Labrador Iron ORE Royalty Corporation - Results FOR the Third Quarter Ended
PRESS RELEASE
Toronto, November 5, 2024
LABRADOR IRON ORE ROYALTY CORPORATION - RESULTS FOR THE THIRD QUARTER ENDED SEPTEMBER 30,
2024
To the Holders of Common Shares of Labrador Iron Ore Royalty Corporation
The Directors of Labrador Iron Ore Royalty Corporation ("LIORC" or the "Corporation") present the third quarter report
for the period ended September 30, 2024.
Financial Performance
In the third quarter of 2024, LIORC’s financial results were negatively affected by lower iron ore prices and lower pellet
premiums, as well as lower concentrate for sale (“CFS”) sales tonnages, partly offset by higher pellet sales tonnages.
Royalty revenue for the third quarter of 2024 of $41.5 million was 12% lower than the third quarter of 2023 and 21%
lower than the second quarter of 2024. Equity earnings from Iron Ore Company of Canada (“IOC”) were $9.7 million in
the third quarter of 2024 compared to $23.1 million in the third quarter of 2023 and $18.5 million in the second quarter
of 2024. Net income per share for the third quarter of 2024 was $0.53 per share, which was a 32% decrease over both
the same period in 2023 and the second quarter of 2024. LIORC received a dividend from IOC in the amount of $20.3
million in the third quarter of 2024, compared to a dividend from IOC in the amount of $30.6 million in the third quarter
of 2023. The adjusted cash flow per share for the third quarter of 2024 was $0.68 per share, which was 23% lower than
in the same period in 2023 and 39% lower than the second quarter of 2024. While adjusted cash flow is not a recognized
measure under International Financial Reporting Standards (“IFRS”), the Directors believe that it is a useful analytical
measure as it better reflects cash available for dividends to shareholders.
Iron ore prices during the third quarter of 2024 were lower than in the third quarter of 2023, as they were negatively
impacted by a reduction in global steel production and an increase in iron ore shipments from the largest seaborne iron
ore producers. According to the World Steel Association, global crude steel production was down 6% in the third quarter
of 2024 compared to the third quarter of 2023. On the supply side, shipments in the quarter ended September 30, 2024,
in aggregate from the world’s three largest iron ore producers (Rio Tinto, Vale and BHP) increased by 1% over the prior
quarter and by 1% over the same quarter last year.
IOC sells CFS based on the Platts index for 65% Fe, CFR China (“65% Fe index”). All references to tonnes and per tonne
prices in this report refer to wet metric tonnes, other than references to Platts quoted pricing, which refer to dry metric
tonnes. Historically, IOC’s wet ore contains approximately 3% less ore per equivalent volume than dry ore. In the third
quarter of 2024, the 65% Fe index averaged US$114 per tonne, a 9% decrease over the prior quarter and a 9% decrease
over the average of US$125 per to nne in the third quarter of 2023. The monthly Atlantic Blast Furnace 65% Fe pellet
premium index as quoted by Platts (the “pellet premium”) averaged US$39 per tonne in the third quarter of 2024, down
20% from an average of US$49 per tonne in the same quart er of 2023, as lower steel margins continued to cause steel
producers to substitute higher quality pellets with less expensive lower quality iron ore.
Based on sales as reported for the LIORC royalty, the overall average price realized by IOC for CFS and pellets, FOB Sept-
Îles, was approximately US$109 per tonne in the third quarter of 2024, compared to approximately US$127 per tonne in
the third quarter of 2023.
Iron Ore Company of Canada Operations
Operations
IOC concentrate production in the third quarter of 2024 of 3.8 million tonnes was 10% lower than the same quarter of
2023 and 1% lower than the second quarter of 2024, due to an 11 -day site-wide shutdown following forest fires in mid-
July. Concentrate production was also negatively affected by the rescheduling of major maintenance from the second
quarter and revisions to the mine plan which resulted in a higher strip ratio and a lower weight yield.
IOC saleable production (CFS plus pellets) of 3.6 million tonnes in the third quarter of 2024 was 11% lower than the same
quarter of 2023. Pellet production of 2.2 million tonnes was 2% higher than the corresponding quarter in 2023,
predominantly due to reliability issues and the rebuild of induration machine number 3 in the third quarter of 2023. CFS
production of 1.4 million tonnes was 26% lower than the same quarter of 2023 mainly due to lower production of
concentrate referred to above and the higher production of pellets.
Sales as Reported for the LIORC Royalty
Total iron ore sales tonnage by IOC (CFS plus pellets) of 4.0 million tonnes in the third quarter of 2024 was 3% higher than
the total sales tonnage for the same period in 2023 and 5% lower than the second quarter of 2024. IOC sales tonnage in
the quarter was negatively impacted by the availability of inventory due to the lower production tonnage and the timing
of vessels. Pellet sales tonnages were 11% higher than the same quarter of 2023 and 20% lower than the second quarter
of 2024. CFS sales tonnages were 5% lower than the same quarter of 2023 and 18% higher than the second quarter of
2024.
Outlook
In its third quarter production report, Rio Tinto disclosed that, because of an 11 -day stie-wide shutdown following the
forest fires in July and the resulting revised mine plan and maintenance schedule, the 2024 guidance for IOC’s saleable
production (CFS plus pellets) was reduced to 15.5 million to 16.3 million tonnes, down from the previous guidance of 16.7
to 19.6 million tonnes. This compares to 16.5 million tonnes of saleable production in 2023. IOC has also amended its
2024 capital expenditure forecast. IOC is now forecasting that its 2024 capital expenditure will be US$381 million, down
from the originally budgeted US$431 million. To date, IOC’s capital expenditures are on track with the new forecast.
Looking forward, iron ore pricing appears challenging. Recently, the World Steel Association made significant downward
revisions to its 2024 and 2025 steel demand outlook for China and the rest of the world, reflecting the ongoing downturn
in the Chinese real estate sector, as well as the persistent weakness in manufacturing alongside lingering global economic
headwinds. It is now forecasting that global steel demand will drop by 0.9% in 2024 to 1,751 Mt, before rebounding by
1.2% in 2025 to 1,772 Mt. It’s prior forecast saw global steel production reaching 1,793 Mt in 2024 and 1,815 Mt in 2025.
Since the end of the third quarter, iron ore prices improved briefly at the beginning of October following a number of
positive announcements regarding government economic stimulus measures in China, before falling back at the end of
the month as more information about the stimulus was released. The 65% Fe index reached a monthly high of US$125
per tonne on October 7, before dropping back to close the month at US$119 per tonne.
On April 16, 2024, the Federal Finance Minister tabled the Federal Budget 2024 which proposed an increase in the capital
gains inclusion rate for corporations from one half to two thirds for capital gains realized on or after June 25, 2024. If this
tax change is passed into law, it will be accounted for in the period of enactment and reflected in the financial results at
that time. LIORC's deferred income taxes payable includes a capital gain equal to the carrying value of its investment in
IOC less its cost. If the capital gains rate change is enacted, it would have the impact of increasing deferred income taxes
by approximately $23.7 million or $0.37 per share. This is a non-cash entry and will only impact LIORC in the event it sells
its shares in IOC.
LIORC has no debt and at September 30, 2024 had positive net working capital (current assets less current liabilities) of
$29 million, which included the third quarter net royalty payment received from IOC on October 25, 2024 and the LIORC
dividend in the amount of $0.70 per share paid to shareholders on the next business day.
Respectfully submitted on behalf of the Directors of the Corporation,
John F. Tuer
President and Chief Executive Officer
November 5, 2024
Management’s Discussion and Analysis
The following discussion and analysis should be read in conjunction with the Management’s Discussion and Analysis
section of Labrador Iron Ore Royalty Corporation’s (“LIORC” or the “Corporation”) 2023 Annual Report, and the financial
statements and notes c ontained therein and the September 30, 2024 interim condensed consolidated financial
statements.
Overview of the Business
The Corporation’s revenues are entirely dependent on the operations of IOC as its principal assets relate to the operations
of IOC and its principal source of revenue is the 7% royalty it receives on all sales of iron ore products by IOC. In addition
to the volume of iron ore sold, the Corporation’s royalty revenue is affected by the price of iron ore and the Canadian –
U.S. dollar exchange rate. The first quarter sales of IOC are traditionally adversely affected by the general winter operating
conditions and are usually 15% – 20% of the annual volume, with the balance spread fairly evenly throughout the other
three quarters. Because of the size of individual shipments, some quarters may be affected by the timing of the loading
of ships that can be delayed from one quarter to the next.
Financial Highlights
The lower revenue, net income and equity earnings from IOC achieved in the third quarter of 2024 as compared to 2023
were mainly due to lower iron ore prices and lower pellet premiums, as well as lower CFS sales tonnages, partly offset by
higher pellet sales tonnages. While the third quarter of 2024 sales tonnage (CFS plus pellets) was negatively impacted by
the availability of inventory due to the lower production tonnage and the timing of vessels, it was 3% higher than the
same quarter in 2023, due to greater inventory issues experienced in 2023 . While CFS sales tonnage was 5% lower than
the same quarter in 2023, pellet sales tonnage was 11% higher.
The lower iron ore prices and lower pellet premiums resulted in royalty income of $41.5 million for the quarter as
compared to $47.0 million for the same period in 2023. Third quarter 2024 cash flow from operations was 43.0 million or
$0.67 per share compared to $65.7 million or $1.03 per share for the same period in 2023. LIORC received an IOC dividend
in the third quarter of 2024 in the amount of $20.3 million or $0.32 per share compared to $30.6 million or $0.48 per
2024 2023 2024 2023
Revenue $ 42.3 $ 47.7 $ 152.1 $ 146.4
Equity earnings from IOC $ 9.7 $ 23.1 $ 62.6 $ 58.5
Net income $ 33.6 $ 49.4 $ 143.1 $ 134.9
Net income per share $ 0.53 $ 0.77 $ 2.24 $ 2.11
Dividend from IOC $ 20.3 $ 30.6 $ 61.8 $ 50.4
Cash flow from operations $ 43.0 $ 65.7 $ 155.1 $ 126.1
Cash flow from operations per share (1) $ 0.67 $ 1.03 $ 2.42 $ 1.97
Adjusted cash flow (1) $ 43.6 $ 56.8 $ 145.8 $ 131.3
Adjusted cash flow per share (1) $ 0.68 $ 0.89 $ 2.28 $ 2.05
Dividends declared per share $ 0.70 $ 0.95 $ 2.25 $ 2.10
(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)
Nine Months Ended
September 30,
Three Months Ended
September 30,
share for the same period in 2023. Equity earnings from IOC amounted to $9.7 million or $0.15 per share in the third
quarter of 2024 compared to $23.1 million or $0.36 per share for the same period in 2023.
Operating Highlights
IOC sells CFS based on the 65% Fe index. In the third quarter of 2024, the 65% Fe index averaged US$114 per tonne, a
9% decrease over the average of US$125 per tonne in the third quarter of 2023, as prices were negatively impacted by a
reduction in global steel production and an increase in iron ore shipments from the largest seaborne iron ore producers.
The monthly pellet premium averaged US$39 per tonne in the third quarter of 2024, down 20% from an average of US$49
per tonne in the same quarter of 2023, as lower steel margins continued to cause steel producers to substitute higher
quality pellets with less expensive lower quality iron ore.
Based on sales as reported for the LIORC royalty, the overall average price realized by IOC for CFS and pellets, FOB Sept-
Îles was approximately US$109 per tonne in the third quarter of 2024 compared to approximately US$127 per tonne in
the third quarter of 2023. The decrease in the average realized price FOB Sept-Îles in 2024 was a result of lower CFS prices
and lower pellet premiums, partly offset by a higher percentage of pellet sales.
IOC Operations 2024 2023 2024 2023
Sales(1)
Pellets 2.03 1.82 7.01 6.08
Concentrate for sale ("CFS") (2) 1.99 2.10 5.61 5.89
Total(3) 4.02 3.92 12.61 11.96
Production
Concentrate produced 3.83 4.27 12.45 12.72
Saleable production
Pellets 2.17 2.12 6.83 5.92
CFS 1.43 1.94 4.94 5.96
Total(3) 3.60 4.06 11.77 11.88
Average index prices per tonne (US$)
65% Fe index(4) $ 114 $ 125 $ 125 $ 130
62% Fe index(5) $ 100 $ 114 $ 112 $ 117
Pellet premium(6) $ 39 $ 49 $ 41 $ 47
(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)
Nine Months Ended
September 30,September 30,
Three Months Ended
Standardized Cash Flow and Adjusted Cash Flow
For the Corporation, standardized cash flow is the same as cash flow from operating activities as recorded in the
Corporation’s cash flow statements as the Corporation does not incur capital expenditures or have any restrictions on
dividends. Standardized cash flow per share was $0.67 for the quarter (2023 - $1.03).
The Corporation also reports “Adjusted cash flow” which is defined as cash flow from operating activities after
adjustments for changes in amounts receivable, accounts payable and income taxes recoverable and payable. It is not a
recognized measure under IFRS. The Directors believe that adjusted cash flow is a useful analytical measure as it better
reflects cash available for dividends to shareholders.
The following reconciles standardized cash flow from operating activities to adjusted cash flow.
3 Months Ended
Sept. 30, 2024
3 Months Ended
Sept. 30, 2023
9 Months Ended
Sept. 30, 2024
9 Months Ended
Sept. 30, 2023
(in millions except per share information)
Standardized cash flow from operating
activities
$43.0 $65.7 $155.1 $126.1
Changes in amounts receivable, accounts
payable and income taxes payable
0.6
(8.9)
(9.3)
5.1
Adjusted cash flow $43.6 $56.8 $145.8 $131.2
Adjusted cash flow per share $0.68 $0.89 $2.28 $2.05
Liquidity and Capital Resources
The Corporation had $40.3 million in cash as at September 30, 2024 (December 31, 2023 - $13.2 million) with total current
assets of $82.9 million (December 31, 2023 - $67.5 million). The Corporation had working capital of $29.0 million as at
September 30, 2024 (December 31, 2023 - $27.2 million). The Corporation’s operating cash flow was $43.0 million and
the dividend paid during the quarter was $70.4 million, resulting in cash balances decreasing by $27.4 million during the
third quarter of 2024.
Cash balances consist of deposits in Canadian dollars with a Canadian chartered bank. Amounts receivable primarily
consist of royalty payments from IOC. Royalty payments are received in U.S. dollars and converted to Canadian dollars on
receipt, usually 25 days after the quarter end. The Corporation does not normally attempt to hedge this short-term foreign
currency exposure.
Operating cash flow of the Corporation is sourced entirely from IOC through the Corporation’s 7% royalty, 10 cents
commission per tonne and dividends from its 15.10% equity interest in IOC. The Corporation normally pays cash dividends
from its free cash flow generated from IOC to the maximum extent possible, subject to the maintenance of appropriate
levels of working capital.
The Corporation has a $30 million revolving credit facility with a term ending September 18, 2026 with provision for
annual one-year extensions. No amount is currently drawn under this facility (2023 – nil) leaving $30.0 million available
to provide for any capital required by IOC or requirements of the Corporation.
John F. Tuer
President and Chief Executive Officer
Toronto, Ontario
November 5, 2024
Forward-Looking Statements
This report may contain “forward -looking” statements that involve risks, uncertainties and other factors that may cause the actual results,
performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-
looking statements. Words such as “may”, “will”, “expect”, “believe”, “plan”, “intend”, “should”, “would”, “anticipate” and other similar terminology
are intended to identify forward- looking statements. These statements reflect current assumptions and expectations regarding future events and
operating performance as of the date of this report. Forward -looking statements involve significant risks and uncertainties, should not be read as
guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A
number of factors could cause actual results to vary significantly, including iron ore price and volume volatility; the perfo rmance of IOC; market
conditions in the steel industry; fluctuations in the value of the Canadian and U.S. dollar; mining risks that cause a disruption in operations and
availability of insurance; disruption in IOC’s operations caused by natural disasters, severe weather conditions and public health crises, including the
COVID-19 outbreak; failure of information systems or damage from cyber security attacks; adverse changes in domestic and global eco nomic and
political conditions; changes in government regulation and taxation; national , provincial and international laws, regulations and policies regarding
climate change that further limit the emissions of greenhouse gases or increase the costs of operations for IOC or its customers; changes affecting
IOC’s customers; competition from other iron ore producers; renewal of mining licenses and leases; relationships with indigenous groups; litigation;
and uncertainty in the estimates of reserves and resources. A discussion of these factors is contained in LIORC’s annual info rmation form dated
March 12, 2024 under the heading, “Risk Factors”. Although the forward- looking statements contained in this report are based upon what
management of LIORC believes are reasonable assumptions, LIORC cannot assure investors that actual results will be consistent with these forward-
looking statements. These forward-looking statements are made as of the date of this report and LIORC assumes no obligation, except as required
by law, to update any forward-looking statements to reflect new events or circumstances. This report should be viewed in conjunction with LIORC’s
other publicly available filings, copies of which can be obtained electronically on SEDAR+ at www.sedarplus.ca.
Notice:
The following unaudited interim condensed consolidated financial statements of the Corporation have been prepared
by and are the responsibility of the Corporation’s management. The Corporation’s independent auditor has not
reviewed these interim financial statements.
LABRADOR IRON ORE ROYALTY CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
September 30, December 31,
(in thousands of Canadian dollars) 2024 2023
(Unaudited)
Assets
Current Assets
Cash 40,282$ 13,192$
Amounts receivable 42,655 53,872
Income taxes recoverable - 465
Total Current Assets 82,937 67,529
Non-Current Assets
Iron Ore Company of Canada ("IOC")
royalty and commission interests 218,180 222,901
Investment in IOC 548,279 546,614
Total Non-Current Assets 766,459 769,515
Total Assets 849,396$ 837,044$
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable and accrued liabilities 8,875$ 11,542$
Dividend payable 44,800 28,800
Taxes payable 264 -
Total Current Liabilities 53,939 40,342
Non-Current Liabilities
Deferred income taxes 136,230 137,370
Total Liabilities 190,169 177,712
Shareholders' Equity
Share capital 317,708 317,708
Retained earnings 347,037 347,927
Accumulated other comprehensive loss (5,518) (6,303)
659,227 659,332
Total Liabilities and Shareholders' Equity 849,396$ 837,044$
-
Approved by the Directors,
John F. Tuer Patricia M. Volker
Director Director
As at