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The cornerstone asset of Iluka’s royalty business is a revenue royalty interest over the BHP operated Mining Area C iron ore operation in the Pilbara, Western Australia (MAC Royalty). The MAC Royalty provides payments comprising of:

·         quarterly royalty payments equal to 1.232% of Australian denominated revenue from the MAC Royalty Area; and

·         one-off production capacity payments of A$1 million per one million dry metric tonne increase in the annual production during any 12-month period.

Iluka first received revenue from the MAC Royalty in 2003, and over the period (up to 31 December 2019), it generated a total of A$881 million. In 2019, the MAC Royalty delivered A$85 million in revenue, 53% higher than 2018, largely as a result of higher iron ore prices and prior to any increase in production and sales resulting from the South Flank expansion. 

The MAC Royalty agreement is with the Mining Area C joint venture parties: BHP, Itochu and Mitsui.

Mining Area C is one of four hubs within BHP’s Western Australian Iron Ore operations (WAIO), contributing 60 million wmt of iron ore in 2019 (100%), located in the Pilbara region in the North of Western Australia. The Pilbara region is one of the premier iron ore regions in the world, with Western Australia accounting for more than 50 per cent of global supply in 2018.

Mining Area C has two major mining areas, North Flank and South Flank which as a combined mining hub is expected by BHP to operate for over 30 years2.

·         North Flank: has been in production since 2003 and produced 60 million wmt in 2019.

·         South Flank: is currently in development, with first production targeted to occur in 2021.

Both mining areas within Mining Area C operate as open pit, producing ore which is crushed, beneficiated (where necessary) and blended to create high-grade lump and fines products. Iron ore products are then transported along the Port Headland-Newman rail line to the port facilities at Port Headland.

An indicative outline of the MAC Royalty Area is shown below.