Iluka Resources is set to report a hefty $565 million pre-tax charge in FY25, driven by impairments and inventory write-downs amid ongoing weak demand for mineral sands products.
- Approximately $350 million impairment on Mineral Sands assets
- Cataby mine and synthetic rutile kiln operations suspended since December 2025
- 35% reduction in Cataby Ore Reserve, shortening mine life to four years
- Inventory value written down by around $215 million due to lower net realisable values
- Underlying mineral sands EBITDA expected near $300 million before exceptional charges
Context of the Impairment
Iluka Resources Limited, a key player in the mineral sands sector, has announced significant accounting adjustments for its FY25 financial results. The company expects to record exceptional charges totalling approximately $565 million pre-tax, primarily stemming from an impairment of its Mineral Sands business and a write-down of inventory values.
The catalyst for these adjustments lies in the suspension of production activities at the Cataby mine and the synthetic rutile kiln 2 processing facility in Western Australia, effective from 1 December 2025. This suspension was a response to persistently subdued demand for mineral sands and related downstream products, particularly pigment, which has dampened price expectations in the near term.
Details of the Impairment and Inventory Write-Down
The impairment charge is estimated at around $350 million pre-tax, with the bulk attributed to the Cataby mine, synthetic rutile kilns 1 and 2, and associated project study costs in the South West region of Western Australia. This reflects a reassessment of asset values in light of the challenging market conditions.
Moreover, Iluka is revising its Cataby Ore Reserve downward by approximately 35%, which translates to a roughly 7% reduction in the Group’s total Ore Reserves. This adjustment shortens Cataby’s expected mine life to four years from the point when mining operations resume.
Alongside the impairment, the company is also recognising a net realisable value adjustment to inventory, resulting in a $215 million pre-tax reduction. This write-down primarily affects Cataby ore and heavy mineral concentrate work-in-progress inventories, reflecting their market value falling below weighted average cost. After this adjustment, Iluka’s inventory balance stands at about $1.1 billion, with finished goods accounting for approximately $600 million.
Financial Outlook and Strategic Positioning
Despite these exceptional charges, Iluka expects its underlying mineral sands EBITDA to be around $300 million before the impairments and write-downs. The company emphasises its commitment to managing inventory drawdowns prudently and remains positioned to respond effectively when market conditions improve.
These developments underscore the volatility and cyclical nature of the mineral sands market, particularly in the pigment segment, which has been hit hard by demand softness. Iluka’s strategic suspension of production and asset revaluation signal a cautious approach as it navigates this challenging phase.
Bottom Line?
Iluka’s substantial FY25 charges mark a pivotal moment, with market recovery and operational restart timelines now in sharper focus.
Questions in the middle?
- When does Iluka anticipate resuming production at Cataby and synthetic rutile kilns?
- How will the reduced Ore Reserves impact Iluka’s long-term growth strategy?
- What market factors could drive a turnaround in mineral sands demand and pricing?