Labrador Iron Ore Royalty Income Fund - Results for the third quarter ended Sept

Royalty income for the third quarter of 2007 amounted to $19.61 millionas compared to $19.86 million for the third quarter of 2006, a decrease of 1%from the same period last year. Royalties received in U.S. dollars were 15%higher than in the 2006 period due to the 5.8% and 10.4% price increases forpellets and concentrates, respectively, and slightly higher sales volume. Therise in the value of the Canadian dollar against its U.S. counterpartnegatively affected revenues and earnings and offset the price increases forpellets and for concentrates. It is customary that the weakness of the U.S.dollar will be a factor in settling prices for 2008. Equity earnings from IOCin the third quarter amounted to $10.71 million ($0.33 per unit) as comparedto $9.10 million ($0.28 per unit) in 2006. Revenue for the nine months was$48.90 million ($1.53 per unit) compared to $53.77 million ($1.68 per unit)for the first nine months of last year. IOC is making every effort to maximizeproduction for the remainder of the year and several new production recordsfor pellets have been achieved since the strike which occurred earlier in theyear. Sales for the period continued to be restricted by the availability ofproduct.

The Fund's cash flow from operating activities adjusted for changes inamounts receivable, accounts payable and income taxes payable/recoverable(adjusted cash flow) for the third quarter was $30.76 million or $0.96 perunit as compared to $20.58 million or $0.64 per unit for the same period in2006. Net income was $22.98 million or $0.72 per unit compared to$20.31 million or $0.63 per unit for the same period in 2006. The increase innet income was the result of increased earnings from IOC and a reduction inincome taxes.

On August 30, 2007, IOC declared a dividend payable in two installmentson September 30, 2007 and November 30, 2007. The Fund's share of the dividendwas US$18.88 million equating to CDN$18.84 million or $0.59 per unit.

Results for the three months and nine months ended September 30 aresummarized below:

                                   3 Months   3 Months   9 Months   9 Months                                      Ended      Ended      Ended      Ended                                   Sept. 30   Sept. 30   Sept. 30   Sept. 30                                       2007       2006       2007       2006                                    -----------------------------------------                                                   (Unaudited)                                                   -----------    Revenue (in millions)            $20.07     $20.25     $48.90     $53.77                                    --------   --------   --------   --------    Adjusted cash flow     (in millions)                   $30.76     $20.58     $48.92     $55.27                                    --------   --------   --------   --------    Adjusted cash flow per unit      $ 0.96     $ 0.64     $ 1.53     $ 1.73                                    --------   --------   --------   --------    Net income (in millions)         $22.98     $20.31     $48.87     $65.68                                    --------   --------   --------   --------    Net income per unit              $ 0.72     $ 0.63     $ 1.53     $ 2.05                                    --------   --------   --------   --------    

A summary of IOC's sales in millions of tonnes is as follows:

                                              9 Months   9 Months       Year                                                 Ended      Ended      Ended                                              Sept. 30,  Sept. 30,   Dec. 31,                                                  2007       2006       2006                                               --------   --------   --------    Pellets                                       7.84       8.63      12.94    Concentrates                                  1.55       1.52       2.91                                               --------   --------   --------    Total                                         9.39      10.15      15.85                                               --------   --------   --------    

Respectfully submitted on behalf of the Trustees of Labrador Iron OreRoyalty Income Fund,

    Bruce C. Bone    Chairman and Chief Executive Officer    October 30, 2007    Management's Discussion and Analysis

The Fund's revenues are entirely dependent on the operations of Iron OreCompany of Canada (IOC) as its principal assets relate to the operations ofIOC and its principal source of revenue is the 7% royalty it receives on allsales of iron ore products by IOC. In addition to the volume of iron ore sold,the Fund's royalty revenue is affected by the price of iron ore, which isusually set in US dollar terms, and thus the Canadian - U.S. dollar exchangerate.

The sales of IOC are usually 15% - 20% of the annual volume in the firstquarter, with the balance spread fairly evenly throughout the other threequarters. Because of the size of individual shipments some quarters may beaffected by the timing of the loading of ships that can be delayed from onequarter to the next.

Royalty income for the third quarter of 2007 amounted to $19.61 millionas compared to $19.86 million for the third quarter of 2006, a decrease of 1%from the same period last year. Royalties received in U.S. dollars were 15%higher than in the 2006 period due to the 5.8% and 10.4% price increases forpellets and concentrates, respectively, and slightly higher sales volume. Therise in the value of the Canadian dollar against its U.S. counterpartnegatively affected earnings and offset the price increases for pellets andfor concentrates. As is customary, the weakness of the U.S. dollar will be afactor in settling prices for 2008. Equity earnings from IOC in the thirdquarter amounted to $10.71 million ($0.33 per unit) as compared to$9.10 million ($0.28 per unit) in 2006. Revenue for the nine months was$48.90 million ($1.53 per unit) compared to $53.77 million ($1.68 per unit)for the first nine months of last year. IOC is making every effort to maximizeproduction for the remainder of the year and several new production recordsfor pellets have been achieved since the strike which occurred earlier in theyear. Sales for the period continued to be restricted by the availability ofproduct.

Bill C-52 will impose a tax on certain distributions from specifiedpublicly traded income flow-through trusts beginning in 2011. Other than the0.5% corporate tax rate reduction effective in 2011, these measures have noimpact on the Trust's future income tax liability as all timing differenceshad already been recorded.

On July 6, 2007, the Canadian Securities Administrators (CSA) publishedrevised National Policy Statement 41-201 for Income Trusts, recommending thatall income trusts report distributable cash flow on a standardized basis. Forthe Fund this newly defined standardized cash flow is the same as cash flowfrom operating activities as recorded in the Fund's cash flow statements asthe fund does not incur capital expenditures or have any restrictions ondistributions. Standardized cash flow per unit was $0.66 for the third quarterand $1.43 for the first nine months of 2007 compared to $0.39 per unit and$1.22 per unit for the comparable periods in 2006. Cumulative standardizedcash flow from inception of the trust is $15.75 per unit and total cashdistributions since inception are $15.58 per unit, for a payout ratio of 99%.The Fund's cash flow from operating activities adjusted for changes in amountsreceivable, accounts payable and income taxes payable/recoverable (adjustedcash flow) for the third quarter was $30.76 million or $0.96 per unit ascompared to $20.58 million or $0.64 per unit for the same period in 2006. OnAugust 30, 2007 IOC declared a dividend payable in two installments onSeptember 30, 2007 and November 30, 2007. The Fund's share of the dividend wasUS$18.88 million equating to CDN$18.84 million or $0.59 per unit. Net incomewas $22.98 million or $0.72 per unit compared to $20.31 million or $0.63 perunit for the same period in 2006. The increase in net income was the result ofincreased earnings from IOC and a reduction in income taxes.

The following table sets out quarterly revenue, net income and cash flowdata for 2007, 2006 and 2005.

                                                            Adjusted Distrib-                                             Net   Adjusted   Cash    utions                                    Net    Income    Cash   Flow per Declared                         Revenue  Income  per Unit  Flow(1)  Unit(1) per Unit                        -------- -------- -------- -------- -------- --------                                (million except per Unit information)    2007    ----    First Quarter       $  13.1  $  10.7  $  0.34  $   8.7  $  0.27  $  0.35    Second Quarter      $  15.7  $  15.2  $  0.47  $   9.5  $  0.30  $  0.35    Third Quarter       $  20.1  $  23.0  $  0.72  $30.8(2) $  0.96  $  0.70    2006    ----    First Quarter       $  14.4  $  11.9  $  0.37  $   9.4  $  0.29  $  0.35    Second Quarter      $  19.2  $  33.5  $  1.05  $25.3(3) $  0.79  $  0.65    Third Quarter       $  20.2  $  20.3  $  0.63  $20.6(4) $  0.64  $  0.60    Fourth Quarter      $  29.4  $  28.7  $  0.90  $  17.6  $  0.56  $  0.55    2005    ----    First Quarter          14.9     15.5     0.48     10.0  $  0.31  $  0.25    Second Quarter         21.3     21.3     0.67     13.5  $  0.42  $  0.35    Third Quarter          17.2     17.9     0.56     11.0  $  0.34  $  0.35    Fourth Quarter         26.2     31.4     0.98   40.1(5) $  1.26  $  1.20    Notes: (1) "Adjusted cash flow" (see below)           (2) Includes a $18.8 million IOC dividend           (3) Includes a $12.5 million IOC dividend           (4) Includes a $8.5 million IOC dividend           (5) Includes a $24.1 million IOC dividend    

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"Adjusted cash flow" is defined as cash flow from operating activities asshown on the attached financial statements less changes in amounts receivable,accounts payable and income taxes payable/recoverable. It is not a recognizedmeasure under Canadian GAAP. The Trustees believe that adjusted cash flow is auseful analytical measure as it better reflects cash available fordistributions to Unitholders.

The following reconciles cash flow from operating activities to adjustedcash flow.

                             3 Months     3 Months     9 Months     9 Months                                Ended        Ended        Ended        Ended                             Sept. 30,    Sept. 30,    Sept. 30,    Sept. 30,                                 2007         2006         2007         2006                          ---------------------------------------------------    Cash flow from     operating activities $21,112,818  $12,502,172  $45,837,840  $38,926,689    Excluding: changes in     amounts receivable,     accounts payable     and income taxes     payable/recoverable    9,644,215    8,076,874    3,084,558   16,344,231                          ---------------------------------------------------    Adjusted cash flow    $30,757,033  $20,579,046  $48,922,398  $55,270,920                          ---------------------------------------------------    Adjusted cash flow     per unit             $      0.96  $      0.64  $      1.53  $      1.73                          ---------------------------------------------------    

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The Fund has a $50 million revolving credit facility reducing by$25 million in 2008 with the balance due in 2009. The amount drawn under thisfacility is currently $11.7 million ($11.7 million at September 30, 2007)leaving $38.3 million available to provide for any capital required by IOC orother Fund requirements.

Outlook

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Steel markets remain strong especially in Asia and IOC expects to be ableto sell all the concentrate and pellets it can produce. Prices for 2007increased by 5.8% for pellets and 10.4% for concentrates retroactive toJanuary 1 for most contracts and a new five year labour agreement is in place.The strike, which closed down production facilities for 7 weeks from March 9to April 27, 2007, will result in a loss of about 14% of annual productionwhich, based on last year's production, would amount to approximately2.3 million tonnes. Reduced sales due to this lost production occurred in thefirst half of the year and sales for the balance of the year will also beslightly lower than normal due to inventory replenishment. On August 1, 2007,IOC announced a $60 million program to increase total concentrate productionto 18.4 million tonnes by mid 2008 and to conduct a feasibility study toincrease concentrate production further to 21 million tonnes annually. Thiswill enable IOC to increase sales resulting in increased royalty revenue forthe Fund. Going forward, the future looks positive for IOC and thus for theFund. The continued strength of the Canadian dollar against its U.S.counterpart continues to be a negative but should be offset by increasedproduction and strong pricing.

    Bruce C. Bone    Chairman and Chief Executive Officer    Toronto, Ontario    October 30, 2007    <<    LABRADOR IRON ORE ROYALTY INCOME FUND    CONSOLIDATED BALANCE SHEETS    -------------------------------------------------------------------------                                                           As at                                               ------------------------------                                                September 30    December 31                                                    2007            2006                                               ------------------------------                                                 (Unaudited)    Assets    Current      Cash                                     $  11,597,830   $     141,937      Amounts receivable                          27,803,815      28,995,350      Income taxes recoverable                     2,522,995               -                                               --------------  --------------                                                  41,924,640      29,137,287    Deferred charges                                 249,976         343,729    Iron Ore Company of Canada ("IOC"),     royalty and commission interests            308,544,794     311,577,494    Investment in IOC                            169,744,547     169,050,037                                               --------------  --------------                                               $ 520,463,957   $ 510,108,547                                               --------------  --------------                                               --------------  --------------    Liabilities and Unitholders' Equity    Current      Accounts payable                         $   5,843,893   $   6,269,559      Income taxes payable                                 -       1,327,432      Distributions payable to unitholders        22,400,000      17,600,000                                               --------------  --------------                                                  28,243,893      25,196,991    Long-term debt                                11,741,141       6,123,088    Future income tax liability                  114,170,000     116,550,000                                               --------------  --------------                                                 154,155,034     147,870,079    Unitholders' equity      Trust units                                317,708,147     317,708,147      Undistributed income                        48,600,776      44,530,321                                               --------------  --------------                                               $ 520,463,957   $ 510,108,547                                               --------------  --------------                                               --------------  --------------    LABRADOR IRON ORE ROYALTY INCOME FUND    CONSOLIDATED STATEMENTS OF INCOME    -------------------------------------------------------------------------                                                     For the Three Months                                                      Ended September 30,                                                     2007            2006                                               ------------------------------                                                          (Unaudited)    Revenue      IOC royalties                            $  19,606,122   $  19,863,703      IOC commissions                                407,953         378,883      Interest and other income                       58,885           4,100                                               --------------  --------------                                                  20,072,960      20,246,686                                               --------------  --------------    Expenses      Newfoundland royalty taxes                   3,921,224       3,972,741      Amortization of royalty and commission       interests                                   1,336,146       1,265,823      Administrative expenses (note 2)             1,048,861         907,041      Interest expense                               344,706         246,097                                               --------------  --------------                                                   6,650,937       6,391,702                                               --------------  --------------    Income before equity earnings and     income taxes                                 13,422,023      13,854,984    Equity earnings in IOC                        10,717,796       9,104,823                                               --------------  --------------    Income before income taxes                    24,139,819      22,959,807                                               --------------  --------------    Provision for (recovery of) income     taxes (note 3)      Current                                      2,874,486       3,029,833      Future                                      (1,710,000)       (380,000)                                               --------------  --------------                                                   1,164,486       2,649,833                                               --------------  --------------    Net income for the period                     22,975,333      20,309,974    Undistributed income, beginning of period     48,025,443      32,281,300    Distributions to unitholders                 (22,400,000)    (19,200,000)                                               --------------  --------------    Undistributed income, end of period        $  48,600,776   $  33,391,274                                               --------------  --------------                                               --------------  --------------    Net income per unit                        $        0.72   $        0.63                                               --------------  --------------                                               --------------  --------------    LABRADOR IRON ORE ROYALTY INCOME FUND    CONSOLIDATED STATEMENTS OF INCOME    -------------------------------------------------------------------------                                                     For the Nine Months                                                      Ended September 30,                                                     2007            2006                                               ------------------------------                                                          (Unaudited)    Revenue      IOC royalties                            $  47,831,924   $  52,690,502      IOC commissions                                924,694         999,018      Interest and other income                      144,386          83,743                                               --------------  --------------                                                  48,901,004      53,773,263                                               --------------  --------------    Expenses      Newfoundland royalty taxes                   9,566,385      10,538,100      Amortization of royalty and commission       interests                                   3,032,700       3,305,204      Administrative expenses (note 2)             2,873,985       1,270,545      Interest expense                               857,280         721,916                                               --------------  --------------                                                  16,330,350      15,835,765                                               --------------  --------------    Income before equity earnings and     income taxes                                 32,570,654      37,937,498    Equity earnings in IOC                        19,536,609      23,575,256                                               --------------  --------------    Income before income taxes                    52,107,263      61,512,754                                               --------------  --------------    Provision for (recovery of) income     taxes (note 3)      Current                                      5,616,808       6,983,331      Future                                      (2,380,000)    (11,150,000)                                               --------------  --------------                                                   3,236,808      (4,166,669)                                               --------------  --------------    Net income for the period                     48,870,455      65,679,423    Undistributed income, beginning of period     44,530,321      18,911,851    Distributions to unitholders                 (44,800,000)    (51,200,000)                                               --------------  --------------    Undistributed income, end of period        $  48,600,776   $  33,391,274                                               --------------  --------------                                               --------------  --------------    Net income per unit                        $        1.53   $        2.05                                               --------------  --------------                                               --------------  --------------    LABRADOR IRON ORE ROYALTY INCOME FUND    CONSOLIDATED STATEMENTS OF CASH FLOWS    -------------------------------------------------------------------------                                                     For the Three Months                                                      Ended September 30,                                                     2007            2006                                               ------------------------------                                                          (Unaudited)    Net inflow (outflow) of cash related     to the following activities    Operating      Net income for the period                $  22,975,333   $  20,309,974      Items not affecting cash:        Equity earnings in IOC                   (10,717,796)     (9,104,823)        Future income taxes                       (1,710,000)       (380,000)        Amortization of royalty and         commission interests                      1,336,146       1,265,823        Amortization of deferred charges              31,251          31,251      Common share dividend received from IOC     18,842,099       8,456,821      Change in amounts receivable, accounts       and income taxes payable/recoverable       (9,644,215)     (8,076,874)                                               --------------  --------------      Cash flow from operating activities         21,112,818      12,502,172                                               --------------  --------------    Financing      Distributions paid to unitholders          (11,200,000)    (20,800,000)      Proceeds from long-term debt                 1,446,362       8,146,984                                               --------------  --------------                                                  (9,753,638)    (12,653,016)                                               --------------  --------------    Increase/(decrease) in cash and cash     equivalents during the period                11,359,180        (150,844)    Cash, beginning of period                        238,650         424,991                                               --------------  --------------    Cash and cash equivalents, end of period   $  11,597,830   $     274,147                                               --------------  --------------                                               --------------  --------------    Cash income taxes paid                     $   2,332,816   $   3,109,679                                               --------------  --------------                                               --------------  --------------    Cash interest paid                         $     281,409   $     127,334                                               --------------  --------------                                               --------------  --------------    LABRADOR IRON ORE ROYALTY INCOME FUND    CONSOLIDATED STATEMENTS OF CASH FLOWS    -------------------------------------------------------------------------                                                     For the Nine Months                                                      Ended September 30,                                                     2007            2006                                               ------------------------------                                                          (Unaudited)    Net inflow (outflow) of cash related     to the following activities    Operating      Net income for the period                $  48,870,455   $  65,679,423      Items not affecting cash:        Equity earnings in IOC                   (19,536,609)    (23,575,256)        Future income taxes                       (2,380,000)    (11,150,000)        Amortization of royalty and         commission interests                      3,032,700       3,305,204        Amortization of deferred charges              93,753          93,753      Common share dividend received from IOC     18,842,099      20,917,796      Change in amounts receivable, accounts       payable and income taxes       payable/recoverable                        (3,084,558)    (16,344,231)                                               --------------  --------------      Cash flow from operating activities         45,837,840      38,926,689                                               --------------  --------------    Financing      Distributions paid to unitholders          (40,000,000)    (70,400,000)      Proceeds from long-term debt                 5,618,053       8,146,984                                               --------------  --------------                                                 (34,381,947)    (62,253,016)                                               --------------  --------------    Increase/(decrease) in cash and cash     equivalents during the period                11,455,893     (23,326,327)    Cash and cash equivalents, beginning     of period                                       141,937      23,600,474                                               --------------  --------------    Cash and cash equivalents, end of period   $  11,597,830   $     274,147                                               --------------  --------------                                               --------------  --------------    Cash income taxes paid                     $   9,467,235   $  19,881,451                                               --------------  --------------                                               --------------  --------------    Cash interest paid                         $     681,767   $     535,526                                               --------------  --------------                                               --------------  --------------    Notes to Consolidated Financial Statements    1.  Basis of Presentation        The financial statements have not been reviewed in accordance with        section 7050 of the CICA Handbook, Auditor Review of the Interim        Financial Statements, by the Fund's Auditor.        Not all disclosures required by Canadian generally accepted        accounting principles for annual financial statements have been        presented and, accordingly, these interim financial statements should        be read in conjunction with the most recently prepared annual        financial statements for the year ended December 31, 2006.        These interim financial statements follow the same accounting        policies and method of application as the most recent annual        financial statements for the year ended December 31, 2006. On        January 1, 2007, the Fund adopted the Canadian Institute of Chartered        Accountants new accounting standards: Section 3855 "Financial        Instruments - Recognition and Measurement", Section 3861 "Financial        Instruments - Disclosure and Presentation" and Section 1530        "Comprehensive Income". Section 3855 establishes standards for        recognizing and measuring financial instruments. All financial        instruments are required to be measured at fair value on the initial        recognition with the exception of certain financial instruments that        do not have quoted market values in an active market. Financial        instruments that will be realized within the normal operating cycle        are measured at their carrying amount as this approximates fair        value. These standards have been applied prospectively without        restatement of prior periods. The adoption of these standards did not        have an impact on the Fund's financial statements. The Fund does not        have any other comprehensive income components and as such,        comprehensive income is equal to net income. Accordingly, a Statement        of Comprehensive Income is not presented.        Seasonality        The results of operations and operating cash flows of the Fund vary        considerably from quarter to quarter. The operations of the Fund are        dependent on the royalty and commission revenues from IOC, whose        production and revenues are not constant throughout the year, being        lower during the winter months when the St. Lawrence Seaway is        closed.    2.  Unit appreciation rights        In 2005, the Fund adopted a unit appreciation rights plan which        granted 50,000 units to each if its six trustees, all as more fully        described in the annual financial statements. Since the grant date,        193,000 unit appreciation rights have been exercised.        Compensation expense is not recognized when rights are issued, but is        accrued as an expense over the period that the rights vest. The unit        appreciation rights are marked to market each quarter to the extent        the units exceed $23.00. Compensation expense of $569,000 (2006 -        $521,000) for the three months and $1,304,000 (2006 - $319,000) for        the nine months ended September 30, 2007 have been accrued in        connection with the unit appreciation rights.        In September 2007, a Trustee exercised unit appreciation rights in        respect of 6,250 units at a market value of $39.67 resulting in a        total payment of $104,188 (2006 - Nil).    3.  Income taxes        In the second quarter of 2007, the Federal Government enacted        legislation which will result in a 0.5% reduction in the federal        corporate income tax rate in 2011.    >>

For further information

Bruce C. Bone, Chairman & Chief ExecutiveOfficer, (416) 863-7133