Mr. John Tuer reports

LABRADOR IRON ORE ROYALTY CORPORATION - RESULTS FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2023

Labrador Iron Ore Royalty Corp. has released its operation and cash flow results for the third quarter ended Sept. 30, 2023.

"To the holders of common shares of Labrador Iron:

"The directors of Labrador Iron present the third quarter report for the period ended Sept. 30, 2023.

"Financial performance

"In the third quarter of 2023, Labrador Iron's financial results were negatively affected by lower pellet prices and lower sales volumes of pellets and concentrate for sale. Royalty revenue for the third quarter of 2023 amounted to $47.0-million compared with $63.5-million for the third quarter of 2022. Equity earnings from Iron Ore Company of Canada were $23.1-million in the third quarter of 2023 compared with $46.8-million in the third quarter of 2022 as a result of lower revenue and higher unit operating costs at Iron Ore Company of Canada. Net income per share for the third quarter of 2023 was 77 cents per share, which was a 38-per-cent decrease over the same period in 2022. Labrador Iron received a dividend from IOC in the amount of $30.6-million in the third quarter of 2023, compared with a dividend from IOC in the amount of $34.2-million in the third quarter of 2022. The adjusted cash flow per share for the third quarter of 2023 was 89 cents per share, which was 18 per cent lower than in the same period in 2022, as a result of lower royalty revenues. While adjusted cash flow is not a recognized measure under international financial reporting standards, the directors believe that it is a useful analytical measure as it better reflects cash available for dividends to shareholders.

"In the third quarter of 2023, iron ore prices for concentrate and fines were generally consistent with the prior quarter and higher than the levels experienced in the third quarter of 2022, predominantly as a result of marginally higher global steel production and increasing expectations that government stimulus will lessen concerns over China's economy and its property sector. According to the World Steel Association, global crude steel production increased 2.4 per cent in the third quarter of 2023 over the third quarter of 2022. In China, which accounts for over 70 per cent of all seaborne iron ore demand, crude steel production increased 2.9 per cent in the third quarter of 2023 over the third quarter of 2022. Over all, in the first nine months of 2023, global crude steel production has been flat compared with the first nine months of 2022. Conversely, pellet prices, while consistent with the prior quarter, were substantially lower than the levels experienced in the second quarter of 2022, as global economic pressures on European steel producers continued to negatively impact the demand for iron ore pellets.

"IOC sells CFS based on the Platts index for 65-per-cent-iron CFR China. 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-per-cent-less ore per equivalent volume than dry ore. In the third quarter of 2023, the 65-per-cent-iron index averaged $125 (U.S.) per tonne, an 8-per-cent increase over the average of $115 (U.S.) per tonne in the third quarter of 2022 and a 1-per-cent increase over the average of $124 (U.S.) in the second quarter of 2023. However, low steel production margins in China caused steel mills to continue to prefer medium-grade fines over high-grade fines. As a result, the spread of the 65-per-cent-iron index over the Platts index for 62-per-cent-iron CFR China narrowed further in the third quarter of 2023 to $11 per tonne from $12 per tonne in the third quarter of 2022. The monthly Atlantic blast furnace 65-per-cent-iron pellet premium index as quoted by Platts averaged $49 (U.S.) per tonne in the third quarter of 2023, down 39 per cent from an average of $80 (U.S.) per tonne in the same quarter of 2022.

"The overall average price realized by IOC for CFS and pellets, FOB Sept-Iles, was approximately $127 (U.S.) per tonne in the third quarter of 2023, compared with approximately $146 (U.S.) per tonne in the third quarter of 2022 and $125 (U.S.) per tonne in the second quarter of 2023. The decrease in the average realized price FOB Sept-Iles in 2023 was a result of lower pellet prices and to a lesser extent a change in product mix, as pellets represented 46 per cent of sales in the third quarter of 2023, compared with 52 per cent of sales in the same quarter of 2022 and the second quarter of 2023.

"Iron Ore Company of Canada operations

"Operations

"IOC concentrate production of 4.3 million tonnes in the third quarter of 2023 was 13 per cent lower than the same quarter of 2022, mainly due to: (i) an unexpected equipment failure with the thickener rake drive, which is used in the dewatering process in the concentrator; and (ii) conveyor belt failures on the overland delivery system between the mine and the concentrator. Concentrate production in the quarter was 11 per cent higher than in the second quarter of 2023 as the second quarter was negatively impacted by the forest fires affecting the rail line.

"The IOC saleable production (CFS plus pellets) of 4.1 million tonnes in the third quarter of 2023 was 14 per cent lower than the same period in 2022 as operations were impacted by extended plant downtime resulting from the equipment and conveyor belt failures, referred to above. The IOC saleable production in the third quarter of 2023 was 16 per cent higher than the second quarter of 2023 as a result of the wildfires in the second quarter.

"Pellet production in the third quarter of 2023 of 2.1 million tonnes was 19 per cent lower than the corresponding quarter in 2022 and 32 per cent higher than the second quarter of 2023. Pellet production in the third quarter of 2023 was negatively impacted by an increase in the machine 3 rebuild duration and plant reliability issues. In the third quarter of 2023, CFS production of 1.9 million tonnes was 8 per cent lower than the same quarter last year and consistent with the second quarter of 2023, due to the reduction of concentrate production for the reasons referred to above.

"Sales

"Total iron ore sales tonnage by IOC (CFS plus pellets) of 3.9 million tonnes in the third quarter of 2023 was 14 per cent lower than the total sales tonnage for the same period in 2022 and 11 per cent lower than the second quarter of 2023, mainly due to inventory availability and shipment timing. Pellet sales tonnage in the third quarter of 2023 was 22 per cent lower than the same period in 2022 and 21 per cent lower than the second quarter of 2023. CFS sales tonnage was 5 per cent lower than the same quarter last year and consistent with the second quarter of 2023.

"Outlook

"Given the third quarter production performance, Rio Tinto's full-year 2023 guidance for IOC's saleable production (CFS plus pellets) has been lowered to 15.8 million to 16.7 million tonnes (previous guidance was 17.0 million to 18.7 million tonnes). This revised guidance compares with 17.6 million tonnes of saleable production in 2022 and 16.6 million tonnes of saleable production in 2021.

"Inflation and the resulting monetary tightening around the world have slowed global investment and consumption. This in turn has put pressure on steel demand and production. Additionally, China's property sector, and the potential effects from the financial difficulties that major real estate developers are experiencing, continues to create significant concerns for China's economy. That being said, the World Steel Association is forecasting that China's property market will stabilize in the latter part of the year and that China's steel demand will record slight positive growth as a result of government measures. Globally, it is forecasting that steel demand will grow by 1.8 per cent in 2023 and 1.9 per cent in 2024 (after falling 3.3 per cent in 2022).

"In the near term, despite the global economic challenges, iron ore prices have so far remained relatively consistent. In October, 2023, the average price of the 65-per-cent-iron index was $128 (U.S.) per tonne, roughly equivalent to the average of the 65-per-cent-iron index for the second and third quarter of 2023. However, the pellet premiums have come under further pressure as steel producers in Europe (significant consumers of pellets) continue to face pressure. The pellet premium for October was $38 (U.S.) per tonne compared with the average of $49 (U.S.) per tonne in the third quarter of 2023.

"Longer term, IOC remains well positioned to benefit from the movement to produce low-emission green steel. The production of steel, a key material for infrastructure and net-zero energy transition, currently contributes around 7 to 9 per cent of global carbon emissions. IOC's high-quality products, including direct reduction pellets, are part of the solution to reducing greenhouse gas emissions in the steelmaking process, as demonstrated by IOC's recent multiyear agreement to supply high-grade direct reduction pellets to H2 Green Steel. H2GS will process IOC's direct reduction pellets into low-carbon hot briquetted iron and then make steel through electric arc furnaces using green hydrogen at its flagship plant in Boden, Sweden. The Boden facility, which will hold one of the world's largest electrolysis plants for the production of green hydrogen, will be one of the world's first large-scale producers of low-carbon iron and steel. By using green hydrogen in electric arc furnaces instead of coal in traditional steelmaking with a blast furnace, carbon emissions can be reduced by up to 95 per cent.

"Labrador Iron has no debt and at Sept. 30, 2023, had positive net working capital (current assets less current liabilities) of $25.8-million, which included the third quarter net royalty payment received from IOC on Oct. 25, 2023, and the Labrador Iron dividend in the amount of 95 cents per share paid to shareholders on the next day.

"Respectfully submitted on behalf of the directors of the corporation,

"John F. Tuer,

"President and chief executive officer,

"Nov. 2, 2023"

About Labrador Iron Ore Royalty Corp.

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-per-cent 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 per cent to 20 per cent 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.

We seek Safe Harbor.