Iluka Resources' Rare Earth Bet Splits Fund Managers on Its Legacy Business

A first offtake agreement and a long-term feedstock deal advanced the Eneabba refinery story, even as ageing mineral sands mines draw a genuine sell case.

31 Aug 2026 · 3 min read

Iluka Resources rallied through early 2026 as rare earth prices surged and its Eneabba refinery project positioned it as a rare non-Chinese producer, before mineral sands weakness and a bear case around ageing mines split fund managers even as the company locked in its first offtake agreement and a long-term feedstock supply deal.

A rare earth security play with legacy mineral sands challenges

Wilson Asset Management said Iluka, a mineral sands producer with its own rare earth refinery project in Western Australia, could benefit from rising geopolitical tension in a similar way to Lynas, with shares up 8 percent since conflict began in late February, outperforming the broader market. Pendal Group described Iluka's quarterly as neutral, with revenue missing on no synthetic rutile sales, though zircon pricing ticked higher for the first time in a couple of years, driven by supply rather than any improvement in demand. Yarra Capital Management said the stock delivered strong outperformance as rare earth prices rose 9 percent, and while the short-term outlook remains challenged, it continues to like mineral sands markets long-term and Iluka's position as the world's largest zircon producer and fifth-largest titanium producer.

A sell case emerges around ageing mines and weak China demand

ClearBridge Investments rated the stock a sell, saying it used to love Iluka as a mineral sands business but now sees it under real pressure, with its Jacinth-Ambrosia mine nearing end of life, falling grades, and higher costs, while both titanium and zircon markets remain weak given a Chinese real estate market ClearBridge does not expect to recover to pre-2020 levels.

Used to love it as a mineral sands business, but clearly under a lot of pressure, near end of life on Jacinth-Ambrosia, falling grades, higher costs, titanium and zircon both under pressure with a weak China real estate market that's just never going to recover to those pre-2020 levels.

— ClearBridge Investments, Article, June 2026

A hold case balancing strong performance against remaining catalysts

Yarra Capital Management held at hold, balancing the stock's very strong performance over the prior twelve months against positive catalysts still expected over the rest of the year and into next, with the stock trading around $8 and Yarra seeing a potential pathway to $10, contingent on developments in both halves of the business, mineral sands and rare earths.

Concrete progress: an offtake deal and a long-term feedstock agreement

Pendal Group said the stock fell during a volatile week for rare earth stocks, as China imposed new export curbs and the Pentagon announced it would allow critical mineral processing plants on US army bases, even as Iluka announced its first offtake agreement, comprising 10 percent of Eneabba volumes to a global auto company from 2028 to 2031, a take-or-pay contract delivering minimum revenue of US$155 million. In July, Pendal said Iluka secured an 18-year rare earth concentrate supply agreement with VHM's Goschen project in Victoria, materially improving feedstock visibility for the Eneabba refinery from later this decade and addressing a key market concern around third-party feedstock availability, though the market reaction was muted given how early stage the underlying project remains.

Comprises 10% of Eneabba volumes to a global auto company over 2028-2031. The take or pay contract will deliver minimum revenue of US$155 million to ILU.

— Pendal Group, Newsletter, June 2026

What fund managers say they are watching next is delivery of the Eneabba refinery's targeted mid-CY27 startup, whether the first offtake agreement is followed by further deals filling remaining capacity, feedstock security under the 18-year VHM agreement, and whether legacy mineral sands weakness keeps offsetting the rare earths growth story.