News-Releases
News Releases

News Releases

RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2008

May, 08, 2008

Toronto

Labrador Iron Ore Royalty Income Fund (TSX: LIF.UN) announced its results for the first quarter ended March 31, 2008.

To the Unitholders of Labrador Iron Ore Royalty Income Fund

Royalty income for the first quarter of 2008 amounted to $16.36 million as compared to $12.93 million for the first quarter of 2007, an increase of 27% 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 $10.36 million or $0.32 per unit as compared to $8.71 million or $0.27 per unit for the same period in 2007. Net income was $10.78 million or $0.34 per unit compared to $10.74 million or $0.34 per unit for the same period in 2007.

The first quarter sales of Iron Ore Company of Canada (IOC) are always 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.

Royalty revenue for the quarter was substantially above the corresponding quarter last year which was negatively affected by the strike which closed down IOC’s production facilities from March 9, 2007 to April 27, 2007. Equity earnings from IOC amounted to $1.3 million ($0.04 per unit) as compared to $3.1 million ($0.10 per unit) in 2007. The decrease in IOC earnings was mainly the result of foreign exchange losses on the translation of IOC’s US dollar denominated debt with increased revenue offset by increased operating costs.

Prices for concentrate and pellets were settled by IOC at the end of April with pellet prices increasing by 86.67% and concentrate prices increasing by 68.75%. These changes will be retroactive to January 1 for most contracts but will be billed and recorded by IOC in the second quarter of 2008. This will result in the Fund receiving additional royalties for IOC first quarter sales in the second quarter of approximately $6.6 million or $0.20 per unit after Newfoundland royalty taxes and provincial and federal income taxes. The Fund estimates its share of the equity earnings in IOC relating to the first quarter will increase by $16 million ($0.50 per unit). The net adjustments to cash flow and earnings to be recorded in the second quarter are estimated to be $6.6 million ($0.20 per unit) and $22.6 million ($0.70 per unit), respectively.

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

    2008   2007
  (Unaudited)        
Revenue
(in millions)
  $16.64   $13.15
Adjusted cash flow
(in millions)
  $10.36   $ 8.71
Adjusted cash flow per unit   $ 0.32   $ 0.27
Net income
(in millions)
  $ 10.78   $ 10.74
Net income per unit   $ 0.34   $ 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/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 Mar. 31, 2008
  3 Months
Ended Mar. 31, 2007
  Year
Ended Dec. 31, 2007
Pellets 2.55   1.79   10.99
Concentrates 0.26   0.43   2.41
 
Total 2.81   2.22   13.40

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

Please download PDF file for further information.

Bruce C. Bone
Chairman and Chief Executive Officer
(416) 863-7133