The February reporting season continued today with a pleasing result from a quite “boring” company

 

Deterra Royalties (DRR): Australia’s only iron ore (Australia) and lithium (USA) royalty trust and the most boring miner on the ASX, released its half-year 2026 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 to BHP with a 95% profit margin. The HNW Core holds 2.7% with the Income Portfolio holds a 3.5% weight in DRR.

Key Points:

  • Record Profits: Deterra’s net profits after tax were up 36% to $87 million, driven by a 6% increase in iron ore sales volumes and 5% increase in iron ore pricing to $139 per tonne. If BHP can match first half production volumes through the second half, DRR will receive a capacity payment in August of $8 million.
  • Strong Balance Sheet: Over the past 6 months, DRR has sold both its gold and silver royalty streams for a combined US$80 million ($60 million for gold, $22 million for silver). These transactions have seen net debt reduce by $120 million over the year to sit at $149 million and reduce gearing to 6%.
  • Dividend Up: Deterra announced a half-year fully franked dividend of 12.4 cents per share, representing a +38% increase on last year.
  • Growth Ahead: 2027 will see profits increase as their Lithium mine in Nevada comes online, which is the world’s largest known lithium resource with an 85 year mine life. This is a low risk project for DRR, with the U.S. Department of Energy providing construction funding, US government taking an equity stake and General Motors the lithium off-take. DRR will receive 1.05% gross revenue as a royalty.
  • Outlook: Although management did not point to specific guidance over the next six months, they did state that they would be disappointed if they did not acquire one or two new royalty streams over the next 12-18 months. Failing that dividends to shareholders will increase.

 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 eventually from lithium in the United States. 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, long-life and the diversification of royalty revenue streams should reduce volatility in the medium term. DRR trades on a fully franked yield of 6%.

DRR finished up +4% to $4.31