Mineral sands miner Iluka Resources is moving closer to spinning off its ‘cash cow’ – the royalty rights to part of BHP’s huge WA iron ore mining and export operations.
The spin-off was revealed late last year but put on hold by the COVID-19 pandemic and then reactivated a couple of months ago.
The demerger will create a company that, along with Fortescue metals, be a pure iron ore play and will attract investor interest for that reason.
In documentation filed with the ASX yesterday Iluka chairman Greg Martin is urging shareholders to back the proposal, saying it is “the best means to deliver value” from the historically significant evolution of the Mining Area C province.
“The separation of these two businesses into two separate ASX listed companies has potential to unlock shareholder value over time,” Mr Martin said on Thursday.
Iluka wants to demerge the royalty interest in BHP’s Mining Area C into a separately listed entity named Deterra Royalties.
Iluka’s involvement in the tenements dates back to 1966 when its subsidiary then known as Consolidated Gold Fields Australia was part of a joint venture at Mount Goldsworthy – the first Pilbara iron ore mine.
Since production from the Mining Area C tenements began in 2003, the royalty has contributed $929 million in revenue to Iluka and more is set to come with BHP’s South Flank mine, which is expected to boost annual iron ore production within the MAC royalty area by about 80 million tonnes from 2023.
The project is more than 76% complete.
Iluka plans to retain a 20% stake in Deterra – up from 15% as planned earlier this year – as a long-term investment.
Iluka shareholders will vote on the demerger at an extraordinary general meeting on October 16. That will be an online meeting.
If the demerger proceeds, eligible shareholders will be entitled to receive one share in Deterra for every Iluka share held at the demerger record date (4.00 pm AWST on October 26, 2020).
Iluka shares rose 2.1% to $9.99.
