Iluka Resources has received backing from the Australian Government for its proposed rare earths refinery at Eneabba, Western Australia.

In a letter to Iluka, two federal ministers said that that the proposed Eneabba rare earths refinery complies with the country’s critical minerals policy and could help in the development of new mines.

The processing facility is expected to help the country move substantially towards in the rare earths value chain and build security in the global critical minerals supply.

The federal government’s support for the project comes as the country intends to reduce its dependence on China, which produces around 70% of the world’s rare earths.

Australian trade minister Dan Tehan and resources minister Keith Pitt said in a joint letter to Australian stock exchange: “The Morrison government is focused on growing Australia’s critical minerals sector, capturing more value from our resources by moving into downstream processing, and diversifying global supply chains.

“This includes supporting Australian projects with broader benefits across the industry.”

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Iluka is currently undertaking feasibility study on the Eneabba project, which involves the extraction, processing and sale of a strategic stockpile rich in monazite, a mineral containing rare earth elements, and zircon.

Iluka managing director Tom O’Leary said: “As I outlined at Iluka’s Annual General Meeting in April, the Eneabba refinery represents an exciting opportunity for the company, consistent with our longstanding plans to diversify into rare earths.

“It is not an opportunity without risk, nor one we will pursue at any cost, particularly given the projected returns from our Phase 2 monazite business.”

In the letter, the two ministers said that the government would consider options to help advance the project, for which Iluka had sought a non-recourse loan from Export Finance Australia.