The Deterra Royalties Ltd (ASX: DRR) share price is on watch today as BHP Group Ltd (ASX: BHP) gave its quarterly update.
Why does BHP matter to Deterra?
Deterra receives an ongoing royalty of 1.232% of Australian dollar denominated quarterly FOB revenue from the MAC royalty area. Additional, one-off capacity payments of A$1 million per one million of dry metric tonne (Mdmt) increase in annual mine production are determined for the period ending 30 June 2021. The current demonstrated annual capacity level is set at 59 Mdmt.
Essentially, Deterra receives royalties from BHP for certain iron ore it produces and the revenue it generates.
BHP’s September 2021 quarter
Deterra Royalties helpfully said that to assist investors to understand the relevant operational matters relating to the Mining Area C (MAC) royalty, it extracted certain information from the quarterly update.
MAC achieved production for the September 2021 quarter of 22.3 million wet metric tonnes (Mwmt) (on a 100% basis), which represents a 19% increase compared to the prior quarter.
Deterra Royalties also noted that BHP said that the South Flank ramp up continues, with additional temporary crushing capacity to provide an ore for rail buffer during commissioning. The ramp up to a stated annual full production capacity of 80 Mwmt (on a 100% basis) over three years remains unchanged.
Is the Deterra Royalties share price a good one to consider?
Over the last three months, Deterra Royalties shares have fallen by around 13%.
That’s not surprising considering the iron ore price has fallen quite a lot over the last few months as well.
If investors are wanting a concentrated way of getting exposure to iron ore revenue, then Deterra Royalties could be a good one to consider.
The changing iron ore price can have a strong impact on how much profit Deterra Royalties achieves. But it could be a solid dividend option considering it aims to pay out 100% of its net profit each year to investors.
However, I think there may be other ASX dividend shares out there that could offer more reliability or dividend growth.
