Iluka Resources (ASX:ILU) secured additional financial support from the Australian government for its Eneabba rare earths refinery in Western Australia amid an increase in the expected capital cost for the project, according to a Friday filing with the Australian bourse.

The government will provide an additional AU$400 million, consistent with the terms of the original AU$1.25 billion non-recourse loan through Export Finance Australia's Critical Minerals Facility, while the company will contribute AU$214 million cash equity, the filing said.

The additional funding is contingent upon securing offtake agreements satisfactory to the government and results aligned with the "Future Made in Australia" program.

The refinery is expected to be commissioned in 2027, according to the filing.

Despite the additional financial support, Eneabba faces economic and execution risks, Bloomberg News reported Friday, citing Morgan Stanley.

"Although a good outcome on financing, the rates of return for Eneabba refinery remain in question given the commodity prices used," Morgan Stanley analysts said, according to the news outlet.

Shares fell past 11% in afternoon trade Friday and earlier hit their lowest since October 2020.

Price (AUD): $4.86, Change: $-0.62, Percent Change: -11.31%