TORONTO, Aug. 7, 2018 /CNW/ - Labrador Iron Ore Royalty
Corporation ("LIORC", TSX: LIF) announced today its operation and
cash flow results for the second quarter ended June 30, 2018.
Royalty revenue for the second quarter of 2018 amounted to
$5.1 million as compared to
$33.8 million for the second quarter
of 2017. Equity (losses) earnings from the Iron Ore Company of
Canada ("IOC") amounted to
($6.1) million or ($0.09) per share as compared to $14.3 million or $0.22 per share in 2017. Net (loss) income was
($3.3) million or ($0.05) per share compared to $32.3 million or $0.50 per share for the same period in 2017. The
shareholders' cash flow from operations for the second quarter was
$15.5 million or $0.24 per share as compared to $45.6 million or $0.71 per share for the same period in 2017.
The cash flow from operations, equity earnings and net income
for the second quarter of 2018 were lower than the second quarter
of 2017, due to the work stoppage at IOC during which operations
were suspended until a new labour agreement was reached. The strike
closed down the IOC production facilities on March 27, 2018. The workforce returned to work on
May 28, 2018. A new five-year
collective agreement is now in place and the ramp up to normal
production rates was achieved by the end of June. IOC is
making every effort to maximize production for the remainder of the
year. Sales for the second quarter of 2018 were restricted by
the availability of product as port inventories had to be
rebuilt.
The average index price for 62% fines increased 3% to
US$65 per tonne CFR China in the
second quarter of 2018 compared to the average price in the second
quarter of 2017 of US$63 per tonne.
Total IOC sales for calculating the royalty to LIORC – pellets plus
concentrate for sale ("CFS") – of 0.53 million tonnes was 87% lower
in the second quarter of 2018 compared to the same period in 2017.
In the second quarter of 2018 concentrate production continued to
be preferentially directed to the pellet plant due to the strong
pellet demand and premiums. LIORC received an IOC dividend in the
second quarter of 2017 in the amount of $15.3 million or $0.24 per share, whereas LIORC received no
dividend in the second quarter of 2018.
LIORC's results for the three months and six months ended
June 30 are summarized below:
(in millions
except per share information)
|
3 Months
Ended
June 30,
2018
|
3 Months
Ended
June 30,
2017
|
6 Months
Ended
June 30,
2018
|
6 Months
Ended
June 30,
2017
|
|
|
(Unaudited)
|
|
|
|
|
|
Revenue
|
$5.2
|
$34.2
|
$39.5
|
$77.6
|
Cash flow from
operations
|
$15.5
|
$45.6
|
$35.8
|
$73.8
|
Operating cash flow
per share
|
$0.24
|
$0.71
|
$0.56
|
$1.15
|
Net (loss)
income
|
($3.2)
|
$32.3
|
$27.1
|
$75.2
|
Net (loss) income per
share
|
($0.05)
|
$0.50
|
$0.42
|
$1.17
|
Iron Ore Company of Canada Operations
Production
Total concentrate production in the second quarter of 2018 of 1.5
million tonnes was 69% lower than the second quarter of 2017 and
was 64% lower than the first quarter of 2018. Similarly, pellet
production in the second quarter of 2018 was 78% lower than the
second quarter of 2017 and 81% lower than the first quarter of
2017. As noted above, IOC production was negatively affected by the
labour strike.
Sales as Reported for the LIORC Royalty
Second quarter 2018 total iron ore tonnage sold by IOC (pellets
plus CFS) of 0.53 million tonnes was 87% below the total sales
tonnage in the second quarter 2017. Again, sales of CFS and pellets
were negatively impacted by the labour strike.
Largely as a result of the strike, the royalty revenue for LIORC
in the second quarter of 2018 was 85% lower than the revenue in
last year's second quarter.
A summary of IOC sales for calculating the royalty to LIORC in
millions of tonnes is as follows:
|
3 Months
Ended June
30,
2018
|
3 Months
Ended June 30,
2017
|
6 Months
Ended June
30,
2018
|
6 Months
Ended June 30,
2017
|
Year
Ended
Dec. 31,
2017
|
Pellets
|
0.48
|
2.44
|
3.02
|
4.92
|
10.48
|
Concentrates(1)
|
0.05
|
1.60
|
1.40
|
3.79
|
8.67
|
Total(2)
|
0.53
|
4.04
|
4.43
|
8.71
|
19.15
|
(1)
|
Excludes third
party ore sales
|
(2)
|
Totals may not
add up due to rounding
|
Outlook
IOC is expecting good production and sales tonnages in the third
and fourth quarters of 2018. Rio Tinto has reduced the IOC
production guidance for 2018 to 9.0 to 10.0 million tonnes of iron
ore pellets and concentrates for its 58.72% interest in IOC, which
is total saleable production of 15.3 to 17.0 million tonnes on a
100% basis. Achieving the low end of the guidance would result in
approximately 2% less total saleable tonnes produced in the second
half of 2018 over the saleable production of 10.06 million tonnes
in the second half of 2017. Achieving the high end of the guidance
would result in approximately 15% more total saleable tonnes
produced in the second half of 2018 over the saleable production in
the second half of 2017.
In the second quarter of 2018 the Platts 62% Fe CFR China
benchmark iron ore price averaged US$65 per tonne, but was largely range bound with
a high price of US$68 per tonne, and
a low of US$63 per tonne. IOC
sells its CFS product based on the 65% Fe index, and the Platts
index price for 65% Fe concentrate averaged US$86 per tonne in the second quarter of 2018,
13% higher than the price in the second quarter of 2017, but 5%
lower than the average price in the first quarter of 2018. Atlantic
Basin blast furnace pellet premiums, as reported by Platts,
improved by 29% from US$45 per tonne
in the second quarter of 2017 to US$58 per tonne against the comparable 2018
quarter.
In the second quarter of 2018, prices for iron ore products with
higher value-in-use characteristics have remained firm, supported
by the environmental policies of the Chinese governments, and by
China's strong steel demand and
margins. The differential between the Platts indexes for 65% Fe CFS
and 62% Fe CFS has widened to US$27
per tonne at the time of writing, the highest spread in recent
years. In the second quarter of 2018 the Canadian dollar weakened,
reflecting concerns regarding international trade. Benchmark iron
ore prices have also been somewhat negatively impacted by trade
concerns but have been more resilient than other base metals,
notably copper and zinc.
The IOC employees and management continue their efforts to
increase production and reduce unit operating costs. Based on LIORC
management's July site visit, they are optimistic regarding the
production and unit costs in the third and fourth quarter of 2018.
Consistent ore production from the Wabush 3 pit is expected in September. The No.
4 pellet line is scheduled to be refurbished over approximately
nine weeks, starting in late September. The usual maintenance of
the rail and port facilities is scheduled for the summer.
Third-party rail haulage volumes are considerably improved over
2017. Capital expenditures are still forecast at C$220 million for 2018.
The LIORC cash balance at June 30,
2018 stood at $18.7 million
with LIORC dividends payable on July 25,
2018 of $16.0 million. As at
June 30, 2018 the current assets
exceeded the current liabilities by $15.7
million. With our expectation of strong production, sales
and premiums for the high value-in-use iron ore products from IOC
over the balance of 2018, LIORC is in a good position to maintain
the regular dividend. In order to maintain the dividend policy of a
regular dividend of $0.25 per share
per quarter, LIORC will plan to rebuild the cash balance back to
approximately $30 million, the
pre-strike level, as sales and prices permit.
Our shareholders will be aware from its June 18, 2018 press release that the LIORC
Directors approved a special meeting of shareholders to seek
approval of changes to the Articles. LIORC is working on the
details for the special meeting, including the preparation of the
management information circular and negotiating debt financing
options. The Directors will determine the date of the special
meeting, likely to be in the fall of 2018. The LIORC Directors are
aware of an investment opportunity that they believe should result
in the Corporation being stronger by adding a third
revenue stream to the royalty and equity investment in IOC.
Shareholders are advised that the board will only proceed with the
proposed acquisition if it is accretive to shareholder value and is
consistent with our existing distribution and balance sheet
objectives. Changes to the Articles are required to make the
proposed investment. Upon the amendment of the Articles,
shareholders will enjoy the rights and protections afforded to
shareholders of a TSX-listed Canada Business Corporation Act (CBCA)
corporation (including with respect to corporate law duties on
directors and officers and the requirement to obtain shareholder
approval of fundamental changes and certain dilutive share
issuances), ensuring that their interests continue to be adequately
protected. The Board of Directors believes these measures, which
are consistent with those enjoyed by shareholders of other
TSX-listed CBCA corporations, are appropriate to protect the
interests of LIORC's shareholders. We understand shareholder
concerns regarding dilution and maintaining its on-going dividends,
and we plan to manage both in a manner consistent with the past.
Some shareholders have expressed concern regarding the lack of
diversification and growth. The Directors believe the most prudent
plan forward is to balance all these objectives in a very
conservative manner by periodically pursuing acquisitions only in
circumstances where the acquisition will increase shareholder value
and will be consistent with our existing distribution and balance
sheet objectives. We do not expect such opportunities to present
themselves often, but when they do – such as the one before us now
– the Directors need the authority to fully consider it on the
merits. It is not our intention to use the proposed amendments to
materially change LIORC, as the Board expects to exercise its
discretion in the same conservative manner as it has managed the
Corporation since its inception.
Respectfully submitted on behalf of the Directors of Labrador
Iron Ore Royalty Corporation,
William H. McNeil
President and Chief Executive Officer
August 7, 2018
Management's Discussion and Analysis
The following discussion and analysis should be read in
conjunction with the Management's Discussion and Analysis section
of the Corporation's 2017 Annual Report, the financial statements
and notes contained therein and the June 30,
2018 interim condensed consolidated financial
statements. 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 strike closed down the IOC production facilities on
March 27, 2018. The workforce
returned to work on May 28, 2018.
A new five-year collective agreement is now in place and the
ramp up to normal production rates was achieved by the end of
June. IOC is making every effort to maximize production for
the remainder of the year. Sales for the second quarter of
2018 were restricted by the availability of product as port
inventories had to be rebuilt.
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.
Royalty revenue for the second quarter of 2018 amounted to
$5.1 million as compared to
$33.8 million for the second quarter
of 2017. Equity (losses) earnings from IOC amounted to ($6.1) million or ($0.09) per share as compared to $14.3 million or $0.22 per share in 2017. Net (loss) income was
($3.3 million or ($0.05) per share compared to $32.3 million or $0.50 per share for the same period in 2017. The
shareholders' cash flow from operations for the second quarter was
$15.5 million or $0.24 per share as compared to $45.6 million or $0.71 per share for the same period in 2017.
The cash flow from operations, equity earnings and net income
for the second quarter of 2018 were lower than the second quarter
of 2017, due to the work stoppage at IOC during which operations
were suspended until a new labour agreement was reached.
The average index price for 62% fines increased 3% to
US$65 per tonne CFR China in the
second quarter of 2018 compared to the average price in the second
quarter of 2017 of US$63 per tonne.
Total IOC sales for calculating the royalty to LIORC – pellets plus
CFS – of 0.53 million tonnes was 87% lower in the second quarter of
2018 compared to the same period in 2017. In the second quarter of
2018 concentrate production continued to be preferentially directed
to the pellet plant due to the strong pellet demand and premiums.
LIORC received an IOC dividend in the second quarter of 2017 in the
amount of $15.3 million or
$0.24 per share, whereas LIORC
received no dividend in the second quarter of 2018.
Total concentrate production in the second quarter of 2018 of
1.5 million tonnes was 69% lower than the second quarter of 2017
and was 64% lower than the first quarter of 2018. Similarly, pellet
production in the second quarter of 2018 was 78% lower than the
second quarter of 2017 and 81% lower than the first quarter of
2017. As noted above, IOC production was negatively affected by the
labour strike.
Second quarter 2018 total IOC sales for calculating the royalty
to LIORC (pellets plus CFS) of 0.53 million tonnes was 87% below
the total sales tonnage in the second quarter 2017. Again, sales of
CFS and pellets were negatively impacted by the labour strike.
Largely as a result of the strike, the royalty revenue for LIORC
in the second quarter of 2018 was 85% lower than the revenue in
last year's second quarter.
Results for the six months were affected by the same factors as
affected the three month period. Royalty and commission interests
amortization expense decreased by $1.2
million for the six months due to the decrease in production
as a result of the labour strike.
The following table sets out quarterly revenue, net income, cash
flow and dividend data for 2018, 2017 and 2016.
|
Revenue
|
Net
Income
|
Net
Income
per Share
|
Cash Flow
|
Cash Flow
from
Operations
per Share
|
Adjusted
Cash Flow
per Share (1)
|
Dividends
Declared per
Share
|
|
(in millions
except per share information)
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
$34.3
|
$30.3
|
$0.47
|
$20.3
|
$0.32
|
$0.29
|
$0.35
|
|
|
|
|
|
|
|
|
Second
Quarter
|
$5.2
|
($3.3)
|
($0.05)
|
$15.5
|
$0.24
|
$0.04
|
$0.25
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
$43.4
|
$42.9
|
$0.67
|
$28.2(2)
|
$0.44(2)
|
$0.53(2)
|
$0.50
|
|
|
|
|
|
|
|
|
Second
Quarter
|
$34.2
|
$32.3
|
$0.50
|
$45.6(3)
|
$0.71(3)
|
$0.53(3)
|
$0.60
|
|
|
|
|
|
|
|
|
Third
Quarter
|
$40.4
|
$43.8
|
$0.69
|
$53.6(4)
|
$0.84(4)
|
$0.85(4)
|
$1.00
|
|
|
|
|
|
|
|
|
Fourth
Quarter
|
$40.6
|
$38.3
|
$0.60
|
$39.6(5)
|
$0.62(5)
|
$0.65(5)
|
$0.55
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
$22.3
|
$11.0
|
$0.17
|
$12.5
|
$0.19
|
$0.19
|
$0.25
|
|
|
|
|
|
|
|
|
Second
Quarter
|
$25.8
|
$8.3
|
$0.13
|
$7.6
|
$0.12
|
$0.22
|
$0.25
|
|
|
|
|
|
|
|
|
Third
Quarter
|
$28.4
|
$21.2
|
$0.33
|
$15.2
|
$0.24
|
$0.24
|
$0.25
|
|
|
|
|
|
|
|
|
Fourth
Quarter
|
$38.6
|
$37.7
|
$0.59
|
$28.3(6)
|
$0.44(6)
|
$0.57(6)
|
$0.25
|
(1)
|
"Adjusted cash
flow" (see below)
|
(2)
|
Includes $10.0
million IOC dividend.
|
(3)
|
Includes $15.3
million IOC dividend.
|
(4)
|
Includes $32.2
million IOC dividend.
|
(5)
|
Includes $19.3
million IOC dividend.
|
(6)
|
Includes$15.1million IOC dividend.
|
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 $0.24 for the quarter (2017 - $0.71). Cumulative standardized cash flow from
inception of the Corporation is $25.71 per share and total cash distributions
since inception is $25.19 per share,
for a payout ratio of 98%.
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 are excluded. 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 (in '000's).
|
3 Months
Ended
June 30,
2018
|
3 Months
Ended
June 30,
2017
|
6 Months
Ended
June 30,
2018
|
6 Months
Ended
June 30,
2017
|
Standardized cash
flow from operating activities
|
$15,496
|
$45,576
|
$35,773
|
$73,758
|
Excluding: changes in
amounts receivable, accounts payable and income taxes
payable
|
(13,210)
|
(11,515)
|
(14,801)
|
(6,074)
|
Adjusted cash
flow
|
$2,286
|
$34,061
|
$20,972
|
$67,684
|
Adjusted cash flow
per share
|
$0.04
|
$0.53
|
$0.33
|
$1.06
|
Liquidity and Capital Resources
The Corporation had $18.7 million
in cash as at June 30, 2018
(December 31, 2017 - $40.5 million) with total current assets of
$33.0 million (December 31, 2017 - $82.6
million). The Corporation had working capital of
$15.7 million as at June 30, 2018 (December
31, 2017 - $33.1 million). The
Corporation's operating cash flow for the quarter was $15.5 million and the dividend paid during the
quarter was $22.4 million, resulting
in cash balances decreasing by $6.9
million during the second quarter of 2018.
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 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 intends to pay cash
dividends of the net income derived from IOC to the maximum extent
possible, subject to the maintenance of appropriate levels of
working capital.
The Corporation has a $50 million
revolving credit facility with a term ending September 18, 2020 with provision for annual
one-year extensions. No amount is currently drawn under this
facility (2017 – nil) leaving $50.0
million available to provide for any capital required by IOC
or requirements of the Corporation.
Outlook
IOC is expecting good production and sales tonnages in the third
and fourth quarters of 2018. Rio Tinto has reduced the IOC
production guidance for 2018 to 9.0 to 10.0 million tonnes of iron
ore pellets and concentrates for its 58.72% interest in IOC, which
is total saleable production of 15.3 to 17.0 million tonnes on a
100% basis. Achieving the low end of the guidance would result in
approximately 2% less total saleable tonnes produced in the second
half of 2018 over the saleable production of 10.06 million tonnes
in the second half of 2017. Achieving the high end of the guidance
would result in approximately 15% more total saleable tonnes
produced in the second half of 2018 over the saleable production in
the second half of 2017.
In the second quarter of 2018 the Platts 62% Fe CFR China
benchmark iron ore price averaged US$65 per tonne, but was largely range bound with
a high price of US$68 per tonne, and
a low of US$63 per tonne. IOC
sells its CFS product based on the 65% Fe index, and the Platts
index price for 65% Fe concentrate averaged US$86 per tonne in the second quarter of 2018,
13% higher than the price in the second quarter of 2017, but 5%
lower than the average price in the first quarter of 2018.
Atlantic Basin blast furnace pellet premiums, as reported by
Platts, improved by 29% from US$45
per tonne in the second quarter of 2017 to US$58 per tonne against the comparable 2018
quarter.
In the second quarter of 2018, prices for iron ore products with
higher value-in-use characteristics have remained firm, supported
by the environmental policies of the Chinese governments, and by
China's strong steel demand and
margins. The differential between the Platts indexes for 65% Fe CFS
and 62% Fe CFS has widened to US$27
per tonne at the time of writing, the highest spread in recent
years. In the second quarter of 2018 the Canadian dollar weakened,
reflecting concerns regarding international trade. Benchmark iron
ore prices have also been somewhat negatively impacted by trade
concerns but have been more resilient than other base metals,
notably copper and zinc.
The IOC employees and management continue their efforts to
increase production and reduce unit operating costs. Based on LIORC
management's July site visit, they are optimistic regarding the
production and unit costs in the third and fourth quarter of 2018.
Consistent ore production from the Wabush 3 pit is expected in September. The No.
4 pellet line is scheduled to be refurbished over approximately
nine weeks, starting in late September. The usual maintenance of
the rail and port facilities is scheduled for the summer.
Third-party rail haulage volumes are considerably improved over
2017. Capital expenditures are still forecast at C$220 million for 2018.
The LIORC cash balance at June 30,
2018 stood at $18.7 million
with LIORC dividends payable on July 25,
2018 of $16.0 million. As at
June 30, 2018 the current assets
exceeded the current liabilities by $15.7
million. With our expectation of strong production, sales
and premiums for the high value-in-use iron ore products from IOC
over the balance of 2018, LIORC is in a good position to maintain
the regular dividend. In order to maintain the dividend policy of a
regular dividend of $0.25 per share
per quarter, LIORC will plan to rebuild the cash balance back to
approximately $30 million, the
pre-strike level, as sales and prices permit.
Our shareholders will be aware from its June 18, 2018 press release that the LIORC
Directors approved a special meeting of shareholders to seek
approval of changes to the Articles. LIORC is working on the
details for the special meeting, including the preparation of the
management information circular and negotiating debt financing
options. The Directors will determine the date of the special
meeting, likely to be in the fall of 2018. The LIORC Directors are
aware of an investment opportunity that they believe should result
in the Corporation being stronger by adding a third revenue stream
to the royalty and equity investment in IOC. Shareholders are
advised that the board will only proceed with the proposed
acquisition if it is accretive to shareholder value and is
consistent with our existing distribution and balance sheet
objectives. Changes to the Articles are required to make the
proposed investment. Upon the amendment of the Articles,
shareholders will enjoy the rights and protections afforded to
shareholders of a TSX-listed CBCA corporation (including with
respect to corporate law duties on directors and officers and the
requirement to obtain shareholder approval of fundamental changes
and certain dilutive share issuances), ensuring that their
interests continue to be adequately protected. The Board of
Directors believes these measures, which are consistent with those
enjoyed by shareholders of other TSX-listed CBCA corporations, are
appropriate to protect the interests of LIORC's shareholders. We
understand shareholder concerns regarding dilution and maintaining
its on-going dividends, and we plan to manage both in a manner
consistent with the past. Some shareholders have expressed concern
regarding the lack of diversification and growth. The Directors
believe the most prudent plan forward is to balance all these
objectives in a very conservative manner by periodically pursuing
acquisitions only in circumstances where the acquisition will
increase shareholder value and will be consistent with our existing
distribution and balance sheet objectives. We do not expect such
opportunities to present themselves often, but when they do – such
as the one before us now – the Directors need the authority to
fully consider it on the merits. It is not our intention to use the
proposed amendments to materially change LIORC, as the Board
expects to exercise its discretion in the same conservative manner
as it has managed the Corporation since its inception.
William H. McNeil
President and Chief Executive Officer
Toronto, Ontario
August 7, 2018
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,
exchange rates, the performance of IOC, market conditions in the
steel industry, mining risks and insurance, relationships with
aboriginal groups, changes affecting IOC's customers, competition
from other iron ore producers, estimates of reserves and resources
and government regulation and taxation. A discussion of these
factors is contained in LIORC's annual information form dated
March 8, 2018 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.sedar.com.
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
|
|
|
|
As
at
|
|
June
30,
|
|
December
31,
|
(in thousands of
Canadian dollars)
|
2018
|
|
2017
|
|
(Unaudited)
|
Assets
|
|
|
|
Current
Assets
|
|
|
|
|
Cash
|
$
|
18,671
|
|
$
|
40,498
|
|
Amounts
receivable
|
5,596
|
|
42,092
|
|
Income taxes
recoverable
|
8,729
|
|
-
|
Total Current
Assets
|
32,996
|
|
82,590
|
|
|
|
|
Non-Current
Assets
|
|
|
|
|
Iron Ore Company of
Canada ("IOC")
|
|
|
|
|
|
royalty and
commission interests
|
257,242
|
|
259,032
|
|
Investment in
IOC
|
417,215
|
|
408,691
|
Total Non-Current
Assets
|
674,457
|
|
667,723
|
|
|
|
|
Total
Assets
|
$
|
707,453
|
|
$
|
750,313
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accounts
payable
|
$
|
1,338
|
|
$
|
8,601
|
|
Dividend
payable
|
16,000
|
|
35,200
|
|
Taxes
payable
|
-
|
|
5,703
|
Total Current
Liabilities
|
17,338
|
|
49,504
|
|
|
|
|
Non-Current
Liabilities
|
|
|
|
|
Deferred income
taxes
|
127,930
|
|
127,220
|
Total
Liabilities
|
145,268
|
|
176,724
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
Share
capital
|
317,708
|
|
317,708
|
|
Retained
earnings
|
252,923
|
|
264,272
|
|
Accumulated other
comprehensive loss
|
(8,446)
|
|
(8,391)
|
|
562,185
|
|
573,589
|
|
|
|
|
Total Liabilities and
Shareholders' Equity
|
$
|
707,453
|
|
$
|
750,313
|
LABRADOR IRON ORE
ROYALTY CORPORATION
|
INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
|
AND COMPREHENSIVE
INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
|
June
30,
|
(in thousands of
Canadian dollars except for per share information)
|
2018
|
|
2017
|
|
(Unaudited)
|
Revenue
|
|
|
|
|
IOC
royalties
|
$
|
5,081
|
|
$
|
33,753
|
|
IOC
commissions
|
53
|
|
397
|
|
Interest and other
income
|
93
|
|
83
|
|
5,228
|
|
34,233
|
Expenses
|
|
|
|
|
Newfoundland royalty
taxes
|
1,016
|
|
6,751
|
|
Amortization of
royalty and commission interests
|
461
|
|
1,427
|
|
Administrative
expenses
|
808
|
|
645
|
|
2,285
|
|
8,823
|
|
|
|
|
Income before
equity earnings and income taxes
|
2,943
|
|
25,410
|
Equity (losses)
earnings in IOC
|
(6,060)
|
|
14,326
|
|
|
|
|
|
(Loss) income
before income taxes
|
(3,117)
|
|
39,736
|
|
|
|
|
|
Provision for
income taxes
|
|
|
|
|
Current
|
1,118
|
|
8,034
|
|
Deferred
|
(1,035)
|
|
(553)
|
|
83
|
|
7,481
|
|
|
|
|
Net (loss) income
for the period
|
(3,200)
|
|
32,255
|
|
|
|
|
Other
comprehensive loss
|
|
|
|
|
Share of other
comprehensive loss of IOC that will not be
|
|
|
|
|
reclassified
subsequently to profit or loss
|
|
|
|
|
(net of income taxes
of 2018 - $5; 2017 - $17)
|
(28)
|
|
(96)
|
|
|
|
|
Comprehensive
(loss) income for the period
|
$
|
(3,228)
|
|
$
|
32,159
|
|
|
|
|
Net (loss) income
per share
|
$
|
(0.05)
|
|
$
|
0.50
|
LABRADOR IRON ORE
ROYALTY CORPORATION
|
INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
AND COMPREHENSIVE
INCOME
|
|
|
|
|
|
For the Six Months
Ended
|
|
June
30,
|
(in thousands of
Canadian dollars except for per share information)
|
2018
|
|
2017
|
|
(Unaudited)
|
Revenue
|
|
|
|
|
IOC
royalties
|
$
|
38,892
|
|
$
|
76,590
|
|
IOC
commissions
|
436
|
|
857
|
|
Interest and other
income
|
213
|
|
142
|
|
39,541
|
|
77,589
|
Expenses
|
|
|
|
|
Newfoundland royalty
taxes
|
7,778
|
|
15,318
|
|
Amortization of
royalty and commission interests
|
1,790
|
|
2,971
|
|
Administrative
expenses
|
1,670
|
|
1,694
|
|
11,238
|
|
19,983
|
|
|
|
|
Income before
equity earnings and income taxes
|
28,303
|
|
57,606
|
Equity earnings in
IOC
|
8,589
|
|
36,563
|
|
|
|
|
Income before
income taxes
|
36,892
|
|
94,169
|
|
|
|
|
Provision for
income taxes
|
|
|
|
|
Current
|
9,121
|
|
18,166
|
|
Deferred
|
720
|
|
834
|
|
9,841
|
|
19,000
|
|
|
|
|
Net income for the
period
|
27,051
|
|
75,169
|
|
|
|
|
Other
comprehensive loss
|
|
|
|
|
Share of other
comprehensive loss of IOC that will not be
|
|
|
|
|
reclassified
subsequently to profit or loss (net of income
taxes
|
|
|
|
|
of 2018 - $10; 2017 -
$34)
|
(55)
|
|
(192)
|
|
|
|
|
Comprehensive
income for the period
|
$
|
26,996
|
|
$
|
74,977
|
|
|
|
|
Net income per
share
|
$
|
0.42
|
|
$
|
1.17
|
LABRADOR IRON ORE
ROYALTY CORPORATION
|
INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
For the Six Months
Ended
|
|
June
30,
|
(in thousands of
Canadian dollars)
|
2018
|
|
2017
|
|
(Unaudited)
|
Net inflow
(outflow) of cash related
|
|
|
|
|
to the following
activities
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
Net income for the
period
|
$
|
27,051
|
|
$
|
75,169
|
|
Items not affecting
cash:
|
|
|
|
|
|
Equity earnings in
IOC
|
(8,589)
|
|
(36,563)
|
|
|
Current income
taxes
|
9,121
|
|
18,166
|
|
|
Deferred income
taxes
|
720
|
|
834
|
|
|
Amortization of
royalty and commission interests
|
1,790
|
|
2,971
|
|
Common share dividend
from IOC
|
-
|
|
25,273
|
|
Change in amounts
receivable
|
36,496
|
|
3,924
|
|
Change in accounts
payable
|
(7,263)
|
|
(990)
|
|
Income taxes
paid
|
(23,553)
|
|
(15,026)
|
|
Cash flow from
operating activities
|
35,773
|
|
73,758
|
|
|
|
|
Financing
|
|
|
|
|
Dividends paid to
shareholders
|
(57,600)
|
|
(48,000)
|
|
Cash flow used in
financing activities
|
(57,600)
|
|
(48,000)
|
|
|
|
|
(Decrease)
increase in cash, during the period
|
(21,827)
|
|
25,758
|
|
|
|
|
Cash, beginning of
period
|
40,498
|
|
23,937
|
|
|
|
|
Cash, end of
period
|
$
|
18,671
|
|
$
|
49,695
|
INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
|
|
|
Accumulated
|
|
|
|
|
other
|
|
|
Share
|
Retained
|
comprehensive
|
|
(in thousands of
Canadian dollars)
|
capital
|
earnings
|
loss
|
Total
|
|
|
(Unaudited)
|
|
|
|
|
|
Balance as at
December 31, 2016
|
$
|
317,708
|
$
|
276,588
|
$
|
(10,451)
|
$
|
583,845
|
Net income for the
year
|
-
|
75,169
|
-
|
75,169
|
Dividends declared to
shareholders
|
-
|
(70,400)
|
-
|
(70,400)
|
Share of other
comprehensive loss from investment in IOC (net of taxes)
|
-
|
-
|
(192)
|
(192)
|
Balance as at June
30, 2017
|
$
|
317,708
|
$
|
281,357
|
$
|
(10,643)
|
$
|
588,422
|
|
|
|
|
|
Balance as at
December 31, 2017
|
$
|
317,708
|
$
|
264,272
|
$
|
(8,391)
|
$
|
573,589
|
Net income for the
year
|
-
|
27,051
|
-
|
27,051
|
Dividends declared to
shareholders
|
-
|
(38,400)
|
-
|
(38,400)
|
Share of other
comprehensive loss from investment in IOC (net of taxes)
|
-
|
-
|
(55)
|
(55)
|
Balance as at June
30, 2018
|
$
|
317,708
|
$
|
252,923
|
$
|
(8,446)
|
$
|
562,185
|
The complete consolidated financial statements for the second
quarter ended June 30, 2018,
including the notes thereto, are posted on sedar.com and
labradorironore.com.
SOURCE Labrador Iron Ore Royalty Corporation