TORONTO, May 4, 2026 /CNW/ - To the Holders of Common Shares of Labrador Iron Ore Royalty Corporation
The Directors of Labrador Iron Ore Royalty Corporation ("LIORC" or the "Corporation") present the first quarter report for the period ended March 31, 2026.
Financial Performance
In the first quarter of 2026, LIORC's financial results continued to be negatively affected by low concentrate for sale ("CFS") and pellet sales volumes. Royalty revenue for the first quarter of 2026 was $35.4 million, comparable to the first quarter of 2025 and a 9% decrease from the fourth quarter of 2025. Equity (losses) earnings from Iron Ore Company of Canada ("IOC") totaled ($6.4) million in the first quarter of 2026 compared to $3.3 million in the first quarter of 2025 and $1.7 million in the fourth quarter of 2025. Net income per share for the first quarter of 2026 was $0.21 per share, which was a 36% decrease from the same period in 2025 and a 40% decrease from the fourth quarter of 2025. The adjusted cash flow per share for the first quarter of 2026 was $0.31 per share, consistent with the same period in 2025 and 9% lower than the fourth quarter of 2025. 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 saw modest improvement during the first quarter of 2026, despite lower global steel production and robust global seaborne iron ore sales. Global steel production fell as China pivoted from construction-grade output to high-value specialty products. This decline was worsened by high energy costs and new carbon regulations that squeezed production margins across Europe. According to the World Steel Association, global steel production was down 2% in the first quarter of 2026 compared to the first quarter of 2025, and steel production in China declined by 5% in the first quarter compared to the same period in 2025. On the supply side, iron ore production remained robust. Combined sales from the world's three largest seaborne producers (Rio Tinto, Vale, and BHP) increased by 2% for the quarter ended March 31, 2026, compared to the same quarter in the prior year.
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 first quarter of 2026, the 65% Fe index averaged US$121 per tonne, a 2% increase over the prior quarter and a 3% increase over the average of US$117 per tonne in the first 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 of 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$28 per tonne in the first quarter of 2026. The Platts DR pellet premium for 67.5% Fe pellet over 65% Fe index (the "DR pellet premium") was US$42, down from an average of US$45 per tonne in the same quarter of 2025.
Based on sales as 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$110 per tonne in the first quarter of 2026, comparable with the first quarter of 2025. The modest increase in iron ore pricing was offset by a modest change in the product mix sold (fewer pellets and more CFS).
Iron Ore Company of Canada Operations
Operations
IOC concentrate production in the first quarter of 2026 totaled 3.7 million tonnes, 14% lower than the same quarter of 2025, and 4% lower than the fourth quarter of 2025. Performance was primarily constrained by reduced haul truck availability mainly due to structural frame failures identified in the fourth quarter of 2025, longer than planned cycle times, and lower payloads. Total mine material moved in the first quarter of 2026 was 26% lower than the same quarter last year and 4% higher than the prior quarter, which was disproportionately impacted by the haul truck frame failures. The lower material movement was partially offset by a lower strip ratio, resulting in crude ore in the first quarter being 14% lower than the same quarter last year. The weight yield in the first quarter of 2026, while comparable to the same quarter last year, continues to be below expectation due to reduced spiral recovery linked to lower crude iron content caused by sequencing changes and the presence of marginal ore in the system.
IOC saleable production (CFS plus pellets) was 3.4 million tonnes in the first quarter of 2026, 13% lower than the same quarter of 2025 and 8% lower than the fourth quarter of 2025, mainly due to the lower concentrate production referred to above. Pellet production of 1.7 million tonnes was 26% lower than the corresponding quarter in 2025 and 28% lower than the fourth quarter of 2025, mainly due to availability of feed and machine--reliability issues, most notably drive failures on Machines 4 and 6. CFS production of 1.7 million tonnes was 7% higher than the same quarter of 2025 and 29% higher than the fourth quarter of 2025 mainly due to the decrease in pellet production.
Sales as Reported for the LIORC Royalty
Total iron ore sales tonnage (CFS plus pellets) by IOC was 3.3 million tonnes in the first quarter of 2026, 1% higher than in the same quarter of 2025 and 15% lower than in the fourth quarter of 2025. Sales tonnages were affected by inventory availability and vessel scheduling. Pellet sales tonnages decreased 2% compared to the same quarter of 2025 and 21% lower than the fourth quarter of 2025. CFS sales tonnages were 8% higher than the same quarter of 2025 and 4% lower than the fourth quarter of 2025.
Outlook
In its first quarter production report, Rio Tinto disclosed that there was no change to its original 2026 guidance for IOC's sales (CFS plus pellets) of 15 million to 18 million tonnes. However, based on the results of the first quarter, LIORC believes that 2026 sales will more likely be at the low end of this range. This compares to sales of 15.7 million tonnes in 2025.
Operationally, IOC continues to focus on improving the pit health of its mining operations. This will be a multi-year effort and will result in increased stripping in the coming years, which will negatively impact IOC's iron ore production levels and the amount of cashflow available for future IOC dividends to LIORC. As part of its 2026 capital budget, IOC is in the process of purchasing 6 new haul trucks to help facilitate the removal of increased waste material.
Since the end of the first quarter, iron ore prices and pellet premiums have remained resilient. In April 2026, the 65% Fe index averaged US$124 per tonne and the April BF pellet premium and DR pellet premium were US$32 per tonne and $43 per tonne, respectively. The World Steel Association expects global steel demand to bottom out in 2025--2026, followed by a modest 0.3% growth rate in 2026 and an improved 2.2% growth rate in 2027. This recovery is supported by stabilizing demand in China, vibrant growth in India, and a meaningful turnaround across all major developed economies. Excluding China, global demand is forecast to hit a 4.0% growth rate in 2027 as the industry transitions toward more pronounced acceleration. Despite this positive turnaround, the ongoing conflict in the Middle East is expected to cause a sharp regional drop in 2026 and poses a significant stress test to the overall outlook.
LIORC remains debt-free and as of March 31, 2026 had positive net working capital (current assets less current liabilities) of $27 million, which included the first quarter net royalty payment received from IOC on April 25, 2026 and the LIORC dividend in the amount of $0.30 per share paid to shareholders on April 29, 2026.
Respectfully submitted on behalf of the Directors of the Corporation,
John F. Tuer
President and Chief Executive Officer
May 4, 2026
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 March 31, 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.
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