The market may be charging higher on Thursday but the same cannot be said for the Resolute Mining Limited (ASX: RSG) share price.

In morning trade the gold miner’s shares crashed 13% lower to 92 cents.

This latest decline means the Resolute share price is now down 45% from its 52-week high.

Why is the Resolute share price crashing lower?

Investors have been selling the company’s shares in recent weeks due to developments in Mali where its key Syama operation is based.

Last month Resolute’s shares came under pressure following the resignation of Mali’s President after he was detained by mutinying soldiers. Given that the company’s Syama gold operation contributed 59.4% of its total production during the June quarter, any disruption could have a major impact on its results.

This morning the company revealed that its Syama operation is about to be disrupted, but not because of the change of government.

According to the release, it has received a strike notice from the local workers union informing of plans to observe a 10-day strike order if certain demands are not met. The principal demand of the union relates to a request to reinstate Syama workers who have been stood down on full pay due to the company’s COVID-19 protocols.

Resolute has implemented a comprehensive, company-wide response to the coronavirus pandemic. At Syama, a decision was made to limit the travel of non-essential workers from outside the surrounding region to the mine site. This decision was made to limit the risk of transmission of the virus between separate regional populations and to maintain Syama’s isolation from the virus.

Resolute advised that it has informed the union that the strike notice is irresponsible, opportunistic, and represents a breach of the commitments made in the Syama Workforce Stability Agreement. It is currently considering how to respond to the strike notice.

In light of the uncertainty this is causing, Resolute has withdrawn its production and cost guidance for FY 2020.

More reading

• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
• These were the worst performing ASX 200 shares in August
• 5 things to watch on the ASX 200 on Tuesday
• Resolute Mining share price on watch after half-year result

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The CLINUVEL Pharmaceuticals Limited (ASX: CUV) share price has been a very strong performer on Thursday.

In morning trade the biopharmaceutical company’s shares are up 5.5% to $20.80.

Why is the CLINUVEL share price storming higher?

Investors have been buying CLINUVEL’s shares after it announced plans to expand its SCENESSE drug (afamelanotide 16mg) to treat the disease xeroderma pigmentosum (XP).

XP is rare genetic disorder affecting 1 in 1 million in the United States and Europe. Sufferers have the most extreme deficiencies in their DNA repair processes, leading to a 10,000-fold increase in their risk of skin cancer. There is no known cure for XP at present.

Having commercialised SCENESSE in Europe and the USA for the rare genetic disorder Erythropoietic Protoporphyria (EPP), CLINUVEL is now aiming to confirm how intervention with the drug enhances elimination of photoproducts and regeneration of DNA.

CLINUVEL’s Chief Scientific Officer, Dr Dennis Wright, commented “In SCENESSE we have a hormone acting on various organs and receptors, but most of all known to protect human DNA. Our task is to confirm how DNA regeneration occurs within genetically affected patients and healthy subjects.”

“Tragically, XP provides an extreme model of what happens to our skin if UV-induced damage is left unrepaired. From a young age, XP patients are incapable of responding to DNA damage caused by UV exposure and experience disfiguring and aggressive skin cancers.”

“After two decades of clinical research, I’m delighted that our team can now focus on the XP patients who are severely affected by UV radiation leaving them a short life expectancy. We will facilitate treatment for the first patient in the next few weeks,” Dr Wright said.

The company advised that the first clinical results from the DNA repair program are expected to be reported in 2021.

More reading

• Why Afterpay, Clinuvel, IDP Education, & Saracen shares are charging higher
• These are the 10 most shorted ASX shares
• These are the 10 most shorted ASX shares
• Clinuvel share price sinks lower following disappointing FY 2020 result
• These are the 10 most shorted shares on the ASX

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Sky Network Television Ltd (ASX: SKT) share price has sank in early morning trade following the release of the company’s FY20 results to the market. At the time of writing, the Sky share price has retreated 9.38% to 14.5 cents. Let’s take a look at what Sky achieved for the last financial year.

FY20 results

For the 12 months that ended on 30 June, Sky reported a mixed result although its performance was in line with the upper-end of its guidance range. Revenue declined 6% to NZ$747.6 million but with notable increases in its revenue streaming segment, jumping 35%

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell 28% to NZ$164.2 million.

On the company’s bottom line, Sky reported a loss after tax of NZ$156.8 million that included a non-cash impairment of goodwill of NZ$177.5 million. Operating profit before the impairment stood at NZ$44.9 million.

Net cash from operating and investing activities came in at NZ$82.7 million. Sky advised that the solid financial position will allow it to navigate through any further COVID-19 uncertainty and deliver on strategy in FY21.

The board determined that no final dividend will be paid as the company intends to reinvest available cash flow during FY21.

COVID-19 response

Sky noted that strong engagement and viewership levels were recorded in its satellite and streaming services during the lockdown period. Access to news, shows, documentaries, movie and e-sports content kept customers informed and entertained.

In addition, the company took proactive steps to minimise its customer ‘spin down’ from sport packages that proved to be effective. The complimentary upgrades were well received, with only 8% of sport satellite customers downgrading their packages.

The return of premium live sport in May 2020 saw the previously downgraded packages renew their subscriptions in the final five weeks of FY20. As a result, Sky’s sport segment saw double digit growth in May and June.

Commercial customers were heavily impacted by COVID-19 restrictions. However, the relaxing of domestic travel restrictions and faster than anticipated return of sport saw a return of normal billing for licenced customers from July.

Outlook

Moving into FY21, Sky provided a guidance of revenue in the range of NZ$660 – NZ$700 million. Furthermore, it anticipates EBITDA will be between NZ$125 – NZ$140 million and a net profit after tax of NZ$10 – NZ$20 million.

Sky announced its intention to enter the broadband market as it sees more customers watching content over broadband. The company is currently trailing its broadband service and is expected to expand to a group of customers before Christmas, followed by a full launch in 2021.

About the Sky share price

The Sky share price has been on a downhill trend for the last 6 years losing up to 98% of its value. Looking at the last 12 months, the Sky share price is up 26% from its 52-week low of 11.5 cents, but is down 74% from this time last year.

More reading

• Stock market crash part 2: how I’d capitalise on buying opportunities to make a million
• Nearmap (ASX:NEA) share price halted for $90 million capital raising
• Whispir (ASX:WSP) share price sinks 9.5% lower on major shareholder sell-down
• Warren Buffett is investing in this hot tech IPO. Should you?
• This LIC will be shut down if it doesn’t meet target share price

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The chances of a second stock market crash continue to be elevated. Risks such as an ongoing rise in the number of coronavirus cases, as well as political challenges caused by factors such as the US election and Brexit, may lead to weak investor sentiment in the coming months.

As such, there could be a buying opportunity for long-term investors. Through purchasing high-quality companies at low prices on a regular basis, you could increase your chances of making a million.

Buying high-quality stocks at low prices

Should a second market crash occur, buying the best stocks you can find at the lowest prices could be a sound move. They may not only stand a better chance of surviving a potential economic downturn, but may be better placed to benefit from a likely long-term recovery.

In terms of the quality of a company, this can be assessed through its financial performance. For example, companies with manageable debt levels and a long track record of outperforming their peers in periods of economic difficulty could be more attractive than their rivals. Furthermore, assessing the size of a company’s competitive advantage may help you to find the most attractive businesses. For example, they may have unique products or strong brand loyalty that allows them to deliver rising profitability.

Buying such companies at low prices during a market crash may improve your portfolio’s long-term outlook. While high-quality businesses may not be among the cheapest stocks around, they could be worthy of premium valuations relative to their sector peers.

Buying regularly in a market crash

Should a second market crash occur, buying shares regularly in small amounts may be a logical approach. After all, it is exceptionally difficult to know how long a market decline will last, as well as when its recovery will take place. Therefore, investing a lump sum may mean that you are either too early, or too late, and fail to obtain the most attractive prices.

Many sharedealing providers offer regular investing services. They provide a convenient means of buying stocks on a monthly or weekly basis. In many cases, they charge lower commission versus the standard rate, which may make regular investing no more expensive than investing a lump sum in the stock market.

Making a million

Clearly, it will take time to make a million – even when investing after a market crash. However, the stock market’s high single-digit returns over recent decades show that investing regularly can lead to a surprisingly large nest egg.

For example, investing $750 per month over 30 years could produce a seven-figure portfolio if an 8% annual return is achieved. By investing when shares are cheap, such as after a market decline, you could obtain an even higher rate of return, and improve your chances of making a million.

More reading

• Sky Network (ASX:SKT) share price plummets 9% on FY20 results
• Nearmap (ASX:NEA) share price halted for $90 million capital raising
• Whispir (ASX:WSP) share price sinks 9.5% lower on major shareholder sell-down
• Warren Buffett is investing in this hot tech IPO. Should you?
• This LIC will be shut down if it doesn’t meet target share price

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Nearmap Ltd (ASX: NEA) share price won’t be taking part in the tech rebound on Thursday after it requested a trading halt.

Why is the Nearmap share price in a trading halt?

This morning Nearmap requested a trading halt whilst it undertakes a capital raising.

According to the release, the company has launched a fully underwritten institutional placement to raise a minimum of $70 million and a non-underwritten share purchase plan aiming to raise a further $20 million.

The pricing of the placement will be determined via an institutional bookbuild with an underwritten floor price of $2.69 per new share. This represents a 6.9% discount to its last close price.

Whereas the share purchase plan will be undertaken at the lower of the placement price and a 2.5% discount to its five-day volume weighted average price at the closing date.

Why is Nearmap raising funds?

Management advised that it is raising the funds to capitalise on the momentum of the business and the tailwinds in the industry.

The proceeds of its capital raising will be deployed across a number of areas of investment. These include scaling its investment in sales and marketing, particularly in North America.

It also intends to expand its product solutions to high-value use cases, which it believes will provide greater engagement and utility to customers.

In addition to this, funds will be used to accelerate the roll out of the HyperCamera3 systems. This will generate expanded coverage at higher fidelity and enable the expansion into new geographical markets.

“Significant opportunity”

CEO and Managing Director, Dr Rob Newman, commented: “Nearmap has continued to scale rapidly over a short period of time and saw particularly strong ACV growth from three core industry verticals in FY20. The Roofing, Insurance and Government verticals have benefited from the increasing attractiveness of our premium content types and we see a significant opportunity for Nearmap to establish a leadership position in each.”

These verticals accounted for 70% of its North American ACV portfolio at the end of FY 2020.

“With our unique technology and subscription business model which no other aerial imagery company has been able to replicate at scale and with the acceleration of investments into strategic growth initiatives, Nearmap continues to focus on the global opportunity to become the world’s leading provider of subscription-based location intelligence.”

Concurrent with the placement, the company non-executive director Ross Norgard is offloading approximately 4.2 million shares. This represents 15.1% of his holding and will leave the director with a relevant interest of 23.6 million shares.

More reading

• Are these the ASX growth shares to buy right now?
• 5 things to watch on the ASX 200 on Thursday
• ASX 200 drops over 2%, tech and oil fall
• How I’d turn $5,000 into $100,000 with ASX growth shares
• Why I would buy Appen and these ASX tech shares after the selloff

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia has recommended Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Whispir Ltd (ASX: WSP) share price is missing out on the tech rebound on Thursday.

In morning trade the cloud-based communication platform provider’s shares are down 9.5% to $3.85.

As a comparison, the S&P ASX All Technology index is up 2.7%.

Why is the Whispir share price dropping lower?

The Whispir share price has come under pressure after it revealed that some large shareholders have sold down their stakes in the company.

According to the release, 53,000,917 shares were released from escrow on Wednesday. These shares were the final tranche subject to escrow from Whispir’s IPO in June last year.

From these, 20,320,950 shares were sold to new and existing domestic and international investors at a price of $3.81 per share after the market close yesterday. This is a discount of over 10% to its last close price and represents a total consideration of approximately $77.4 million.

Given that Whispir listed on the ASX last week at a price of $1.60, it appears as though these early investors have decided to crystallise some their impressive gains.

According to the AFR, one of those shareholders is believed to be Telstra Corporation Ltd (ASX: TLS). At the last count its Telstra Ventures Fund was the second largest shareholder behind the company’s CEO Jeromy Wells. 

Mr Wells commented: “I would like to thank our formerly escrowed shareholders for their support, before, during and after our IPO in June 2019. Their support has been instrumental in enabling our growth and listing on the ASX.”

“Whispir’s communications workflow platform has a significant global market opportunity, supporting and facilitating long-term macro communications trends in process automation, digital customer engagement and broader digital transformation projects. New customer wins in the second half of FY20 ensure we are well-positioned for growth in FY21 and we remain focused on increasing our international footprint as we welcome new institutional investors to the WSP register,” he concluded.

More reading

• Why I would buy Appen and these ASX tech shares after the selloff
• Why the Telstra share price is a good buy for dividends
• Top ASX growth shares to buy in September 2020
• 3 ASX shares for growth, income, and value investors to buy right now
• ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Whispir Ltd. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended Whispir Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

It’s not every day that Warren Buffett, famously averse to tech companies that aren’t named after fruit, as well as IPOs in general, agrees to buy into a hot tech IPO. Yet that’s exactly what Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) is preparing to do.

To be clear, it’s highly likely that the Oracle of Omaha is not making the call personally and instead one of his investing lieutenants (Todd Combs or Ted Weschler) made the decision, but presumably Buffett had to give his blessing for such a risky investment. Let’s see if you should consider investing in Snowflake like Berkshire Hathaway is about to.

Half a billion from Berkshire

Cloud-based data-warehousing start-up Snowflake filed its initial S-1 Registration Statement a couple weeks ago and submitted an amended version this week that included some important updates. For starters, Snowflake expects to price the stock at $75 to $85 and raise approximately $2.7 billion in fresh capital. That would put the unicorn’s market cap at $20.9 billion to $23.7 billion — quite a jump from the $12.4 billion valuation that it fetched in February of this year in a Series G funding round.

Snowflake also disclosed that it will be conducting two concurrent private placements with Berkshire Hathaway and Salesforce Ventures, the venture capital arm of salesforce.com (NYSE: CRM), that will close immediately after the IPO. While Salesforce Ventures is a fixture in Silicon Valley private markets — it already has a stake in Snowflake — Berkshire Hathaway is decidedly not.

Buffett’s investment holding company has agreed to purchase $250 million worth of Class A stock through a private placement. Based on the midpoint of the expected range ($80), that would be good for 3.13 million shares. On top of that, Berkshire Hathaway is buying another 4 million shares from former Snowflake CEO Robert Muglia at the IPO offer price, or another $323 million based on the midpoint. The end result will be Berkshire Hathaway spending over half a billion dollars to buy a 2.6% stake in Snowflake.

A value investor buying a high-growth tech IPO

What does Berkshire Hathaway see in Snowflake? In no uncertain terms, Snowflake’s numbers are fantastic. Revenue skyrocketed 174% last fiscal year, and sales are up 133% in the first half of this fiscal year. The company now has 3,117 total customers, of which 56 have contributed over $1 million in trailing-12-month product revenue. That cohort of big spenders has more than doubled over the past year, up from 22 at the end of July 2019.

Remaining performance obligations (RPO), which represents future revenue under contract but not yet recognized, has more than tripled over the past year to $688.2 million. Existing customers continue to expand their relationships with Snowflake, as evidenced by a net revenue retention rate of 158%.

These types of figures will appeal to any growth investor, but Buffett tends to prefer value stocks instead of unprofitable start-ups, particularly those that are valued at nearly 60 times sales. Combs and Weschler are surely behind the move; let’s see if they can prove Buffett wrong about tech IPOs.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

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• Warren Buffett is dumping banks and buying gold, should you?

Evan Niu, CFA owns shares of Salesforce.com. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: short September 2020 $200 calls on Berkshire Hathaway (B shares), long January 2021 $200 calls on Berkshire Hathaway (B shares), and short January 2021 $200 puts on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The new manager of troubled Blue Sky Alternatives Access Fund Ltd (ASX: BAF) has made an unprecedented guarantee to current and future shareholders.

In an extraordinary general meeting this week, 99.97% of the listed investment company’s shareholders voted to hand over the reins to Wilson Asset Management.

BAF has been treading water ever since allegations surfaced that its previous manager exaggerated the magnitude of its assets.

Shareholders had watched in horror as their price went from a peak of $1.25 to just 68 cents in 2018.

But Wilson Asset Management chair Geoff Wilson on Wednesday sought to comfort investors with a promise he claimed was the “first of its kind in the Australian market”.

Wilson Asset Management would live and die by what it calls the “premium target”.

“The principle of the Premium Target is simple: the company’s share price needs to trade at a premium to its pre-tax NTA for a period of one month for it to be achieved,” Wilson said in a memo. 

“If this does not occur at least three times during the next five years, shareholders will automatically have the right to vote to terminate the arrangements with Wilson Asset Management, and to liquidate the company.”

Blue Sky’s ironically colourful history

BAF has been in the headlines for all the wrong reasons.

The Brisbane-based LIC was born out of parent and manager Blue Sky Alternative Investments Ltd (ASX: BLA) in 2014.

BAF is an “alternative” fund because it provides retail investors access to opportunities they can’t normally reach. These include water rights, venture capital and private real estate, according to Wilson.

Back in 2018, short-seller Glaucus Research went public with accusations that Blue Sky had been exaggerating its assets under management while charging clients sky-high fees.

The company denied this was the case and even reported Glaucus to the Australian Securities and Investments Commission for price manipulation.

But eventually Blue Sky was forced to revalue its assets from $4 billion to $2.8 billion.

While all this was happening, the BAF share price tumbled. That was when Wilson first approached BAF about taking over.

While BAF was favourable about the change in management, BLA blocked the move.

Days before BLA went into administration in May last year, BAF even told its parent to stop touching its money.

After the collapse of BLA, BAF was then free to court Wilson again.

So now more than a year later, Wilson has finally been allowed in the cockpit.

No wonder Geoff Wilson was forced to make an unprecedented guarantee to BAF’s scarred shareholders.

“I personally hold 6.4 million shares in the company,” said Wilson this week.

“We will engage with current shareholders and market to new shareholders with a plan to return the share price to a premium to net tangible assets.”

More reading

• Warren Buffett is investing in this hot tech IPO. Should you?
• Is the Shekel Brainweigh (ASX:SBW) share price a millionaire maker?
• Iluka share price on watch after Deterra demerger update
• Should you ‘buy the dip’ with ASX shares?
• This devastated sector is ripe for buying: fundie

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The Shekel Brainweigh Ltd (ASX: SBW) share price burst through a falling market on Wednesday with a rise of 45.45%. This company is an advanced weighing company which has integrated artificial intelligence into its products. In addition, it has a market cap of $44.48 million and looks set to grow quickly. 

There is a massive difference between the spark of invention and the process of innovation. Specifically, this is what has attracted me to this company. It is doing the very hard work of innovation to improve a developing niche. The company has two verticals, the Shekel Scales and Retail Innovation. In the retail innovation sector is the company’s flagship development technology, the micro-market project, ‘Capsule’.

The company is in an advanced stage in a pilot for this product, and investors are expecting to hear positive news after a halt to trading on Wednesday.

The Shekel Brainweigh difference

Something happened while we were in COVID-19 lockdown that changed everything. Yet, we all took it in our stride. Physical money basically disappeared. Sure, some places still accept it, but contact-less shopping appears inevitable. 

Shekel Brainweigh has a range of products designed for the contact-less shopping world. First, AI-enabled smart retail bays for grab-and-go service. The bays provide retail insights for shop owners, minimise out-of-stock, and control stock quantities to manage inventory. 

Second, the companies smart vending machines. Specifically, these include real time sales, inventory status, and automated replenishment plans. Moreover, the company has filled its first order for a minimum of 1200 machines. 

Third, in the retail innovation area is the walk-in, walk-out Capsule micro market, a truly innovative product. It boasts flawless identification and tracking, payment without checkout, is available 24/7, and is autonomous. Lastly, it uses product aware shelves, providing it with inventory management capabilities. 

The core business

The company sells “best in class” weighing technology to the retail and healthcare sectors globally. In healthcare, this includes special care scales, baby and neo-natal scales, as well as a line of products in incubators and warmers for premature babies.  In retail, it sells self-checkout technology for blue-chip OEMs

Foolish Takeaway

Shekel Brainweigh is a disruptive technology company, wrapped in a successful precision instruments manufacturer. Among other things, the company is vying for its share of the 32,000 micro markets locations it believes will exist in the US alone by 2022.

It is not the only company in either of these sectors. Nevertheless, the technology is a big differentiator. It also appears to have a good grasp on how to bring these technologies to a global market. 

More reading

• If the ASX BNPL party is over, what’s next?

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Iluka Resources Limited (ASX: ILU) share price will be on watch today after the release of an update on its demerger plans.

What did Iluka announce?

This morning Iluka released its booklet in relation to the proposed demerger of its Deterra Royalties business. This demerger will result in two independent ASX-listed companies.

Iluka notes that it will remain a global leader in the mineral sands industry, whereas Deterra will be the largest independent royalty company listed on the ASX with its royalty over Mining Area C in Western Australia’s Pilbara region as its cornerstone asset. This iron ore asset is operated by BHP Group Ltd (ASX: BHP).

What next for shareholders?

Iluka shareholders will have the opportunity to vote on the demerger at a meeting on 16 October 2020.

If the demerger proceeds, eligible shareholders will receive one share in Deterra for every Iluka share held at the demerger record date of 26 October. Iluka will retain a minority shareholding interest of 20% in Deterra as a long-term investment.

According to the release, the Iluka board strongly encourage shareholders to support the demerger by voting in favour of the demerger resolution. It has concluded that the proposal is in the best interests of shareholders and has potential to unlock shareholder value over time.

Why demerge the business?

Management notes that listed royalty companies provide investors with exposure to the value created through the discovery, extraction, and sale of natural resources, typically without full exposure to some of the key operating risks of mining businesses.

It also explained that royalty companies that hold revenue-based royalties typically have an advantaged position in a mining company’s capital structure, accessing cash flows ahead of debt and equity capital providers.

Finally, given its structure, Deterra will also have little use for the cash it generates. As a result, its intended dividend policy will be to payout 100% of net profit after tax. This could make it an attractive option for income investors in the future.

More reading

• Iluka share price on watch as half-year profit falls 17%

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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