Iluka Resources Rides Rare Earth Tailwinds Into a Structural Test

Fund managers say geopolitical rare earth demand is offsetting a challenging outlook for Iluka's core mineral sands business

6 Jul 2026 · 5 min read

Mineral sands producer Iluka Resources rode a wave of geopolitically driven rare earth price gains through 2025 and 2026, as its Eneabba refinery project positioned it as one of the few ways to invest in a rare earth supply chain outside China.

A US government deal sets a new price floor

Spheria Asset Management's July 2025 update reported shares up 36 per cent after the US Department of Defense agreed to invest in MP Materials, a major rare earth magnet producer, with a floor price materially above the current spot price for neodymium-praseodymium. Yarra Capital Management specified the number: US$110 a kilogram, well above the roughly US$80 market consensus, a deal Yarra saw as a meaningful signal for how governments outside China might support rare earth supply chains, directly benefiting Iluka's own Eneabba refinery project.

Iluka Resources (ILU, overweight) – the mineral sands producer delivered strong outperformance following the announcement of an offtake agreement between the U.S. Department of Defence and U.S. rare earths producer MP Materials. The agreed price of US$110/kg of Neodymium-Praseodymium (NdPr) is a meaningful signal for how governments outside China might support rare earth supply chains.

— Yarra Capital Management, Monthly Report, July 2025

A quick profit-take, then renewed conviction on price momentum

Clime Investment Management took profits and exited in September 2025 after a significant rally in the two months since its purchase, having originally invested on the view that the market wasn't recognising Eneabba's rare earths potential separately from Iluka's mineral sands business. Yarra Capital Management stayed the course, and by February 2026 reported rare earth prices up 25 per cent that month alone, with Ellerston Capital describing the rally as reflecting a geopolitical shift toward supply security away from China rather than pure supply-demand dynamics.

A challenging near-term mineral sands market

Australian Eagle Asset Management's November 2025 update flagged a countervailing headwind: weak Chinese housing data and the shutdown of a customer's titanium dioxide manufacturing plant creating near-term uncertainty for the core zircon and titanium business. Pendal Group's April 2026 update described the quarterly result as neutral, with revenue missing on no synthetic rutile sales, though zircon pricing ticked higher for the first time in a couple of years, a move Pendal attributed entirely to supply constraints rather than improving demand.

A Middle East conflict adds a fresh tailwind

Wilson Asset Management's April 2026 update reported shares rising 8 per cent since the Iran conflict began on 28 February, outperforming the broader market, alongside a 12 per cent gain for peer Lynas, as both companies were seen as beneficiaries of the same critical minerals security dynamic. Yarra Capital Management's own April update tracked continued NdPr price gains of 9 per cent for the month, maintaining its overweight given Iluka's leverage as the world's largest zircon producer alongside its emerging rare earths exposure.

Structural challenges in the core business draw a bearish view

Not every manager shared the enthusiasm. ClearBridge Investments rated the stock a sell in June 2026, pointing to the ageing Jacinth-Ambrosia mine nearing end of life, falling ore grades, higher costs, and both titanium and zircon markets under pressure from a Chinese real estate sector ClearBridge saw as unlikely to recover meaningfully. Yarra Capital Management took a more balanced hold stance the same month, weighing very strong 12-month performance against still-positive catalysts, seeing a potential pathway to $10 from around $8 contingent on two specific developments still needing to play out.

We're more a hold on Iluka, balancing the very strong performance in the last 12 months with some positive catalysts still over the course of this calendar year and into next year. The stock is trading at about $8; we see a potential pathway to $10.

— Yarra Capital Management, Article, June 2026

A long-term supply deal de-risks the refinery pipeline

Pendal Group's July 2026 update reported a significant milestone: 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 the latter part of the decade, addressing what Pendal called a key market concern about the refinery's long-term supply security once construction is complete.