Iluka advances demerger plans as South Flank production nears

The demerger, which will result in the formation of two separate ASX-listed businesses, Iluka and Deterra Royalties, will allow Iluka to focus on its mineral sands operations, including its move into rare earths production.

Deterra Royalties will carry Iluka’s royalties business, including royalties from BHP’s Mining Area C (MAC) within the South Flank project in Western Australia.

Post demerger, Iluka will remain operational in mineral sands and rare earths projects in Western Australia, South Australia and Sierra Leone.

The company aims to build organic projects for the long-term as the demand for mineral sands, particularly in Asia, continues to grow.

“Mineral sands demand growth linked to urbanisation and rising living standards over the medium and longer term, with supply from Iluka’s projects able to deliver in what is expected to be a supply constrained industry,” Iluka stated in a presentation to its shareholders.

“Iluka’s executive and management team are committed to the long-term success of the business and reinvesting in its people and assets to deliver sustainable value.”

Deterra Royalties, meanwhile, is expecting iron ore sales volumes to more than double by 2023 due to operating company BHP expanding its South Flank project.

This relationship gives Deterra Royalties exposure to one of the world’s key iron ore mines of more than 30 years’ mine life.

“Current MAC operations are expected to continue until 2050, with two potential mining areas identified by BHP in its long-term plan, Tandanya and Mudlark,” Deterra Royalties stated.

“(These are) likely to fall at least partially within the royalty area, extending the potential for royalty cash flows.

“First ore from South Flank is targeted in the 2021 calendar year, with the project expected to produce ore for more than 25 years.

“The long-term strategy for MAC is to continue operations to 2073.”

Iluka Resources shareholders will vote on the proposed demerger on October 16.