Markets

Analyst Actions: Labrador Iron Ore Royalty Corp. Estimates Lowered

Labrador Iron Ore Royalty Corp. (LIF.TO)

NEUTRAL

N. Littlewood

CP: C$ 32.17

TP: C$ 33

CAP: C$ 2b

1 416 352 4585

MarQ13 shipping weak for IOC, but production OK; Lowering 2013 Estimates

Rio Tinto has reported a fairly weak MarQ13 IOC sales/shipping figure of 2.59mt, as flagged in our recent trade data review (click here). Production (3.42mt) was much better however, implying a significant inventory build and some benefit from the recent CEP1 expansion project.

The reason for the weak sales/shipping figure is not evident from RIO's release, however we would guess it may be weather related. Independently of IOC, RIO reports that its 290mtpa Pilbara expansion is on track for SepQ13.

LIF.TO will report its MarQ13 results in early May, at which time we will receive the full accounts allowing us to estimate realised pricing and cash costs. Realised pricing is our main concern. The semi-lagged nature of IOC's contracts is unlikely to see the full benefit of the quarter's 62% IODEX strength reflected in LIF/IOC's MarQ13 realised pricing. IOC's sales figures show the usual seasonal swing towards pellet too (MarQ pellet/concentrate sales of 1.65mt/0.94mt), and all of the indicators we look at for pellet premiums suggest that they have reduced significantly since DecQ12. We suspect that consensus realised pricing estimates may be disappointed.

No change to our C$33/sh target price nor NEUTRAL rating. We however reduce our MarQ13 EPS from C$0.54/sh to C$0.36/sh in light of RIO's sales and production results. Our full year 2013 EPS estimates also reduces to C$2.04 from C$2.22.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright (C) 2016 MTNewswires.com. All rights reserved. Unauthorized reproduction is strictly prohibited.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Commodities