Champion Iron Limited press release
CHAMPION IRON REPORTS ITS FY2025 SECOND QUARTER RESULTS, DECLARES DIVIDEND AND ADVANCES THE DRPF PROJECT AS PLANNED
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Quarterly production of 3.2M wmt, sales of 3.3M dmt, revenue of $351M , EBITDA of $75M 1 and EPS of $0.04 Declares a dividend of $0.10 per ordinary share DRPF project advancing as planned for scheduled commissioning in H2/2025, including an additional $65M deployed in the quarter and cumulative investments to date of $218M Disclosed work programs required for the Company to meet its 2030 Scope 1 and 2 emission reduction commitment and the Company's initial Scope 3 emissions assessment
MONTRÉAL , Oct. 30, 2024 /CNW/ - ( Sydney , October 31, 2024 ) - Champion Iron Limited (TSX: CIA) (ASX: CIA) (OTCQX: CIAFF) ("Champion" or the "Company") reports its operational and financial results for its financial second quarter ended September 30, 2024 .
Champion's CEO, Mr. David Cataford, said, "Although forest fires impacted operations for several days in July, our comprehensive protocols successfully safeguarded our workforce and infrastructure while also achieving quarterly records for material mined and hauled. Notwithstanding the effect of forest fires on quarterly results, Bloom Lake demonstrated its ability to operate at its recently expanded nameplate capacity in the past months. Despite a turbulent macroeconomic environment, our strong balance sheet and continued focus on reliable production performance enabled our Company to pursue its capital return strategy by declaring a seventh consecutive semi-annual dividend. Looking forward, our focus remains on solidifying operations and pursuing the construction of the DRPF project, which will further position our Company as an industry solution to decarbonize steelmaking."
Conference Call Details Champion will host a conference call and webcast on October 31, 2024, at 9:00 AM (Montréal time) / November 1, 2024 , at 12:00 AM ( Sydney time) to discuss the results of the financial second quarter ended September 30, 2024. Call details are set out at the end of this press release.
1. Quarterly Highlights
Operations and Sustainability
No serious injuries or major environmental incidents reported in the three-month period ended September 30, 2024 ; Gradual return of Bloom Lake's workforce, three days after being evacuated from the site on July 12, 2024 , as a preventive response to nearby forest fires. The Company's facilities and third parties' infrastructure were not damaged by the fires. Although these events impacted production for approximately a week, mining activities resumed a few days before the rail service, closely followed by the resumption of operations at the concentration plants; As scheduled, the Company successfully executed the major planned semi-annual shutdowns of the two concentration plants in September 2024 , impacting production over several days; Quarterly production of 3.2 million wmt (3.1 million dmt) of high-grade 66.3% Fe concentrate for the three-month period ended September 30, 2024 , down 18% from the previous quarter and down 8% over the same period last year; Quarterly iron ore concentrate sales of 3.3 million dmt for the three-month period ended September 30, 2024 , down 5% from the previous quarter and up 13% from the prior-year period; The Company continues to seek improvements from the rail operator to receive contracted haulage services to ensure that production, as well as iron ore concentrate currently stockpiled at Bloom Lake, is hauled over future periods. Iron ore concentrate stockpiled at Bloom Lake was 2.8 million wmt as at September 30, 2024 , down from 3.0 million wmt as at June 30, 2024 . The rail operator haulage capacity is expected to increase in the near term as it has recently started receiving additional rolling stock that had previously been ordered; and Aligned with its sustainability objectives and vision to reduce emissions across the steelmaking value chain, the Company identified work programs to achieve its 2030 Scope 1 and 2 emission reduction target and completed its initial Scope 3 assessment. Additional details can be found in the Company's MD&A for the three and six-month periods ended September 30, 2024 , available under its profile on SEDAR+ at www.sedarplus.ca , the ASX at www.asx.com.au and the Company's website at www.championiron.com .
Financial Results
Gross realized selling price of US$118.9 /dmt 1 , compared to the P65 index average of US$114.2 /dmt in the period; Net realized selling price of US$79.0 /dmt 1 , representing a 20% decrease quarter-on-quarter, and 21% year-on-year; C1 cash cost of $77.5 /dmt 1 ( US$56.8 /dmt) 2 , comparable quarter-on-quarter, and representing an increase of 5% year-on-year; EBITDA of $74.5 million 1 , a decrease of 59% quarter-on-quarter, and 52% year-on-year; Net income of $19.8 million , a decrease of 76% quarter-on-quarter, and 70% year-on-year; EPS of $0.04 , a decrease of 75% quarter-on-quarter, and 69% year-on-year; As anticipated, the cash balance decreased by $110.9 million since June 30, 2024 , and was $183.8 million as at September 30, 2024 , mainly resulting from the dividend payment in July 2024 , seasonal sustaining capital expenditures and the advancement of the DRPF project, offset in part by changes in working capital; Available liquidity to support growth initiatives, including amounts available from the Company's credit facilities, totalled $759.3 million 1 at quarter-end, compared to $860.8 million 1 as at June 30, 2024 ; and Semi-annual dividend of $0.10 per ordinary share declared on October 30, 2024 (Montréal) / October 31, 2024 ( Sydney ), will be payable on November 28, 2024 (Montréal and Sydney ) to the Company's shareholders on record as at the close of business on November 12, 2024 (Montréal and Sydney ), in connection with the semi-annual results for the period ended 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 scheduled for the second half of calendar year 2025. Advanced engineering and construction works continued as planned, with quarterly and cumulative investments of $64.7 million and $218.4 million , respectively, as at September 30, 2024 , out of the estimated total capital expenditures of $470.7 million detailed in the project study released in January 2023 ; Progressed the Environmental Impact Statement for the Kami Project as required by the Government of Newfoundland and Labrador , officially introduced the project's brand to support local community awareness, and appointed a General Manager with significant experience in developing and operating sizeable mining projects. Concurrently, the Company continued to work on initiatives to improve the project economics prior to considering a final investment decision, including strategic partnerships; The production of 400 additional railcars, ordered in the previous quarter, commenced in September 2024 , with delivery to Sept-Îles expected in the coming months. This acquisition should be fully financed through a long-term loan and is expected to improve the Company's rail shipment flexibility and potentially increase Bloom Lake's sales in the future; and Promotion of François Lavoie as Senior Vice-President, Sales, Technical Marketing and Product Development, joining Champion's Management Team on July 25, 2024 , in recognition of years of valuable contributions to the Company's success, including the recommissioning of Bloom Lake in 2018 and completion of several project economic studies.
2. Bloom Lake Mine Operating Activities
During the three-month period ended September 30, 2024, Bloom Lake's operations continued to deliver solid performance. Production and sales during the period were impacted by the planned major semi-annual shutdowns of both concentration plants and rail infrastructures, in addition to approximately one week of production losses following the preventive evacuation of Bloom Lake's facilities on July 12, 2024 , in response to nearby forest fires. Although production and sales were negatively impacted by these events, the Company continued to solidify its operations and achieved record volume of material mined and hauled during the second quarter, benefiting from improved mining equipment availability and productivity. During the three-month period ended September 30, 2024, volumes transported were slightly higher than production as rail haulage services resumed shortly before processing activities returned to their normal operational cadence in July 2024 , following the forest fires. The Company also drew stockpiled iron ore at Bloom Lake during its scheduled semi-annual plants maintenance. Accordingly, the iron ore concentrate stockpiled at Bloom Lake decreased to 2.8 million wmt as at September 30, 2024, from 3.0 million wmt as at June 30, 2024.
The Company continues to seek improvements from the rail operator to receive contracted haulage services to ensure that Bloom Lake's production, as well as iron ore concentrate currently stockpiled at Bloom Lake, is hauled over future periods. The rail operator recently received and is expected to receive in the near-term additional rolling stock, which should increase its shipment capacity. The production of an additional 400 railcars, ordered by the Company in July 2024 , began in September and are expected to be gradually delivered to Sept-Îles in the coming months. The 400 railcars, combined with additional rolling stock from the rail operator, are expected to increase Champion's rail haulage flexibility over time as part of its strategy to potentially increase Bloom Lake's future sales.
The Company continued to analyze work programs and investments required to structurally increase Bloom Lake's nameplate capacity beyond 15 Mtpa over time. The recently acquired additional mining equipment, to be delivered and commissioned over the coming months, is expected to support the mine's production capacity, as the Company evaluates opportunities to address operational bottlenecks and maintain high stripping activities in the future, as per the mine plan.
| | | Q2 FY25 | Q1 FY25 | Q/Q Change | | Q2 FY24 | Y/Y Change | | | | | | | | | | | Operating Data | | | | | | | | | Waste mined and hauled (wmt) | | 9,323,600 | 6,733,700 | 38 % | | 6,264,600 | 49 % | | Ore mined and hauled (wmt) | | 9,287,100 | 10,779,300 | (14) % | | 10,593,600 | (12) % | | Material mined and hauled (wmt) | | 18,610,700 | 17,513,000 | 6 % | | 16,858,200 | 10 % | | Stripping ratio | | 1.00 | 0.62 | 61 % | | 0.59 | 69 % | | Ore milled (wmt) | | 9,125,000 | 11,084,300 | (18) % | | 10,339,700 | (12) % | | Head grade Fe (%) | | 29.1 | 29.1 | 0 % | | 28.2 | 3 % | | Fe recovery (%) | | 78.7 | 79.3 | (1) % | | 77.8 | 1 % | | Product Fe (%) | | 66.3 | 66.3 | — % | | 66.1 | — % | | Iron ore concentrate produced (wmt) | | 3,170,100 | 3,876,500 | (18) % | | 3,447,200 | (8) % | | Iron ore concentrate sold (dmt) | | 3,265,700 | 3,442,800 | (5) % | | 2,883,800 | 13 % |
During the three-month period ended September 30, 2024, a record 18.6 million tonnes of material were mined and hauled, compared to 16.9 million tonnes during the same period in 2023 and 17.5 million tonnes during the previous quarter, representing an increase of 10% and 6%, respectively. The increased mine performance was attributable to a higher utilization and availability of mining equipment, and reduced trucking cycle time associated with the construction of additional ramp accesses in the previous quarters.
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 1.00 for the three-month period ended September 30, 2024, significantly higher than 0.59 for the same prior-year period, and 0.62 in the previous quarter. After the July 2024 forest fires, the Company resumed mining operations earlier than the concentration plants, enabling the reallocation of mining equipment to move additional waste materials during the three-month period ended September 30, 2024. With the addition of mining equipment in the coming months, the Company 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 September 30, 2024, the two concentration plants at Bloom Lake processed 9.1 million tonnes of ore, compared to 10.3 million tonnes for the same prior-year period and 11.1 million tonnes in the previous quarter, a decrease of 12% and 18%, respectively. Ore processed during the three-month period ended September 30, 2024, was negatively impacted by the availability of the concentration plants due to the major scheduled semi-annual shutdowns, as well as the production interruption due to the preventive evacuation of Bloom Lake in response to the nearby forest fires. Ore processed was also negatively impacted during the quarter by a mined area of higher ore hardness, reducing milling capacity and affecting the Fe recovery.
The iron ore head grade for the three-month period ended September 30, 2024, was 29.1%, compared to 28.2% for the same period in 2023, and 29.1% during the previous quarter. The variation in head grade was within expected normal variations of the mine plan.
Champion's average Fe recovery rate was 78.7% for the three-month period ended September 30, 2024, compared to 77.8% for the same period in 2023, and 79.3% during the previous quarter. The Company continued its work programs to optimize its recovery circuits and expects to improve recovery rates over time.
Bloom Lake produced 3.2 million wmt (3.1 million dmt) of high-grade iron ore concentrate during the three-month period ended September 30, 2024, a decrease of 8% compared to 3.4 million wmt (3.4 million dmt) during the same period in 2023, and a decrease of 18% compared to 3.9 million wmt (3.8 million dmt) during the previous quarter.
3. Financial Performance
| | | Q2 FY25 | Q1 FY25 | Q/Q Change | | Q2 FY24 | Y/Y Change | | | | | | | | | | | Financial Data (in thousands of dollars) | | | | | | | | | Revenues | | 350,980 | 467,084 | (25 %) | | 387,568 | (9 %) | | Cost of sales | | 252,960 | 264,911 | (5 %) | | 212,584 | 19 % | | Other expenses | | 23,153 | 21,159 | 9 % | | 20,192 | 15 % | | Net finance costs | | 7,486 | 8,259 | (9 %) | | 11,634 | (36 %) | | Net income | | 19,807 | 81,357 | (76 %) | | 65,281 | (70 %) | | EBITDA 1 | | 74,536 | 181,160 | (59 %) | | 155,036 | (52 %) | | | | | | | | | | | Statistics (in dollars per dmt sold) | | | | | | | | | Gross average realized selling price 1 | | 161.8 | 171.6 | (6 %) | | 169.4 | (4 %) | | Net average realized selling price 1 | | 107.5 | 135.7 | (21 %) | | 134.4 | (20 %) | | C1 cash cost 1 | | 77.5 | 76.9 | 1 % | | 73.7 | 5 % | | AISC 1 | | 101.4 | 91.6 | 11 % | | 99.1 | 2 % | | Cash operating margin 1 | | 6.1 | 44.1 | (86 %) | | 35.3 | (83 %) |
A. Revenues
Revenues totalled $351 .0 million for the three-month period ended September 30, 2024, compared to $387 .6 million for the same period in 2023, driven by lower gross average realized selling prices, $22 .9 million negative provisional pricing adjustments on sales recorded during the previous quarter and higher freight costs. This was partially offset by sales volume of 3.3 million tonnes of high-grade iron ore concentrate, up from 2.9 million tonnes for the same prior-year period, and by a weaker Canadian dollar. Sales volume increased year-over-year despite a planned shutdown of rail operations in September, a rail closure caused by nearby forest fires in July, rolling equipment maintenance activities, and a minor rock slide on the rail road, together interrupting rail services for several days during the period. Sales volumes last year were negatively impacted by railway interruptions and reduced service capacity due to forest fires in June 2023 .
Negative provisional pricing adjustments on prior quarter sales of $22 .9 million ( US$17 .1 million) were recorded during the three-month period ended September 30, 2024, representing a negative impact of US$5.2 /dmt over 3.3 million dmt sold during the quarter as a final average price of US$110.0 /dmt was established for the 1.8 million tonnes of iron ore that were in transit as at June 30, 2024, and which were provisionally priced at US$119.4 /dmt.
The gross average realized selling price of US$118.9 /dmt 1 for the three-month period ended September 30, 2024, was higher than the P65 index average price of US$114.2 /dmt for the period. The gross average realized selling price for the period was impacted by the 2.3 million tonnes in transit as at September 30, 2024, which were evaluated using an average price of US$119.9 /dmt and certain sales contracts using backward-looking iron ore index prices, when the index was higher than the P65 index average price for the period. The P65 index premium over the P62 index remained resilient despite market challenges and increased to 14.6% over the P62 index average price of US$99.7 /dmt during the quarter, compared to a premium of 9.6% in the prior-year period, and up from a premium of 12.8% in the previous quarter.
Freight and other costs of US$34.7 /dmt increased by 31% during the three-month period ended September 30, 2024, compared to US$26.4 /dmt in the same prior-year period. This increase was driven by a significantly higher average C3 index of US$26.7 /t for the period, compared to US$20.3 /t for the same period last year. This can likely be attributed to the conflict in the Red Sea which impacted freight routes during the period.
After taking into account sea freight and other costs of US$34.7 /dmt and the negative provisional pricing adjustments of US$5.2 /dmt, the Company obtained a net average realized selling price of US$79.0 /dmt ( C$107.5 /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 September 30, 2024, the cost of sales totalled $253 .0 million with a C1 cash cost of $77.5 /dmt 1 , compared to $212.6 million with a C1 cash cost of $73.7 /dmt 1 for the same period in 2023. Cost of sales in the previous quarter was $264 .9 million with a C1 cash cost of $76.9 /dmt 1 .
Mining and processing costs for the 3.1 million dmt produced in the three-month period ended September 30, 2024, totalled $57.7 /dmt produced 1 , representing an increase of 22% compared to $47.3 /dmt produced 1 in the same period last year. This increase was mainly driven by an 8% reduction in the volume of iron ore concentrate produced, leading to a lower absorption of fixed costs, and higher maintenance costs associated with the major scheduled semi-annual shutdowns performed at both concentration plants during the quarter. Last year's major scheduled semi-annual shutdowns of the two concentration plants were performed over two quarters. Land transportation and port handling costs for the three-month period ended September 30, 2024, were $26.7 /dmt sold 1 , comparable to last year, as the higher volume of iron ore concentrate transiting at the port facilities in Sept-Îles offset higher fixed costs incurred by the port service provider. The increase in C1 cash cost over the same period last year was also due to the impact of the change in concentrate inventory valuation, resulting from higher mining and processing costs incurred in the current quarter as discussed above.
C. Net Income & EBITDA
For the three-month period ended September 30, 2024, the Company generated EBITDA of $74 .5 million 1 , representing an EBITDA margin of 21% 1 , compared to $155 .0 million 1 , representing an EBITDA margin of 40% 1 , for the same period in 2023. Lower EBITDA and EBITDA margin were mainly driven by lower net average realized selling prices.
For the three-month period ended September 30, 2024, the Company generated net income of $19 .8 million (EPS of $0.04 ), compared to $65 .3 million (EPS of $0.13 ) for the same prior-year period. This decrease in net income is attributable to lower gross profit partially offset by lower income and mining taxes.