LABRADOR IRON ORE ROYALTY CORPORATION - RESULTS FOR THE SECOND QUARTER ENDED JUNE 30, 2026
LABRADOR IRON ORE ROYALTY CORPORATION - RESULTS FOR THE SECOND QUARTER ENDED JUNE 30, 2026 |
| [05-August-2026] |
TORONTO, Aug. 5, 2026 /CNW/ -- The Directors of Labrador Iron Ore Royalty Corporation ("LIORC" or the "Corporation") present the second quarter report for the period ended June 30, 2026.
Financial Performance In the second quarter of 2026, LIORC's financial results were negatively affected by low concentrate for sale ("CFS") and pellet sales volumes. Royalty revenue for the second quarter of 2026 was $33.7 million, a 27% decrease from the second quarter of 2025 and a 5% decrease from the first quarter of 2026. Equity (losses) earnings from Iron Ore Company of Canada ("IOC") totaled ($7.6) million in the second quarter of 2026 compared to $2.3 million in the second quarter of 2025 and ($6.4) million in the first quarter of 2026. Net income per share for the second quarter of 2026 was $0.17 per share, which was a 58% decrease from the same period in 2025 and a 19% decrease from the first quarter of 2026. The adjusted cash flow per share for the second quarter of 2026 was $0.29 per share, a 28% decrease from the same period in 2025 and 5% lower than the first quarter of 2026. While adjusted cash flow is not a measure recognized under IFRS Accounting Standards, the Directors believe it provides a useful analytical indicator of cash available for distribution to shareholders. Iron ore prices improved modestly in the second quarter of 2026, supported by resilient demand in emerging markets despite higher seaborne supply and flat global steel output. According to data from the World Steel Association, overall global crude steel production during the second quarter of 2026 remained unchanged compared to the same period in 2025. In China, second quarter steel production fell 1.7% year-over-year. This contraction was primarily driven by ongoing weakness in the domestic property market, which reduced demand for construction grade steel, as well as strict carbon emission caps and rising compliance costs that led steelmakers to reduce low-margin volume in favor of high-value specialty products. China's decline was countered by expansion in other regions, where non-China steel production grew by 2.2% year-over-year in the second quarter. Growth was fueled by robust manufacturing and infrastructure activity in major emerging markets such as India and Turkey. European steel output also rebounded from historical lows in 2025. Pellet premiums in the second quarter were supported by increased demand from global steelmakers seeking low-emission feedstocks to minimize direct carbon liabilities under the EU Carbon Border Adjustment Mechanism, now in effect. On the supply side, iron ore production remained strong. Combined sales from the world's three largest seaborne producers (Rio Tinto, Vale, and BHP) rose approximately 2% in the quarter ended June 30, 2026, compared with the same quarter of 2025, ensuring that global markets were well supplied even as prices found steady demand-side support. IOC sells CFS based on the Platts index for 65% Fe, CFR China ("65% Fe index"). All references to tonnes and per-tonne prices in this report refer to wet metric tonnes, other than references to Platts quoted pricing, which refer to dry metric tonnes. Historically, IOC's wet ore contains approximately 3% less ore per equivalent volume than dry ore. In the second quarter of 2026, the 65% Fe index averaged US$122 per tonne, a 1% increase over the prior quarter and a 12% increase over the average of US$108 per tonne in the second quarter of 2025. IOC sells blast furnace ("BF") pellets and direct reduction ("DR") pellets based on a premium to the 65% Fe index. In 2026, Platts began publishing a new Atlantic Iron Ore Blast Furnace Pellet Contract Price Premium based on the 65% Fe index (the "BF pellet premium") to reflect the higher liquidity and usage of Atlantic pellet premium contract settlements over the 65% Fe index. The BF pellet premium averaged US$31 per tonne in the second quarter of 2026, up from an average of US$28 in the prior quarter. The Platts DR pellet premium for 67.5% Fe pellets over 65% Fe index (the "DR pellet premium") was US$43 per tonne, up from an average of US$42 per tonne in the prior quarter and down from an average of US$46 per tonne in the same quarter of 2025. Based on sales reported for the LIORC royalty, the overall average price realized by IOC for CFS and pellets (FOB Sept-Îles, net of freight charges) was approximately US$111 per tonne in the second quarter of 2026, compared to approximately US$107 per tonne in the second quarter of 2025. Higher iron ore prices and a more favorable product sales mix (higher proportion of pellets relative to CFS) were partially offset by lower pellet premiums and increased shipping costs. Iron Ore Company of Canada Operations Operations IOC concentrate production in the second quarter of 2026 totaled 3.1 million tonnes, down 31% from the second quarter of 2025 and 15% lower than the first quarter of 2026. This performance reflects a strategic operational reset to catch up on deferred waste removal, advance long-term pit health, and restore operational optionality. Concurrently, output continued to be constrained by reduced haul truck availability and increased cycle times. Total material moved in the second quarter of 2026 fell 15% year-over-year reflecting the baseline effect of external contractors utilized in the second quarter of 2025 but increased 13% compared to the first quarter of 2026. While waste movement was down 5% year-over-year, it rebounded 56% quarter-over-quarter as operations advanced necessary waste removal to support future ore release. Conversely, crude ore moved was down 20% year-over-year and 10% from the previous quarter. Weight yield in the second quarter of 2026 remained comparable to that of prior quarters, though recovery continued to reflect the processing of marginal ore and mine sequencing adjustments. IOC saleable production (CFS plus pellets) was 2.9 million tonnes in the second quarter of 2026, 31% lower than the same quarter of 2025 and 15% lower than the first quarter of 2026, mainly due to the lower concentrate production referred to above. Pellet production of 2.2 million tonnes was 3% lower than the corresponding quarter in 2025 and 26% higher than the first quarter of 2026. While pellet production continued to be negatively impacted by lack of feed, there were improvements in induration machine availability in the second quarter relative to the prior quarter. CFS production of 0.8 million tonnes was 63% lower than the same quarter of 2025 and 56% lower than the first quarter of 2026 mainly due to the decrease in concentrate production. Sales as Reported for the LIORC Royalty Total iron ore sales tonnage (CFS plus pellets) by IOC was 3.1 million tonnes in the second quarter of 2026, 33% lower than in the same quarter of 2025 and 6% lower than in the first quarter of 2026. Sales tonnages were affected by inventory availability and the ore dumper replacement project, which reduced train unloading capacity into the port. Pellet sales tonnages decreased 19% compared to the same quarter of 2025 and were 5% lower than the first quarter of 2026. CFS sales tonnages were 49% lower than the same quarter of 2025 and 7% lower than the first quarter of 2026. Outlook In its second quarter production report, Rio Tinto indicated that its original 2026 guidance for IOC's sales (CFS plus pellets) of 15 million to 18 million tonnes remains subject to the impact of recent forest fires in Canada. Fortunately, the forest fire situation referenced was quickly resolved; however, despite the fact that Rio Tinto has not commented further on its guidance, based on the results of the first half, LIORC believes that 2026 sales will more likely be at or below the low end of the original guidance. This compares to sales of 15.7 million tonnes in 2025. Operationally, IOC remains committed to the strategic reset outlined above. This multi-year initiative aims to improve pit health and access new ore bodies required to restore operational efficiency and flexibility. Concurrently, IOC is focused on driving profitability through cost discipline, process enhancements, and greater asset reliability. LIORC anticipates these efforts will take several years, during which concentrate production will remain constrained, limiting free cash flow available for IOC dividends to LIORC. Since the end of the second quarter, iron ore prices have softened, while pellet premiums continue to find support. In July 2026, the 65% Fe index averaged US$115 per tonne, while the July BF pellet premium and DR pellet premium were US$31 per tonne and US$50 per tonne, respectively. Iron ore prices are projected to remain well supported around current levels during the second half of 2026, as an elevated global cost curve, driven by higher freight, fuel, and operational expenses, establishes a firm price floor. While expanding seaborne supply from major global miners and new project ramp-ups are expected to keep overall market fundamentals balanced to modestly surplus, steady Chinese import demand and robust infrastructure-related steel consumption in India are expected to prevent significant downside. Furthermore, a widening structural preference for high-grade feeds (such as 65% Fe fines) continues to allow premium iron ore products to decouple and outperform standard 62% Fe fines benchmarks. Pellet premiums for both BF and DR grades are expected to strengthen through the second half of the year, supported by depleted port inventories across key Asian import hubs and a tight global balance of low-impurity, high-grade feed. This upward trajectory is further underpinned by integrated steelmakers expanding their pellet charge ratios to lower coking coal usage and satisfy stricter carbon-compliance mandates. Consequently, high-grade DR pellets are projected to maintain robust structural price differentials over standard iron ore fines as new green steel and DRI/EAF capacity comes online in Europe and the Middle East. LIORC remains debt-free, and as of June 30, 2026, had positive net working capital (current assets less current liabilities) of $26 million, which included the second quarter net royalty payment received from IOC on July 25, 2026, and the LIORC dividend in the amount of $0.30 per share paid to shareholders on July 29, 2026. Respectfully submitted on behalf of the Directors of the Corporation, John F. Tuer Management's Discussion and Analysis The following discussion and analysis should be read in conjunction with the Management's Discussion and Analysis section of Labrador Iron Ore Royalty Corporation's ("LIORC" or the "Corporation") 2025 Annual Report, and the financial statements and notes contained therein and the June 30, 2026 interim condensed consolidated financial statements. Overview of the Business The Corporation's revenues are entirely dependent on the operations of 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 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. Financial Highlights
In the second quarter of 2026, LIORC's financial results continued to be impacted by lower CFS and pellet sales volumes, with total sales tonnages down 33% compared to the second quarter of 2025. Consequently, royalty revenue fell to $33.7 million from $46.2 million in the same period last year. Sales volumes were constrained by reduced saleable production at IOC, driven by the strategic operational reset—focused on catching up on deferred waste removal, advancing pit health, and restoring operational optionality—as well as haul truck availability and longer-than-planned cycle times. By product line, CFS sales tonnages decreased 49%, while pellet sales tonnages fell 19%. Net income and equity earnings from IOC decreased in the second quarter of 2026 compared to the second quarter of 2025, driven by lower profitability as fixed costs were spread over fewer tonnes produced. Equity (losses) earnings from IOC amounted to ($7.6) million or ($0.12) per share in the second quarter in 2026 compared to $2.3 million or $0.04 per share for the same period in 2025. Cash flow from operations in the second quarter of 2026 was $17.7 million, or $0.28 per share, consistent with the same period in 2025. LIORC received no IOC dividend in the second quarter of 2026 or in the second quarter of 2025. Operating Highlights
IOC sells CFS based on the 65% Fe index. In the second quarter of 2026, the 65% Fe index averaged US$122 per tonne, a 1% increase over the prior quarter and a 12% increase over the average of US$108 per tonne in the second quarter of 2025. Iron ore prices improved modestly in the second quarter of 2026, as robust infrastructure and manufacturing activity in emerging markets offset a 1.7% contraction in Chinese steel production. On the supply side, global markets remained well supplied as the top three seaborne producers (Rio Tinto, Vale, and BHP) increased combined sales by approximately 2% year-over-year. Despite this expansion in major miner shipments and flat overall global steel output, resilient non-China demand provided steady support for pricing throughout the quarter. Pellet premiums in the second quarter were supported by increased demand from global steelmakers seeking low-emission feedstocks to minimize direct carbon liabilities under the EU Carbon Border Adjustment Mechanism, now in effect. IOC sells BF and DR pellets based on a premium to the 65% Fe index. The BF pellet premium averaged US$31 per tonne in the second quarter of 2026, up from an average of US$28 in the prior quarter. The DR pellet premium was US$43, up from an average of US$42 per tonne in the prior quarter and down from an average of US$46 per tonne in the same quarter of 2025. Based on sales reported for the LIORC royalty, the overall average price realized by IOC for CFS and pellets (FOB Sept-Îles, net of freight charges) was approximately US$111 per tonne in the second quarter of 2026, compared to approximately US$107 per tonne in the second quarter of 2025. Higher iron ore prices and a more favorable product sales mix (higher proportion of pellets relative to CFS) were partially offset by lower pellet premiums and increased shipping costs. The following table sets out quarterly revenue, net income, cash flow and dividend data for 2026, 2025 and 2024. Due to seasonal weather patterns the first and fourth quarters generally have lower production and sales. Royalty revenues and equity earnings in IOC track iron ore spot prices, which can be very volatile. Dividends, included in cash flow, are declared and paid by IOC irregularly according to the availability of cash.
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 dividends. Standardized cash flow per share was $0.28 for the quarter (2025 - $0.28). The Corporation also reports "Adjusted cash flow" which is defined as cash flow from operating activities after adjustments for changes in amounts receivable, accounts payable and income taxes recoverable and 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 standardized cash flow from operating activities to adjusted cash flow.
Liquidity and Capital Resources The Corporation had $13.7 million in cash as at June 30, 2026 (December 31, 2025 - $14.6 million) with total current assets of $52.8 million (December 31, 2025 - $57.7 million). The Corporation had working capital of $26.3 million as at June 30, 2026 (December 31, 2025 - $26.4 million). The Corporation's operating cash flow was $17.7 million and the dividend paid during the quarter was $19.2 million, resulting in cash balances decreasing by $1.6 million during the second quarter of 2026. Cash balances consist of deposits in Canadian dollars with a Canadian chartered bank. Amounts receivable primarily consist of royalty payments from IOC. Royalty payments are received in U.S. dollars and converted 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 normally pays cash dividends from its free cash flow generated from IOC to the maximum extent possible, subject to the maintenance of appropriate levels of working capital. The Corporation has a $30 million revolving credit facility with a term ending September 18, 2027 with provision for annual one-year extensions. No amount is currently drawn under this facility (2025 – nil) leaving $30.0 million available to provide for any capital required by IOC or requirements of the Corporation. Disclosure Controls and Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate disclosure controls and procedures and internal control over financial reporting as defined in National Instrument 52-109-Certification of Disclosure in Issuers' Annual and Interim Filings. Internal control, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and due to its inherent limitations, may not prevent or detect all misrepresentations. There have been no changes in the Corporation's internal controls over financial reporting during the three-month period ended June 30, 2026, that have materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting. For the quarter ended June 30, 2026, the Chief Executive Officer and the Chief Financial Officer concluded that Labrador Iron Ore Royalty Corporation's disclosure controls and procedures, and internal control over financial reporting are designed to provide reasonable assurance regarding the reliability of information disclosed in its filings, including its interim financial statements prepared in accordance with IFRS. John F. Tuer Forward-Looking Statements Notice:
The complete consolidated financial statements for the second quarter ended June 30, 2026, including the notes thereto, are posted on http://www.sedarplus.ca and labradorironore.com. SOURCE Labrador Iron Ore Royalty Corporation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Company Codes: Toronto:LIF | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
