Who is Deterra and what does it do?
Deterra is a listed mining royalties company that is bringing the mining royalties business model to Australia. We manage a portfolio of mining royalty assets for the benefit of our shareholders and look to acquire new royalties in a disciplined and value accretive way.
This business model and has been applied very successfully in other markets, particularly in the North American market, but Deterra is the first mining royalty company of scale to list on the ASX.
What is a mining royalty?
Mining royalties are agreements that provide a mining company with a one-time payment in exchange for a share of future revenues. These are extremely flexible agreements that provide many benefits to both the royalty provider and the mining company.
What is a royalty company?
Deterra is a royalty company. We manage a portfolio of mining royalty assets for the benefit of our shareholders and look to acquire new royalties in a disciplined and value accretive way.
Why are royalty companies a better way to invest in resources?
Royalty companies provide a different risk exposure to investing in resources, they reduce operational exposure to a mine but capture the upside. Our portfolio of royalties gives our investors exposure to the “top line” cash flows from high quality mines – this provides commodity price leverage and the participation in any mine life extension or expansion at no further cost. Importantly our royalties do not have direct exposure to the mine’s operating costs, or future project capital requirements.
Does Deterra pay a dividend?
Yes, our capital management policy is an important part of our identity. For FY2021 we declared dividends representing 100% of NPAT, fully franked. Our dividend policy is to pay semi-annual dividends (franked to the maximum extent possible) at a target dividend payout ratio of 100 per cent of net profit after tax (NPAT).
Payment of dividends and dividend policy is determined by the Deterra Board at its discretion and may change over time.
What is the difference between a royalty and a stream?
A mining royalty provides its owner with a percentage of revenue from the mine in exchange for an upfront payment. A stream provides its owner with the right to purchase a proportion of metal produced from the mine at a discount to the prevailing spot price, again in exchange for an upfront payment.
Although there are important differences, broadly a royalty and a stream have a similar economic effect, providing financial exposure to production volume and commodity pricing over a period with limited exposure to operating costs, margins or capital costs, in exchange for an upfront payment.
What are Bulks, Base and Battery Metals?
Deterra focuses on these commodities that are all central to modern civilisation and our daily lives. Deterra’s main royalty is over iron ore, a bulk commodity, which is used to make the steel in everything from our buildings and bridges, through to the cars we drive. Base and battery metals are future facing commodities that are key ingredients to our high tech world. They are expected to face increasing demand as major global thematics such as the clean energy revolution and the electrification of transport change the way we live.
Does Deterra have a competitive advantage by focusing on Bulks, Base and Battery Metals?
30% of the world’s royalties2 are in Bulks, Base and Battery metals and being pursued by only ~10% of the mining royalty company universe. Deterra believes there is therefore a competitive advantage to focus on these commodities.
1 S&P Capital IQ. Average market capitalisation for the peer group during September 2021. Includes; TSX:FNV, NYSE:WPM, NasdaqGS:RGLD, TSX:OR, TSX:TFPM, TSX:SSL, TSX:MMX, TSX:NSR, TSXV:MTA, TSXV:EMX, TSXV:RZZ, TSXV:VOX, TSXV:ELE, AIM:ALS, TSXV:FISH, TSXV:OGN, TSX:LIF, ASX:DRR, TSX:ALS, LSE:APF, NYSE:MSB, TSXV:URC, AIM:TRR
2 Number of royalties from Deterra analysis of S&P Capital IQ.