An upsized profit and record production at BHP’s MAC iron ore camp weren’t enough to avoid a dividend haircut.
Deterra Royalties has boosted its profit but downsized its dividend, balancing the sting of weaker commodity prices against record production out of BHP’s MAC iron ore camp.
The royalty company’s full-year profit rose to $155.7 million in FY25 — up just half a per cent on last year’s $154.9 million result.
Underlying earnings climbed 10 per cent to $250.1 million, supported by record sales and outputs from BHP’s Mining Area C (MAC) and gold offtake agreements linked to Deterra’s Trident portfolio.
Revenue for the full year also jumped 10 per cent to $263.4 million.
Still, the growth wasn’t enough to prevent a dividend haircut: Deterra declared a fully franked final dividend of 13 cents per share, taking the total payout for FY25 to 22 cents.
While down from last year’s 29.3 cent dividend, the payout met analyst forecasts and represents 75 per cent of the royalty company’s net profit after tax.
The change also reflects an update to Deterra’s dividend policy last year, when the board shifted from paying out 100 per cent of NPAT to a minimum 50 per cent target.
A dividend reinvestment plan was also introduced to give investors the option of taking shares instead of cash.
Management said the reset was aimed at balancing income with growth, noting Deterra has returned more than $480 million in fully franked dividends since listing in 2020.
The board has kept the minimum payout ratio at 50 per cent for FY26, with a 75 per cent NPAT target.
Tuesday's financial results make it clear that Mining Area C remains the cornerstone of Deterra’s portfolio. Annual production at the BHP iron ore hub reached 140.1 million tonnes, up 12.5 per cent on the prior year.
Meanwhile, South Flank (which forms part of MAC) exceeded nameplate capacity production in its first year following ramp up, triggering a $20 million capacity payment to Deterra.
Higher sales volumes helped offset a 17 per cent drop in realised iron ore prices, which reduced royalty revenue from MAC.
Even so, Deterra chief executive Julian Andrews said the asset continued to perform strongly despite pricing headwinds.
“Mining Area C has continued its outstanding performance with record volumes delivering a capacity payment and underpinning our result,” he said.
The company’s gold offtake contracts contributed $21.5 million in net margin for the year — a record figure amid the precious metal’s price run.
But down the road, Deterra expects long-term growth come from the Thacker Pass lithium project in Nevada, where construction began this year following a final investment decision by Lithium Americas and partner General Motors.
Deterra holds a royalty interest over the project, which is targeting initial production in 2027.
With an 85-year mine life and a planned capacity of 160,000 tonnes of lithium carbonate annually, the company sees Thacker Pass as a sizeable future revenue stream.
Deterra ended the financial year with gearing of 10 per cent, providing scope to fund new acquisitions and sustain shareholder returns.
The company counted $5 million in cost savings after integrating the Trident assets into its royalty portfolio, although overall expenses rose slightly due to higher compliance and business development costs.
Moving forward, Mr Andrews said the company would continue to balance shareholder returns with bulk and battery metal investments.
“Our strategy is to maintain a strong balance sheet while pursuing value-accretive opportunities,” he said.
Deterra, spun out of Iluka Resources in 2020, remains heavily leveraged to MAC royalties but has sought to diversify through recent acquisitions.
Analysts at Morningstar described the company’s royalty model as akin to “a toll road”; able to generate high margins without bearing exposure to mining costs.
Deterra shares closed 0.68 per cent higher following today's financials, valued at $4.45 a pop.
