and depleting inventory in China, drawdown of higher stocks in Europe, relatively close alignment of Hainan Island pricing with Iluka's) without "over egging it", rather than continue the theme of "phasing of demand taking time".
344 Mr Robb responded:
I'm frustrated in that I've no other option than to prevaricate (and be "theoretical and conceptual") because the demand work is in no shape to present.
Also our supply/demand work hasn't got too good a track record, so trotting it out as a "science" is fraught with danger.
345 This also does not support Mr Bonham's case. Mr Robb was not suggesting that the demand work could have been in better shape. He was recognising the complexity of that work (given that the market was global, fragmented and opaque) and that it was not a "science". No doubt this is why Iluka qualified all of its sales volumes information to the public so extensively. Mr Robb was certainly not suggesting that Iluka knew one thing (its sales volumes guidance was unreliable) but was telling the market another (that its sales volume guidance was reliable). As discussed above, the guidance Iluka provided was always heavily qualified and for good reasons given that its markets were global, fragmented, opaque and complex.
346 Mr Bonham submitted that Mr Robb's email disclosed that "Iluka simply did not know what global demand was doing at this time, such that it had no means of determining whether its extant zircon sales forecast had reasonable grounds".
347 This is an inaccurate over-simplification. Iluka had never suggested that its guidance could be relied on as a predictor of future performance and had repeatedly expressly said to the contrary. It had said its guidance was for sophisticated investors to use in modelling. It gave no future price guidance. Mr Bonham's submissions ignore these facts. Even if these facts are ignored, Mr Robb was not suggesting Iluka was simply "in the dark" about demand. One reason it was not "in the dark" was because it could reduce production to match demand. Another was that it had a successful track record leaving aside the global financial crisis in 2009. Yet another reason was that it had long experience in the markets in which it operated. Iluka was also in regular receipt of up to date information from its sales employees in each region. It had a global presence and was aware that market forces differed between regions. In other words, Iluka was in as good a position as it could be to estimate annual demand for its products.
348 Otherwise, and contrary to Mr Bonham's submissions:
(1) it is not apparent that Iluka was predicting in this presentation that global zircon demand in 2012 to be 1,400kt - this involves reading a lot into a simple graph of global zircon consumption over time and in any event he source of the graph is said to be TZMI; and
(2) the presentation gave a clear message that Iluka was in a period of soft demand for zircon - one reason for which was said to be thrifting.
349 In his presentation Mr Robb also made these valid points:
(1) Iluka was operating in different markets so "generalisations in our industry … can be dangerous";
(2) "it is clearly … better to have two horses pulling a margin cart than one";
(3) "[w]e trade globally and we are exposed to the health of the world";
(4) pigment production is capital intensive (unlike zircon use) and security of supply is critical;
(5) "markets can come out of nowhere in our business" and the zircon market was not mature as new demand areas had emerged;
(6) the zircon market had been soft, but positive signs were being seen as stocks are exhausted, prices were holding, interest in bulk orders was returning, and Iluka's bidding website was encouraging which was a good lead indicator of the market trend;
(7) conversely Iluka had seen negatives in terms of customer thrifting and investment in known technology to produce tiles with a lower zircon intensity, particularly in China, but Mr Robb firmly held the view that "square metres win over any efforts to reduce the intensity of zircon in tiles so space wins over time and developing economies are a big part of the story";
(8) Mr Robb was confident about China due to the drive for urbanisation with residential floor space set to double over the next 10 to 15 years and a strategy of constructing buildings with an expected life of only 20 years;
(9) "[t]itanium dioxide market conditions are healthy";
(10) "[f]eedstock buyers are clearly seeking supply security";
(11) "we will grow in a way which enables us to target all of the feedstock markets, not just the chloride segment, where we are traditionally very strong"; and
(12) "we are number one in chloride, that's great, we are good in high-grade, we think we have an enormous opportunity to be strong in sulphate as well".
350 Mr Bonham's criticisms of these messages are misplaced. Iluka's TiO2 sales were not "unhealthy". They were slower than expected to date in 2012, but Iluka was well placed to benefit from increased sales in H2 2012 given its high grade products, secure supply, capacity to adjust production, and to obtain the best possible price.
351 Mr Bonham referred to a Merrill Lynch report covering this presentation showing that the report reflected the presentation but both were at odds with Iluka's internal documents. This is inaccurate. Iluka is not responsible for Merrill Lynch's analysis. Mr Robb had been clear that the zircon market was soft. The focus of his speech was clearly the medium to longer term, not 2012. According, there is no material discrepancy between Mr Robb's presentation and Iluka's internal commentary.
352 Iluka completed its F4+8 forecast on 17 May 2012. It was presented to the board on 22 May 2012. It identified sales in 2012 of 402kt of zircon, 222kt of rutile and 305kt of synthetic rutile, as reflected in the 8 May 2012 updates.
353 Mr Bonham submitted that this was too optimistic and unreasonable, and that:
Mr Robb's evidence was that, while Mr Cobb and other senior managers were "postulating numbers", their work was always "accompanied with health warnings about the difficulty of data gatherings", and that their "work was inconclusive". However, it is fair to assume, as acknowledged by Mr Cobb, that the data recorded in documents like the 1 May 2012 presentation and subsequent drafts contained the best information Iluka had been able to compile as at each successive date. The best available information to Iluka at this time was that global zircon demand in 2012 would be 1,050kt ("mild" substitution impact - adopted as the "base case").
(Footnotes omitted).
354 I do not accept these submissions. Specifically:
(1) Mr Robb's evidence about the inconclusive nature of the work on future zircon demand did not involve a criticism of others within Iluka - I would infer that the nature of the issue made reliable (in the sense of more probable than not) estimates difficult from late 2011 onwards, which explains the significant qualifications Iluka placed on the information it published in this regard;
(2) the 1 May 2012 presentation was prepared to present to a group planning committee - it was not the views of the committee or the leadership team (see above);
(3) Iluka did not act on the basis of an assumed demand in 2012 of 1,050kt or adopt that as its demand estimate (nor, it would be inferred, did TZMI);
(4) Iluka accepted that the 23 February 2012 guidance of 450kt of zircon sales for 2012 had to be reduced as a result of information of the continued soft state of the zircon market (which occurred on 8 May 2012), but it cannot be inferred that it did so on the basis of the modelled global demand in the 1 May 2012 presentation of 1,050kt being accurate and appropriate for adoption. It is far more likely that it acted on the basis of a global demand for zircon in accordance with Mr Cobb's estimated range (1,250kt) which would involve a market share for Iluka of around 32% if its achieved sales of around 400kt in 2012. Mr Cobb's evidence supported this inference in the following exchange:
I showed you before, Mr Cobb, the document from the corporate planning session that identified a mid-mild scenario of 1,050 tonnes for 2012. Looking at this email and recalling that corporate planning document, does that refresh your memory at all as to whether by mid-May 2012 you had become aware of the forecast that is reflected in that corporate planning document that I showed you earlier this 25 afternoon?---No, definitely not. My opinion at this time was that the market was 1,250 to 1,200 and subsequent to you showing me that document, I still believe that the actual - I mean, that was a draft - the actual final corporate plan must have had the outcome of what the forecast was for 2012, and I still think it was higher than 1,050.
355 Taken with the contemporaneous documents, this evidence is compelling. It does not support an inference that Iluka considered global demand for zircon would be 1,050kt in 2012. It supports the inference that Iluka estimated global demand for zircon would be 1,200kt to 1,250kt in 2012, requiring a reduction in Iluka's guidance for zircon sales volumes to around 400kt. This was not unreasonable in all of the circumstances at the time.
356 On 17 May 2012 Mr Cobb and Mr Hudson met with DuPont to discuss terms for H2 2012. DuPont proposed that Iluka was not "understanding how bad the pigment downturn may be", while Iluka said that it was not "being advised by any of the other majors the same degree of severity". DuPont said the current disagreement would not affect the long-term relationship and it would contract its tonnage in H2, but would be stockpiling it. This should be understood as part of a complex negotiation, not a sign of impending catastrophe in the TiO2 market.
357 Mr Bonham then noted that on 17 May 2012 Mr Barry Murphy emailed an updated corporate plan presentation to the leadership team and that on some slides in this presentation the global demand for zircon was 1,200kt and in others the global demand for zircon was 1,050kt. Mr Bonham submitted that the "only reasonable inference that can be drawn is that the 1,200kt figures excluded an allowance for the impact of substitution and thrifting, while the 1,050kt had made allowance for this factor in the amount of 150kt". Mr Bonham said 150kt was a conservative estimate for substitution and thrifting in the circumstances.
358 There are a number of reasons to reject these submissions: (a) the presentation was a draft for discussion purposes with the leadership team and said to be a "preliminary assessment only", and thus could not be inferred to have represented the views of the leadership team, (b) the submission is inconsistent with the clear and cogent evidence of Mr Cobb about his views as to zircon demand, (c) the posited reductions in demand due to modernisation, substitution and thrifting were projected on a cumulative basis until 2014 (150ktpa on a mild scenario and 300ktpa on an extreme scenario), and (d) despite the negative effect of modernisation, substitution and thrifting on demand, demand was posited to grow in 2013 and 2014.
359 The fact that Mr Hugo emailed the leadership team on 19 May 2012 with information about products competing with zircon shows only that Iluka was keeping a close eye on technological developments.
360 Nor is the email from Mr Hudson of 19 May 2012 about a meeting with Tronox all bad news. The email includes that: (a) Q1 2012 was a record for Tronox, but there was market decline and price erosion, (b) Iluka's dilemma was that it "was hearing similar stories (but not from all producers), yet the paint producers were trumpeting increased profits and ability to increase paint price more than the pigment increases they were expecting", and (c) paint producers "had been hoping for an excellent year, and now see it evaporating. I suggested that whilst it may not end up 'excellent', it would still be good. He agreed".
361 In other words, the chloride pigment producers had been expecting another record year in 2012, but it looked like they were going to get merely a good year instead. This is far from the propositions for Mr Bonham about Iluka's TiO2 market in 2012.
362 Mr Bonham also places an unreasonable emphasis on the deferral of shipments. The shipments were not being cancelled. Tronox was trying to defer a shipment for one to two months only. It still wanted to receive the products. In any event, the context was price negotiations for H2 2012 products.
363 Emails about the price difference between chloride and sulphate feedstocks on 20 and 21 May 2012 are of no significance. Mr Robb had asked a question - to what price level will high grade chloride feedstock prices need to drop to restore chloride pigment margins to that of sulphate pigment producers, assuming a sulphate ilmenite price of $350/t? The answers show the complexity of price considerations in this market. They do not suggest anything else about the market other than what was known - the margins for sulphate pigment producers were greater than for chloride pigment producers.
364 Mr Bonham submitted that around this time more reports that "things had taken a turn for the worst in pigment" were received in the form of consistent feedback coming from the majority of Iluka's largest customers and as reflected in CEFIC data. Again, this is over-simplified and inaccurate. Iluka and DuPont were in the middle of complex price negotiations. There was give and take on both sides. DuPont said the pigment world had taken a turn for the worse and they were preparing for a 2012 without growth. This was in the context of an expected record year for 2012 on top of the record 2011 year. No growth in 2012 would still be an equal record year to 2011. DuPont wanted to delay the last H1 shipment. Iluka agreed instead to extend terms (I infer for payment) by 14 days. DuPont then indicated it may need increased tonnage in H1. DuPont also agreed to "take the H2 tonnage if at all possible but couldn't commit 100%". The conclusion was Iluka saying that the "negotiation progress is unacceptable and they [DuPont] need to step up the pace if they want to do a deal - they promised they will do so". This is not representative of a collapse in demand but of tough commercial negotiations on both sides.
365 Further, the information about the CEFIC data for April 2012 merely confirmed Iluka's view that, contrary to the position of TZMI, it was not appropriate to try to raise prices for TiO2 feedstocks at this time. This was because there was an estimated 3 months' supply stockpiled by the end of April 2012. Mr Hudson said this was "scaring everyone". But the context is important. Mr Hudson was not suggesting that Iluka's views about the TiO2 market were wrong. He was saying that Iluka had been right not to adopt TZMI's views about a price increase for TiO2 feedstocks. In any event, the expert evidence indicates that the information Iluka was being given about the CEFIC date by its customers (the data was otherwise confidential to the customers) was confused and confounding. Iluka did not have the raw data. It was being provided with relative information comparing 2012 to the record 2011 year.
366 Ongoing negotiations with customers from around mid-May 2012 also do not reflect the case theory for Mr Bonham. It is apparent that while customers were trying to defer H2 tonnages and were using that threat to get a better deal on price: (a) negotiations with Cristal had only just started and the idea that Iluka should have written off any sales to Cristal at this time is unreasonable, (b) discussions with Tronox were just starting but the indication was Tronox would take its full H2 allocation, and (c) DuPont had locked in its 100kt allocation of SR.
367 Iluka was also continuing to investigate the effects of substitution and thrifting. Mr Cobb said, however, that as at 20 May 2012 and by reference to continuing work by Mr Masbate, the "cross-section of tile manufacturers (particularly in China) that Iluka had managed to obtain some information about in the first half of 2012 was still too narrow to allow Iluka to reliably extrapolate from the data". Mr Cobb considered that the estimate of a reduction in global demand for zircon of 114kt, as posited in Iluka's most up to date zircon demand model at that time, was appropriately reflected in Iluka's F4+8 zircon sales reforecast (which already included a reduction of approximately 115kt of zircon sales as compared to the level of sales actually achieved by Iluka in 2011).
368 A document dated 21 May 2012, an update for the leadership team about the 2012 corporate plan for the period 2013-2017, disclosed a forecast global consumption of zircon for 2012 as 1,200kt (again, inconsistent with Mr Bonham's insistence of Iluka having adopted an internal estimate for 2012 global zircon demand of 1,050kt). This document also said that for substitution and thrifting:
• Quantification complex: data limitations; decomposing cyclical demand losses (Europe, China property confidence, de-stocking) versus structural demand destruction.
369 This document also continued to estimate the total impact of substitution and thrifting as 150kt by 2012 (50kt in 2011 and another 100kt in 2012), which is inconsistent with Mr Bonham's propositions that the estimate of 1,200kt for global demand was excluding substitution and thrifting and that Iluka's estimate of global demand for zircon in 2012 consistently remained 1,050kt. This document also remained a "[d]raft for management discussion purposes - preliminary assessment only". It too contained the routine note that an "expanded investigation of modernisation, substitution and thrifting is on the way".
370 This document also contained the following information about zircon:
• Demand soft both cyclical (Europe, China) and structural (substitution, modernisation and thrifting) forces at play. Decomposing by force complex. European risk to downside. China data is mixed. New end-uses (e.g. chemicals) emerging.
• …
• Limited further supply in 2012 and 2013, except for Indonesia. Grand Cote and Kwale due in 2014 delays possible.
• Iluka currently the 'market balancer' holding price, flexing volume.
• Iluka influential to whether market is balanced or surplus path to be determined based on maximising "($Price - $Unit Cost) * Volume kt" equation over time.
371 Mr Bonham submitted that despite everything Mr Pizzey and Mr Robb were "upbeat" at the annual general meeting on 23 May 2012 and did not mention: (a) thrifting and substitution impacting zircon demand, including it being a structural change, resulting in a permanent shift in the demand curve, and (b) Iluka's projections of a significant reduction in global zircon demand in 2012, nor that there was a risk or likelihood that this decline would disproportionately affect Iluka's zircon sales and market share.
372 In response to these propositions generally: (a) the only relevant issues in this proceeding are whether Iluka's statements as pleaded were likely to be misleading or deceptive and whether it contravened its continuous disclosure obligations, the relevant focus being only volumes of Iluka's sales, not NPAT or any other topic, and (b) there is no basis in the contemporaneous material to reject Mr Robb's view that urbanisation in China would lead to overall increased demand for zircon irrespective of thrifting and substitution.
373 Otherwise:
(1) Mr Pizzey's presentation at the annual general meeting on 23 May 2012 showed that risks remained on the global economic scene and Iluka was not immune from those risks; and
(2) Mr Robb's presentation at the annual general meeting on 23 May 2012 showed that:
(a) Iluka's actions to curtail production of zircon in a period of market softness were right;
(b) Iluka had to deal with continuing global uncertainties creating a shifting landscape;
(c) economic growth, business confidence and technological changes are notoriously difficult to predict with precision;
(d) demand is often more volatile than supply, particularly in global markets such as the mineral sands markets;
(e) Iluka was making technical and other advances in targeting the supply of the sulphate pigment market which it currently did not supply;
(f) Iluka does not disclose sales until its June quarter report, but Q1 revenues reflected the softness of the zircon market and Q1 shipping issues had meant that a substantial part of TiO2 product had not shipped in Q1;
(g) while there was some evidence of improved economic traction in major economies, European demand remained subdued and could deteriorate;
(h) Iluka did not consider that lower zircon prices would result in additional demand and inventory holdings were low seeing bulk order interest resuming; and
(i) the high-grade TiO2 market was undergoing change.
374 On this basis, it could not be said that Mr Pizzey and Mr Robb were "upbeat" about sales volumes in 2012. They were positive about Iluka's medium to longer-term performance, but this is different from 2012 sales. Mr Bonham's criticisms of the presentations are unfounded.
375 Nor is Iluka responsible for the analysis by Goldman Sachs contained in its 21 May 2012 report. The salient point about that analysis is that Goldman Sachs, like Iluka, believed that there was no means to accurately assess the demand impact of thrifting and substitution. The same observations apply to the analysis by Macquarie which modelled Iluka's zircon sales at 350kt for 2012. Mr Bonham submitted that Macquarie "had not appreciated the extent of the problem in the same way as Iluka treats it (as a permanent or structural problem) because Macquarie continued to model sales growth in future years in line with historical compound annual growth rates". This is inaccurate. While Iluka accepted that a degree of thrifting and substitution were permanent, it did not accept that demand for zircon would be permanently reduced. It considered that demand for zircon would increase (including because of urbanisation in China and new markets) after the period of softness.
376 Another point can be made here. It is a forensic curiosity because, ultimately, Mr Bonham's case is to be determined on the evidence as it exists. The curiosity is this. In respect of the zircon market, Mr Bonham's case theory is that demand would be permanently reduced by thrifting and substitution so Iluka's guidance from February 2012 lacked reasonable grounds, and Iluka should have known that and disclosed it by and from 12 April 2012. In respect of the TiO2 market, Mr Bonham's case theory is that demand would be permanently reduced by thrifting and substitution and the growing sulphate pigments market so Iluka's guidance from February 2012 lacked reasonable grounds, and Iluka should have known that and disclosed it by and from 12 April 2012. But circumstances after 2012 are unknown. Mr Bonham's case theories might be right or might be wrong over the medium to longer-term. Iluka's markets may or may not have been permanently adversely affected in the way Mr Bonham posits. What this means is that Mr Bonham's case can only be assessed by reference to the evidence about circumstances in and as expected from 2012.
377 Further, the supply of ilmenite from Kalimantan was not a new issue in May 2012. It was an ongoing issue for Iluka. In a complex and fragmented global market, the idea that this necessarily meant lost market share for Iluka on some irrevocable basis is naïve.
378 Iluka's June quarterly report was scheduled for release on 12 July 2012. Contrary to Mr Bonham's submission, Mr Porter was not warning in his email of 29 May 2012 that this report would have to include sales volumes. Mr Porter was simply saying that he wanted to "ensure that this timing looks OK for you given we will have sales volumes and cash costs included in this disclosure". Mr Cobb emailed back with a query and said he was "hoping to get a months [sic] grace to have some better news on H2 to go with the low H1 Zircon numbers" and "[s]till chasing sales but looks like Zircon will be a shade under 100kt for H1 at this stage, that will set some demanding questions as to how we sell 300kt in H2". Mr Porter noted that the broker average of forecast zircon sales for Iluka in 2012 was now 360kt so a lower outcome would not be a surprise to some. Iluka thus had to decide whether to adjust numbers again or "ignore this garbage and stick to our guns".
379 Mr Bonham noted that Mr Porter sent this exchange to Mr Green who was General Manager of Finance and Risk, so Mr Porter presumably "felt this information posed a serious enough risk that it needed to be flagged with Mr Green". This is mere speculation, and difficult to reconcile with the description of the issue as "garbage". Apart from this it is apparent that:
(1) analysts had not taken Iluka's sales guidance at face value, given their average projection of 360kt for zircon sales in 2012 at this time - akin to the 350kt identified by TZMI as representing its view;
(2) consistently with the reasoning above, it is difficult to characterise one view (Iluka's) involving sales guidance of 400kt of zircon as unreasonable and another (the average of analysts' views) involving a projection of 400kt of zircon sales as reasonable;
(3) on Mr Bonham's case the sales' estimates by analysts as at May 2012 would be unreasonable, in common with TZMI's estimate; and
(4) Dr Unni's evidence (discussed further below) undermines the proposition of Mr Bonham that analysts were taking Iluka's sales guidance at face value. Dr Unni concluded that as of 12 April 2012, 70% of the equity analysts projected Iluka's 2012 zircon sales to be within a band of plus or minus 5% around Iluka's guidance and 80% of the analysts projected Iluka's 2012 zircon sales to be within a band of plus or minus 10% around Iluka's guidance. However, Dr Unni also said:
(a) "… although the level of detail provided in these reports varied with respect to the research on which the analysts based their zircon sales projections, several analysts described relatively extensive research performed to arrive at their projections. For example, the analyst report from Macquarie dated 1 March 2012 includes evidence from survey research of 20 Chinese tile producers underlying the analysis. The analyst report for Credit Suisse dated 12 April 2012 described incorporation of research performed related to Chinese property developers underlying their projections. The equity report from CLSA dated 9 March 2012 described direct discussions with Chinese tile manufacturers";
(b) "… there was no clear consensus among these equity analysts with respect to the level of downward influence the factors described by Mr Murray (discussed below) would have on Chinese zircon demand and Iluka's sales of zircon in China for the remainder of 2012". For example:
on 9 March 2012 the CLSA view was that substitution among Chinese tile producers was not a large concern, and on 21 May 2012 the Goldman Sachs analyst report noted that zircon demand in China had been adversely impacted by substitution, but that "There are no means of quantifying this…";
(c) "… all forecasts for Iluka's Chinese zircon sales that I reviewed in this matter that were available as of 12 April 2012, including Mr Murray's own purportedly 'reasonable' forecast range, reflect the expectation that Iluka's Chinese zircon sales would increase considerably after the first quarter of 2012."; and
(d) "[t]he contemporaneous forecasts of every equity analyst for Iluka that I have reviewed, for worldwide sales of zircon for 2012 during the Relevant Period exceeded Mr Murray's purportedly 'reasonable' forecast range".
380 In other words, the evidence indicates that analysts were undertaking their own work, and until May 2012, the results they were reaching were generally consistent with Iluka's views. By May 2012, the majority of analysts were taking a more conservative view than Iluka about zircon sales, consistent with the publicly stated approach of TZMI from May 2012. Again, and in accordance with the views expressed above about the divergence between the views of Iluka and TZMI about zircon sales evident from May 2012, this does not establish any unreasonableness on the part of Iluka. The variance (40kt to 50kt) is not large and is 10% to 12.5% of the total estimated sales of 400kt on Iluka's part. As noted, given that Mr Murray's range involves a variance of 105kt or 31% to 45% of the total, the conclusion of lack of reasonable grounds on the part of Iluka at this time is unsustainable.
381 Mr Hudson's email on 29 May 2012 about an industry event said that while the industry prefers the premium zircon product it was making do with standard material and the fear was "current slack demand will become the norm". Mr Hudson suggested ways forward on zircon, none of which are easy to understand and all of which disclose that the market was not as straightforward as Mr Bonham assumes. These were:
• Maintain current pricing until level playing field established. We can supply 500 tonne lots to anyone who wants it until that happens. [Estimate of] 3-6 months
• Assuming we want zircon demand to increase above current levels, then
• Move zircon to a level that will reignite ceramic flour/opacifier demand, and deter small start ups
• If we are prepared to produce/sell lower volumes and never see 600k sales again, then demand will recover slowly as China, European economies improve. But we will probably starve in the meantime
• Imperative that we don't hurt our biggest supporters who have bought Q2 to help us
382 A response from Mr Hind of 29 May 2012 suggests he believed a price reduction would re-stimulate demand (which was not the view of Mr Cobb or Mr Robb). Mr Hind referred to purchasing by Endeka who needed the stock. Mr Hind also said:
We dismissed Endeka's prediction back at TZMI that demand would fall 30%, but to date their view is continuing to be substantiated in the market and proving to be more accurate than ours. Interestingly Endeka also believe 2010 is the better basis for demand comparisons and forecasts. They now believe 2011 was just an anomaly influenced by government stimulus spending after the GFC and not true demand.
383 Mr Hind considered that price reductions would deal with the impacts of substitution but not reduced housing and construction activity.
384 Mr Cobb noted in response that discussions had been scheduled for the following week "behind closed doors" about these issues.
385 Mr Bonham submitted that Mr Cobb was trying to shut this discussion down. This is untenable. Mr Cobb was saying that the issues would be discussed on a confidential basis the following week.
386 Mr Bonham submitted that by this time it "was abundantly clear that Iluka had no reasonable prospect of achieving its zircon sales guidance". I disagree. What was becoming apparent was only that Iluka might not achieve its sales guidance for zircon in 2012. It was not clear that it would not do so. Iluka always had the possibility of price reductions available even if it was reluctant to do so. Other circumstances also had to be considered. It was nearly the end of May 2012, so awaiting the full May results was sensible. As also noted, a meeting was scheduled for the first week in June 2012 which would consider demand issues for the balance of 2012. The May results also had to be reported to the board meeting in June 2012 (scheduled for 20 June 2012).
387 An email from Mr Simon Hay on 30 May 2012 about his visit to the Gunagzhou ceramics fair recorded that: (a) Bitossi were running three mills instead of five and substitution was not finished in China. While ceramics plants wanted to use zircon they could not due to the price. Iluka was not listening to customers, (b) another customer said that the global market is bad and she was reducing the price of her products to survive, and (c) other customers had the same story - "conditions are tough, our price is too high and can't buy [from] us". Mr Cobb responded:
Plenty to talk about next week, and not a lot of good news around at the moment other than Kalimantan might slow down dramatically. Shame it didn't happen a month ago before the RBM and Exarro's started to cut prices.
We need to react to the changing circumstances, but on the basis of knowledge if possible so any quotes from competitors would be useful?
388 This response was realistic and reasonable. Mr Cobb was not ruling out recommending price reductions to stimulate demand but wanted to ensure that if he did so any reduction was appropriate in the current circumstances.
389 The idea, inherent within Mr Bonham's case, that Iluka should have dropped everything and raced to revise its sales guidance at this time (even if just for zircon) is unrealistic. Acting reasonably, Iluka had to await the May results. It had to have its meeting in the first week of June 2012. It had to work out for itself if its 400kt sales guidance for zircon, which was only 40kt to 50kt above the recent estimates by TZMI and analysts, needed to be revised, part of which had to involve consideration of price. I do not accept that Iluka was determined never to reduce price if circumstances justified it. It is clear that Iluka preferred to sacrifice volume over price, but the idea that it would never consider price reductions is too extreme and not supported by the evidence which indicates that, at his time, price reductions were being considered by Iluka management.
390 Ms Diamond emailed the May results to Mr Green and Mr Cobb on 31 May 2012. All sales volumes were below forecasts for the month.