Pat McKeough responds to many personal questions on stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of the most intriguing questions of the past week go out to all Inner Circle members. And every Friday, we offer you one of the highlights from these Q&A sessions.
This week, an Inner Circle member asked Pat about one of Canada’s major mining stocks. Labrador Iron Ore Royalty has quietly built a position as a world leader in iron ore. Now it faces several challenges in today’s volatile commodity markets.
Q: Hello Pat: What is your opinion of Labrador Iron Ore Royalty Corp.? Would it be a buy now or in the future? Thanks.
A: Labrador Iron Ore Royalty Corp., (symbol LIF.UN on Toronto; www.labradorironore.com) holds a 7% gross overriding royalty (or 7% of the selling price for all iron ore produced, sold and shipped), and a 15.1% equity interest in Iron Ore Company of Canada (IOC). On top of that, Labrador Iron Ore gets a $0.10-per-tonne commission on all iron ore that IOC makes, sells and ships to steelmakers around the globe.
IOC, which has produced iron-ore concentrate and pellets since 1954, is Canada’s largest iron-ore producer, and is among the world’s top-five makers of iron-ore pellets. Rio Tinto (symbol RTP on New York) is IOC’s operator and majority shareholder, with 58.7% of its shares. Mitsubishi Corp. of Japan holds the remaining 26.2%.
IOC operates a mine, a concentrator (a machine that separates ore from waste rock) and a pellet plant at Labrador City, Newfoundland. The company also has year-round port facilities at Sept-Iles, Quebec. IOC has proven ore reserves for at least 30 years of production at current levels, along with the potential to add to its reserves through exploration and development drilling.
As a member of my Inner Circle, you will get individual answers to your personal investment questions. And you will see my answers to questions other investors like you are asking. In fact, you will get virtually all the investment advice I have to give. You will have access to all of our advisories – The Successful Investor, Wall Street Stock Forecaster, Stock Pickers Digest and Canadian Wealth Advisor – and full access to the members-only, password-protected Inner Circle section of The Successful Investor Network website.
Although my team carefully researches all the stocks that members ask about, I personally review each and every recommendation. To ensure this close personal attention, only a limited number of members can be admitted to our Inner Circle. Under the pressure of world events, even more investors are asking for my personal investment advice. We are nearing our membership limit already. Click here to secure your membership in the Inner Circle right away.
Mining stocks: Exporting to all the world’s major markets
IOC transports the iron-ore concentrate and pellets to its port facilities at Sept-Iles, using its wholly owned Quebec North Shore and Labrador Railway, a 418-kilometre rail line that links the company’s mine to the port. From there, the products are shipped to markets throughout North America, Europe and Asia.
This mining stock’s unitholders receive quarterly distributions of $0.25 a unit, which yield 3.1% on an annualized basis. Each payment consists of a $0.133 common share dividend and a $0.117 interest payment.
If you hold these units outside an RRSP, the dividend portion qualifies for the dividend tax credit, and the interest portion is taxed at the same rate as ordinary income.
You can see Pat’s recommendation on Labrador Iron Ore Royalty Corp. in this week’s Inner Circle Q&A. In his buy-hold-sell analysis, he looks at the long-term outlook for iron ore prices amid slower economic growth as well as the effect of the stronger Canadian dollar on the company’s prospects.
Inner Circle members see Pat’s analysis and recommendations on the stocks other members have asked about in each week’s Inner Circle Q&A. You can view it immediately when you become a member of this special investment group. You will get Pat McKeough’s answers to your personal investment questions, full access to our members-only Inner Circle website, and many other membership privileges. Click here to get started right away.
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