Iluka Resources has pledged to use surplus funds for increased dividend payments and organic growth after delivering a record profit on the back of higher sales volumes and prices.
The mineral sands miner on Thursday posted a net profit for calendar 2011 of $541.8 million, up 15-fold from $36.1 million in 2010.
Managing director David Robb said it was the highest profit in the miner's history.
Iluka's shares fell 57 cents, or 3.27 per cent, to $16.86 after the company flagged a continuation of softness in zircon demand from China over the short term.
The company said zircon sales were strong in the first nine months of calendar 2011 but weakened in the fourth quarter.
It blamed global economic conditions for denting customer confidence and the ability to obtain credit, and China's move to quell inflation.
"We think monthly and quarterly fluctuations need to be seen in the context of an overall trend and not viewed in isolation," Mr Robb told a teleconference.
The miner lowered its 2011/12 zircon production guidance from about 550,000 tonnes to 500,000 tonnes and said sales volumes could be about 10 per cent lower than that.
Morningstar analyst Mathew Hodge said investors were on Thursday taking a very short term view of Iluka and needn't worry because the miner had demonstrated that it would curb supply to defend pricing when necessary.
Mr Hodge said this was part of the strength of the business, which had transformed itself in recent years through clever marketing, shorter term pricing and mining new, better deposits.
Iluka controlled about one third of the global supply of zircon, which was used in ceramic tiles, so it had considerable influence on prices for the commodity, Mr Hodge said.
Mr Robb said the company planned to hold back product as required in the short term, while the medium term outlook for Chinese demand for zircon was favourable.
Iluka also had the potential to increase zircon and rutile production in response to demand growth.
"The world is going to need more mineral sands products and we have the capability to supply them," Mr Robb said.
He also said the company, with $589.6 million free cashflow at the end of December, sought to increase distributions to shareholders and would pursue logical growth opportunities.
The company would likely chase organic growth in its own backyard rather than mergers and acquisitions, Mr Robb said.
"We carefully assessed our internal options versus anything we saw eternally and came to the conclusion that the internal options were not only lower risk, they were better returns," he said.
The $40 million re-start of its Eneabba operations in Western Australia was an example, delivering a triple-digit internal rate of return, he said.
"They have shown super discipline getting a return on capital investment," Mr Hodge said.
Iluka declared a fully-franked final dividend of 55 cents a share, compared to eight cents for the previous year.
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