Why Invest?
- LIORC generates all of its revenue from its investments in Iron Ore Company of Canada (IOC), a leading North American producer and exporter of premium iron ore pellets and high-grade concentrate, with the following attractive investment attributes.
- Leading producer of high grade, low impurity concentrate and pellets – IOC’s concentrate and pellets are high quality products with chemistry which helps steel producers increase efficiency and lower the carbon footprint compared to lower quality grades and forms of iron ore. IOC produces 65 - 66% Fe concentrate as well as direct reduction and blast furnace pellets. Steelmaker demand for high quality products, such as those produced by IOC, has increased in recent years given tightening environmental standards, a shift to electric arc furnaces which use direct reduction pellets, and greater consumer demand for higher quality steels. IOC also has the operational flexibility to shift production between concentrate for sale and pellets to adapt to changes in market demand.
- Integrated operations – IOC wholly owns all of the infrastructure to mine and produce high grade concentrate and pellets, and transport finished product by its rail-line to its marine terminal and ship-loading facilities.
- Large, high quality resource with a long mine life – IOC has mineral reserves and resources of 1.1 billion tonnes and 1.7 billion tonnes, respectively. Based on planned processing rates, IOC has a mine life of approximately 24 years based on reserves alone.
- Stable jurisdiction – IOC’s operations are all located in Canada. Its mining operations, concentrator and pelletizing plant are located near Labrador City, in the province of Newfoundland and Labrador. Its marine terminal and materials handling facility is located in Sept-Îles, Québec.
- World class operator – IOC is operated by its majority shareholder, Rio Tinto, one of the world’s largest diversified mining companies.
- Competitive operating costs and margins – IOC’s costs are competitive. In 2022 the cost of goods sold, excluding depreciation, on a blended basis for iron ore pellets and concentrate for sale was US$69.25 per tonne. In addition, IOC’s high-quality iron ore pellets and concentrate command premium prices which further strengthens operating margins. To put IOC’s operating margins in perspective, since 1962 when it first began producing and processing iron ore pellets and concentrate from its current facilities in Labrador City IOC has never had to shut down production due to market conditions.
- Focussed on production growth – From 2008 to 2014, IOC undertook expansion programs to increase its annual concentrate production. After completion of commissioning and optimization of the production system, IOC’s nominal concentrate production capacity is approximately 23.3 million tonnes per year, subject to ore quality. In 2022, concentrate production was about 19.1 million tonnes. IOC continues to seek operating improvements and to invest in development capital expenditures to reach production capacity.
- The structure of LIORC’s investments in IOC provides unique benefits for LIORC and its Shareholders.
- Attractive 7% top line royalty – A significant portion of LIORC’s value can be attributed to its royalty interest in IOC. The royalty is "off-the-top", and thus the amount of cash received each quarter from IOC is dependent only on the sales volume and the realized price of the iron ore sold. Cashflows generated from the royalty are not impacted by the expenses and capital costs incurred by IOC. As a result, these cashflows are generally viewed as less risky and more valuable than similar cashflows generated from equity investments.
- 15.1% equity investment in IOC – LIORC’s minority equity investment in IOC provides additional upside to iron ore markets. Free cashflow generated by IOC has generally been paid out as dividends, which LIORC then has distributed to its shareholders. In 2022, IOC paid LIORC dividends of approx. C$69.1 million. The IOC minority equity investment also provides LIORC with certain participation and oversight rights, including two seats on IOC’s board of directors.
- LIORC represents a quality investment with a strong dividend yield. LIORC has generally paid cash dividends from the cash flow generated from its IOC investments to the maximum extent possible, subject to the maintenance of appropriate levels of working capital. Since inception, the Company has paid out to shareholders 98% of standardized cash flow.
- LIORC has a debt-free balance sheet. As at December 31, 2022, LIORC had a positive working capital position of $29.0 million.