Iluka boss shreds China for ‘weaponising’ rare earths supply and...

Iluka boss shreds China for ‘weaponising’ rare earths supply and pricing

Iluka Resources’ managing director Tom O’Leary has launched an astonishing broadside at China’s control of the rare earths market, accusing the world’s dominant critical minerals player of brandishing its power over metals supply and pricing like a weapon.

The comments presented at Iluka’s AGM in Perth come as the ASX 100 mineral sands miner looks to negotiate a lift in its loan under the Federal Government’s Critical Minerals Facility.

The low cost $1.25 billion finance package was approved in early 2022, bankrolling the company’s plan to build a new refinery at Eneabba to process rare earth metals from stockpiled monazite at its operations in WA’s Mid West.

Previously a useless by-product of mineral sands processing, the explosion in demand for magnet metals used in defence, aviation, EV and wind power applications along with consumer electronics have made Australia and specifically Iluka’s monazite resources a metaphorical gold mine.

But with Australia’s first rare earths refinery expected to be in operation from late 2026, Iluka’s capex has risen to $1.7-1.8bn, with O’Leary acknowledging it’s extremely unlikely the Commonwealth would advance all the funds needed to meet the additional capital requirement.

“But I can assure you that I have heard your perspective on the limits to which Iluka can go to invest shareholders’ funds in the Eneabba project, especially considering the risks inherent in the rare earths industry,” he said.

As those talks progress, O’Leary has delivered a stark warning to Australian policymakers on the importance of breaking China’s complete dominance of the supply chain, including its decision to ban the export of rare earths processing tech.

“And there are clear, ongoing efforts, including by Chinese state-owned entities, to extend their nation’s monopoly by controlling Australia’s rare earth deposits.

From Western Australia to Western Victoria, this is taking place via a number of binding offtake agreements with various companies; and via ownership – as in the well documented case of Northern Minerals, among others,” he said.

“Further still, China’s influence over the global rare earths market is pervasive, including through pricing indices such as the Asian Metals Index.

“This is different from the cyclical pricing dynamics associated with markets for other critical minerals, such as the nascent lithium market, or markets for Iluka’s titanium and zircon products.

It is also different from the impact of technological shifts, such as that evidenced by Indonesia’s emergent dominance in nickel.

“While China is a significant customer of all these commodities, they are all produced in material quantities in countries outside China.

For rare earth oxides, China accounts for approximately 90% of all production, and for the key heavy rare earths effectively 100%.

“It is this monopolistic production, combined with interference in pricing, that is resulting in market failure; and rare earths are among very few metals where China has demonstrated a preparedness to weaponise its control.”

Commentary on the development of western rare earths supply chains has lifted in recent weeks after Gina Rinehart took large stakes in both US-listed MP Materials and ASX-listed Lynas, raising the prospect plans to merge the two biggest non-Chinese suppliers could be revived.

Meteoric Resources, owner of the highest grade ionic clay rare earth deposit at Caldeira in Brazil, also last week announced a non-binding MoU to supply rare earth oxides to TSX-listed Neo Performance Materials from 2027.



IXR = Right place + Right time imo

Food for thought

Cheers

Frank