Iluka Resources (ILU)

Equity Research 28 July 2026 | 7:25PM AEST

Iluka Resources (ILU.AX): 2Q26 result: Revenue & cash flow beat on strong Zircon sales and pricing; RE refinery remains on track; Buy

ILU reported a strong 2Q26 (see Exhibit 3) with mineral sands revenue of ~A$290mn, Paul Young | well ahead of GSe and Visible Alpha Consensus Data estimates, up from ~A$150mn Goldman Sachs Australia Pty Ltd in 1Q, driven by materially higher zircon sales (109kt vs. 54kt Mar Q) and the Chris Bulgin resumption of synthetic rutile sales (37kt) in line with take-or-pay contract | Goldman Sachs Australia Pty Ltd schedules. Zircon pricing momentum continued, with the average realised zircon sand price contracted in 2Q of ~US$1,530/t (up US$55/t QoQ), and the 3Q contracted zircon sand price set to increase by a further US$215/t to ~US$1,760/t FOB (reported 3Q price ~US$1,685/t FOB), reflecting ongoing supply discipline and constrained global availability of high-quality zircon.

The key strategic milestone in the quarter was ILU executing its first binding rare earths offtake agreement - a multi-year take-or-pay contract with a global automotive company for 1,200t of magnet rare earth oxides, commencing 2028 for an initial four-year term, encompassing the full suite of light and heavy magnet REOs, and including minimum agreed prices. Export Finance Australia also confirmed ILU’s access to the full A$1.65bn non-recourse loan for the Eneabba refinery, removing a key financing overhang and satisfying the offtake precondition for further drawdown. The Eneabba refinery is now nearing ~60% construction complete (~99% engineering complete), with almost all major equipment on site including the roaster kiln, and remains on track for commissioning mid 2027.

Net debt finished at ~A$1.15bn (split ~A$273mn Min Sands and ~A$877mn non-recourse REs). Notably, the Min Sands business generated strong operating cash flow of A$247mn and free cash flow of A$200mn in 1H (including a A$53mn tax refund), and is expected to report underlying EBITDA of ~A$40mn.

Other key 2Q26 takeaways: n Balranald - commissioning progressing, but ramp-up slower. Both mining rigs were operational in the quarter, producing both non-magnetic and magnetic HMC on specification, and Balranald achieved commercial production for accounting purposes in June. However, commissioning took longer than expected, with ramp-up of ore extraction rates and recovery improvement continuing. Expected full-year final product volumes are now lower than the group Z/R/SR guidance provided in February (GSe 31kt), and ILU has optimised the group product mix (now a more even split of zircon sand and ZIC), with full-year zircon production maintained at ~180kt.

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Goldman Sachs Iluka Resources (ILU.AX)

n TiO2 feedstock - stabilising but cautious. SR sales of 37kt at US$1,087/t in line with take-or-pay schedules; full-year contracted SR sales of 110kt weighted to 2H. Rutile of US$1,256/t was in line with Q1. Some pigment producers reported lower inventories and improving operating rates, with pigment price increases announced across several regions, but feedstock purchasing remains cautious. Both SR kilns remain idle with restart subject to market conditions. n Eneabba - on track, offtake and funding de-risked. Total capex to 30 June of A$1,101mn of the A$1.7-1.8bn budget with A$265mn spent during the Q; construction nearing ~60% complete; roaster kiln delivered; remaining equipment scheduled for 3Q. ILU also signed first binding offtake (1,200t magnet REO to a global auto OEM) plus a new feedstock agreement with VHM (adding to Northern Minerals and Lindian). o ILU announced a binding, multi-year, take-or-pay…