Labrador Iron Ore Royalty Corporation - 2015 Results of Operations

TORONTO, March 3, 2016 /CNW/ - Labrador Iron Ore Royalty Corporation ("LIORC") (TSX: LIF) announced the results of its operations for the year ended December 31, 2015.

To the Holders of Common Shares of Labrador Iron Ore Royalty Corporation 

Financial Performance

The Shareholders' adjusted cash flow (see Management's Discussion & Analysis for definition and calculation) for the year ended December 31, 2015 was $56.2 million or $0.88 per share as compared to $113.6 million or $1.77 per share for 2014. 

The Shareholders' consolidated net income for the year ended December 31, 2015 was $54.7 million or $0.85 per share compared to $104.1 million or $1.63 per share in 2014. Equity earnings from IOC amounted to $2.4 million compared to $40.6 million in 2014. IOC's 2015 iron ore sales totaled 17.9 million tonnes compared to 14.3 million tonnes in 2014. Royalty revenue decreased to $99.7 million as compared to $115.7 million in 2014.

The adjusted cash flow and net income for the year were below last year mainly due to the sharp decline in the price of iron ore. This continued the decline that started in 2014 with the Platts 62.5% fines index for 2015 averaging 43% less than 2014. The price hit a low on December 15, 2015 of US$38.50/dmt as compared to US$69.25 on the same date in 2014. The price decline is the result of demand for iron ore in China falling at the same time as major producers in Australia and Brazil were increasing production. Chinese steel exports impacted steel producers in other markets and reduced their iron ore demand. Although premiums for IOC ore remained firm, pellet demand and premiums weakened in the second half of 2015, which affected pellet sales in the final quarter of the year. Subsequent to a catastrophic tailings dam failure in November, which resulted in the indefinite closure of a major pellet producer in Brazil, both pellet premiums and demand have currently returned to more normal levels. Other factors have been positive for IOC, including an 18% increase in concentrate production, the continued weakening of the Canadian dollar relative to the US dollar and a reduction in seaborne freight cost of about 45% year over year.

IOC Developments

As previously reported, the IOC expansion program to increase capacity to 23.3 million tonnes per annum was completed in 2014 and a material increase in production was expected in 2015. Production did increase by 20% and as a result of this and the ongoing efforts to increase efficiencies, the cost per tonne of concentrate produced continued to decline and was 19% lower than the previous year. During the year, multiple production records were set as the full benefits of the expansion started to be realized. IOC continues to examine all avenues to increase the efficiency of operations in order to increase production and lower unit costs.

Outlook

IOC continues to pursue all avenues to lower unit costs so that it can remain profitable in the current very difficult market conditions. It appears to be well along toward meeting its objective of 2016 concentrate unit cash cost of US$30 or less. Record January 2016 concentrate production exceeded an annual rate of 20 million tonnes, which bodes well for reaching an objective of 21 million tonnes in 2016. The major concern is the price of iron ore. Although the price has recovered more than 20% from its December low, its future direction remains unclear. The weakness of the Canadian dollar against its US counterpart continues to be positive for IOC. In spite of the current low price for iron ore, there are a number of positive factors affecting the royalty received by LIORC including increasing IOC production enabling increased sales, the premiums received on sales by IOC due to the grade and quality of its ore, the firming demand and premiums for pellets, favourable seaborne freight rates, and since the royalty is paid in US dollars, the continued weakness of the Canadian dollar in relation to the US dollar. While we do not expect to receive dividends from IOC until the market stabilizes, IOC is well positioned for a strong performance when this occurs. The board is closely monitoring markets and believes that royalty income will still provide a reasonable return to shareholders until IOC is able to reinstate its dividend.

I would like to take this opportunity to thank our Shareholders for their interest and loyalty and my fellow Directors for their wisdom and support.

Respectfully submitted on behalf of the Directors of Labrador Iron Ore Royalty Corporation,

Bruce C. Bone
President and Chief Executive Officer
March 3, 2016

Corporate Structure

Labrador Iron Ore Royalty Corporation ("LIORC" or the "Corporation") is a Canadian corporation resulting from the conversion of the Labrador Iron Ore Royalty Income Fund (the "Fund") under an Arrangement effective on July 1, 2010. LIORC is also the successor by amalgamation under the Arrangement of Labrador Mining Company Limited, formerly a wholly-owned subsidiary of the Fund. Under the Arrangement, the Fund distributed $248 million of subordinated notes to its unitholders and the unitholders exchanged their units of the Fund for common shares of LIORC. Effective October 3, 2012, the $248 million subordinated notes outstanding were exchanged for additional common shares and the common shares were consolidated, with the result that each holder of common shares ("Shareholder") ended up holding the same number of common shares as before the transactions, and LIORC had 64 million common shares outstanding.

LIORC, directly and through its wholly-owned subsidiary Hollinger-Hanna Limited ("Hollinger-Hanna"), holds a 15.10% equity interest in Iron Ore Company of Canada ("IOC") and receives a 7% gross overriding royalty and a 10 cent per tonne commission on all iron ore products produced, sold and shipped by IOC.  Generally, LIORC pays cash dividends from its net income to the maximum extent possible, subject to the maintenance of appropriate levels of working capital. The common shareholders receive quarterly dividends on the common shares on the 25th day of the month following the end of each quarter.

Nine Directors are responsible for the governance of the Corporation and also serve as directors of Hollinger-Hanna. The Directors, in addition to managing the affairs of the Corporation and Hollinger-Hanna, oversee the Corporation's interests in IOC. Two of the nine Directors sit on the board of IOC and the five independent Directors serve as members of the Audit, Nominating and Compensation Committees. Scotia Managed Companies Administration Inc., pursuant to an administration agreement, acts as the administrator of the Corporation and Hollinger-Hanna.

Taxation

The Corporation is a taxable corporation. Dividend income received from IOC and Hollinger-Hanna is received tax free while royalty income is subject to income tax and Newfoundland royalty tax. Expenses of the Corporation include administrative expenses. Hollinger-Hanna is a taxable corporation.

Income Taxes

Dividends to a shareholder that are paid within a particular year are to be included in the calculation of the shareholder's taxable income for that year. All dividends paid in 2015 were "eligible dividends" under the Income Tax Act.

Review of Operations

Iron Ore Company of Canada

The income of the Corporation is entirely dependent on IOC as the only assets of the Corporation and its subsidiary are related to IOC and its operations. IOC is one of Canada's largest iron ore producers, operating a mine, concentrator and pellet plant at Labrador City, Newfoundland and Labrador, and is among the top five producers of seaborne iron ore pellets in the world.  It has been producing and processing iron ore concentrate and pellets since 1954.  IOC is strategically situated to serve the markets of the Great Lakes and the balance of the world from its year-round port facilities at Sept-Îles, Quebec.

IOC has ore reserves sufficient for approximately 28 years at current production rates with additional resources of a greater magnitude.  It currently has the nominal capacity to extract around 55 million tonnes of crude ore annually. The crude ore is processed into iron ore concentrate and then either sold or converted into many different qualities of iron ore pellets to meet its customers' needs.  The iron ore concentrate and pellets are transported to IOC's port facilities at Sept-Îles, Quebec via its wholly-owned Quebec North Shore and Labrador Railway, a 418 kilometer rail line which links the mine and the port.  From there, the products are shipped to markets throughout North America, Europe, the Middle East and the Asia-Pacific region.

IOC's 2015 sales totaled 17.9 million tonnes, comprised of 9.5 million tonnes of iron ore pellets and 8.4 million tonnes of iron ore concentrate.   Production in 2015 was 9.3 million tonnes of pellets and 8.4 million tonnes of concentrate. IOC generated ore sales revenues (excluding third party ore sales) of $1,387 million in 2015 (2014 - $1,595 million).

Selected IOC Financial Information


2015

2014

2013

2012

2011




($ in thousands) 



Operating Revenues

1,494,726

1,794,380

2,193,836

1,963,444

2,443,195

Cash flow from operating activities

267,136

454,597

780,976

505,319

946,240

Net income1

21,195

273,282

549,010

393,437

826,677

Capital expenditures

145,741

187,042

275,445

757,323

647,209














1  Net income includes unrealized foreign exchange gains/(loss) before tax on U.S. debt translation of ($46,632) in 2015, ($25,361) in 2014, ($18,248) in 2013, $1,143 in 2012, and $4,122 in 2011. All amounts are presented in accordance with IFRS.

IOC Royalty

The Corporation holds certain leases and licenses covering approximately 18,200 hectares of land near Labrador City. IOC has leased certain portions of these lands from which it currently mines iron ore. In return, IOC pays the Corporation a 7% gross overriding royalty on all sales of iron ore products produced from these lands. A 20% tax on the royalty is payable to the Government of Newfoundland and Labrador. For the five years prior to 2015, the average royalty net of the 20% tax had been $111.9 million per year and in 2015 the net royalty was $79.8 million (2014 - $92.5 million). 

Because the royalty is "off-the-top", it is not dependent on the profitability of IOC. However, it is affected by changes in sales volumes, iron ore prices and, because iron ore prices are denominated in US dollars, the United States - Canadian dollar exchange rate.

IOC Equity

In addition to the royalty interest, the Corporation directly and through its wholly owned subsidiary, Hollinger-Hanna, owns a 15.10% equity interest in IOC.  The other shareholders of IOC are Rio Tinto Limited with 58.72% and Mitsubishi Corporation with 26.18%.  

IOC Commissions

Hollinger-Hanna has the right to receive a payment of 10 cents per tonne on the products produced and sold by IOC. Pursuant to an agreement, IOC is obligated to make the payment to Hollinger-Hanna so long as Hollinger-Hanna is in existence and solvent.  In 2015, Hollinger-Hanna received a total of $1.8 million in commissions from IOC (2014 - $1.4 million).

Quarterly Dividends

Dividends of $1.00 per share were declared in 2015 (2014 – dividends of $1.65 per share including special dividends of $0.65 per share). These dividends were allocated as follows:


Period

Ended

Payment

Date

Dividend

Income

per Share

Total

Dividend

($ Million)





Mar. 31, 2015

Apr. 25, 2015

$

0.25

$

16.0

Jun.  30, 2015

Jul. 25, 2015


0.25


16.0

Sep. 30, 2015

Oct. 25, 2015


0.25


16.0

Dec. 31, 2015

Jan. 25, 2016


0.25


16.0





Dividend to Shareholders - 2015

$

1.00

$

64.0





Mar. 31, 2014

Apr. 25, 2014

$

0.25

$

16.0

Special Dividend

Apr. 25, 2014


0.15


9.6

Jun.  30, 2014

Jul. 25, 2014


0.25


16.0

Special Dividend

Jul. 25, 2014


0.15


9.6

Sep. 30, 2014

Oct. 25, 2014


0.25


16.0

Special Dividend

Oct. 25, 2014


0.25


16.0

Dec. 31, 2014

Jan. 25, 2015


0.25


16.0

Special Dividend

Jan. 25, 2015


0.10


6.4






Dividend to Shareholders - 2014

$

1.65

$

105.6

The quarterly dividends are payable to all shareholders of record on the last day of each calendar quarter and are paid on the 25th day of the following month. 

Management's Discussion and Analysis

The following is a discussion of the consolidated financial condition and results of operations of the Labrador Iron Ore Royalty Corporation ("LIORC" or the "Corporation") for the years ended December 31, 2015 and 2014.  This discussion should be read in conjunction with the consolidated financial statements of the Corporation and notes thereto for the years ended December 31, 2015 and 2014.  This information is prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and all amounts are shown in Canadian dollars unless otherwise indicated.

The Corporation is a Canadian corporation resulting from the conversion of the Labrador Iron Ore Royalty Income Fund (the "Fund") under an Arrangement effective on July 1, 2010. LIORC is also the successor by amalgamation under the Arrangement of Labrador Mining Company Limited, formerly a wholly-owned subsidiary of the Fund. Under the Arrangement, the Fund distributed $248 million of subordinated notes to its unitholders and the unitholders exchanged their units of the Fund for common shares of LIORC. Effective October 3, 2012, the $248 million subordinated notes outstanding were exchanged for additional common shares and the common shares were consolidated, with the result that each holder of common shares ("Shareholder") ended up holding the same number of common shares as before the transactions, and LIORC had 64 million common shares outstanding.

General

The Corporation is dependent on the operations of IOC. IOC's earnings and cash flows are affected by the volume and mix of iron ore products produced and sold, costs of production and the prices received. Iron ore demand and prices fluctuate and are affected by numerous factors which include demand for steel and steel products, the relative exchange rate of the US dollar, global and regional demand and production, political and economic conditions and production costs in major producing areas.

Liquidity and Capital Resources

The Corporation had $24.5 million in cash as at December 31, 2015 with total current assets of $45.2 million. The Corporation has working capital of $24.8 million. The Corporation's operating cash flow was $59.9 million and dividends paid during the year were $70.4 million, resulting in cash balances declining $10.5 million during 2015.

Cash balances consist of deposits in Canadian dollars with Canadian chartered banks. Accounts 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 Company 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, 2018 with provision for annual one-year extensions.  No amount is currently drawn under this facility leaving $50.0 million available to provide for any capital required by IOC or requirements of the Corporation.

Operating Results

The following table summarizes the Corporation's 2015 operating results as compared to 2014 results.

Revenue

2015


2014

IOC royalties (net of 20% Newfoundland royalty tax)

$

79,751,617


$

92,546,049

IOC commissions

1,759,426


1,409,750

Other

249,565


390,170


81,760,608


94,345,969

Expenses




Administrative expenses

2,730,867


2,385,249

Income taxes expense – current

22,809,371


26,455,430


25,540,238


28,840,679

Net Income before undernoted items

56,220,370


65,505,290

Non cash revenue (expense)




Equity earnings in IOC

2,359,556


40,556,772

Deferred income taxes

994,000


2,213,000

Amortization

(4,915,613)


(4,143,811)


(1,562,057)


38,625,961





Net income for the year

54,658,313


104,131,251

Other comprehensive (loss) gain

596,000


(4,140,000)

Comprehensive income for the year

$

55,254,313


$

99,991,251

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


First

Second

Third


Fourth


Total


Total


Quarter

Quarter

Quarter


Quarter


Year


Year


2015

2015

2015


2015


2015


2014











Pellets

2.50

2.29

2.64


2.04


9.47


8.33

Concentrates(1)

0.71

1.89

3.15


2.66


8.41


5.99











Total

3.21

4.18

5.79


4.70


17.88


14.32

(1)       Excludes third party ore sales.

IOC's 2015 iron ore sales totaled 17.9 million tonnes compared to 14.3 million tonnes in 2014. Royalty revenue decreased to $99.7 million as compared to $115.7 million in 2014. Equity earnings from IOC amounted to $2.4 million compared to $40.6 million in 2014.The lower royalty revenue and equity earnings were mainly due to the sharp decline in the price of iron ore. This continued the decline that started in 2014 with the Platts 62.5% fines index for 2015 averaging 43% less than 2014. The price hit a low on December 15, 2015 of US$38.50/dmt as compared to US$69.25 on the same date in 2014. The price decline is the result of demand for iron ore in China falling at the same time as major producers in Australia and Brazil were increasing production. Chinese steel exports impacted steel producers in other markets and reduced their iron ore demand. Although premiums for IOC ore remained firm, pellet demand and premiums weakened in the second half of 2015, which affected pellet sales in the final quarter of the year. Subsequent to a catastrophic tailings dam failure in November, which resulted in the indefinite closure of a major pellet producer in Brazil, both pellet premiums and demand have currently returned to more normal levels. Other factors have been positive for IOC, including an 18% increase in concentrate production, the continued weakening of the Canadian dollar relative to the US dollar and a reduction in seaborne freight cost of about 45% year over year.  The lower prices reduced IOC's cash flow from operating activities to $267 million, compared to $455 million in 2014. With the completion of the expansion program, capital expenditure was $146 million as compared to $200 million in 2014.

The Shareholders' consolidated net income for the year ended December 31, 2015 was $54.7 million or $0.85 per share compared to $104.1 million or $1.63 per share in 2014.  Equity earnings from IOC amounted to $2.4 million compared to $40.6 million in 2014. The main cause of IOC's lower earnings for 2015 as compared to 2014 was the lower iron ore price.

Fourth quarter 2015 sales of 4.7 million tonnes were higher than last year but the sharp fall in the sales price of iron ore resulted in royalty income of $21.5 million for the quarter as compared to $25.3 million for the same period in 2014. Fourth quarter 2015 adjusted cash flow from operations was $12.1 million ($0.19 per share) compared to 2014 of $14.4 million ($0.22 per share). IOC did not pay a dividend in the fourth quarter of 2015 or 2014. IOC recorded a loss of $6.5 million (2014 – loss of $8 million) in the fourth quarter as a result of substantially lower iron ore prices.

Selected Consolidated Financial Information

The following table sets out financial data from a Shareholder's perspective for the three years ended December 31, 2015, 2014 and 2013.


Years Ended December 31

Description

2015


2014


2013


(in millions except per Share information)

Revenue

$

101.7


$

117.5


$

139.3

Net Income

$

54.7


$

104.1


$

148.8

Net Income per Share

$

0.85


$

1.63


$

2.33

Adjusted Cash Flow (1)

$

56.2


$

113.6(2)


$

115.4(3)

Adjusted Cash Flow per Share (1)

$

0.88


$

1.77


$

1.80

Total Assets

$

714.1


$

731.0


$

775.6

Cash Distribution per Share

$

1.000


$

1.650


$

1.875

Number of Common Shares outstanding

64.0


64.0


64.0








(1)

"Adjusted cash flow" ( see below)



(2)

Includes $48.1 million of IOC dividends.



(3)

Includes $40.0 million of IOC dividends.


The following table sets out quarterly revenue, net income and cash flow data for 2015 and 2014. Due to seasonal weather patterns the first and fourth quarters generally have lower production and sales. Royalty revenues and equity earnings in IOC track iron ore spot prices, which can be very volatile. Dividends, included in adjusted cash flow, are declared and paid by IOC irregularly according to the availability of cash.




Revenue


Net
Income

Net
Income
per Share


Adjusted Cash
Flow(1)

Adjusted

Cash Flow

per Share (1)

Distributions
Declared  

per Share





(in millions except per Share information)


2015







First Quarter

$23.7

$10.0

$0.16

$13.1

$0.20

$0.250

Second Quarter

$24.0

$15.4

$0.24

$13.1

$0.21

$0.250

Third Quarter

$32.0

$19.0

$0.30

$17.9

$0.28

$0.250

Fourth Quarter

$22.0

$10.3

$0.15

$12.1

$0.19

$0.250

2014







First Quarter

$27.2

$27.1

$0.42

$27.7(2)

$0.43

$0.400

Second Quarter

$33.8

$35.9

$0.56

$33.7(3)

$0.53

$0.400

Third Quarter

$30.8

$29.0

$0.46

 $37.8(4)

$0.59

$0.500

Fourth Quarter

$25.7

$12.1

$0.19

$14.4

$0.22

$0.350





(1)

"Adjusted cash flow"(see below)


(2)

Includes a $12.6 million IOC dividend.


(3)

Includes a $14.8 million IOC dividend.


(4)

Includes a $20.7 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 $0.94 for 2015 (2014 - $1.77).  Cumulative standardized cash flow from inception of the Corporation is $21.55 per share and total cash distributions since inception are $20.94 per share, for a payout ratio of 97%.

"Adjusted cash flow" is defined as cash flow from operating activities after adjustments for changes in amounts receivable, accounts and interest 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 distributions to Shareholders.

The following reconciles standardized cash flow from operating activities to adjusted cash flow.


2015


2014

Standardized cash flow from operating activities

$

59,907,879


$

113,541,709

Changes in amounts receivable, accounts and interest payable and     income taxes recoverable and payable

 

(3,687,509)


 

29,385

Adjusted cash flow

$

56,220,370


$

113,571,094

Adjusted cash flow per share

$

0.88


$

1.77

Disclosure Controls and Internal Control over Financial Reporting

The President and CEO and the CFO are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the Corporation.  Two officers serve as directors of IOC and IOC provides monthly reports on its operations to them.  The Corporation also relies on financial information provided by IOC, including its audited financial statements, and other material information provided to the President and CEO, the Executive Vice President and Secretary and the CFO by officers of IOC.  IOC is a private corporation, and its financial statements are not publicly available.

The Directors are informed of all material information relating to the Corporation and its subsidiary by the officers of the Corporation on a timely basis and approve all core disclosure documents including the Management Information Circular, the annual and interim financial statements and related Management's Discussion and Analyses, the Annual Information Form, any prospectuses and all press releases.  An evaluation of the design and operating effectiveness of the Corporation's disclosure controls and procedures was conducted under the supervision of the CEO and CFO.  Based on their evaluation, they concluded that the Corporation's disclosure controls and procedures were effective in ensuring that all material information relating to the Corporation was accumulated and communicated for the year ended December 31, 2015.

The President and CEO and the CFO have designed internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.  An evaluation of the design and operating effectiveness of the Corporation's internal control over financial reporting was conducted under the supervision of the CEO and CFO.  Based on their evaluation, they concluded that the Corporation's internal control over financial reporting was effective and that there were no material weaknesses therein for the year ended December 31, 2015. 

The preparation of financial statements requires the Corporation's management to make estimates and assumptions that affect the reported amounts of the assets, liabilities, revenue and expenses reported each period. Each of these estimates varies with respect to the level of judgment involved and the potential impact on the Corporation's reported financial results. Estimates are deemed critical when the Corporation's financial condition, change in financial condition or results of operations would be materially impacted by a different estimate or a change in estimate from period to period. By their nature, these estimates are subject to measurement uncertainty, and changes in these estimates may affect the consolidated financial statements of future periods.

No material change in the Corporation's internal control over financial reporting occurred during the year ended December 31, 2015.

Outlook

IOC continues to pursue all avenues to lower unit costs so that it can remain profitable in the current very difficult market conditions. It appears to be well along toward meeting its objective of 2016 concentrate unit cash cost of US$30 or less. Record January 2016 concentrate production exceeded an annual rate of 20 million tonnes, which bodes well for reaching an objective of 21 million tonnes in 2016. The major concern is the price of iron ore. Although the price has recovered more than 20% from its December low, its future direction remains unclear. The weakness of the Canadian dollar against its US counterpart continues to be positive for IOC. In spite of the current low price for iron ore, there are a number of positive factors affecting the royalty received by LIORC including increasing IOC production enabling increased sales, the premiums received on sales by IOC due to the grade and quality of its ore, the firming demand and premiums for pellets, favourable seaborne freight rates, and since the royalty is paid in US dollars, the continued weakness of the Canadian dollar in relation to the US dollar. While we do not expect to receive dividends from IOC until the market stabilizes, IOC is well positioned for a strong performance when this occurs. The board is closely monitoring markets and believes that royalty income will still provide a reasonable return to shareholders until IOC is able to reinstate its dividend.

Additional information
Additional information relating to the Corporation, including the Annual Information Form, is on SEDAR at www.sedar.com. Additional information is also available on the Corporation's website at www.labradorironore.com.

Bruce C. Bone, President and Chief Executive Officer
Toronto, Ontario
March 3, 2016

LABRADOR IRON ORE ROYALTY CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION











As at



December 31



2015


2014




Assets




Current Assets





Cash

$

24,463,512


$

34,955,633


Amounts receivable 

20,508,756


24,861,203


Income taxes recoverable

240,299


472,626

Total Current Assets

45,212,567


60,289,462






Non-Current Assets




Iron Ore Company of Canada ("IOC"),





royalty and commission interests

270,517,368


275,432,981

Investment in IOC 

398,327,969


395,271,413

Total Non-Current Assets

668,845,337


670,704,394






Total Assets

$

714,057,904


$

730,993,856











Liabilities and Shareholders' Equity




Current Liabilities





Accounts payable

$

4,414,212


$

5,311,477


Dividend payable

16,000,000


22,400,000

Total Current Liabilities

20,414,212


27,711,477






Non-Current Liabilities





Deferred income taxes 

124,670,000


125,563,000

Total Liabilities

145,084,212


153,274,477






Shareholders' Equity





Share capital 

317,708,147


317,708,147


Retained earnings 

262,415,545


271,757,232


Accumulated other comprehensive loss

(11,150,000)


(11,746,000)



568,973,692


577,719,379






Total Liabilities and Shareholders' Equity

$

714,057,904


$

730,993,856

 

LABRADOR IRON ORE ROYALTY CORPORATION

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME







For the years ended December 31 

2015


2014




Revenue





IOC royalties

$

99,689,521


$

115,682,561


IOC commissions

1,759,426


1,409,750


Interest and other income 

249,565


390,170



101,698,512


117,482,481

Expenses





Newfoundland royalty taxes

19,937,904


23,136,512


Amortization of royalty and commission interests

4,915,613


4,143,811


Administrative expenses 

2,730,867


2,385,249



27,584,384


29,665,572






Income before equity earnings and income taxes

74,114,128


87,816,909

Equity earnings in IOC 

2,359,556


40,556,772






Income before income taxes 

76,473,684


128,373,681






Provision for income taxes 





Current 

22,809,371


26,455,430


Deferred

(994,000)


(2,213,000)



21,815,371


24,242,430






Net income for the year

54,658,313


104,131,251






Other comprehensive income (loss)





Share of other comprehensive income (loss) of IOC that will not be 





reclassified subsequently to profit or loss (net of taxes) 

596,000


(4,140,000)






Comprehensive income for the year

$

55,254,313


$

99,991,251






Net income per share 

$

0.85


$

1.63

 

LABRADOR IRON ORE ROYALTY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS











For the years ended December 31 

2015


2014



Net inflow (outflow) of cash related

to the following activities











Operating





Net income for the year

$

54,658,313


$

104,131,251


Items not affecting cash:






Equity earnings in IOC

(2,359,556)


(40,556,772)



Current income taxes

22,809,371


26,455,430



Deferred income taxes

(994,000)


(2,213,000)



Amortization of royalty and commission interests

4,915,613


4,143,811


Common share dividend from IOC

-


48,065,804


Change in amounts receivable

4,352,447


10,957,721


Change in accounts payable

(897,265)


(2,196,668)


Income taxes paid

(22,577,044)


(35,245,868)


Cash flow from operating activities

59,907,879


113,541,709





Financing





Dividends paid to shareholders

(70,400,000)


(131,200,000)


Cash flow used in financing activities

(70,400,000)


(131,200,000)





Decrease in cash, during the year

(10,492,121)


(17,658,291)





Cash, beginning of year

34,955,633


52,613,924





Cash, end of year

$

24,463,512


$

34,955,633

 

LABRADOR IRON ORE ROYALTY CORPORATION





CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY









Accumulated

other 

comprehensive 

loss







Share

capital

Retained

earnings



Total








Balance as at December 31, 2013

$

317,708,147

$

273,225,981

$

(7,606,000)

$

583,328,128

Net income for the year

-

104,131,251

-

104,131,251

Dividends declared to shareholders 

-

(105,600,000)

-

(105,600,000)

Share of other comprehensive loss from investment in IOC (net of taxes)

-

-

(4,140,000)

(4,140,000)

Balance as at December 31, 2014

$

317,708,147

$

271,757,232

$

(11,746,000)

$

577,719,379






Balance as at December 31, 2014

$

317,708,147

$

271,757,232

$

(11,746,000)

$

577,719,379

Net income for the year

-

54,658,313

-

54,658,313

Dividends declared to shareholders 

-

(64,000,000)

-

(64,000,000)

Share of other comprehensive income from investment in IOC (net of taxes)

-

-

596,000

596,000

Balance as at December 31, 2015

$

317,708,147

$

262,415,545

$

(11,150,000)

$

568,973,692

The complete consolidated financial statements for the year ended December 31, 2015, including the notes thereto, are posted on sedar.com and labradorironore.com.  

SOURCE Labrador Iron Ore Royalty Corporation

For further information: Bruce C. Bone, President & Chief Executive Officer, (416) 863-7133

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