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RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2009

May, 05, 2009

Toronto

Labrador Iron Ore Royalty Income Fund (TSX: LIF.UN) announced its results for the first quarter ended March 31, 2009.

Royalty income for the first quarter of 2009 amounted to $16.27 million as compared to $16.36 million for the first quarter of 2008. The Fund’s cash flow from operating activities after adjustments for changes in amounts receivable, accounts payable and income taxes payable (adjusted cash flow) for the first quarter was $11.11 million or $0.35 per unit as compared to $10.36 million or $0.32 per unit for the same period in 2008. Net income was $16.53 million or $0.52 per unit compared to $10.78 million or $0.34 per unit for the same period in 2008.

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

The current world recession which resulted in a sharply reduced demand for iron ore in the fourth quarter of 2008 continues to cause reduced iron ore demand and as a result pellet sales in the quarter were substantially lower than last year with the decreased volume partially offset by increased sales of concentrates. Royalty revenue for the quarter was approximately the same as 2008 with the lower volume being offset by the lower value of the Canadian dollar against its U.S. counterpart and prices that were higher than those received in last year’s first quarter. Last year’s first quarter prices were at 2007 levels as the 2008 price increases were not settled until the second quarter. Last year’s price increase which occurred in the second quarter resulted in retroactive income relating to the 2008 first quarter of approximately $0.20 per unit which would have increased adjusted cash flow to $0.52 per unit. Prices for 2009 are still under negotiation and when settled they are expected to be significantly lower than 2008. Royalties for the first quarter are not expected to be materially affected when 2009 benchmark pricing is settled.

Equity earnings from IOC amounted to $6.8 million ($0.21 per unit) as compared to $1.3 million ($0.04 per unit) in 2008. If the retroactive price increase had been included in the first quarter of 2008 IOC equity earnings would have been increased by $16 million or $0.50 per unit to $0.54 per unit.

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

    2009   2008
  (Unaudited)        
Revenue
(in millions)
  $16.59   $16.64
Adjusted cash flow
(in millions)
  $11.11   $10.36
Adjusted cash flow per unit   $ 0.35   $ 0.32
Net income
(in millions)
  $ 16.53   $ 10.78
Net income per unit   $ 0.52   $ 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) 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, 2009
  3 Months
Ended Mar. 31, 2008
  Year
Ended Dec. 31, 2008
Pellets 1.21   2.55   12.30
Concentrates 0.92   0.26   2.76
 
Total 2.13   2.81   15.06

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
May 5, 2009