Labrador Iron ORE Royalty Corporation - Results FOR the Second Quarter Ended
P R E S S R E L E A S E
Toronto, August 6, 2024
LABRADOR IRON ORE ROYALTY CORPORATION - RESULTS FOR THE SECOND QUARTER ENDED JUNE 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 second quarter report
for the period ended June 30, 2024.
Financial Performance
In the second quarter of 2024, LIORC’s financial results benefited from higher pellet sales tonnages and higher iron ore
prices, as well as a more favourable US/CAD exchange rate, partly offset by lower concentrate for sale (“CFS”) sales
tonnages and lower pellet premiums. Royalty revenue for the second quarter of 2024 of $52.3 million was 3% higher than
the second quarter of 2023 and 7% lower than the first quarter of 2024. Equity earnings from Iron Ore Company of Canada
(“IOC”) were $18.5 million in the second quarter of 2024 compared to $ 13.5 million in the second quarter of 2023 and
$34.3 million in the first quarter of 2024. Net income per share for the second quarter of 2024 was $0.78 per share, which
was a 20% increase over the same period in 2023 and a 15% decrease over the first quarter of 20 24. LIORC received a
dividend from IOC in the amount of $41.5 million in the second quarter of 2024, compared to a dividend from IOC in the
amount of $19.9 million in the second quarter of 202 3. The adjusted cash flow per share for the second quarter of 2024
was $1.11 per share, which was 47% higher than in the same period in 202 3 and 127% higher than the first 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.
Despite ongoing uncertainty regarding the outlook for global steel demand and an increase in iron ore shipments from
the largest seaborne iron ore producers, iron ore prices during the second quarter of 2024 remained relatively consistent
with last year’s second quarter prices. According to the World Steel Association, global crude steel production was down
1% in the second quarter of 2024 compared to the second quarter of 2023. On the supply side, shipments in the quarter
ended June 30, 2024 for the world ’s three largest iron ore producers (Rio Tinto, Vale and BHP) increased over the last
quarter by 3%, 25% and 7%, respectively and increased year over year by 2%, 7% and 7%, respectively.
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 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 second quarter of 2024, the 65% Fe index averaged US$126 per tonne, a 7% decrease over the prior
quarter and a 2% increase over th e average of US$ 124 per tonne in the second quarter of 202 3. The monthly Atlantic
Blast Furnace 65% Fe pellet premium index as quoted by Platts (the “pellet premium ”) averaged US$43 per tonne in the
second quarter of 2024, down 8% from an average of US$47 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.
Rio Tinto has disclosed that the average realised price achieved for IOC pellets, FOB Sept Îles, in the second quarter of
2024 was US$148 per tonne, compared to US$151 per tonne in the same quarter of 2023. 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$127
per tonne in the second quarter of 2024, compared to approximately US$125 per tonne in the second quarter of 2023.
Iron Ore Company of Canada Operations
Operations
IOC concentrate production in the second quarter of 2024 of 3.9 million tonnes was 1% higher than the same quarter of
2023, predominantly due to the negative impact of the wildfires last June that temporarily shut down operations in June
2023 and 19% lower than the first quarter of 2024. Concentrate production in the second quarter of 2024 was negatively
affected by lower feed from the mine (as a result of lower haul truck availability and higher cycle times) and changes in
mine sequence that lowered the mill throughput rate and weight yield.
IOC saleable production (CFS plus pellets) of 3.7 million tonnes in the second quarter of 2024 was 6% higher than the
same quarter of 2023 . Pellet production of 2.1 million tonnes was 33% higher than the corresponding quarter in 202 3,
predominantly as a result of the wildfires that negatively impacted operations in June 2023. CFS production of 1.6 million
tonnes was 17% 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 4.2 million tonnes in the second quarter of 2024 was 4% lower
than the total sales tonnage for the same period in 2023 and 3% lower than the first quarter of 2024. The decrease in
IOC sales tonnage was largely a result of issues relating to the availability of inventory and timing of vessels. Pellet sales
tonnages were 10% higher than the same quarter of 2023 and 4% higher than the first quarter of 2024. CFS sales tonnages
were 19% lower than the same quarter of 2023 and 12% lower than the first quarter of 2024.
Outlook
In its second quarter production report, Rio Tinto disclosed that the 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 saleable production in
2023. However, wildfires caused the evacuation of residents of Labrador City from July 12, 2024 to July 22, 2024. As a
result, IOC’s operations were temporarily suspended, which may affect annual production forecasts. IOC continues to
focus on upgrading its capital as sets through increased capital expenditures IOC is now forecasting that its 2024 capital
expenditure will be US$408 million, down from the originally budgeted US$431 million. To date, IOC’s capital expenditures
are on track with the new forecast.
Looking forward, analysts at S&P Global Commodity Insights forecast further weakening in third quarter iron ore prices,
suggesting that mill margins are likely to remain under pressure and sentiment bearish given the weak housing market
data. Longer term the World Steel Association is more positive, forecasting that global steel demand will grow by 1.7% in
2024 and 1.2% in 2025. Since the end of the second quarter iron ore prices are lower. In July 2024, the 65% Fe index
averaged US$122 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 $24.2 million or $0.38 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 June 30, 2024 had positive net working capital (current assets less current liabilities) of $30
million, which included the second quarter net royalty payment received from IOC on July 25, 2024 and the LIORC dividend
in the amount of $1.10 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
August 6, 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”) 202 3 Annual Report, and the financial
statements and notes contained therein and the June 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 additio n
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 higher revenue, net income and equity earnings from IOC achieved in the second quarter of 2024 as compared to
2023 were mainly due to higher pellet sales tonnages and higher iron ore prices, as well as a more favourable US/CAD
exchange rate, partly offset by lower CFS sales tonnages and lower pellet premiums. The second quarter of 202 4 sales
2024 2023 2024 2023
Revenue $ 53.1 $ 51.5 $ 109.8 $ 98.8
Equity earnings from IOC $ 18.5 $ 13.5 $ 52.8 $ 35.4
Net income $ 50.2 $ 41.9 $ 109.5 $ 85.4
Net income per share $ 0.78 $ 0.65 $ 1.71 $ 1.33
Dividend from IOC $ 41.5 $ 19.9 $ 41.5 $ 19.9
Cash flow from operations $ 82.1 $ 40.9 $ 112.1 $ 60.4
Cash flow from operations per share (1) $ 1.28 $ 0.64 $ 1.75 $ 0.94
Adjusted cash flow (1) $ 70.9 $ 48.3 $ 102.2 $ 74.4
Adjusted cash flow per share (1) $ 1.11 $ 0.75 $ 1.60 $ 1.16
Dividends declared per share $ 1.10 $ 0.65 $ 1.55 $ 1.15
(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)
Six Months Ended
June 30,
Three Months Ended
June 30,
tonnages (CFS plus pellets) were lower by 4% predominantly due to issues of availability of inventory and timing of vessels.
While CFS sales tonnages were 19% lower than the same quarter in 2023, pellet sales tonnages were 10% higher.
The higher pellet sales tonnages, higher iron ore prices, as well as a more favourable US/CAD exchange rate, partly offset
by lower CFS sales tonnages and lower pellet premiums resulted in royalty income of $52.3 million for the quarter as
compared to $50.9 million for the same period in 2023. Second quarter 2024 cash flow from operations was $82.1 million
or $1.28 per share compared to $40.9 million or $ 0.64 per share for the same period in 2023. LIORC received an IOC
dividend in the second quarter of 202 4 in the amount of $ 41.5 million or $0.65 per share compared to $19. 9 million or
$0.31 per share for the same period in 202 3. Equity earnings from IOC amounted to $18.5 million or $0.29 per share in
the second quarter of 2024 compared to $13.5 million or $0.21 per share for the same period in 2023.
Operating Highlights
IOC sells CFS based on the 65% Fe index. In the second quarter of 2024, the 65% Fe index averaged US$126 per tonne, a
2% increase over the average of US$124 per tonne in the second quarter of 2023, despite ongoing uncertainty regarding
the outlook for global steel demand and an increase in iron ore shipments from the largest seaborne iron ore producers.
The monthly pellet premium averaged US$43 per tonne in the second quarter of 2024, down 8% from an average of
US$47 per tonne in the same quarter of 2023, as lower steel margins continued to cause steel producers to substitute
higher quality pellets with less expensive lower quality iron ore.
IOC Operations 2024 2023 2024 2023
Sales(1)
Pellets 2.54 2.30 4.98 4.26
Concentrate for sale ("CFS") (2) 1.70 2.09 3.61 3.79
Total(3) 4.23 4.40 8.60 8.05
Production
Concentrate produced 3.87 3.83 8.61 8.46
Saleable production
Pellets 2.14 1.61 4.66 3.79
CFS 1.58 1.91 3.51 4.02
Total(3) 3.72 3.51 8.17 7.81
Average index prices per tonne (US$)
65% Fe index(4) $ 126 $ 124 $ 131 $ 132
62% Fe index(5) $ 112 $ 111 $ 118 $ 118
Pellet premium(6) $ 43 $ 47 $ 42 $ 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)
Six Months Ended
June 30,June 30,
Three Months Ended
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$127 per tonne in the second quarter of 2024 compared to approximately US$125 per tonne
in the second quarter of 2023. The increase in the average realized price FOB Sept-Îles in 2024 was a result of higher CFS
prices and a higher percentage of pellet sales, partly offset by 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 $1.28 for the quarter (2023 - $0.64).
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
Jun. 30, 2024
3 Months Ended
Jun. 30, 2023
6 Months Ended
Jun. 30, 2024
6 Months Ended
Jun. 30, 2023
(in millions except per share information)
Standardized cash flow from operating
activities
$82.1 $40.9 $112.1 $60.4
Changes in amounts receivable, accounts
payable and income taxes payable
(11.1)
7.4
(9.9)
14.0
Adjusted cash flow $70.9 $48.3 $102.2 $74.4
Adjusted cash flow per share $1.11 $0.75 $1.60 $1.16
Liquidity and Capital Resources
The Corporation had $67.7 million in cash as at June 30, 2024 (December 31, 2023 - $13.2 million) with total current assets
of $116.8 million (December 31, 2023 - $67.5 million). The Corporation had working capital of $30.2 million as at June 30,
2024 (December 31, 2023 - $27.2 million). The Corporation’s operating cash flow was $82.1 million and the dividend paid
during the quarter was $28.8 million, resulting in cash balances increasing by $53.3 million during the second 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 (202 3 – 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
August 6, 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 custom ers; 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
June 30, December 31,
(in thousands of Canadian dollars) 2024 2023
(Unaudited)
Assets
Current Assets
Cash 67,698$ 13,192$
Amounts receivable 49,096 53,872
Income taxes recoverable - 465
Total Current Assets 116,794 67,529
Non-Current Assets
Iron Ore Company of Canada ("IOC")
royalty and commission interests 219,632 222,901
Investment in IOC 558,828 546,614
Total Non-Current Assets 778,460 769,515
Total Assets 895,254$ 837,044$
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable and accrued liabilities 10,097$ 11,542$
Dividend payable 70,400 28,800
Taxes payable 6,099 -
Total Current Liabilities 86,596 40,342
Non-Current Liabilities
Deferred income taxes 138,240 137,370
Total Liabilities 224,836 177,712
Shareholders' Equity
Share capital 317,708 317,708
Retained earnings 358,228 347,927
Accumulated other comprehensive loss (5,518) (6,303)
670,418 659,332
Total Liabilities and Shareholders' Equity 895,254$ 837,044$
-
Approved by the Directors,
John F. Tuer Patricia M. Volker
Director Director
As at
LABRADOR IRON ORE ROYALTY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands of Canadian dollars except for per share information) 2024 2023
Revenue
IOC royalties 52,286$ 50,941$
IOC commissions 416 433
Interest and other income 423 163
53,125 51,537
Expenses
Newfoundland royalty taxes 10,457 10,188
Amortization of royalty and commission interests 1,647 1,464
Administrative expenses 684 774
12,788 12,426
Income before equity earnings and income taxes 40,337 39,111
Equity earnings in IOC 18,495 13,543
Income before income taxes 58,832 52,654
Provision for income taxes
Current 12,597 12,174
Deferred (3,939) (1,384)
8,658 10,790
Net income for the period 50,174 41,864
Other comprehensive income (loss)
Share of other comprehensive income (loss) of IOC that will not be
reclassified subsequently to profit or loss (net of income taxes
of 2024 - $139; 2023 - $56) 785 (315)
Comprehensive income for the period 50,959$ 41,549$
Net income per share 0.78$ 0.65$
For the Three Months Ended
June 30,
(Unaudited)