Insights

Deterra (ASX:DRR) share price falls on weakening iron ore prices

Let’s further investigate.
The post Deterra (ASX:DRR) share price falls on weakening iron ore prices appeared first on The Motley Fool Australia. –

The Deterra Royalties Ltd (ASX: DRR) share price is on the downtrend on Thursday.

At the time of writing, shares in the mining royalties company are 3.75% lower to $4.11. Today’s further share price weakness puts Deterra 8.6% below where it was a month ago.

Iron ore tumbles from its top

For those unaware, Deterra hit the ASX in October 2020 after successfully conducting a demerger from Iluka Resources Limited (ASX: ILU). Unlike many other ASX-listed companies, the way Deterra makes money is quite simplistic. Rather than selling a product or a service, it collects revenue by holding royalties on various mining tenements.

Currently, Deterra holds royalties over 5 tenements with Mining Area C (MAC) being its biggest. This tenement is one of the four hubs within the BHP Group Ltd (ASX: BHP) Western Australian Iron Ore operations. As you can imagine — it had been a good year for the royalty company as it clipped the ticket on 61.6 million wet metric tonnes of iron ore at an average realised price of $200 per tonne. However, since the end of June 2021, iron ore prices have weakened.

To illustrate, iron ore prices have traversed a cliff that began at $214 at the end of June and is now perched at $143 per tonne. Based on some rudimentary calculations, that means the price is down 33.1% in the space of a couple of months.

Unsurprisingly, this has dealt a blow to the momentum in iron ore mining shares such as BHP and Fortescue Metals Group Limited (ASX: FMG) in recent weeks. Likely investors of Deterra are now taking a closer look at what the impact on prices could mean for them.

Calculating the impact

Conveniently, Deterra included a chart in its FY21 full-year results presentation for estimating royalty revenue. Keep in mind this is specifically for the Mining Area C royalty revenue.

Source: Deterra Royalties FY21 Financial Results and Outlook Presentation

Essentially, revenue is a function of iron ore sales and the realised iron ore price. As an exercise, let’s run a hypothetical if output volume was to remain roughly the same but the realised price came down to ~$140 per tonne. In this case, Deterra’s revenue would likely be somewhere around $105 million.

For reference, in FY21 Deterra pulled in $145.2 million in revenue and $94.3 million in net profit after tax.

Deterra share price recap

Since listing in October 2020, the Deterra share price has fallen 10.4%. In comparison, the S&P/ASX 200 Index (ASX: XJO) has rallied 21% over the same period.

On a side note, Deterra is paying a dividend yield of 3.4% based on its dividends paid during the last financial year.

The post Deterra (ASX:DRR) share price falls on weakening iron ore prices appeared first on The Motley Fool Australia.

Should you invest $1,000 in Deterra Royalties right now?

Before you consider Deterra Royalties, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Deterra Royalties wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

Deterra (ASX:DRR) share price lifts after successful demerger
How owning too much Afterpay (ASX:APT) was our biggest regret

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!