Why is this ASX 200 mining stock crashing 9% today?

Let's find out why this mining stock is being sold off by investors on Friday.

| More on:
A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Iluka Resources Limited (ASX: ILU) shares are ending the week in the red.

In morning trade, the ASX 200 mining stock is down 9% to a new 52-week low of $4.98.

Why is this ASX 200 mining stock crashing?

The mineral sands producer's shares are being sold off today after it released an update on its rare earths ambitions.

Rare earths are essential inputs to defence systems, electric and hybrid vehicles, robotics, renewable energy, consumer, industrial, and agricultural applications.

The company notes that global rare earth production is highly concentrated, which creates inherent risks.

It is hoping to change that with the Eneabba refinery in Western Australia, which it believes will be an important step in increasing the resilience of global rare earths supply chains. Commissioning of the refinery is expected in 2027.

What's the latest?

This morning, the ASX 200 mining stock announced a positive outcome to the funding discussions with the Australian Government. These discussions were in relation to additional financing support to deliver the Eneabba rare earths refinery.

The release notes that discussions have progressed positively and agreement has been reached on key indicative terms.

The Australian Government will contribute an additional $400 million, on terms consistent with the original $1.25 billion non-recourse loan. Whereas Iluka will contribute an additional $214 million cash equity.

Given that the company had net cash of $305 million at the end of the first half (down from $371 million), investors may believe that Iluka will need to raise funds in the near future to maintain a robust balance sheet. This could be putting some pressure on its shares today.

The additional government funding is subject to securing offtake agreements satisfactory to the Australian Government and delivering positive outcomes in line with the Community Benefits Principles under the Government's Future Made in Australia agenda.

Management advised that Iluka continues to engage actively with potential offtake counterparties and is focused on securing commercially-attractive supply agreements for the benefit of all stakeholders of the Eneabba refinery.

In response to the news, the ASX 200 mining stock's managing director, Tom O'Leary, said:

We expect the Eneabba refinery to deliver substantial, sustainable value over several decades – that is why Iluka is investing significant shareholder funds in this opportunity. This is a strategic infrastructure asset that puts Iluka and Australia at the forefront of global electrification, the creation of new and resilient critical minerals supply chains, and the establishment of a rare earths industry that is genuinely independent.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Scott Phillips.

More on Materials Shares

smiling worker stands before power generator technology
Materials Shares

Fortescue shares jump 5% on record performance

This mining giant was in fine form during the quarter.

Read more »

A man casually dressed looks to the side in a pensive, thoughtful manner with one hand under his chin, holding a mobile phone in his hand while thinking about something.
Materials Shares

Should you buy Pilbara Minerals shares today?

Let's see if analysts think investors should be buying the lithium giant's shares.

Read more »

Image of young successful engineer, with blueprints, notepad and digital tablet, observing the project implementation on construction site and in mine.
Materials Shares

Expert says this ASX mining stock could rise almost 30%

Let's see which miner is being tipped as a buy for investors right now.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Materials Shares

BHP shares charge higher on record copper and iron ore production

Let's see how the miner performed during the fourth quarter.

Read more »

A man stands with hands on hips surveying construction of three high-rise buildings.
Materials Shares

Building activity on the rise – will ASX materials shares benefit?

New data from the March quarter shows a sharp rise in building activity. 

Read more »

Man smiling at a laptop because of a rising share price.
Materials Shares

Macquarie predicts 11% upside for this ASX materials stock

Here's why the broker is positive on the stock.

Read more »

Miner and company person analysing results of a mining company.
Materials Shares

Rio Tinto share price falls on Q2 update

Let's see what the mining giant reported for the second quarter.

Read more »

a man in a hard hat and high visibility vest smiles as he stands in the foreground of heavy mining equipment on a mine site.
Materials Shares

Could these 3 ASX materials shares be set to double?

This broker has buy ratings and aggressive price targets for these holdings. 

Read more »