TORONTO, Nov. 7, 2018 /CNW/ - Labrador Iron Ore Royalty
Corporation ("LIORC", TSX: LIF) announced today its operation and
cash flow results for the third quarter ended September 30, 2018.
Royalty revenue for the third quarter of 2018 amounted to
$44.0 million as compared to
$39.8 million for the third quarter
of 2017. LIORC received a dividend from Iron Ore Company of
Canada ("IOC") in the third
quarter of 2018 in the amount of $58.6
million or $0.92 per share as
compared to $32.2 million or
$0.50 per share in the third quarter
of 2017. Equity earnings from IOC amounted to $30.6 million or $0.48 per share as compared to $21.2 million or $0.33 per share in 2017. Net income was
$58.1 million or $0.91 per share compared to $43.8 million or $0.69 per share for the same period in 2017. The
shareholders' cash flow from operations for the third quarter was
$59.7 million or $0.93 per share as compared to $53.6 million or $0.84 per share for the same period in 2017.
The cash flow from operations, equity earnings and net income
for the third quarter of 2018 were higher than the third
quarter of 2017, due to an overall 9% improvement in sales tonnages
for concentrate for sale ("CFS") and pellets, and improved pellet
premiums, offset by slightly lower prices for CFS. Recall that
sales tonnages for the third quarter of 2017 were negatively
affected by the maintenance on the dumper in Sept-Îles for the rail
cars that transport the iron ore products from the concentrator at
Labrador City to the port.
The Platts average index price for 62% fines decreased 6% to
US$67 per tonne CFR China in the
third quarter of 2018 compared to the average index price in the
third quarter of 2017 of US$71 per
tonne. However, IOC sells the CFS product based on the 65% Fe
index, and the Platts average index price for 65% fines was 4%
higher in the third quarter of 2018 compared to the average price
in the comparable quarter of 2017. Total IOC sales for
calculating the royalty to LIORC – pellets plus CFS – of 5.43
million tonnes was 9% higher in the third quarter of 2018 compared
to the same period in 2017. In the third quarter of 2018
concentrate production continued to be preferentially directed to
the pellet plant due to the strong pellet demand and premiums.
LIORC's results for the three months and nine months ended
September 30 are summarized
below:
(in millions
except per share information)
|
3 Months
Ended
Sept. 30,
2018
|
3 Months
Ended
Sept. 30,
2017
|
9 Months
Ended
Sept. 30,
2018
|
9 Months
Ended
Sept. 30,
2017
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Revenue
|
$44.6
|
$40.4
|
$84.1
|
$118.0
|
Cash flow from
operations
|
$59.7
|
$53.6
|
$95.5
|
$127.4
|
Operating cash flow
per share
|
$0.93
|
$0.84
|
$1.49
|
$1.99
|
Net income
|
$58.1
|
$43.8
|
$85.1
|
$118.9
|
Net income per
share
|
$0.91
|
$0.69
|
$1.33
|
$1.86
|
Iron Ore Company of Canada Operations
Production
Total concentrate production in the third quarter of 2018 of 5.0
million tonnes was 11% lower than the third quarter of 2017 and was
243% higher than the second quarter of 2018. CFS production was 22%
lower in the third quarter of 2018 as compared to the third quarter
of 2017. However, pellet production in the third quarter of 2018
was 2% higher than the third quarter of 2017, reflecting the
preference for pellets due to the high premiums offered. As stated
by Rio Tinto in its production report for the third quarter of
2018, production in the third quarter of 2018 was adversely
affected by "maintenance and the commissioning of a productivity
improvement project on the spiral plant, which temporarily
restricted throughput." Recall that IOC production was negatively
affected by the labour stoppage in the second quarter of 2018,
making comparisons between the second and third quarters of 2018
not meaningful.
Sales as Reported for the LIORC Royalty
Third quarter 2018 total iron ore tonnage sold by IOC (pellets plus
CFS) of 5.43 million tonnes was 9% above the total sales tonnage in
the third quarter 2017. The pellet sales tonnage was maintained
quarter over quarter reflecting maintenance improvements made over
the past year by IOC personnel. All six pellet lines operated
during the third quarter, but the No. 4 pellet line is scheduled
for refurbishment in the fourth quarter of 2018. The CFS sales
tonnage in the third quarter 2018 was an 18% improvement over the
comparable 2017 quarter, which was affected by the required
maintenance of the rail car dumper.
The royalty revenue for LIORC in the third quarter of 2018 was
10% higher than the revenue in last year's third quarter driven by
the strong pellet premiums and the higher sales volumes.
Sales of CFS and pellets in the second quarter 2018 were
negatively impacted by the labour stoppage, which is reflected in
the year-to-date 2018 sales tonnages, as reported below.
A summary of IOC sales for calculating the royalty to LIORC in
millions of tonnes is as follows:
|
3 Months
Ended
Sept. 30,
2018
|
3 Months
Ended
Sept. 30,
2017
|
9 Months
Ended
Sept. 30,
2018
|
9 Months
Ended
Sept. 30,
2017
|
Year
Ended Dec. 31,
2017
|
|
|
|
|
|
|
Pellets
|
2.79
|
2.78
|
5.81
|
7.70
|
10.48
|
Concentrates(1)
|
2.64
|
2.23
|
4.04
|
6.01
|
8.67
|
|
|
|
|
|
|
Total(2)
|
5.43
|
5.00
|
9.86
|
13.71
|
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
fourth quarter of 2018, with anticipated benefits from the spiral
improvement project noted above. IOC has also initiated trials with
a reflux classifier to improve the weight yield in the
concentrator. The Wabush 3 Pit was officially opened on
September 25, 2018, and renamed the
Moss Pit in recognition of the geologic and exploration
contribution to IOC by Dr. A.E. Moss. The availability of the Moss
Pit is expected to enhance the overall mine production, reduce
overall mining costs due to a lower waste stripping ratio, improve
IOC's ability to blend ores to meet client specifications, and
extend the mine life. The dewatering of the Luce Pit has progressed
well, and this initiative is also expected to result in improved
performance at IOC.
Rio Tinto has maintained the IOC production guidance for 2018 at
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 –
CFS plus pellets – of 15.3 to 17.0 million tonnes on a 100%
basis.
The price outlook for higher value-in-use CFS and pellets
remains positive for the balance 2018 and going into 2019. There is
strong demand by steelmakers for IOC's high quality, low impurity
(low phosphorus and alumina content) iron ore which helps to
improve efficiency, reduce emissions and produce higher quality
steel. The strong demand by Chinese steelmakers for high quality
seaborne iron ore products is supported by strong steel margins,
and the expected application of winter output cuts in China. The Chinese demand for pellets has
caused the pellet premium CFR China to rapidly increase to average
US$89 per tonne in September 2018 compared to US$46 per tonne in September 2017, as reported by Platts. While this
premium has reduced somewhat to US$74
per tonne, at the time of writing, we expect the pellet premiums in
2019 will be strong given the likely restart of Samarco being
delayed into 2020 according to Vale officials. The differential for
65% Fe CFR China compared to the 62% IODEX price has weakened
somewhat recently as reported by Platts to US$24 per tonne, but this remains strong as
compared to the differential of less than US$10 per tonne in 2016.
IOC has reduced the forecast capital for 2018 from $220 million to $203
million based on the second quarter work stoppage resulting
in delays to ramp up the personnel and equipment necessary to
execute the full plan in 2018. We do not expect any long-term
impacts from this delay in capital spending.
Third party ore haulage tonnage and sales are well above plan
year to date 2018. With a good price outlook for iron ore, it is
expected that IOC will benefit from third party haulage contracts
for the balance of 2018 and into 2019.
There are forecasts for the Canadian dollar to strengthen
against the US dollar over the balance of 2018 and into 2020 with a
reduction in uncertainty owing to the United States Mexico Canada
Agreement, and a significant boost to growth in 2020 associated
with the construction of the Kitimat LNG terminal.
In its press release dated June 18,
2018, the LIORC Board indicated its intention to call a
special meeting of shareholders to approve amendments to the
articles of incorporation to, among other things, allow the
corporation to invest in other mining royalties. While the
immediate opportunity referred to in the press release remains a
possibility, the Board has decided to defer the calling of the
meeting.
On September 14, 2018, LIORC
announced that it would receive a dividend from IOC on September 27, 2018 in the amount of approximately
$59 million or $0.92 per share. On the same date, the LIORC
Board declared regular and special dividends totaling
$35.2 million or $0.55 per share to be paid to LIORC shareholders
on October 25, 2018. The
balance was used to build our cash balance to provide the
Corporation with additional financial flexibility. The LIORC cash
balance at September 30, 2018 stood at $62.4 million and the current assets
exceeded the current liabilities by $63.5
million. The LIORC dividends payable on October 25, 2018 was largely covered by the
royalty receivable from IOC. We expect good production, sales
and premiums for the high value-in-use iron ore products from IOC
over the balance of 2018. As a result, for the balance of 2018 and
going into 2019, LIORC is in a good position to maintain the
regular dividend, continue to pay special dividends, and
maintain a strong balance sheet.
Respectfully submitted on behalf of the Directors of Labrador
Iron Ore Royalty Corporation,
William H. McNeil
President and Chief Executive Officer
November 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 third quarter of 2018 amounted to
$44.0 million as compared to
$39.8 million for the third quarter
of 2017. LIORC received a dividend from IOC in the third quarter of
2018 in the amount of $58.6 million
or $0.92 per share as compared to
$32.2 million or $0.50 per share in the third quarter of 2017.
Equity earnings from IOC amounted to $30.6
million or $0.48 per share as
compared to $21.2 million or
$0.33 per share in 2017. Net income
was $58.1 million or $0.91 per share compared to $43.8 million or $0.69 per share for the same period in 2017. The
shareholders' cash flow from operations for the third quarter was
$59.7 million or $0.93 per share as compared to $53.6 million or $0.84 per share for the same period in 2017.
The cash flow from operations, equity earnings and net income
for the third quarter of 2018 were higher than the third
quarter of 2017, due to an overall 9% improvement in sales tonnages
for CFS and pellets, and improved pellet premiums, offset by
slightly lower prices for CFS. Recall that sales tonnages for the
third quarter of 2017 were negatively affected by the maintenance
on the dumper in Sept-Îles for the rail cars that transport the
iron ore products from the concentrator at Labrador City to the port.
The Platts average index price for 62% fines decreased 6% to
US$67 per tonne CFR China in the
third quarter of 2018 compared to the average price in the third
quarter of 2017 of US$71 per tonne.
However, IOC sells the CFS product based on the 65% Fe index, and
the Platts average index price for 65% fines was 4% higher in the
third quarter of 2018 compared to the average index price in the
comparable quarter of 2017. Total IOC sales for calculating
the royalty to LIORC – pellets plus CFS – of 5.43 million tonnes
was 9% higher in the third quarter of 2018 compared to the same
period in 2017. In the third quarter of 2018 concentrate production
continued to be preferentially directed to the pellet plant due to
the strong pellet demand and premiums.
Total concentrate production in the third quarter of 2018 of 5.0
million tonnes was 11% lower than the third quarter of 2017 and was
243% higher than the second quarter of 2018. CFS production was 22%
lower in the third quarter of 2018 as compared to the third quarter
of 2017. However, pellet production in the third quarter of 2018
was 2% higher than the third quarter of 2017, reflecting the
preference for pellets due to the high premiums offered. As stated
by Rio Tinto in its production report for the third quarter of
2018, production in the third quarter of 2018 was adversely
affected by "maintenance and the commissioning of a productivity
improvement project on the spiral plant, which temporarily
restricted throughput." Recall that IOC production was negatively
affected by the labour stoppage in the second quarter of 2018,
making comparisons between the second and third quarters of 2018
not meaningful.
Third quarter 2018 total iron ore tonnage sold by IOC (pellets
plus CFS) of 5.43 million tonnes was 9% above the total sales
tonnage in the third quarter 2017. The pellet sales tonnage was
maintained quarter over quarter reflecting maintenance improvements
made over the past year by IOC personnel. All six pellet lines
operated during the third quarter, but the No. 4 pellet line is
scheduled for refurbishment in the fourth quarter of 2018. The CFS
sales tonnage in the third quarter 2018 was an 18% improvement over
the comparable 2017 quarter, which was affected by the required
maintenance of the rail car dumper.
The royalty revenue for LIORC in the third quarter of 2018 was
10% higher than the revenue in last year's third quarter driven by
the strong pellet premiums and higher sales volumes.
Sales of CFS and pellets in the second quarter 2018 were
negatively impacted by the labour stoppage, which is reflected in
the year-to-date 2018 sales tonnages.
Results for the nine months to September
30, 2018 were affected by the labour stoppage in the second
quarter of 2018. The CFS sales tonnage in the nine months to
September 2018 was 33% below the CFS
sales tonnage in the comparable period in 2017. The pellet sales
tonnage was 25% lower. CFS prices for IODEX 62% Fe CFR China were
6% lower but the Platts price index for 65% Fe CFR China was
slightly positive by 2% in the nine months ended September 30, 2018 compared to the comparable
2017 period. Atlantic Basin pellet premiums as reported by Platts
were 30% higher in the nine months ended September 30, 2018 compared to the comparable
2017 period.
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
|
|
|
|
|
|
|
|
|
Third
Quarter
|
$44.6
|
$58.1
|
$0.91
|
$59.7(2)
|
$0.93(2)
|
$1.30(2)
|
$0.55
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
$43.4
|
$42.9
|
$0.67
|
$28.2(3)
|
$0.44(3)
|
$0.53(3)
|
$0.50
|
|
|
|
|
|
|
|
|
Second
Quarter
|
$34.2
|
$32.3
|
$0.50
|
$45.6(4)
|
$0.71(4)
|
$0.53(4)
|
$0.60
|
|
|
|
|
|
|
|
|
Third
Quarter
|
$40.4
|
$43.8
|
$0.69
|
$53.6(5)
|
$0.84(5)
|
$0.85(5)
|
$1.00
|
|
|
|
|
|
|
|
|
Fourth
Quarter
|
$40.6
|
$38.3
|
$0.60
|
$39.6(6)
|
$0.62(6)
|
$0.65(6)
|
$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(7)
|
$0.44(7)
|
$0.57(7)
|
$0.25
|
|
(1) "Adjusted cash flow"
(see below)
|
(2) Includes $58.6 million
IOC dividend.
|
(3) Includes $10.0 million
IOC dividend.
|
(4) Includes $15.3 million
IOC dividend.
|
(5) Includes $32.2 million
IOC dividend.
|
(6) Includes $19.3 million
IOC dividend.
|
(7) Includes $15.1 million
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 $0.93 for the quarter
(2017 - $0.84). Cumulative
standardized cash flow from inception of the Corporation is
$26.64 per share and total cash
distributions since inception is $25.74 per share, for a payout ratio of 97%.
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
Sept. 30,
2018
|
3 Months
Ended
Sept. 30,
2017
|
9 Months
Ended
Sept. 30,
2018
|
9 Months
Ended
Sept. 30,
2017
|
Standardized cash
flow from operating activities
|
59,756
|
$53,640
|
$95,529
|
$127,398
|
|
|
|
|
|
Excluding: changes in
amounts receivable, accounts payable and income
taxes payable
|
23,325
|
798
|
8,524
|
(5,276)
|
|
|
|
|
|
Adjusted cash
flow
|
$83,081
|
$54,438
|
$104,053
|
$122,122
|
|
|
|
|
|
Adjusted cash flow
per share
|
$1.30
|
$0.85
|
$1.63
|
$1.91
|
Liquidity and Capital Resources
The Corporation had $62.4 million
in cash as at September 30, 2018
(December 31, 2017 - $40.5 million) with total current assets of
$107.9 million (December 31, 2017 - $82.6
million). The Corporation had working capital of
$63.5 million as at September 30, 2018 (December 31, 2017 - $33.1
million). The Corporation's operating cash flow for the
quarter was $59.8 million and the
dividend paid during the quarter was $16.0
million, resulting in cash balances increasing by
$43.7 million during the third
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 have historically been 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 of the net income derived from IOC to the maximum extent
possible, subject to the maintenance of appropriate levels of
working capital. As noted above, the Corporation has built up its
cash balances to provide the Corporation with additional financial
flexibility.
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.
Outstanding Share Data
At November 7, 2018, there were 64
million common shares of the Corporation outstanding.
Outlook
IOC is expecting good production and sales tonnages in the
fourth quarter of 2018, with anticipated benefits from the spiral
improvement project noted above. IOC has also initiated trials with
a reflux classifier to improve the weight yield in the
concentrator. The Wabush 3 Pit was officially opened on
September 25, 2018, and renamed the
Moss Pit in recognition of the geologic and exploration
contribution to IOC by Dr. A.E Moss. The availability of the Moss
Pit is expected to enhance the overall mine production, reduce
overall mining costs due to a lower waste stripping ratio, improve
IOC's ability to blend ores to meet client specifications, and
extend the mine life. The dewatering of the Luce Pit has progressed
well, and this initiative is also expected to result in improved
performance at IOC.
Rio Tinto has maintained the IOC production guidance for 2018 at
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 –
CFS plus pellets – of 15.3 to 17.0 million tonnes on a 100%
basis.
The price outlook for higher value-in-use CFS and pellets
remains positive for the balance 2018 and going into 2019. There is
strong demand by steelmakers for IOC's high quality, low impurity
(low phosphorus and alumina content) iron ore which helps to
improve efficiency, reduce emissions and produce higher quality
steel. The strong demand by Chinese steelmakers for high quality
seaborne iron ore products is supported by strong steel margins,
and the expected application of winter output cuts in China. The Chinese demand for pellets has
caused the pellet premium CFR China to rapidly increase to average
US$89 per tonne in September 2018 compared to US$46 per tonne in September 2017, as reported by Platts. While this
premium has reduced somewhat to US$74
per tonne, at the time of writing, we expect the pellet premiums in
2019 will be strong given the likely restart of Samarco being
delayed into 2020 according to Vale officials. The differential for
65% Fe CFR China compared to the 62% IODEX price has weakened
somewhat recently as reported by Platts to US$24 per tonne, but this remains strong as
compared to the differential of less than US$10 per tonne in 2016.
IOC has reduced the forecast capital for 2018 from $220 million to $203
million based on the second quarter work stoppage resulting
in delays to ramp up the personnel and equipment necessary to
execute the full plan in 2018. We do not expect any long-term
impacts from this delay in capital spending.
Third party ore haulage tonnage and sales are well above plan
year to date 2018. With a good price outlook for iron ore, it is
expected that IOC will benefit from third party haulage contracts
for the balance of 2018 and into 2019.
There are forecasts for the Canadian dollar to strengthen
against the US dollar over the balance of 2018 and into 2020 with a
reduction in uncertainty owing to the United States Mexico Canada
Agreement, and a significant boost to growth in 2020 associated
with the construction of the Kitimat LNG terminal.
In its press release dated June 18,
2018, the LIORC Board indicated its intention to call a
special meeting of shareholders to approve amendments to the
articles of incorporation to, among other things, allow the
corporation to invest in other mining royalties. While the
immediate opportunity referred to in the press release remains a
possibility, the Board has decided to defer the calling of the
meeting.
On September 14, 2018, LIORC
announced that it would receive a dividend from IOC on September 27, 2018 in the amount of approximately
$59 million or $0.92 per share. On the same date, the LIORC
Board declared regular and special dividends totaling
$35.2 million or $0.55 per share to be paid to LIORC shareholders
on October 25, 2018. The
balance was used to build our cash balance to provide the
Corporation with additional financial flexibility. The LIORC cash
balance at September 30, 2018 stood at $62.4 million and the current assets
exceeded the current liabilities by $63.5
million. The LIORC dividends payable on October 25, 2018 was largely covered by the
royalty receivable from IOC. We expect good production, sales
and premiums for the high value-in-use iron ore products from IOC
over the balance of 2018. As a result, for the balance of 2018 and
going into 2019, LIORC is in a good position to maintain the
regular dividend, continue to pay special dividends, and
maintain a strong balance sheet.
Additional Information
Additional information relating to the Corporation, including
its most recently filed unaudited interim and audited consolidated
financial statements, Annual Information Form and Management
Information Circular is on SEDAR at www.sedar.com. Additional
information is also available on the Corporation's website at
www.labradorironore.com.
William H. McNeil
President and Chief Executive Officer
Toronto, Ontario
November 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
|
|
|
September
30,
|
|
|
December
31,
|
(in thousands of
Canadian dollars)
|
|
2018
|
|
|
2017
|
|
|
(Unaudited)
|
Assets
|
|
|
|
Current
Assets
|
|
|
|
|
Cash
|
$
|
62,427
|
|
$
|
40,498
|
|
Amounts
receivable
|
44,180
|
|
42,092
|
|
Income taxes
recoverable
|
1,300
|
|
-
|
Total Current
Assets
|
107,907
|
|
82,590
|
|
|
|
|
|
Non-Current
Assets
|
|
|
|
|
Iron Ore Company of
Canada ("IOC")
|
|
|
|
|
royalty
and commission interests
|
255,509
|
|
259,032
|
|
Investment in
IOC
|
390,722
|
|
408,691
|
Total Non-Current
Assets
|
646,231
|
|
667,723
|
|
|
|
|
|
Total
Assets
|
$
|
754,138
|
|
$
|
750,313
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accounts
payable
|
$9,168
|
|
$8,601
|
|
Dividend
payable
|
35,200
|
|
35,200
|
|
Taxes
payable
|
-
|
|
5,703
|
Total Current
Liabilities
|
44,368
|
|
49,504
|
|
|
|
|
|
Non-Current
Liabilities
|
|
|
|
|
Deferred income
taxes
|
123,450
|
|
127,220
|
Total
Liabilities
|
167,818
|
|
176,724
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
Share
capital
|
317,708
|
|
317,708
|
|
Retained
earnings
|
275,784
|
|
264,272
|
|
Accumulated other
comprehensive loss
|
(7,172)
|
|
(8,391)
|
|
|
586,320
|
|
573,589
|
|
|
|
|
|
Total Liabilities and
Shareholders' Equity
|
$
|
754,138
|
|
$
|
750,313
|
|
|
|
|
|
|
Approved by the
Directors,
|
|
|
|
|
|
|
|
|
|
|
|
William H.
McNeil
|
|
Patricia M.
Volker
|
|
|
|
Director
|
|
Director
|
|
|
|
LABRADOR IRON ORE
ROYALTY CORPORATION
|
INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
AND COMPREHENSIVE
INCOME
|
|
|
For the Three
Months Ended
|
|
September
30,
|
(in thousands of
Canadian dollars except for per share information)
|
2018
|
|
2017
|
|
|
(Unaudited)
|
Revenue
|
|
|
|
|
IOC
royalties
|
$
|
43,979
|
|
$
|
39,810
|
|
IOC
commissions
|
534
|
|
493
|
|
Interest and other
income
|
43
|
|
110
|
|
|
44,556
|
|
40,413
|
Expenses
|
|
|
|
|
Newfoundland royalty
taxes
|
8,796
|
|
7,962
|
|
Amortization of
royalty and commission interests
|
1,733
|
|
1,824
|
|
Administrative
expenses
|
843
|
|
662
|
|
|
11,371
|
|
10,448
|
|
|
|
|
|
Income before
equity earnings and income taxes
|
33,185
|
|
29,965
|
Equity earnings in
IOC
|
30,600
|
|
21,150
|
Income before
income taxes
|
63,785
|
|
51,115
|
|
|
|
|
|
Provision for
income taxes
|
|
|
|
|
Current
|
10,429
|
|
9,519
|
|
Deferred
|
(4,705)
|
|
(2,183)
|
|
|
5,724
|
|
7,336
|
|
|
|
|
|
Net income for the
period
|
58,061
|
|
43,779
|
|
|
|
|
|
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 2018 - $205; 2017 - $17)
|
1,274
|
|
(96)
|
|
|
|
|
|
Comprehensive
income for the period
|
$
|
59,335
|
|
$
|
43,683
|
|
|
|
|
|
Net income per
share
|
$
|
0.91
|
|
$
|
0.69
|
LABRADOR IRON ORE
ROYALTY CORPORATION
|
INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
AND COMPREHENSIVE
INCOME
|
|
|
|
For the Nine
Months Ended
|
|
|
September
30,
|
(in thousands of
Canadian dollars except for per share information)
|
2018
|
|
2017
|
|
|
(Unaudited)
|
Revenue
|
|
|
|
|
IOC
royalties
|
$
|
82,871
|
|
$
|
116,400
|
|
IOC
commissions
|
970
|
|
1,350
|
|
Interest and other
income
|
256
|
|
252
|
|
|
84,097
|
|
118,002
|
Expenses
|
|
|
|
|
Newfoundland royalty
taxes
|
16,574
|
|
23,280
|
|
Amortization of
royalty and commission interests
|
3,523
|
|
4,795
|
|
Administrative
expenses
|
2,512
|
|
2,356
|
|
|
22,609
|
|
30,431
|
|
|
|
|
|
Income before
equity earnings and income taxes
|
61,488
|
|
87,571
|
Equity earnings in
IOC
|
39,189
|
|
57,713
|
Income before
income taxes
|
100,677
|
|
145,284
|
|
|
|
|
|
Provision for
income taxes
|
|
|
|
|
Current
|
19,550
|
|
27,685
|
|
Deferred
|
(3,985)
|
|
(1,349)
|
|
|
15,565
|
|
26,336
|
|
|
|
|
|
Net income for the
period
|
85,112
|
|
118,948
|
|
|
|
|
|
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 2018 - $215; 2017
- $34)
|
1,219
|
|
(288)
|
|
|
|
|
|
Comprehensive
income for the period
|
$
|
86,331
|
|
$
|
118,660
|
|
|
|
|
|
Net income per
share
|
$
|
1.33
|
|
$
|
1.86
|
LABRADOR IRON ORE
ROYALTY CORPORATION
|
INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
For the Nine
Months Ended
|
|
September
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
|
$
|
85,112
|
|
$
|
118,948
|
Items not affecting
cash:
|
|
|
|
Equity earnings in
IOC
|
(39,189)
|
|
(57,713)
|
Current income
taxes
|
19,550
|
|
27,685
|
Deferred income
taxes
|
(3,985)
|
|
(1,349)
|
Amortization of
royalty and commission interests
|
3,523
|
|
4,795
|
Common share dividend
from IOC
|
58,592
|
|
57,441
|
Change in amounts
receivable
|
(2,088)
|
|
1,012
|
Change in accounts
payable
|
567
|
|
(396)
|
Income taxes
paid
|
(26,553)
|
|
(23,025)
|
Cash flow from
operating activities
|
95,529
|
|
127,398
|
|
|
|
|
Financing
|
|
|
|
Dividends paid to
shareholders
|
(73,600)
|
|
(86,400)
|
Cash flow used in
financing activities
|
(73,600)
|
|
(86,400)
|
|
|
|
|
Increase in cash,
during the period
|
21,929
|
|
40,998
|
|
|
|
|
Cash, beginning of
period
|
40,498
|
|
23,937
|
|
|
|
|
Cash, end of
period
|
$62,427
|
|
$64,935
|
LABRADOR IRON ORE
ROYALTY CORPORATION
|
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
period
|
-
|
118,948
|
-
|
118,948
|
Dividends declared to
shareholders
|
-
|
(134,400)
|
-
|
(134,400)
|
Share of other
comprehensive loss from investment in IOC (net of taxes)
|
-
|
-
|
(288)
|
(288)
|
Balance as at
September 30, 2017
|
$
|
317,708
|
$
|
261,136
|
$
|
(10,739)
|
$
|
568,105
|
|
|
|
|
|
Balance as at
December 31, 2017
|
$
|
317,708
|
$
|
264,272
|
$
|
(8,391)
|
$
|
573,589
|
Net income for the
period
|
-
|
85,112
|
-
|
85,112
|
Dividends declared to
shareholders
|
-
|
(73,600)
|
-
|
(73,600)
|
Share of other
comprehensive income from investment in IOC (net of
taxes)
|
-
|
-
|
1,219
|
1,219
|
Balance as at
September 30, 2018
|
$
|
317,708
|
$
|
275,784
|
$
|
(7,172)
|
$
|
586,320
|
The complete consolidated financial statements for the third
quarter ended September 30, 2018,
including the notes thereto, are posted on sedar.com and
labradorironore.com.
SOURCE Labrador Iron Ore Royalty Corporation