Deterra Royalties Limited (ASX:DRR)

Julian Andrews
Market Cap (AUD): 2.35B
Sector: Materials
Last Trade (AUD): 4.47 +0.02 (+0.45%)
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1. About

Deterra Royalties Limited (ASX:DRR) holds a royalty over iron ore produced from specific tenements of BHP's Mining Area C (MAC) province in Western Australia. The royalty results from a 1994 restructure of deferred payments owed to Consolidated Gold Fields Australia, an Iluka antecedent.

MAC is a large iron ore mining area located in the Pilbara region in the North of Western Australia, operated by BHP (ASX:BHP).

Deterra holds six royalties in its existing portfolio:

  • Mining Area C
  • Yoongarillup (under two royalty agreements)
  • Eneabba
  • Wonnerup
  • St Ives

Only certain tenements related to royalties over the Yoongarillup Mineral Sands Mine and the Wonnerup Project are in production. 

Listed royalty companies provide investors with exposure to the value created through the discovery, extraction and sale of natural resources, typically without full exposure to some of the key operating risks of mining businesses

The royalty business model typical consists of:

  • Royalties: contractual agreements that involve a one-time up-front payment (or asset transfer) in return for future payments, typically based on a percentage of revenue or profit from a specific project or set of tenements.
  • Streams: contractual agreements whereby the holder purchases a percentage of the production from an identified mine, for an upfront payment plus an additional payment when the product is delivered. Royalty companies that hold revenue based royalties typically have an advantaged position in a mining company’s capital structure, accessing cash flows ahead of debt and equity capital providers.

Deterra was demerged from Iluka Resources Limited (ASX:ILU), a global leader in the mineral sands industry on 2 November 2020, to create the largest independent royalty company listed on the ASX.

2. Business model

3. Strategy

4. Markets

5. Competition

6. History

7. Team

8. Financials

9. Risk