Iluka Resources (ASX:ILU) announced the successful conclusion of financing negotiations with the Australian government to support its $1.8 billion Eneabba rare earths refinery in Western Australia.
The refinery is designed to process both light and heavy rare earth oxides, positioning Iluka as a key player in the global rare earth market.
Financing and project economics
The refinery’s development will be supported by a $1.65 billion non-recourse loan from the Australian Government. This includes an original amount of $1.25 billion announced in 2022 and another $400 million announced on Friday. This financing complements Iluka’s $214 million cash contribution. The refinery is expected to generate a net present value of between $1.7 billion and $3.4 billion, depending on commodity scenarios, and achieve internal equity rates of return of up to 51%.
The project aligns with the government’s Future Made in Australia agenda, which aims to enhance sovereign capabilities and diversify critical mineral supply chains.
The refinery will produce up to 5,500 tonnes of neodymium-praseodymium (NdPr) and 750 tonnes of dysprosium-terbium (DyTb) per year. These rare earths are critical for electric vehicles, renewable energy and defense technologies.
Iluka CEO Tom O’Leary said: “The Eneabba refinery is not only a transformational project for Iluka, but also a critical infrastructure asset for Australia’s future in global electrification and community resilience. supply chain”.
Construction is expected to be completed in 2027, with the refinery operating for up to 35 years. Raw materials will initially come from Iluka Eneabba, Balranald and Wimmera stocks, with potential third party arrangements.
Market reaction
Despite the positive news, Iluka shares closed 10.04% lower at $4.93 on Friday, following a note from Morgan Stanley.
“Despite the good outcome on the financing, rates of return at the Eneabba refinery remain in question given the prices of the raw materials used,” Morgan Stanley said. The project’s net profit value “is likely to be negative relative to current spot prices.”