Good afternoon, everyone, and welcome to Iluka's 2025 Annual General Meeting. I'm Andrea Sutton, Iluka's Acting Chair, and on behalf of the company, I would like to thank our shareholders, proxy holders, staff, and guests for attending this meeting. Welcome to everybody watching the webcast of today's AGM. This is an important event in our calendar and one that the board looks forward to each year, as it gives us a chance to hear directly from our shareholders and respond to each of your questions. Iluka has operations in multiple locations around Australia, but our headquarters are located here in Perth on Whadjuk Noongar Country. With this in mind, I'd like to acknowledge the Whadjuk people of the Noongar Nation as the traditional owners of the land on which we meet today, and pay my respects to elders past and present.
I recognize their continuing connection to culture and contribution of this city. I also recognize the many traditional owners that protect and preserve the rich cultural heritage in areas where Iluka's operations are also located. I extend that respect to Aboriginal and Torres Strait Islander peoples here today. I'm advised that a quorum is present, and therefore I formally declare the meeting open. To ensure everyone has the best opportunity to vote, I now also declare the poll open on all of the resolutions to be considered at today's meeting. You can vote throughout the meeting. I will give you a warning before closing the poll. Our Company Secretary, Ben Martin, will outline the procedures for voting at today's AGM later in the meeting. I'm joined on stage this afternoon by the Chief Executive Officer and Managing Director Tom O'Leary and General Counsel and Company Secretary Ben Martin.
Also here with us today in the front row are my fellow directors. Each director's experience and qualifications are outlined in the 2024 Iluka Annual Report. First is Susie Corlett. Susie is Iluka's longest-serving director, who joined the board in June 2019. Susie is an independent, non-executive director, chair of the Sustainability Committee, and a member of the Audit Risk Committee and the Nomination and Governance Committee. Susie is standing for re-election today. I will introduce Susie in more detail before the resolution for her re-election, where Susie will also address the meeting. Next is Lynn Saint. She joined the board in October 2019. Lynn is an independent, non-executive director, chair of the Audit Risk Committee, a member of the Nomination and Governance Committee, and the People and Performance Committee. Finally, Peter Smith, who joined the board in June 2024.
Peter is an independent, non-executive director, a member of the Nominations and Governance Committee, the People and Performance Committee, and the Sustainability Committee. This is Peter's first AGM with Iluka, and he is standing for election today. I will introduce Peter in more detail before the resolution for his election, and Peter will address the meeting. As announced on the 15th of April 2025, James Mactier will be joining the board and will assume the position of chair effective Monday, the 5th of May. We are looking forward to James joining the board, and I will talk a bit more about James in my address shortly. In accordance with Iluka's constitution, James will seek formal election at next year's AGM.
Given it will be a while until the next AGM, we thought it would be a good opportunity for James to introduce himself to shareholders at this meeting, and I will invite him to say a few words. Also in attendance today are members of Iluka's executive management team. Finally, Jane Bailey, a partner of our external auditor, KPMG. Jane and her representative will be available to answer any questions shareholders may have on the conduct of the 2024 audit, the preparation and content of the auditor's report, the accounting policies adopted by the company in relation to the preparation of the financial statements, and the independence of the auditor in relation to the audit. I will commence the chair's address, which will be followed by the managing director's address, meeting procedures, and formal business.
Once again, good afternoon to everyone in the room and those watching the live webcast. I'm delighted to address this year's meeting as Acting Chair. Our recently announced new chair, James Mactier, commences his role next week and is in attendance today. On behalf of the board and all at Iluka, I'd like to take this opportunity to welcome James formally to our company. This is Iluka's 70th AGM. That longevity is no accident. We have a rich history, and there have been many points in our past where Iluka has evolved to seize new prospects observable in the markets and the world in which we operate. We're in the midst of one of those periods of evolution now. Iluka's mineral sands business is undergoing an important transition via our new mine at Balranald, which will be commissioned later this year.
At the same time, we are developing a new and unique rare earths business, the significance of which the managing director has outlined previously and becomes more evident by the day. These are matters of profound determination for our company. By that, I mean the determination to deliver, to take the tremendous opportunities we have before us, and thereby set the foundation for the next era of sustainable value for our shareholders. There's no denying that we are doing this in an environment of considerable macroeconomic uncertainty, which was persistent in 2024 and has increased further in 2025. Quite obviously, predicting the trajectory of global events is a fraught enterprise, but to a greater or lesser extent, some measures of uncertainty seem very likely to remain the reality for the business for the foreseeable future.
Whilst board directors like to think we have some powers, I trust I won't offend my colleagues when I say that eliminating uncertainty is not one of them. What we can do and what has governed Iluka's approach is to focus on those areas that are within our means to control. This is important when reflecting on our company's achievements over the past year. In safety and environment, we've improved our serious potential injury frequency rate and increased our rehabilitation to 400 ha of land. Despite muted demand in all markets, we delivered a 42% margin across our product suite, the result of continued discipline in production and pricing. Those margins generated cash to fund progress on our development pipeline, including Balranald, without resorting to high gearing levels or raising capital.
Even with this AUD 434 million investment in our future, we declared an 8% dividend in 2024, made possible by our 20% stake in Deterra Royalties . Critically, we finalized our expanded strategic partnership with the Australian government, ensuring risk protection, a limited equity contribution, and AUD 1.65 billion non-recourse finance to deliver Australia's first fully integrated rare earths refinery. Mindset is paramount to these achievements, but agency is equally a function of long-term strategy and planning. Iluka's discipline in the marketplace is enabled by the company's mineral sands balance sheet, which has been in a net cash position since 2019 and was again at the end of 2024. Balranald's commercialization has been made possible by a new mining technology, the product of 11 years of investment in research and development, including three field trials.
Our rare earths business is the result of views taken first in the early 1990s to stockpile minerals that until recently others thought worthless, and since 2019, this stockpile could be leveraged to build a multi-decade refining business. A Deterra stake exists because of careful decision-making at the time of the company's merger in 2020. At this point, I'd like to acknowledge Iluka's former Chair, Rob Cole, who retired in December due to health reasons. Rob joined the board in 2018 and became Chair in 2022. Throughout that period, Rob's leadership was integral to much of what I have just outlined and many more matters besides. His contribution to the company will continue to be felt long after his departure, and I'm pleased to report that Rob is doing well. The other board subject I wish to address this afternoon is the re-election of Susie Corlett.
Many will be aware of the recent media commentary regarding Mineral Resources and Susie's resignation as a director of that company. It would not be appropriate for me to comment on any of that. Mineral Resources and Iluka are, of course, entirely separate. Nevertheless, one proxy advisor has determined to recommence against Susie's re-election today. For our part, we consider Susie to be a highly experienced and highly effective Iluka director. She continues to contribute to the board in driving the company's objective, which is to deliver sustainable value. She has our fullest confidence, and I am pleased that some shareholders met with Susie before casting their votes ahead of the AGM. It has been another eventful 12 months at Iluka, and in many respects, I mentioned earlier, an important year.
We're in the process of delivering developments vital to our future, consistent with our objective and with our long-standing strategy. That said, I'm mindful that in the past few months have not been pleasant for the company's shareholders. Our share price is not what it should be. I want to assure you that this situation is satisfactory to no one at Iluka. We remain determined, laser-focused on delivery, and confident that equity markets will recognise the substantial value our investment proposition represents. Tom is leading these efforts, and I'd like to thank him and his team for their work in 2024. I will now hand over to Tom for the Managing Director's address. Thank you.
Thank you, Andrea. I too offer my thanks personally and on behalf of everyone at Iluka for your leadership as Acting Chair following Rob Cole's retirement back in December. I also extend a warm welcome to James Mactier as our incoming Chair and to all of our shareholders joining us today. Andrea just mentioned Iluka's investment proposition. In times like this, with the external environment uncertain and our company engaged in a substantial capital works program, I think it's helpful to return to those fundamentals. At Iluka's core is a mature mineral sands business with an established record of attractive margins and cash generation. Zircon and titanium are ubiquitous in everyday life. Construction and development are key drivers of demand, which has historically correlated closely with GDP.
While few would describe global economic activity in recent times as a runaway growth story, supply dynamics have been such that this business has delivered annual average operating cash flows of approximately AUD 400 million over each of the past five years. In parallel, we're developing a new and unique rare earths business with significant growth exposure. Rare earths are a critical component of electric and hybrid vehicles, robotics, defence applications, and electronics. They are essential for our modern economy, and demand is set to increase materially. As I've conveyed in the past, the current industry is unsustainable, owing to China's monopoly position and approach. That is why governments are acting, and it's also why the risks associated with Iluka's rare earths diversification are mitigated by our AUD 1.65 billion strategic partnership with the Australian government.
For a total cash equity contribution of AUD 414 million, representing about a year of historic average operating cash flows from the mineral sands business, and with the balance funded on a non-recourse basis by government, Iluka shareholders will own one of few rare earths refineries that will exist outside China, a refinery with enhanced economics by virtue of feedstocks existing in the Eneabba rare earth stockpile. This is a strategic infrastructure asset that will be the foundation of an independent Western and like-minded supply chain that is clearly required. Two complementary businesses, each important in its own right, and yet mutually reinforcing in the context of key megatrends: urbanisation, electrification, and supply chain diversification. Our 20% stake in Deterra Royalties provides additional financial strength and dividend certainty, which is particularly valuable during periods of capital investment.
I've said it many times previously, discipline is critical to Iluka achieving its objective, not only in how we produce and price our products, but in how we allocate capital, manage risk, and position the company to capture the future opportunities that will deliver sustainable value. That positioning matters given recent geopolitical developments and the realignment of trade flows. All of Iluka's production occurs in Australia, and in our mineral sands business, zircon is captured by the blanket 10% tariff announced recently by the United States. However, the company's sales of zircon into the U.S. have been relatively small in recent years, some 6% of our sales in 2024, meaning the immediate business impact of this action is pretty limited. Iluka's titanium feedstocks, rutile and synthetic rutile, are exempt from U.S. tariffs.
Tariffs are not new to the pigment industry, which accounts for 90% of titanium feedstock demand, which has been a pattern of action since 2018, with the U.S., the European Union, and India all implementing similar anti-dumping measures against pigment imports from China, and Brazil now undertaking its own investigation. The vast majority of Iluka's synthetic rutile sales are to pigment manufacturers in the Americas and Europe. To the extent these anti-dumping measures may have the effect of strengthening the ex-China pigment industry, that would be a positive for our company. I say all of this by way of echoing strongly Andrea's comments about macroeconomic uncertainty and the unpredictability of global events. From recessions in some countries to stimulus in others, the range of potential outcomes resulting from the trade dislocation currently taking place is wide.
In turn, the outcomes on Iluka's markets vary in each case, and it's imperative that we remain prepared to deal with them. As has been reported extensively, China's response to U.S. tariffs has included adding medium and heavy rare earths to its export control list as part of its continued drive to assert ever greater control. In 2022, the Chinese government issued a directive to its producers to jointly guide prices back to rationality. In 2023, China banned the export of rare earth separation and extraction technologies. During this same period, China has consolidated its rare earth industry into three large players, with all rare earth resources declared as belonging to the state. The most recent action has magnified the threat to Western and like-minded manufacturing that Iluka has been highlighting and preparing for for an extended period.
It is a fact that China today controls around 90% of global rare earth oxide production and effectively 100% of the supply of the key heavy rare earths, dysprosium and terbium. It is also a fact that at present, Australia and the rest of the world remain reliant on China for the supply of heavy rare earths, materials essential for electrification and defense systems. It is a fact that rare earths are among very few metals where China has demonstrated a preparedness to withhold supply to achieve political or strategic objectives. It is encouraging to see growing recognition of the risks posed by China's dominance, with the implications of this dynamic and the opportunity it presents having been evident for some time.
This is precisely why Iluka has leveraged our unique stockpile of rare earth materials at Eneabba to build a refinery that puts us at the forefront of global electrification and the diversification of supply chains, which is now accelerating. Once again, we are sharing the risk associated with this diversification with the Australian government, primarily through the non-recourse nature of our capital structure, which also includes priority cash flows to Iluka. With commissioning in 2027, our refinery will produce both light and heavy rare earth oxides, with the latter a key point of competitive differentiation for Iluka over other sources of Western supply. Beyond capital structure, the principal drivers of value in the rare earths business are project delivery, operational performance, market development, and maturing additional feedstock options.
We'll continue to update shareholders on our progress in these areas, as well as all relevant external developments as we work towards commissioning. We take market communication and investor engagement seriously at Iluka. Consider that Iluka's Deterra stake is today worth approximately AUD 400 million. We also hold around AUD 1 billion of product inventory on our balance sheet at cost. Adding the value of those two assets together, you don't need to factor much of Iluka's average sales margin on our existing inventory before arriving at the company's current market capitalisation. This implies that the market is at present ascribing minimal value to either the mineral sands business we've run for over 70 years or the rare earths business we're building, a business that, as I've outlined, represents significant future upside for a limited equity contribution.
This anomaly becomes even more stark when viewed against the valuations of other non-China participants in the rare earths industry, which do not have a mineral sands business, nor do they have the Australian production capacity Iluka is building in permanent magnet heavy rare earths. We could view this situation with frustration. We choose instead to renew our investor engagement efforts to ensure the equity market recognises Iluka's value. I share Andrea's confidence that that value will be recognised in time. I look forward to continuing our discussions with current and prospective shareholders both this afternoon and at our investor briefing in Sydney next week. Thank you.
Thank you, Tom. Transcripts of both my address and that of the Managing Director are available on the company's website and the ASX company announcement platform. I will now ask Ben Martin, our Company Secretary, to walk through the procedural matters of asking questions and voting at today's AGM.
Thanks, Andrea. I will start with the procedure for asking questions and then move on to the voting procedure. Only shareholders or their proxy attorney or authorized company representative holding a green or yellow admission card are entitled to ask questions or make comments. All questions should be addressed to Andrea Sutton as Chair of the meeting. When the floor is open to questions, and if you wish to ask a question or make a comment on a resolution or management of the company, please make your way to the microphone with your admission card. If you are unable to make your way to the microphone, please raise your hand and a microphone will be passed to you.
Please state your name and indicate whether you are speaking on behalf of a shareholding you own directly or beneficially, and or whether you are speaking as a proxy or representative for another shareholder or group of shareholders. Please also state your affiliation if you are not here today in your personal capacity. It is important that we give shareholders as a whole a reasonable opportunity to ask questions or make comments if they wish to do so. Therefore, I ask that speakers restrict themselves, at least initially, to no more than two questions at the microphone. If you have two questions, please ask them together and limit your questions to no longer than two minutes. Anyone wishing to speak more than once will be given a subsequent opportunity to do so if time permits, and in the meantime, they should kindly resume their seat.
As no questions or comments were submitted before the meeting, the Chair will commence with shareholder questions or comments from the floor. For shareholders and proxy holders, at the time of registration for this meeting, those persons eligible to vote were given a green admission card. The voting boxes are on the back of this green admission card. If you are a proxy holder, a summary of your voting instructions has been attached to the green admission card you have received. By signing and lodging the voting card, you'll be taken to have voted in accordance with the instructions you have been given. The summary also shows any open votes that you have been given to vote as you consider appropriate. The Chair has already opened the poll, so you can vote at any time.
You do not need to wait for the resolution to be discussed before casting your vote. Computershare staff will collect all voting cards after all resolutions have been put to the meeting. Alternatively, you may drop your completed voting card in one of the ballot boxes located at the exit if you need to leave the meeting early. There will be an opportunity for you to ask Computershare staff any questions about the completion of your voting card prior to the closing of the poll. Thanks for your attention.
Thanks, Ben. Voting today will be conducted by way of poll on all items of business. Each shareholder present, either in person or by proxy, attorney or corporate representative has one vote for every ordinary share owned. Rod Somes, from Computershare Investor Services, has agreed to act as returning officer for the poll. As of the proxy close date, we have received proxies representing 290 million shares, or 67% of the company's issued shares. Details of the proxies received will be shown at each item of business before any discussion commences. A summary of the proxies received will also be shown before the poll closes. I am holding open proxies in my capacity as Chair of the meeting, and it is my intention to vote all available proxies in favor of all resolutions.
The result of the poll will be announced later today to the Australian Securities Exchange and will be posted on Iluka's website. The notice of the meeting for this year's annual general meeting was distributed to shareholders and posted on the ASX on the 21st of March 2025, and I propose that it be taken as read. We now come to the formal business of the meeting. Each of the agenda items will be considered in turn, with an opportunity for shareholders to ask questions on each item. As mentioned, all voting today will be conducted by way of a poll, which is already open. You may vote using your green voting card. Now let's proceed to the first item of business.
The first item of business is to receive and consider the annual financial report, the director's report, and the auditor's report for the company and its controlled entities for the year ended 31st of December 2024. During this item of business, we will also give shareholders as a whole a reasonable opportunity to ask questions or make comments about Iluka and its management. Shareholders may also ask questions of the auditor. Such questions must be relevant to the conduct of the audit, the preparation and the content of the auditor's report, the accounting policies adopted in preparing the financial statements, and the auditor's independence. Please note that no resolution or vote is required on this item. I will now open the meeting to any questions or comments from shareholders.
If you have a question that relates to other items of business, including director election and re-election, remuneration, or the grants of securities to the managing director, I would ask that you hold that question until we reach that agenda item. As there were no questions submitted in advance of the meeting, are there any questions or comments on this item from the floor now?
Chair, we've got John Campbell representing Australian Shareholders Association.
Thank you. Good afternoon, John.
Good afternoon, Chair. The first question is on the format of the meeting. Last year, you conducted the meeting as a hybrid meeting, which gave shareholders the opportunity to listen in real time, ask questions in real time, and vote. This year, you've gone back to the old-fashioned webcast, or perhaps not that old-fashioned, but the webcast, which we see as a retrograde step, I guess, and we see Australian Shareholders Association. I should say that I've got proxies from 90 shareholders, 400,000 shares. We would prefer to see hybrid meetings, as opposed to webcast.
Look, thank you, John, and thank you for your question, and I appreciate the ASA and your ongoing overview with the company. We do acknowledge that some shareholders prefer the hybrid meeting format, which we've conducted over the past few years, but we also recognize some shareholders actually prefer other versions as well. Look, our decision to host a physical and webcast meeting this year was done with consideration of AGM trends across the board, consideration of cost pressure, and the relatively low number of Iluka shareholders that have attended via the hybrid method. We have provided an avenue for shareholders to submit questions in advance of the AGM, and none were received, and we are recording the AGM, so I do appreciate your feedback. We consider on an annual basis how we manage the meetings.
We'll take your feedback on board, and we'll continue to monitor the trends associated with the AGM. Thanks, John.
I do have a second question.
Yes.
It relates to the rare earth refinery.
Yes.
I'm glad that you were finally able to agree to a funding plan with Export Finance corporation , whatever it's now called. This has come at significant cost to the company in terms of an increased contribution. You're required to fund an additional, well, you're required to fund AUD 100 million in each of the current and next two financial years, I think. Would you like to comment on where you will source these funds from, whether it'll involve raising capital or selling your Deterra stake?
Thank you. I'll let Tom. Did you want to touch on this?
Sure. Thank you, John, for the question. I do not expect it will come from either of those sources. In my opening remarks, I touched on the fact that over the last five years, we have generated annual operating cash flows of some AUD 400 million per annum, and I expect our contributions over the next couple of years of AUD 100 million per annum to meet our requirement for our equity contribution of AUD 414 million in total will come from those operating cash flows. If they were not to, we have significant undrawn debt facilities at our disposal, some AUD 800 million under our multi-option facility agreement.
Thank you. I'll sit down and let somebody else have a go.
Thank you. Is there any other comments or questions? Yes, sir.
Good afternoon.
Can you hear me?
Yes, I can.
Okay. My question simply is, as I'm a proxy holder for my wife, and my name is Paul Slyth, and the question is simply if, as is likely to happen in the not-too-distant future, that hydrogen comes into the play where the current EV cars may tend to become superseded. The real question is, are Iluka prepared to handle the alternate type of minerals that would be required to handle that change? That's all my question is.
Yeah. Look, the introduction of hydrogen into the economy has absorbed a lot of column inches over the last few years. Most recently, probably most of those have been devoted to the emerging acceptance that the production of hydrogen at scale and in commercial quantities is potentially decades away still. If hydrogen were available to be piped to industrial facilities, I think we'd be very pleased with that outcome. That's more likely to be available, I think, in advance of it being available more freely for vehicle fuel use. If it were available in a piped environment for industrial use, we'd be quite pleased because our synthetic rutile operations currently consume coal as a reductant and an agent for the removal of iron in the processing of ilmenite to synthetic rutile, and we could replace that coal with hydrogen. Even there, I think that's a long-term prospect.
We'd welcome it, but I do think it's quite some time away yet. Thank you for the question.
Thank you for the question. Did you have a follow-up question? Oops.
There's one other thing which is, I think, of importance, and I think everyone is well aware of it, as you called, geothermal power, which is coming from 1,000 m below the earth. It is happening in Perth here at WA, the biggest one being built north of Perth. Now, that particular power station will probably be a start of something for the future because this happens in other countries. They use geothermal power, and that may have an impact upon what sources of power that maybe Iluka would want to use for the future. That's just a general comment. Thank you .
Thank you. Appreciate that. Our Chief Technology Officer is here and is always interested in different perspectives and keeping quite a wide view with regards to technologies as they come forward. Thank you for that. Are there any other comments or questions from the floor on the financial reports or the management of the company? Yes, John.
I do have one more. On the safeguard mechanism, the government's requirement that you reduce emissions by 4.9% per annum to 2030, have there been any developments in terms of clarification of what that precisely means for Iluka and the Capel? Are there any adverse implications as regards the impairment of assets at the Capel?
For the impairment of assets, yeah.
No, thank you, John. Look, we sort of touched on some of this in the earlier question because in Capel, we use coal as a reductant in the processing of ilmenite to produce synthetic rutile, and that is largely where the emissions that Iluka generates come from. They're largely from Capel as well as our mining operations, but they're focused on Capel. And our Capel facility has been allocated the title as being a carbon safeguard facility. As you've implied or alluded to, we have an obligation to reduce emissions by 4.9% annually or, as an alternative, acquire offsets on market. Look, in terms of what we're doing at the moment, we're doing everything we can to reduce power, but we have been doing that anyway. Sorry, reduce consumption, but we have been doing that anyway for many years.
There is very little we can do in terms of the reduction in use of coal. We certainly look at alternates to coal, and in the annual report, you will have seen that we are doing trials with biochar and tide-derived fuel and other things. They are small measures. The only way we are going to really have significant inroads into the reduction of emissions there, particularly given that we are using coal as a reductant, not merely an energy source, is through the replacement of coal as a reductant with something like hydrogen. In fact, we have a technology that is capable of being applied in that way, and we actually touch on it in the annual report as well, and that is the new-gen technology. That is a long-term project, and again, a decade away or more.
We're continuing to focus on that and do tests and progress feasibility and the like. As I say, it's a long way away. In the meantime, we are in this position where we need to reduce emissions, and that presents or buy offsets, and at the moment, we're having to buy offsets. That's a slightly invidious position, I would say, particularly given that the carbon emissions of the production of pigment, which is largely what synthetic rutile is used for, using our feedstock on a life cycle basis, is in the lowest 50% of global emissions for the production of pigment. If we're to reduce, then reduce production, then it's going to be replaced with production in third countries with a higher emissions level.
It's disappointing that the government, I think, has implemented this mechanism in a blunt way as they have and will continue to make representations to the federal government in that regard because making it less attractive for us to produce synthetic rutile in Capel is a net negative for global emissions.
The second part of the question was, what does that mean in terms of Capel and are you going to have to reduce production simply to get under the government's requirement, or can you get enough carbon credits to compensate, and where do we stand with impairment in terms of the fact that obviously the returns are going to be influenced by the cost of those credits?
Yeah, it is. It's really a margin issue, John. I'm not suggesting that we're going to have to cease production, but it's making it less attractive. We're having to buy offsets at this stage, and we'll continue to have to buy offsets, I expect, for years to come.
I see. Thank you.
Thank you, John. Are there any more questions on the floor on the financial reports or management of the company? Yes, sir. Thank you.
I'm CK. I'm a shareholder. Sorry to ask this question, but obviously, we've got a very direct and already established comparison on ASX, which is Lynas. I mean, for my benefit, okay, could the management sort of highlight to us the upcoming rare earth refinery, the integrated operation, how do we actually differentiate from the established player as of now? Obviously, we have been reading a lot. We've got dirt that has been stocked up worth AUD 1 billion. That there has been news for the longest time. Obviously, you've got your other suppliers, like is that Northern Minerals or and then your own Mineral Sands operations that is actually coming up in New South Wales or Victoria. To me, from the way I'm reading it, I'm not a mining person, sorry about that. Yeah.
Actually, I lost a lot of money on Iluka based on, yeah, I think a lot of people lost a lot of money over here. Perhaps for our benefit, could you highlight this current state-of-the-art plant that is actually coming up? How do we actually differentiate from Lynas, which is actually tapping on the Malaysia plant? They have a plant in Calgary. Obviously, if we can keep it in Australia and potentially you even have, I think, rare earth coming from Africa, I think, recently, the recent announcement that you have actually made. Obviously, I think you're gearing up for this state-of-the-art plant.
If I remember correctly, when the company actually gets the final non-recourse financing, the additional amount, I think there's a condition that the federal government actually imposed that you must be able to get some sort of offtake agreement as you approach us. Am I right to say that this plant is scheduled to come on stream in 2027? Is that correct? Or second half 2026 calendar year? Obviously, you've got to start to prepare. We have this situation right now. We know, okay, the trade war, et cetera. et cetera. The trade war, China that you have always been saying, conceptually, the big picture really means that this plant is worth a lot of money. Yeah. I'm finishing. I'll stop here.
Yeah. Thank you.
Okay. Thank you, CK. Yeah, CK for the question. Oh, sorry.
No, you're all right.
Okay. Yeah. There's a range of questions you asked there. I might just take a few of the very specific questions you asked and then we'll deal with the broader. You asked when we're due to commission. It's 2027. You're correct. You asked if there's a condition on the additional funding. That is correct. We need to enter into an offtake arrangement, which is satisfactory for the federal government or Export Finance Australia. That is something that we're obviously working on and we're working on in any event. You asked about some of the sources of mineral sands, of rare earth feed for the refinery, and you correctly identified Northern Minerals as one potential. That's up in the Kimberley. It's a very heavy, rich deposit. It hasn't yet passed FID, so it is still uncertain.
That is one, and we have an offtake agreement there for 10 years of their offtake, which is very clear and unambiguous. In fact, we have a mortgage over the mining tenement to ensure that whenever those minerals are mined, they will come to our refinery for processing. We are also engaged with a range of others who have the possibility of developing mines that could feed our refinery. There was an announcement recently, you are right, about a Kenyan possibility. That is a possibility where we may enter into an offtake agreement in time if that company gets the mining right and they proceed and so on. That is, again, somewhat down the track. The thrust of your question was really, I think, around a comparison with Lynas and how we distinguish ourselves.
I guess a couple of key ones are that, and we've touched on it a couple of times in the addresses, is around heavy rare earths. There are four permanent magnet rare earths, as I'm sure you know, but just for the benefit of everybody, there's neodymium, praseodymium. They're the lights, and there's dysprosium and terbium, which are the heavies. The world is very reliant on China for lights as to some 90%, but they're reliant on China as to 100% for the heavies, the dysprosium and terbium. Now, our monazite at Eneabba has an attractive assemblage in heavies, much more in heavies than any of the other Western producers such as Lynas or MP Materials in the U.S. Our proposed developments within Iluka, so think about Wimmera in Victoria, again, has a much higher assemblage than our monazite, even at Eneabba, of dysprosium and terbium.
That is a tremendous competitive advantage, I believe, of our rare earths business over any other Western rare earth business. Remembering the importance of those heavies, the dysprosium and terbium, is not merely for the defense applications that are so often spoken about. It is essential for those, but it is also important. It is critical for all permanent magnets, for any permanent magnet has some element, very small potentially, but some elements of the heavies. That is a tremendous competitive advantage, I think, that we will have and a distinction between Lynas and ourselves. The other one that comes to mind quickly, and we could probably go all day, is that Lynas, over the course of their journey through the troubles they had in the last decade and so on, have become—they have been the recipient of a lot of support from the Japanese government.
As a consequence, their production is somewhat tied to Japan and its industry. We are free of any such ties, and so we'll be free to engage with a range of electric vehicles and other potential customers unconstrained by those restrictions on supplying to one particular country. I think that's probably all that comes to mind at the moment. Perhaps we can continue afterwards.
I think the other thing you just touched on was where the share price is. I just want to reinforce that it's not where we believe it should be, and this is a situation that is not satisfactory to anybody at Iluka and appreciate a source of frustration. We are absolutely determined and really laser-focused to get these key projects delivered, Balranald and Eneabba, and we're confident that the work that Tom and the team will continue to do with the equity markets will recognize the substantial value of our proposition. That is work that Tom touched on in his speech, and we'll continue to focus on going forward. Thank you.
Can I just clarify? For the time being, shareholders are actually getting the evidence via the distribution that's been streamlined from Iluka.
Yeah.
Okay. When do you expect we can actually get some sort of dividend payout from the ex-Iluka core operations? Bearing in mind Deterra has also announced a change in their dividend policy because they have actually taken on the lithium mining royalties because they bought something. I mean, we understand that we have to bear through this period right up to 2027. Even then, as many fixed-scale operations, we can actually expect some startup costs, etc. Realistically, we may be even waiting until 2028 to see everything stabilizing for us. Deterra's sort of upstream could be on the decline. In the meantime, when are we going to expect dividends to come out from the existing operation under the core Iluka operation?
I think Tom will get you to answer that in a minute. Just for those online that may not have heard the question, it was really a question with regards to our dividend streaming going forward and what our dividend policy is given the capital investment we have in the refinery and noting the 20% stake in Deterra. So Tom, did you want to talk through that?
Yeah, sure. Yeah, you're absolutely right that the current dividend is limited to the amount that we have stated we would pay in terms of what we receive from Deterra. In terms of our dividend payout framework, we're very clear about how we determine dividends. It's 40% of the free cash flow after capital and balance sheet requirements, plus any amount we receive from Deterra. Now, at the moment, Iluka is in a very heavy capital investment phase in our mineral sands business, and we will be in that until Balranald is complete, and Balranald is due for commissioning at the end of this year.
Going forward, though, I'd note that we are treating the business as having two separate balance sheets, and we've been more and more clear about this as time has gone on, one about our mineral sands business and the other our rare earths business. We plan to continue to pay dividends out of our mineral sands business along the lines of just said 40% of free cash flow after capital and balance sheet of the mineral sands business, plus the Deterra receipts. The payments of dividends out of our rare earths business are obviously many years away. I'm not about to give a dividend forecast for several years ahead, but when you look at your own expectations of our business, you should be thinking about it separately as a mineral sands business and a rare earths business and think about the cash flows in those ways.
Thank you. Thank you, Tom.
My apology, Tom, just one more question. Is that Image Resources are a very small company by comparison to Iluka, but they've just shipped, as I understand it, either 10 million tons or whatever to China of heavy minerals. Now, they've done their own processing in a different manner than what Iluka does, but apparently that has occurred in the very recent times in the last month or so.
Which company?
Image Resources.
Oh, Image Resources. Yeah, yeah, yeah.
That's right.
Cool. Yeah, Image Resources is a company which has a mine not far from our Capel mine, and they export a heavy mineral concentrate. They do not process it here in Australia, and they send it almost entirely to China for processing there. Sorry, I just could not hear who it was, so I lost track of the question. What was the question?
The question is, is it worthwhile that Iluka has a look at them to see if you can take them over? That's what I'm really asking.
Yeah. Look, we don't really comment on M&A activity, but certainly whenever we do look at targets, we look not just at their current profitability and exports, but we also take a really close look at their rehabilitation liability and whether they have the cash flows that will enable them ever to actually meet those liabilities to Western Australia.
Thank you. All right. Are there any more questions from the floor with regards to the financial reports or general management? Nope. Since there are no more questions, by the way, thank you for your interest in the company. That's been, I think, quite a good discussion. That includes the discussion on this item of business. The next item of business is the election of Peter Smith as director, which is resolution one in the notice of meeting. Details of Peter's qualification and experience are set out in that notice. Peter was appointed to the board in June 2024 and is considered by the board to be an independent director. Peter retires at this meeting, and in accordance with Article 16.4 (b)(2)(i) of the company's constitution and being eligible, Peter offers himself for election at this meeting.
The board considers Peter's skills and experience, in particular in mining operations, business improvement, and development, coupled with his international leadership experience, as valuable to the board and to Iluka's long-term sustainable success. Peter is a member of the Nomination and Governance Committee, the People and Performance Committee, and the Sustainability Committee. The board, with Peter abstaining, unanimously supports Peter's election. I'd now like to invite Peter to address the meeting.
Thank you, Andrea, and good afternoon, everyone. My name is Peter Smith. I've actually lived in the minerals industry all my life, being the son of a coal miner. I began my career as an underground miner in 1976 and have been fortunate to have held opportunities to work in a broad cross-section of the industry, including copper, gold, nickel, coal, potash, exploration industry, and now, fortunately, mineral sands and rare earths. Along the way, I've had the privilege of also visiting and working in many countries around the world, and it's developed a deep respect for the diversity of cultures that we deal with every day.
Over the past 30 years, I've held several key positions, including General Manager of Operations with Western Mining Corporation and Business Improvement General Manager, Chair and Executive Director of a company called Western Metals, Chief Operating Officer of Lihir Gold, Executive General Manager for the Australian, African, and Indonesian operations of Newcrest, Chief Executive Officer of ICL Potash based in Israel, and Chief Executive Officer, finally, of Kestrel Coal Resources before retirement from executive life. I currently serve as a lead independent director with Evolution Mining and as a non-executive director with Yancoal Resources. I'm delighted to have been given the opportunity to join the Iluka board. I believe the past 48 years, so next year it'll be getting close to 50, I've developed the necessary skills and experience to make a valuable contribution to this company. Therefore, I present myself today for election as a non-executive director.
Thank you very much.
Thank you, Peter. Proxies received in relation to this item of business are shown on the screen. I will now open the meeting to any questions or comments from shareholders. Are there any questions? As there were no questions submitted in advance of the meeting, are there any questions or comments on this item from the floor? Since there are no questions or comments, this concludes our discussion on this item of business. Please cast your vote. The next item of business is the re-election of Susie Corlett as a director, which is resolution two in the notice of meeting. Details of Susie's qualifications and experience are set out in that notice. Susie was appointed to the board in June 2019 and is considered by the board to be an independent director.
Susie retires at this meeting in accordance with Article 17.1 of the company's constitution, and being eligible, Susie offers herself for re-election. Having reviewed Susie's performance, the board considers Susie's skills and experience, in particular in mining, exploration, investment banking, and mining project finance, coupled with her international experience, as valuable to the board and Iluka's long-term sustainable success. Susie is the chair of the Sustainability Committee and a member of the Audit Risk Committee and the Nomination and Governance Committee. The board, with Susie abstaining, unanimously supports Susie's re-election. I would now like to invite Susie to address the meeting.
Good afternoon, everyone. It's a real privilege to be standing here today seeking your support for my re-election. Iluka is at a pivotal moment. As our Chair and Managing Director both have outlined, we are overseeing an important transition in our mineral sands business with the Balranald project. This is based on technology Iluka has developed specifically to access critical mineral deposits that, because of their depth, have previously been regarded as uneconomic. It also has material benefits for reduced environmental impacts and represents a paradigm step for our industry that I'm especially excited about. Our rare earth business is being built at a time when the need for their secure supply has never been clearer. This is demonstrated by geopolitical developments both recently and over several years, and demand for magnet rare earths is set to increase materially with the electrification of the global economy.
I've spent 35 years in this industry. In fact, I started out as a geologist with Renison Goldfields, which was one of two organizations that merged to form Iluka in the 1990s. This company is very much in my DNA. I've since moved through mining operations, risk management, global mining finance, and private equity. It's been a career built on understanding the detail, managing complexity, and backing good people to capture upside opportunity whilst managing downside risk. My skills complement the high caliber of diverse director talent on the Iluka board. I've had the privilege of serving on a number of listed boards over the past 10 years and am known for living my values, independent thinking, a preparedness to challenge when required, rolling up my sleeves when needed, and a genuine focus on long-term value creation.
I believe passionately that it is a director's responsibility to work with courage, care, diligence in the best interest of the company and its shareholders, regardless of complexity, difficulties in doing so, and at the risk of personal cost. At Iluka, it's a privilege to chair the Sustainability Committee and serve as a member of the Audit and Risk Committee. To my fellow directors, thank you for your support, and to our shareholders, thank you for your trust. I would be delighted to continue to contribute to the next chapter of Iluka's success. Thank you.
Thank you, Susie. Proxies received in relation to this item of business are shown on the screen. I will now open the meeting to any questions or comments from shareholders. As there were no questions submitted in advance of the meeting, are there any questions or comments on this item of business from the floor? Since there are no questions or comments, this concludes our discussion on this item of business. Please cast your vote on this item. The next item of business asks shareholders to adopt the company's remuneration report for the year ended 31st of December 2024. It is resolution three in the notice of meeting. The remuneration report is contained in pages 57 - 80 of the company's annual report, which is available on the company's website.
It contains information on the company's remuneration framework, the outcomes of the financial year ended 31st of December 2024 for the Chief Executive Officer, the Chief Financial Officer, non-executive directors of the company, and other key management personnel. Whilst this is a non-binding advisory vote of shareholders, the views and comments of shareholders will certainly be taken into account by directors when further considering remuneration matters. I note that a voting exclusion applies to this resolution as set out in the notice of meeting. The board is committed to ensuring that our remuneration arrangements are competitive, serve as an effective incentive for our executive, and are aligned to the company performance and shareholder outcomes. For 2024, our executive remuneration structure, consisting of fixed remuneration and short and long-term incentives, remained unchanged from 2023.
Heading into 2024, we faced subdued market demand and cost headwinds, and as a result, we adjusted the financial metrics. In the short-term incentive, we'll have a greater focus on cost management. At the time of setting financial targets, the outlook was uncertain, and targets were set at a challenging level based on the board's assessment at that time. The final outcomes achieved by management were positive in light of the complex external environment we have been facing and exceeded the targets set. Despite that, the company and management's achievements, in 2024, the board decided to exercise downward discretion to reduce the final outcome to just above the threshold level following a recommendation from management. The decision was an acknowledgment of the shareholders' experience over 2024 and into 2025. The final short-term incentive outcome for the managing director was 80% of target, down from 104% of target in 2023.
In addition, there were no increases to fixed remuneration for key management personnel during the year, and there was no vesting of long-term incentives under the 2020 executive incentive plan award. I'm happy to take any questions you may have on the 2024 outcomes or any other matter regarding the remuneration report. Proxies received in relation to this item of business are shown on the screen. I will now open the meeting to any questions or comments from shareholders. As there were no questions submitted in advance of the meeting, are there any questions or comments on this item of business from the floor? Yes, John.
Chair, the Shareholders Association has a set of guidelines that we measure remuneration plans against, and it is fairly rare that we have a completely clean sheet in terms of comments on remuneration. Iluka is no exception. We do have some detailed issues that we have raised with you as we go along. The thing that strikes me this year is that for the last two years, we have had declining profits, significantly declining profits, and significantly declining share prices. Yet management has exceeded its targets and, as you mentioned, needed to scale back to reflect what would be reasonable in the circumstances. I think probably the solution must be to set better targets, higher targets, more difficult targets. I suggest that the board has probably been a bit slack in accepting management's targets without challenging them sufficiently.
I mean, I think the bottom line is that we'd like to see that situation reverse, that the targets to be set in a more challenging manner such that it is a target, a real target that needs to be achieved. I think we should be giving notice that if we have the same sort of situation next year where profits are down but bonuses are up, we should be voting against the remuneration plan.
Thank you. John, look, I appreciate your perspective on this. I must admit, I'm somewhat disappointed. I think if you had a chat to any of the management team, they wouldn't have felt that their budget got through and their targets for STI got through relatively easily. There are robust discussions about them internally. As I touched on, when we set those targets at the start of 2024, it was an incredibly challenging environment, and they were on the best information available that we had. It continues to be uncertain and challenging, and we recognize in 2024 that the management team actually worked extremely hard to hit the targets that they had. They have a lot of components that they can influence, and we feel as a board that the financial results delivered were positive given quite substantial external conditions.
It's also worth noting that the discretion that was applied for the 2024 results, the driving factor behind those was actually recognition of shareholder experience, which is not normally considered as part of STI because it's really considered as part of LTI. Management recommended or proposed a downward adjustment to the STIP outcomes, recognizing that shareholder experience, and that was actually one of the key factors with regards to why the discretion was applied. I appreciate the external perspective. It is, as we see now again in 2025, a really difficult environment to set targets. We do feel that the management team put a huge amount of effort in 2024, but that decision was taken to the discretion because we recognized just that shareholder experience. I appreciate that.
I look forward to working with you again in 2025, and hopefully we do not come to that position as we go forward.
Thank you.
Thank you. Any other comments or questions on the matter? Since there are no more questions or comments, that concludes our discussion on this item of business. Can you please cast your vote on this item? The next item of business asks shareholders to approve the grant of restricted shares to the Managing Director, Tom O'Leary, as his incentive award under the company's 2024 short-term incentive plan, or STIP for short, on the terms summarized in the notice of meeting. The Board considers the grant of restricted shares to the Managing Director to be appropriate for the performance delivered during 2024, and with Tom abstaining, unanimously recommends that shareholders vote in favor of resolution four. I note that a voting exclusion applies to this resolution as set out in the notice of meeting. Proxies received in relation to this item of business are shown on the screen.
I will now open the meeting to any questions or comments from shareholders. As there were no questions submitted in advance of the meeting, are there any questions or comments on this item of business from the floor? Since there are no questions or comments, this concludes our discussion on this item of business. Please cast your vote on this item. The last item of business asks shareholders to approve the grant of the performance rights to the Managing Director, Tom O'Leary, as his incentive award under the company's long-term incentive plan, or LTIP for short, on the terms summarized in the notice of meeting. The board considers the grant of performance rights to the Managing Director to be appropriate, and with Tom abstaining, recommends that shareholders vote in favor of resolution five.
I note that a voting exclusion applies to this resolution as set out in the notice of meeting. Proxies received in relation to this item of business are shown on the screen. I will now open the meeting to any questions or comments from shareholders. As there were no questions submitted in advance of the meeting, are there any questions or comments on this item of business from the floor? Since there are no questions or comments, this concludes our discussion on the last item of business. Please cast your vote on this item. We have now concluded all items of business at this AGM. Shown on the screen is a summary of the proxies received for all resolutions as at close date. Whilst you are completing your voting cards, and as I mentioned earlier, James Mactier is here today.
As promised, I'd like to invite James to introduce himself. Over to you, James.
Thanks, Andrea, and hello to everyone. First, can I say how pleased I am to be joining Iluka at such an exciting time? Iluka is a household name in WA and hopefully soon to be globally. Many people have contacted me over the last few weeks, actually, fondly recounting their history and their family's history with Iluka, its operations and its people. I think that's a timely reminder of the lasting and beneficial impact that companies such as Iluka can and should have in our community. I think it's also important to remember when we're planning for our future that our past can guide us. What's my past and why I'm excited to be joining the Iluka team? My background is predominantly in commodities and resources, resource finance, equity, debt, investments, trading, and corporate governance. I had the first 24 years of my career at Macquarie Bank.
The last 15 of those as co-head of its metals and energy capital division and also a member of its fixed income currencies and commodities group, Global Management Committee. Shortly after leaving Macquarie in 2015, I joined the board of well-known WA gold producer, Regis Resources, where I've been the chair for the last nine years. I've also had seven years in an advisory role with a specialist resource investment firm, Resource Capital Funds, and I've been involved in the governance of various not-for-profits and community-based organizations. Why Iluka? In short, it's people, assets, finances, and upside. Just to expand a little, people is always my first filter. Whenever I look at any opportunity, be it privately or elsewhere, it's all about the people. Without good people, a company will not succeed.
We have a highly regarded management team and board, and we have deep technical and commercial expertise throughout the organization. It is very well governed, and I believe, has an open and accountable culture. The assets are very well established. They're diversified. They're globally competitive and globally significant. The finances, it's a robust financial position that has enabled Iluka to withstand the cycles and events over the years and have also allowed it to take advantage of opportunities. With opportunities comes the upside. The Balranald project, the Eneabba project, which we've heard a lot about today, are of course the clear examples of this. The latter, quite rightly, being garnering global attention. Of course, with the upside comes risk. The risk needs to be managed, and it needs to be in the right ratio with the potential reward. I believe at Iluka that this is the case.
As you've heard and as I've witnessed, the team is very focused on executing these opportunities and delivering value and upside for shareholders. I am very pleased to be joining the Iluka team, and I look forward to engaging further with you all in due course. Thank you.
Thanks, James. As we touched on, James will officially join the board on Monday, so we welcome you to Iluka. If shareholders have any questions regarding the green voting card, please raise your hand, and someone from Computershare will come over and assist. Computershare staff will now walk around, and can all persons voting please place your green voting card in one of the Computershare voting boxes. Please raise your hand if you are yet to place your green voting card in one of the boxes being walked around. Have all persons who intended to vote now voted? It appears as though the voting process has been completed. I therefore declare the poll closed. That concludes the proceedings of today's annual general meeting. I would like to thank you all for your attendance and participation at today's meeting.
I now formally declare the meeting closed, subject to finalization of the poll. Details of the results of today's meeting will be posted on both the company's website and on the Australian Securities Exchange company announcement platform shortly. A recording of this meeting webcast will also be made available on our website. Light refreshments will be served outside of this room, and I hope shareholders will take the opportunity to meet with company directors, members of the executive team, and staff. Thank you for joining us and keep safe. Thank you.