Deterra’s Heavy Debt and Lithium Bets: What Could Go Wrong?

Strong Financial Performance Anchored by Mining Area C

Deterra Royalties Limited has delivered a robust financial performance for the full year ended 30 June 2025, reporting a 10% increase in total revenue to $263.4 million. This growth was primarily underpinned by record production volumes at the Mining Area C (MAC) iron ore mine in Western Australia, which offset the impact of lower realised iron ore prices. The MAC operation, a flagship asset operated by BHP, achieved an annual production of 140.1 million wet metric tonnes, a 12.5% increase on the prior year, with the South Flank mine exceeding its nameplate capacity in its first full year of operation.

Underlying EBITDA rose in tandem by 10% to $250.1 million, maintaining an impressive margin of 95%. This reflects Deterra’s disciplined cost management and operational efficiency, even as total operating expenses increased modestly by 6%, partly due to investments in business development and integration costs from the Trident acquisition.

Dividend Policy Balances Returns and Growth

The company declared a fully franked final dividend of 13.0 cents per share, bringing the total dividend for FY25 to 22.0 cents per share, representing 75% of net profit after tax (NPAT). This payout ratio aligns with the Board’s new target to maintain dividends at 75% of NPAT going forward, signaling a commitment to returning value to shareholders while preserving capital for strategic investments.

Deterra’s net debt position improved to $271 million at 30 June 2025, down from $308 million six months earlier, with gearing at a conservative 10%. This financial flexibility supports the company’s dual focus on sustainable shareholder returns and disciplined capital allocation for growth opportunities.

Progress at Thacker Pass Lithium Project Signals Long-Term Growth

Beyond iron ore, Deterra is advancing its exposure to the battery metals sector through its interest in the Thacker Pass lithium project in Nevada, USA. The project, operated by Lithium Americas Corporation and General Motors, has recently updated its technical report, supporting an expansion plan targeting 160,000 tonnes per annum of lithium carbonate equivalent over an 85-year mine life.

Phase 1 construction is well underway, with over 70% of detailed engineering completed and all long-lead equipment awarded. Capitalised construction costs have reached US$574 million, with completion targeted for late 2027. This development positions Deterra to benefit from the growing demand for lithium, a critical component in electric vehicle batteries and renewable energy storage.

Strategic Acquisition Enhances Portfolio and Revenue Streams

The acquisition of the Trident portfolio in September 2024 has contributed $22.6 million in revenue over ten months, exceeding initial expectations. This move has diversified Deterra’s asset base and added significant option value, complementing its core royalties and offtake agreements across multiple commodities and geographies.

CEO Julian Andrews highlighted the company’s balanced approach to capital allocation, emphasizing ongoing portfolio reviews to identify value realisation opportunities for non-core assets. This strategy aims to sustain strong earnings margins while positioning Deterra for future growth in both traditional and emerging resource sectors.