Iluka and government agree to fund $1.7bn rare earths refinery

Iluka Resources and the federal government have come to a funding agreement which will see the construction of a rare earths refinery at Iluka’s mine at Eneabba in Western Australia, a key part of the government’s critical minerals and Future Made in Australia plans.

Following a positive outcome to the funding discussions on Friday, both the government and Iluka will tip in additional funding for the refinery, which will process Iluka’s one million tonne tailings stockpile as well as rare earths ores from third party miners.

The tailings from earlier mineral sands processing are rich in light and heavy rare earths, essential inputs to defence systems, electric and hybrid vehicles, robotics, renewable energy, consumer, industrial and agricultural applications.

Originally the recipient of a government $1.25 billion non-recourse loan under the Critical Minerals Facility, a funding gap emerged requiring additional financing support to deliver the Eneabba rare earths refinery.

Iluka’s original contribution to the partnership included the company’s unique rare earths stockpile and $200 million of cash equity.

Iluka concluded front-end engineering and design in December 2023 and announced an increase in Eneabba’s expected capital cost to $1.7-1.8 billion.

Iluka Managing Director Tom O’Leary told investors: “We expect the Eneabba refinery to deliver substantial, sustainable value over several decades – that is why Iluka is investing significant shareholder funds in this opportunity.

“This is a strategic infrastructure asset that puts Iluka and Australia at the forefront of global electrification, the creation of new and resilient critical minerals supply chains, and the establishment of a rare earths industry that is genuinely independent.

“Iluka’s partnership with the Australian Government encompasses key contributions from both parties, an appropriate sharing of risk and the alignment of commercial and policy objectives.”

Now to fire up construction of the Eneabba refinery, the Australian government will contribute an additional $400 million, on terms consistent with the original $1.25 billion non-recourse loan.

Iluka will contribute an additional $214 million cash equity.

In addition, Iluka and the government have agreed to establish a $150 million cost overrun facility, which would be contributed on a 50/50 basis.

O’Leary said: “With the capital structure for Eneabba now confirmed, we remain focused on efficient construction of the refinery, and on realising the operational performance, pricing outcomes and longevity that will collectively drive returns from our rare earths business.”

The refinery is seen as globally important – especially given new export restrictions placed on rare earth metals by China – as well as achieving policy objectives relating to supply chain resilience, domestic value addition and refining, and facilitating an Australian rare earths industry.

The additional funding is subject to securing offtake agreements satisfactory to the government and delivering positive outcomes in line with the Community Benefits Principles under the Government’s Future Made in Australia agenda.

O’Leary said: “I thank the Australian Government for its continued support for what is a globally important critical minerals development and look forward to formalising our agreement through detailed documentation.”

Key features of the Eneabba refinery comprise its production of separated light and heavy rare earth oxides at a single domestic facility and its capability to process feedstock from both Iluka’s mines and from third parties, thereby catalysing an Australian rare earths industry.

Further reading:
Critical mineral industry gets a boost with new funding

Image: Iluka Resources/proposed Eneabba rare earths refinery