Iluka Considers Spinning Off MAC Royalty

   By David Winning 
 

SYDNEY--Iluka Resources Ltd. (ILU.AU) is revisiting the possibility of spinning off an iron-ore royalty that has become more valuable as partner BHP Group Ltd. (BHP.AU) invests more heavily in Australia's Pilbara region.

Perth-based Iluka said the decision to consider separating the royalty--known to investors as Mining Area C--followed a significant increase in the current and future "materiality of MAC's contribution to Iluka's overall valuation" as BHP progresses the development of the South Flank iron-ore project in Pilbara.

The review will consider the demerger of MAC, among options that include possible changes to dividend policies. Capital requirements, business plans, management structures, and cost and tax implications will also be examined, Iluka said.

Iluka's royalty, calculated either on each ton of iron ore sold to customers or produced from the mining area, was secured as part of the sale of a joint venture interest in the early 1990s.

Iluka is the world's largest producer of zircon, which makes ceramic products opaque and is used in everything from wash basins to kitchen tiles. The company is also a major exporter of minerals such as rutile, used to make pigments in paint.

"Given the substantial scale of the mineral sands business and the prospective scale of MAC, the time is right to formally review Iluka's corporate and capital structure with the objective of fully capitalizing on the respective features of both assets," Chairman Greg Martin said.

An update on the review's progress is planned alongside Iluka's annual result in February.

Write to David Winning at [e-mail]

(END) Dow Jones Newswires

October 30, 2019 17:39 ET (21:39 GMT)

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