Franco-Nevada

Labrador Iron Ore (Iron Ore)

Labrador

LOCATION: Newfoundland & Labrador, Canada
OPERATOR: Rio Tinto plc
ROYALTY: GORR 0.7% Iron Ore, IOC Equity 1.5%

Franco-Nevada holds 6.3M common shares (a 9.9% equity investment) in Labrador Iron Ore Royalty Corporation (“LIORC”). The position was acquired over a number of years for a total investment of C$93M, representing an average cost of C$14.72/share.

The investment in LIORC functions similar to a royalty given the flow through of revenue generated from LIORC’s underlying 7% gross overriding royalty interest (0.7% attributable), C$0.10 per tonne commission (C$0.01 per tonne attributable), and 15.1% equity interest (1.5% attributable) in Iron Ore Company of Canada’s (“IOC”) Carol Lake mine, operated by Rio Tinto plc (“Rio Tinto’). LIORC normally pays cash dividends from net income derived from IOC to the maximum extent possible, while maintaining appropriate levels of working capital. IOC produces high grade +65% Fe iron ore concentrate for sale and pellets with a reserve-only 24-year mine life and a large mineral resource supporting further extensions. IOC has nominal capacity of 23 Mtpa (combined concentrate and pellets) with 2020 attributable sales of 18.3 Mt and Rio Tinto has provided 2021 guidance of saleable production between 17.9 Mt and 20.4 Mt. IOC benefits from integrated infrastructure, including the mine, concentrator/pellet facilities, railway, and a port at Sept-Îles, Quebec.

IOC has a long history as a supplier of high quality, low impurity, premium iron ore and pellets which has typically received premium prices from the European steel making industry.

ASSET HIGHLIGHTS

  • Producer of high-quality pellets and fines
  • 24-year reserve life with large resource base to support extensions
  • Fully integrated from mine to port, operated by Rio Tinto
  • +50-year track record