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Labrador Iron ore shareholders call for IOC spinoff vote

Stockhouse Editorial
0 Comments| April 5, 2013

(The Canadian Press) TORONTO _ Labrador Iron Ore Royalty Corp. (TSX: T.LIF, Stock Forum) is being urged to allow investors to vote on selling the mining holding company's equity stake in Iron Ore Company of Canada.

Toronto-based hedge fund Waratah Investors called on the company Friday to add the non-binding vote to the agenda of its May 29 annual meeting despite having missed the deadline for shareholder proposals.

It says that the separation of Labrador's 15.1 per cent stake in IOC from its seven per cent royalty on IOC sales would boost the stock's value.

It claims IOC has been a ``chronic underperformer'' and that spinning off the equity stake would allow shareholders to choose whether they want to invest in a pure play royalty interest, equity in a miner, or both.

The effort was prompted by Rio Tinto Plc's (NYSE: RIO, Stock Forum) reported efforts to sell its majority stake in IOC.

Waratah says it has not received any response to its requests starting in February for the board of Labrador Iron to formally review available strategic alternatives.

Waratah says a shareholder vote is required because the board doesn't appear willing to take action.

It claims it has received many unsolicited calls in support of its efforts from significant shareholders.

British-based Rio Tinto owns a 58.7 per cent stake in IOC. Mitsubishi holds a 26.2 per cent stake and Labrador Iron Ore Royalty Corp. holds the remaining 15.1 per cent stake and receives a seven per cent gross royalty on all IOC iron ore sales.

Production at IOC has averaged 14.4 million tonnes over the past five years, well below the 18 million tonnes of capacity and potential capacity of 23.3 million tonnes.

Trading at $32.68 on Friday, Labrador Iron Ore has a market cap of $2.1 billion, based on 64 million shares outstanding. The 52-week range is $37.04 and $26.02.


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