Benzinga | Apr 30, 2021 05:01PM EDT

Scully Royalty Provides Update On Scully Mine

Scully Royalty Ltd. (the "Company") (NYSE:SRL) is pleased to announce that it has filed its annual report on form 20-F with the Securities and Exchange Commission, and also provides the following corporate updates:

UPDATE ON THE SCULLY MINE

The most valuable asset that the Company owns is its net revenues royalty interest in the Scully iron ore mine located in the Province of Newfoundland and Labrador, Canada. The royalty rate under this interest is 7.0% on iron ore shipped from the mine and 4.2% on iron ore shipped from tailings and other disposed materials, with a minimum payment of C$3.25 million per annum.

In 2017, a new operator acquired the Scully mine and has disclosed that it has since achieved a number of milestones, including completing a US$276 million financing and commencing operations at the mine in 2019. The Scully mine has a capacity of 6 million tonnes per annum and produces a premium iron ore product, with Fe content in excess of 65%.

Iron ore is primarily used to make steel, which is considered to be a critical commodity for global economic development. As such, the demand and consequently the pricing of iron ore are largely dependent upon the raw material requirements of integrated steel producers. Demand for blast furnace steel is in turn cyclical in nature and is influenced by, among other things, the level of global economic activity.

The operator of the mine has disclosed the Scully iron ore mine produces a high-grade ore in excess of 65% iron content that also has other favorable characteristics, such as relatively low contaminant ratios. Globally, steelmakers value high grade iron ore with low contaminants (such as silica, alumina, and phosphorus) because they improve environmental and financial performance through more efficient raw material utilization, higher plant yields, and lower emissions. Therefore, it is common and generally expected for 65% Fe iron ore, including the Scully iron ore mine's product, to sell at a premium to 62% Fe iron ore. In 2020, the Platts 65% Fe index price was at an approximately 12% (US$13) premium to the Platts 62% Fe Index price.





The Scully Iron Ore Mine

We are encouraged by the development of iron ore pricing and the production ramp up of the mine to date. The following is a three-year price chart of 62% iron ore.





The following table sets forth total iron ore products shipped (which include pellets, chips and concentrates by the Scully mine operator in 2019 and 2020:

H1 H2 Full Year

(in thousands of tonnes)

2019- 954,579 954,579

20201,459,1621,539,4922,998,654