Shares in Mineral sands miner Iluka hit all-time highs yesterday in the wake of the news that it plans to spend up to $1.2 billion at its Eneabba operation north of Perth to build a rare earth oxide refinery.
The investment, which will be co-financed by the federal government, will allow Iluka to move up the value chain from exporting rare earth ore concentrates to separated rare earth oxides that are the final stage before metal is produced.
The refinery will be built under a risk-sharing arrangement with the federal government that will provide $1.05 billion non-recourse loan from its $2 billion Critical Minerals Facility.
The plant will have a total rare earth oxide capacity of 17.5 thousand tonnes a year, will employ 300 people in construction (due to start in the current June quarter) and employ 270 people when operational from 2025.
Total cost is put in the range of $1 billion to $1.2 billion, according to Iluka’s statement on Monday.
The news saw Iluka shares hit a record high of $12.50 in trading and end the day up 6% at $12.22, also an all-time closing high.
In a statement to the ASX on Monday, Iluka said it had pressed the go button on the refinery at Eneabba in WA after a feasibility study and agreement of a “risk sharing agreement with the Australian government”.
The project, when completed, will handle are earths from Iluka’s beach sanding mining (and its Wimmera operations) as well as product from other rare earths mining operations in Australia.
At the moment, Lynas Corp is the major rare earths miner in Australia as well as processor (and the largest in the world outside China).
Iluka said that agreement includes a “non-recourse loan under the Australian Government’s $2 billion Critical Minerals Facility, administered by Export Finance Australia (EFA).”
The project is planned to build and deliver a fully integrated refinery for the production of separated rare earth oxides at Eneabba, Western Australia.
“The refinery will be capable of processing rare earth feedstocks sourced from both Iluka’s portfolio and from a range of potential third party concentrate suppliers.
“Iluka’s close collaboration with the Australian Government reflects the alignment of the company’s commercial objectives for its rare earths business with the Commonwealth’s Critical Minerals Strategy,” Iluka said in Monday’s ASX statement.
The refinery will produce the high value rare earth oxides neodymium, praseodymium, dysprosium and terbium which Iluka says “are critical inputs across a range of industries and technologies including electric vehicles, sustainable energy, advanced electronics, medical and defence applications.
“Eneabba is the highest grade rare earths operation globally. It currently consists of Iluka’s stockpile of the rare earth bearing minerals monazite and xenotime, as well as the company’s Phase 1 (screening) and Phase 2 (concentrating) plant.
“Phase 3 will build on this existing operation to deliver a significant downstream infrastructure asset comprising roasting, leaching, purification, solvent extraction and product finishing. The refinery will be fed initially from the Eneabba stockpile. Potential future sources of feedstock include Iluka’s Wimmera and other deposits and a range of third parties.”
Iluka says the construction and commissioning of plant will be funded by it and the Australian Government. Iluka will contribute cash equity of $200 million (provided on a 1:3 ratio basis with initial Critical Minerals Facility loan drawdowns); a $1.270 billion “equity-like contribution of the Eneabba stockpile; and funds deployed of $50 million for Phase 1 and Phase 2 plant and $20 million for the Phase 3 feasibility study.”
“Commonwealth funding is via a $1,050 million non-recourse loan provided to RefineryCo under the Critical Minerals Facility, administered by EFA, plus a $200 million cost overrun facility if required.”
Iluka says the loan is non-resourced to it. It will help finance the remaking of the company in the next three years.
…………
Meanwhile it wasn’t just Iluka and its rare earths news that grabbed attention yesterday.
The more established player Lynas also saw its shares hit an all-time high of $11.59 yesterday as the Iluka news saw rare earths move to the forefront of investor thinking – at least for the session.
A bullish report on a rival company from a broker also helped buoy the shares which closed up 2.7% at $11.39 which – like Iluka – was also a record close.
UBS hosted a conference call with Lynas rival MP Materials which highlighted the “clear lack of supply to meet the expected lift in demand”.
The big source of demand will continue to be electric vehicles with estimates that the average vehicle will consumer 2 to 3 kilos of rare earth elements Neodymium and Praseodymium (NdPr). Wind farms are also big consumers.
