Labrador Iron ORE Royalty Corporation - Results FOR the First Quarter Ended March 31, 2022
P R E S S R E L E A S E
Toronto, May 5, 2022
LABRADOR IRON ORE ROYALTY CORPORATION - RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2022
Labrador Iron Ore Royalty Corporation (“LIORC”, TSX: LIF) announced today its operation and cash flow results for the
first quarter ended March 31, 2022.
Financial Performance
In the first quarter of 2022, LIORC’s financial results were negatively impacted by lower sales of concentrate and lower
average realized concentrate and pellet prices . Royalty revenue for the first quarter of 2022 amounted to $53.7 million
compared to $65.2 million for the first quarter of 2021. Equity earnings from Iron Ore Company of Canada (“IOC”) were
$40.4 million in the first quarter of 2022 compared to $57.0 million in the first quarter of 2021. Net income per share for
the first quarter of 2022 was $0.99 per share, which was a 27% decrease over the same period in 202 1. The adjusted
cash flow per share for the first quarter of 2022 was $0.47 per share, which was 46% lower than in the same period in
2021, as a result of lower royalty revenues and the decision by IOC to not pay a dividend in the first quarter of 2022 . In
the first quarter of 2021, LIORC received a dividend in the amount of $19.0 million from IOC.
Decreased demand for iron ore by steel producers , partially offse t by lower supply, led to lower iron ore prices in the
first quarter of 2022. According to the World Steel Association, global crude steel production in the first quarter of 2022
decreased 6% over the first quarter of 2021 and crude steel production in Chi na, which accounts for over 70% of all
seaborne iron ore demand, was 9% lower in the first quarter of 2022 compared to the same quarter of 2021. Steel
production in China was lower partly as a result of the continuation of the restrictions imposed on Chine se steel
production that were initiated in the second half of 2021. At the same time, some of the world’s largest suppliers of
seaborne iron ore reported lower production in the first quarter of 2022, compared to the first quarter of 2021. Iron ore
production by Rio Tinto was lower by 6%, as ongoing mine depletion was not offset by mine replacement projects and
COVID-19 constraints impacted labour supply and iron ore production by Vale was lower by 6%, due to heavy rains in
January and March, along with licensing delays at its Northern System.
IOC sells concentrate for sale (“CFS”) based on the Platts index for 65% Fe, CFR China (“65% Fe index”). In the first
quarter of 2022, the 65% Fe index averaged US$170 per tonne, an 11% decrease over the average of US$191 per tonne
in the first quarter of 202 1. The monthly Atlantic Blast Furnace 65% Fe pellet premium index as quoted by Platts (the
“pellet premium”) averaged US$67 per tonne in the first quarter of 202 2, up substantially from an avera ge of US$43 in
the same quarter of 2021, on strong demand for pellets from both blast furnace and direct reduction iron markets, and
supply constraints from Brazil and the Commonwealth of Independent States. Overall, the average price realized by IOC
for CFS and pellets, FOB Sept -Îles, net of sel ling costs was approximately C$ 219 per tonne in the first quarter of 202 2,
compared to approximately C$226 per tonne in the first quarter of 2021.
Iron Ore Company of Canada Operations
Operations
IOC concentrate production in the first quarter of 2022 of 4.4 million tonnes was approximately the same as the same
period of 2021, and 8% lowe r than the fourth quarter of 2021 . Concentrate production in the first quarter of 2022 was
negatively affected by in termittent periods of a lack of feed at the concentrator due to the mine and ore delivery
system issues. IOC saleable production (CFS plus pellets) of 4.1 million tonnes in the first quarter of 2022 was 3% higher
than the same period in 202 1. Pellet production of 2.5 million tonnes was 2% lower than the corresponding quarter in
2021, mainly due to issues with the flux hopper and conveyor belts in the pellet feed system , a lack of feed at certain
times from the con centrator and the idling of machines to prioritize concentrate for sale in order to meet sales
commitments. CFS production of 1. 6 million tonnes was 10% higher than the same quarter last year due to the lower
production of pellets.
Sales as Reported for the LIORC Royalty
Total iron ore sales tonnage by IOC (CFS plus pellets) of 3.6 million tonnes in the first quarter of 202 2 was 13% lower
than the total sales tonnage for the same period in 202 1, and 19% lower than the fourth quarte r of 202 1,
predominantly due to equipment failures (ship loader cable, conveyor drive pulley and belt tear) , inventory availability,
and manpower constraints due to C OVID-19. Pellet sales tonnages were 1% lower than the same quarter last year and
16% lower than the fourth quarter of 202 1. CFS sales tonnages were 31% lower than the same quarter last year and
25% lower than the fourth quarter of 2021.
Outlook
Rio Tinto’s 2022 guidance for IOC’s saleable production (CFS plus pellets) remains at 17. 0 million to 18.7 million tonnes.
This compares to 16.6 million tonnes of saleable production in 2021. As reported in the 2021 Annual Report, IOC has
ambitious capital expenditure plans to continue renewing the asset infrastructure and to improve the production results
at IOC. These initiatives will be of benefit to LIORC as both an equity holder and a royalty holder.
There are a number of issues affecting the outlook for the seaborne iron ore market. The current COVID-19 crisis in
China is negatively impacting China’s economic outlook as a result of the widespread lock-downs being imposed as part
of China’s zero COVID -19 strategy. There also remains significant uncertainty regarding the economic health of the
property markets in China. In addition, China r ecently announced that as part of its efforts to improve the
decarbonization of the steel industry, it will ensure that crude steel production in 2022 does not exceed 2021 levels.
Finally, the war in Ukraine has resulted in the disruption of some traditional sources of iron ore supply.
It is unclear as to the longer -term effects that these events will have on the market. However, d espite these
uncertainties, seaborne iron ore prices remain attractive from a historical perspective. Since the end of the first quarter
iron ore prices have strengthened. In April 2022, the average price of the 65% Fe index was US$175 per tonne, or 2%
higher than the average of the 65% Fe index for the first quarter of 202 2. The pellet premium for April was US$ 82 per
tonne compared to the average of US$ 67 per tonne in the first quarter of 202 2. To put these prices in a longer -term
historical context, the average of the 65% Fe index and the pellet premium over the five years ending December 31,
2021 were $118 and $50, respectively. As a result , we remain positive abou t the outlook for IOC and LIORC remains
well positioned to continue to benefi t from the current iron ore pricing environment through royalty revenues and
expected future dividends from IOC.
The LIORC cash balance at March 31, 202 2 stood at $13.5 million before LIORC dividends payable on April 26, 202 2 of
$0.50 per share or $ 32.0 million. The net royalty from IOC was received by LIORC on the same date, maintaining the
Corporation’s strong cash balance.
Respectfully submitted on behalf of the Directors of the Corporation,
John F. Tuer
President and Chief Executive Officer
May 5, 2022
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”) 2021 Annual Report, and the financial
statements and notes contained therein and the March 31, 2022 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 a nd 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
2022 2021
Revenue 54.2 65.7
Equity earnings from IOC 40.4 57.0
Net income 63.2 86.6
Net income per share $ 0.99 $ 1.35
Dividend from IOC - 19.0
Cash flow from operations 4.1 42.7
Cash flow from operations per share (1) $ 0.06 $ 0.67
Adjusted cash flow (1) 29.8 55.4
Adjusted cash flow per share (1) $ 0.47 $ 0.87
Dividends declared per share $ 0.50 $ 1.00
(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.
(Unaudited)
Three Months Ended
March 31,
($ in millions except per share information)
The lower revenue, net income and equity earnings achieved in the first quarter of 2022 as compared to 2021 were
mainly due to lower concentrate sales and lower iron ore prices, partly offset by higher pellet premiums. The first
quarter of 202 2 sales tonnages (CFS plus pellets) were lower by 13% predominantly due to equipment failures (ship
loader cable, conveyor drive pulley and belt tear) , inventory availability, and manpower constraints due to C OVID-19.
Pellet sales were 1% lower and CFS sales were 31% lower than the same quarter in 2021.
The lower sales tonnages and a decrease in the average realized sales price of pellets and CFS, resulted in royalty
income of $ 53.7 million for the quarter as compared to $ 65.2 million for the same period in 202 1. First quarter 202 2
cash flow from operations was $ 4.1 million or $0. 06 per share compared to $ 42.7 million or $0. 67 per share for the
same period in 202 1. There w as no IOC dividend received by LIORC in the first quarter of 202 2 compared to $19.0
million or $0.30 per share IOC dividend received for the same period in 2021 . Equity earnings from IOC amounted to
$40.4 million or $0.63 per share in the first quarter of 202 2 compared to $57.0 million or $0.89 per share for the same
period in 2021.
Operating Highlights
IOC Operations 2022 2021
Sales(1)
Pellets 2.43 2.44
Concentrate for sale ("CFS") (2) 1.16 1.68
Total(3) 3.58 4.12
Production
Concentrate produced 4.39 4.40
Saleable production
Pellets 2.46 2.51
CFS 1.64 1.48
Total(3) 4.09 3.99
Average index prices per tonne (US$)
65% Fe index(4) $ 170 $ 191
62% Fe index(5) $ 142 $ 167
Pellet premium(6) $ 67 $ 43
(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)
March 31,
Three Months Ended
IOC sells CFS based on the 65% Fe index. In the first quarter of 202 2, the 65% Fe index averaged US$ 170 per tonne, an
11% decrease over the average of US$ 191 per tonne in the first quarter of 202 1. Iron ore prices decreased party as a
result of lower steel production in China as restrictions imposed on Chinese steel production that were initiated in the
second half of 2021 continued during the quarter. At the same time, the expected supply of seaborne iron ore by some
of the large producers was lower than expected. The monthly pellet premium averaged US$ 67 per tonne in the first
quarter of 202 2, up substantially from an average of US$ 43 in the same quarter of 202 1, which had been negatively
impacted by a reduction in demand from European steel producers due to COVID-19.
The average price realized by IOC for CFS and pellets, FOB Sept -Îles, net of selling costs was approximately C$ 219 per
tonne in the first quarter of 2022 compared to C$226 per tonne in the first quarter of 2021. The decrease in the average
realized price FOB Sept-Îles in 2022 was a result of lower CFS prices, partially offset by higher 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 $0.06 for the quarter (2021 - $0.67).
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 International Financial Reporting Standards (“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, 2022
3 Months Ended
Mar. 31, 2021
(in thousands except for per share information)
Standardized cash flow from operating activities $4,140 $42,686
Changes in amounts receivable, accounts payable and
income taxes payable
25,702
12,724
Adjusted cash flow $29,842 $55,410
Adjusted cash flow per share $0.47 $0.87
Liquidity and Capital Resources
The Corporation had $ 13.5 million in cash as at March 31, 2022 (December 31, 2021 - $82.9 million) with total current
assets of $70.3 million (December 31, 2021 - $132.6 million). The Corporation had working capital of $ 27.4 million as at
March 31, 2021 (December 31, 2021 - $29.6 million). The Corporation’s operating cash flow was $ 4.1 million and the
dividend paid during the quarter was $ 73.6 million, resulting in cash b alances decreasing by $ 69.5 million during the
first quarter of 2022.
Cash balances consist of deposits in Canadian dollars with Canadian chartered banks. 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 fro m 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 net income to the maximum extent possible, subject to the maintenance of a ppropriate levels of
working capital.
The Corporation has a $30 million revolving credit facility with a term ending September 18, 2024 with provision for
annual one-year extensions. No amount is currently drawn under this facility (2021 – 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 5, 2022
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 expectati ons 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 accu rate
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 performance 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 economic and political conditions; changes in government regulation
and taxation; national, provincial and international law s, regulations 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 licen ces 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 information form dated March 11, 2022 under the heading, “Risk Factor s”. 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 w ith LIORC’s other publicly available filings, copies of which can be obtained
electronically on SEDAR at www.sedar.com.
LABRADOR IRON ORE ROYALTY CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
March 31, December 31,
(in thousands of Canadian dollars) 2022 2021
Assets
Current Assets
Cash and short-term investments 13,453$ 82,913$
Amounts receivable 52,635 49,681
Income taxes recoverable 4,187 -
Total Current Assets 70,275 132,594
Non-Current Assets
Iron Ore Company of Canada ("IOC")
royalty and commission interests 234,036 235,341
Investment in IOC 461,755 421,376
Total Non-Current Assets 695,791 656,717
Total Assets 766,066$ 789,311$
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable 10,850$ 10,786$
Dividend payable 32,000 73,600
Taxes payable - 18,625
Total Current Liabilities 42,850 103,011
Non-Current Liabilities
Deferred income taxes 127,910 122,240
Total Liabilities 170,760 225,251
Shareholders' Equity
Share capital 317,708 317,708
Retained earnings 289,018 257,772
Accumulated other comprehensive loss (11,420) (11,420)
595,306 564,060
Total Liabilities and Shareholders' Equity 766,066$ 789,311$
-
Approved by the Directors,
John F. Tuer Patricia M. Volker
Director Director
As at
(Unaudited)
LABRADOR IRON ORE ROYALTY CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands of Canadian dollars except for per share information) 2022 2021
Revenue
IOC royalties 53,748$ 65,248$
IOC commissions 353 406
Interest and other income 63 65
54,164 65,719
Expenses
Newfoundland royalty taxes 10,750 13,050
Amortization of royalty and commission interests 1,305 1,466
Administrative expenses 884 771
12,939 15,287
Income before equity earnings and income taxes 41,225 50,432
Equity earnings in IOC 40,379 56,977
Income before income taxes 81,604 107,409
Provision for income taxes
Current 12,688 15,501
Deferred 5,670 5,260
18,358 20,761
Net income for the period 63,246 86,648
Comprehensive income for the period 63,246$ 86,648$
Net income per share 0.99$ 1.35$
For the Three Months Ended
March 31,
(Unaudited)