Iluka (ASX:ILU) share price falls despite government letter

The Iluka Resources (ASX: ILU) share price is lower today despite the Australian Government reaffirming its support of the Eneabba Refinery.

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Iluka Resources Limited (ASX: ILU) shares are falling today despite news Australian Government ministers have contacted the company to reconfirm their support of the Eneabba Rare Earths Refinery. At the time of writing, the Iluka share price is trading at $8.67, 2.36% lower than yesterday's closing price.

According to Iluka, yesterday it received a letter from Minister for Trade, Tourism and Investment Dan Tehan and Minister for Resources, Water and Northern Australia Keith Pitt. The letter reconfirmed that Eneabba aligns with the government's critical minerals policy objectives and encouraged the company to continue working on the project's feasibility study. 

Let's take a closer look at the news released by Iluka this morning.

Eneabba aligns with government objectives

The two ministers reaffirmed the government is interested in building Australia's rare earth oxide production through projects such as Eneabba. They said doing so could move Australia further along the rare earths value chain.

The letter follows previous meetings between the ministers and the Iluka board in March.

Iluka is currently undertaking a feasibility study into the development and potential of the Eneabba Refinery.

The letter from Ministers Tehan and Pitt commented on the government's recognition of the project's possible value, saying:

The Morrison Government is focused on growing Australia's critical minerals sectors, capturing more value from our resources by moving into downstream processing, and diversifying global supply chains.

It also stated the ministers believe Eneabba will generate jobs in regional Australia and build security in the supply of critical minerals.

If executed, Eneabba may be able to process some third-party rare earth concentrates, in addition to Iluka's own monazite. Minister's Tehan and Pitt stated:

This could help develop new Australian mines by reducing capital expenditure and risk for those projects.

Iluka is currently seeking financial support for the project from Export Finance Australia, which would include a non-recourse loan facility. Export Finance Australia is a government-run body offering financial support to companies engaged in export-related businesses.

Minister's Tehan and Pitt encouraged Iluka to continue its discussions with Export Finance Australia, as well as the Clean Energy Finance Corporation. 

Commentary from management

Iluka managing director Tom O'Leary commented on the opportunity Eneabba affords the company, saying:

[Eneabba] is not an opportunity without risk, nor one we will pursue at any cost, particularly given the projected returns from our Phase 2 monazite business. This is the focus of our discussions with the Australian Government, along with the potential for alignment between commercial objectives and policy objectives. I have been impressed with the quality of engagement Iluka is receiving on these matters and the letter from Ministers Pitt and Tehan is a further, important and confidence building step in this regard.

Iluka Resources share price snapshot 

Despite today's falls, the Iluka share price has been performing well on the ASX lately. Currently, Iluka shares are up by around 34% year to date. They have also rallied by around 121% over the last 12 months.

The company has a market capitalisation of $3.75 billion, with around 422 million shares outstanding.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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