Canberra’s $1.25 billion backing for rare earths production

By Peter Roberts

The federal government has made an unprecedented intervention in private business funding with the approval of a $1.25 billion loan through the Critical Minerals Facility to Australian company Iluka Resources.

The massive loan – picking winners on a grand scale – will fund the development of Australis’s first integrated rare earths refinery at Iluka’s Eneabba minerals processing operation in Western Australia.

The refinery will produce separated rare earth oxide products – Praseodymium, Dysprosium, Neodymium and Terbium – which are used in permanent magnets in a wide range of technologies, including electric vehicles, sustainable energy, advanced electronics, medical and defence applications.

The Eneabba Refinery Project will capture more value on-shore from critical minerals, strengthen Australia’s position as a trusted supplier of critical minerals, and create regional jobs crucial for the new energy economy, according to a government announcement issued late on Monday.

Prime Minister Scott Morrison said: “Australia has the best resource industry in the world and we have an unrivalled competitive-edge when it comes to being a reliable, sustainable provider of critical minerals and rare earths.

“Our support for this project will capitalise on our advantages, helping to strengthen Australia’s critical minerals supply chain while also creating huge job and economic opportunities for Australians for generations to come.”

The United States and allies such as Australia have been spurred into action by the Covid-19 pandemic which showed the fragility of global supply chains for critical minerals – China produces 80 per cent of all rare earths.

They have also been jolted by Russia’s invasion of Ukraine which has showed the unreliability of dictatorships such as Putin-dominated Russia and communist party dominated China.

However no-one predicted the coalition government would make such a massive bet with taxpayers dollars on a single company.

Iluka has been processing massive tailings accumulated at Eneabba, with the refinery a third stage proposal to further process Iluka ores.

To be developed is infrastructure including roasting, leaching, purification, solvent extraction and product finishing with a total rare earth capacity of 17,500 tonnes a year.

Iluka told investors that the agreement with Canberra was a ‘risk-sharing’ one.

Iluka will contribute cash equity of $200 million, a $1.27 billion equity-like contribution of the ores contained in the Eneabba stockpile and funds spent to date of $70 million.

Commonwealth funding is via a $1.05 billion non-recourse loan under the critical minerals facility plus $200 million cost overrun facility if required.

Interest will be three per cent over a period of up to 16 years.

Iluka CEO Tom O’Leary said: “Eneabba Phase 3 represents a defining opportunity for Iluka and an order of magnitude evolution for value addition to Australia’s rare earths resources.

“…Rare earths are among the key building blocks of an electrified economy and our final investment decision for Phase 3 will see Eneabba become a strategic hub for the downstream processing of Australia’s rare earths resources.”

Minister for resources Keith Pitt said the refinery was also designed to process concentrate from many other deposits across Australia, making it a natural hub and reducing the capital required to bring other projects online.

The loan will be administered by Export Finance Australia and is the third project under the Government’s Critical Minerals Facility to be announced.

Rare earths elements are more abundant than their name suggests but extracting, processing and refining the metals poses a range of technical, political and #environmental issues.

Picture: Iluka Resources/Eneabba

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