Toronto, Ontario-based Labrador Iron Ore Royalty Corporation (LIORC) announced its operation and cash flow results for the first quarter ended March 31, 2018.
Royalty revenue for the first quarter of 2018 amounted to $33.8 million as compared to $42.8 million for the first quarter of 2017. Equity earnings from Iron Ore Company of Canada (IOC) amounted to $14.6 million in the first quarter of 2018 as compared to $22.2 million in the first quarter of 2017.
Net income was $30.3 million for the first quarter of 2018 compared to $42.9 million for the same period in 2017. Cash flow from operations for the first quarter was $20.3 million as compared to $28.2 million for the same period in 2017.
In a statement, the company said issues with the parallel ore delivery system, increased ore hardness, and a work stoppage, which commenced on March 27, 2018, adversely affected concentrate production in the first quarter. Consequently, total concentrate production in the first quarter of 2018 of 4.2 million tons was 13 percent lower than the first quarter of 2017 and was 15 percent lower than the fourth quarter of 2017. The first quarter of 2017 was a record for first quarter concentrate production.
The decreased concentrate production in the first quarter primarily affected production since pellet production was favored due to continued strong demand and premiums. Concentrate for sales (CFS) production in the first quarter of 2018 was 28 percent lower than in the first quarter of 2017 and 31 percent lower than the previous quarter. Pellet production in the first quarter of 2018 was 7 percent higher than in the first quarter of 2017; pellet production in the first quarter of 2018 was approximately the same as the previous quarter. The pellet plant operated well in the first quarter of 2018.
First quarter 2018 total iron ore tonnage sold by IOC (CFS plus pellets) of 3.9 million tons was 17 percent below the total sales tonnage in the first quarter of 2017 and 28 percent below the fourth quarter of 2017. In the first quarter of 2018, the pellet sales tonnage was 8 percent lower and CFS sales tonnage was 49 percent lower than the fourth quarter of 2017.
As for an outlook, LIORC said it is “clouded by the labor disruption at IOC,” which started on March 27, 2018, and at press time was not resolved.
“IOC had operational issues in the fourth quarter of 2017 and in the first quarter of 2018, but the benchmark prices for concentrate and pellet premiums were good and the demand for pellets remained strong,” the company said. “When operations resume at IOC, LIORC can expect strong royalty revenue and the possibility of IOC dividends, if these market conditions continue. The labor disruption will also affect the timing of capital investments, including the refurbishment of the No. 4 pellet line and the development of the Wabush 3 open pit.”