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RESULTS FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2008

October, 21, 2008

Toronto
Labrador Iron Ore Royalty Income Fund (TSX: LIF.UN) announced its results for the third quarter ended September 30, 2008.

Royalty income for the third quarter of 2008 amounted to $43.20 million as compared to $19.61 million for the third quarter of 2007, an increase of 120% from the same period last year. Equity earnings from Iron Ore Company of Canada (IOC) in the third quarter amounted to $34.19 million ($1.07 per unit) as compared to $10.71 million ($0.33 per unit) in 2007. Royalties and equity earnings were higher than in the 2007 period due to the 86.67% and 68.75% price increases for pellets and concentrates, respectively, slightly higher sales and the lower value of the Canadian dollar versus its U.S. counterpart. The Fund’s cash flow from operating activities adjusted for changes in amounts receivable, accounts payable and income taxes payable/recoverable (adjusted cash flow) for the third quarter was $104.10 million or $3.25 per unit as compared to $30.76 million or $0.96 per unit for the same period in 2007. Net income was $65.64 million or $2.05 per unit compared to $22.98 million or $0.72 per unit for the same period in 2007. The increase in net income was the result of increases in royalties and the Fund’s share of IOC earnings.

On September 25, 2008 the Fund received a dividend from IOC totaling US$75.5 million equating to CDN$77.9 million or $2.43 per unit.

Results for the three months and nine months ended September 30 are summarized below:

  3 Months Ended Sept. 30 2008 3 Months Ended Sept. 302007 9 Months Ended Sept. 302008 9 Months Ended
Sept. 302007
  (Unaudited)
Revenue
(in millions)
$43.72 $20.07 $118.42 $48.90
Adjusted cash flow
(in millions)
$104.10 $30.76 $147.40 $48.92
Adjusted cash flow per unit $ 3.25 $ 0.96 $ 4.60 $ 1.53
Net income
(in millions)
$65.64 $22.98 $150.34 $48.87
Net income per unit $ 2.05 $ 0.72 $ 4.70 $ 1.53

“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/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 Sept. 30, 2008 3 Months Ended Sept. 30, 2007 9 Months Ended Sept. 30, 2008 9 Months Ended Sept. 30, 2007 Year Ended Dec. 31, 2007
Pellets 3.29 3.33 9.86 7.84 10.99
Concentrates 1.15 0.82 1.97 1.55 2.41
 
Total 4.44 4.15 11.83 9.39 13.40

IOC completed its $60 million program to expand production to 18.4 million tonnes of concentrate and is progressing on the $500 million program to expand production to 22 million tonnes annually. During the quarter, IOC announced a further $225 million program which will increase concentrate production to 23 million tonnes and a $75 million expenditure for a feasibility study to increase production to 26 million tonnes by 2011. On completion of these programs, including projects to debottleneck pellet production, the capacity to produce pellets from the concentrate will increase from 13.5 to 14.5 million tonnes.

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 
October 21, 2008