Champion Iron Limited press release

CHAMPION IRON REPORTS ITS FY2025 THIRD QUARTER RESULTS, ADVANCES THE DRPF PROJECT AND INITIATES KAMI FEASIBILITY STUDY WITH PARTNERS

2025-01-29

TSX - Toronto Stock Exchange · Iron · Aluminium · Manganese · Copper · Zinc · Australia

Canada NewsWire

Quarterly production of 3.6M wmt, sales of 3.3M dmt, revenue of $363M and EBITDA of $88M 1 DRPF project advancing on budget and as scheduled for commissioning in December 2025 , including an additional $69M deployed in the quarter with cumulative investments to date of $288M Entered into a binding agreement with Nippon and Sojitz to form a partnership to evaluate the Kami Project and initiated a definitive feasibility study

MONTRÉAL , Jan. 29, 2025 /CNW/ - ( Sydney , January 30, 2025 ) - Champion Iron Limited (TSX: CIA) (ASX: CIA) (OTCQX: CIAFF) ("Champion" or the "Company") reports its operational and financial results for its financial third quarter ended December 31, 2024.

Champion's CEO, Mr. David Cataford, said, "Our workforce demonstrated their responsiveness and ingenuity during the breakdown of a critical piece of equipment in the period. While events inevitably impacted quarterly results, Bloom Lake has proven its operational stability in the last several years, providing the foundation to grow our position as a leading high-purity iron ore producer. As such, our DRPF project continues to advance towards an expected commissioning in December 2025 , further aligning our Company with the green steelmaking transition which supports higher pricing premiums for our products. Additionally, the rare quality of our high-purity iron ore resources, local support and operational expertise enabled our Company to attract global industry leaders as partners for the Kami Project. This newly formed agreement provides an opportunity to further evaluate the Kami Project, including initiating a definitive feasibility study, which is expected to be completed by mid-2026."

Conference Call Details

Champion will host a conference call and webcast on January 30, 2025, at 9:00 AM (Montréal time) / January 31, 2025 , at 1:00 AM ( Sydney time) to discuss the results of the financial third quarter ended December 31, 2024. Call details are set out at the end of this press release.

1. Quarterly Highlights

Operations and Sustainability

During the three-month period ended December 31, 2024 , no major environmental incidents were reported; however, one non-fatal incident occurred involving a contractor at the DRPF construction site; Quarterly production of 3.6 million wmt (3.5 million dmt) of high-grade 66.3% Fe concentrate for the three-month period ended December 31, 2024 , up 14% from the previous quarter and down 10% over the same period last year; In December 2024 , shipments were negatively impacted by a 14-day interruption due to the breakdown of a critical piece of equipment at the Bloom Lake mine's train load-out facility, which is utilized to ship iron ore concentrate by railway to the port of Sept-Îles (the "Load-Out"). During this period, the Company stockpiled its production and took the opportunity to complete additional maintenance, which impacted production. Despite this interruption, quarterly iron ore concentrate sales were 3.3 million dmt for the three-month period ended December 31, 2024 , comparable to the previous quarter and the prior-year period; Iron ore concentrate stockpiled at Bloom Lake increased slightly to 2.9 million wmt as at December 31, 2024 , compared to 2.8 million wmt as at September 30, 2024 , primarily as a result of events at the Load-Out. The Company is confident that the iron ore concentrate currently stockpiled at Bloom Lake will decrease in future periods. The Company believes that the receipt of 400 railcars, and additional rolling stock recently commissioned by the rail operator should improve the rail shipment capabilities in the near-term; and Record material mined and hauled at Bloom Lake totalling 20.0 million tonnes for the three-month period ended December 31, 2024 , up 8% from the previous quarter and 10% from last year. The Company also achieved monthly sales in November of almost 1.6 million dmt, driven by 1.4 million wmt of concentrate transported from Bloom Lake, and by the loading of the two largest vessels in the Company's history.

Financial Results

Gross average realized selling price of US$113.4 /dmt 1 , compared to the P65 index average of US$118.0 /dmt in the period; Net average realized selling price of US$78.8 /dmt 1 , comparable quarter-on-quarter, and representing a decrease of 32% year-on-year; C1 cash cost of $78.7 /dmt 1 ( US$56.3 /dmt) 2 , comparable quarter-on-quarter, and representing an increase of 8% year-on-year; EBITDA of $88.2 million 1 , an increase of 18% quarter-on-quarter, and a decrease of 64% year-on-year; Net income of $1.7 million , a decrease of 91% quarter-on-quarter, and 99% year-on-year, negatively impacted by an unrealized foreign exchange loss of $21.1 million resulting from the revaluation of net monetary liabilities denominated in U.S. dollars; Cash balance totalled $93.1 million as at December 31, 2024 , a decrease of $90.7 million since September 30, 2024 , as the Company continued to advance the DRPF project and paid its seventh semi-annual dividend of $0.10 per ordinary share totalling $51.8 million on November 28, 2024 (Montréal and Sydney ); and Available liquidity to support growth initiatives, including amounts available from the Company's credit facilities, totalled $595.0 million 1 at quarter-end, compared to $759.3 million 1 as at September 30, 2024 .

Growth and Development

The DRPF project, aimed at upgrading half of Bloom Lake's capacity to DR quality pellet feed iron ore grading up to 69% Fe, is progressing on schedule and on budget, with commissioning currently expected in December 2025 . Quarterly and cumulative investments of $69.3 million and $287.8 million , respectively, as at December 31, 2024 , out of the estimated total capital expenditures of $470.7 million , as detailed in the project study released in January 2023 ; Entered into a binding agreement with Nippon Steel Corporation ("Nippon") and Sojitz Corporation ("Sojitz", and collectively with Nippon, the "Partners") to form a partnership (the "Partnership") for the joint ownership and development of the Kami Project (the "Transaction"). The Partners share the Company's long-term vision for Kami and will initially contribute $245 million for 49% of the equity interest in the Partnership. The Company may receive future payments based on the Kami Project's financial performance, if and when in operation. Closing of the Transaction is subject to the Company and the Partners entering into a framework agreement (the "Framework Agreement") to advance the Kami Project towards a potential interim investment decision ("IID") and ultimately a final investment decision ("FID"), including Kami Project permitting and the completion of a definitive feasibility study for the Kami Project (the "DFS"), which is expected to be completed in calendar mid-2026. The Partners will also contribute cash to the Partnership to support their share of the DFS over the next two years. Should the Company and the Partners make a positive FID election following the completion of the DFS, they will share development and construction costs of the Project in accordance with their respective ownership interests. Through the Transaction and future pro-rata contributions from the Partners, the Project will benefit from up to $490 million in contributions prior to Champion requiring additional capital funding for its pro-rata share of the Project; and Additional mining equipment received during the period, increasing the Bloom Lake's mine production capacity, including stripping activities.

2. Bloom Lake Mine Operating Activities

During the three-month period ended December 31, 2024, an outage occurred on the Company's Load-Out facility at Bloom Lake, which caused a 14-day interruption of rail haulage activities. During the repair period of the Load-Out, the Company took the opportunity to complete additional maintenance, which impacted production. The port operator also took advantage of this interruption to carry out maintenance work on its ship loader. Despite reclaimed tonnes in the first two months of the quarter, the iron ore concentrate stockpiled at Bloom Lake increased to 2.9 million wmt as at December 31, 2024, compared to 2.8 million wmt as at September 30, 2024, as no iron ore concentrate was hauled to the port of Sept-Îles from December 3 to December 17, 2024. The Load-Out facility was repaired at a relatively low cost and rail haulage activities gradually resumed on December 17, 2024. During the three-month period ended December 31, 2024, sales volumes were also impacted by a planned shutdown at the port of Sept-Îles for maintenance activities, a rail service interruption due to a landslide on the main line, as well as a minor train derailment at the beginning of the period. Despite these events, sales volume remained stable quarter-on-quarter and year-on-year.

The Company is confident that the iron ore concentrate currently stockpiled at Bloom Lake will decrease in future periods. The Company believes that the receipt of 400 railcars, and additional rolling stock recently commissioned by the rail operator should improve the rail shipment capabilities in the near-term. The Company also continues to seek improvements from the rail operator to receive contracted haulage services on a continued basis to ensure that Bloom Lake's production, as well as iron ore concentrate currently stockpiled at Bloom Lake, is hauled over future periods.

As part of the investments required to address operational bottlenecks and increase stripping activities in the future, as per the mine plan, the Company received and commissioned additional haul trucks and loading equipment during the three-month period ended December 31, 2024. As a result, the Company achieved record production at Bloom Lake, with material mined and hauled exceeding 20 million tonnes during the quarter for the first time. The Company continues to analyze work programs and investments required to structurally increase Bloom Lake's nameplate capacity beyond 15 Mtpa over time.

To optimize operations, since the fourth quarter of the 2024 financial year, the Company has arranged for both plants' scheduled maintenance to be in tandem in the financial second and fourth quarters, compared to alternating scheduled plant maintenance quarterly. This creates significant differences quarter-on-quarter on production output, mining and processing costs and inventory valuation at quarter-end.

| | | Q3 FY25 | Q2 FY25 | Q/Q Change | Q3 FY24 | Y/Y Change | | Operating Data | | | | | | | | Waste mined and hauled (wmt) | | 9,694,200 | 9,323,600 | 4 % | 6,993,200 | 39 % | | Ore mined and hauled (wmt) | | 10,347,500 | 9,287,100 | 11 % | 11,215,800 | (8) % | | Material mined and hauled (wmt) | | 20,041,700 | 18,610,700 | 8 % | 18,209,000 | 10 % | | Stripping ratio | | 0.94 | 1.00 | (6) % | 0.62 | 52 % | | Ore milled (wmt) | | 10,305,300 | 9,125,000 | 13 % | 11,137,000 | (7) % | | Head grade Fe (%) | | 29.3 | 29.1 | 1 % | 29.4 | — % | | Fe recovery (%) | | 79.1 | 78.7 | 1 % | 81.4 | (3) % | | Product Fe (%) | | 66.3 | 66.3 | — % | 66.3 | — % | | Iron ore concentrate produced (wmt) | | 3,620,600 | 3,170,100 | 14 % | 4,042,600 | (10) % | | Iron ore concentrate sold (dmt) | | 3,287,400 | 3,265,700 | 1 % | 3,227,500 | 2 % |

Bloom Lake produced 3.6 million wmt (3.5 million dmt) of high-grade iron ore concentrate during the three-month period ended December 31, 2024, a decrease of 10% compared to 4.0 million wmt (3.9 million dmt) during the same period in 2023.

During the three-month period ended December 31, 2024, a record 20.0 million tonnes of material were mined and hauled, compared to 18.2 million tonnes during the same period in 2023, representing an increase of 10%. The increased mine performance was attributable to a higher utilization and availability of mining equipment, additional haul trucks, and loading equipment commissioned at the end of the period.

The mining equipment's increased performance allowed the Company to mine and haul a higher volume of waste material, resulting in a stripping ratio of 0.94 for the three-month period ended December 31, 2024, significantly higher than the 0.62 ratio for the same prior-year period. During the previous quarter, the Company mined and hauled 18.6 million tonnes of materials for a stripping ratio of 1.00. With the recent addition of mining equipment, Champion expects to maintain this high level of mining and hauling activities in the future, in line with the LoM plan.

During the three-month period ended December 31, 2024, the two concentration plants at Bloom Lake processed 10.3 million tonnes of ore, compared to 11.1 million tonnes for the same prior-year period, representing a decrease of 7%. During the same period last year, the Company decided to run both plants beyond their nameplate capacity to identify operational bottlenecks. Ore processed during the three-month period ended December 31, 2024, continued to be negatively impacted by higher ore hardness which reduced milling capacity and Fe recovery. Production was also slightly impacted by the timing of maintenance activities during the interruption of the rail haulage activities as described above.

The iron ore head grade for the three-month period ended December 31, 2024, was 29.3%, comparable to the same period in 2023. The variation in head grade was within expected normal variations of the mine plan.

Champion's average Fe recovery rate was 79.1% for the three-month period ended December 31, 2024, compared to 81.4% for the same period in 2023. The Company will continue to optimize recovery circuits and expects to improve and stabilize recovery rates over time.

3. Financial Performance

| | | Q3 FY25 | Q2 FY25 | Q/Q Change | Q3 FY24 | Y/Y Change | | Financial Data (in thousands of dollars) | | | | | | | | Revenues | | 363,170 | 350,980 | 3 % | 506,891 | (28) % | | Cost of sales | | 258,728 | 252,960 | 2 % | 235,457 | 10 % | | Other expenses | | 17,290 | 23,153 | (25) % | 27,219 | (36) % | | Net finance costs | | 30,508 | 7,486 | 308 % | 8,747 | 249 % | | Net income | | 1,741 | 19,807 | (91) % | 126,462 | (99) % | | EBITDA 1 | | 88,216 | 74,536 | 18 % | 246,609 | (64) % | | Statistics (in dollars per dmt sold) | | | | | | | | Gross average realized selling price 1 | | 158.8 | 161.8 | (2) % | 195.8 | (19) % | | Net average realized selling price 1 | | 110.5 | 107.5 | 3 % | 157.1 | (30) % | | C1 cash cost 1 | | 78.7 | 77.5 | 2 % | 73.0 | 8 % | | AISC 1 | | 93.9 | 101.4 | (7) % | 83.9 | 12 % | | Cash operating margin 1 | | 16.6 | 6.1 | 172 % | 73.2 | (77) % |

A. Revenues

Revenues totalled $363 .2 million for the three-month period ended December 31, 2024, compared to $506 .9 million for the same period in 2023, mostly driven by lower gross average realized selling prices and $17 .4 million negative provisional pricing adjustments on sales recorded during the previous quarter, partially offset by slightly lower freight and other costs, and a weaker Canadian dollar. Sales volumes of 3.3 million tonnes of high-grade iron ore concentrate were comparable to the same prior-year period. Sales volumes were impacted by the interruption of rail haulage activities in December as outlined in previous sections of this press release, a planned shutdown at the port of Sept-Îles, a rail interruption due to heavy rains, as well as a minor train derailment at the beginning of the period.

Negative provisional pricing adjustments on prior quarter sales of $17 .4 million ( US$12 .9 million) were recorded during the three-month period ended December 31, 2024, representing a negative impact of US$3.9 /dmt over 3.3 million dmt sold during the quarter. A final average price of US$114.4 /dmt was established for the 2.3 million tonnes of iron ore that remained subject to pricing adjustments as at September 30, 2024, which were provisionally priced at US$119.9 /dmt.

The gross average realized selling price of US$113.4 /dmt 1 for the three-month period ended December 31, 2024, was lower than the P65 index average price of US$118.0 /dmt for the period. The gross average realized selling price for the period was impacted by the 1.7 million tonnes that remained subject to pricing adjustments as at December 31, 2024, and which were evaluated using an average price of US$110.1 /dmt. The price of sales contracts using backward-looking iron ore index prices was comparable to the P65 index average price for the period. The P65 index premium over the P62 index averaged 14.1% during the quarter, up significantly from 8.1% in the comparative period.

Freight and other costs of US$30.7 /dmt during the three-month period ended December 31, 2024, decreased by 5%, compared to US$32.2 /dmt in the same prior-year period. This decrease was mainly driven by lower average C3 index of US$21.6 /t for the period, compared to US$24.9 /t for the same period last year. The 5% decrease in freight and other costs was lower than the 13% decrease in the average C3 index for the period, due to the vessels being rerouted via the Cape of Good Hope as a result of the conflict in the Red Sea, and the timing of vessels booked. Champion typically books vessels three to five weeks prior to the desired laycan period. As such, for vessels contracted on the spot market, the Company did not benefit from the lower C3 index prices of December. Moreover, the events at the Load-Out negatively impacted demurrage costs during the period.

After taking into account sea freight and other costs of US$30.7 /dmt and the negative provisional pricing adjustments of US$3.9 /dmt, the Company obtained a net average realized selling price of US$78.8 /dmt ( C$110.5 /dmt 1 ) for its high-grade iron ore shipped during the quarter.

B. Cost of Sales and C1 Cash Cost

For the three-month period ended December 31, 2024, the cost of sales totalled $258 .7 million with a C1 cash cost of $78.7 /dmt 1 , compared to $235 .5 million with a C1 cash cost of $73.0 /dmt 1 for the same period in 2023. Cost of sales in the previous quarter was $253 .0 million with a C1 cash cost of $77.5 /dmt 1 .

Mining and processing costs for the 3.5 million dmt produced in the three-month period ended December 31, 2024, totalled $49.6 /dmt produced 1 , representing an increase of 9% compared to $45.3 /dmt produced 1 in the same period last year. This increase was mainly driven by a 10% reduction in the volume of iron ore concentrate produced leading to a lower absorption of fixed costs, higher maintenance cost relating to planned and unplanned maintenance activities and higher subcontractor expenses at the mine required for stripping activities.

Land transportation and port handling costs for the three-month period ended December 31, 2024, were $26.2 /dmt sold 1 , higher than $24.4 /dmt sold 1 last year. This increase was partially attributable to the volume impact of iron ore concentrate hauled as a result of the events at the Load-Out in December. The increase in C1 cash costs over the same period last year was also due to the change in concentrate inventory valuation impacted by mining and processing costs incurred in the previous quarter, and production volumes.

C. Net Income & EBITDA

For the three-month period ended December 31, 2024, the Company generated EBITDA of $88 .2 million 1 , representing an EBITDA margin of 24% 1 , compared to $246 .6 million 1 , representing an EBITDA margin of 49% 1 , for the same period in 2023. Lower EBITDA and EBITDA margin were mainly driven by lower net average realized selling prices and higher cost of sales.

For the three-month period ended December 31, 2024, the Company generated net income of $1 .7 million (EPS of 0.00), compared to $126 .5 million (EPS of $0.24 ) for the same prior-year period. This decrease in net income is attributable to lower gross profit and an unrealized foreign exchange loss of $21.1 million resulting from the revaluation of net monetary liabilities denominated in U.S. dollars, partially offset by lower income and mining taxes.

D. All in Sustaining Cost & Cash Operating Margin