Record quarterly production of 2.9M wmt, adjusted EPS1 of
$0.06 and EBITDA1 of
$84.3 million; Bloom Lake
Phase II expansion ramping-up as scheduled, contributing
towards reducing operating costs metrics; Declares a dividend of
$0.10 per ordinary share
MONTRÉAL, Oct. 26,
2022 /CNW/ - Champion Iron Limited (TSX: CIA) (ASX:
CIA) (OTCQX: CIAFF) ("Champion" or the "Company") is pleased to
announce operational and financial results for the financial second
quarter ended September 30, 2022.
Conference Call Details
Champion will host a conference call and webcast on
October 27, 2022 at 8:30 AM
(Montréal time) / 11:30 PM (Sydney time) to discuss the results for the
second quarter ended September 30, 2022. Call details are
outlined at the end of this press release.
Champion's CEO, Mr. David
Cataford, said: "Our record production is attributable to
the hard work and dedication of our team as Phase II continues to
ramp-up as scheduled, despite the challenging environment. As a
result, our iron ore volumes sold in the quarter increased by
nearly 43% year on year. With Phase II on track to reach commercial
production by the end of the calendar year, the higher production
volumes are also contributing towards normalizing our operating
costs per tonne sold. In addition, our team is finalizing the
feasibility study evaluating the production of a Direct Reduction
("DR") pellet feed product, which will be the foundation towards
our potential transition to higher value products in the green
steel supply chain."
1. Highlights
Sustainability
- No major environmental issues reported during the period;
- Partnership with Innu Takuaikan Uashat Mak Mani-Utenam and
Comité sectoriel de main d'oeuvre de l'industrie des mines, to
implement training programs aimed at increasing collaboration
between Innu partners and Champion;
- Workshops and commemoration activities aimed at familiarizing
Champion's employees with the Innu culture were organized on the
National Day for Truth and Reconciliation on September 30, 2022, as part of an annual
commitment, in line with our Company's values; and
- Fundraising organized by the Company at Fermont and Montréal attracted record
participation, with more than 240 individuals running or walking in
an event benefiting Cancer Fermont, a charitable organization
improving the quality of life of local residents fighting cancer,
as well as a significant donation to l'Envol-Maison de la Famille
Sept-Îles, a help center which provides support for struggling
local families.
Operations and Financial
- Record production of 2,857,300 wmt of high-grade 66.1% Fe
concentrate for the three-month period ended September 30, 2022, driven by the commissioning
of Phase II, compared to 2,089,100 wmt of high-grade 66.3% Fe
concentrate for the same period in 2021;
- C1 cash cost1 of $65.9/dmt (US$50.5/dmt)2 for the three-month
period ended September 30, 2022,
comparing favourably with the cash cost1 of $74.0/dmt for the previous quarter ended
June 30, 2022, as the Company begins
to benefit from higher production volumes generated from the Phase
II project;
- Record iron ore concentrate sold for the three-month period
ended September 30, 2022,
contributing to revenues of $300.6
million ($331.0 million for
the same period in 2021), net cash flow from operating activities
of $87.1 million ($374.1 million for the same period in 2021),
EBITDA1 of $84.3 million
($200.0 million for the same period
in 2021) and net income of $19.5
million (EPS of $0.04)
($114.6 million and EPS of
$0.23 for the same period in
2021);
- Financial results during the quarter were positively impacted
by the higher iron ore volumes sold, and were more than offset by
decreasing iron ore index prices, expected transitional start-up
costs to support Phase II commercial production, anticipated lower
recovery circuit rates in relation to the Phase II ramp-up,
scheduled seasonal tailings related work programs and increased
operating costs attributable to global inflationary pressures. The
economic benefits of the Phase II expansion project should be
progressive as throughput gradually increases towards Bloom Lake's
revised nameplate capacity of 15 Mtpa;
- Available liquidity1 of $586.4 million as at September 30, 2022, including $277.4 million of cash and cash equivalents and
short-term investments, compared to $571.0
million as at June 30, 2022;
and
- Dividend of $0.10 per ordinary
share declared on October 26, 2022
(Montréal time) / October 27, 2022
(Sydney time), in connection with
the semi-annual results for the period ended September 30, 2022.
Phase II Milestones
- Commissioning activities continue as scheduled, including
ongoing system optimization work related to commercial production,
scheduled to commence by the end of calendar 20223, with
nameplate capacity anticipated to be achieved in calendar
20233; and
- Last major on-site work program in relation to the Phase II
equipment has been completed, enabling the Company's two crushers
to feed both facilities and reduce bottlenecks during maintenance
periods.
Growth and Development
- The feasibility study evaluating the reprocessing and
infrastructure required to convert approximately half of Bloom
Lake's increased nameplate capacity of 15 Mtpa towards commercially
producing a 69% Fe DR pellet feed product is nearing
completion;
- In collaboration with a major international steelmaking
partner, a feasibility study evaluating the re-commissioning of the
Pointe-Noire Iron Ore Pelletizing Facility (the "Pellet Plant") to
produce DR grade pellets is advancing, with an anticipated
completion date in the second half of calendar 2023;
- The Kamistiatusset iron ore project's (the "Kami Project")
feasibility study, whereby the project is being evaluated for its
capability to produce DR grade pellet feed product, is expected to
be completed in the first half of calendar 2023; and
- Freight agreements signed, contracting two vessels per month,
from January 2023 to December 2023, expected to reduce the Company's
freight premium volatility by using an agreed-upon price premium
above the average C3 Baltic Capesize Index per tonne, plus an
additional seasonal premium for winter conditions.
2. Bloom Lake Mine Operating Activities
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2022
|
2021
|
Variance
|
|
2022
|
2021
|
Variance
|
|
|
|
|
|
|
|
|
|
Operating
Data
|
|
|
|
|
|
|
|
|
Waste mined and hauled
(wmt)
|
|
4,572,900
|
5,299,600
|
(14 %)
|
|
10,178,900
|
9,999,100
|
2 %
|
Ore mined and hauled
(wmt)
|
|
8,214,700
|
5,713,900
|
44 %
|
|
14,407,800
|
11,357,800
|
27 %
|
Material mined and
hauled (wmt)
|
|
12,787,600
|
11,013,500
|
16 %
|
|
24,586,700
|
21,356,900
|
15 %
|
|
|
|
|
|
|
|
|
|
Strip ratio
|
|
0.56
|
0.93
|
(40 %)
|
|
0.71
|
0.88
|
(19 %)
|
|
|
|
|
|
|
|
|
|
Ore milled
(wmt)
|
|
8,102,700
|
5,679,800
|
43 %
|
|
14,124,900
|
10,907,000
|
30 %
|
Head grade Fe
(%)
|
|
29.5
|
29.1
|
1 %
|
|
30.2
|
29.4
|
3 %
|
Fe recovery
(%)
|
|
78.6
|
83.3
|
(6 %)
|
|
79.3
|
83.1
|
(5 %)
|
Product Fe
(%)
|
|
66.1
|
66.3
|
— %
|
|
66.1
|
66.3
|
— %
|
Iron ore concentrate
produced (wmt)
|
|
2,857,300
|
2,089,100
|
37 %
|
|
5,139,900
|
4,025,100
|
28 %
|
Iron ore concentrate
sold (dmt)
|
|
2,793,400
|
1,953,900
|
43 %
|
|
4,807,300
|
3,928,600
|
22 %
|
Phase II Commissioning
During the first quarter of the 2023 financial year, the Company
initiated and advanced the commissioning of Phase II and at the end
of April 2022, the first of two Phase II plant production
lines was commissioned. The first shipments were railed on
May 3, 2022. In June 2022, the Company successfully
started the second line as scheduled in the ramp-up sequencing of
the project. Accordingly, both operating lines were in service at
the end of the first quarter. During the three-month period ended
September 30, 2022, commissioning activities progressed
as scheduled. The Company made adjustments and improvements in some
areas to stabilize operations (including work to increase
throughput and the recovery ratio) and reach expected performance,
positioning the Company to achieve, as scheduled, commercial
production by the end of calendar 20223 and nameplate
capacity in calendar 20233. The last major on-site work
program relating to the Phase II equipment was completed during the
three-month period ended September 30, 2022, enabling the
Company's two crushers to feed both facilities and reduce
bottlenecks during maintenance periods. Final minor on-site work
programs are expected to be completed as planned during the third
and fourth quarters of the 2023 financial year. While on-site work
programs are being delivered ahead of schedule, off-site work
programs, including third-party infrastructure, continue to advance
as scheduled.
Operational Performance
Second Quarter of the 2023 Financial Year vs Second Quarter
of the 2022 Financial Year
In the three-month period ended September 30, 2022,
12.8 million tonnes of material were mined and hauled, compared to
11.0 million tonnes during the same period in 2021, an increase of
16%. The increase in material movement was enabled through the
utilization of additional equipment compared to the same prior-year
period, offset by a longer haul cycle as material was sourced from
different pits, including those that deepened with mining
activities over time. The lower strip ratio for the three-month
period ended September 30, 2022, is in line with the
revised mine plan in connection with transitional incremental feed
requirements during the Phase II ramp-up period.
The iron ore head grade for the three-month period ended
September 30, 2022, was 29.5%, compared to 29.1% for the
same period in 2021. The variation in head grade is attributable to
the presence of some higher-grade ore being sourced and blended
from different pits, which was anticipated and is in line with the
mine plan and the LoM head grade average.
The Company's average Fe recovery rate for the three-month
period ended September 30, 2022, was negatively impacted
by the anticipated lower recoveries during the commissioning of the
Phase II concentrator, but is in line with Management's
expectations at this stage of the Phase II commissioning. The
slight decrease in the Fe recovery rate during the three-month
period ended September 30, 2022, compared to the first
quarter, was due to a higher proportion of tonnes processed by the
second concentrator together with stability impacts on Phase I
attributable to the finalization of the Phase II tie-in program, as
the utilization of the second plant is increasing over time. The
Company expects to reach a stable Fe recovery circuit when Phase II
achieves commercial production, anticipated to occur by the end of
calendar 20223.
During the three-month period ended
September 30, 2022, operational activities were impacted
by a scheduled semi-annual maintenance on the second concentrator,
while no shutdown occurred in the same prior-year period. A
shutdown is now planned every quarter, alternating between the two
concentrators and related facilities. A non-recurring 20-day
scheduled shutdown of specific equipment was required for the
tie-in of the first crusher to the A-Frame dome as part of the
Phase II project ramp-up, which also impacted operational
activities in the quarter. Despite these factors, Bloom Lake
produced 2.9 million wmt of high-grade iron ore concentrate during
the three-month period ended September 30, 2022, an
increase of 37%, compared to 2.1 million wmt during the same period
in 2021. The Company achieved record production in connection with
the commissioning of the second plant at the mine site. Higher
throughput and head grade also contributed to higher production
volumes, despite a lower global recovery. The commissioned Phase II
project's production compares favourably to the scheduled
production volumes. The plants processed 8.1 million tonnes of ore
during the three-month period ended September 30, 2022,
compared to 5.7 million tonnes for the same prior-year period. The
throughput for the period was positively affected by higher
availability of mined ore and the commissioning of Phase II
operations in the previous quarters.
First Six Months of the 2023 Financial Year vs First Six Months
of the 2022 Financial Year
The Company mined and hauled 24.6 million tonnes of material
during the six-month period ended September 30, 2022, compared
to 21.4 million tonnes for the same period in 2021. This increase
in material mined and hauled is attributable to the commissioning
of additional operational equipment compared to the same prior-year
period. The strip ratio was 0.71 for the six-month period ended
September 30, 2022, compared to 0.88 for the same period in
2021, and is consistent with the revised mine plan.
The iron ore head grade of 30.2% for the six-month period ended
September 30, 2022, was attributable to different sourcing
pits, compared to 29.4% for the same period in 2021, and is
consistent with the LoM head grade average. The lower average Fe
recovery rate for the six-month period ended September 30,
2022, was attributable to the commissioning of the Phase II
concentrator as detailed above.
The plant processed 14.1 million tonnes of ore during the
six-month period ended September 30, 2022, an increase of 30%
over the same period in 2021, and produced 5.1 million wmt of
high-grade iron ore concentrate, compared to 4.0 million wmt for
the same period in 2021, mainly attributable to the commissioning
of the Phase II project.
3. Financial Performance
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2022
|
2021
|
Variance
|
|
2022
|
2021
|
Variance
|
|
|
|
|
|
|
|
|
|
Financial Data
(in thousands of dollars)
|
|
|
|
|
|
|
|
|
Revenues
|
|
300,621
|
331,006
|
(9 %)
|
|
579,942
|
876,414
|
(34 %)
|
Cost of
sales
|
|
199,841
|
110,884
|
80 %
|
|
369,248
|
231,730
|
59 %
|
Other
expenses
|
|
16,839
|
20,313
|
(17 %)
|
|
32,444
|
34,873
|
(7 %)
|
Net finance
costs
|
|
10,765
|
1,012
|
964 %
|
|
14,955
|
5,399
|
177 %
|
Net income
|
|
19,530
|
114,596
|
(83 %)
|
|
61,084
|
338,935
|
(82 %)
|
EBITDA1
|
|
84,331
|
200,013
|
(58 %)
|
|
179,261
|
605,752
|
(70 %)
|
|
|
|
|
|
|
|
|
|
Statistics
(in dollars per dmt sold)
|
|
|
|
|
|
|
|
|
Gross average realized
selling price1
|
|
157.0
|
218.8
|
(28 %)
|
|
171.0
|
249.4
|
(31 %)
|
Net average realized
selling price1
|
|
107.6
|
169.4
|
(36 %)
|
|
120.6
|
223.1
|
(46 %)
|
C1 cash
cost1
|
|
65.9
|
56.2
|
17 %
|
|
69.3
|
58.2
|
19 %
|
All-in sustaining cost
("AISC")1
|
|
81.9
|
73.6
|
11 %
|
|
86.8
|
73.1
|
19 %
|
Cash operating
margin1
|
|
25.7
|
95.8
|
(73 %)
|
|
33.8
|
150.0
|
(77 %)
|
A. Revenues
Second Quarter of the 2023 Financial Year vs Second Quarter
of the 2022 Financial Year
During the three-month period ended
September 30, 2022, 2.8 million tonnes of high-grade iron
ore concentrate were sold at a gross average realized
price1 of US$120.6/dmt,
before freight and other costs and provisional pricing adjustments,
compared to US$174.6/dmt for the same
prior-year period. The decrease in gross average realized selling
price1 reflects lower index prices during the
three-month period ended September 30, 2022, compared to
the same prior-year period. Despite lower index prices, the gross
average realized selling price1 of US$120.6/dmt represents a premium of 16.7% over
the benchmark IODEX 62% Fe CFR China Index ("P62") price for the
period, compared to a premium of 7.2% for the same period in
2021.
During the three-month period ended
September 30, 2022, the IODEX 65% Fe CFR China Index
("P65") for high-grade iron ore fluctuated from a high of
US$131.5/dmt to a low of US$107.2/dmt. The P65 index average price for the
period was US$115.5/dmt, a
decrease of 39% from the same prior-year quarter, resulting in an
average premium of 11.8% over the P62 reference price of
US$103.3/dmt. The gross average
realized selling price1 of US$120.6/dmt was higher than the P65 index
average price for the period of US$115.5/dmt due to sales based on fixed
backward-looking iron ore prices, when prices were higher compared
to the P65 index average for the current period. This factor was
partially offset by the negative impact of 1.3 million tonnes which
were in transit as at September 30, 2022, provisionally priced
using an average forward price of US$112.3/dmt, which was lower than the P65 index
average price for the period. After accounting for sea freight and
other costs and provisional pricing adjustments, the Company's net
realized FOB selling price1 was US$83.2/dmt, compared to US$134.7/dmt for the same period in 2021.
The average C3 Baltic Capesize Index for the three-month period
ended September 30, 2022, was US$24.0/t compared to US$31.7/t for the same period in 2021,
representing a decrease of 24%, which contributed to lower freight
costs in the three-month period ended September 30, 2022,
compared to the same prior-year period. The lower freight rates for
the three-month period ended September 30, 2022, can be
partially attributed to decreased fuel prices and lower iron ore
shipments from Brazil.
Simultaneously, the partial removal of COVID-19 lockdowns in
China reduced port congestion,
further influencing the decreasing freight rates, with lower
seaborn iron ore volumes as marginal suppliers facing profitability
challenges curtailed operations. Champion typically contracts
vessels three to four weeks prior to the desired laycan period.
This creates a natural delay between the freight paid and the C3
route index price. The effects of these delays are eventually
reconciled since the Company ships its high-grade iron ore
concentrate uniformly throughout the year.
Provisional pricing adjustments on previous sales, which were
directly correlated to the decrease in the P65 index during the
quarter, contributed to decreasing the net average realized selling
price1. During the three-month period ended
September 30, 2022, a final price of US$116.2/dmt was established for the 0.7 million
tonnes of iron ore that were in transit as at June 30, 2022,
and which were previously evaluated using an average expected price
of US$138.4/dmt. Accordingly, during
the three-month period ended September 30, 2022, net
negative provisional pricing adjustments of $20.9 million were recorded as a decrease in
revenues for the 0.7 million tonnes, representing a negative impact
of US$5.3/dmt over the total volume
of 2.8 million dmt sold during the current period, comparable to
the negative impact for the same period in 2021.
After taking into account sea freight and other costs of
US$32.1/dmt and the negative
provisional pricing adjustment of US$5.3/dmt, the Company obtained a net average
realized selling price1 of US$83.2/dmt (CA$107.6/dmt) for its high-grade
iron ore delivered to the end customer. Revenues totalled
$300.6 million for the
three-month period ended September 30, 2022, compared to
$331.0 million for the same
period in 2021, reflecting the lower net average realized selling
price1 partially offset by a significantly higher sales
volume and the weakening Canadian dollar.
First Six Months of the 2023 Financial Year vs First Six Months
of the 2022 Financial Year
For the six-month period ended September 30, 2022, the
Company sold 4.8 million tonnes of iron ore concentrate, mainly to
customers in China, Japan, South
Korea and Europe. While the
high-grade iron ore P65 index price fluctuated between a low of
US$107.2/dmt and a high of
US$185/dmt during the six-month
period ended September 30, 2022, the Company sold its product
at a gross average realized selling price1 of
US$132.7/dmt before sea freight and
other costs and provisional pricing adjustments. The P65 index
average price for the six-month period ended September 30,
2022, was US$137.3/dmt, a decrease of
35% from the same period in 2021, resulting in an average premium
of 14.2% over the P62 index reference price of US$120.2/dmt. The gross average realized selling
price1 is lower than the average P65 high-grade index of
US$137.3/dmt for the period due to
sales provisionally priced using an average forward price of
US$112.3/dmt at the end of the
period, which was significantly lower than the average P65 index
for the period. The Company expects its iron ore concentrate
pricing to track the P65 index in the long term.
Combining the gross average realized selling price1
with the negative provisional pricing adjustment of US$5.8/dmt, the Company sold its high-grade iron
ore at a price of US$126.9/dmt during
the six-month period ended September 30, 2022, compared to the
P65 high-grade index average of US$137.3/dmt. Deducting sea freight and other
costs of US$33.1/dmt, the Company
obtained a net average realized selling price1 of
US$93.8/dmt (CA$120.6/dmt) for its
high-grade iron ore. As such, revenues totalled $579.9 million for the six-month period
ended September 30, 2022, compared to $876.4 million for the same period in 2021,
mainly as a result of a lower gross average realized selling
price1, partially offset by a significantly higher sales
volume and the weakening Canadian dollar. A negative provisional
pricing adjustment during the six-month period ended
September 30, 2022, compared to a positive provisional pricing
adjustment during the same period in 2021, also contributed to the
decrease in revenues.
B. Cost of Sales and C1 Cash Cost1
The cost of sales represents mining, processing, and mine
site-related general and G&A expenses as well as rail and port
operation costs. It also includes specific and incremental costs
related to COVID-19 and, starting in April
2022, it includes Bloom Lake Phase II start-up costs
incurred after commissioning. These start-up costs mainly include
abnormal operational costs attributable to the facility not having
reached the normalized expected level of output.
For the three-month period ended September 30, 2022,
the cost of sales totalled $199.8 million, compared to $110.9 million for the same period in 2021.
During the three-month period ended September 30, 2022,
the C1 cash cost1 per tonne, excluding specific and
incremental costs related to COVID-19 and Phase II start-up costs,
totalled $65.9/dmt, compared to
$56.2/dmt for the same period in
2021.
The C1 cash cost1 per dmt sold for the three-month
period ended September 30, 2022, benefited from higher
volumes of iron ore concentrate sold associated with increased
production volumes from the Phase II project, but were more than
fully offset by global inflationary pressures, impacting cost of
fuel used in the Company's mining activities and land
transportation, explosives costs as well as rail and port
operations. The life of mine stripping ratio used for cost
capitalization for the three-month period ended
September 30, 2021, was also significantly lower,
positively impacting the prior-year period cash cost1.
The lower recoveries associated with the commissioning of the Phase
II concentrator also negatively impacted cash cost1 for
the period as the concentrate volume produced was lower than
standard level. Finally, longer haul cycle times associated with
the current mine plan also contributes quarter-over-quarter to
higher mining costs.
For the six-month period ended September 30, 2022, the
Company produced high-grade iron ore at a C1 cash cost1
amounting to $69.3/dmt, compared to
$58.2/dmt for the six-month period
ended September 30, 2021. The variation is attributable to the
same factors that affected the C1 cash cost1 for the
three-month period ended September 30, 2022.
In addition, unplanned third-party shutdowns, planned
maintenance of additional facilities, as well as increased
headcount and subcontractor usage in relation to the commissioning
of the Phase II project during the first quarter, also contributed
to the higher cash cost1 for the six-month period ended
September 30, 2022.
C. Net Income & EBITDA1
Second Quarter of the 2023 Financial Year vs Second Quarter
of the 2022 Financial Year
For the three-month period ended September 30, 2022,
the Company generated net income of $19.5 million (EPS of $0.04), compared to $114.6 million (EPS of $0.23) for the same period in 2021. The net
income was mainly affected by a lower P65 index average price
during the period, as well as a higher cash cost1,
compared to the same prior-year period. The decrease in net income
is partially offset by a higher sales volume driven by the solid
ramp-up of Phase II and lower current income and mining taxes.
For the three-month period ended September 30, 2022,
the Company generated EBITDA1 of $84.3 million, representing an EBITDA
margin1 of 28%, compared to $200.0 million, representing an EBITDA
margin1 of 60%, for the same period in 2021. The
decrease in EBITDA1 period-over-period is primarily due
to lower net average realized selling prices1 and higher
cash costs1. This decrease is partially offset by a
higher sales volume driven by the solid ramp-up of Phase II.
First Six Months of the 2023 Financial Year vs First Six Months
of the 2022 Financial Year
For the six-month period ended September 30, 2022, the
Company generated net income of $61.1 million (EPS of $0.12), compared to $338.9 million (EPS of $0.67) for the same period in 2021. The decrease
in net income is mainly due to lower iron ore index prices and
higher cash costs, partially offset by a higher sales volume driven
by the solid commissioning of Phase II and lower current income and
mining taxes.
For the six-month period ended September 30, 2022, the
Company generated an EBITDA1 of $179.3 million, representing an EBITDA
margin1 of 31%, compared to $605.8 million, representing an EBITDA
margin1 of 69% for the same period in 2021. This
decrease in EBITDA1 is mainly attributable to the
decrease in the net average realized selling price1
and higher production costs, partially offset by a higher
sales volume following the Phase II commissioning.
D. All In Sustaining Cost ("AISC")1 and Cash
Operating Margin1
During the three-month period ended
September 30, 2022, the Company realized an
AISC1 of $81.9/dmt,
compared to $73.6/dmt for the same
period in 2021. The increase relates to higher C1 cash
costs1, partially offset by the positive impact of
higher volumes of iron ore concentrate sold.
The Company generated a cash operating margin1 of
$25.7/dmt for each tonne of
high-grade iron ore concentrate sold during the three-month period
ended September 30, 2022, compared to $95.8/dmt for the same prior-year period. The
variation is mainly due to a lower net average realized selling
price1 and higher AISC1 for the period.
During the six-month period ended September 30, 2022,
the Company recorded an AISC1 of $86.8/dmt, compared to $73.1/dmt for the same period in 2021. The
variation is mainly due to higher C1 cash costs1
and higher sustaining capital expenditures mainly related to
higher investments made in tailings lifts. The Company is actively
working to ensure everything is in place to support Phase II
operations, including hiring additional personnel and incurring the
necessary sustaining capital expenditures. Refer to section 5 -
Cash flow for details on sustaining capital expenditures.
The cash operating margin1 totalled $33.8/dmt for the six-month period ended
September 30, 2022, compared to $150.0/dmt for the same period in 2021. The
variation is mainly due to a lower net average realized selling
price1 and higher AISC1.
4. Exploration Activities
During the three and six-month periods ended
September 30, 2022, the Company maintained all of its
properties in good standing and did not enter into any
farm-in/farm-out arrangements. During the three and six-month
periods ended September 30, 2022, $0.9 million and $3.1 million in exploration and evaluation
expenditures were incurred, respectively, compared to $2.0 million and $2.7 million for the same periods in 2021.
During the three and six-month periods ended
September 30, 2022, exploration and evaluation
expenditures mainly consisted of costs associated with resource
development and drilling, work related to updating the Kami Project
feasibility study and claim renewal fees. During the six-month
period ended September 30, 2022, 4,430 metres of diamond
drilling was completed on the Bloom Lake property. Drilling at
Bloom Lake was undertaken mainly for the conversion of resources.
Geological mapping and assessment were started on exploration
claims localized south of Bloom Lake. In addition, late in
September, the Company started a diamond drilling campaign at
Lamêlée South.
Details on exploration projects and maps are available on the
Company's website at www.championiron.com under the section
Operations & Projects.
5. Cash Flows — Purchase of Property, Plant and Equipment
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
(in thousands of
dollars)
|
|
|
|
|
|
|
|
|
Tailings
lifts
|
|
28,440
|
|
14,174
|
|
37,425
|
|
20,512
|
Stripping and mining
activities
|
|
3,730
|
|
8,684
|
|
14,793
|
|
17,218
|
Mining equipment
rebuild
|
|
4,011
|
|
3,603
|
|
10,908
|
|
5,498
|
Sustaining capital
expenditures
|
|
36,181
|
|
26,461
|
|
63,126
|
|
43,228
|
|
|
|
|
|
|
|
|
|
Other capital
development expenditures at Bloom Lake
|
|
42,403
|
|
127,192
|
|
138,072
|
|
220,364
|
Purchase of property,
plant and equipment as per cash flows
|
|
78,584
|
|
153,653
|
|
201,198
|
|
263,592
|
Sustaining Capital Expenditures
The increase in tailings-related investments for the three and
six-month periods ended September 30, 2022, is due to the
reclassification of preparation work performed on Phase II dikes
from other capital development expenditures in the comparative
periods to tailings lifts. In addition, during the three and
six-month periods ended September 30, 2022, weather
conditions were more favourable than in the same prior-year
periods, enabling the Company to advance work performed on the
dikes. As part of the Company's ongoing and thorough tailings
infrastructure monitoring and inspections, the Company continues to
invest in its safe tailings strategy and is developing a long-term
tailings investment plan.
The decrease in stripping and mining activities during the three
and six-month periods ended September 30, 2022, compared
to the same periods in 2021, is in line with the mine plan,
inclusive of Phase II operations. The variation in stripping
activities is attributable to the revised stripping ratio used to
capitalize some of the mining cost since the fourth quarter of the
2022 financial year. The new ratio considers the Company's mineral
reserves as per the execution of the Phase II mine plan. Higher
stripping and mining activities in the comparative periods were
associated with the preparation for the Phase II project
operations.
The increase in the Company's mining equipment maintenance
program for the three and six-month periods ended
September 30, 2022, is attributable to the addition of
mining operating equipment and the high utilization rate for this
equipment. Mining equipment rebuild expenditures were also
negatively affected by global inflation during the three and
six-month periods ended September 30, 2022.
Other Capital Development Expenditures at Bloom Lake
During the three-month period ended
September 30, 2022, other capital development
expenditures at Bloom Lake totalled $42.4 million, compared to $127.2 million in the same period in 2021.
During the three-month period ended September 30, 2022,
the expenditures mainly consisted of $26.2
million in Phase II capital expenditures, $5.1 million in borrowing costs which were
capitalized during the development of the Phase II project, and
$4.5 million in deposits for
production equipment to be commissioned and financed in the future
through the finance agreement with Caterpillar Financial Services
Limited. During the three-month period ended
September 30, 2022, other capital development
expenditures were offset by the receipt of a government grant
totalling $5.2 million related
to the Company's greenhouse gas emissions and energy consumption
reduction initiatives, compared to $6.2
million in the same prior-year period. The Company qualified
for total grants of up to $21.8
million.
During the six-month period ended September 30, 2022,
other capital development expenditures at Bloom Lake totalled
$138.1 million, compared to
$220.4 million in the same
prior-year period. During the six-month period ended
September 30, 2022, the expenditures mainly consisted of
$94.0 million in Phase II capital
expenditures, $19.2 million in
deposits for production equipment, and $9.6 million in borrowing costs. Other
capital development expenditures were offset by the receipt of a
government grant totalling $5.2 million as detailed above, compared to
$6.2 million in the same period in
2021.
During the three and six-month periods ended
September 30, 2021, the expenditures mainly comprised of
Phase II capital expenditures, lodging infrastructure investments
at the mine site required to accommodate an increasing workforce,
prepayments for production equipment and increases in mill capacity
and other infrastructure improvements.
6. Conference Call and Webcast Information
A webcast and conference call to discuss the foregoing results
will be held on October 27, 2022 at 8:30 AM (Montréal time) / 11:30 PM
(Sydney time). Listeners may
access a live webcast of the conference call from the Investors
section of the Company's website at
www.championiron.com/investors/events-presentations or by dialing
toll free 1-888-390-0546 within North
America or +1-800-076-068 from Australia.
An online archive of the webcast will be available by accessing
the Company's website at
www.championiron.com/investors/events-presentations. A telephone
replay will be available for one week after the call by dialing
+1-888-390-0541 within North
America or +1-416-764-8677 overseas, and entering passcode
477793 #.
About Champion Iron Limited
Champion Iron Limited, through its subsidiary Quebec Iron Ore
Inc., owns and operates the Bloom Lake Mining Complex, located on
the south end of the Labrador Trough, approximately 13 km north of
Fermont, Québec. Bloom Lake is an
open-pit operation with two concentrators that primarily source
energy from renewable hydroelectric power. The Bloom Lake Phase I
and Phase II plants have a combined nameplate capacity of 15 Mtpa
and produce a low contaminant high-grade 66.2% Fe iron ore
concentrate with a proven ability to produce a 67.5% Fe direct
reduction quality concentrate. Bloom Lake's high-grade and low
contaminant iron ore products have attracted a premium to the
Platts IODEX 62% Fe iron ore benchmark. The Company ships iron ore
concentrate from Bloom Lake by rail, to a ship loading port in
Sept-Îles, Québec, and has sold its iron ore concentrate to
customers globally, including in China, Japan,
the Middle East, Europe, South
Korea, India and
Canada. In addition to the Bloom
Lake Mining Complex, Champion owns a portfolio of exploration and
development projects in the Labrador Trough, including the
Kamistiatusset Project located a few kilometres south-east of Bloom
Lake, and the Consolidated Fire Lake North iron ore project,
located approximately 40 km south of Bloom Lake.
Cautionary Note Regarding Forward-Looking Statements
This press release includes certain information and statements
that may constitute "forward-looking information" under applicable
Canadian securities legislation. Forward-looking statements are
statements that are not historical facts and are generally, but not
always, identified by the use of words such as "plans", "expects",
"is expected", "budget", "scheduled", "estimates", "continues",
"forecasts", "projects", "predicts", "intends", "anticipates",
"aims", "targets" or "believes", or variations of, or the negatives
of, such words and phrases, or state that certain actions, events
or results "may", "could", "would", "should", "might" or "will" be
taken, occur or be achieved. Inherent in forward-looking statements
are risks, uncertainties and other factors beyond the Company's
ability to predict or control.
All statements other than statements of historical facts
included in this press release that address future events,
developments or performance that Champion expects to occur are
forward-looking statements. Forward-looking statements include
Management's expectations regarding: (i) the partnership with Innu
Takuaikan Uashat Mak Mani-Utenam and Comité sectoriel de main
d'oeuvre de l'industrie des mines, to implement training programs
aimed at increasing collaboration between Innu partners and
Champion; (ii) the Company's Phase II expansion project, its
expected transitional start-up costs to support commercial
production, lower recovery circuit rates, economic benefits, impact
on nameplate capacity and milestones; (iii) the potential to
upgrade the Bloom Lake iron ore concentrate to a higher grade with
lower contaminants and the feasibility study evaluating the
reprocessing and infrastructure required to convert approximately
half of Bloom Lake's increased nameplate capacity of 15 Mtpa
towards commercially producing a 69% Fe DR pellet feed product and
its completion timeline; (iv) the feasibility study evaluating the
re-commissioning of the Pointe-Noire Iron Ore Pelletizing Facility
to produce DR grade pellets and its anticipated completion date;
(v) the Kami Project's feasibility, its purpose and anticipated
completion date; (vi) the reduction of the Company's freight
premium volatility under freight agreements; (vii) the shift in
steel industry production methods and expected rising demand for
higher-grade iron ore products and the transition of the Company's
product offering; and (viii) the impact of iron ore prices
fluctuations on the Company and the occurrence of certain events
and their impact on iron ore prices and demand for high-grade iron
ore products.
Although Champion believes the expectations expressed in such
forward-looking statements are based on reasonable assumptions,
such forward-looking statements involve known and unknown risks,
uncertainties and other factors, most of which are beyond the
control of the Company, which may cause the Company's actual
results, performance or achievements to differ materially from
those expressed or implied by such forward-looking statements.
Factors that could cause the actual results to differ materially
from those expressed in forward-looking statements include, without
limitation: the results of feasibility studies; changes in the
assumptions used to prepare feasibility studies; project delays;
timing and uncertainty of industry shift to Green Steel and EAF;
continued availability of capital and financing and general
economic, market or business conditions; general economic,
competitive, political and social uncertainties; future prices of
iron ore; future transportation costs, failure of plant, equipment
or processes to operate as anticipated; delays in obtaining
governmental approvals, necessary permitting or in the completion
of development or construction activities; and the effects of
catastrophes and public health crises, including the impact of
COVID-19 on the global economy, the iron ore market and Champion's
operations, as well as those factors discussed in the section
entitled "Risk Factors" of the Company's 2022 Annual Report and
Annual Information Form for the financial year ended March 31, 2022, all of which are available on
SEDAR at www.sedar.com, the ASX at www.asx.com.au and the Company's
website at www.championiron.com. There can be no assurance that
such information will prove to be accurate, as actual results and
future events could differ materially from those anticipated in
such forward-looking information. Accordingly, readers should not
place undue reliance on forward-looking information.
All of Champion's forward-looking information contained in this
press release is given as of the date hereof or such other date or
dates specified in such statements and is based upon the opinions
and estimates of Champion's Management and information available to
Management as at the date hereof. Champion disclaims any intention
or obligation to update or revise any of its forward-looking
information, whether as a result of new information, future events
or otherwise, except as required by law. If the Company does update
one or more forward-looking statements, no inference should be
drawn that it will make additional updates with respect to those or
other forward-looking statements. Champion cautions that the
foregoing list of risks and uncertainties is not exhaustive.
Readers should carefully consider the above factors as well as the
uncertainties they represent and the risks they entail.
Abbreviations
Unless otherwise specified, all dollar figures stated herein are
expressed in millions of Canadian dollars, except for: (i) tabular
amounts which are in thousands of Canadian dollars; and (ii) per
share or per tonne amounts. The following abbreviations and
definitions are used throughout this press release: US$
(United States dollar), CA$
(Canadian dollar), Fe (iron ore), wmt (wet metric tonnes), dmt (dry
metric tonnes), Mtpa (million tonnes per annum), M (million), km
(kilometers), LoM (life of mine), G&A (general and
administrative), EBITDA (earnings before interest, tax,
depreciation and amortization), AISC (all-in sustaining cost), EPS
(earnings per share), Bloom Lake or Bloom Lake Mine (Bloom Lake
Mining Complex) and Phase II (Phase II expansion project). The
utilization of "Champion" or the "Company" refers to Champion Iron
Limited and/or one, or more, or all of its subsidiaries, as
applicable. IFRS refers to International Financial Reporting
Standards.
For additional information on Champion Iron Limited, please
visit our website at: www.championiron.com.
This document has been authorized for release to the market by
the CEO of Champion Iron Limited, David
Cataford.
Copies of the Company's unaudited Condensed Consolidated
Financial Statements and associated Management's Discussion and
Analysis ("MD&A") for the three and six-month periods ended
September 30, 2022 are available under the Company's
profile on SEDAR (www.sedar.com), on the ASX (www.asx.com.au) and
the Company's website (www.championiron.com).
_________________________________
|
1 This is a
non-IFRS financial measure, ratio or other financial measure. The
measure is not a standardized financial measure under the financial
reporting framework used to prepare the financial statements and
might not be comparable to similar financial measures used by other
issuers. Refer to the section below - Non-IFRS and Other Financial
Measures for definitions of these metrics and reconciliations to
the most comparable IFRS measures when applicable. Additional
details for these non-IFRS and other financial measures, have been
incorporated by reference and can be found in section 20 of the
Company's MD&A for the three and six-month periods ended
September 30, 2022, available on SEDAR at www.sedar.com,
the ASX at www.asx.com.au and on the Company's website under the
Investors section at www.championiron.com.
|
2 See the
"Currency" section of the MD&A for the three and six-month
periods ended September 30, 2022, included in note 6 -
Key Drivers, available on SEDAR at www.sedar.com, the ASX at
www.asx.com.au and on the Company's website under the Investors
section at www.championiron.com.
|
3 See
the "Cautionary Note Regarding Forward-Looking Statements" section
of this press release.
|
Non-IFRS and Other Financial Measures
The Company has included certain non-IFRS financial measures,
ratios and supplementary financial measures in this press
release, as listed in the table below, to provide investors with
additional information in order to help them evaluate the
underlying performance of the Company. These measures are mainly
derived from the Financial Statements but do not have any
standardized meaning prescribed by IFRS and, therefore, may not be
comparable to similar measures presented by other companies.
Management believes that these measures, in addition to
conventional measures prepared in accordance with IFRS, provide
investors with an improved ability to understand the results of the
Company's operations. Non-IFRS and other financial measures should
not be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS. The exclusion of
certain items from non-IFRS financial measures does not imply that
these items are necessarily non-recurring.
EBITDA and EBITDA Margin
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
(in thousands of
dollars)
|
|
|
|
|
|
|
|
|
Income before income
and mining taxes
|
|
45,511
|
|
189,564
|
|
116,459
|
|
580,957
|
Net finance
costs
|
|
10,765
|
|
1,012
|
|
14,955
|
|
5,399
|
Depreciation
|
|
28,055
|
|
9,437
|
|
47,847
|
|
19,396
|
EBITDA
|
|
84,331
|
|
200,013
|
|
179,261
|
|
605,752
|
Revenues
|
|
300,621
|
|
331,006
|
|
579,942
|
|
876,414
|
EBITDA
margin
|
|
28 %
|
|
60 %
|
|
31 %
|
|
69 %
|
Adjusted Net Income and Adjusted EPS
|
Three Months
Ended
|
Six Months
Ended
|
|
September 30,
|
September 30,
|
|
2022
|
|
2021
|
2022
|
|
2021
|
|
|
|
|
|
|
|
(in thousands of
dollars except per share)
|
|
|
|
|
|
|
Net Income
|
19,530
|
|
114,596
|
61,084
|
|
338,935
|
|
|
|
|
|
|
|
Cash items
|
|
|
|
|
|
|
Loss (gain) on
disposal of non-current investments
|
—
|
|
232
|
—
|
|
(176)
|
Incremental costs
related to COVID-19
|
305
|
|
1,099
|
1,145
|
|
3,167
|
Bloom Lake Phase II
start-up costs
|
15,391
|
|
4,613
|
34,867
|
|
4,613
|
|
15,696
|
|
5,944
|
36,012
|
|
7,604
|
|
|
|
|
|
|
|
Tax effect of
adjustments listed above1
|
(5,964)
|
|
(2,228)
|
(13,684)
|
|
(3,118)
|
|
|
|
|
|
|
|
Adjusted net
income
|
29,262
|
|
118,312
|
83,412
|
|
343,421
|
|
|
|
|
|
|
|
Weighted average number
of ordinary shares
outstanding - Basic
|
517,104,000
|
|
506,429,000
|
516,899,000
|
|
506,351,000
|
|
|
|
|
|
|
|
Adjusted EPS
|
0.06
|
|
0.23
|
0.16
|
|
0.68
|
1 The tax
effect of adjustments is calculated using the applicable tax
rate.
|
Available Liquidity
|
|
As at
September 30,
|
|
As at June
30,
|
|
|
2022
|
|
2022
|
|
|
|
|
|
Cash and cash
equivalents
|
|
276,858
|
|
155,924
|
Short-term
investments
|
|
562
|
|
31,161
|
Undrawn amounts under
credit facilities
|
|
309,002
|
|
383,941
|
Available
liquidity
|
|
586,422
|
|
571,026
|
C1 cash Cost
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
Per tonne
sold
|
|
|
|
|
|
|
|
|
Iron ore concentrate
sold (dmt)
|
|
2,793,400
|
|
1,953,900
|
|
4,807,300
|
|
3,928,600
|
|
|
|
|
|
|
|
|
|
(in thousands of
dollars except per tonne)
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
199,841
|
|
110,884
|
|
369,248
|
|
231,730
|
Less: Incremental costs
related to COVID-19
|
|
(305)
|
|
(1,099)
|
|
(1,145)
|
|
(3,167)
|
Less: Bloom Lake Phase
II start-up costs
|
|
(15,391)
|
|
—
|
|
(34,867)
|
|
—
|
|
|
184,145
|
|
109,785
|
|
368,103
|
|
228,563
|
|
|
|
|
|
|
|
|
|
C1 cash cost (per dmt
sold)
|
|
65.9
|
|
56.2
|
|
69.3
|
|
58.2
|
All-In Sustaining Cost
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
Per tonne
sold
|
|
|
|
|
|
|
|
|
Iron ore concentrate
sold (dmt)
|
|
2,793,400
|
|
1,953,900
|
|
4,807,300
|
|
3,928,600
|
|
|
|
|
|
|
|
|
|
(in thousands of
dollars except per tonne)
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
199,841
|
|
110,884
|
|
369,248
|
|
231,730
|
Less: Incremental costs
related to COVID-19
|
|
(305)
|
|
(1,099)
|
|
(1,145)
|
|
(3,167)
|
Less: Bloom Lake Phase
II start-up costs
|
|
(15,391)
|
|
—
|
|
(34,867)
|
|
—
|
Sustaining capital
expenditures
|
|
36,181
|
|
26,461
|
|
63,126
|
|
43,228
|
G&A
expenses
|
|
8,564
|
|
7,548
|
|
20,836
|
|
15,352
|
|
|
228,890
|
|
143,794
|
|
417,198
|
|
287,143
|
|
|
|
|
|
|
|
|
|
AISC (per dmt
sold)
|
|
81.9
|
|
73.6
|
|
86.8
|
|
73.1
|
Cash Operating Margin and Cash Profit Margin
|
|
Three Months
Ended
|
Six Months
Ended
|
|
|
September 30,
|
September 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
Per tonne
sold
|
|
|
|
|
|
|
|
|
Iron ore concentrate
sold (dmt)
|
|
2,793,400
|
|
1,953,900
|
|
4,807,300
|
|
3,928,600
|
|
|
|
|
|
|
|
|
|
(in thousands of
dollars except per tonne)
|
|
|
|
|
|
|
|
|
Revenues
|
|
300,621
|
|
331,006
|
|
579,942
|
|
876,414
|
Net average realized
selling price (per dmt sold)
|
|
107.6
|
|
169.4
|
|
120.6
|
|
223.1
|
|
|
|
|
|
|
|
|
|
AISC (per dmt
sold)
|
|
81.9
|
|
73.6
|
|
86.8
|
|
73.1
|
Cash operating margin
(per dmt sold)
|
|
25.7
|
|
95.8
|
|
33.8
|
|
150.0
|
Cash profit
margin
|
|
24 %
|
|
57 %
|
|
28 %
|
|
67 %
|
Gross Average Realized Selling Price per dmt Sold
|
Three Months
Ended
|
|
Six Months
Ended
|
|
September 30,
|
|
September 30,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Per tonne
sold
|
|
|
|
|
|
|
|
Iron ore concentrate
sold (dmt)
|
2,793,400
|
|
1,953,900
|
|
4,807,300
|
|
3,928,600
|
|
|
|
|
|
|
|
|
(in thousands of
dollars except per tonne)
|
|
|
|
|
|
|
|
Revenues
|
300,621
|
|
331,006
|
|
579,942
|
|
876,414
|
Provisional pricing
adjustments
|
20,931
|
|
11,229
|
|
36,599
|
|
(49,666)
|
Freight and other
costs
|
117,131
|
|
85,219
|
|
205,492
|
|
153,026
|
Gross
revenues
|
438,683
|
|
427,454
|
|
822,033
|
|
979,774
|
|
|
|
|
|
|
|
|
Gross average realized
selling price (per dmt sold)
|
157.0
|
|
218.8
|
|
171.0
|
|
249.4
|
SOURCE Champion Iron Limited