Australia has agreed to provide an additional A$400 million ($257.2 million) loan to Iluka Resources to support the development of its rare earths refinery in Western Australia. This funding boost is on top of the A$1.25 billion loan previously offered in 2022. However, Iluka will also need to contribute an additional A$214 million in cash equity, on top of the A$200 million in cash equity and stockpiled materials already allocated for the project.
The Eneabba refinery, which is set to become Australia’s first fully integrated rare earths facility, is now estimated to cost between A$1.7 billion ($1.09 billion) and A$1.8 billion. This represents a significant increase from the earlier projected cost of A$1.2 billion.
Analysts at Sandstone Insights have raised concerns about the hefty upfront costs associated with the project, as well as Iluka’s rising net debt, which they expect to peak at over A$1 billion by fiscal year 2027. As of June 30, Iluka reported net cash of A$154.2 million, less than half of what it held a year earlier.
The analysts also noted that the revised terms of the deal with the Australian government for the Eneabba refinery are less favorable than Iluka might have hoped. In response to the announcement, Iluka’s shares dropped as much as 15%, reaching A$4.660—its lowest level since early October 2020—and making it the biggest loser in the ASX200 index.
The refinery is a key part of Australia’s strategy to develop alternative sources of critical minerals, such as rare earths, in a bid to reduce dependence on China, the dominant global producer. However, the new funding will only be accessible once Iluka has secured offtake agreements for the refinery, and only after the initial A$1.45 billion in funding is fully drawn.
