LABRADOR IRON ORE ROYALTY CORPORATION - 2025 RESULTS OF OPERATIONS

Executive Summary

• Labrador Iron Ore Royalty Corporation (LIORC) reported a significant decline in financial performance for the year ended December 31, 2025, driven by lower iron ore prices, reduced pellet premiums, and operational challenges at its primary asset, the Iron Ore Company of Canada (IOC).
• Net income per share dropped 42% to $1.57, while revenue fell 20% to $166.5 million. The decrease was primarily attributed to a 74% drop in equity earnings from IOC and lower royalty revenues due to decreased sales volumes and pricing.
• IOC faced operational headwinds in 2025, including pit health issues and equipment reliability failures, which constrained concentrate production and led to a 22% drop in Q4 concentrate production. IOC did not pay a dividend in 2025, impacting LIORC's cash flow.

Key Details

• Financial Performance (2025 vs 2024):
  • Revenue: $166.5 million (down 20% from $209.0 million).
  • Net Income: $100.6 million (down 42% from $175.0 million).
  • Net Income Per Share: $1.57 (down 42% from $2.73).
  • Cash Flow from Operations: $97.1 million (down 52% from $201.9 million).
  • Cash Flow from Operations Per Share: $1.52 (down 52% from $3.15).
  • Adjusted Cash Flow: $91.5 million (down 54% from $199.0 million).
• IOC Operational Metrics:
  • Total Concentrate Production: 16.9 million tonnes (down 2% from 17.32 million tonnes).
  • Saleable Production: 15.9 million tonnes (down 1% from 16.09 million tonnes).
  • Concentrate for Sale (CFS) Production: 6.6 million tonnes (down 3%).
  • Pellet Production: 9.4 million tonnes (consistent with 2024).
  • Stripping Ratio: 1.13 (vs 1.00 in 2024).
  • Q4 Concentrate Production: 3.8 million tonnes (down 22% from Q4 2024).
  • Q4 Saleable Production: 3.7 million tonnes (down 14% from Q4 2024).
• Pricing and Market Conditions:
  • Average 65% Fe Index Price: US$115/tonne (down 7% from US$123).
  • Average Pellet Premium: US$30/tonne (down 24% from US$40).
  • Average Realized Price (FOB Sept-Îles): US$109/tonne (down 13% from US$125).
  • Global steel demand contracted by 2.0% in 2025; China steel production down 4.2%.
  • Seaborne iron ore shipments rose ~2%, with non-major producers up ~10%.
• Dividends and Cash Position:
  • LIORC Dividends Declared: $1.55 per share (down from $3.00 in 2024), totaling $99.2 million.
  • IOC Dividend: $0 in 2025 (vs $83.6 million in 2024) due to decreased earnings at IOC.
  • LIORC Cash Balance: $14.6 million (down from $42.3 million).
  • Working Capital: $26.4 million (down from $34.1 million).
• Capital Expenditures (IOC):
  • 2025 Actual: US$303 million (down 19% from US$376 million).
  • 2025 Forecast Variance: 11% lower than the US$342 million forecast, due to project timing and deferment of locomotive purchases.
  • 2026 Forecast: Approximately US$290 million (US$210M sustaining, US$53M growth/development, US$27M deferred stripping).
• 2026 Outlook:
  • IOC Saleable Production Guidance: 15.0 to 18.0 million tonnes.
  • IOC Mid-term Capacity Target: Reduced to ~20 million tonnes (from nominal 23 million tonnes) due to pit health and reliability challenges.
  • Rio Tinto restructuring: IOC integrated into Western Australian Iron Ore operations and Simandou project for better access to safety and technical expertise.
  • 2026 Steel Demand Forecast: Modest 1.3% rebound globally.
  • Early 2026 Pricing: 65% Fe index averaged US$119/tonne; Pellet premium averaged US$24/tonne.