2023 Results of Operations
LABRADOR IRON ORE ROYALTY CORPORATION
P R E S S R E L E A S E
Toronto, March 12, 2024
2023 RESULTS OF OPERATIONS
Labrador Iron Ore Royalty Corporation (TSX: LIF) announced the results of its operations for the year
ended December 31, 2023.
To the Holders of Common Shares of Labrador Iron Ore Royalty Corporation
The Directors of Labrador Iron Ore Royal ty Corporation ("LIORC" or the "Corporation") pres ent the
Annual Report for the year ended December 31, 2023.
86 Years in Labrador West
Labrador I ron Ore Ro yalty Corporation has been involved in Labrador West for 86 years. Under a
Statutory Agreement wit h Newfoundland made in 1938, a predecessor company , Labrador Mining and
Exploration Limited (“LM&E”), was granted extensive exploration and mining r ights in L abrador West.
LM&E found the iron ore bodies that now constitute the mine operated by Iron Ore Com pany of
Canada. LM&E received grants of leases and licences under the Statutory Agreement. It also received a
grant of surface rights to establish t he town site that became Labrador City. LM&E sublets the leases to
IOC and IOC, with major steel companies as original shareholders, built the infrastructure, mine, railway
and port. Under the sublease, LIORC receives a 7% gross overriding royalty on iron ore produc ts
produced and sold by IOC.
Financial Performance
In 2023, LIORC’s finan cial results were negati vely impacted by lower iron ore prices and lower p ellet
premiums, as well as a less advantageous product mix (lower volumes of pellet sales and high er volumes
of concentrate for sale (“CFS”) sales ). Net income per share for the year ended December 31, 202 3 was
$2.91 per share, which was a 30% decrease over 2022. The cash flow from operations per share for 2023
was $2.38 per share, which was 17% lower than in 2022 due to lower royalty revenues and decreased
dividends from IOC. IOC dividends decreased as a re sult of lower earnings at IOC and a decision by IO C
to pay lower shareholder dividends in order to retain a higher cash balance due in part to expec tations
of higher capital expenditure needs going forward. In 2023, IOC paid divide nds to its shareholders
totalling US$250 million and had a year-end net working capital balance of US$345.8 million, compared
to dividends of US$345 million and a year-end net working capital balance of US$274.7 million in 2022.
In December 2023 steel production in China, which had seen 1.5% growth year -to-date, dropped 15%
relative to December 2022. As a result , global steel production ended the year flat relative to 2022, and
5% lower than 2021, when the market experienced record prices for iron ore . On the supply side, three
producers, Rio Tinto, BHP and Vale, account for ov er half the world’s volume of seaborne iron ore. The
combined production of iron ore in calendar 2 023 by the se producers was 907 million tonnes, an
increase of 2.4% over calendar 2022.
IOC sells CFS based on the the Platts index for 65% Fe, CFR China (t he “65% Fe index”). All references to
tonnes and per tonne prices in this report refer to wet metri c tonnes, other than references to Platts
quoted pricing, which refer to dry metri c tonnes. Historically, IO C’s wet ore contains approximately 3%
less ore per equivalent volume than dry ore. In 2023, the average price for the 65% Fe index was US$132
per tonne, a decrease of 5% year over year. The 65% Fe index continued to be quite volat ile throughout
the year, starting the year at US$1 31 per tonne and trading as low as US$110 per tonne in May, before
ending the year at US$151 per tonne.
In addition to the reduction in iron ore prices , pellet premiums dropped as steel producers, faced w ith
tightening profit margins, substituted high quality pellets with cheaper, lower quality iron feed.
The monthly Atlantic Blast Furnace 65% Fe pellet premium index as quoted by Pla tts (the “pellet
premium”) averaged US$45 per tonne in 2023, a decrease of 38% from 2022.
Rio Tinto disclosed that IOC achieved an average realised price f or pellets, FOB Sept -Îles of
approximately US$155 per tonne, a decrease of 1 8% year over year. Based on sales as reported for the
LIORC Royalty, the overall average price re alized by IOC for CFS and pellets, FOB Sept -Îles was
approximately US$130 per tonne in 2023, a decrease of 15% year over year. The decrease in the average
realized price FOB Sept-Îles in 2023 was a result of lower CFS and pellet prices.
Iron Ore Company of Canada Operations
Operations
Total concentrate production in 2023 was 17.7 million tonnes. This was 7% lower than 2022. While
concentrate production was 5% higher in the fourth quarter of 2023 compared to the fourth quarter of
2022, this was not enough to offset the lower concentrate production in the third quarter due to
unexpected equipment failures with the thickener rake drive and the overland delivery system conveyor
belt and the lower concentrate production in the second quarter due to the impact of the forest fires.
The IOC saleable production (CFS plus pellets) of 16.5 million tonnes in 202 3 was 6% lower than 2022
and was 8% lower than the low end of the range of Rio Tinto’s original annual guidance of 17. 9 to 19.6
million tonnes , due to extend ed plant downtime in t he second and third quarters as a result of the
equipment failures and forest fires referred to above . Saleable production in the fourth quarter of 4.6
million tonnes was 7% higher than the fourth quarter of 2022. In 2023, CFS produc tion of 8.2 million
tonnes was 3% higher than 2022, mainly due to less concentrate being diverted to make pellets. Pellet
production in 2023 of 8.3 million tonnes was 14% lower than 2022, partly as a result of lack of feed, as
well as an increase in the duration of the induration machine 3 rebuild.
Despite the forest fires that limited rail service in the second quarter of 2023, t hird party iron ore
haulage by the Québec North Shore a nd Labrador Railway Company, Inc. (“QNS&L”) of 1 7.7 million
tonnes in 202 3 was 21% higher than in 202 2 and 38% higher than in 2021 , predominantly du e to
increased shipments of iron ore from Champion Iron Limited.
Sales as Reported for the LIORC Royalty
Total iron ore sales tonnage by IOC (CFS plus pellets) of 16. 3 million tonnes in 2023 was 1% lower than
the total sales tonnage in 2022, predominantly due to inventory availability in both 2023 and 2022.
Capital Expenditures
Capital expenditures for IOC were US$362 million in 2023, or 2% lower than 2022. Capital expenditures
in 2023 were 11% lower than the US$407 million that IOC had originally fore casted, mainly due to the
decision by IOC to defer certain capital projects, including the rebuild of shovel 101 at the mine and
culvert replacements along the QNS&L line, and delays in the development of the mine wireless
network, the execution of the Mil l 11 fine circuit redesign project to increase recovery yield , and the
replacement of existing heavy fuel oil steam capacity with an electric boiler to reduce carbon emissions.
Outlook
Rio Tinto’s 2024 guidance for IOC’s saleable production tonnage (CFS p lus pellets) is 16.7 million to 19.6
million tonnes. This compares to 16.5 million tonnes of saleable production in 2023.
Despite ongoing lower pellet premiums, it is expected that IOC will contin ue to focus on maximizing
pellet production in 2023.
The capital expenditures for 2024 at IOC are forecasted by IOC to be approximately US$431 million. The
2024 forecast includes approximately US$80 million of growth and development projec ts. Significan t
development capital expenditure projects include the redesign of Mill 11 Fine Circuit and the
replacement of existing heavy fuel oil steam capacity with an electric boiler, which projects were
previously scheduled for 2023 but d elayed. Significan t sustaining capital expenditure projects include
the track replacement program at QNS&L to ensure the safe and efficient operation of the increased rail
traffic.
In September, IOC announced a major donation of $4 million over two yea rs to the Cégep de Sept-Îles in
Quebec, Canada for the construction of its new pavilion for training, research and innovation in the
railway, industrial maintenance and energy int elligence industries. The new partnership will strengthen
Sept-Îles’ position as a centre of excel lence for specialised training in railway operations and provide
local Indigenous communities with additional training and employment opportunities.
IOC’s o perator, Rio Tin to, continues to be committed to reaching net ze ro emissions by 2050 and is
targeting a 15% reduction in Scope 1 & 2 emissions by 2025 and a 50% reduction by 2030 (1) (from a
2018 equity baseline). Approximately 70% of IOC’s current total greenhouse gas (“ GHG”) emissions
come from pelletizing. In 2023, IOC began its pilot project to test the use o f four new plasma torches in
the pellet plant , which could potentially replace the use of bunker ‘C’ fuel oil in the induration process .
More immed iately, IOC has initiated a project (expected to be c ompleted in the first half of 2025) to
install an electr ic boiler to displace emissions from the usage of the heavy fuel oil boilers, as well as
instrumentation and fuel -efficient burners to further redu ce heavy fuel oi l consumption in the
induration process. Through the Low Ca rbon Economy Fund, the Government of Canada has awarded
$18.1 million (or approximately 25% of the expected total cost of the project) to IOC to support the
project, which is expect ed to eliminate approximately 9% of IOC’s GHG emissions, or a cumulative
reduction of about 2.2 million tonnes of GHG emissions over the lifetime of the project.
Rio Tinto’s approach to addressing Scope 3 emissions is to engage with its customers on clima te change
and work with them to develop the technologies to decarbonize. Steel production currently accounts for
approximately 9% of GHG emissions. Strategies to r educe steel production GHG emissions include
optimizing the use of traditional blast furnaces through the use of higher-grade iron ore (such as th at
produced by IOC), and more importantly processing high-grade direct reduction iron ore pellets (such as
those produced by IOC) for use as direct feed in electric arc furnace s. In regard to this secon d process,
Rio Tinto has stated that it is studying the feasibility of buildi ng a hydrog en-based hot briquett ed iron
plant at IOC. The proposed plant would have access to high-grade Direct Reduction pellets from IOC, and
renewable electricity, with the prospect of producing green hydrogen.
Despite ongoing concerns regarding the global economy and the property se ctor in China in particular,
the outlook for steel dem and and for iron ore prices remains quite robust. Currently, the World Steel
Association is f orecasting a 1.9% increase in global stee l production for 2024. Thus far in 2 024 (January
and February), the average price of the 65% Fe index has been US$142 per tonne, up from an average of
US$132 per tonne in 2023. However, the demand for pellets has re mained weaker and thus far in 202 4
(January and Febru ary) the average pellet premium has averaged US$40 per t onne compared to an
annual average of US$45 per tonne in 2023 and an annual average of US$72 per tonne in 2022.
I would like to take this opportu nity to thank ou r Shareholders for their interest and support and my
fellow Directors for their guidance.
(1) Source: Rio Tinto Climate Change Report 2023.
Respectfully submitted on behalf of the Directors of the Corporation,
John F. Tuer
President and Chief Executive Officer
March 12, 2024
Corporate Structure
LIORC is a Canadian corporation formed to give effect to the conversion of the Labrador Iron Ore Royalty
Income Fund (the “Fund”) into a cor poration under a plan of arrangement completed on July 1, 2010.
LIORC is also the successor by amalgama tion of a predecessor of LIORC with Labrador Mining Company
Limited, formerly a wholly -owned subsidiary o f the Fund, that occurred pursuant to the plan o f
arrangement.
LIORC, directly and through its wh olly-owned subsidiary Hollinger-Hanna, holds a 15.10% equity interest
in IOC and receives a 7% gross overriding royalty on all iron ore product produced, sold and shipped by
IOC and a 10 cent per tonne commission on all iron ore products produced and sold by IOC. Generally,
LIORC pays cash dividends from th e free cash flow generated from IOC to the maximum extent possibl e,
subject to the main tenance of appropr iate levels of working capital. Quarterly dividends are payable to
all shareholders of record on the last business day of each calendar quarter and are paid on or after the
26th day of the following month.
Seven Di rectors are responsible for the governan ce of the Corporation and also serve as directors of
Hollinger-Hanna. The Directors, in addition t o managing the aff airs of the Corporation and Holling er-
Hanna, oversee the Co rporation’s interests in IOC. The Audit and Governance and Human Resources
Committees are composed of four independent Directors.
Taxation
The Corporation is a taxable corporat ion. Divid end inco me received from IOC and Hollinger -Hanna is
received tax free while royalty income is subject to inc ome tax and Newfoundlan d and Labrador ro yalty
tax. Expenses of the Corporation include administrative expenses. Hollinger -Hanna is a taxab le
corporation.
Income Taxes
Dividends to a shareh older that are paid with in a particular year are to be included i n the calculation of
the shareholder’s t axable income for that year. All dividends paid in 2023 were “eligible dividends”
under the Income Tax Act.
Review of Operations
Iron Ore Company of Canada
The income of the Corporation is entirely dependent on IOC as the only assets of the Corporation and its
subsidiary are related to IOC and its operations. IOC is one of Canada’s largest iron ore producers,
operating a mine, concentrator and pellet plant at Labrador City, Newfoundland and Labrador, and is
among the top five producers of seaborne iron ore pellets in the world. It has been producing and
processing iron ore concentrate and pellets si nce 1954. IOC is strategically situated to serve mar kets
throughout the world from its year-round port facilities at Sept-Îles, Québec.
IOC has ore rese rves sufficient for 21 years at current production rates with additional resources of a
greater magnitude. It curren tly has the nominal capacity to ex tract around 55 million tonnes of crude
ore annually . The crude ore is process ed into iron ore concentrat e and then either sold or converted
into many different qualities of iron ore pellets to meet its customers’ needs. T he iron ore concentrate
and pellets are transported to IOC ’s port facilities at Sept -Îles, Québec via its wholly -owned QNS&L, a
418 kilomet er rail line which links the mine and the port. From there, the products are shipped to
markets throughout North America, Europe, the Middle East and the Asia-Pacific region.
IOC’s 2023 sales tonnages totaled 16.3 million tonnes, comprised of 8.4 million tonnes of iron ore pellets
and 7.9 million tonnes of iron ore concentrate. Saleable production in 2023 was 8.3 million tonnes of
pellets and 8.2 million tonnes of CFS. IOC generated ore sales r evenues (excluding third p arty ore sales)
of $2,830 million in 2023 (2022 - $3,184 million).
Selected IOC Financial Information
2023 2022 2021 2020 2019
($ in millions)
Operating Revenues(1) 3,122 3,426 4,147 3,099 2,719
Cash Flow from Operating
Activities
788
1,021
1,955
837
1,302
Net Income 568 1,028 1,551 842 749
Capital Expenditures (2) 494 460 498
288 294
(1) 2023, 2022 and 2021 Ore sales revenue is presented on a net basis (net of related freight costs) to align with IFRS financial statements presentation.
(2) Reported on an incurred basis.
IOC Royalty
The Corporation holds cert ain leases and licenses co vering approximately 18,200 hecta res of land near
Labrador City. IOC has subleased certain portions of these lan ds from which it currently mines iron ore.
In return, IOC pays the Corpo ration a 7% gross overri ding royalty on all sa les of iron ore products
produced from these lands. A 20% t ax on the royalty is payable to the Government of Newfoundland
and Labrador. Fo r the five ye ars prior to 2023, the av erage royalty net of the 20% tax h ad been $162.1
million per year and in 2023 the net royalty was $158.8 million (2022 - $184.6 million).
Because the royalty is “off -the-top”, it is not dependent on the profitability of IOC. Howev er, it is
affected by changes in sales volumes, iron ore prices and, because iron ore prices are denominated in US
dollars, the United States - Canadian dollar exchange rate.
IOC Equity
In addition to the royalty interest, the Corporation dir ectly and thr ough i ts wholly owned sub sidiary,
Hollinger-Hanna, owns a 1 5.10% equity interest in IOC. The other share holders of IOC are Rio Tin to
Limited with 58.72% and Mitsubishi Corporation with 26.18%.
IOC Commissions
Hollinger-Hanna has the right to receive a payment of 10 cents per tonne on the products produced and
sold by IOC. Pursuant to an agreement, IOC is obligated to make the payment to Hollinger-Hanna so long
as Hollinger-Hanna is in existence and solvent. In 2023, Hollinger-Hanna received a total of $1.6 million
in commissions from IOC (2022 - $1.6 million).
Quarterly Dividends
Dividends of $ 2.55 per share were declared in 2023 (2022 – dividends of $ 3.10 per share). These
dividends were allocated as follows:
Period
Record
Payment
Dividend
Income
Total
Dividend
Ended Date Date per Share ($ Million)
Mar. 31, 2023 Mar. 31, 2023 Apr. 26, 2023 $0.50 $32.0
Jun. 30, 2023 Jun. 30, 2023 Jul. 26, 2023 0.65 41.6
Sep. 30, 2023 Sep. 29, 2023 Oct. 26, 2023 0.95 60.8
Dec. 31, 2023 Dec. 29, 2023 Jan. 26, 2024 0.45 28.8
Dividend to Shareholders – 2023 $2.55 $163.2
Mar. 31, 2022 Mar. 31, 2022 Apr. 26, 2022 $0.50 $32.0
Jun. 30, 2022 Jun. 30, 2022 Jul. 26, 2022 0.90 57.6
Sep. 30, 2022 Sep. 29, 2022 Oct. 26, 2022 1.00 64.0
Dec. 31, 2022 Dec. 30, 2022 Jan. 26, 2023 0.70 44.8
Dividend to Shareholders – 2022 $3.10 $198.4
The quarterly dividends are payable to all shareholders of record on the last business day of each
calendar quarter and are paid on or after the 26th day of the following month.
Management’s Discussion and Analysis
The following is a discussion of the consolidat ed financial condition and results of opera tions of
the Corporation for the y ears ended December 31, 2023 and 2022. Th is discussion s hould be
read in conjunction with t he consolidate d financial statements of the Corporation and notes
thereto for the years ended Decembe r 31, 2023 and 2022 which are prepared in accordance
with Intern ational Financial Report ing Standards (“I FRS”) as issued by the International
Accounting St andards Board (“IASB”) and all amounts are shown in Canadian dollars unless
otherwise indicated.
Overview of the Business
The Corp oration is a Canadian corporation resulting from the conve rsion of the Fund into a
corporation under a plan of arrangement co mpleted on July 1, 2010. LIORC is also the successor
by amalgamation of a predecessor of LIORC with Labrador Mining Company Limited, formerly a
wholly-owned subsidiary of the Fund, that occurred pursuant to the plan of arrangement.
The Corporation is econo mically dependent on the operations of IOC. IOC’s earnings and cash
flows are affected b y the volume and mix of iron ore products p roduced and sold, costs of
production and the prices recei ved. Iron ore dem and and prices fluctuate and are affected by
numerous factors which include demand for steel and steel products, the relative exchange rat e
of the US d ollar, global and regional dem and and production, political and economic conditions
and production costs in major producing areas.
Financial Highlights
2023 2022 2023 2022
Revenue $ 54.9 $ 48.3 $ 201.3 $ 232.9
Equity earnings from IOC $ 26.2 $ 19.7 $ 84.7 $ 154.1
Net income $ 51.4 $ 44.6 $ 186.3 $ 265.4
Net income per share $ 0.80 $ 0.70 $ 2.91 $ 4.15
Dividend from IOC - $ 15.4 $ 50.4 $ 69.1
Cash flow from operations $ 26.4 $ 60.5 $ 152.5 $ 184.2
Cash flow from operations per share (1) $ 0.41 $ 0.95 $ 2.38 $ 2.88
Adjusted cash flow (1) $ 30.2 $ 41.9 $ 161.5 $ 197.8
Adjusted cash flow per share (1) $ 0.47 $ 0.65 $ 2.52 $ 3.09
Dividends declared per share $ 0.45 $ 0.70 $ 2.55 $ 3.10
(1) This is a non-IFRS financial measure and does not have a standard meaning under IFRS.
Please refer to Standardized Cash Flow and Adjusted Cash Flow section in the MD&A.
(in millions except per share information)
Twelve Months Ended
December 31,
Three Months Ended
December 31,
The lower revenue, net income and equity earnings achieved in 202 3 as compared to 2022 were
mainly due to lower iron ore prices an d lower pellet premiums, as well a s a less advantageous
product mix (lower volumes of pellet sales and higher volumes of CFS sales). Iron ore prices and
pellet premiums were lower as a result of flat demand for st eel and low m argins causing steel
producers to favour cheaper, low quality iron ore over high quality iron ore products. Total sales
tonnage (pellets and CFS) at IOC were 1% lower in 2023 than 2022, predominantly due to
operational issues (thickener, overl and conveyor, rebuild of induration machine #3, and forest
fires, as referenced above) leading to inventory availability issues.
Fourth quarter 202 3 sales tonnage (pel lets and CFS) was higher year-over-year by 9% due to
higher saleable production and improved inventory availabil ity. Royalty revenue was $ 54.1
million for the quarter as compared to $47.6 million for the same period in 2022. Fourth quarter
2023 cash flow f rom operations was $ 26.4 million or $0. 41 per share compared to fourth
quarter 2022 cash flow from op erations of $60.5 million or $ 0.95 per share. LIORC received no
IOC dividend in the four th quarter of 2023 (2022 - $15.4 million or $0. 24 per share). Equit y
earnings from IOC amounted to $ 26.2 million or $0. 41 per share in the fourth quarter o f 2023
compared to $19.7 million or $0.31 per share for the same period in 2022.
Operating Highlights
IOC Operations 2023 2022 2023 2022
Sales(1)
Pellets 2.29 1.94 8.37 9.17
Concentrate for sale ("CFS") (2) 2.04 2.02 7.92 7.21
Total(3) 4.33 3.96 16.29 16.38
Production
Concentrate produced 5.01 4.76 17.73 19.09
Saleable production
Pellets 2.39 2.29 8.31 9.61
CFS 2.21 2.02 8.17 7.95
Total(3) 4.60 4.31 16.48 17.56
Average index prices per tonne (US$)
65% Fe index(4) $ 139 $ 111 $ 132 $ 139
62% Fe index(5) $ 128 $ 99 $ 120 $ 120
Pellet premium(6) $ 37 $ 61 $ 45 $ 72
(1) For calculating the royalty to LIORC.
(2) Excludes third party ore sales.
(3) Totals may not add up due to rounding.
(4) The Platts index for 65% Fe, CFR China.
(5) The Platts index for 62% Fe, CFR China.
(6) The Platts Atlantic Blast Furnace 65% Fe pellet premium index.
(in millions of tonnes)
Twelve Months Ended
December 31,December 31,
Three Months Ended
IOC’s total concentrate pr oduction in 2023 of 17.7 million tonnes , was 7% lower than 202 2.
While concentrate producti on was 5% high er in the fourth quarter of 2023 compared to the
fourth quarter of 2022, this was not enough to of fset the lower conc entrate production in the
third qu arter due to unexpected equipment failur es with the thi ckener rake drive and the
overland d elivery system conveyor belt and the lower concentrate production in the second
quarter due to the impact of the forest fires. IOC’s total saleable production (CFS plus pellets) of
16.5 million tonnes in 2023 was 6% lower than 2022, due to extended plant downtime in th e