Mineral sands miner Iluka Resources executed an 18-year rare earths offtake agreement with developer VHM Limited on 3 July 2026. The binding deal secures a foundational supply of rare earths carbonate for Iluka’s Eneabba refinery in Western Australia from VHM’s Goschen project. This long-term contract materially de-risks a key feedstock source for one of the few major rare earths separation facilities under construction outside China.
Context — why this matters now
Global demand for permanent magnets used in electric vehicles and wind turbines drives the search for non-Chinese rare earths supply. China currently controls over 85% of global rare earths separation capacity. The US Department of Energy lists neodymium and praseodymium as critical minerals vital for national security and the energy transition.
The deal accelerates a trend of Western vertical integration. In May 2025, MP Materials signed a seven-year supply agreement with Siemens Gamesa for neodymium-praseodymium oxide. The Iluka-VHM pact is notably longer, signaling deeper strategic alignment. This agreement directly supports geopolitical initiatives like the US-led Minerals Security Partnership, which aims to secure supply chains for critical minerals.
VHM’s Goschen project received major project status from the Australian government in 2024, fast-tracking its environmental approvals. Iluka’s fully funded Eneabba refinery is scheduled to commence production in late 2027. The timing of this offtake agreement ensures feedstock is secured well in advance of the refinery’s operational date, mitigating a significant execution risk.
Data — what the numbers show
The 18-year term is exceptionally long for a mineral offtake agreement, which typically spans 5-10 years. This duration provides Iluka with substantial supply visibility for its refinery’s planned 25-year operational life. VHM’s Goschen project has a JORC-compliant mineral resource estimate of 655 million tonnes at 4.1% heavy mineral content.
Initial annual supply volume | Post-ramp-up annual supply volume
---------------------------- | -----------------------------------
5,000 tonnes rare earths carbonate | 15,000 tonnes rare earths carbonate
Iluka’s Eneabba refinery has a nameplate capacity of 20,500 tonnes per annum of separated rare earths oxide. The VHM supply could eventually fulfill over 70% of its feedstock requirements. The agreement includes a market-based pricing mechanism linked to a basket of rare earths prices, providing exposure to commodity upside.
Iluka’s market capitalization is approximately AUD 3.2 billion. VHM is a smaller developer with a market cap near AUD 150 million. The deal provides VHM with a credible offtake partner, which is crucial for securing project financing. Lynas Rare Earths, a key peer, operates a cracking and leaching plant in Kalgoorlie with a capacity of 12,000 tonnes per annum.
Analysis — what it means for markets / sectors / tickers
This pact is a clear positive for Iluka (ASX:ILU), securing low-cost, long-term feedstock for its high-margin refining business. It reduces the company's reliance on its own mine production and third-party spot market purchases. For VHM (ASX:VHM), the deal de-risks the Goschen project and enhances its ability to secure debt financing for construction.
The agreement strengthens the entire Western rare earths sector, including players like Lynas (ASX:LYC) and MP Materials (NYSE:MP). A more resilient supply chain benefits downstream manufacturers like Tesla (NASDAQ:TSLA) and General Motors (NYSE:GM), which require magnets for EV motors. Wind turbine manufacturers Siemens Energy (ETR:ENR) and Vestas (CPH:VWS) also gain from diversified supply.
A key risk is project execution. Both the Goschen mine and the Eneabba refinery must be built and commissioned on schedule to realize the agreement's value. Any significant delays or cost overruns at either project could impair the economics. The deal is also exposed to long-term demand risks should the adoption of EV and wind power slow unexpectedly.
Hedge funds and long-only asset managers are increasing allocations to critical mineral miners as a geopolitical hedge. Flow data indicates institutional accumulation in mid-cap miners with defined offtake agreements and clear development pathways. Short interest remains focused on junior explorers without binding contracts.
Outlook — what to watch next
The next major catalyst for VHM is a final investment decision for the Goschen project, expected by Q1 2027. This decision will be contingent on securing full project financing. For Iluka, the next milestone is the mechanical completion of the Eneabba refinery, scheduled for Q2 2027.
Markets will monitor the quarterly production reports from Lynas’s Kalgoorlie facility, which serves as a benchmark for Australian rare earths processing capacity. The US Department of Defense is expected to announce further funding awards for critical minerals projects under the Defense Production Act in Q3 2026.
Key price levels to watch include the neodymium-praseodymium oxide spot price, currently near $75 per kilogram. A sustained break above $80/kg would significantly improve the projected economics of both the Goschen and Eneabba projects. The ASX 300 Metals and Mining index (AXMM) is trading near 5,800; a breakout above 6,000 would signal renewed institutional confidence in the sector.
Frequently Asked Questions
What are rare earths used for?
Rare earth elements are critical components in high-strength permanent magnets found in electric vehicle motors, wind turbine generators, and consumer electronics. Neodymium and praseodymium are the most valuable magnetic rare earths. They are also used in precision-guided munitions and other defense applications, making them strategically important for national security.
How does this deal impact the US critical minerals strategy?
The Iluka-VHM agreement directly supports US efforts to build a friendly-shored critical minerals supply chain. Iluka’s Eneabba refinery is a key strategic asset outside China. The US Defense Department has previously funded similar projects through its Industrial Base Policy office to reduce reliance on Chinese processing for defense-related materials.
What is the difference between mineral sands and rare earths?
Mineral sands typically contain zircon, titanium dioxide feedstocks ilmenite and rutile, and sometimes rare earths. Iluka’s traditional business focuses on zircon and titanium minerals. Rare earths often occur alongside these minerals but require complex chemical processing to separate them into individual elements used in magnets and other technologies.
Bottom Line
The 18-year Iluka-VHM offtake deal materially de-risks the Western rare earths supply chain.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
