Taxpayers could tip more funding into a new rare earths refinery in WA as Iluka flags big cost lift
\nEneabba refinery, originally expected to be covered by a $1.25 billion loan from the Federal Government, will now need $1.7-1.8b in capital to complete by 2026
\nMinesite chemical supplier and blaster Orica nabs US sodium cyanide deal<\/p>\n
The developer behind Australia\u2019s first rare earths refinery has flagged a need for more funding in a bid to deliver a piece of infrastructure of \u2018strategic importance\u2019 to providing a Western supply chain of the critical metals.<\/p>\n
Iluka Resources (ASX:ILU)<\/a> revealed the cost of delivering a refinery which will process rare earths from waste rock at its Eneabba project near Geraldton had lifted to $1.7-1.8 billion, well above the US$1.25 billion low cost Critical Minerals Facility loan from Canberra that underpinned its decision to enter construction in early 2022.<\/p>\n The project is also intended to be able to process other feedstocks like the mineral sands giant\u2019s undeveloped eastern states mineral sands projects and third party feed from Aussie juniors.<\/p>\n But Iluka\u2019s Tom O\u2019Leary noted on the company\u2019s half year financial call today that more Australian players were looking to toll treat in China to get off the ground and process their materials downstream, with Hastings Technology Metals (ASX:HAS)<\/a> notably announcing plans to do so from its Yangibana project in WA last week.<\/a><\/p>\n \u201cThe Australian Government is our strategic partner in this development and has been kept up to date with the FEED process as you\u2019d expect. I\u2019m not going to comment further on those discussions other than to say we\u2019re working with the Government to come to a pathway to deliver the refinery,\u201d MD O\u2019Leary said.<\/p>\n \u201cI think it\u2019s fair to say that Eneabba\u2019s strategic importance in providing a secure Western supply chain has only increased in recent times following China\u2019s ban on the export of heavy rare earths technology in December. <\/p>\n \u201cWe\u2019ve also seen several further offtake and toll treating arrangements for projects which involve downstream processing of Australian rare earth minerals in China.\u201d<\/p>\n It raises the prospect more government funding may be needed to bring the project to fruition amid rising costs and a dive in rare earth oxide prices.<\/p>\n \u00a0<\/p>\n One thing Eneabba will be able to add to the Western supply chain for rare earths is heavy rare earths like dysprosium and terbium, which carry higher price points and are considerably rarer than more common light rare earths like neodymium-praseodymium oxide.<\/p>\n It plans to process heavies from Northern Minerals\u2019 (ASX:NTU)<\/a> Browns Range project, Iluka\u2019s Balranald project in New South Wales and at Wimmera in western Victoria.<\/p>\n Dysprosium and terbium is mainly sourced from ionic clay deposits in Myanmar and China and are required in permanent magnets to prevent performance slipping at temperatures exceeding 100 degrees Celsius.<\/p>\n O\u2019Leary noted price would remain key, with spot prices for NdPr falling so low last year amid a rise in Chinese production quotas and weak demand for consumer goods in China that the largest Western producer Lynas (ASX:LYC)<\/a> began stockpiling uncontracted material to wait for higher prices to return.<\/p>\n \u201cPricing is obviously a key driver of returns and much is made of current low spot prices,\u201d O\u2019Leary told analysts. <\/p>\n \u201cLonger term though, widely held views \u2026 are supply is going to be materially less than demand and prices need to be higher to incentivise supply particularly if the West wants any sort of longer term assurance about availability.\u201d<\/p>\n But O\u2019Leary noted Eneabba was ultimately, for Iluka, a commercial decision.<\/p>\n \u201cAs we contemplate funding, we and government are really cognisant of the risks of the project but also its strategic importance, not only from a geopolitical and defense perspective but also from the perspective of its contribution to facilitating global decarbonisation,\u201d he said.<\/p>\n \u201cUltimately, Iluka is a commercial enterprise focused on returns to shareholders rather than an instrument of government policy. So while government and Iluka objectives are aligned around the development of the refinery, discipline around our capital allocation decisions has got to be maintained. <\/p>\n \u201cWe\u2019re currently discussing this broadly with government and I really won\u2019t to comment further on that, given the ongoing nature of our discussions.\u201d<\/p>\n Iluka\u2019s final dividend clocked in at 4c per share, with its total dividend for 2023 down 84% from 45c in 2022 to 7c last year, reflecting the pass through of payouts received from its 20% holding in royalty firm Deterra (ASX:DRR)<\/a>, which earns an ongoing royalty on production from BHP\u2019s Mining Area C operations.<\/p>\n That came as profits fell 42% to $343 million, with free cash flow swinging from $444m in 2022 to negative $160m in 2023. Revenue from mineral sands operations slid 19% to $1.238m, with EBITDA down 32% to $582m.<\/p>\n O\u2019Leary said the company would have more clarity on demand for mineral sands products after Chinese New Year, having weathered \u2018subdued demand\u2019 through the second half of 2023. It is also following anti-dumping investigations from the European Commission in response to complaints from European pigment producers against Chinese companies.<\/p>\n A positive outcome could see 4-5 assets supplied by Iluka increase their operating rates, O\u2019Leary believes.<\/p>\n READ: Canberra reckons Iluka Resources\u2019 rare earth refinery will build a local supply chain, but is it a good bet?<\/a><\/p>\n \u00a0<\/p>\n <\/span>\u00a0<\/p>\n \u00a0<\/p>\n $7.7 billion capped Orica (ASX:ORI)<\/a>, which makes things go kaboom on minesites among other important resources industry functions, says it is going beyond blasting by making a major investment in sodium cyanide production in the USA.<\/p>\n Orica will pay US$640 million for Cyanco, which will double the firm\u2019s sodium cyanide production capacity to 240,000tpa via two plants in Nevada and Texas.<\/p>\n Funded by a $400 million placement and $65m SPP alongside ORI\u2019s cash and debt facilities, the deal would increase gold exposure to 25% of Orica\u2019s revenue once it completes the acquisitions of Cyanco and Terra Insights, with North American end markets also to make up a quarter of its geographic exposure.<\/p>\n Sodium cyanide is an irreplaceable chemical in most gold processing methods, with Cyanco\u2019s facilities strategically located near the massive Nevada operations of Barrick and Newmont.<\/p>\n Gold has been a reliable performer in recent times, paying near record levels at US$2,030\/oz today, with global production rates also around record highs.<\/p>\n At the same time prices in base and bulk metals have been volatile, with a number of lithium, nickel and copper operations at risk of closure or curtailment.<\/p>\n Orica says global sodium cyanide demand is expected to grow at a rate of 4% a year from 2023 to 2028, with North Amercian demand lifting 5% annually over the same period, with lower ore grades leading to increased use as more tonnes are required to be processed to extract the same quantum of metal.<\/p>\n \u201cCyanco is a highly complementary business, and by combining it with our established sodium cyanide business, Orica will create a leading integrated global sodium cyanide producer with world-class supply capabilities in mining,\u201d Orica MD Sanjeev Gandhi said.<\/p>\n \u201cThe Acquisition will more than double Orica\u2019s existing sodium cyanide production capacity and provide us with the ability to cater to the highly attractive US and Canadian gold mining industries.<\/p>\n \u201cBy combining these two leading businesses, we expect to improve our ability to serve our customers by enhancing Orica\u2019s global network of transfer stations in key gold mining regions, supporting security of supply to mine sites.<\/p>\n \u201cThe Acquisition is mutually beneficial to both Cyanco and Orica stakeholders, and we look forward to welcoming Cyanco\u2019s employees to Orica. We are excited about the opportunities this will create for Orica, our customers, and our shareholders.\u201d<\/p>\n ORI says the implied multiple in the deal after synergies will come in at 6.7x EBITDA, with mining chemicals to make up 11% of its revenue after the acquisition goes through, compared to 5% beforehand, with blasting coming down from 77% to 72%.<\/p>\n Gold exposure will lift from 21 to 25%, with thermal coal, copper, quarrying\/construction and iron ore all falling 1% to 13%, 22%, 13% and 8% respectively.<\/p>\n \u00a0<\/p>\n <\/span>\u00a0 The post Ground Breakers: Could Canberra faces more funding calls on rare earths refinery?<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Source of heavies<\/h2>\n
Iluka Resources (ASX:ILU) share price today<\/h2>\n\n
Mine site blast stock Orica punts on gold<\/h2>\n
Orica (ASX:ORI) share price today<\/h2>\n\n
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