Iluka Secures 18-Year Rare Earths Supply from VHM with $40 Million Funding Support
Iluka Resources has locked in a long-term supply deal with VHM Limited for rare earth concentrate from the Goschen project, underpinning its Eneabba refinery feedstock with a $40 million convertible note commitment to aid project development.
- 146kt rare earth concentrate supply over 18 years
- $40 million convertible note funding in two tranches
- Supply linked to Eneabba refinery product pricing
- Right of first refusal on additional VHM projects
- Goschen project backed by Australian and US funding interest
Long-Term Rare Earths Supply Agreement Finalised
Iluka Resources (ASX:ILU) has secured a significant feedstock deal, agreeing to purchase all planned rare earth concentrate production from VHM Limited’s (ASX:VHM) Goschen deposit in western Victoria. The contract spans 18 years and covers 146,000 tonnes of rare earth concentrate, containing 86,000 tonnes of rare earth oxides (REO). On an annualised basis, this translates to roughly 8,320 tonnes per year of concentrate, with about 4,900 tonnes of total REO, complementing Iluka’s Eneabba rare earths refinery feedstock.
Strategic Feedstock for Eneabba Refinery Ramp-Up
The Eneabba refinery, Australia’s first fully integrated rare earths processing facility, is over halfway through construction and slated for commissioning in mid-2027. Iluka’s Managing Director Tom O’Leary emphasised that the agreement with VHM strengthens Eneabba’s supply base, blending external and internal feedstocks to optimise refinery throughput. The refinery will produce separated light and heavy rare earth oxides, including critical elements like neodymium, praseodymium, and dysprosium.
Funding Support Tied to Goschen Project Milestones
To support VHM’s Goschen development, Iluka will provide a $40 million secured convertible note in two tranches: an initial $10 million followed by $30 million contingent on the final investment decision and project financing milestones. This funding package is structured with a 10% annual interest rate and secured by mining mortgages and general security agreements, ranking behind Goschen’s senior project finance. The convertible notes’ terms include shareholder approvals and customary conditions, with conversion prices linked to VHM’s future equity raises.
Pricing and Additional Project Rights
The concentrate pricing is tied to a formula referencing Iluka’s realised selling prices from Eneabba’s rare earth products, aligning incentives across the supply chain. Additionally, Iluka holds a right of first refusal over any rare earths produced beyond the contracted volumes from Goschen and VHM’s earlier-stage Cannie and Nowie projects, potentially expanding feedstock options for the refinery.
Regional Significance and Project Backing
Western Victoria is emerging as a notable rare earth province, with Iluka’s historic operations and ongoing Wimmera development underscoring the company’s regional expertise. VHM’s Goschen project has secured environmental approvals and attracted funding interest from both Australian and US governments, reflecting strategic geopolitical support for critical minerals supply chains.
Bottom Line?
Iluka’s deal with VHM not only secures vital feedstock for Eneabba but also embeds financial support for Goschen, setting the stage for a more integrated Australian rare earths supply chain.
Questions in the middle?
- Will VHM secure the necessary shareholder approvals and project financing to advance Goschen on schedule?
- How will the final blend of internal and external feedstocks impact Eneabba refinery’s production efficiency and product mix?
- Could the right of first refusal on Cannie and Nowie projects lead to further supply expansions for Iluka?
