Labrador Iron Ore Royalty Income Fund - Results for the first quarter ended March 31, 2007

May 3, 2007

TORONTO, May 3 /CNW/ - Labrador Iron Ore Royalty Income Fund (TSX: LIF.UN) announced its results for the first quarter ended March 31, 2007.

Royalty income for the first quarter of 2007 amounted to $12.93 million as compared to $14.05 million for the first quarter of 2006, a decrease of 8% over the same period last year. The Fund's cash flow from operating activities after adjustments for changes in amounts receivable, accounts payable and income taxes payable/recoverable (adjusted cash flow) for the first quarter was $8.71 million or $0.27 per unit as compared to $9.41 million or $0.29 per unit for the same period in 2006. Net income was $10.74 million or $0.34 per unit compared to $11.92 million or $0.37 per unit for the same period in 2006.

Negotiations for new labour agreements to replace the Iron Ore Company of Canada (IOC) agreements, which expired on February 28, 2007, broke down and a strike commenced on March 9, 2007 closing down IOC's production facilities. A new five year agreement was ratified on April 25, 2007, and production has resumed with a ramp up to normal production expected in early May. Sales have continued to be made from stockpiles but the loss of production during the strike will negatively affect second quarter sales. The timing of cargo shipments was the cause of reduced sales compared to the 2006 first quarter. Prices for 2007 were settled during the quarter with increases of 5.8% for pellets and 10.4% for concentrates retroactive to January 1 for most contracts. Equity earnings from IOC, which were affected by the strike, amounted to $3.1 million ($0.10 per unit) as compared to $3.8 million ($0.12 per Unit) in 2006.

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

                                                    2007          2006
                                                 ------------------------
                                                        (Unaudited)

Revenue (in millions)                             $  13.15      $  14.36
                                                 ----------    ----------
Adjusted cash flow (in millions)                  $   8.71      $   9.41
                                                 ----------    ----------
Adjusted cash flow per unit                       $   0.27      $   0.29
                                                 ----------    ----------
Net income (in millions)                          $  10.74      $  11.92
                                                 ----------    ----------
Net income per unit                               $   0.34      $   0.37
                                                 ----------    ----------

"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/recoverable) 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 Ended  3 Months Ended     Year Ended
                              Mar. 31,        Mar. 31,        Dec. 31,
                                2007            2006            2006
                          --------------  --------------  --------------
Pellets                         1.79            2.16           12.94
Concentrates                    0.43            0.31            2.91
                          --------------  --------------  --------------
Total                           2.22            2.47           15.85
                          --------------  --------------  --------------

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

Bruce C. Bone

Chairman and Chief Executive Officer

May 3, 2007

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 2006 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 2006 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.

Negotiations for new labour agreements to replace the Iron Ore Company of Canada (IOC) agreements, which expired on February 28, 2007, broke down and a strike commenced on March 9, 2007 closing down IOC's production facilities. A new five year agreement was ratified on April 25, 2007 and production has resumed with a ramp-up to normal production expected in early May. Sales have continued to be made from stockpiles but the loss of production during the strike will negatively affect second quarter sales.

Prices for 2007 were settled during the quarter with increases of 5.8% for pellets and 10.4% for concentrates retroactive to January 1 for most contracts. Equity earnings from IOC, which were affected by the strike, amounted to $3.1 million ($0.10 per unit) as compared to $3.8 million ($0.12 per Unit) in 2006.

Net income for the first quarter was $10.73 million or $0.34 per unit as compared to $11.92 million or $0.37 per unit in 2006. The decrease mainly resulted from lower equity earnings in IOC of $3.1 million compared to $3.8 million or $0.37 per unit last year and slightly reduced sales. The timing of cargo shipments was the cause of reduced sales compared to the 2006 first quarter.

Cash flow from operating activities after adjustments for changes in amounts receivable, accounts payable and income taxes payable/recoverable (adjusted cash flow) for the quarter was $8.71 million or $0.27 per unit as compared to $9.41 million or $0.29 per unit for the same period in 2006.

The following table sets out quarterly revenue, net income and cash flow
data for 2007, 2006 and 2005.

                                                                Distrib-
                                         Adjusted  Adjusted     utions
                    Net      Net Income  Cash      Cash Flow    Declared
           Revenue  Income   per Unit    Flow(1)   per Unit(1)  per Unit
           -------  -------  ----------  --------  ----------   --------
                         (million except per Unit information)
2007
----
First
 Quarter    $13.1    $10.7     $0.34      $8.7       $0.27       $0.35
2006
----
First
 Quarter    $14.4    $11.9     $0.37      $9.4       $0.29       $0.35
Second
 Quarter    $19.2    $33.5     $1.05     $25.3(2)    $0.79       $0.65
Third
 Quarter    $20.2    $20.3     $0.63     $20.6(3)    $0.64       $0.60
Fourth
 Quarter    $29.4    $28.7     $0.90     $17.6       $0.56       $0.55
2005
----
First
 Quarter     14.9     15.5      0.48      10.0       $0.31       $0.25
Second
 Quarter     21.3     21.3      0.67      13.5       $0.42       $0.35
Third
 Quarter     17.2     17.9      0.56      11.0       $0.34       $0.35
Fourth
 Quarter     26.2     31.4      0.98      40.1(4)    $1.26       $1.20

Notes:    (1)  "Adjusted cash flow" (see below)
          (2)  Includes a $12.5 million IOC dividend
          (3)  Includes a $8.5 million IOC dividend
          (4)  Includes a $24.1 million IOC dividend

Adjusted Cash Flow

------------------

"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/recoverable. 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, 2007   Mar. 31, 2006
                                           --------------  --------------
Cash flow from operating activities(x)     $  18,773,343   $   5,935,229
Excluding: changes in amounts receivable,
 accounts payable and income taxes
 payable/recoverable(x)                      (10,065,875)      3,472,020
                                           --------------  --------------
Adjusted cash flow                         $   8,707,468   $   9,407,249
                                           --------------  --------------
Adjusted cash flow per unit                $        0.27   $        0.29
                                           --------------  --------------

(x) The major reason for the change quarter over quarter was that the
    2006 quarter included a payment of $11.1 million of income taxes
    relating to 2005 earnings.

Liquidity

---------

The Fund has a $50 million revolving credit facility reducing by $25 million in 2008 with the balance due in 2009. The amount drawn under this facility is currently $7.7 million ($4.9 million at March 31, 2007) leaving $42.3 million available to provide for any capital required by IOC or other Fund requirements.

Outlook

-------

Steel markets remain strong especially in Asia and IOC expects to be able to sell all the concentrates and pellets it can produce. Prices for 2007 have been settled with increases of 5.8% for pellets and 10.4% for concentrates retroactive to January 1 for most contracts. The strike, which closed down production facilities for 7 weeks from March 9 to April 27, 2007, will result in a loss of about 14% of annual production which, based on last year's production, would amount to approximately 2.3 million tonnes. This will result in lower sales than expected for the balance of the year but, with a five year labour agreement in place, IOC's program to expand production to 17.5 million tonnes largely completed in 2006 and plans for further increases under consideration, and price increases settled for 2007, the future looks positive for IOC and thus for the Fund. Going forward, continued strength of the Canadian dollar against its US counterpart would be a negative but that should be more than offset by increased production and firm pricing.

Bruce C. Bone

Chairman and Chief Financial Officer

Toronto, Ontario

May 3, 2007

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

                                                        As at
                                           ------------------------------
                                               March 31      December 31
                                                 2007            2006
                                           --------------  --------------
                                              (Unaudited)
Assets
Current
  Cash                                     $      82,756   $     141,937
  Amounts receivable                          12,956,700      28,995,350
  Income taxes recoverable                     1,625,962               -
                                           --------------  --------------
                                              14,665,418      29,137,287

Deferred charges                                 312,478         343,729

Iron Ore Company of Canada ("IOC"),
 royalty and commission interests            310,856,678     311,577,494

Investment in IOC                            172,180,118     169,050,037
                                           --------------  --------------
                                           $ 498,014,692   $ 510,108,547
                                           --------------  --------------
                                           --------------  --------------

Liabilities and Unitholders' Equity
Current
  Accounts payable                         $   3,250,178   $   6,269,559
  Income taxes payable                                 -       1,327,432
  Distributions payable to unitholders        11,200,000      17,600,000
                                           --------------  --------------
                                              14,450,178      25,196,991

Long-term debt                                 4,890,564       6,123,088

Future income tax liability                  116,900,000     116,550,000
                                           --------------  --------------
                                             136,240,742     147,870,079

Unitholders' equity
  Trust units                                317,708,147     317,708,147
  Undistributed income                        44,065,803      44,530,321
                                           --------------  --------------
                                           $ 498,014,692   $ 510,108,547
                                           --------------  --------------
                                           --------------  --------------



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

                                                For the Three Months
                                                   Ended March 31,
                                                2007            2006
                                           ------------------------------
                                                     (Unaudited)
Revenue
  IOC royalties                            $  12,928,314   $  14,048,080
  IOC commissions                                219,051         242,850
  Interest and other income                        3,913          68,109
                                           --------------  --------------
                                              13,151,278      14,359,039
                                           --------------  --------------
Expenses
  Newfoundland royalty taxes                   2,585,663       2,809,616
  Amortization of royalty and commission
   interests                                     720,816         808,720
  Administrative expenses (note 2)               600,382         641,375
  Interest expense                               258,423         199,373
                                           --------------  --------------
                                               4,165,284       4,459,084
                                           --------------  --------------

Income before equity earnings and income
 taxes                                         8,985,994       9,899,955
Equity earnings in IOC                         3,130,081       3,842,775
                                           --------------  --------------

Income before income taxes                    12,116,075      13,742,730
                                           --------------  --------------

Provision for income taxes
  Current                                      1,030,593       1,332,677
  Future                                         350,000         490,000
                                           --------------  --------------
                                               1,380,593       1,822,677
                                           --------------  --------------

Net income for the period                     10,735,482      11,920,053

Undistributed income, beginning of period     44,530,321      18,911,851

Distributions to unitholders                 (11,200,000)    (11,200,000)
                                           --------------  --------------

Undistributed income, end of period        $  44,065,803   $  19,631,904
                                           --------------  --------------
                                           --------------  --------------

Net income per unit                        $        0.34   $        0.37
                                           --------------  --------------
                                           --------------  --------------



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

                                                For the Three Months
                                                   Ended March 31,
                                                2007            2006
                                           ------------------------------
                                                     (Unaudited)
Net inflow (outflow) of cash related
 to the following activities

Operating
  Net income for the period                $  10,735,482   $  11,920,053
  Items not affecting cash:
    Equity earnings in IOC                    (3,130,081)     (3,842,775)
    Future income taxes                          350,000         490,000
    Amortization of royalty and
     commission interests                        720,816         808,720
    Amortization of deferred charges              31,251          31,251
  Change in amounts receivable, accounts
   and income taxes payable/recoverable       10,065,875      (3,472,020)
                                           --------------  --------------
  Cash flow from operating activities         18,773,343       5,935,229
                                           --------------  --------------

Financing
  Distributions paid to unitholders          (17,600,000)    (38,400,000)
  Proceeds from (repayment of) long-term
   debt                                       (1,232,524)      9,225,063
                                           --------------  --------------
                                             (18,832,524)    (29,174,937)
                                           --------------  --------------

Decrease in cash and cash equivalents
 during the period                               (59,181)    (23,239,708)
Cash and cash equivalents, beginning of
 period                                          141,937      23,600,474
                                           --------------  --------------

Cash and cash equivalents, end of period   $      82,756   $     360,766
                                           --------------  --------------
                                           --------------  --------------

Cash income taxes paid                     $   3,983,987   $   2,837,760
                                           --------------  --------------
                                           --------------  --------------

Cash interest paid                         $     209,409   $     124,714
                                           --------------  --------------
                                           --------------  --------------



Notes to Consolidated Financial Statements

1.  Basis of Presentation

    The financial statements have not been reviewed in accordance with
    section 7050 of the CICA Handbook, Auditor Review of the Interim
    Financial Statements, by the Fund's Auditor.

    Not all disclosures required by Canadian generally accepted
    accounting principles for annual financial statements have been
    presented and, accordingly, these interim financial statements should
    be read in conjunction with the most recently prepared annual
    financial statements for the year ended December 31, 2006.

    These interim financial statements follow the same accounting
    policies and method of application as the most recent annual
    financial statements for the year ended December 31, 2006. On
    January 1, 2007, the Fund adopted the Canadian Institute of Chartered
    Accountants new accounting standards: Section 3855 "Financial
    Instruments - Recognition and Measurement", Section 3861 "Financial
    Instruments - Disclosure and Presentation" and Section 1530
    "Comprehensive Income". Section 3855 establishes standards for
    recognizing and measuring financial instruments. All financial
    instruments are required to be measured at fair value on the initial
    recognition with the exception of certain financial instruments that
    do not have quoted market values in an active market. Financial
    instruments that will be realized within the normal operating cycle
    are measured at their carrying amount as this approximates fair
    value. These standards have been applied prospectively without
    restatement of prior periods. The adoption of these standards did not
    have an impact on the Fund's financial statements. The Fund does not
    have any other comprehensive income components and as such,
    comprehensive income is equal to net income. Accordingly, a Statement
    of Comprehensive Income is not presented.

    Seasonality

    The results of operations and operating cash flows of the Fund vary
    considerably from quarter to quarter. The operations of the Fund are
    dependent on the royalty and commission revenues from IOC, whose
    production and revenues are not constant throughout the year, being
    lower during the winter months when the St. Lawrence Seaway is
    closed.

2.  Unit appreciation rights

    In 2005, the Fund adopted a unit appreciation rights plan which
    granted 50,000 units to each if its six trustees, all as more fully
    described in the annual financial statements. Since the grant date,
    150,000 unit appreciation rights have been exercised.

    Compensation expense is not recognized when rights are issued, but is
    accrued as an expense over the period that the rights vest. The unit
    appreciation rights are marked to market each quarter to the extent
    the units exceed $23.00. For the three months ended March 31, 2007,
    compensation expense of $291,000 (2006 - $398,000) has been recorded
    in administrative expenses in connection with the unit appreciation
    rights.

%SEDAR: 00002722E


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