Medium Term Target: A$1+ billion market cap, page-1966

A bit of an insight in to EFA from AFR this morning...

MoreAustralian miners are expected to secure financial support from governments incoming weeks and Iluka Resources chief Tom O’Leary says there is now bipartisansupport for the trend in many nations.

Iluka secured $1.2 billion worth ofsupport for a domestic rare earths refinery on Monday from the federalgovernment’s Export Finance Australia, a loan that dwarfs the $719 million intotal loans, guarantees and bonds issued by the same agency last financialyear.

Australia’smajor defence partners in the US, Britain and Japan havealso shown interest in securing their supply chains by lending or assistingAustralian producers of “critical minerals”, and at least two Australian minersare understood to be close to winning funds from foreign governments.

TheUS government has named 50 minerals it considers “critical” to nationalsecurity and economic growth, including lithium, nickel, antimony and cobalt toname a few, and President Joe Biden last week enacted wartime powers that makeit easier for his government to directly invest in critical minerals projects.

Thosepowers may be extended to Australian companies.

TheBiden administration sits on a different side of the political spectrum toScott Morrison’s Coalition government, but Mr O’Leary said the fact both wereprepared to support minerals projects suggested the trend was unlikely to bedisrupted by the electoral cycle.

“It demonstrates that it is not justsimply one end of politics if you like, or one party that is interested indoing this. It is more of a bipartisan approach across the world aroundfacilitating the reductions of carbon emissions by electrification andrecognising what that requires,” he said.

Iluka’s refinery will be Australia’s first domesticrare earths separation facility, producing the raw materials needed to make theindustrial magnets required for wind turbines and automobiles.

“What the government is doing here is recognising thatto achieve ambitions around reduction of carbon emissions, you have got to takethese sorts of very deliberate steps and that is the journey we have been onwith government for the past two years,” he said.

Aside from decarbonisation infrastructure, rareearths are also needed for many defence industry applications such as drones,and China’s control of 80 per cent of the separated rare earths industry hasmade the industry geopolitically sensitive at a time of deteriorating relationsbetween China and Australia’s defence partners in the US and Britain.

Chinese consumers of zircon and other mineral sandsprovided about 33 per cent of Iluka’s revenue in each of the past two years butMr O’Leary said he was confident the Australian government loan would notpoliticise his company amid trade tensions between Canberra and Beijing.

“Those customers are relatively small businesseswith which we have had very strong relationships for a long time, so we arepretty confident about the strength of those relationships and our ongoingzircon business,” he said.

Iluka will establish a new subsidiary it dubbed“RefineryCo” to build the new rare earths separation plant near Eneabba inWestern Australia.

The loan from Export Finance Australia carries a16-year term, is non-recourse to Iluka and offers flexibility on projectcompletion and repayment schedules.

Mr O’Leary said he did not believe many of thoseattractive features would have been available from private lenders.

“There are a number of features of the risk-sharingarrangement that are somewhat unique and really encourage us to go down thepath of moving ahead with the refinery and thereby establishing a downstreamrare earths industry in Australia,” he said.

Asked whether the terms of the loan allowed Iluka to divest a stake inRefineryCo in future, Mr O’Leary said: “There are strict controls on anydivestment of the refinery by Iluka but we are building a permanent business aspart of Iluka and that is reflected in the facility agreement.″