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.