Labrador Iron ORE Royalty Corporation - Results FOR the First Quarter Ended
P R E S S R E L E A S E
Toronto, May 8, 2024
LABRADOR IRON ORE ROYALTY CORPORATION - RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2024
To the Holders of Common Shares of Labrador Iron Ore Royalty Corporation
The Directors of Labrador Iron Ore Royalty Corpor ation ("LIORC" or the "Corporation") present the first quarter report
for the period ended March 31, 2024.
Financial Performance
In the first quarter of 2024, LIORC’s financial results benefited from higher sales tonnages of pellets and concentrate for
sale (“CFS”), partly offset by lower iron ore prices and pellet premiums. Royalty revenue for the first quarte r of 2024 of
$56.0 million was 20% higher than the first quarter of 20 23 and 3% higher than the fourth quarter of 2023. Equity
earnings from Iron Or e Company of Canada (“IOC”) were $34.3 million in the first quarter of 2024 compared to $21.8
million in the first quarter of 2023 and $ 26.2 million in the fourth quarter of 2023. Net income per share for the first
quarter of 2024 was $0.93 per share, whic h was a 36% increase over the same period in 2023 and a 15% increase over
the fourth quarter of 2023. T he adjusted cash flow per share for the first quarter of 202 4 was $0.49 per share, which
was 20% higher than in the same period in 202 3 and 4% higher than the fourth quarter of 202 3. 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.
Ongoing uncertainty regarding the outlook for global steel demand and an unexpected increase in iron ore shipments
from Brazil contributed to an almost 25% decrease in iron ore prices during the first quarter of 2024. According to the
World Steel Association, global crude steel production was up 1% in the first quarter of 2024 compared to the first
quarter of 2023. However, concerns regarding steel demand, particularly as a result of China’s troubled property sector
and lower profit margins for steel producers has put pressure on the demand for higher quality iron ore and pellets. On
the supply side, decreases in seaborne iron ore shipments from western Australia were offset by a 15% increase in iron
ore shipments by Vale due to operational improvements during Brazil’s traditionally rainy season.
IOC sells concentrate for sale (“CFS”) based on the Platts index for 65% Fe, CFR China (“65% Fe index”). All references to
tonnes and per tonne pric es in this report refer to wet metric tonnes, oth er 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 first quarter of 20 24, the 65% Fe index averaged US$136 per tonne, a 2% decrease over the prior
quarter and a 3% decrease over the average of US$140 per tonne in the first quarter of 202 3. However, while the 65%
Fe Index started the quarter at a robust US$153 per tonne, it finished the quarter at US$115 per tonne.
The monthly Atlantic Blast Furnace 65% Fe pellet premium index as quoted by Platts (the “pellet premium ”) averaged
US$40 per tonne in the first quarter of 202 4, down 12% from an average of US$ 46 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$133 per tonne in the first quarter of 2024, compared to approximately
US$136 per tonne in the first quarter of 2023.
Iron Ore Company of Canada Operations
Operations
IOC concentrate production in the first quarter of 2024 of 4. 7 million tonnes was 3% higher than the same quarter of
2023 and 5% lower than the fourth quarter of 2023. Concentrate production in the first quarter of 2024 benefited from
a lower strip ratio as a result of changes in the mining sequence, which resulted in an increase in the amount of crushed
ore that was delivered to the concentrator.
IOC saleable production (CFS plus pellets) of 4. 4 million tonnes in the first quarter of 2024 was 3% higher than the same
quarter of 2023. Pellet production of 2.5 million tonnes was 15% higher than the corresponding quarter in 202 3, due to
an increase in the availability of concentrate and fewer plant reliability issues than in 2023. CFS production of 1.9 million
tonnes was 9% lower than the same quarter of 2023 mainly due to the higher production of pellets.
Sales as Reported for the LIORC Royalty
Total iron ore sales tonnage by IOC (CFS plus pellets) of 4.4 million tonnes in the first quarter of 2024 was 20% higher
than the total sales tonnage for the same period in 2023 and 1% higher than the fourth quarter of 2023. The increase in
IOC sales tonn age was largely a result of improved availability of inventory and timing of vessels. Pellet sales tonnages
were 25% higher than the same quarter of 202 3 and 7% higher than the fourth quarter of 2023. CFS sales tonnages
were 13% higher than the same quarter of 2023 and 6% lower than the fourth quarter of 2023.
Outlook
Rio Tinto’s 2024 guidance for IOC’s saleable production (CFS plus pellets) remains at 16.7 million to 19.6 million tonnes.
This compares to 16.5 million tonnes of saleab le production in 2023. IOC continues to focus on upgrading its capital
assets through increased capital expenditures. As reported in the 2023 Annual Report, IOC’s capital expenditures for
2024 are forecasted to be US$431 million, up from US$362 million in 2023.
While lower capital investment rates, higher inflation and monetary tightening continue to negatively affect global steel
demand, recently seaborne iron ore prices have shown some resiliency. Since the end of the first quarter, iron ore
prices have improved. At the end of April 2024, the 65% Fe index was US$131 per tonne or 14% higher than at the end
of the first quarter of 2024. Longer term the outlook for iron ore and high -quality iron ore in particular, is positive. The
World Steel Association forecasts that global steel demand will grow by 1.7% in 2024 and 1.2% in 2025. It expects that
steel demand in China in 2024 will remain flat, as declining demand from real estate investments is offset by growth in
steel demand from infrastructure investments and manufacturing sectors. However, it forecasts broad-based growth in
steel demand for the world excluding Chin a of 3.5% per annum over 2024 and 2025, with India emerging as the
strongest driver with 8% growth in its steel demand over 2024 and 2025. It also forecasts steel demand in the European
Union showing a meaningful pick up in 2025 and continued resilience in the US, Japan and Korea.
Lastly, significant additional demand for the type of high -quality iron ore products that IOC is capable of producing will
come from the global transition to green steel. Currently, steel production accounts for 7% – 9% of the w orld’s
greenhouse gas (“GHG”) emissions . The transition to steel production by way of the Electri c Arc Furnace (“EAF”)
process and away from the Blast Furnace or Basic Oxygen Furnace process has the potential to substantially reduce GHG
emissions. This transition to EAF technology requires iron ore products with very low deleterious materials and a h igh
iron content, such as those produced by IOC. According to Wood Mackenzie , just 8% of iron ore production is prime
grade suitable for green steelmaking and another 15% – 20% can be processed to become such prime grade material.
On April 16, 2024, the F ederal 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 aft er 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 $25 .3 million or $0.40 per share. This would be a non -cash entry and will only
impact LIORC in the event it sells its shares in IOC.
LIORC has no debt and at March 31, 202 4 had positive net working capital (current assets less current liabilities) of $30
million, which included the first quarter net royalty payment received from IOC on April 25, 202 4 and the LIORC
dividend in the amount of $0.45 per share paid to shareholders on the next day.
Respectfully submitted on behalf of the Directors of the Corporation,
John F. Tuer
President and Chief Executive Officer
May 8, 2024
Management’s Discussion and Analysis
The following discussion and analysis s hould 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 contained therein and the March 31, 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 qu arters may be affected by the
timing of the loading of ships that can be delayed from one quarter to the next.
Financial Highlights
2024 2023
Revenue $ 56.7 $ 47.2
Equity earnings from IOC $ 34.3 $ 21.8
Net income $ 59.3 $ 43.6
Net income per share $ 0.93 $ 0.68
Cash flow from operations $ 30.0 $ 19.5
Cash flow from operations per share (1) $ 0.47 $ 0.30
Adjusted cash flow (1) $ 31.3 $ 26.1
Adjusted cash flow per share (1) $ 0.49 $ 0.41
Dividends declared per share $ 0.45 $ 0.50
(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)
Three Months Ended
March 31,
The higher revenue, net income and equity earnings from IOC achieved in the first quarter of 2024 as compared to 2023
were mainly due to higher sales tonnages of pellets and CFS, partly offset by lower iron ore prices and pellet pre miums.
The first quarter of 202 4 sales tonnages (CFS plus pellets) were higher by 20%. While CFS sales tonnages were 13%
higher than the same q uarter in 202 3, pellet sales were 25% higher , predominantly due to improved availability of
inventory and timing of vessels.
The higher pellet and CFS sales tonnages resulted in royalty income of $56 .0 million for the quarter as compared to
$46.5 million for the same period in 202 3. First quarter 202 4 cash flow from operations was $30.0 million or $0.47 per
share compared to $19.5 million or $0.30 per share for the same period in 2023. Equity earnings from IOC amounted to
$34.3 million or $0. 54 per share in the first quarter of 2024 compared to $21.8 million or $ 0.34 per share for the sa me
period in 2023.
Operating Highlights
IOC Operations 2024 2023
Sales(1)
Pellets 2.45 1.96
Concentrate for sale ("CFS") (2) 1.92 1.69
Total(3) 4.37 3.65
Production
Concentrate produced 4.75 4.63
Saleable production
Pellets 2.53 2.19
CFS 1.92 2.11
Total(3) 4.45 4.30
Average index prices per tonne (US$)
65% Fe index(4) $ 136 $ 140
62% Fe index(5) $ 124 $ 126
Pellet premium(6) $ 40 $ 46
(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)
Three Months Ended
March 31,
IOC sells CFS based on the 65% Fe index. In the first quarter of 202 4, the 65% Fe index averaged US$136 per tonne, a
3% decrease over the average of US$140 per tonne in the first quarter of 2023. Ongoing concerns regarding steel
demand, particularly as a result of China’s troubled property sector and a 15% increase in iron ore shipments by Vale
due to operational improvements durin g Brazil’s traditionally rainy season , contributed to an almost 25% decrease in
iron ore prices during the first quarter of 2024 . The 65% Fe Index, which started the quarter at a robust US$153 per
tonne, finished the quarter at US$115 per tonne . The monthly pellet premium averaged US$40 per tonne in the first
quarter of 2 024, down 12% from an average of US$ 46 per tonne in the same quarter of 20 23, 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$133 per tonne in the first quarter of 2024 compared to US$136 per tonne in the first quarter
of 2023. The de crease in the average realized price FOB Sept -Îles in 2024 was a result of lower CFS prices and lower
pellet premiums.
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 $0.47 for the quarter (2023 - $0.30).
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 taxe s 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
Mar. 31, 2024
3 Months Ended
Mar. 31, 2023
(in millions except for per share information)
Standardized cash flow from operating activities $30.0 $19.5
Changes in amounts receivable, accounts payable and
income taxes recoverable and payable
1.3
6.6
Adjusted cash flow $31.3 $26.1
Adjusted cash flow per share $0.49 $0.41
Liquidity and Capital Resources
The Corporation had $14. 4 million in cash as at March 31, 2024 (December 31, 2023 - $13.2 million) with total cur rent
assets of $71.9 million (December 31, 2023 - $67.5 million). The Corporation had working capital of $ 29.7 million as at
March 31, 2023 (December 31, 2023 - $27.2 million). The Corporation’s operating cash flow was $30.0 million and the
dividend paid d uring the quarter was $28.8 million, resulting in cash balances increasing by $1.2 million during the first
quarter of 2024.
Cash balances consist of deposits in Canadian dollars with a Canadian chartered bank. Amounts receivable primarily
consist of roy alty 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 gen erated 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
May 8, 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 o ther 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 guarant ees of fu ture 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 volatilit y; the performance of
IOC; market conditions in the steel industry; fluctuations in the value of the Canadian and U.S. dollar; mining risks that ca use a disruption in
operations and availability of insurance; disruption in IOC’s operations caused by natural dis asters, s evere 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 economic and political conditions; changes in governme nt 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 operation s for IOC or its
customers; changes affecting IOC’s cus tomers; 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 L IORC’s
annual information 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 investo rs 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
March 31, December 31,
(in thousands of Canadian dollars) 2024 2023
(Unaudited)
Assets
Current Assets
Cash 14,437$ 13,192$
Amounts receivable 57,413 53,872
Income taxes recoverable - 465
Total Current Assets 71,850 67,529
Non-Current Assets
Iron Ore Company of Canada ("IOC")
royalty and commission interests 221,279 222,901
Investment in IOC 580,938 546,614
Total Non-Current Assets 802,217 769,515
Total Assets 874,067$ 837,044$
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable and accrued liabilities 11,942$ 11,542$
Dividend payable 28,800 28,800
Taxes payable 1,426 -
Total Current Liabilities 42,168 40,342
Non-Current Liabilities
Deferred income taxes 142,040 137,370
Total Liabilities 184,208 177,712
Shareholders' Equity
Share capital 317,708 317,708
Retained earnings 378,454 347,927
Accumulated other comprehensive loss (6,303) (6,303)
689,859 659,332
Total Liabilities and Shareholders' Equity 874,067$ 837,044$
-
Approved by the Directors,
John F. Tuer Patricia M. Volker
Director Director
As at
LABRADOR IRON ORE ROYALTY CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands of Canadian dollars except for per share information) 2024 2023
Revenue
IOC royalties 55,983$ 46,543$
IOC commissions 430 359
Interest and other income 246 312
56,659 47,214
Expenses
Newfoundland royalty taxes 11,197 9,309
Amortization of royalty and commission interests 1,622 1,582
Administrative expenses 831 655
13,650 11,546
Income before equity earnings and income taxes 43,009 35,668
Equity earnings in IOC 34,324 21,817
Income before income taxes 77,333 57,485
Provision for income taxes
Current 13,336 11,110
Deferred 4,670 2,810
18,006 13,920
Net income for the period 59,327 43,565
Comprehensive income for the period 59,327$ 43,565$
Basic and diluted income per share 0.93$ 0.68$
For the Three months Ended
March 31,
(Unaudited)