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VHM Inks $40M Iluka Deal to Fast-Track Goschen Rare Earths
VHM secures $40M convertible note and 18-year offtake with Iluka for Goschen rare earths. The deal funds pre-FID work and locks in a strategic buyer. Next marker: FID.
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Critical minerals explorer VHM (ASX: VHM) has entered a strategic partnership with Iluka Resources (ASX: ILU) that gives the Goschen rare earths and mineral sands project a development pathway without a big upfront capital raise. The deal includes a life-of-mine offtake agreement and a $40 million convertible note package split into two tranches.
Tranche 1 is $10 million at a 10% coupon with three-year maturity, priced at a 30% premium to VHM's 15-day volume-weighted average price. It converts into a maximum 43 million shares including capitalised interest. Tranche 2 is $30 million at a 10% coupon with four-year maturity, priced at the same level as any future equity raising for the project. The structure reduces the need for additional shareholder funding, at least for the development phase leading to a final investment decision.
Under the offtake, VHM will supply about 8,320 tonnes per annum of rare earths concentrate to Iluka's Eneabba refinery in Western Australia over 18 years. The concentrate contains dysprosium, terbium, yttrium, and neodymium-praseodymium, translating to roughly 4,900 tonnes per annum of contained rare earth oxides. Eneabba is in its final construction phase and is expected to be commissioned next year. It will be the first Australian refinery of its kind.
Offtake pricing is linked to Iluka's realised rare earths pricing with a payability structure that gives VHM exposure to upside and downside protection. It also includes a pass-through of any government price support. Iluka gets first right of refusal over any rare earth material from VHM's earlier-stage Nowie and Cannie projects and any future Goschen expansion.
VHM CEO Andrew King called the partnership a "transformational milestone that materially advances the development of the Goschen project." He said the combination of demand certainty and downstream access "significantly derisks our asset" and reinforces the role Goschen and Eneabba can play in building a sovereign rare earths supply chain.
Iluka managing director Tom O'Leary said the agreement reflects Iluka's focus on securing advanced third-party feedstocks for Eneabba alongside its own portfolio. The deal follows Iluka's inaugural offtake agreement for rare earth oxides produced at Eneabba and the award of the final construction contract for the refinery.