Monsters of Rock: Iluka plays cards close to its chest on Canberra rare earths chats

Iluka continues to talk with Feds on rare earth refinery funding
Metals Acquisition delivers more than 10,000t of copper metal at Cobar
Stanmore up as sales rise, despite falling met coal prices

The outlook for the great white hope of the Aussie Government’s muddled rare earths strategy is no clearer after its owner Iluka Resources (ASX:ILU) gave the project short shrift in a light quarterly report today.

Its Eneabba project, a mineral sands stockpile near Geraldton where a ~$1.8bn refinery will take monazite waste and turn it into the magnet metals almost entirely extracted by China, is effectively waiting on further funding commitments from Canberra to get across the line.

A $1.25 billion low cost loan was delivered from the critical minerals facility by the previous Coalition Government ahead of the 2022 Federal Election.

But costs have since blown out to $1.7-1.8bn and rare earth prices have tumbled.

In early 2022 neodymium-praseodymium oxide prices climbed above US$175/kg. Now the metals used in EV motors, wind turbines, defence and consumer electronics are worth US$59.25/kg, levels at which few producers are making money and largely unattractive for commercial lenders.

Iluka has effectively accused China of weaponising a virtual monopoly to subdue prices and lock out western competitors.

In essence, the pressure is on the Feds to meet the gap. Today’s September quarterly wasn’t all that instructive, highlighting that a broader project update is due in the second half. Government discussions continue.

“Q3 site works activity focussed on progressing critical path items at an appropriate level of capital outlay given ongoing nature of funding discussions,” Iluka said.

“Tendering and awarding of equipment, fabrication and site works contract packages continues with prioritisation and approach based on criticality to schedule and overall cost commitment given the status of funding discussions. This included the award of structural steel and pipe racks.”

Broader narrative

Looking at the bigger picture for Iluka and its stock fell around 4% after reporting continued weak economic conditions impacting the mineral sands market, with zircon demand in China especially timid.

“The announcements in September targeting the property sector aim to boost liquidity, encourage lending and stabilise prices,” the company noted.

“These measures are not expected to have an immediate impact. Chinese demand for ceramics remains subdued, impacting demand for raw materials such as opacifier. The fused zirconia, refractory and foundry markets also showed some softening over the quarter. ”

US rate cuts and the end of the monsoon season in India offer some hope of a rebound in those markets.

At the same time, seasonal weakness in the fourth quarter could see zircon prices fall US$40-50/t, Iluka said. Prices were flat QoQ for Iluka at US$1891/t in Q3.

The global pigment market meanwhike, which dominates demand for titanium dioxide feedstocks like natural and synthetic rutile, remains stable.

“The global pigment market remains stable heading into the seasonally slower northern hemisphere winter, with pigment producers running at higher operating rates in anticipation of a market turnaround in 2025,” ILU said.

“Titanium pigment producers view several external events as supporting renewed demand growth in 2025, including the final implementation of the EU antidumping tariffs on Chinese imports; economic stimulus measures being implemented in China to support additional domestic pigment consumption; and lower interest rates in the US helping to support new and existing home sales.”

Combined zircon, rutile and synthetic rutile output was down 31.4% YoY to 366,900t in the September quarter, with sales 5.8% lower at 338,900t. Ilmenite output and sales dropped 29.8% and 26.4% respectively to 298,800t and 90,400t.

However, zircon sales ran ahead of guidance and are expected to lift further in December, while synthetic rutile sales are backended to the latter stages of the year. Zircon prices dropped slightly QoQ from US$1907/t to US$1891/t.

Synthetic rutile prices came down from US$1194/t in September to US$1178/t in the June quarter, with lower production and a pause at the SR1 kiln seeing its overall mineral sands cash cost up 50.4% YoY to US$1302/t.

Copper and coal

Metals Acquisition (ASX:MAC) was on the bill as well, announcing 10,159t of copper metal production from its CSA mine in New South Wales.

The Cobar operation is on track to hit the midpoint of its annual guidance for 2024 at 40,500t Cu.

Costs were down 6% to US$1.90/lb, though partly that was due to increased capitalisation of development costs.

MAC, which wants to lift output to over 50,000tpa from 2026, announced a string of high grade drill hits as well, notably 19.8m at 10.9% Cu from 177.1m in hole UDD23021 at the QTS North deposit.

QTSN grades over 8% Cu on average, MAC says, making it a lynchpin in the ~4% head grade CSA mine.

Stanmore Coal (ASX:SMR) meanwhile rose over 3%. Its Queensland met coal mines produced 3.8Mt of saleable coal in the September quarter, up from 3.4Mt in the three months to June 30.

Coal sales so far this year are up from 9.3Mt in 2023 to 10.8Mt in 2024.

Boss Marcelo Matos said the met coal market was awaiting direction in the form of Chinese stimulus announcements after weakness in China’s domestic market and high Chinese exports that limited demand elsewhere saw coking coal prices fall across the quarter.

Prices for premium coking coal dropped from US$245/t to US$180/t, averaging US$205/t, though the differential between PHCC and lower grade PCI, of which SMR is a major producer, has closed.

SMR is one of three companies alongside Yancoal and Glencore rumoured to be a strong contender to acquire Anglo American’s Queensland coal assets.

NRW Holdings (ASX:NWH) was the same day revealed as the winner of a $1.6bn mining services agreement to start in 2026 at SMR’s South Walker Creek mine.