Iluka Resources shares tumbled as much as 10% after Morgan Stanley said the Eneabba rare earths project faces economic and execution risks, even after it received A$400-million ($258-million) in fresh funding from the Australian government.
“Although a good outcome on financing, the rates of return for Eneabba refinery remain in question given the commodity prices used,” Morgan Stanley analysts including Rahul Anand said in a note. The project’s net-profit value was “likely to be negative on current spot prices,” they added.
Shares in Iluka were trading down 9.5% to A$4.96 at 12.25 p.m. Sydney time. They earlier fell as much as 10%, the biggest intraday decline since August 2023.
Iluka is in the early stages of construction of the Eneabba facility in Western Australia and had asked for government support after costs increased. The government had previously committed A$1.25-billion in loans for the project, but earlier this year Iluka said it would not proceed with the development unless it received more funds.
Australian Resources Minister Madeleine King announced the extra funding, which may eventually total A$425-million, in a statement earlier Friday. Eneabba is seen as an opportunity for the nation to counter China’s near-monopoly on the rare earths market.
Still, prices of rare earths, which are used for magnets and play an integral part in electronics and military applications, have remained subdued due to oversupply.
The additional funding is subject to securing offtake agreements satisfactory to the Australian government, Iluka said in its statement Friday.