Anglo Pacific Group (APF.L, APY.TO) has spent an additional C$9.8M on buying additional shares in Labrador Iron Ore Royalty Corp (LIF.TO), bringing its total investment into LIORC this year to approximately C$26.7M. Anglo continued to build its stake when the iron ore price collapsed and has now spent almost C$93M on acquiring the 5.88% position. Anglo remains convinced about the future of iron ore and decided to increase its investment in LIF.TO based on its own internal (and according to the company, conservative) estimates and expectations.
Rather than investing in iron ore mines, Anglo’s move into LIF makes sense as it receives a Gross Revenue Royalty on the iron ore production from the Labrador Iron mine (which means there is no direct exposure to shrinking operating margins as the royalty is based on the revenue per tonne) as well as dividends from its minority ownership of the mine. So the GRR will provide protection in tough iron ore markets while the dividend income will increase when the iron ore prices are strong.
Disclosure: The author has no position in either Anglo Pacific or Labrador Iron Ore Royalty.