Iluka Shares Rise 8% as Mineral Sands Miner Hits Rare Earths Milestones and Eneabba Refinery Reaches 65%

Iluka Resources Ltd shares rose more than 8% on Wednesday. The mineral sands producer reported progress on its rare earths strategy, including its first commercial-scale production of heavy rare earth metals and continued construction of its flagship refinery.

Iluka shares gained 43 Australian cents, or 8.18%, to close at A$5.69, near the session high of A$5.70. About 4.2 million shares changed hands, and the company's market value rose to about A$2.5 billion.

The stock is still down about 16% over the past year.

Iluka was among the top gainers on the S&P/ASX 200, which ended flat at 8,847.3.

Quarterly update

In its September-quarter review released Wednesday, Iluka reported:

Mineral sands revenue of A$219 million, down 6.9% from a year earlier Production of 76,000 tonnes of zircon, rutile and synthetic rutile Sales of 115,000 tonnes, including 77,000 tonnes of zircon A weighted average realized zircon price of US$1,685 a tonne Mineral sands net debt of A$249 million, down from A$273 million at June 30

The company said it expects higher zircon prices in the fourth quarter, as delayed sales are realized at improved contract rates.

Rare earths progress

Investors focused mainly on Iluka's rare earths business, a key part of its long-term growth plan.

The company said its Eneabba rare earths refinery in Western Australia was 65% complete and remained on track within its budget of A$1.7 billion to A$1.8 billion. Iluka has spent A$1.237 billion on the project so far.

Iluka also said it had achieved initial commercial-scale production of dysprosium and terbium metals. These heavy rare earths are used in high-performance magnets for electric vehicles, wind turbines and defense equipment. The company has also bought metallization equipment to convert rare earth oxides into metals.

Strategic importance

Rare earths have become a major focus for Western governments seeking to reduce reliance on China, which dominates global production and processing. China has periodically restricted exports of rare earths and related technologies, increasing the strategic value of alternative supply.

The Eneabba refinery is backed by a large loan from the Australian government under its critical minerals strategy. Once complete, it will be one of the few rare earths refineries outside China capable of producing both light and heavy rare earths.

Producing heavy rare earth metals such as dysprosium and terbium is especially significant, because supply of these materials is even more concentrated in China.

Other projects

Iluka said ramp-up continues at its Balranald mineral sands project in New South Wales, where one mining rig has been enhanced and is now meeting its target extraction rates.

Exploration drilling at the Typhoon deposit in South Australia has been completed. The board is preparing to consider development options for the Wimmera project in Victoria and the Typhoon project.

Challenging mineral sands market

The rare earths progress comes as Iluka's core mineral sands business faces softer conditions. Demand for zircon, used in ceramics, tiles and other products, has been weighed down by weakness in China's property sector.

The lower revenue in the quarter reflected those market conditions. The company's expectations for better zircon prices in the fourth quarter may signal some improvement.

Market reaction

The strong gain suggests investors were encouraged by the combination of steady refinery construction, the start of heavy rare earth metal production and the outlook for higher zircon prices.

Rare earths stocks have been volatile as investors weigh geopolitical developments, Chinese export policies and government support for alternative supply chains.

What to watch

Investors will be watching the progress of the Eneabba refinery toward completion and commissioning, any offtake agreements with customers, the ramp-up at Balranald and the board's decisions on its Wimmera and Typhoon projects.