Results for the first quarter ended March 31, 2009



    TORONTO, May 5 /CNW/ - Labrador Iron Ore Royalty Income Fund (TSX:
LIF.UN) announced its results for the first quarter ended March 31, 2009.
    Royalty income for the first quarter of 2009 amounted to $16.27 million
as compared to $16.36 million for the first quarter of 2008. The Fund'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 $11.11 million or $0.35 per unit as compared to $10.36
million or $0.32 per unit for the same period in 2008. Net income was $16.53
million or $0.52 per unit compared to $10.78 million or $0.34 per unit for the
same period in 2008.
    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.
    The current world recession which resulted in a sharply reduced demand
for iron ore in the fourth quarter of 2008 continues to cause reduced iron ore
demand and as a result pellet sales in the quarter were substantially lower
than last year with the decreased volume partially offset by increased sales
of concentrates. Royalty revenue for the quarter was approximately the same as
2008 with the lower volume being offset by the lower value of the Canadian
dollar against its U.S. counterpart and prices that were higher than those
received in last year's first quarter. Last year's first quarter prices were
at 2007 levels as the 2008 price increases were not settled until the second
quarter. Last year's price increase which occurred in the second quarter
resulted in retroactive income relating to the 2008 first quarter of
approximately $0.20 per unit which would have increased adjusted cash flow to
$0.52 per unit. Prices for 2009 are still under negotiation and when settled
they are expected to be significantly lower than 2008. Royalties for the first
quarter are not expected to be materially affected when 2009 benchmark pricing
is settled.
    Equity earnings from IOC amounted to $6.8 million ($0.21 per unit) as
compared to $1.3 million ($0.04 per unit) in 2008. If the retroactive price
increase had been included in the first quarter of 2008 IOC equity earnings
would have been increased by $16 million or $0.50 per unit to $0.54 per unit.

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

                                                      2009        2008
                                                   --------------------
                                                         (Unaudited)

    Revenue (in millions)                           $16.59      $16.64
                                                    ------      ------
    Adjusted cash flow (in millions)                $11.11      $10.36
                                                    ------      ------
    Adjusted cash flow per unit                     $ 0.35      $ 0.32
                                                    ------      ------
    Net income (in millions)                        $16.53      $10.78
                                                    ------      ------
    Net income per unit                             $ 0.52      $ 0.34
                                                    ------      ------

    "Adjusted cash flow" (defined as cash flow from operating activities as
shown on the attached financial statements less changes in amounts receivable,
accounts payable and income taxes payable) is not a recognized measure under
Canadian GAAP. The Trustees 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   3 Months
                                                 Ended      Ended       Year
                                               Mar. 31,   Mar. 31, Ended Dec.
                                                  2009       2008   31, 2008
                                              ---------- --------- ----------
    Pellets                                       1.21       2.55      12.30
                                              ---------- --------- ----------
    Concentrates                                  0.92       0.26       2.76
                                              ---------- --------- ----------
    Total                                         2.13       2.81      15.06
                                              ---------- --------- ----------

    Respectfully submitted on behalf of the Trustees of Labrador Iron Ore
    Royalty Income Fund,

    Bruce C. Bone
    Chairman and Chief Executive Officer
    May 5, 2009
    

    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 Fund's 2008 Annual
Report and the interim financial statements and notes contained in this
report. Although management believes that expectations reflected in
forward-looking statements are reasonable, such statements involve risk and
uncertainties including the factors discussed in the Fund's 2008 Annual
Report.
    The Fund's revenues are entirely dependent on the operations of Iron Ore
Company of Canada (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 Fund's royalty revenue is affected by the price of iron ore and the
Canadian - U.S. dollar exchange rate.
    The sales of IOC are usually 15% - 20% of the annual volume in the first
quarter, 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. The current state of the market may cause 2009 sales to
deviate from this pattern.
    Royalty income for the first quarter of 2009 amounted to $16.27 million
as compared to $16.36 million for the first quarter of 2008. The Fund'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 $11.11 million or $0.35 per unit as compared to $10.36
million or $0.32 per unit for the same period in 2008. Net income was $16.53
million or $0.52 per unit compared to $10.78 million or $0.34 per unit for the
same period in 2008.
    The current world recession which resulted in a sharply reduced demand
for iron ore in the fourth quarter of 2008 continues to cause reduced iron ore
demand and as a result pellet sales in the quarter were substantially lower
than last year with the decreased volume partially offset by increased sales
of concentrates. Royalty revenue for the quarter was approximately the same as
2008 with the lower volume being offset by the lower value of the Canadian
dollar against its U.S. counterpart and prices that were higher than those
received in last year's first quarter. Last year's first quarter prices were
at 2007 levels as the 2008 price increases were not settled until the second
quarter. Last year's price increase which occurred in the second quarter
resulted in retroactive income relating to the 2008 first quarter of
approximately $0.20 per unit which would have increased adjusted cash flow to
$0.52 per unit. Prices for 2009 are still under negotiation and when settled
they are expected to be significantly lower than 2008. Royalties for the first
quarter are not expected to be materially affected when 2009 benchmark pricing
is settled.
    Equity earnings from IOC amounted to $6.8 million ($0.21 per unit) as
compared to $1.3 million ($0.04 per unit) in 2008. If the retroactive price
increase had been included in the first quarter of 2008 IOC equity earnings
would have been increased by $16 million or $0.50 per unit to $0.54 per unit.
    Net income for the first quarter was $16.53 million or $0.52 per unit as
compared to $10.78 million or $0.34 per unit in 2008. Had the price increase
been recorded in the first quarter the net income would have increased by
$22.6 million ($0.70 per unit).
    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 $11.11 million or $0.35 per unit as compared to
$10.36 million or $0.32 per unit for the same period in 2008.
    The following table sets out quarterly revenue, net income and cash flow
data for 2009, 2008 and 2007.

    


                                                          Adjusted    Distri-
                                                              Cash   butions
                                           Net  Adjusted      Flow  Declared
                                 Net    Income      Cash       per       per
                   Revenue    Income  per Unit    Flow(1)   Unit(1)     Unit
                   -------    ------  --------    -------   -------     ----
                             (in millions except per Unit information)

    2009
    ----
    First Quarter    $16.6     $16.5     $0.52    $11.11     $0.35     $0.50

    2008
    ----
    First Quarter    $16.6     $10.8     $0.34     $10.4     $0.32     $0.35

    Second Quarter   $58.1     $73.9     $2.31     $32.9     $1.03     $1.00

    Third Quarter    $43.7     $65.6     $2.05    $104.1(2)  $3.25     $3.00

    Fourth Quarter   $45.0     $26.2     $0.82     $27.5     $0.86     $0.50

    2007
    ----
    First Quarter    $13.1     $10.7     $0.34      $8.7     $0.27     $0.35

    Second Quarter   $15.7     $15.2     $0.47      $9.5     $0.30     $0.35

    Third Quarter    $20.1     $23.0     $0.72   $30.8(3)    $0.96     $0.70

    Fourth Quarter   $18.7     $32.0     $1.00     $11.5     $0.36     $0.55

    Notes:    (1)  "Adjusted cash flow" (see below)
              (2)  Includes a $77.9 million IOC dividend
              (3)  Includes a $18.8 million IOC dividend
    

    Standardized Cash Flow and Adjusted Cash Flow

    For this Fund, standardized cash flow is the same as cash flow from
operating activities as recorded in the Fund's cash flow statements as the
Fund does not incur capital expenditures or have any restrictions on
distributions. Standardized cash flow (after making a $25.2 million payment
re: 2008 income taxes) per unit was $0.08 for the quarter (2008 - $0.46).
Cumulative standardized cash flow from inception of the trust is $22.32 per
unit and total cash distributions since inception are $21.43 per unit, for a
payout ratio of 96%.
    "Adjusted cash flow" is defined as cash flow from operating activities as
shown on the attached financial statements less changes in amounts receivable,
accounts payable and income taxes payable. It is not a recognized measure
under Canadian GAAP. The Trustees believe that adjusted cash flow is a useful
analytical measure as it better reflects cash available for distributions to
Unitholders.
    The following reconciles cash flow from operating activities to adjusted
cash flow.

    

                                              3 Months Ended  3 Months Ended
                                               Mar. 31, 2009   Mar. 31, 2008
                                             ---------------- ---------------
    Standardized cash flow from operating
     activities                                  $ 2,521,897     $14,787,921
                                             ---------------- ---------------
    Excluding: changes in amounts receivable,
     accounts payable and income taxes
     payable/recoverable                           8,592,557      (4,432,449)
                                             ---------------- ---------------
    Adjusted cash flow                           $11,114,454     $10,355,472
                                             ---------------- ---------------
    Adjusted cash flow per unit                        $0.35           $0.32
                                             ---------------- ---------------

    Liquidity
    ---------

    The Fund has a $50 million revolving credit facility to September 18, 2011
with provision for annual one-year extensions. No amounts are currently drawn
under this facility ($3.9 million at March 31, 2008) leaving $50 million
available to provide for any capital required by IOC or other Fund
requirements.

    Outlook
    -------
    At the present time markets remain unsettled and it is difficult to
predict sales volumes and thus royalty revenue. Also, price negotiations are
progressing slowly and until they are settled it is difficult to predict
royalty revenue. The weakness of the Canadian dollar against its U.S.
counterpart is a positive factor somewhat offsetting volume and price
weakness. Steel markets remain very weak in Europe and North America and
although Asian demand has weakened somewhat it remains relatively strong. 2009
is expected to be disappointing when compared to last year's results.

    Bruce C. Bone
    Chairman and Chief Executive Officer
    Toronto, Ontario
    May 5, 2009



    LABRADOR IRON ORE ROYALTY INCOME FUND
    CONSOLIDATED BALANCE SHEETS
    -------------------------------------------------------------------------

                                                          As at
                                        -------------------------------------
                                               March 31          December 31
                                                 2009                2008
                                        -------------------------------------
                                             (Unaudited)
    Assets
    Current
      Cash and cash equivalents          $    14,317,467     $    27,795,570
      Amounts receivable                      15,459,327          36,476,337
                                        -----------------   -----------------
                                              29,776,794          64,271,907

    Deferred charges                             371,999             392,666

    Iron Ore Company of Canada ("IOC"),
     royalty and commission interests        301,515,962         302,198,099

    Investment in IOC                        194,247,708         187,452,133
                                        -----------------   -----------------
                                         $   525,912,463    $    554,314,805
                                        -----------------   -----------------
                                        -----------------   -----------------


    Liabilities and Unitholders' Equity
    Current
      Accounts payable                   $     3,354,811    $      7,484,614
      Income taxes payable                       162,128          25,641,892
      Distributions payable to
       unitholders                            16,000,000          16,000,000
                                        -----------------   -----------------
                                              19,516,939          49,126,506

    Future income tax liability              103,790,000         103,110,000
                                        -----------------   -----------------
                                             123,306,939         152,236,506

    Unitholders' equity
      Trust units                            317,708,147         317,708,147
      Undistributed income                    84,897,377          84,370,152
                                        -----------------   -----------------
                                        $    525,912,463    $    554,314,805
                                        -----------------   -----------------
                                        -----------------   -----------------



    LABRADOR IRON ORE ROYALTY INCOME FUND
    CONSOLIDATED STATEMENTS OF INCOME AND
    COMPREHENSIVE INCOME AND UNDISTRIBUTED INCOME
    -------------------------------------------------------------------------

                                                   For the Three Months
                                                      Ended March 31,
                                                 2009                2008
                                        -------------------------------------
                                                       (Unaudited)
    Revenue
      IOC royalties                      $    16,265,101     $    16,361,263
      IOC commissions                            209,529             276,336
      Interest and other income                  118,970               1,767
                                        -----------------   -----------------
                                              16,593,600          16,639,366
                                        -----------------   -----------------
    Expenses
      Newfoundland royalty taxes               3,253,020           3,272,253
      Amortization of royalty and
       commission interests                      682,137             905,415
      Administrative expenses (note 2)           318,278           1,005,185
      Interest expense                           113,132             172,433
                                        -----------------   -----------------
                                               4,366,567           5,355,286
                                        -----------------   -----------------

    Income before equity earnings and
     income taxes                             12,227,033          11,284,080
    Equity earnings in IOC                     6,795,575           1,327,271
                                        -----------------   -----------------
    Income before income taxes                19,022,608          12,611,351
                                        -----------------   -----------------
    Provision for (recovery of) income
     taxes
      Current                                  1,815,383           1,865,274
      Future                                     680,000             (30,000)
                                        -----------------   -----------------
                                               2,495,383           1,835,274

    Net income and comprehensive income
     for the period                           16,527,225          10,776,077

    Undistributed income, beginning of
     period                                   84,370,152          63,053,439

    Distributions to unitholders             (16,000,000)        (11,200,000)
                                        -----------------   -----------------
    Undistributed income, end of period  $    84,897,377     $    62,629,516
                                        -----------------   -----------------
                                        -----------------   -----------------
    Net income per unit                  $          0.52     $          0.34
                                        -----------------   -----------------
                                        -----------------   -----------------



    LABRADOR IRON ORE ROYALTY INCOME FUND
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    -------------------------------------------------------------------------

                                                    For the Three Months
                                                      Ended March 31,
                                                 2009                2008
                                        -------------------------------------
                                                       (Unaudited)
    Net inflow (outflow) of cash related
     to the following activities

    Operating
      Net income for the period          $    16,527,225     $    10,776,077
      Items not affecting cash:
        Equity earnings in IOC                (6,795,575)         (1,327,271)
        Future income taxes                      680,000             (30,000)
        Amortization of royalty and
         commission interests                    682,137             905,415
        Amortization of deferred charges          20,667              31,251
      Change in amounts receivable,
       accounts payable and income taxes
       payable/recoverable                    (8,592,557)          4,432,449
                                        -----------------   -----------------
      Cash flow from operating activities      2,521,897          14,787,921
                                        -----------------   -----------------

    Financing
      Distributions paid to unitholders      (16,000,000)        (17,600,000)
      Proceeds from long-term debt                     -           2,848,480
                                        -----------------   -----------------
                                             (16,000,000)        (14,751,520)
                                        -----------------   -----------------

    Increase (decrease) in cash and cash
     equivalents during the period           (13,478,103)             36,401
    Cash and cash equivalents, beginning
     of period                                27,795,570             151,256
                                        -----------------   -----------------
    Cash and cash equivalents, end of
     period                              $    14,317,467     $       187,657
                                        -----------------   -----------------
                                        -----------------   -----------------
    Cash and cash equivalents are
     comprised of:
      Cash in bank                       $       865,534     $       187,657
      Term deposits                           13,451,933                   -
                                        -----------------   -----------------
                                         $    14,317,467     $       187,657
                                        -----------------   -----------------
                                        -----------------   -----------------
    Cash income taxes paid               $    27,295,147     $       260,000
                                        -----------------   -----------------
                                        -----------------   -----------------
    Cash interest paid                   $        94,521     $        97,915
                                        -----------------   -----------------
                                        -----------------   -----------------

    

    %SEDAR: 00002722E




For further information:

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

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LABRADOR IRON ORE ROYALTY INCOME FUND

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