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Iluka Resources is building Australia’s first fully integrated rare earths refinery

Iluka Resources Limited (ASX: ILU) (“Iluka”) is an Australian critical metals producer, specializing in mineral sand mining and processing. Iluka is the world’s largest producer of zircon, a major producer of high grade titanium feedstocks rutile and synthetic rutile, and is set to become a significant global supplier of refined rare earths from 2025.

Iluka’s core business is the mining and processing of mineral sands to produce zircon and titanium feedstocks rutile and synthetic rutile

Source: Iluka Resources company presentation

The Eneabba rare earth oxide planned refinery

Iluka plans to build one of only a few rare earth oxide refineries globally, at Eneabba in Western Australia. This is occurring in a strategic partnership with the Australian Government which has provided Iluka with a A$1.25 billion non-recourse loan to construct the refinery.

Commissioning of the Eneabba Refinery is scheduled for 2025. The Eneabba Refinery will produce separated neodymium, praseodymium, dysprosium and terbium.

The Eneabba Refinery will be fed by Iluka’s internal feedstocks including their unique rare earths stockpile at Eneabba, Wimmera development in Western Victoria and Balranald development in New South Wales, Australia.

A summary of Iluka’s Australian operations including the planned Eneabba Refinery which will produce separated neodymium, praseodymium, dysprosium and terbium

Source: Iluka Resources company presentation

Eneabba Refinery Project update

Iluka already has a stockpile of ~1 million tonnes of high grade rare earth concentrate, readily available at surface at Eneabba.

The Eneabba Refinery feedstock operations continue to progress. Wimmera has completed a PFS (DFS underway), and Balranald has completed a DFS and taken a final investment decision.

The Eneabba Refinery has been approved and bulk earthworks continue with site preparation.

Once finished and ramped the Eneabba Refinery will produce separated rare earth oxides essential for global electrification, including ~4ktpa Nd+Pr and up to 0.75ktpa Dy+Tb. Once production is ramped the rare earth oxides are expected to potentially produce revenues slightly in excess of Iluka’s current mineral sands products revenues (see chart on page 19).

Schematic of the Eneabba Refinery once complete in 2025

Source: Iluka Resources company presentation

The Eneabba Refinery will support junior rare earths miners as they can supply feedstock for the refinery

Iluka’s Managing Director & CEO, Tom O’Leary, states:

In strategic partnership with the Australian Government, Iluka is catalysing the development of Australia’s rare earths industry by facilitating other emerging Australian mining companies into production, with Iluka as their customer, and with value addition taking place domestically. In October last year, Iluka concluded an agreement with Northern Minerals – just such an emerging rare earths company – for the future supply of concentrate from its planned rare earths mine at Browns Range in the Eastern Kimberley…….

Closing remarks

Iluka Resources is already a giant in the business of mineral sands mining and processing to produce zircon and titanium feedstocks rutile and synthetic rutile.

Even more exciting is their plans to build a globally significant rare earths integrated refinery at Eneabba in Western Australia. Once completed in 2025, the refinery will ramp up to produce key light and heavy rare earth oxides and provide the world with an alternative to the current Chinese dominated supply chain.

Well done Iluka!

Iluka Resources has net cash of A$431 million (as at 31 March 2023), trades on a PE of 9.4, and has a market cap of A$4.917 billion.




Iluka Resources looks to join exclusive club of rare earths producers

Iluka Resources Limited, (ASX: ILU) an Australian mineral sands company, is poised to add rare earth elements to its portfolio of products. The company’s main products are zircon, titanium, plus iron and carbon materials from its processing plants in Australia. It also has recently announced the de-merger of its Sierra Leone company, Sierra Rutile Holdings Limited, to end up with two ASX listed companies.

The plan announced by Iluka is to start concentrating monazite and xenotime in the second half of this year from its mineral sands operation in Western Australia. Cracking and leaching will begin next year followed by separation to produce rare earth oxides in 2024 at Eneabba, Western Australia, which is a 3 hour’s drive north of Perth. According to public company information, the planned output is 17,500 tons per year of Total Rare Earth Oxides (TREO). They note the plant will have a full capacity of 23,000 TPY of TREO with all circuits fully utilized. It is reasonable to assume that they are looking for additional monazite to fill their plant as the capacity is more than they can produce themselves.

Based on the feed rate of 17,500 TPY TREO Iluka expects to produce 4,000 TPY of Nd/Pr plus 500 TPY of Dy/Tb. Typically, Dy:Tb ratio varies from 2:1 to 5:1. At today’s pricing of $135/kg USD for Nd/Pr oxide, Dy oxide at $362/kg USD, and Tb4O7 at $2.056/kg USD, Iluka’s annual revenue could be in the range of US$1 billion.

The projected capital costs are AU$170-200 million for the cracking and leaching, and AU$320-390 million for the separation and finishing. Additional costs include plant and infrastructure AU$110-140 million plus indirect costs, contingency, commissioning and miscellaneous costs of AU$400-470 million for a total of AU$1-1.2 billion. According to the company, there will be support from the Australian government in the form of a loan from the government’s Critical Minerals Facility fund and a risk-sharing agreement that would include non-recourse debt, royalty payments to Iluka, and flexibility in repayment schedules.  This is what is necessary to get these projects off the ground – government support and vision to see that risk sharing is very important.

Raising this amount of capital in the markets today is a challenge and also very dilutive as their current market cap is AU$3.8 billion.  An advantage Iluka has over many other planned entrants into the rare earth space is their existing cash flow from current operations, as it will take time to generate revenues from this operation after construction begins this year and until the first output is expected to be seen in 2025.

Source: Iluka Company presentation, April 4, 2022

Based on using their existing stockpile at Eneabba, Iluka could produce 12,400 TPY TREO with an operating cost of AU$13/kg or about US$10/kg which is competitive with Chinese costs. I am assuming they put no value on the feed material as it is in a stockpile.  They have not included any transfer costs from other sources in their expanded production estimates with other sources of feed. The stockpile feed would produce 2,700 TPY of Nd/Pr or about half of the capacity of 5,500 TPY of Nd/Pr. This stockpile would be exhausted in 9 years, so they are actively looking for other sources to fill the plant.

One question that is not clear is whether they will take a Molycorp plant design approach or the Lynas approach.  Molycorp originally designed a single train 20,000 TPY TREO capacity. Lynas built four 5,500 TPY TREO trains so that if supply or demand changed, or there was a problem in one train, they did not lose all their production.  This came to light over the COVID era when demand dropped.  This is a major consideration of any new plant design as economies of scale are limited or offset by potential operational problems.

Overall this may well be one of the players to cross the finish line in the race for more production of rare earths outside China.