Iluka Resources (ASX:ILU) has announced the successful conclusion of funding discussions with the Australian Government to support its $1.8bn 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 earths market.
Funding and project economics
The refinery’s development will be supported by a $1.65bn non-recourse loan from the Australian Government. This includes an original $1.25bn announced in 2022, and an additional $400m announced Friday. This funding complements Iluka’s $214m cash equity contribution. The refinery is expected to generate a net present value of $1.7bn to $3.4bn, depending on feedstock scenarios, and achieve equity internal rates of return of up to 51%.
The project aligns with the government’s Future Made in Australia agenda, which aims to enhance sovereign capability 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) annually. These rare earths are critical for electric vehicles, renewable energy, and defence technologies.
Iluka Managing Director Tom O’Leary stated, “The Eneabba refinery is not only a transformative project for Iluka but also a critical infrastructure asset for Australia’s future in global electrification and supply chain resilience.”
Construction is expected to be completed in 2027, with the refinery operating for up to 35 years. Feedstock will initially come from Iluka’s Eneabba stockpile, Balranald, and Wimmera developments, with potential for third-party agreements.
Market reaction
Despite the positive news, shares in Iluka closed 10.04% lower at $4.93 on Friday on the back of a note from Morgan Stanley.
“Although a good outcome on financing, the rates of return for Eneabba refinery remain in question given the commodity prices used,” said Morgan Stanley. The project’s net-profit value is “likely to be negative on current spot prices.”