ILU-ked For a Rare Find

At A$8.395 per share, Iluka Resources (ASX: ILU) appears reasonably valued when considering its existing mineral sands business, its 20% interest in Deterra Royalties and the progress already made on the Eneabba rare earths refinery. With approximately 430 million shares on issue, the assessed price values Iluka’s shares at around A$3.61 billion.

Iluka reported 2025 mineral sands revenue of A$976 million, underlying group EBITDA of A$329 million and underlying profit after tax of A$78 million. This equates to underlying earnings of approximately 18 cents per share and a P/E ratio of around 46 times at the assessed price. The relatively high P/E indicates that A$8.395 cannot be justified by 2025 earnings alone, although the reported A$288 million statutory loss was affected by substantial inventory write-downs and asset impairments.

Iluka also retains a 20% interest in Deterra Royalties, which had a carrying value of approximately A$445 million at the end of 2025 and contributed A$30 million to Iluka’s underlying earnings. The company also held around A$1.1 billion of mineral sands inventory available for future processing or sale, although the value ultimately realised will depend on customer demand and mineral sands prices.

The Eneabba rare earths refinery is an important part of the assessed valuation. The project is more than 50% complete, retains an estimated total cost of A$1.7–A$1.8 billion and is supported by a A$1.65 billion non-recourse Australian Government loan. Commissioning is scheduled for mid-2027, with planned capacity of up to 5,500 tonnes of NdPr oxide and 750 tonnes of dysprosium and terbium oxides per year, depending on the feedstock used.

Some commercial support for the refinery is now visible. Iluka has signed its first binding rare earths supply agreement with a global automotive company, covering approximately 10% of planned production between 2028 and 2031. The agreement provides minimum revenue of US$155 million over the initial four-year term, although this represents only a portion of the refinery’s planned output.

Debt remains an important consideration. At 31 March 2026, the mineral sands business had net debt of A$417 million, while the rare earths business had A$693 million of non-recourse net debt. The distinction matters because the rare earths borrowing is contained within the refinery funding structure, but the project must still be completed, commissioned and successfully ramped up.

Importantly, this assessment is not based solely on Iluka’s current earnings. It assigns some value to the existing Deterra interest, mineral sands inventory, Balranald operations and the refinery construction already completed, but does not assume that Eneabba immediately reaches full production or achieves all potential future sales. Further offtake agreements, a successful refinery ramp-up and development of Wimmera may provide additional upside, but remain subject to mineral sands demand, rare earth prices, project execution, operating costs and debt.