Iluka Resources faces $565m blow over Cataby suspension amid mineral sales price slump

Iluka Resources has brushed off a report the Trump administration could be cooling off on Government set price floors, as the mineral sands miner and rare earths hopeful deals with a $565 million hole in its balance sheet. The miner on Thursday warned investors of a looming non-cash impairment of $350m in its full-year accounts, mostly related to the shuttering of the Cataby mine 150km north of Perth, synthetic rutile kilns 1 and 2 at Capel and project study costs in WA’s South West. A slump in the price of mineral sands that has already forced Iluka Resources to suspend mining operations at Cataby and slash about 120 jobs. The update sparked a mass sell-off in Iluka’s stock, with shares plunging 16 per cent in early trade. They recovered only marginally over the session and closed down almost 14 per cent at $5.56 to be the worst performing stock on Thursday. A Reuters article claiming that Washington was “stepping back from plans to guarantee a minimum price for US critical minerals projects” – also dragged on rare earths stocks. Chief executive Tom O’Leary seemingly had little concern about the claim and the potential impact on its negotiations with customers. “There’s a lot of noise in the in the rare earths market over the last couple of years, and they’ll continue to be,” he said. “The underlying premise of our investment remains the same…and that is that strategically, those who rely on permanent magnets for their supply chain want to ensure they have a reliable supply which is not subject to withdrawal at any particular point in time.” Operations-wise, suspension of production at Cataby began on December 1 after Iluka said subdued demand for mineral sands and their downstream products, particularly pigment, made continued operation unviable. The main commodity produced at Cataby is chloride ilmenite, which is processed at Capel in the South West to produce synthetic rutile — a high grade titanium dioxide product used predominantly as a feedstock to make pigments used in paint. “The persistence of these demand conditions has impacted price expectations in the nearer term,” Iluka said. “The company will continue to manage the drawdown of its mineral sands product inventory in a disciplined manner and remains well positioned to respond to improved market conditions.“ The miner delivered savings of about $36m after making 120 workers redundant in the December quarter, including 38 at its head office in Perth after Cataby was shuttered. Contractors bore the initial brunt of the Cataby job losses, with most of Iluka’s in-house workforce either staying on at site or deployed to other projects, including the $1.7 billion Eneabba rare earths refinery currently under construction. Iluka will also cop a $215m hit as it adjusts the net realisable value for its inventory, which has seen some product inventory items fall below their weighted average cost. The reduction mostly relates to Cataby ore and heavy mineral concentrate work-in-progress inventories. Releasing its December quarter production results, the miner said market uncertainty continued to weigh on business and consumer confidence, influencing customer buying patterns. However Mr O’Leary told analysts he believed the zircon market had “found a bottom”, based on feedback from customers. “Pricing for both intermediate and finished mineral sands products is widely reported as being unsustainably low, with several of Iluka’s competitors and customers reporting losses, asset closures and significant restructuring efforts,” it said. “Historically, improvements in zircon demand tend to become visible after the Chinese New Year (mid-February), while changes in pigment demand are typically signalled by restocking activity aligned with the Northern Hemisphere spring. “Iluka enters 2026 with production settings calibrated for a period of moderate mineral sands demand. The company remains well positioned to respond quickly to any improvement in market conditions that may flow from an uptick in Northern Hemisphere housing markets, economic activity levels in China or supply interruptions.” Full-year production of 559,000 tonnes of zircon, rutile and synthetic rutile beat guidance but sales were narrowly under the previous year at 474,900t. Revenue for the full year is expected to tumble 13.5 per cent to $976m, down from $1.13 billion. On a brighter note, Iluka said the backdrop for rare earths remained favourable, “with sustained interest from both governments and commercial customers to strategically diversify the supply chain, despite record exports from China in 2025”. It said offtake talks were continuing and it was buoyed by the potential for international co-operation through G7 nations and their partners to enhance supply chain independence, including in relation to pricing support. “Upon commissioning in 2027, Eneabba will be one of the few rare earths refineries operating outside of China; a multi-decade infrastructure asset capable of processing a diverse range of feedstocks, from Australian and international projects, and producing both light and heavy separated rare earth oxides,” it said.