Iluka mulls over BHP iron ore royalty demerger

Image: BHP

Iluka Resources will see an increase in iron ore production from its Mining Area C royalty with BHP through the development of the South Flank project in Western Australia.

BHP’s development of South Flank includes the expansion of existing infrastructure at the Mining Area C hub, which is forecast to produce close to 145 million wet metric tonnes a year from 2023 onwards.

This would translate to an increase in annual iron ore production within the Mining Area C royalty area from around 55 million to 135 million dry metric tonnes a year.

Iluka holds a royalty over iron ore produced from specific tenements of BHP’s Mining Area C, under agreements that have in place since 1994.

“On completion of South Flank, the expected increase to annual iron ore production from the royalty area has the potential to materially increase the cash flows generated from Mining Area C, and in turn its value to Iluka shareholders,” Iluka stated.

Iluka has subsequently commenced a corporate and capital structure review of its mineral sands operations in Australia and Sierra Leone, West Africa, and Mining Area C royalty.

The company plans to consider a structural separation of Mining Area C by way of demerger.

“The Iluka board consistently reviews all of our operations and assets to determine what is in the best long term interests of our company and shareholders,” Iluka chairman Greg Martin said.

“Given the substantial scale of the mineral sands business and the prospective scale of Mining Area C, the time is right to formally review Iluka’s corporate and capital structure with the objective of fully capitalising on the respective features of both assets.”

Iluka expects to provide an update on the review in February next year.

The company stated there was no certainty the review would result in a change of structure.

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