MELBOURNE, Oct 22 (Reuters) - Set to become Australia's biggest mining royalty company, Deterra Royalties Ltd lists shares in Sydney on Friday with plans to scout for new deals to diversify its portfolio beyond iron ore, its chief executive said on Thursday.

Deterra, being spun off from mineral sands producer Iluka Resources Ltd is expected to join Australia's top 200 listed companies on its market debut, with a valuation of up to A$3 billion ($2.13 billion), according to an estimate from brokerage Shaw & Partners.

The major asset at Deterra - meaning 'from the earth' in Latin - is an iron ore royalties stream from global giant BHP Group's South Flank operations in Western Australia. In royalty streaming, a company pays a miner upfront for part of its metal production.

"Although we won't be limiting our geographic scope, we will be more likely to be focused on opportunities in Australia than offshore," Chief Executive Julian Andrews told a media briefing.

"We will have a fairly broad mandate so we won't be restricting the types of commodities that we look at," he said. Typically streaming companies have tended to focus on precious metals.

Royalty streaming has become popular with miners in recent years as a way to raise capital. For investors, it can offer a way to get exposure to rising metals prices with lower risk than investing directly in a miner.

Already well established in North America, streaming firms are expanding their global footprint. Vancouver's Wheaton Precious Metals Corp is planning a British listing by year-end, potentially the largest metals and mining company to join the London Stock Exchange since Glencore in 2011.

As BHP expands its Mining Area C (MAC), from which Deterra receives royalties, as part of a $2.9 billion South Flank expansion, proceeds are expected to help Deterra fund growth.

In 2019, the royalty earned Iluka A$85 million in revenue, up by 53% on the year before, largely due to higher iron ore prices.

"We will have low debt at inception, but given the cash flow MAC has generated and we would expect it to generate, that provides significant additional capacity to fund opportunities through debt if we need it," Andrews said, adding that Deterra will target 100% payout of net profit in dividends. ($1 = 1.4086 Australian dollars) (Reporting by Melanie Burton; Editing by Kenneth Maxwell)