James Marlay

Interesting wire - mining royalties are something I've heard of but always assumed they were only available in private markets.

Mark Ferguson

Your article seems to be more focussed on the potential M&A activity than the dividend stream. Why would ILU spin off DRR and then only receive 20% of a potential sale when they could have the lot? A quick back of the envelope yield is less than 2% (fully franked) - is that your calculation?


Emanuel, the iron ore price isn’t likely to stay this high for a long period of time? How much sense would Deterra make if the spot price were halved?

Emanuel Datt

Mark, The DRR spinoff was effectively an in-specie distribution of stock to ILU shareholders. Often we observe, listing an attractive asset can be a precursor to corporate action. No doubt that ILU would have been approached for this asset, but likely the public route was chosen to best reward shareholders and achieve a transparent valuation ascribed by the public markets. Note ILU increased their retained portion of the company from 15% to 20%. At current spot iron ore & FX prices, with full production (come 2023) the look through yield for DRR is approx 15%. Not a bad result in our book

Emanuel Datt

Jehangir, We can only speculate on the iron ore price going forward. Deterra will be receiving royalties on around 2.5x current production levels come 2023, which provides good downside protection from falling iron ore prices - which would also likely come with a weaker AUD also mitigating risk