Anglo Pacific Group PLC (LON:APF, TSX:APY) has acquired a 4.25% stake in Labrador Iron Ore Royalty Corp (TSX:LIF) (LIORC) for an investment cost of C$65.5mln.
The miner said LIORC, which holds a market cap of around C$1.5bn, is structured as a passive flow-through entity for a 7% gross revenue royalty (GRR) and a C$0.10 per tonne commission on all iron ore products sold by the Iron Ore Company of Canada (IOC).
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IOC, operated by FTSE 100 miner Rio Tinto (LON:RIO), is one of the largest producers of iron ore in Canada, and among the top five global producers of iron ore pellets, in addition to selling iron ore concentrate products.
Anglo Pacific said the investment would provide it with exposure to the “premium end of the iron ore concentrate and high margin pellet markets, on terms which are immediately accretive”, adding that LIORC has a historical 2017 dividend yield of around 11%.
Julian Treger, chief executive of Anglo Pacific, said that the company was expecting to receive between C$4.7mln-C$5.7mln of royalty-related revenue during the 2019 calendar year via LIORC dividends.
Treger also said that going forward, the company expected a drive by the Chinese government to reduce pollution from its steel industry to result in “sustained demand for high grade iron ore concentrates with low alumina and silica contents, and an increase in pellets usage within the typical Chinese blast furnace load mix”.