Image credit: Iluka resources (available on http://www.iluka.com)
Australia will grant an additional A$400 million ($257.20 million) loan to Iluka Resources (ILU.AX), opens new tab to develop its rare earths refinery in Western Australia, which will also see the critical minerals miner shell out more money than committed.
Iluka on Friday said the federal government is granting the additional loan on top of the A$1.25 billion loan offered in 2022. The miner will have to cough up an extra A$214 million in cash equity on top of the A$200 million cash equity and stockpile already earmarked for the project.
Eneabba, set to be Australia’s first fully integrated rare earths refinery, is estimated to cost between A$1.7 billion ($1.09 billion) and A$1.8 billion, a sharp jump from the previous estimate of A$1.2 billion.
Analysts at Sandstone Insights raised concerns over Iluka’s high upfront funding and its net debt which they forecast will peak at just over A$1 billion in fiscal year 2027.
As of June 30, Iluka had net cash of A$154.2 million, opens new tab, less than half of what it had a year ago.
“The revised deal with the Australian government for the Eneabba rare earth refinery is less favourable than ILU would have desired,” Sandstone Insights analysts said.
After the announcement, shares of the miner plunged as much as 15% to A$4.660 – their lowest level since early October 2020 – making them the top loser in the ASX200 benchmark index (.AXJO), opens new tab.
The refinery is part of a push by the government to develop new sources of critical minerals, including rare earths, to diversify the supply chain away from top producer China.
The new funding is subject to the company securing offtake deals for the refinery and can only be used after the original A$1.45 billion funding is fully drawn, Iluka said.
($1 = 1.5552 Australian dollars)
