Raising Deterra Royalties' FVE by 8% Driven by Higher Iron Ore Prices; Shares Overvalued

The royalty over BHP Mining Area C provides cash flow without exposure to capital or operating costs. The low historical cost for the royalty means returns are enviable. BHP is expanding output from 60 million metric tons of iron ore in 2019 to about 145 million metric tons by 2024 through the development of its South Flank mine. This benefits Deterra through a proportionally increased royalty. Iluka receives 1.232% of the Australian dollar value of iron ore sales revenue from the royalty area, free on-board price ex-Port Hedland. Deterra also receives AUD 1 million capacity payments for each 1 million metric tons annualized increase in production above the high-water mark.