To the Holders of Common Shares of Labrador Iron Ore Royalty Corporation  

The Directors of Labrador Iron Ore Royalty Corporation present the third quarter report for the period ended September 30, 2025.

Financial Performance

In the third quarter of 2025, LIORC’s financial results were negatively affected by lower concentrate for sale sales tonnages and lower pellet premiums, offset by higher iron ore prices and increased pellet sales volumes. Royalty revenue for the third quarter of 2025 was $43.4 million representing a 5% increase over the third quarter of 2024 and a 6% decrease from the second quarter of 2025. Equity earnings from Iron Ore Company of Canada totaled $8.6 million in the third quarter of 2025 compared to $9.7 million in the third quarter of 2024 and $2.3 million in the second quarter of 2025. Net income per share for the third quarter of 2025 was $0.47 per share, which was an 11% decrease from the same period in 2024 and a 12% increase from the second quarter of 2025. The adjusted cash flow per share for the third quarter of 2025 was $0.38 per share, which was 44% lower than in the same period in 2024 and 5% lower than the second quarter of 2025. The significant decrease in adjusted cashflow per share primarily reflects that LIORC received no dividend from IOC in the third quarter of 2025, compared to a dividend from IOC of $20.3 million in the third quarter of 2024. While adjusted cash flow is not a measure recognized under IFRS Accounting Standards, the Directors believe it provides a useful analytical indicator of cash available for distribution to shareholders.

While iron ore prices saw some improvement during the third quarter of 2025, average prices for the first three quarters of 2025 remained lower compared to the first three quarters of 2024.  Global steel demand remained weak as a result of a more difficult global trading environment, and on-going concerns regarding China’s housing sector. According to the World Steel Association, global crude steel production was down 1% in the third quarter of 2025 compared to the third quarter of 2024, and down 1% for the first three quarters of 2025 relative to the same period in 2024.  Steel demand in China declined by 3% in the third quarter compared to the same period in 2024. On the supply side, iron ore production remained robust. Combined production from the world’s three largest seaborne producers (Rio Tinto, Vale and BHP) increased by 1% for the quarter ended September 30, 2025, compared to the same quarter of 2024, led by Vale’s 4% increase in production. For the three quarters ending September 30, 2025, total production from Rio Tinto, BHP and Vale rose 1% compared to the same period in 2024.

Pellet premiums continued to decline in the third quarter of 2025. Demand trends for pellets continued to diverge across markets. In the Blast Furnace segment, steel demand remained sluggish due to seasonal softness, and lower steel margins continued to prompt producers to substitute higher-quality pellets with less expensive lower-quality iron ore. In contrast, the Direct Reduction market in Middle East and North Africa showed stable consumption, supported by infrastructure and construction activity. In the U.S., import constraints under prevailing tariff policies contributed to higher domestic crude steel production. However, despite this, U.S. steel prices were lower and DR pellet imports have remained below typical levels during the third quarter.  On the supply side, Vale’s pellet shipments declined in the quarter following the idling of its Sao Luis plant in July. While this reduction was expected to tighten the market, increased production from Samarco and LKAB partially offset the shortfall.

IOC sells CFS based on the Platts index for 65% Fe, 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% less ore per equivalent volume than dry ore. In the third quarter of 2025, the 65% Fe index averaged US$117 per tonne, an 8% increase over the prior quarter and a 3% increase over the average of US$114 per tonne in the third quarter of 2024. However, longer term, the 65% Fe Index averaged US$114 per tonne over the first three quarters of 2025, or 9% lower than the average for the same period in 2024. The monthly Atlantic Blast Furnace 65% Fe pellet premium index as quoted by Platts, averaged US$27 per tonne in the third quarter of 2025, down 32% from an average of US$39 per tonne in the same quarter of 2024.

Based on sales as reported for the LIORC royalty, the overall average price realized by IOC for CFS and pellets, FOB Sept-Îles, net of freight charges, was approximately US$114 per tonne in the third quarter of 2025, compared to approximately US$109 per tonne in the third quarter of 2024. This increase was primarily due to the pricing changes referred to above, as well as an improved product mix (more pellets and less CFS).

Iron Ore Company of Canada Operations 

Operations

IOC concentrate production in the third quarter of 2025 totaled 4.4 million tonnes, 15% higher than the same quarter of 2024, (mainly reflecting the 11-day site-wide shutdown following forest fires in the third quarter of 2024) and 1% lower than the second quarter of 2025. Total mine material moved in the third quarter of 2025 increased 4% over the same quarter last year but was 7% lower than the prior quarter due to lower haul truck availability and higher cycle times. While concentrate production in the third quarter of 2025 continued to be negatively impacted by lower ground tonnes resulting from upstream ore availability and ore delivery system performance, these impacts were mostly offset by a higher weight yield.

IOC saleable production (CFS plus pellets) was 4.0 million tonnes in the third quarter of 2025, 11% higher than the same quarter of 2024 and 6% lower than the second quarter of 2025. Pellet production of 2.4 million tonnes was 11% higher than the corresponding quarter in 2024 (primarily due to the site-wide shutdown in the third quarter of 2024), and 8% higher than the second quarter of 2025, reflecting refractory repairs carried out on induration machines in the second quarter of 2024. CFS production of 1.6 million tonnes was 11% higher than the same quarter of 2024 mainly due to the higher concentrate output noted above.

Sales as Reported for the LIORC Royalty 

Total iron ore sales tonnage (CFS plus pellets) by IOC was 3.9 million tonnes in the third quarter of 2025, 3% lower than in the same quarter of 2024 and 16% lower than in the second quarter of 2025. The decrease in IOC sales tonnage was primarily due to inventory availability and vessel scheduling. Pellet sales tonnages increased 8% compared to the same quarter of 2024 and 11% lower than the second quarter of 2025. CFS sales tonnages were 13% lower than the same quarter of 2024 and 21% lower than the second quarter of 2025.

Outlook

In its second quarter production report, Rio Tinto disclosed that the 2025 guidance for IOC’s saleable production (CFS plus pellets) is expected to be at the low end of its original guidance of 16.5 million to 19.4 million tonnes. This compares to 16.1 million tonnes of saleable production in 2024 (which experienced the 11-day shutdown noted above), and 12.2 million tonnes produced in the first nine months of 2025. IOC has revised its outlook for capital expenditures in 2025. IOC is now forecasting that its 2025 capital expenditure will be US$288 million, down from the originally budgeted US$342 million. To date, IOC’s capital expenditures are on track with the updated forecast.

Operationally, Rio Tinto, the operator of IOC, has implemented several changes to leverage Rio Tinto’s mining expertise and strengthen IOC’s operations. In connection with these changes, IOC is also focussed on continuing to improve the pit health of its mining operations. This will require increased stripping in the coming years, which could impact the level of future IOC dividends to LIORC. On October 29, Rio Tinto announced a management restructuring that resulted in IOC, together with Simandou, falling under the leadership of Elias Scafidas, Managing Director – International Operations. This change reflects Rio Tinto’s commitment to simplify how they operate and further strengthen collaboration across its organization.

Since the end of the third quarter, iron ore prices have remained relatively stable, while pellet premiums have continued to decline.  In October 2025, the 65% Fe index averaged US$119 per tonne and the October pellet premium was US$25 per tonne. Longer term the outlook for iron ore prices remains challenging.  The World Steel Association has stated that, despite a considerable escalation of the global trade war and inherent uncertainties, it is cautiously optimistic that global steel demand will stabilize in 2025 (0% increase) and show moderate growth in 2026 (1.3% increase).  However, it acknowledged that these projections depend on, among other things, the long-awaited return of steel demand growth in Europe and the moderation of the decline in China’s steel demand as its housing market stabilizes. On the supply side, while Vale’s São Luís plant is expected to remain idled through fourth quarter, longer-term a surplus of seaborne iron ore is anticipated, most significantly due to increased Brazilian exports and the start-up of Simandou.

LIORC remains debt-free and as of September 30, 2025 had positive net working capital (current assets less current liabilities) of $27 million, which included the third quarter net royalty payment received from IOC on October 25, 2025 and the LIORC dividend in the amount of $0.40 per share paid to shareholders on October 29, 2025.

Respectfully submitted on behalf of the Directors of the Corporation,

John F. Tuer
President and Chief Executive Officer
November 5, 2025

Management’s Discussion and Analysis 

The following discussion and analysis should be read in conjunction with the Management’s Discussion and Analysis section of Labrador Iron Ore Royalty Corporation’s 2024 Annual Report, and the financial statements and notes contained therein and the September 30, 2025 interim condensed consolidated financial statements.

Overview of the Business

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% 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% – 20% 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.

Financial Highlights

⁽¹⁾ This is a non-IFRS financial measure and does not have a standard meaning under IFRS. 

     Please refer to Standardized Cash Flow and Adjusted Cash Flow section in the MD&A.

The higher revenue achieved in the third quarter of 2025 compared to the third quarter of 2024 was primarily driven by higher iron ore prices and an improved product mix (more pellets and less CFS), partly offset by lower sales tonnages and declining pellet premiums. This resulted in royalty revenue of $43.5 million for the quarter, compared to $41.5 million for the same period in 2024.  Total sales tonnages (CFS plus pellets) in the third quarter of 2025 were 3% lower, than the same quarter of 2024, mainly due to inventory availability and vessel scheduling. CFS sales tonnages declined 13%, while pellet sales tonnages increased 8%.

Net income and equity earnings from IOC were lower in the third quarter of 2025 as compared to the third quarter of 2024 reflecting reduced profitability at IOC. Equity earnings from IOC amounted to $8.6 million or $0.13 per share in the third quarter in 2025 compared to $9.7 million or $0.15 per share for the same period in 2024. Cash flow from operations in the third quarter of 2025 was $32.7 million, or $0.51 per share, compared to $43.0 million, or $0.67 per share, for the same period in 2024. LIORC received no IOC dividend in the third quarter of 2025 compared to $20.3 million, or $0.32 per share, for the same period in 2024.

Operating Highlights

⁽¹⁾ For calculating the royalty to LIORC.

⁽²⁾ Excludes third party ore sales.

⁽³⁾ Totals may not add up due to rounding.

⁽⁴⁾ The Platts index for 65% Fe, CFR China.

⁽⁵⁾ The Platts index for 62% Fe, CFR China.

⁽⁶⁾ The Platts Atlantic Blast Furnace 65% Fe pellet premium index.

IOC sells CFS based on the 65% Fe index.  In the third quarter of 2025, the 65% Fe index averaged US$117 per tonne, a 3% increase over the average of US$114 per tonne in the third quarter of 2024. Despite this modest improvement in iron ore prices in the quarter, global steel demand remained weak due to a challenging global trading environment, and on-going concerns regarding China’s housing sector. On the supply side, production remained robust, with combined iron ore production from the world’s three largest seaborne producers (Rio Tinto, Vale and BHP) rising by 1% in the quarter ended September 30, 2025, compared to the same quarter of 2024. The monthly pellet premium averaged US$27 per tonne in the third quarter of 2025, down 32% from an average of US$39 per tonne in the same quarter of 2024, as lower steel margins continued to prompt steel producers to substitute higher-quality pellets with less expensive lower-quality iron ore.

Based on sales as reported for the LIORC royalty, the overall average price realized by IOC for CFS and pellets, FOB Sept-Îles, net of freight charges was approximately US$114 per tonne in the third quarter of 2025 compared to approximately US$109 per tonne in the third quarter of 2024. This increase was primarily due to the pricing changes referred to above, as well as an improved product mix (more pellets and less CFS).

The following table sets out quarterly revenue, net income, cash flow and dividend data for 2025, 2024 and 2023. Due to seasonal weather patterns the first and fourth quarters generally have lower production and sales. Royalty revenues and equity earnings in IOC track iron ore spot prices, which can be very volatile. Dividends, included in cash flow, are declared and paid by IOC irregularly according to the availability of cash.

(1)    “Adjusted cash flow” (see below).

(2)    Includes $41.5 million IOC dividend.

(3)    Includes $20.3 million IOC dividend.

(4)    Includes $21.8 million IOC dividend.

(5)    Includes $19.9 million IOC dividend.

(6)    Includes $30.5 million IOC dividend.

Standardized Cash Flow and Adjusted Cash Flow

For the Corporation, standardized cash flow is the same as cash flow from operating activities as recorded in the Corporation’s cash flow statements as the Corporation does not incur capital expenditures or have any restrictions on dividends.  Standardized cash flow per share was $0.51 for the quarter (2024 – $0.67).

The Corporation also reports “Adjusted cash flow” which is defined as cash flow from operating activities after adjustments for changes in amounts receivable, accounts payable and income taxes recoverable and payable.  It is not a recognized measure under IFRS. The Directors believe that adjusted cash flow is a useful analytical measure as it better reflects cash available for dividends to shareholders.

The following reconciles standardized cash flow from operating activities to adjusted cash flow.

Liquidity and Capital Resources 

The Corporation had $18.3 million in cash as at September 30, 2025 (December 31, 2024 – $42.3 million) with total current assets of $61.7 million (December 31, 2024 – $95.1 million). The Corporation had working capital of $27.1 million as at September 30, 2025 (December 31, 2024 – $34.1 million). The Corporation’s operating cash flow was $32.7 million and the dividend paid during the quarter was $19.2 million, resulting in cash balances increasing by $13.5 million during the third quarter of 2025.

Cash balances consist of deposits in Canadian dollars with a Canadian chartered bank. Amounts receivable primarily consist of royalty payments from IOC. Royalty payments are received in U.S. dollars and converted to Canadian dollars on receipt, usually 25 days after the quarter end. The Corporation does not normally attempt to hedge this short-term foreign currency exposure.

Operating cash flow of the Corporation is sourced entirely from IOC through the Corporation’s 7% royalty, 10 cents commission per tonne and dividends from its 15.10% equity interest in IOC. The Corporation normally pays cash dividends from its free cash flow generated from IOC to the maximum extent possible, subject to the maintenance of appropriate levels of working capital.

The Corporation has a $30 million revolving credit facility with a term ending September 18, 2026 with provision for annual one-year extensions.  No amount is currently drawn under this facility (2024 – nil) leaving $30.0 million available to provide for any capital required by IOC or requirements of the Corporation.

Disclosure Controls and Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate disclosure controls and procedures and internal control over financial reporting as defined in National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings. Internal control, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and due to its inherent limitations, may not prevent or detect all misrepresentations.

There have been no changes in the Corporation’s internal controls over financial reporting during the three-month period ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting. For the quarter ended September 30, 2025, the Chief Executive Officer and the Chief Financial Officer concluded that Labrador Iron Ore Royalty Corporation’s disclosure controls and procedures, and internal control over financial reporting are designed to provide reasonable assurance regarding the reliability of information disclosed in its filings, including its interim financial statements prepared in accordance with IFRS.

John F. Tuer
President and Chief Executive Officer
Toronto, Ontario
November 5, 2025