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Iluka Resources Limited

Specialty Minerals and Metals | Raising Target Price

1H'25 Results

ILU-ASX| Price A$6.04 | Market Cap A$2,586.6M BUYUnchanged PRICE TARGET A$6.80↑from A$5.85

1H'25 results in line with consensus Underlying Group EBITDA of A$233m was ahead of our forecasts (CGe A$210m) and in line with VA consensus (A$238m). The variance against our numbers was largely driven by larger-than-expected positive inventory movements (~$85m), partially offset by marketing/selling costs and idle capacity charges. NPAT was better than expected at $92m (CGe $123m, VA cons. $87m) on higher-than-expected D&A and tax charges. Net debt increased A$115m to A$502m, including A$481m drawn under the EFA Eneabba loan facility and cash of A$193m. An interim dividend of 2cps fully franked was declared. Outlook No change to 2025 Z/R/SR guidance of 495kt. Management comments continue to point to weak market conditions in mineral sands, driven by both soft demand and competition from Chinese supply. Balranald remains on schedule for first production in 2H25. Lindian supply deal increases Eneabba output ILU recently announced a binding loan term sheet for US$20m and a full form offtake agreement with Lindian Resources (LIN:ASX | Not Rated) for the supply of up to 6ktpa of monazite concentrate over 15 years from the Kangankunde Project in Malawi (see below). Additionally, ILU holds a ROFR on production beyond the existing terms and capacity. The agreement represents ~10% of Eneabba's capacity, and should Kangankunde deliver a staged expansion, there would be sufficient concentrate to fully utilise Eneabba for over 15 years. Incorporating the LIN offtake, our modelled Eneabba utilisation increases to 75% (capacity 5.5ktpa NdPr) post ramp-up in 2027. We further assume the refinery is fully utilised via third-party feedstock from 2030. Our price forecasts (CGe 2030 NdPr US$105/kg) should support the economics of a staged expansion at Kangankunde as additional feed, or other greenfield projects (i.e Browns Range, Wimmera). Kangankunde project overview Kangankunde is located in Southern Malawi and hosts Resources of 261Mt at ~2.2% TREO (including a ~20Mt high-grade zone at >3% TREO). A July'24 study defined a stage 1, 16ktpa monazite conc. project (9kta of TREO) with AISC of US$3.4/kg TREO and capex of US$40m. LIN has begun construction and is targeting first production in DecQ'25. Model revisions We calibrate our model for 1H actuals and make no changes to our mineral sands forecasts. Increased RE's production from Eneabba increases our FY27E-FY30E EBITDA estimates by ~10% on average. Valuation & Recommendation Our target increases (NPV10%) to A$6.80. Maintain BUY.