Iluka Resources' major assault on rare earth sector

Iluka Resources (ASX: ILU) was trading up 7.29% to a record high at the open after the mineral sands company revealed that a final financial investment decision (FID) has been made to proceed with construction of its rare earths refinery located at Eneabba in WA.

Today’s decision follows completion of two notable milestones, including the feasibility study, demonstrating solid economics and significant potential for growth; and an agreement of a risk sharing arrangement with the Australian government.

New WA refinery

With the aid of a $1bn low-cost loan from the federal government, plus $200m in company cash, Iluka will construct a $1.2bn fully integrated refinery for the production of separated rare earth oxides at Eneabba, aka Phase 3.

Phase 3 is expected to process rare earth feedstocks sourced from both Iluka’s portfolio and from a range of potential third-party concentrate suppliers, with first production due in 2025.

Best estimates suggest the plant will produce around 17,500 tonnes rare earth oxides annually.

Iluka plans to establish a separate subsidiary to build and manage the refinery, with the government loan operating as a non-recourse to its own balance sheet.

Refinery overview

Regarded as the world’s highest-grade rare earths operation, Eneabba currently includes Iluka’s stockpile of the rare earth-bearing minerals monazite and xenotime, as well as the company’s phase one screening and phase two concentration plant.

Iluka’s refinery will produce the high value rare earth oxides neodymium, praseodymium, dysprosium and terbium, critical inputs for numerous industries and technologies including EV vehicles.

Inflection point

Managing Director Tom O’Leary believes the phase 3 development represents a defining opportunity for Iluka and an order of magnitude evolution for value addition to Australia’s rare earth resources.

“For several years, Iluka has been progressing its diversification into rare earths based on the company’s assets at Eneabba in WA and Wimmera in Western Victoria,” O’Leary noted.

“Since 2019 we have adapted, accelerated and amplified these plans in the context of key external developments, notably the continued transition towards the electrification of the global economy and the increasing policy priority assigned to critical minerals and their supply chains by the Australian Government.”

Iluka Resources share price snapshot over 12 months.