Mineral sands miner Iluka will demerge its Sierra Leone mines, less than five years after spending $375 million on what proved to be troubled assets, to focus on Australia and diversifying into rare earths. If the demerger is approved by Iluka shareholders Sierra Rutile will list on the ASX and be chaired by outgoing Iluka chairman Greg Martin.
Martin on Wednesday told his last annual general meeting that the west African operation that produces rutile, a natural form of titanium dioxide, was unfinished business.
“Sierra Rutile has not delivered in line with Iluka’s original acquisition case,” Martin said.
“In the early years, its business performance fell well short of our expectations.”
Martin said Iluka had to report corrupt behaviour of previous management to authorities, while the introduction of new mining technologies also proved difficult at the sites.
Three years after the acquisition, Iluka impaired the carrying value of Sierra Rutile by $US290 million ($389 million) and wrote down associated tax assets by $US115 million ($154 million).
“We had to undertake a major reset in 2021, including contemplation of suspending operation,” he said.
Martin, who has chaired Iluka for nine years and took his share of responsibility for the Sierra Rutile deal at the AGM, said while performance had improved over the past nine months further capital investment did not match Iluka’s priorities.
Iluka’s announcement that it would shed the asset that gave it geographic diversity came a week after it announced a major move from its core produce suite of minerals sands.
Iluka will spend up to $1.2 billion to build a rare earth oxide refinery at its Eneabba minerals sands operation north of Perth that will initially process tailings stockpiled since the 1990s that contain rare earth bearing minerals.
The investment is backed by a risk-sharing arrangement with the federal government that will provide a $1.05 billion non-recourse loan from its $2 billion Critical Minerals Facility.
The refinery’s output includes neodymium and praseodymium which are in high demand, including for the manufacture of high-performance magnets required for wind turbines and electric vehicles.
Iluka managing director Tom O’Leary said the refinery was game-changing for Iluka, with the refinery being the first of its type in Australia and one of the few globally.
In addition to Iluka’s stockpiles near the refinery, the facility will also be able to accept feedstock from other Iluka mines, including Wimmera in Victoria and other suppliers.
O’Leary said Iluka’s main business of mineral sands production in Australia was benefitting from the tight global supply for zircon and titanium dioxide, the latter of which will benefit Sierra Rutile.
Sierra Rutile will not be Iluka’s first spin-off of assets deemed to no longer be a strategic fit. Deterra Royalties was listed in late 2020, with its main asset being iron ore royalties from BHP’s Mining Area C in WA’s Pilbara region.
Martin will be replaced as chair by former Beach Energy chief executive Rob Cole, a director for four years who also chairs mining services provider Perenti.
Iluka shares rose 0.9 per cent on Wednesday and finished at an all-time high of $12.54 a share.
Source: Iluka spins off Africa as it chases rare earths (smh.com.au)