Deterra Royalties (DRR): Australia’s only iron ore royalty trust and the most boring miner on the ASX has released its full-year 2025 results, which were quite pleasing. For DRR, there is minimal scope for surprises on results day, as revenue and production data were pre-released. The company is a royalty trust that passes through payments from BHP with a 95% profit margin. The HNW Portfolios hold a 2.5% in DRR.
Key Points:
- Record Iron Ore Production: Deterra’s net profits after tax were up 1% to $156 million, likely one of the few miners on the ASX that will report increased profits in August. Falling iron ore prices were offset by record production and new gold royalties. Not a bad outcome in the context of BHP -26% fall in profits also reported today.
- Trident Acquisition looking better: The Trident acquisition has seen DRR move away from being a solely iron ore royalty company. During the year, DRR received $22 million in gold offtakes as both production and the price of gold increased. These offtakes will be used to service the debt until the large Thacker Pass lithium mine in Nevada is set to start production in 2027. We had assigned minimal value to these gold royalties when they were acquired.
- Dividends: Deterra announced a full-year fully-franked dividend of 22 cents per share, representing a 75% payout ratio of earnings, as management focused on paying off debt used to acquire Trident.
Portfolio Strategy: DRR is a royalty trust that owns an income stream based on 1.23% of the revenue BHP receives from iron ore mined in the Mining Area C iron ore tenements and gold offtakes from across the Americas, and eventually lithium. As a royalty trust, DRR is not responsible for operating the mine, raising wages, any capital expenditure or clean-up costs, which is an attractive proposition. DRR’s assets are low-cost, and the diversification of royalty revenue streams will reduce volatility in the medium term. DRR trades on a fully franked yield of 5%.
DRR finished up +0.7% to $4.45.
