Red Hill converts Pannawonica into a potential royalty stream

Arrow takes a 12-month option over Pannawonica

Red Hill Minerals (ASX:RHI) is preparing to turn a long-held iron ore asset into a potential royalty stream, without committing itself to the next phase of development. The company has signed a binding heads of agreement with Arrow Minerals (ASX:AMD), giving Arrow an exclusive 12-month option to acquire Red Hill's 100%-owned Pannawonica Iron Project in Western Australia.

Arrow will pay a $150,000 option fee in its own shares, priced against its 20-day volume-weighted average price before the agreement was signed. During the option period, Arrow will take responsibility for minimum expenditure, rents and rates on the seven tenements, as well as its own technical and commercial assessment of the project.

Red Hill retains exposure through two royalties

If Arrow exercises the option, Red Hill will receive $1 million in cash or shares at Arrow's election. The more strategically important consideration is an uncapped 1.5% gross revenue royalty on future iron ore sales from the Pannawonica tenements.

“Location of the Pannawonica Iron Project, proposed 1.5% GRR royalty tenements and additional 0.25% GRR AOI, relative to Red Hill’s existing West Pilbara iron ore royalty portfolio.”

“Location of the Pannawonica Iron Project and surrounding tenement holders within the AOI.”

Caption and image © Red Hill Minerals Limited. From “Pannawonica Iron Project Divestment Option with 1.5% Royalty”, 10 Nov 2026.

Red Hill would also receive an additional uncapped 0.25% gross revenue royalty over iron ore produced from specified deposits outside the project tenements but within the surrounding Area of Influence. The agreement gives Red Hill a matching right if Arrow later receives an offer to sell one of the tenements.

The proposed royalty would sit alongside Red Hill's existing portfolio, which includes the producing Onslow Iron royalty, a 2% gross revenue royalty over gold associated with Brightstar's Sandstone Gold Hub and a 1.5% net smelter royalty over Legacy Minerals' Thomson Project. Red Hill's recent reporting showed A$5.97 million of Onslow Iron royalty revenue in the September quarter and A$58.7 million in cash after paying a dividend, providing the financial backdrop for its royalty-led strategy. That earlier income profile was covered in September royalty revenue.

Project carries a reported 62.5 million tonne resource

Pannawonica contains a reported Mineral Resource of 62.5 million tonnes grading 53.4% iron on granted mining leases. Red Hill said it has already completed technical and development work, including environmental and heritage assessments, while the project also has granted haul road tenure and other infrastructure-related approvals and applications.

Those features may help explain why Red Hill is willing to preserve future revenue exposure rather than simply relinquish the asset. Arrow's assessment, however, remains preliminary in commercial terms: the option can be withdrawn during the 12-month period, subject to the specified minimum expenditure requirements.

Capital raising and approvals remain decisive

Arrow cannot exercise the option unless it has first received binding investor commitments for at least $5 million under a capital raising of no less than $5 million. Completion would also require standard conditions, including any necessary ASX approvals and Ministerial consent.

That condition leaves the transaction short of a completed sale. The immediate benefit to Red Hill is the option fee in Arrow shares and the transfer of carrying costs, while the larger payment and royalty package remain dependent on Arrow raising the required funds, exercising the option, completing the transaction and ultimately producing and selling iron ore.