dolphin resources (ASX:ILU) announced the successful conclusion of financing negotiations with the Australian Government to support the $1.8 billion Eneaba Rare Earths Refinery in Western Australia.

The refinery is designed to process both light and heavy rare earth oxides, positioning Iluka as a major player in the global rare earth market.

Funding and project economics

Development of the refinery will be supported by a $1.65 billion non-recourse loan from the Australian Government. This includes an initial $1.25 billion announced for 2022 and an additional $400 million announced Friday. This financing complements Iluka’s $214 million cash and equity investment. The refinery is expected to generate a net present value of $1.7 billion to $3.4 billion, depending on the feedstock scenario, and achieve an internal rate of return on equity of up to 51%.

The project is in line with the government’s Future Made in Australia agenda, which aims to strengthen sovereign capacity and diversify critical mineral supply chains.

The refinery will produce up to 5,500 tonnes of neodymium praseodymium (NdPr) and 750 tonnes of dysprosium terbium (DyTb) per year. These rare earths are essential for electric vehicles, renewable energy, and defense technology.

Tom O’Leary, Managing Director of Dolphin, said: “The Eneaba Refinery is not only a transformative project for Dolphin, but also a critical infrastructure asset for Australia’s future in global electrification and supply chain resilience. There is,” he said.

Construction is expected to be completed in 2027 and the refinery is expected to operate for up to 35 years. Raw materials will initially be sourced from Iluka’s Eneaba stockpile, the Balranardo development facility and the Wimmera development facility, with the possibility of third-party agreements.

market reaction

Despite the positive news, Dolphins stock closed 10.04% lower at $4.93 on Friday following the note from Morgan Stanley.

“Despite the positive financing results, the profitability of the Eneaba refinery remains in question given the prices of the commodities used,” Morgan Stanley said. The project’s net income is “likely to be negative at current spot prices.”