Iluka has moved to secure its first third-party supply of rare earths raw material for its planned $1.2 billion Eneabba refinery and project near Perth.
The company indicated earlier this year when announcing the go-ahead for the project (with over $1 billion in aid from the Federal government) that it would be looking to do deals with third parties to supply raw materials for the refinery to be processed on a toll basis (or some other arrangement).
The announcement confirms that Australia’s rare earths business is coalescing around Lynas and Iluka because of their big investments (planned or already done) on processing and upgrading the ores.
Iluka this week revealed it had entered into an agreement with Northern Minerals for the supply of rare earths concentrate in exchange for an equity injection.
The agreement is for the supply of all available concentrate from Northern’s Browns Range project (in far northern Western Australia), until the delivery of contained rare earth oxide (REO) has reached 30,500 tonnes.
To support Northern’s development of Browns Range, Iluka said it will make an initial investment of $20 million in Northern via a convertible note ($15 million) and share placement ($5 million).
“This will provide Northern the funding required to complete a definitive feasibility study (DFS), promoting delivery of a final investment decision (FID) on Browns Range over the next year,” Iluka said.
“Subject to Northern developing Browns Range, Northern’s concentrate will be a valuable additional source of feedstock for Iluka’s Eneabba rare earths refinery in Western Australia and will be a significant contributor to establishing the Eneabba refinery as a long-term producer of highly valued heavy, as well as light, permanent magnet REOs,” Iuka said on Wednesday.
On top of the initial investment Iluka said it has committed to “provide additional equity funding towards Browns Range post FID through a further placement, subject to certain conditions; and subject to shareholder approval, Iluka and Northern have agreed to the grant of put and call options over additional Northern shares.”
This provides Iluka with a pathway up to an ultimate 19.9% shareholding in Northern.
In background for the deal, Northern said Browns Range consists of seven deposits, with a total Mineral Resource of 10.8 million tonnes.
Wolverine is the largest of these deposits with a Mineral Resource of 6.4 million tonnes and the focus of the DFS.
“Project parameters encompass mining and concentrating and Northern has the potential to produce an attractive source of direct feed for Iluka’s Eneabba refinery.
“The rare earth bearing mineral at Browns Range is xenotime, which is characterised by high dysprosium (Dy) and terbium (Tb) assemblage of 10.0% in REO at Wolverine. Dy and Tb are the valuable ‘heavy’ permanent magnet rare earths. They improve magnetic performance and provide temperature resistance to the permanent magnets used in electric vehicles and wind turbines.
“They are also used in a number of specialised defence applications, such as guidance and control systems. Most of the world’s supply of Dy and Tb is currently derived from ionic clay deposits in China and Myanmar.
“Northern’s high assemblage of heavy REOs complements Iluka’s portfolio. Iluka’s Eneabba stockpile is dominant in monazite (with some xenotime), with a high assemblage of the valuable ‘light’ REOs of neodymium (Nd) and praseodymium (Pr). Iluka’s Wimmera deposits contain both monazite and xenotime, with a higher proportion of heavy REOs relative to the Eneabba stockpile. Further detail is provided in Appendix B.
“Northern expects that the DFS for Browns Range will take 12-15 months and first production is targeted for 2025-26. This timing aligns with the planned commissioning and ramp up of Iluka’s Eneabba refinery.”
“The supply agreement between Iluka and Northern covers all Browns Range production up to 30,500 tonnes of REO equivalent xenotime concentrate; at a targeted delivery profile building over the first four years post commissioning (of Browns Range) to up to about 5,000 tonnes of REO; at a targeted average grade of 25% REO. Pricing of the concentrate will include a fixed price component based on contained REO and an upside price sharing mechanism based on realised selling price.”
“Northern’s feedstock is uncommon globally in that it has an elevated assemblage of Dy and Tb. These highly sought after heavy rare earths will be an important part of the product offering from the Eneabba refinery.
“Just as Iluka’s leading position in zircon has underpinned our competitive advantage in mineral sands over the past decade, the production of high value heavy REOs in Australia will be an important differentiator for our rare earths business in the decades to come.
“The Eneabba refinery has been designed with the capability to process multiple feedstocks. In addition to the Eneabba stockpile and Northern’s concentrate, Iluka continues to progress other sources of internal and external feed. A key source among these is our Wimmera project in Victoria, which is currently the subject of a pre-feasibility study that is due for completion at the end of 2022.”
