Iluka Resources Limited (ASX: ILU)

Iluka Resources Limited (ASX: ILU) is a global critical minerals company with over 70 years of experience in the exploration, project development, mining, processing, marketing, and rehabilitation of mineral sands. 

Recommendation Rationale – SELL at AUD 5.060

• Likely to Face Resistance: ILU has surpassed the R2 level recommended on 18 June 2025, and thus, it can face resistance at the current level.
• Technical Standpoint: The momentum oscillator, 14-day RSI (81.26) indicates the stock is in the overbought zone. This typically signals that the stock has experienced strong recent buying pressure and may be due for a price correction or pullback.
• Earnings Under Pressure: Iluka’s profitability softened in FY24, with net profit after tax down 33% year-on-year and mineral sands EBITDA declined 18% YoY, reflecting weaker pricing and volume dynamics in core product lines.
• Negative Free Cash Flow amid High Capex: Iluka reported negative AUD$288 million in Group free cash flow in FY24, a significant deterioration from the prior year, driven by capital-intensive growth projects and lower operational cash generation.
• Execution Risk on Long-dated Projects: Major projects like Eneabba (commissioning in 2027) and Balranald (H2 FY25) are yet to contribute earnings, while requiring sustained capital outlay. This elevates medium-term risk during a lower-margin phase.

ILU Daily Chart

Valuation Methodology: Price/Cash Flow Approach (FY Dec'25E) (Illustrative)

The stock might trade at a slight premium to its peers, considering the positive cash position (net cash excluding non-recourse debt of AU$90 million), commissioning of Balranald project, contracted revenue streams, and positioning in critical minerals markets.

For conducting the valuation, the following peers have been considered: Champion Iron Ltd (ASX: CIA), 29Metals Ltd (ASX: 29M), and Aurelia Metals Ltd (ASX: AMI).

Given its current trading levels, recent rally in the share price, and risks associated, it is prudent to sell the stock at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 5.060, as of 11 July 2025 at 11:05 AM AEST.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 11 July 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Note 5: Dividend Yield may vary as per the stock price movement.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.