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OPERATIONAL REVIEW
DIGGeRs & DeALeRs PReVIeW MACA.NET.AU

Deterra aims to be king of the royalties

Deterra’s 1.232% royalty over BHP’s Mining
Area C and South Flank mine delivered
$92.8 million in revenue during 1H22

t has been a successful start to listed life dends of 100% of NPAT. We also have a Andrews’ reference to the TSX high-
Ifor Deterra Royalties Ltd, now manag- strong organic growth profile thanks to lights the achievements of the royalty/
ing director Julian Andrews just needs to BHP’s development of South Flank which streaming business in North America
convince miners and developers they can will be at full production rates by mid-2024.” where giants such as Franco Nevada Inc
also benefit from a royalty agreement. For all that success and organic growth (market cap $US30 billion) and Wheaton
Deterra listed on the ASX in October potential, Deterra is determined to spread Precious Metals Inc ($US20 billion) have
2020, having been spun out of Iluka Re- its wings further with Andrews declaring been joined by mid-sized companies such
sources Ltd with the cornerstone asset be- that the company was actively seeking as Osisko Gold Royalties Inc ($US2.44
ing a 1.232% royalty on revenue from BHP new opportunities. billion), Labrador Iron Ore Royalties Inc
Ltd’s Mining Area C iron ore operation in The challenge may be finding willing ($US2.42 billion) and Sandstorm Gold Inc
the Pilbara. partners with royalty and streaming agree- ($US1.67 billion).
For investors used to assessing oper- ments having a chequered reputation in Andrews believes Deterra (market cap
ating miners, Deterra’s numbers are eye- Australian mining thanks to the legacy is- $2.43 billion) could be part of the upper
watering. The 1H22 reporting period saw sues of the 1980s and 1990s. echelon of the sector.
revenue of $92.8 million generated for Andrews acknowledged it has been “In the last two decades, there have
EBITDA of $88.7 million (a 96% margin) tough convincing companies of the merits been some substantial businesses built in
and NPAT of $61.7 million. Those total of streaming and royalty agreements given the space and we are bringing that model
profits were handed directly back to share- the legacy of past generations. to Australia,” he said. “It is about building
holders via an 11.68c/share, fully-franked “There is no question that if you talk to on that cornerstone asset to get a broader
dividend. CFOs in TSX-listed companies they al- portfolio.”
Andrews is more than happy to highlight ways include royalty companies as part of Deterra is taking a two-pronged ap-
that performance. the financing process, we are not at that proach to growth; identifying existing roy-
“It is one of the best royalty assets go- level in Australia,” he said. “But there were alties and streams and striking new agree-
ing around, 60 mtpa and because we don’t different forces at play in the 80s and 90s. ments.
have an operational presence we are very Now it is a more sophisticated sector, and “That secondary market is interest-
scalable,” he explained to Paydirt. “We we certainly feel we have a lot to offer. But ing because existing royalties can often
keep overheads manageable, earnings we have to prove it and get over the nega- sit dormant in a portfolio,” Andrews said.
are in the mid-90s and we declare divi- tive perception.” “There is an active market of trading royal-

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