Resource Rumblings: ILU, MCR

Company News

by Glenn Dyer

News from the ASX resources sector on Thursday saw Iluka wasting no time in moving on from Sierra Rutile and Mincor continuing its Lazarus-like renaissance.

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Days after it revealed the divorce documents for its Sierra Rutile spin off, Iluka Resources (ASX: ILU) has made it clear it is heading towards its rare earths future at a rate of knots.

Iluka told the ASX in a short statement that it had issued a major contract to start work on the $1.2 billion project to major US contractor Fluor Australia.

The contract calls for Fluor to complete the Front End Engineering Design (FEED) and undertake the Engineering, Procurement and Construction Management (EPCM) services for the Eneabba rare earths refinery.

Iluka announced the final investment decision for the Eneabba refinery at the start of April.

A major part of the deal was the spinoff of Sierra Rutile into a separate company to be owned by Iluka shareholders. There’s a vote next month on the proposal.

The $1.2 billion cost is being funded under a risk sharing arrangement between Iluka and the Australian Government.

The Federal government has approved up to $1.25 billion in funding via a low-cost non-recourse loan to support the Eneabba refinery through Export Finance Australia from the Critical Minerals Facility, a fund set up to finance a local critical minerals supply chain (such as rare earths and battery minerals).

It’s the third project to be funded after Ecograf’s Australian Battery Anode Material Facility in Kwinana and Renascor Resources integrated Siviour graphite mine and processing facility in South Australia.

The Iluka refinery will be fully integrated, producing light and heavy separated rare earth oxides and capable of processing feedstocks from Iluka’s portfolio and from a range of third party suppliers.

This includes both mineral sands and rare earths deposits.

Iluka wants to be able to process rare earths from third parties in addition to its reserves of monazite (a beach mineral) it has stockpiled for years at Eneabba.

The refinery will produce separated light and heavy rare earth oxide products from the monazite concentrate from the Mid-West Eneabba mine before using concentrate from Iluka’s Wimmera deposit in Victoria.

Analysts say the concentrate from Eneabba will use up around 24,000 to 25,000 tonnes of plant capacity a year.

Eneabba is the highest-grade source of light rare earths neodymium, praseodymium (NdPr) terbium, and dysprosium globally. It will have a design capacity of 55,000 tonnes a year of rare earths concentrate and a total rare earths oxide production rate of 23,000 a year along with NdPr production of 5,500 tonnes a year.

With the Lynas Corp Mount Weld operation and its processing operations in Malaysia, here and in the US (the latter are still or are about to be built), the Iluka operation will give Australia more clout globally to go up against the dominant Chinese sector.

The two operations, plus a couple of promising other projects will cement Australia’s second place behind China and Number 1 standing outside that unpredictable country.

That is why Lynas got US government backing to the tune of $120 million for a processing business in Texas and why the Federal government stumped up the funds for the Eneabba facility.

Construction is due to start later this year, with first production scheduled for 2025.

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Mincor Resources (ASX: MCR) has again proved that there is life after a brush with a near death experience.

Down and out a few years ago, the reversal of fortunes started with the rediscovery of nickel as a green, EV battery metal.

That saw the company take a look at its languishing WA nickel assets, seek out new business (BHP came to the party) and commit to spend more than $100 million on the comeback by developing its new Cassini Mine in WA.

It has worked – earlier this year it delivered its first nickel ore to the BHP nickel concentrator at Kambalda and yesterday it confirmed it had received 90% of the money due to it from BHP.

Yesterday it told the world it had been paid $25.3 million by BHP’s NIckel West for concentrate delivered as part of the offtake agreement.

Investors liked the news and sent the shares up a tidy 2.1% to $1.65 – a solid rise, but still a long way from their 52-week high of $2.84 earlier this year in the wake of the Russian invasion of Ukraine and then the big nickel squeeze on the London Metal Exchange which saw prices crash and burn.

Mincor said the $25.3 million was “net proceeds from BHP Nickel West, representing 90% of the payment for nickel concentrate calculated for ore deliveries up to 31 May 2022.

The final 10% payment due in August.

The first payment was made after the ore had been through BHP’s Kambalda nickel concentrator

Mincorp said the payments cover 1,003 tonnes of nickel in concentrate, less deductions for processing and transport.

Mincor said it has “successfully delivered the project for an actual peak funding outlay of A$98 million, ~8% below the previous estimate of A$107 million.”

“This outcome represents an outstanding result for Mincor, with the successful delivery of two mining
operations developed entirely during the COVID-19 pandemic period,” the company told the ASX.

The project’s major capital works (are) now predominantly complete, with the new Cassini Village the final outstanding project scheduled for completion early in the December 2022 quarter, and slightly lower than budget.”

Mincor said it was looking forward to delivering an Initial Mineral Resource for the newly identified LN04a prospect at the Golden Mile (Northern Operations) in July, “underpinned by the first stage of results delivered so far ahead of what is expected to be a significant ongoing drilling program for FY23.”

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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