(By Balaseshan) CIBC World Markets Inc. analyst Matthew Gibson downgraded rating of Labrador Iron Ore Royalty Corp. (TSE: LIF) to "Sector Performer" from "Sector Outperformer" while maintaining $40 price target.
Gibson said LIF has significantly outperformed its peers with total returns of 24% since January 2011. Iron ore peers have declined by 42% over the same time period. He still views the stock as a defensive way to play iron ore with a pro forma dividend implying a 6.54% yield.
IOC reported production of 2.5 million tonnes of pellets and 1.4 million tonnes of concentrates, below the analyst's expectations of 2.7 million tonnes and 1.5 million tonnes, respectively. The lower-than-expected results were most likely due to integration of the Phase 1 expansion and the onset of winter conditions.
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Sales volumes in the quarter came in below Gibson's expectations and could result in downside to Q4 earnings. Sales volumes in Q4 totaled 2.5 million tonnes of pellets and 1.3 million tonnes of concentrate versus his expectations of 2.7 million tonnes and 1.5 million tonnes, respectively.
The analyst believes that stability in iron ore prices will be more beneficial to iron ore developers. Given the recent increase in the share price, he downgraded the stock and maintained his price target.
LIF is trading down 3.14% at $33.29 on Wednesday.