Labrador Iron Mines (LIM.TO) announced devastating numbers for the 2012 operating season. As the company records revenues of $95.8M on 1.7Mtonnes sold, the average revenue per tonne of iron ore is only a little over $56, which very likely doesn’t even cover their cash costs.
This means Labrador still isn’t self-funding further expansion and exploration works, and will continuously need to tap the equity or debt markets. It is true that the current iron ore price is much better than in September/October, but there is no guarantee this bump in the iron ore prices will continue until Labrador restarts its production in April this year.
Labrador Iron Mines was a recommendation in the past, but it’ll be difficult for them to be profitable at an iron ore price below $125/tonne. As the current iron ore price is approximately $145/tonne, it would be a good idea for Labrador to hedge a part of the 2013 production at these price levels.
Disclosure: The author holds a long position in Labrador Iron Mines Holdings Ltd. but is waiting for an exit point. Please see our disclaimer for current positions.
