October 31, 2019 / 12:53 AM / 14 days ago

Australia's Iluka Resources flags possible demerger of BHP royalties asset

(Reuters) - Australia’s Iluka Resources Ltd, the world’s largest producer of zircon, said on Thursday it was considering a demerger of an asset that earns royalties from a BHP Group iron ore operation - Mining Area C (MAC).

Iluka holds a royalty over iron ore produced from specific properties of MAC, resulting from a 1994 agreement. MAC is a large iron ore mining area in Pilbara, and is operated by BHP.

The mineral sands producer said it expected much higher royalties from MAC following the completion of BHP’s development of its South Flank project.

“Thanks to the South Flank development, it (MAC) has significant growth in expected cash flows. In addition, further growth in the value of MAC is possible given the potential for the development by BHP of deposits within the area covered by the royalty agreement,” Iluka Managing Director Tom O’Leary said.

Iluka said the possible demerger is part of a broader review of its two “principal” businesses- its mineral sands operations and MAC.

Shares of the company rose as much as 7% after the announcement.

Reporting by Ambar Warrick in Bengaluru; Editing by Muralikumar Anantharaman

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