Iluka Reports 69% Drop in Q1 Mineral Sands Output, Zircon Prices Steady

Production Cuts Reflect Strategic Idling and Market Uncertainty

Iluka Resources Limited (ASX:ILU) reported a significant reduction in its Q1 2026 mineral sands production, driven by the idling of the Cataby mine in Western Australia and both synthetic rutile kilns. This resulted in total zircon, rutile, and synthetic rutile (Z/R/SR) production plummeting 69% quarter-on-quarter to 47.6kt. The Cataby mine produced no heavy mineral concentrate (HMC) during the quarter, while synthetic rutile sales were absent, with shipments deferred to the second half of the year in line with take-or-pay contracts.

The Jacinth-Ambrosia mine in South Australia produced 60kt of HMC, down from 104kt in Q4 2025, reflecting planned lower ore volumes and grades. Iluka adjusted its Narngulu mineral separation plant configuration to prioritise zircon-in-concentrate production amid lower quality feed, reverting to zircon sand production expected at 20-30kt in Q2. Meanwhile, the Balranald project in New South Wales is progressing with commissioning and ramp-up of mining operations, aiming for steady-state HMC production by mid-2026.

Zircon Prices Stable but Set for Q2 Increase

Zircon sand sales in Q1 were 40kt, with an additional 9kt deferred into Q2 due to logistics constraints. The weighted average zircon sand price held steady at US$1,491 per tonne FOB, consistent with Q4 2025. However, Iluka has secured contracts for 50kt of zircon sand sales in Q2 featuring price increases up to US$120 per tonne, varying by market segment and geography. After accounting for rising logistics costs, the company anticipates an approximate US$45 per tonne increase in weighted average zircon sand prices in Q2 on an FOB basis.

Market conditions remain cautious amid geopolitical tensions, notably the Middle East conflict, which has disrupted energy supplies and logistics. This has tempered customer purchasing activity across Iluka’s end markets, with China demand subdued due to seasonal factors and India experiencing temporary production halts linked to LNG shortages. The titanium dioxide feedstock segment also faces supply constraints, especially in China, potentially supporting Western pigment producers and their feedstock demand in the medium term.

Eneabba Rare Earths Refinery Nears Completion

Capital expenditure on the Eneabba rare earths refinery in Western Australia reached $977 million by the end of March 2026. The project, a strategic partnership with the Australian Government supported by a non-recourse loan under the Critical Minerals Facility, is nearing completion with engineering 99% finished. Installation of mechanical equipment, pipe racks, tanks, and buildings is well advanced, and major equipment deliveries remain on schedule despite recent cyclone activity.

Once operational in 2027, Eneabba will be one of the few rare earths refineries outside China, capable of processing diverse feedstocks and producing separated rare earth oxides critical for electrification technologies. This aligns with broader trends accelerating supply chain diversification and reducing reliance on traditional fuel sources amid geopolitical uncertainties.

Financial Position and Exploration Activity

Iluka’s net debt stood at $417 million for its mineral sands business and $693 million non-recourse for the rare earths segment as of 31 March 2026. The company continues to monitor diesel supply disruptions in Australia, which could impact production costs given diesel accounts for approximately 7% of total cash costs. Exploration expenditure in Q1 was $2.3 million, focusing on resource delineation at Cataby with 97 air core holes drilled, and planning for field programs at the North Fork project in Idaho, USA.

This update follows Iluka’s recent $288M loss and project progress, highlighting ongoing challenges in mineral sands markets but steady advancement in critical minerals infrastructure.