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November, 01, 2013
Labrador Iron Ore Royalty Corporation (TSX: LIF) announced today its operation and cash flow results for the third quarter ended September 30, 2013.
Royalty income for the third quarter of 2013 amounted to $35.6 million as compared to $32.1 million for the third quarter of 2012. The shareholders’ cash flow from operating activities after adjustments for changes in amounts receivable, accounts payable and income taxes payable (adjusted cash flow) for the quarter was $20.0 million or $0.31 per share compared to last year’s $18.5 million or $0.28 per unit. Equity earnings from Iron Ore Company of Canada (IOC) amounted to $25.8 million or $0.40 per share as compared to $14.2 million or $0.22 per unit in 2012. Net income was $41.2 million or $0.65 per share compared to $29.7 million or $0.47 per unit for the same period in 2012. Earnings and cash flow for the quarter, although higher than last year were reduced due to higher income taxes, a result of the elimination of interest expense on the subordinated notes that were cancelled last September (see the reorganization referred to below).
As reported last quarter, the wildfires in the area, mine ore quality issues and power outages resulted in reduced production in June and July. The reduced production in June and July resulted in lower sales for the quarter, due to the lack of available product for shipment. Production for August and September returned to May levels and is approaching the levels expected, now that the first phase of the expansion has been completed. Barring unforeseen circumstances, we should see these production levels continue going forward, subject to the usual production reduction that occurs during the winter months. Royalty income for the quarter was positively affected by iron ore prices that remained relatively firm during the quarter and the weaker Canadian dollar against its U.S. counterpart. Revenue for the quarter was substantially improved from last year, mainly due to the higher prices received but was lower than the preceding quarter, because of the lack of product available for sale. Equity earnings from IOC for the quarter were substantially above last year’s corresponding quarter and an improvement over the preceding quarter of this year.
At a special meeting held on September 28, 2012, the holders of stapled units approved an exchange of their subordinated notes for common shares of Labrador Iron Ore Royalty Corporation (“LIORC”) and a consolidation of common shares. The $248 million subordinated notes were cancelled and each holder of common shares ended up holding the same number of common shares as before the transactions, and LIORC continued to have 64 million common shares outstanding. Interest on the subordinated notes ceased to accrue after September 30, 2012. For the purposes of this report, all references to shareholders and per share figures may refer to holders of stapled units and per stapled units, respectively, as applicable. Prior to the transactions, the net income attributed to the holders of stapled units consisted of the net income of LIORC plus the interest paid on the subordinated notes. Thus 2012 net income, adjusted cash flow and per share figures referred to in this report use the totals according to the financial statements plus the $7,488,000 ($0.117 per stapled unit) and $22,464,000 ($0.351 per stapled unit) interest on the subordinated notes for the three months and nine months periods, respectively.