Overview

Iluka holds a royalty over iron ore produced from specific tenements of BHP's Mining Area C (MAC) province in Western Australia. The royalty results from a 1994 restructure of deferred payments owed to Consolidated Gold Fields Australia, an Iluka antecedent.

MAC is a large iron ore mining area located in the Pilbara region in the North of Western Australia, operated by BHP Billiton. The agreement provides for a revenue-based royalty and production capacity payments consisting of:
  • ongoing quarterly royalty payments of 1.232 per cent of ‚ÄčAustralian denominated revenue from the MAC Royalty Area; and
  • a series of one-off payments of AUD$1 million per million tonne increase in the annual production level from the MAC Royalty Area during any 12 month period ending 30 June above the previous highest annual production level.

For information on the MAC royalty’s financial contribution, please refer to the latest company results.

Demerger Plans

Iluka is preparing to put a proposal to shareholders regarding a demerger of the Mining Area C (MAC) royalty business from the mineral sands business via an in specie distribution.
If approved, a demerger holds the prospect of creating two separate, stand-alone ASX listed companies, each with quality assets and promising futures.
A demerger resolution will be put to shareholders at an Extraordinary General Meeting to be held later in 2020.

South Flank Development

The South Flank project was approved by BHP in June 2018 and is now more that 50% complete. The project is expected to deliver a production increase within the MAC royalty area of approximately 80 million dry metric tonnes per annum from 2023, increasing the potential cash flows generated by Iluka’s royalty business substantially. First ore from the project is targeted by BHP for 2021, with a mine life of over 25 years.
 

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