Iluka Resources (ASX:ILU) used its FY2025 results call to reiterate themes it had already outlined at its January quarterly review, with management emphasizing that near-term performance will hinge on market conditions for mineral sands and on execution across two major growth projects: the Balranald development and the Eneabba rare earths refinery.
Mineral sands markets: waiting for clearer signals
Managing Director Tom O’Leary said Iluka expects “greater clarity” on zircon demand after Chinese New Year and on titanium dioxide feedstocks ahead of the North American coatings season. Since the company last updated the market, Iluka said it maintained pricing and secured additional contracted zircon sales; first-quarter contracted sales were described as 41,000 tonnes of sand and 11,000 tonnes of zircon concentrate.
On specific questions about zircon, O’Leary said he did not expect Iluka’s lower zircon sales to materially tighten the market, but he characterized demand as “pretty solid” for premium zircon and said he expected that to persist. On titanium feedstocks and coatings demand, he acknowledged optimism around a Northern Hemisphere recovery but said it was still “a bit early” to lean into that view. He added that there is not much inventory in the paint end of the supply chain, and pigment producers are not holding large pigment inventories, which he said could allow for a “pretty rapid uptick” in demand if construction activity improves.
Cash flow, working capital, and hedging
Chief Financial Officer Adele Stratton addressed questions on working capital and liquidity, noting that receivables were already beginning to unwind. She said Iluka’s net debt position at the end of January was down to AUD 420 million for the mineral sands business and that receivables should move toward more normalized levels “over the next month or two.” Stratton also said payables were elevated due to accruals linked to the Balranald and Eneabba capital programs, with Balranald nearing the end of its capital phase.
Stratton highlighted that Iluka had added a cash flow “stack chart” intended to show a step-down in cash uses in 2026 versus the prior year. O’Leary said the expected uses of funds in 2026 were more than AUD 600 million lower than the previous year, attributing the change to cost-reduction actions taken late last year, including the decision to idle Cataby and SR2 and the conclusion of capital investment in Balranald.
On currency management, Stratton said Iluka’s hedging approach is tied to contracted sales and is not speculative. She said Iluka had US$200 million of hedges covering 2026, structured as collars and caps with a US$0.63 floor and a US$0.685 ceiling. She also provided a sensitivity reference point: for each 1-cent change in the exchange rate, the impact is about AUD 2 million for every US$100 of revenue.
Stratton said Iluka expects a tax refund in the first half tied to accounting adjustments in December, including an inventory write-down. She pointed to a current tax asset of about AUD 52 million on the balance sheet, with the cash expected in the first half; she added that tax installments would begin in the second half depending on 2026 earnings.
Inventory drawdown and operating settings
In response to questions about inventory levels, Stratton pointed to finished goods inventory of 379,000 tonnes and said the company generally does not provide product-mix breakdowns for competitive reasons. However, she noted Iluka has guided to 110,000 tonnes of synthetic rutile sales in 2026 and is not running the kiln, implying those sales would come from inventory. She said Iluka is looking to draw down inventory in 2026, which would support cash generation.
On operating strategy at the Jacinth-Ambrosia (JA) operation, Stratton said Iluka generally runs operations at full capacity to optimize unit costs. She said Iluka’s 2026 cost outlook assumes JA runs “at full tilt,” with a focus on generating premium zircon, which she said remains in demand.
Balranald ramp-up: first market product expected in 2H
O’Leary said Iluka commenced mining at Balranald on one rig in January, with a second rig scheduled to start in February. He said ramp-up would occur over the first half, with “investment case” production targeted for mid-year. Heavy mineral concentrate will be transported to Iluka’s Narngulu mineral separation plant for processing, and O’Leary said the first finished mineral sands products from Balranald are expected to enter the market in the second half.
Asked about early performance, O’Leary said it was “a little bit early” to provide detailed operating metrics, but he noted the project was experiencing typical commissioning issues and that extraction rates had at times been at investment case levels. He also said grades had not disappointed and the company did not have concerns about how the material would process, adding that some processing had been done in the past.
Eneabba rare earths refinery: engineering nearly complete, commissioning targeted for 2027
O’Leary said construction at the Eneabba refinery is progressing and will accelerate over the next year ahead of commissioning in 2027. He said engineering is now more than 95% complete, equipment is arriving for early placement, and SMP&I (structural, mechanical, piping, and instrumentation) contracts will be awarded in coming months.
Management also referenced recent U.S. government announcements and broader government commentary around supply-chain diversification and potential price support, which O’Leary described as “tailwinds” for Iluka’s rare earths business. However, he emphasized that Iluka’s focus is building a business that is “commercially sustainable for decades,” citing construction, commissioning, operational performance, offtake, and feedstock longevity as key priorities. O’Leary reiterated that, upon commissioning, Eneabba would be among the few rare earths refineries operating outside China and would be capable of producing both light and heavy separated rare earth oxides from a range of feedstocks.
On project timing, management said peak construction is approaching, with about 600 people working at Eneabba and expected increases in the second half of the year. They indicated peak construction is expected in the second half of this year and the beginning of next, with commissioning later in 2027. Stratton emphasized the company remains within its stated capital range of AUD 1.7 billion to AUD 1.8 billion, describing the remaining contingency as “healthy,” while cautioning against complacency on project cost control.
On commissioning and ramp-up, Stratton described a typical sequence including wet commissioning followed by introduction of product, noting it can take 3–6 months for material to work through separation and finishing after organics are introduced. She also said it has historically taken around two years from commissioning to reach full ramp-up. O’Leary added that Eneabba monazite would be used exclusively during the commissioning period.
On rare earths offtake discussions, Stratton said the second tranche of the Export Finance Australia facility requires offtake that is “satisfactory to the government,” without specifying volume, price, or duration. She said Iluka has pursued contract structures not tied to the Asian Metals Index and has been discussing alternative pricing mechanisms such as fixed pricing, floors, and floor-and-ceiling arrangements. Stratton said she remained confident Iluka would have contracts in place in 2026, though she did not provide customer-specific details.
In response to questions about prepayments, Stratton said they have not been a particular focus, emphasizing Iluka’s priority is commercial contracts that underpin long-term refinery viability.
Finally, management briefly discussed Northern Minerals, noting the company released a definitive feasibility study last year and has secured funding support, with management focused on fully funding the project ahead of a final investment decision. Iluka said the deposit is attractive for Western supply-chain independence in heavy rare earths and that it would support progress toward a timely FID.
About Iluka Resources (ASX:ILU)
Iluka Resources Limited engages in the exploration, project development, mining, processing, marketing, and rehabilitation of mineral sands in Australia, China, rest of Asia, Europe, the Americas, and internationally. It operates through Jacinth-Ambrosia/Mid-West, Cataby/South West, Rare Earths, and United States/Murray Basin segments. The company produces zircon; titanium dioxide products of rutile and synthetic rutile; and ilmenite, as well as activated carbon, gypsum, and iron concentrate products.
