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Critical minerals producer Iluka Resource Ltd (ASX:ILU) has reached an agreement with the Federal government which will see the latter provide $400 million for development of the Eneabba rare earths refinery in Western Australia.
This follows an original loan of $1.25 billion which was approved by the government in April 2022 after it entered a strategic partnership with Iluka for development of the facility, with this funding being offered through the Critical Minerals Facility administered by Export Finance Australia (EFA).
To this partnership, Iluka offered a contribution of its rare earths stockpile and $200 million of cash equity.
But information yielded from the company’s front-end engineering and design at the end of 2023 showed an increase in expected capital cost to $1.7 to 1.8 billion, resulting in a funding gap.
The latter has been the subject of discussions throughout 2024.
According to the recent agreement, Iluka will contribute $214 million more in cash equity to complement the government’s offer of $400 million.
The two parties have also agreed to set up a $150 million cost overrun facility, which would be contributed on a 50/50 basis.
Managing director and CEO Tom O’Leary said the additional funding was a necessary step to ensure the success of this $1.2 billion project.
“We expect the Eneabba refinery to deliver substantial, sustainable value over several decades – that is why Iluka is investing significant shareholder funds in this opportunity,” he said.
“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.”
Eneabba is expected to be a multi-decade facility, processing not only monazite produced from its project of the same name, but also potentially feed stock from the Wimmera project in Victoria, and the Balranald project in New South Wales.
Iluka has been trading at $5.48.
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