Inflation and Market Pressures Challenge Iluka’s Profitability Despite Project Progress

• Mineral sands revenue declined 9% to $1.13 billion
• EBITDA margin remained strong at 42% despite cost pressures
• Balranald mine on track for H2 2025 commissioning
• Eneabba rare earths refinery fully funded, commissioning set for 2027
• Final dividend declared at 4 cents per share, fully franked

Stable Market Conditions Support Operational Discipline

Iluka Resources Limited (ASX: ILU) delivered its 2024 full year results showcasing resilience in a challenging cost environment. Despite a 9% decline in mineral sands revenue to $1.13 billion, the company maintained a robust EBITDA margin of 42%, reflecting disciplined operational and marketing strategies amid persistent inflation in Australia.

Managing Director’s commentary highlighted that stable global macroeconomic conditions, particularly in construction and real estate sectors, underpinned steady demand for zircon and titanium feedstocks. Iluka’s decision to operate mines at capacity helped optimise unit costs and sustain supply to premium zircon markets, where demand remains strong.

Project Advancements Signal Long-Term Growth

Strategic project developments were a key feature of Iluka’s 2024 narrative. The Balranald mine project in New South Wales is progressing well, with commissioning expected in the second half of 2025. Over its projected 10-year life, Balranald will supply natural rutile, high-quality zircon, and concentrate feedstocks essential for synthetic rutile and rare earths production, addressing tightening industry supply.

Further afield, Iluka secured funding certainty for its Eneabba rare earths refinery in Western Australia, backed by an expanded $1.65 billion Australian Government non-recourse loan facility. This refinery, scheduled for commissioning in 2027, positions Iluka at the forefront of critical minerals processing, aligning with global strategic priorities on rare earths supply chains.

Financial Performance and Dividend

While group net profit after tax (NPAT) fell 33% to $231 million, reflecting lower revenue and higher costs, Iluka maintained a strong balance sheet with net cash of $90 million excluding non-recourse debt. The company declared a final fully franked dividend of 4 cents per share, bringing the full-year dividend to 8 cents per share, signaling confidence in cash flow generation despite headwinds.

Iluka’s synthetic rutile asset SR2 operated at capacity throughout the year, supported by secure sales contracts that provide revenue certainty. The company also built ilmenite inventory to enable a future restart of its swing synthetic rutile asset SR1 when market conditions improve, demonstrating prudent operational flexibility.

Outlook and Strategic Priorities

Looking ahead, Iluka’s focus remains on delivering sustainable value through operational excellence and strategic diversification. The company is advancing its Wimmera project in Western Victoria, targeting multi-decade rare earths and zircon resources, with a definitive feasibility study underway. Early-stage resource estimates at Goschen South further underscore the region’s potential.

Iluka’s rare earths business is positioned as a long-term growth driver, with priorities centered on project delivery, operational performance, market development, and securing additional feedstock sources. The company anticipates that tariff implementations on Chinese imports in Europe and other regions will positively influence trade flows and titanium feedstock demand in 2025.

Bottom Line?

Iluka’s 2024 results reflect steady operational discipline and strategic progress, setting the stage for rare earths to shape its future growth trajectory.

Questions in the middle?

• How will inflationary pressures evolve and impact Iluka’s cost structure in 2025?
• What are the key risks and timelines for the Eneabba refinery’s commissioning and ramp-up?
• How quickly can Iluka scale rare earths production to capitalize on emerging market demand?