Iluka chief fends off concerns over cost blowout at new refinery

Iluka is building the Eneabba refinery in Western Australia.

Iluka chief executive Tom O’Leary has been doing his best to calm the nerves of investors about cost blowouts at its new refinery, but there’s still plenty of questions being asked about it.

The $3.4bn Australian-listed critical minerals company is building the Eneabba refinery in Western Australia.

This will enable processing of a range of feedstocks, including those from third party producers.

The facility will produce the rare earth oxides neodymium, praseodymium, dysprosium, terbium and others.

Under the Australian government’s $2bn Critical Minerals Facility, Iluka has secured a $1.25bn non-recourse loan.

Iluka reached a final investment decision on the plan in April, when it said it would cost between $1bn and $1.2bn.

It is now through to the front-end engineering design – a design approach used to control project expenses – which is due to conclude at the end of the year.

When reporting results last month, Mr O’Leary told the market that he was not looking to guide the market higher or lower.

But could concern about costs partly explain why the company’s stock has sold off in recent weeks?

Some theories suggest that should costs increase in the next six months, an equity raise could be on the cards to pay for the project – in the very worst case scenario.

Another more likely scenario with cost blowouts is that Iluka could sell down some of its 20 per cent stake in its $2.56bn demerged Deterra Royalties business, which could net the company about $500m.

Deterra, once part of Iluka, manages a stream of royalties, including those from BHP’s Mining Area C iron ore hub.

However, sources close the company have strongly played both of those options down, and stress that there is no reason to date to suggest that the project could run over budget.