Results for the Second Quarter Ended June 30, 2015

August 6, 2015

TORONTO, Aug. 6, 2015 /CNW/ - Labrador Iron Ore Royalty Corporation ("LIORC", TSX: LIF) announced today its operation and cash flow results for the second quarter ended June 30, 2015.

Royalty income for the second quarter of 2015 amounted to $23.5 million as compared to $33.3 million for the second quarter of 2014. The shareholders' adjusted cash flow (see below for definition) for the second quarter was $13.1 million or $0.21 per share as compared to $33.7 million or $0.53 per share for the same period in 2014. The higher cash flow in the second quarter of 2014 reflected an IOC dividend of which Labrador Iron Ore Royalty Corporation's share was $14.8 million or $0.23 per share. Net income was $15.4 million or $0.24 per share compared to $35.9 million or $0.56 per share for the same period in 2014. Equity earnings from Iron Ore Company of Canada ("IOC") amounted to $3.8 million or $0.06 per share as compared to $18.2 million or $0.28 per share in 2014. The increased sales for the quarter were a reflection of the increased production, but this along with the lower Canadian dollar against its US counterpart only partially offset the lower prices received as compared to last year. As a result, royalty revenue for the quarter was substantially lower than last year.

Second quarter of 2015 concentrate for sale (CFS) production improved by 55% from the previous quarter and was 10% better than the second quarter of 2014. This was mainly driven by better asset availability and utilization resulting from IOC's ongoing business transformation programs together with favorable weight yield. Second quarter of 2015 pellet production was 5% and 11% higher than the first quarter of 2015 and the second quarter of 2014 respectively driven by the restart of a 6^th induration machine which was idled in 2009.

Second quarter of 2015 concentrate sales in tonnes were 166% higher than the previous quarter and similar to the corresponding quarter in 2014. Good operational performance translated into better sales performance in the second quarter of 2015. Second quarter of 2015 pellet sales in tonnes were 8% lower than the previous quarter due to vessel timing and 19% higher than the second quarter of 2014 driven by higher production.

Results for the three months and six months ended June 30 are summarized below:

(in millions except per share information)	3 Months Ended June 30, 2015	3 Months Ended June 30, 2014	6 Months Ended June 30, 2015	6 Months Ended June 30, 2014
			(Unaudited)

Revenue	$24.0	$33.8	$47.7	$61.0
Adjusted cash flow	$13.1	$33.7	$26.2	$61.4
Adjusted cash flow per share	$0.21	$0.53	$0.41	$0.96
Net income	$15.4	$35.9	$25.4	$63.0
Net income per share	$0.24	$0.56	$0.40	$0.98

"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 IFRS. The Directors believe that adjusted cash flow is a useful analytical measure as it better reflects cash available for dividends to shareholders.

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

	3 Months Ended June 30, 2015	3 Months Ended June 30, 2014	6 Months Ended June 30, 2015	6 Months Ended June 30, 2014	Year Ended Dec. 31, 2014

Pellets	2.29	1.93	4.79	3.81	8.33
Concentrates⁽¹⁾	1.89	1.91	2.60	2.54	5.99

Total	4.18	3.84	7.39	6.35	14.32

⁽¹⁾^{Excludes third party ore sales}

Outlook

The restart of the 6^th induration machine which restored pellet capacity to 12.5 million tonnes per annum was completed during the quarter. The increased concentrate production realized represents the partial attainment of the results expected from the expansion program which was completed last year. Concentrate and pellet production is expected to continue to increase going forward. The Canadian dollar has continued to weaken against its US counterpart, which partially offsets the lower iron ore price which is currently about 50% below last year's level. Because of the quality of the IOC ore, it remains in demand and commands a premium to posted prices. The premium for pellets remains relatively strong. The price of iron ore is beyond the control of IOC but all possible steps are being taken to reduce costs and increase production, so that IOC remains profitable even at current iron ore price levels. The steps being taken to increase production are positive for the royalty we receive from IOC and will partially offset the lower prices currently being received.

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

Bruce C. Bone
President and Chief Executive Officer
August 6, 2015

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 Labrador Iron Ore Royalty Corporation's ("LIORC" or the "Corporation") 2014 Annual Report and the interim financial statements and notes contained therein. Although management believes that expectations reflected in forward-looking statements are reasonable, such statements involve risk and uncertainties including the factors discussed in the Corporation's 2014 Annual Report.

The Corporation'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 Corporation's royalty revenue is affected by the price of iron ore and the Canadian – U.S. dollar exchange rate.

The first quarter sales of IOC are traditionally adversely affected by the closing of the St. Lawrence Seaway and general winter operating conditions and are usually 15% – 20% of the annual volume, 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.

Royalty income for the second quarter of 2015 amounted to $23.5 million as compared to $33.3 million for the second quarter of 2014. The shareholders' adjusted cash flow (see below for definition) for the second quarter was $13.1 million or $0.21 per share as compared to $33.7 million or $0.53 per share for the same period in 2014. The higher cash flow in the second quarter of 2014 reflected an IOC dividend of which LIORC's share was $14.8 million or $0.23 per share. Net income was $15.4 million or $0.24 per share compared to $35.9 million or $0.56 per share for the same period in 2014. Equity earnings from IOC amounted to $3.8 million or $0.06 per share as compared to $18.2 million or $0.28 per share in 2014. The increased sales for the quarter were a reflection of the increased production, but this along with the lower Canadian dollar against its US counterpart only partially offset the lower prices received as compared to last year. As a result, royalty revenue for the quarter was substantially lower than last year.

Results for the six months were affected by the same factors as the three month period including lower iron ore prices. Administrative expenses were higher in 2015 due to the legal fees incurred in 2015 in connection with amendments to the Corporation's articles. Also higher directors fees due to the increased size of the board from eight to ten, which has subsequently been reduced to nine. IOC did not pay a dividend in the first half of 2015 but did pay in 2014, of which LIORC's share was $27.4 million or $0.42 per share.

The following table sets out quarterly revenue, net income and cash flow data for 2015, 2014 and 2013.

			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

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

2013
First Quarter			$26.4	$21.7	$0.34	$14.4	$0.22	$0.375
Second Quarter			$42.2	$39.2	$0.61	$23.4	$0.37	$0.375
Third Quarter			$36.1	$41.2	$0.65	$20.0	$0.31	$0.375
Fourth Quarter			$34.6	$46.7	$0.73	$57.6⁽⁵⁾	$0.90	$0. 750
Notes:	⁽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
	⁽⁵⁾	Includes a $40.0 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 distributions. Standardized cash flow per share was $0.20 for the quarter (2014 - $0.46). Cumulative standardized cash flow from inception of the Corporation is $21.05 per share and total cash distributions since inception is $20.44 per share, for a payout ratio of 97%.

"Adjusted cash flow" is 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. 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 dividends to shareholders.

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

	3 Months Ended June 30, 2015	3 Months Ended June 30, 2014	6 Months Ended June 30, 2015	6 Months Ended June 30, 2014
Standardized cash flow from operating activities	$12,492,921	$29,229,157	$27,725,984	$55,077,722
Excluding: changes in amounts receivable, accounts payable and income taxes payable	614,378	4,439,911	(1,505,150)	6,274,780
Adjusted cash flow	$13,107,299	$33,669,068	$26,220,834	$61,352,502
Adjusted cash flow per share	$0.21	$0.53	$0.41	$0.96

Liquidity and Capital Resources

The Corporation has $24.3 million in cash as at June 30, 2015 with total current assets of $47.6 million and working capital of $26.8 million. During the quarter, the Corporation earned operating cash flows of $12.5 million with the cash balance declining $3.5 million as a result of dividends paid.

Cash balances consist of deposits in Canadian dollars with Canadian chartered banks. Amounts receivable primarily consist of royalty payments from IOC. Royalty payments are received in U.S. dollars and converted in to Canadian dollars on receipt, usually 25 days after the quarter end. The Corporation 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 and debt.

The Corporation has a $50 million revolving credit facility with a term ending September 18, 2017 with provision for annual one-year extensions. No amount is currently drawn under this facility (2014 – nil) leaving $50.0 million available to provide for any capital required by IOC or requirements of the Corporation.

Outlook

Bruce C. Bone
President and Chief Executive Officer
Toronto, Ontario
August 6, 2015

Notice:
The following unaudited interim condensed consolidated financial statements of the Corporation have been prepared by and are the responsibility of the Corporation's management. The Corporation's independent auditor has not reviewed these interim financial statements.

LABRADOR IRON ORE ROYALTY CORPORATION
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

		As at
		June 30,		December 31,
		2015		2014
		(Unaudited)
Assets
Current Assets
	Cash	$	24,281,617	$	34,955,633
	Amounts receivable		23,281,244		24,861,203
	Income taxes recoverable		67,821		472,626
Total Current Assets			47,630,682		60,289,462

Non-Current Assets
Iron Ore Company of Canada ("IOC"),
	royalty and commission interests		273,135,160		275,432,981
Investment in IOC			395,309,889		395,271,413
Total Non-Current Assets			668,445,049		670,704,394

Total Assets		$	716,075,731	$	730,993,856


Liabilities and Shareholders' Equity
Current Liabilities
	Accounts payable	$	4,831,863	$	5,311,477
	Dividend payable		16,000,000		22,400,000
Total Current Liabilities			20,831,863		27,711,477

Non-Current Liabilities
	Deferred income taxes		124,950,000		125,563,000
Total Liabilities			145,781,863		153,274,477

Shareholders' Equity
	Share capital		317,708,147		317,708,147
	Retained earnings		265,189,721		271,757,232
	Accumulated other comprehensive loss		(12,604,000)		(11,746,000)
			570,293,868		577,719,379

Total Liabilities and Shareholders' Equity		$	716,075,731	$	730,993,856

LABRADOR IRON ORE ROYALTY CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME


		For the Three Months Ended
		June 30,
Canadian $		2015		2014
		(Unaudited)
Revenue
	IOC royalties	$	23,477,310	$	33,305,033
	IOC commissions		411,701		395,190
	Interest and other income		64,505		81,796
			23,953,516		33,782,019
Expenses
	Newfoundland royalty taxes		4,695,462		6,661,006
	Amortization of royalty and commission interests		1,197,257		977,496
	Administrative expenses		741,718		646,478
			6,634,437		8,284,980

Income before equity earnings and income taxes			17,319,079		25,497,039
Equity earnings in IOC			3,778,944		18,242,559
Income before income taxes			21,098,023		43,739,598

Provision for income taxes
	Current		5,409,037		7,615,927
	Deferred		222,000		231,000
			5,631,037		7,846,927

Net income for the period			15,466,986		35,892,671

Other comprehensive loss
	Share of other comprehensive loss of IOC that will not be
	reclassified subsequently to profit or loss (net of taxes)		(429,000)		(479,000)

Comprehensive income for the period		$	15,037,986	$	35,413,671

Net income per share		$	0.24	$	0.56

LABRADOR IRON ORE ROYALTY CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



		For the Six Months Ended
		June 30,
		2015		2014
		(Unaudited)
Revenue
	IOC royalties	$	46,823,445	$	60,157,477
	IOC commissions		727,694		637,280
	Interest and other income		144,317		180,438
			47,695,456		60,975,195
Expenses
	Newfoundland royalty taxes		9,364,689		12,031,495
	Amortization of royalty and commission interests		2,297,821		1,759,845
	Administrative expenses		1,428,084		1,180,067
			13,090,594		14,971,407

Income before equity earnings and income taxes			34,604,862		46,003,788
Equity earnings in IOC			1,041,476		30,809,961
Income before income taxes			35,646,338		76,813,749

Provision for income taxes
	Current		10,681,849		13,787,926
	Deferred		(468,000)		14,000
			10,213,849		13,801,926

Net income for the period			25,432,489		63,011,823

Other comprehensive loss
	Share of other comprehensive loss of IOC that will not be
	reclassified subsequently to profit or loss (net of taxes)		(858,000)		(957,000)

Comprehensive income for the period		$	24,574,489	$	62,054,823

Net income per share		$	0.40	$	0.98

LABRADOR IRON ORE ROYALTY CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

			For the Six Months Ended
			June 30,
			2015		2014
			(Unaudited)
Net inflow (outflow) of cash related
	to the following activities

Operating
	Net income for the period		$	25,432,489	$	63,011,823
	Items not affecting cash:
		Equity earnings in IOC		(1,041,476)		(30,809,961)
		Current income taxes		10,681,849		13,787,926
		Deferred income taxes		(468,000)		14,000
		Amortization of royalty and commission interests		2,297,821		1,759,845
	Common share dividend from IOC			-		27,376,795
	Change in amounts receivable and accounts payable			1,100,345		4,069,162
	Income taxes paid			(10,277,044)		(24,131,868)
	Cash flow from operating activities			27,725,984		55,077,722

Financing
	Dividends paid to shareholders			(38,400,000)		(73,600,000)
	Cash flow used in financing activities			(38,400,000)		(73,600,000)

Decrease in cash, during the period				(10,674,016)		(18,522,278)

Cash, beginning of period				34,955,633		52,613,924

Cash, end of period			$	24,281,617	$	34,091,646

LABRADOR IRON ORE ROYALTY CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
	Share capital		Retained earnings		Accumulated other comprehensive loss		Total
	(Unaudited)

Balance as at December 31, 2013	$	317,708,147	$	273,225,981	$	(7,606,000)	$	583,328,128
Net income for the period		-		63,011,823		-		63,011,823
Dividends declared to shareholders		-		(51,200,000)		-		(51,200,000)
Share of other comprehensive loss from investment in IOC (net of taxes)		-		-		(957,000)		(957,000)
Balance as at June 30, 2014	$	317,708,147	$	285,037,804	$	(8,563,000)	$	594,182,951

Balance as at December 31, 2014		317,708,147		271,757,232		(11,746,000)		577,719,379
Net income for the period		-		25,432,489		-		25,432,489
Dividends declared to shareholders		-		(32,000,000)		-		(32,000,000)
Share of other comprehensive loss from investment in IOC (net of taxes)		-		-		(858,000)		(858,000)
Balance as at June 30, 2015	$	317,708,147	$	265,189,721	$	(12,604,000)	$	570,293,868

The complete consolidated financial statements for the second quarter ended June 30, 2015, including the notes thereto, are posted on sedar.com and labradorironore.com.

SOURCE Labrador Iron Ore Royalty Corporation

Bruce C. Bone, President & Chief Executive Officer, (416) 863-7133Copyright CNW Group 2015

Company

Iron Ore Company of Canada

Investors

Responsibility

Results for the Second Quarter Ended June 30, 2015

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