The Iluka Resources Ltd (ASX: ILU) share price is down 16% after the business announced a painful $565 million hit to its profits.
Iluka is a mining business that provides exposure to a number of commodities including zircon, rutile and synthetic rutile. Its operations are located in South Australia and Western Australia.
$565 million impairment
The mining company announced to the ASX that it was impairing the balance sheet values of its assets for the mineral sands business unit and recognising a net realisable value (NRV) adjustment to inventory.
In other words, Iluka doesn’t think those assets are worth as much as it was stated on the balance sheet.
In September 2025, Iluka announced the suspension of production activities at both the Cataby mine and the synthetic rutile kiln 2 (SR2) processing facility in Western Australia, as of 1 December.
That suspension was because of subdued demand for mineral sands and the associated downstream products, particularly pigment. The persistence of those conditions has impacted price expectations in the near term.
Iluka expects to include an impairment charge of around $350 million in its FY25 result. It also expects to reduce the remaining Cataby ore reserve by 35%, representing a 7% reduction in group ore reserves.
The ASX mining share’s price expectations for its inventory has led to a reduction in the inventory value by around $215 million. This predominantly relates to Cataby ore and heavy mineral concentrate work-in-progress inventories.
Quarterly update
The business also told investors how it performed in the three months to December 2025, which is the fourth quarter of its FY25.
Production of zircon/rutile/synthetic rutile (Z/R/SR) was 155kt, an increase compared to the third quarter, despite the previously-announced idling of SR2.
Iluka noted that the quarterly average zircon sand price was US$1,502 per tonne, a reduction from the third quarter, reflecting softer prices for premium grade zircon in China.
This brought full-year production for 2025 for Z/R/SR to 559kt, exceeding guidance, due to higher-than-forecast zircon-in-concentrate (ZIC) production. That was the result of optimised processing of remnant material through all of its active separation facilities.
Full-year 2025 unit cash costs of production were $1,054 per tonne, which was below guidance, reflecting higher-than-forecast ZIC production.
The business also noted that mining has commenced at Balranald. Ore extraction rates have “met and at times exceeded” nameplate production.
Iluka also revealed that its mineral sands business generated $976 million of revenue in 2025, with $276 million recognised in the fourth quarter.
Outlook for the Iluka Resources share price
The company said its production guidance of 265kt of Z/R/SR assumes SR2 and Cataby will remain idle throughout the year, though it can restart production if market conditions support that.
Lower cash production costs are expected ($420 million) in FY26 compared to FY25, which includes $140 million of Balranald production costs. However, there are also idle costs of $85 million expected.
Time will tell whether conditions improve for the business and whether it rebound.
