UPDATE 1-Labrador Iron Ore hires advisers, may sell itself

Fri Apr 5, 2013 5:34pm EDT

April 5 (Reuters) - Labrador Iron Ore Royalty Corp said on Friday it has hired advisors to consider a possible sale or other strategic options following reports that Rio Tinto may sell its controlling stake in the Canadian company's only asset.

Labrador Iron Ore owns a 15.1 percent equity stake and a 7 percent royalty interest in the Iron Ore Company of Canada (IOC), Canada's largest iron ore producer.

Rio, which owns 59 percent of IOC, recently hired investment banks to sell its stake, two sources familiar with the matter told Reuters last month.

Labrador Iron Ore said its board is now mulling "all strategic alternatives," including selling the company, selling all or part of its assets, severing its royalty and equity interests in IOC, and maintaining the status quo.

According to its website, Labrador Iron Ore is "entirely dependent on IOC, as the only assets of LIORC and its subsidiary are related to IOC and its operations."

Waratah Advisors a shareholder in Labrador Iron Ore Royalty Corp had earlier this year called on the company to explore its strategic options in light of Rio Tinto's move.

In a statement earlier on Friday, Waratah urged the company to explore a separation of the equity stake and royalty asset.

"We reiterate that the royalty is a premium financial asset which is having its true value diminished by the IOC equity," said Waratah. "The Board should move to separate these two discrete assets, through a tax efficient spin-out of the IOC equity to LIORC's shareholders or otherwise."

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