Cost Cuts and Market Headwinds Shape Iluka’s 2025 Outlook

Strong Production Performance

Iluka Resources Limited (ASX: ILU) closed out 2024 with production figures that exceeded its initial guidance, delivering a total of 496kt of zircon, rutile, and synthetic rutile (Z/R/SR). This performance was driven by increased zircon-in-concentrate (ZIC) output and strong kiln operations, particularly the synthetic rutile kiln SR2, which produced 58kt in Q4 alone. The company’s ability to surpass its 455kt guidance underscores operational resilience amid fluctuating market conditions.

Sales volumes in the December quarter reflected seasonal softness and subdued demand in key markets, with zircon sand sales at 22kt and synthetic rutile sales at 89kt. Despite a marginal decline in the weighted average zircon sand price to US$1,819 per tonne in Q4, Iluka has proactively contracted approximately 40kt of zircon sand sales for Q1 2025 at prices about 5% lower than Q4, though currency effects have kept Australian dollar pricing steady.

Cost Management and Operational Efficiency

Iluka’s unit cash production costs of $1,290 per tonne were below guidance, reflecting higher finished production and targeted cost minimisation initiatives. A comprehensive cost review completed in Q4 identified approximately 130 roles for removal across operations and support functions, aiming to deliver around $20 million in annual savings for 2025. This restructuring aligns with Iluka’s focus on sustainable cost structures as it prepares for the ramp-up of new projects.

Advancing Growth Projects

The Balranald project in New South Wales, featuring innovative remotely operated underground mining technology, remains on schedule for commissioning in the second half of 2025. Key components, including mining rigs and modular concentrator units, are being delivered and assembled, with workforce recruitment and training underway.

Meanwhile, the Eneabba rare earths refinery in Western Australia has secured full funding through a strategic partnership with the Australian Government, including a $1.65 billion non-recourse loan facility. Capital expenditure for Eneabba reached $162 million in 2024, with significant progress on earthworks and infrastructure upgrades. This project positions Iluka at the forefront of Australia’s critical minerals sector.

Market Dynamics and Outlook

Market conditions for zircon and titanium dioxide feedstocks remain mixed. Zircon demand softened in China due to seasonal factory closures and cautious end-user sentiment, while European ceramics production slowed amid energy cost pressures. However, stimulus measures in China and tariff implementations in Europe are expected to support demand recovery in 2025. Synthetic rutile sales under long-term take-or-pay contracts remain stable, with contract prices for the first half of 2025 anticipated to decline modestly.

Iluka’s 2025 production outlook assumes operation of only the larger synthetic rutile kiln SR2, with the option to restart the smaller SR1 kiln to increase output by 110kt per annum if market conditions improve. The company also anticipates higher cash costs in 2025, partly due to capitalisation of Balranald’s heavy mineral concentrate production and operational readiness expenses.

Financial Position and Corporate Updates

Iluka’s mineral sands business generated $252 million in operating cash flow during 2024, despite a significant working capital build. Capital expenditure totaled $434 million, reflecting ongoing investments in growth projects. The company ended the year with a net cash position of $90 million in its mineral sands segment, while the rare earths business carried net debt of $205 million, primarily due to the Eneabba project financing.

Looking ahead, Iluka will report financial results under revised business segments, Mineral Sands, Rare Earths, and US/Murray Basin, to better reflect operational integration and performance. This change aims to provide clearer insights into the company’s evolving business model.