Labrador Iron Ore pays div­i­dends

Ru­mours of Lab West mine sale swirl amid im­prov­ing iron ore mar­ket con­di­tions

The Aurora (Labrador City) - - News - BY THOM BARKER

De­spite a nine-week work stop­page at the iron ore mine in Labrador West and rel­a­tively soft global iron ore prices, the Labrador Iron Ore Roy­alty Cor­po­ra­tion (IORC), which owns 15 per cent of the mine, re­cently an­nounced a strong div­i­dend to share­hold­ers.

“The Di­rec­tors of Labrador Iron Ore Roy­alty Cor­po­ra­tion (the “Cor­po­ra­tion”) de­clared Sept. 24 a reg­u­lar quar­terly cash div­i­dend of $0.25 per Com­mon Share,” a press re­lease dated Sept. 14 stated. “The Di­rec­tors also de­clared a spe­cial div­i­dend of $0.30 per Com­mon Share for to­tal div­i­dends of $0.55 per Com­mon Share.”

The news, both of a new fiveyear col­lec­tive agree­ment at the Labrador West mine and the div­i­dend pay­out, had in­vest­ment an­a­lysts spec­u­lat­ing it is a good time to get in on IORC stock.

“Those amounts com­bined saw Labrador Iron Ore pay in­vestors a to­tal quar­terly div­i­dend of $0.55, giv­ing it an im­pres­sive an­nu­al­ized yield of just over five per cent,” wrote Matt Smith on the in­vest­ment site The Mot­ley Fool. “This will grow sig­nif­i­cantly should the com­pany elect to pay an­other spe­cial div­i­dend for the fourth quar­ter 2018, which is highly likely if earn­ings ex­pand as ex­pected.”

San­dra Rosch, IORC ex­ec­u­tive vice pres­i­dent and di­rec­tor, told The Aurora the com­pany does not spec­u­late nor make pre­dic­tions about earn­ings.

“The price of iron ore is pretty volatile,” she said. “It all de­pends on what hap­pens in China.”

For much of the past two years, a po­ten­tial trade war be­tween China and the United States — com­bined with strong Chi­nese do­mes­tic iron ore pro­duc­tion —has fu­elled a big drop in and sig­nif­i­cant fluc­tu­a­tions in the price of iron ore.

Smith and many other an­a­lysts think this is go­ing to sta­bi­lize with China mak­ing a big ef­fort to curb air pol­lu­tion in part by re­strict­ing pro­duc­tion of steel.

“When com­bined with the move away from do­mes­ti­cal­lymined iron ore be­cause of the Chi­nese gov­ern­ment’s fo­cus on wind­ing down un­eco­nomic state-sup­ported en­ter­prises, this should drive an in­crease in de­mand from China,” he wrote. “Any in­crease in de­mand from China, es­pe­cially for higher qual­ity iron ore such as that pro­duced by the Iron Ore Com­pany of Canada (IOC), will help to boost prices.”

If that is true, it could ei­ther al­le­vi­ate or ex­ac­er­bate ru­mours that Rio Tinto, the ma­jor owner of IOC with 59 per cent, is try­ing to sell the Labrador West mine. In Au­gust, Reuters re­ported that bank­ing and in­dus­try sources said the com­pany is ex­plor­ing a pub­lic list­ing.

Ron Thomas, pres­i­dent of USW lo­cal 5795, which rep­re­sents the ma­jor­ity of IOC work­ers in Labrador West, said while he is watch­ing for any fur­ther de­vel­op­ments, he is not overly con­cerned about it one way or the other.

“At the end of the day for us, we’ve just come off a nine-week strike, so there’s talk of im­prov­ing the re­la­tion­ship,” he said. “Some­times the devil you know is bet­ter than the devil you don’t know, but then you look at the other side of it and maybe it is time for a change. At the end of day, I don’t re­ally know what to say on that, un­til it ac­tu­ally hap­pens.”

Since a com­mod­ity price crash in 2015, Rio Tinto has been divesting min­ing as­sets, mostly in the coal sec­tor, that it deems to be not part of its core busi­ness.

Most re­cently on Sept. 19, the com­pany an­nounced a $3.2 bil­lion USD share buy­back to stock­hold­ers from its sale of coal as­sets in Aus­tralia.

Reuters also re­ported in 2012 that Rio Tinto tried to sell the Labrador West mine, but could not get the $3.5 to $4 bil­lion it was look­ing for at the time.

The Aurora did not receive a re­sponse from Rio Tinto by press time, although the com­pany has con­sis­tently of­fered no com­ment on prospec­tive deals of this na­ture.

IRON ORE OF CANADA

Iron Ore Com­pany of Canada’s Labrador City mine.

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