LABRADOR IRON ORE ROYALTY CORPORATION - RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2011

TORONTO, May 12 /CNW/ - Labrador Iron Ore Royalty Corporation ("LIORC") (TSX: LIF.UN) announced the results of its operations for the first quarter ended March 31, 2011.

Royalty income for the first quarter of 2011 amounted to $30.3 million as compared to $16.4 million for the first quarter of 2010. The unitholder's cash flow from operating activities after adjustments for changes in amounts receivable, accounts payable and income taxes payable (adjusted cash flow) for the first quarter was $48.0 million or $1.50 per unit as compared to $22.3 million or $0.70 per unit for the same period in 2010.  Net income was $38.9 million or $1.21 per unit compared to $15.7 million or $0.49 per unit for the same period in 2010. Equity earnings from IOC amounted to $19.2 million or $0.60 per unit as compared to $4.8 million or $0.15 per unit in 2010. The higher cash flow for the quarter reflected an IOC dividend of which our share was $29.0 million or $0.91 per unit as compared to $11.5 million or $0.36 per unit in 2010. Had the price adjustments which occurred in the second quarter of 2010 and related to the first quarter been included, 2010 royalty income would have been increased by $10.4 million or $0.33 per unit and equity earning from IOC by $14.2 million or $0.44 per unit. The inclusion of these amounts would have increased 2010 first quarter net income by $0.49 per unit and adjusted cash flow by $0.18 per unit.

Prior to the July 1, 2010 conversion of LIORC from an income trust, the net income of the unitholders was the same as the trust's net income. Since the unitholders now own the $248 million LIORC subordinated notes directly, the net income of the unitholders consists of the net income of LIORC plus the interest paid on the LIORC subordinated notes. Thus all net income, adjusted cash flow and per unit figures referred to in this report use the totals according to the financial statements plus (where applicable) the $7,488,000 ($0.234 per stapled unit) interest on the subordinated notes for the period January 1 to March 31, 2011.

The first quarter sales of Iron Ore Company of Canada ("IOC") are traditionally adversely affected by the closing of the St. Lawrence Seaway and general winter shipping conditions and are not indicative of the full year's sales.

Iron ore markets remain firm and pricing which is now on a quarterly basis was slightly higher than the fourth quarter of 2010. IOC sales volumes were slightly below 2010 first quarter sales due to a particularly severe winter and timing of shipments. The severe winter also caused some reduced production as it affected truck availability resulting in ore shortages which reduced the supply of concentrate. The continuing strength of the Canadian dollar against its U.S. counterpart adversely affected 2011 results.

Results for the three months ended March 31 are summarized below:

                      2011   2010
                      (Unaudited)
                           
Revenue (in millions)                     $30.7   $16.7
Adjusted cash flow (in millions)                     $48.0   $22.3
Adjusted cash flow per unit                     $1.50   $0.70
Net income (in millions)                     $38.9   $15.7
Net income per unit                     $1.21   $0.49
                           

"Adjusted cash flow" (defined as cash flow from operating activities as shown on the attached financial statements adjusted for changes in amounts receivable, accounts payable and income taxes payable) is not a recognized measure under Canadian GAAP or IFRS.  The Directors believe that adjusted cash flow is a useful analytical measure as it better reflects cash available for distributions to unitholders.

A summary of IOC's sales in millions of tonnes is as follows:

                                3 Months
Ended
Mar. 31,
2011
      3 Months
Ended
Mar. 31,
2010
      Year
Ended
Dec. 31,
2010
                                                 
Pellets                               2.27       2.67       12.05
Concentrates                               0.28       0.31       3.02(1)
                                                 
Total                               2.55       2.98       15.07

Note: (1) Excludes third party ore sales

Outlook

Iron ore markets remain firm and prices for the second quarter of 2011 are expected to be over 10% higher than those in the first quarter. Production for the first quarter was disappointing due to severe winter conditions and some equipment failures. The second quarter is expected to have production approach more normal levels but the month of April still faced severe weather and the operations were shut down for almost three days as the result of an industrial accident which resulted in the death of a contractor employee. IOC has orders for all the concentrate and pellets it can produce. The continued strength of the Canadian dollar against its U.S. counterpart is a negative but is more than offset by increased prices for iron ore.

Transition to International Financial Reporting Standards

The financial statements for the quarter ended March 31, 2011 have been prepared under International Financial Reporting Standards ("IFRS"), which became effective on January 1, 2011. As reported previously, this change to IFRS has not affected the reported numbers for revenue, adjusted cash flow or adjusted cash flow per share. Net income and net income per share numbers for the quarters ended March 31, 2011 and March 31, 2010 are not materially different from what would have been reported under the Corporation's previous accounting principles.  The net income and net income per share amounts for the quarter ended March 31 2010 presented for comparison have been restated to reflect the changes required by the switch to IFRS. Due to the complexity of IFRS requirements affecting the presentation of the restated financial statements, some matters are yet to be finalized with the auditors of IOC and LIORC. It is expected these matters will be finalized shortly, at which time the Management's Discussion and Analysis and financial statements for the quarter ended March 31, 2011 will be issued. These would normally have been attached to this press release.

 

SOURCE Labrador Iron Ore Royalty Corporation

For further information:

Bruce C. Bone
President & Chief Executive Officer
(416) 863-7133


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