Tom O’Leary stokes China rare earths fears as Iluka Resources waits on Eneabba decision for more taxpayer cash

The boss of Iluka Resources has issued a stern warning as China seeks to ‘weaponise’ the supply of vital materials to purposely force down prices to unviable levels for Australian miners.

“Rare earths are among the very few metals where China has demonstrated a preparedness to weaponise its control,” chief executive Tom O’Leary told Iluka’s annual general meeting on Tuesday.

“China’s dominance of the rare earths industry, which in the case of heavy rare earths is near-total, is achieved through production supremacy and its influence over pricing,” he said.

“It’s this monopolistic production combined with interference in pricing that’s resulting in market failure.”

Mr O’Leary said no rare earths producer in the Western World was economically viable in the current market.

“Our CFO, Adele Stratton, will present at an investor conference in the coming days and will demonstrate through publicly available information that no participant, regardless of geography, is making any money at today’s prices,” he said.

Iluka is planning Australia’s first fully integrated refinery for the production of separated rare earth oxides at Eneabba, 270km north of Perth, underpinned by a $1.25 billion Federal loan.

The project will transform monazite waste stockpiles into valuable rare earths materials, which have wide applications across a variety of modern defence equipment.

The company disclosed in February that the plant’s price tag had ballooned to between $1.7b and $1.8b , which is at least at least $500 million more than the original maximum estimate.

It also flagged a delay in first production at Eneabba from 2025 to 2026.

In April 2022, Iluka made a final decision on the project at a forecast cost of between $1b and $1.2b.

Mr O’Leary said though there was a “significant increase in the capital” required to build the refinery, the energy transition and need for sovereign capabilities to counter interference were megatrends shaping the global economy.

“The need to act with urgency particularly in relation to heavy rare earths is self-evident,” he said.

“For our part, we have taken steps to catalyse an Australian rare earths industry that is truly independent.”

Iluka in February indicated it was sticking its hand out for more government funding to bridge the cost blowout.

At that time Mr O’Leary was quizzed by analysts over whether Iluka would offload its lucrative 20 per cent stake in iron ore royalty business Deterra Royalties to free up some cash for Eneabba, but he said that was an avenue “not contemplated seriously”.

Mr O’Leary said Iluka was in discussions with the Federal Government over Eneabba’s additional capital requirement.

It was “extremely unlikely that the Commonwealth would countenance advancing all of the funds necessary to meet the additional capital requirement“, he said.

Meanwhile the US, Canada, Japan, South Korea and some European countries were “aiming squarely” at retaining onshore some of the economic opportunities of the energy transition, according to Mr O’Leary.

“In addition to being essential for the production of electric vehicles and wind turbines, the key heavy rare earths dysprosium and terbium have critical applications in defence and national security,” he said.

“And there are clear ongoing efforts, including by China’s state-owned entities to extend their nation’s monopoly by controlling Australia’s rare earths deposits from Western Australia to western Victoria.”

Binding offtake agreements for raw materials and stakes in Australian producers were among the tactics used to discourage local development of refineries, he said.

China in December banned the export of heavy rare earths extraction and separation technologies, to further tighten control.