Shares in Iluka Resources Ltd (ASX: ILU) have tumbled after the company announced it would recognise $565 million in impairment charges in its upcoming first-half results.
The mineral sands miner said in a statement to the ASX that the suspension of operations at its Cataby mine in Western Australia and changes to price expectations for some of its inventory had led to the decision to make two separate write-downs.
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Shutdown impacting on value for ASX rare earths share
The company said it announced in September that it would suspend operations at the Cataby mine and the synthetic rutile kiln number two from the start of December.
Iluka added:
The suspension was enacted given subdued demand for mineral sands and their associated downstream products, particularly pigment. The persistence of these demand conditions has impacted price expectations in the nearer term. Iluka expects to record a non-cash impairment charge of about $350 million pre-tax in its FY25 Results, the majority of which relates to the Cataby mine, synthetic rutile kilns 1 and 2 and associated project study costs for the South West region of Western Australia.
In terms of the adjustments to inventory, Iluka said price expectations had led to changes to the net realisable value, "resulting in some product inventory items falling below their weighted average cost, leading to a reduction in inventory value of about $215 million pre-tax''.
This reduction is mainly related to ore at the Cataby site, Iluka said.
Iluka said it expected its underlying mineral sands EBITDA to be about $300 million, before the one-off charges were factored in.
Good news on development project for ASX rare earths share
Separately, Iluka announced an increase to the mineral resource at its WIM100 deposit in Western Victoria, which is currently the subject of a definitive feasibility study for the potential long-term supply of rare earths and zircon.
The company said:
The updated mineral resource estimate for WIM100 comprises a total of 540 million tonnes grading at 4.6% heavy minerals for 25 million tonnes of heavy minerals. Relative to the previous mineral resource estimate, there is a 19% increase in total reported heavy mineral tonnage; an 8% increase in the heavy mineral tonnage classified as measured; and a 53% increase in heavy mineral tonnage classified as indicated. This represents a significant increase in heavy mineral tonnage and improvement in the confidence level of the WIM100 mineral resource estimate.
The company said the mineral sands from WIM100 were an important potential future feedstock for the company's Eneabba refinery in Western Australia, which is currently under construction.
The company added:
Upon commissioning in 2027, Eneabba will be one of the few rare earths refineries operating outside of China; a multi-decade infrastructure asset capable of processing a diverse range of feedstocks, from Australian and international projects, and producing both light and heavy separated rare earth oxides.
Iluka shares were 9.4% lower at $5.85 in early trade.
The company was valued at $2.77 billion at the close of trade on Wednesday.
