VHM Secures Long-Term Rare Earths Offtake and A$40 Million Funding from Iluka

Transformational Offtake Agreement Secures Long-Term Revenue

VHM Limited (ASX:VHM) has entered a binding offtake agreement with Iluka Resources (ASX:ILU) that guarantees 100% of rare earth concentrate (REC) production from its fully permitted Goschen Rare Earths and Mineral Sands Project in Victoria will be supplied to Iluka’s Eneabba Rare Earths Refinery in Western Australia. This agreement covers approximately 145,620 tonnes over a 20-year term, underpinning VHM’s revenue with a take-and-pay structure that provides predictable cash flows and project bankability.

The pricing mechanism is linked to the realised basket price from Iluka’s refinery output, with a payability factor that increases with higher prices and includes downside protection. Additionally, any government price support is passed through, offering a balanced exposure to market fluctuations. This long-term offtake secures VHM’s position as a cornerstone supplier of both heavy and light rare earths, including Dysprosium, Terbium, Yttrium, and NdPr, at a time when global demand for secure rare earth supply chains is intensifying.

A$40 Million Convertible Note Package Provides Cornerstone Capital

Complementing the offtake deal, Iluka has committed up to A$40 million in funding through a two-tranche convertible note package. The first tranche is a A$10 million note priced at a 30% premium to VHM’s recent share price, carrying a 10% coupon and maturing in three years. The second tranche, worth A$30 million, is convertible at the same price as any future equity raise tied to the project, with a four-year maturity and the same coupon rate.

This funding structure not only injects immediate capital to support development and progression to final investment decision (FID) but also aligns Iluka’s interests with VHM’s long-term project success. The notes are secured with a second-ranking security package behind senior project debt, including a mining mortgage over the tenements. Shareholder approval will be sought within six months to issue these notes, as VHM currently lacks sufficient placement capacity.

Strategic Partnership Advances Sovereign Rare Earth Supply Chain

The partnership with Iluka marks a significant step in establishing an integrated Australian rare earths supply chain. Iluka’s Eneabba refinery is set to become the country’s first operational rare earths oxide refinery, processing both Iluka’s internal feedstocks and third-party inputs like Goschen’s concentrate. This aligns with the Australian Government’s Critical Minerals Strategy, which prioritises domestic value-added processing capabilities to reduce reliance on overseas supply.

Iluka also holds a right of first refusal on future expansions of Goschen and adjacent projects Cannie and Nowie, signalling a strategic commitment that preserves VHM’s upside potential. The deal includes step-in rights for Iluka to manage product diversion risks and insolvency scenarios, supported by comprehensive security arrangements.

Pathway to Final Investment Decision Accelerates with Funding and Offtake in Place

With the offtake agreement and cornerstone funding secured, VHM is actively advancing debt financing discussions, leveraging letters of support from Export Finance Australia and the US Export-Import Bank. The company, supported by Macquarie Capital, is also finalising a heavy mineral concentrate offtake agreement and engaging with commercial lenders to complete a fully funded development solution.

These developments materially de-risk the Goschen Project by providing revenue certainty and capital support, improving credit attractiveness and financing terms. VHM targets a final investment decision in the latter half of 2026, aiming to move swiftly towards construction and production.

CEO Highlights Strategic Milestone for VHM

CEO Andrew King described the partnership as transformational, stating it significantly derisks the Goschen Project while reinforcing the role of both Goschen and Eneabba in building sovereign rare earths processing capabilities in Australia. He emphasised the importance of long-term demand certainty, downstream processing access, and financing support in advancing the project’s development.