Australia to Provide More Funds to Iluka Resources

The Australian Government has agreed to provide $257.2 million as additional financing support to Iluka Resources to develop the Eneabba rare earths refinery in Western Australia as the costs increased in the last two years.

The additional funding is on terms consistent with the original $800 million non-recourse loan provided by the government and Iluka will contribute an additional $137.61 million cash equity, Iluka said in a notice to Australian Securities Exchange (ASX) on Friday.

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

Iluka continues to engage actively with potential offtake counterparties and is focused on securing commercially-attractive supply agreements for the benefit of all stakeholders of the Eneabba refinery. This additional funding can be drawn only once the original $930 million of funding agreements is fully drawn.

Cost overrun

In addition, Iluka and the Australian Government have agreed to establish a $96.45 million cost overrun facility, which would be contributed on a 50/50 basis. Iluka has provided a parent company guarantee for the Australian Government’s share of the cost overrun facility,

It may be recalled that Iluka’s Board approved the development of the $770 million Eneabba rare earths refinery in April 2022 following the establishment of a strategic partnership between Iluka and the Australian Government.

Iluka’s contribution to the partnership included the company’s unique rare earths stockpile and $128.61 million of cash equity. The Australian Government’s contribution was a $800 million non-recourse loan via the Critical Minerals Facility administered by Export Finance Australia (EFA).

Capital Cost

Iluka concluded front-end engineering and design (FEED) in December 2023 and announced an increase in Eneabba’s expected capital cost between $1.09 billion and $1.16 billion. This resulted in a funding gap, the resolution of which Iluka and the Australian Government have been discussing throughout 2024.

Substantial Returns

Iluka Resources Managing Director and CEO Tom O’Leary confident that the Eneabba refinery to deliver substantial, sustainable value over several decades and hence Iluka has been 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, he said.

According to him, Iluka’s partnership with the Australian Government encompassed key contributions from both parties, an appropriate sharing of risk and the alignment of commercial and policy objectives. 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.

“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,” he added.