@jcmleng im a holder of DRR, also a holder of FNV and WPM. I have written about royalty companies on the site before, i like them. why? i don't really want the grief of investing in operating miners with operational issues, unless you want to get into he weeds with them like bear77.

so my commodity exposure is basically through these lower-risk plays. it is almost impossible for them to go broke, so i like that. NPAT margins 50-60%. they should be long-term wealth generators--unlike most of the resource sector.

specifically DRR, i didn't like the acquisition they did in lithium and gold, although it was reasonably small. they may get lucky on gold and be able to sell it for a good price help offset what they paid for the lithium (i think they got stitched up), let's see. i don't think they have the expertise of FNV or WPM. but the MAC royalty is very good.

thats my strategy on brief here.

Yes @jcmleng - Deterra is almost entirely the MAC (Mining Area C) Iron Ore Royalty that covers most of BHP's iron ore mining areas in the Pilbara region of WA - including all of their latest mine, South Flank. MAC was owned by mineral sands company Iluka (ILU) for decades and it got spun out into Deterra a few years ago after a few years of shareholder activism that was based on claims that the royalty wasn't being properly valued as part of ILU.

There are a lot of positives about MAC including that it based on revenue derived from the area rather than profits, and that there is a an additional series of one-off payments of $1 million per million tonne increase for additional tonnes mined in any 12 month period over and above what was mined in the previous year, as detailed below:

• ongoing quarterly royalty payments of 1.232 per cent of ​Australian denominated revenue from the MAC Royalty Area; and
• a series of one-off payments of AUD$1 million per million tonne increase in the annual production level from the MAC Royalty Area during any 12 month period ending 30 June above the previous highest annual production level.

For information on Deterra, visit the website at www.deterraroyalties.com 

Source: https://www.iluka.com/investors-media/deterra-royalties/

So Deterra get paid on both revenue generation by BHP from Mining Area C (MAC) - regardless of BHP's costs - as well as benefitting from annual volume increases in mined tonnes.

The main negative is that last time I looked MAC was the main royalty that DRR own, with the others either being insignificant or earning zero revenue because the areas they covered were not being currently mined.

That would be OK except for the staff costs and other overheads that DRR claim against that income they receive from BHP for doing absolutely nothing. DRR management claim that they're always busy evaluating other royalty opportunities, but if that's true, their evaluations invariably lead them to pass on those opportunities, or the vast majority of them, so the question then becomes what value does Deterra management really provide to Deterra shareholders? Are they getting paid appropriately? And if so, what for?

If you look at much larger royalty companies in north America, who have a number of active royalties, they tend to be brilliant business models and the management do seem to be adding value there because they are managing those portfolios of royalties and passing the majority of their earnings through to their shareholders. Deterra do that too, but only on a single royalty (MAC), and the main negative is that a lot of people think that Deterra should be either passing more of their revenue through to shareholders OR buying additional royalty streams to broaden their royalty portfolio.

All that said, I haven't really looked at DRR in detail since about a year after they were spun out of Iluka; I was holding ILU during that period and received DRR shares and added to them, sold my ILU, then sold my DRR after it became obvious that the South Flank ramp-up was going to take longer than many had anticipated and therefore the income that the MAC royalty would generate for DRR was not going to be as large as many analysts were expecting, and I believe my assumptions did prove to be correct and the DRR SP did drop significantly but then gained ground again later when South Flank really hit its straps and the royalty income really picked up. By which time I'd moved on.

Hope that helps.

So for now, I'd say it's a play on iron ore demand, or just on iron ore, because, let's face it, BHP aren't going to slow down production due to increased supply; As one of the world's lowest cost iron ore producers they will just keep pumping it out and they'll always be making some money on it. However because the royalty is mostly based on revenue, the price of iron ore does impact the income that Deterra get from BHP - so there's that - but it's all about iron ore anyway, at this stage. It might change later if DRR buy more royalties related to other commodities.

P.S. - based on @Solvetheriddle's comments, looks like Deterra might have bought some more royalties since I last looked at them, so perhaps they are more diversified now. It was really 99% MAC when I last looked at them, which is a really good royalty, but didn't justify the headcount and overheads at DRR in my opinion - at that time.