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Champion Iron Reports Record Net Income, EPS and EBITDA for its FY2022 First Quarter

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Champion Iron Reports Record Net Income, EPS and EBITDA for its FY2022 First Quarter

 

 

 

 

 

Net income of $224.3M, EPS of $0.44 and EBITDA of $405.7M; Phase II expansion remains on track for completion by mid-2022 and redeems $60.0M of its outstanding preferred shares

 

Champion Iron Limited (TSX: CIA) (ASX: CIA) (OTCQX: CIAFF) is pleased to announce operational and financial results for the first quarter ended June 30, 2021.

 

  1. Highlights

 

Health & Safety

  • An employee recordable injury frequency rate of 2.7, which is in line with Québec’s open-pit industry standards; and
  • Fully operational COVID-19 laboratory and measures maintained in line with the Government of Québec (the “Government”) directives to mitigate risks related to COVID-19.

 

Financial

  • Revenues of $545.4M for the three-month period ended June 30, 2021, compared to $244.6M for the same period in 2020;
  • Record EBITDA1 of $405.7M for the three-month period ended June 30, 2021, compared to $130.2M for the same period in 2020;
  • Record net income of $224.3M for the three-month period ended June 30, 2021 (EPS of $0.44), compared to $75.6M for the same period in 2020 (EPS of $0.16);
  • Cash flow from operating activities before change in working capital items of $248.4M for the three-month period ended June 30, 2021, compared to $82.5M for the same period in 2020. Cash used in operating activities totalled $261.1M for the current period and included income and mining taxes payment, resulting in net cash outflow from operations of $12.6M, compared to net cash flow from operations of $75.3M for the same period in 2020;
  • Redemption of $60.0M of Quebec Iron Ore Inc. (“QIO”), the Company’s subsidiary, preferred shares on June 30, 2021 held by Caisse de dépôt et placement du Québec, expected to reduce future dividend payments and overall cost of capital; and
  • Cash on hand1 and restricted cash of $466.7M and receivables of $283.3M as at June 30, 2021, compared $680.5M and $98.8M, respectively, as at March 31, 2021.

 

Operations

  • New 3-year collective agreement reached on June 23, 2021, maintaining the Company’s strong partnership with its workers;
  • Production of 1,936,000 wmt of high-grade 66.3% iron ore (“Fe”) concentrate for the three-month period ended June 30, 2021, compared to 1,798,800 wmt of high-grade 66.5% Fe iron ore concentrate for the same period in 2020;
  • Fe recovery rate of 82.9% for the three-month period ended June 30, 2021, compared to 82.3% for the same period in 2020; and
  • Free on Board (”FOB”) total cash cost1 of $60.1/dmt (US$48.9/dmt) (C1) for the three-month period ended June 30, 2021, compared to $58.4/dmt (US$42.2/dmt) for the same period in 2020 mainly due to increased costs of the scheduled and completed semi-annual maintenance program.

 

Growth and Development

  • Acquisition of the Kamistiatusset iron ore project (the “Kami Project”) and commencement of work related to revising the project’s scope and its feasibility study; and
  • Completion of the acquisition of the Lac Lamêlée property and the 1.5% net smelter return royalty on the Company’s Moiré Lake property and Fermont Properties portfolio.

 

Phase II Expansion Project (“Phase II”) Milestones

  • Construction work is progressing as planned, with more than 300 individuals actively working on the Phase II project, which is expected to be completed by mid-2022; and
  • Capital expenditures of $77.9M and advance payments to Société Ferroviaire et Portuaire de Pointe-Noire (“SFPPN”) and Quebec North Shore and Labrador Railway (“QNS&L”) totalling $40.3M were incurred in the three-month period ended June 30, 2021, with $288.6M invested to date.

Champion’s CEO, Mr. David Cataford, said: “We owe another strong quarterly financial result to our workforce dedicated to the success of our Company. Through their efforts and with an increased focus on reducing global emissions in the steelmaking industry, Champion is benefiting from the rising demand and premium pricing for Bloom Lake’s high-grade iron ore. I am also pleased to report that our Phase II expansion project, which is expected to double our nameplate capacity, remains on target for completion by mid-2022.”

 

  1. Response to the COVID-19 Pandemic

 

Since the beginning of the pandemic, the Company has consistently and proactively deployed several measures in its efforts to mitigate risks related to COVID-19, in line with or exceeding Government guidelines.

 

In a collective effort to improve immunity against COVID-19, including the Company’s ongoing participation in the Côte-Nord Industry Vaccination Center, the Québec vaccination campaign is progressing rapidly. According to daily data published on the website of the Institut National de Santé Publique du Québec, approximately 73% of Québec’s population has received a first dose of vaccine and 63% are considered adequately vaccinated as at July 25, 2021.

 

Although the Company is managing its operations to mitigate risks related to COVID-19, given the significant uncertainty regarding the ultimate impact that the pandemic will have on the overall economy and the demand for iron ore concentrate, the extent to which it could impact operations and cash flows in the future remains uncertain and will depend on future developments, such as the duration of the pandemic, the emergence of variants, the efficacy and availability of vaccines and regulatory actions to contain the virus.

 

There has been no material change to the estimated impacts of the COVID-19 pandemic on the Company’s ongoing and future operations and results since the filing of the 2021 annual MD&A on May 27, 2021. Refer to section 4 of the annual MD&A for the year ended March 31, 2021. The Company’s full COVID-19 plan is available on its website at www.championiron.com.

 

  1. Bloom Lake Phase II Update

 

The Phase II project aims to double Bloom Lake’s nameplate capacity to 15 Mtpa of 66.2% Fe iron ore concentrate by completing the construction of the second plant which was partially built by the mine’s former owner. Based on the new optimized mine plan, the Bloom Lake mining rate would also be increased to accelerate the supply of ore to the expanded facilities, while maintaining a life of mine (“LoM”) of 20 years. On June 20, 2019, the Company announced the findings of the Bloom Lake Feasibility Study (the “Feasibility Study”), including proven and probable mineral reserve estimates of 807.0 Mt (346.0 Mt of proven reserves and 461.0 Mt of probable reserves) at an average grade of 29.0% Fe.

 

During the three-month period ended June 30, 2021, $77,925,000 in capital expenditures and $40,338,000 in advance payments were incurred for the Phase II project, with $288,580,000 invested to date, including $30,549,000 in advance payments to SFPPN and $25,000,000 to QNS&L.

 

The Company had total cash on handand restricted cash of $466,711,000 as at June 30, 2021. In addition, the Company maintains a total undrawn credit facility of US$220,000,000, a master lease agreement for an amount up to US$75,000,000 in connection with the financing of Phase II mining equipment and a seven-year loan agreement with Fonds de Solidarité des Travailleurs du Québec of $75,000,000, of which $45,000,000 remains undrawn as at June 30, 2021. Investments of $85,000,000 related to required upgrades at SFPPN, included in the overall Phase II capital expenditures, will be partially financed through a term loan of up to $70,000,000 signed on July 21, 2021 with Fonds du développement économique du Québec. Based on the foregoing and using ongoing operational cash flows, the Company is now fully funded for the construction of the Phase II project which is scheduled for completion by mid-2022.

 

Milestones

 

In connection with the construction work that is progressing as planned, there are currently more than 300 employees, consultants and subcontractors on-site to meet the Bloom Lake Phase II completion objectives. Project milestones that were achieved and related works undertaken during the three-month period ended June 30, 2021 include:

  • Commencement of load-out conveyors’ installation;
  • Mechanical and electrical installation of the mill recirculation conveyors;
  • Erection of structure steel in the milling and screening area;
  • Excavation of the crushed ore conveyors’ bunker;
  • Continuation of piping installation inside the plant;
  • Continuation of electrical work; and
  • Delivery of some major mining equipment.

 

The progression of construction work accelerated significantly in May and should continue to increase and reach its peak during the second fiscal quarter until October 2021. The ongoing hiring campaign to support the Phase II expansion is progressing as planned and the project is scheduled for completion by mid-2022.

 

Bloom Lake Phase II reserves are based on the technical report entitled “Bloom Lake Mine – Feasibility Study Phase II”, prepared pursuant to National Instrument 43-101 – Standards of Disclosure for Mineral Projects and the Joint Ore Reserves Committee Code (2012 edition) by BBA Inc., Soutex and WSP Canada Inc., having an effective date of June 20, 2019 and filed on August 2, 2019. Bloom Lake Phase II mineral reserves include Bloom Lake Phase I mineral reserves as of the effective date of the mineral reserve estimate reported in the Feasibility Study. The Company is not aware of any new information or data that materially affects the information included in the Feasibility Study and confirms that all material assumptions and technical parameters underpinning the estimates in the Feasibility Study continue to apply and have not materially changed. The Feasibility Study is available under the Company’s filings at www.sedar.com, on the ASX at www.asx.com.au or the Company’s website at www.championiron.com.

 

  1. Bloom Lake Mine Operating Activities

 

Three Months Ended
June 30,
2021 2020 Variance
Operating Data
Waste mined and hauled (wmt) 4,699,500 2,612,800 80 %
Ore mined and hauled (wmt) 5,643,900 4,682,600 21 %
Material mined and hauled (wmt) 10,343,400 7,295,400 42 %
Strip ratio 0.83 0.56 48 %
Ore milled (wmt) 5,227,200 4,604,600 14 %
Head grade Fe (%) 29.6 31.3 (5) %
Fe recovery (%) 82.9 82.3 1 %
Product Fe (%) 66.3 66.5 %
Iron ore concentrate produced (wmt) 1,936,000 1,798,800 8 %
Iron ore concentrate sold (dmt) 1,974,700 1,758,800 12 %
Financial Data (in thousands of dollars)
Revenues 545,408 244,574 123 %
Cost of sales 120,846 107,338 13 %
Other expenses 14,560 9,541 53 %
Net finance costs 4,387 1,145 283 %
Net income 224,339 75,556 197 %
EBITDA1 405,739 130,162 212 %
Statistics (in dollars per dmt sold)
Gross average realized selling price 279.7 149.2 87 %
Net average realized selling price1 276.2 139.1 99 %
Total cash cost (C1 cash cost)1 60.1 58.4 3 %
All-in sustaining cost1 72.6 64.8 12 %
Cash operating margin1 203.6 74.3 174 %

 

Operational Performance

 

On March 24, 2020, the Company announced the ramp down of its operations following Government directives in response to the COVID-19 pandemic. Operations gradually ramped up following the Government’s announcement in April 2020 that mining activities were to be considered a “priority service” in Québec. Early actions implemented by the Company in response to the COVID-19 pandemic minimized impacts on the Company and its operations.

 

During the three-month period ended June 30, 2021, operational activities were impacted by a scheduled and completed semi-annual maintenance program. The next semi-annual maintenance is scheduled for the third quarter of the 2022 fiscal year.

 

In the current period, the Company and its mine site workers agreed on the terms of a new 3-year collective agreement on June 23, 2021, maintaining the Company’s strong mutually beneficial partnership with its workers. The negotiation process did not affect the Company’s operations.

 

In the three-month period ended June 30, 2021, 10,343,400 tonnes of material were mined and hauled, compared to 7,295,400 tonnes for the same period in 2020, an increase of 42%. This increase in material mined and hauled is attributable to the negative impact of the COVID-19 pandemic on several of the Company’s other activities in the comparative period and to a higher strip ratio as per the mine plan in connection with the preparation for the Phase II project operations. The increase in material movement was enabled by the Company’s ongoing mining equipment rebuild program, which provided a higher equipment utilization rate and additional equipment availability, and the commissioning of an additional haul truck during the second quarter of the 2021 fiscal year.

 

The strip ratio increased to 0.83 for the three-month period ended June 30, 2021, compared to 0.56 for the same period in 2020. The strip ratio is consistent with the mine plan for this period of the year.

 

The iron ore head grade for the three-month period ended June 30, 2021 was 29.6%, compared to 31.3% for the same period in 2020. The decrease in head grade is attributable to the presence of some lower-grade ore being sourced and blended from different pits, when compared to the prior year, which was anticipated and is in line with the mining plan and the LoM head grade average.

 

The Bloom Lake plant processed 5,227,200 tonnes of ore during the three-month period ended June 30, 2021, compared to 4,604,600 tonnes for the same period in 2020, representing an increase of 14%. The higher throughput is attributable to the combination of the COVID-19 imposed ramp-down in the comparative period and the higher mill throughput rate for the recently completed quarter. The continuous improvements and operational innovations saw the Company increase throughput stability and reach a higher level of mill productivity, enabling the Company to capitalize on elevated iron ore prices.

 

Bloom Lake produced 1,936,000 wmt of 66.3% Fe high-grade iron ore concentrate during the three-month period ended June 30, 2021, an increase of 8%, compared to 1,798,800 wmt of 66.5% Fe for the same period in 2020. The higher production is attributable to the mining of higher ore tonnages, and both higher throughput and recovery performance at the plant.

 

  1. Financial Performance

 

  1. Revenues

 

During the three-month period ended June 30, 2021, 1,974,700 tonnes of high-grade iron ore concentrate were sold at the CFR China gross average realized price of US$228.3/dmt, before provisional sales adjustments and shipping costs. The gross average realized selling price of US$228.3/dmt represents a premium of 14.2% over the benchmark IODEX 62% Fe CFR China Index (“P62”) price, compared to a premium of 15.5% for the same period in 2020. The gross average realized selling price reflects the sales at a determined price, as well as the forward price of US$232.3 at the expected settlement date for 1,156,100 tonnes which were in transit at the end of the period. The gross average realized selling price of US$228.3/dmt is lower for the quarter, compared to the average IODEX 65% Fe CFR China Index (“P65”) of US$232.3/dmt. The difference is due to the fact that 25% to 40% of iron ore sales are not subject to provisional pricing and are based on backward-looking iron ore prices, which were approximately US$40/dmt lower than the current spot price.

 

Further to recent discounting, required to compete with low pellet pricing and Chinese domestic concentrates priced lower than seaborne ones, the Company now has the ability to fully benefit from the premium pricing of its high-grade product and, in some cases, realizing a supplementary premium to the index. The Company believes that global carbon emissions reduction efforts will support the demand for high-grade raw materials including concentrates and pellets. As such, the Company expects its iron ore concentrate pricing to continue tracking the P65 index in the long term. In addition, the Company should continue to benefit from the current period prices for its contracted volumes based on previous months’ P65 prices in the upcoming fiscal period ending September 30, 2021. Other factors influencing the Company’s realized price included the increasing demand for low silica and alumina products, due to rising coking coal prices and falling levels of iron ore inventories at Chinese ports, further tightening iron ore availability.

 

During the three-month period ended June 30, 2021, the global economic recovery, rising fuel prices and decreased vessel availability contributed to the rising sea freight index, when compared to the previous quarter. As a result, the Company paid higher freight costs in the three-month period ended June 30, 2021, compared to the same period in 2020. The freight costs variation relative to the Baltic Exchange C3 index during the period is mainly due to the timing of the vessels’ booking.

 

During the three-month period ended June 30, 2021, the final price was established for the 1,007,000 tonnes of iron ore that were in transit as at March 31, 2021. Accordingly, during the three-month period ended June 30, 2021, provisional pricing adjustments of $60,895,000 were recorded as additional revenues for the 1,007,000 tonnes, representing a positive impact of US$25.3/dmt for the period.

 

After taking into account sea freight costs of US$28.1/dmt and the provisional sales adjustment of US$25.3/dmt, the Company obtained a net average realized selling price1 of US$225.5/dmt (CA$276.2/dmt) for its high-grade iron ore delivered to the end customer. Revenues totalled $545,408,000 for the three-month period ended June 30, 2021 compared to $244,574,000 for the same period in 2020. The increase is attributable to a higher net average realized selling price1 and higher tonnages of iron ore concentrate being sold.

 

For the three-month period ended June 30, 2021, the Company sold 1,974,700 tonnes of iron ore concentrate shipped to 6 customers located in China, Japan and South Korea.

 

  1. Cost of Sales

 

Cost of sales represents mining, processing, and mine site-related general and administrative expenses. For the three-month period ended June 30, 2021, the cost of sales totalled $120,846,000, compared to $107,338,000 for the same period in 2020.

 

During the three-month period ended June 30, 2021, the total cash cost1 or C1 cash cost1 per tonne, excluding specific and incremental costs related to COVID-19, totalled $60.1/dmt, compared to $58.4/dmt for the same period in 2020. The total cash cost1 for the period was higher mainly due to increased costs of the scheduled and completed maintenance program.

 

  1. Net Income & EBITDA1

 

For the three-month period ended June 30, 2021, the Company generated a record net income of $224,339,000 (EPS of $0.44), compared to $75,556,000 (EPS of $0.16) for the same period in 2020. The increase in net income is mainly due to higher gross profit and improved production resulting in more iron ore concentrate sold, partially offset by higher income and mining taxes from increased taxable income.

 

For the three-month period ended June 30, 2021, the Company generated record EBITDA1 of $405,739,000, including non-cash share-based payments, representing an EBITDA margin1 of 74%, compared to $130,162,000, representing an EBITDA margin1 of 53% for the same period in 2020. The variation in EBITDA1 period over period is primarily due to the greater revenue from higher net average realized selling price1.

 

  1. All-In Sustaining Cost1 and Cash Operating Margin1

 

During the three-month period ended June 30, 2021, the Company realized an AISC1 of $72.6/dmt, compared to $64.8/dmt for the same period in 2020. The variation is due to higher total cash cost1 and higher sustaining capital expenditures related to higher stripping and mining activities and higher investments made in tailings lifts. Stripping and mining activities were negatively impacted by the reduced level of operations at the onset of the COVID-19 pandemic in the three-month period ended June 30, 2020. During the three-month period ended June 30, 2021, the Company performed preventive work on the dykes. Refer to section 7 – Cash Flows – Purchase of Property, Plant and Equipment.

 

Deducting the AISC1 of $72.6/dmt from the net average realized selling price1 of $276.2/dmt, the Company generated a cash operating margin1 of $203.6/dmt for each tonne of high-grade iron ore concentrate sold during the three-month period ended June 30, 2021, compared to $74.3/dmt for the same period in 2020. The variation is essentially attributable to a higher net average realized selling price1.

 

  1. Exploration Activities and Regional Growth

 

Exploration Activities

 

During the three-month period ended June 30, 2021, the Company maintained all of its properties in good standing and did not enter into any farm-in/farm-out arrangements. During the three-month period ended June 30, 2021, the Company incurred $743,000 in exploration and evaluation expenditures, compared to $76,000 for the same period in 2020. During the three-month period ended June 30, 2021, the exploration expenditures mainly consisted of costs associated with minor exploration work and preliminary work related to updating the Kami Project feasibility study. In the comparative period, exploration expenditures related to the acquisition costs of staking additional exploration claims and the fees required to maintaining all of the Company’s properties.

 

Acquisition of the Kami Project

 

On April 1, 2021, the Company completed the acquisition of the Kami Project and certain related contracts. The Kami Project and the related mining properties are located in the Labrador Trough geological belt in southwestern Newfoundland, near the Québec border. Refer to note 5 – Acquisition of the Kami Project of the condensed interim consolidated financial statements for the three-month period ended June 30, 2021.

 

The Kami Project is a high-grade iron ore project near available infrastructure, situated only a few kilometers south-east of the Company’s operating Bloom Lake Mine. Alderon Iron Ore Corp. the Kami Project’s former owner, previously disclosed historical resources estimated at 1,274.5 Mt of measured and indicated resources (536.9 Mt measured and 737.6 Mt indicated) and proven and probable reserves of 517.2 Mt (392.7 Mt proven and 124.5 Mt probable). The historical Kami Project resource estimates are based on the NI 43-101 technical report entitled “Feasibility Study of the Rose Deposit and Resource Estimate for the Mills Lake Deposit of the Kamistiatusset (Kami) Iron Ore Property, Labrador” prepared for Alderon Iron Ore Corp. by BBA Inc., Stantec and Watts, Griffis and McOuat Ltd. dated January 9, 2013 and having an effective date of December 17, 2012. The historical Kami Project reserve estimates are based on the NI 43-101 technical report entitled “Updated Feasibility Study of the Kamistiatusset (Kami) Iron Ore Property, Labrador” prepared for Alderon Iron Ore Corp. by BBA Inc., Gemtec Ltd., Watts, Griffis and McOuat Ltd. and Golder Associates Ltd. dated October 31, 2018 and having an effective date of September 26, 2018. Kami Project mineral resources include Kami Project mineral reserves. The historical mineral resources and reserves mentioned are strictly historical in nature, are non-compliant with NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied upon. A qualified person or competent person has not done sufficient work to upgrade or classify the historical estimates as current “mineral resources”, “mineral reserves” or “ore reserves”, as such terms are defined in NI 43-101 and the JORC Code (2012 edition), and it is uncertain whether, following evaluation and/or further exploration work, the historical estimates will be able to be reported as mineral resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition). Champion is not treating the historical estimates as current mineral resources, mineral reserves or ore reserves. These reserves and resources are not material mining projects and are for properties adjacent to or near the Company’s existing mining tenements and therefore the reports on these mineralizations have not been prepared in accordance with the JORC Code (2012 edition) and the ASX Listing Rules. As stated above, the Company has initiated work to revise the Kami Project’s scope and update the feasibility study.

 

Alderon completed an updated feasibility study on the Kami Project in September 2018. The Company is currently revising the Kami Project’s scope and has initiated work intended to update the feasibility study, which is expected to be completed in the second half of 2022, as part of the Company’s strategy to evaluate its growth alternatives within its property portfolio.

 

Acquisition of Exploration Property from Fancamp Exploration Ltd.

 

On July 12, 2021, the Company completed the acquisition of the Lac Lamêlée property and a 1.5% net smelter royalty interest on the Company’s Moiré Lake property and the Company’s Fermont property portfolio, including the O’Keefe-Purdy, Harvey-Tuttle, and Consolidated Fire Lake North properties from Fancamp.

 

The Lac Lamêlée property adds an additional 74.7 Mt of historical indicated resources and 229.3 Mt of historical inferred resources, with the project located adjacent to the Company’s existing development properties south of Bloom Lake. The historical Lac Lamêlée resource estimates are based on the NI 43-101 technical report entitled “NI 43-10 Technical Report and Mineral Resource Estimate on the Lac Lamêlée South Resources Quebec – Canada” by Met-Chem, a division of DRA Americas Inc. dated July 28, 2017 and having an effective date of January 26, 2017. The historical mineral resources mentioned are strictly historical in nature, are non-compliant with NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied upon. A qualified person or competent person has not done sufficient work to upgrade or classify the historical estimates as current “mineral resources”, “mineral reserves” or “ore reserves”, as such terms are defined in NI 43-101 and the JORC Code (2012 edition), and it is uncertain whether, following evaluation and/or further exploration work, the historical estimates will be able to be reported as mineral resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition). Champion is not treating the historical estimates as current mineral resources, mineral reserves or ore reserves. These reserves and resources are not material mining projects and are for properties adjacent to or near the Company’s existing mining tenements and therefore the reports on these mineralizations have not been prepared in accordance with the JORC Code (2012 edition) and the ASX Listing Rules.

Consideration paid to Fancamp included $1,300,000 in cash, an undertaking in favour of Fancamp to make future finite production payments on a fixed amount of future iron ore production payable once certain production thresholds have been reached with respect to the Lac Lamêlée, Moiré Lake and Fermont property portfolio properties.

 

Concurrently with the transaction, the Company also staked 11 additional claims directly adjacent to the Lac Lamêlée property.

 

Map: Acquisition of Exploration Property from Fancamp Exploration Ltd. (“Fancamp”)

 

Notes
1. The historical Lac Lamêlée resource estimates are based on the NI 43-101 technical report entitled “NI 43-10 Technical Report and Mineral Resource Estimate on the Lac Lamêlée South Resources Quebec – Canada” by Met-Chem, a division of DRA Americas Inc. dated July 28, 2017 and having an effective date of January 26, 2017. The historical mineral resources mentioned are strictly historical in nature, are non-compliant with NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied upon. A qualified person or competent person has not done sufficient work to upgrade or classify the historical estimates as current “mineral resources”, “mineral reserves” or “ore reserves”, as such terms are defined in NI 43-101 and the JORC Code (2012 edition), and it is uncertain whether, following evaluation and/or further exploration work, the historical estimates will be able to be reported as mineral resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition). Champion is not treating the historical estimates as current mineral resources, mineral reserves or ore reserves. These reserves and resources are not material mining projects and are for properties adjacent to or near the Company’s existing mining tenements and therefore the reports on these mineralizations have not been prepared in accordance with the JORC Code (2012 edition) and the ASX Listing Rules.
2. The historical Consolidated Fire Lake resource estimates are based on the NI 43-101 technical report entitled “Preliminary Feasibility Study of the West and East Pit Deposits of the Fire Lake North Project” by BBA Inc., P&E Mining Consultants Inc. and Rail Cantech Inc. dated February 22, 2013 and having an effective date of January 25, 2013. The historical mineral resources mentioned are strictly historical in nature, are non-compliant with NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied upon. A qualified person or competent person has not done sufficient work to upgrade or classify the historical estimates as current “mineral resources”, “mineral reserves” or “ore reserves”, as such terms are defined in NI 43-101 and the JORC Code (2012 edition), and it is uncertain whether, following evaluation and/or further exploration work, the historical estimates will be able to be reported as mineral resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition). Champion Iron Limited is not treating the historical estimates as current mineral resources, mineral reserves or ore reserves. These reserves and resources are not material mining projects and are for properties adjacent to or near Champion Iron Limited’s existing mining tenements and therefore the reports on these mineralizations have not been prepared in accordance with the JORC Code (2012 edition) and the ASX Listing Rules.
3. The historical Quinto Claims resource estimates are based on the NI 43-101 technical reports entitled “Mineral Resource Technical Report, Peppler Project, Quebec” (as regards Peppler Lake), “Mineral Resource Technical Report, Lamelee Project, Quebec” (as regards Lamêlée) and “Mineral Resource Technical Report, Hobdad Project, Quebec” (as regards Hobdad), each prepared by G H Wahl & Associates Consulting dated February 15, 2013 and having an effective date of December 31, 2012. The historical mineral resources mentioned are strictly historical in nature, are non-compliant with NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied upon. A qualified person or competent person has not done sufficient work to upgrade or classify the historical estimates as current “mineral resources”, “mineral reserves” or “ore reserves”, as such terms are defined in NI 43-101 and the JORC Code (2012 edition), and it is uncertain whether, following evaluation and/or further exploration work, the historical estimates will be able to be reported as mineral resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition). Champion Iron Limited is not treating the historical estimates as current mineral resources, mineral reserves or ore reserves. These reserves and resources are not material mining projects and are for properties adjacent to or near Champion Iron Limited’s existing mining tenements and therefore the reports on these mineralizations have not been prepared in accordance with the JORC Code (2012 edition) and the ASX Listing Rules.
4. The historical Harvey Tuttle resource estimates are based on the NI 43-101 technical report entitled “Technical Report and Resource Estimate on the Harvey-Tuttle Property Québec, Canada” by P&E Mining Consultants Inc. dated April 13, 2011 and having an effective date of February 25, 2011. The historical mineral resources mentioned are strictly historical in nature, are non-compliant with NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied upon. A qualified person or competent person has not done sufficient work to upgrade or classify the historical estimates as current “mineral resources”, “mineral reserves” or “ore reserves”, as such terms are defined in NI 43-101 and the JORC Code (2012 edition), and it is uncertain whether, following evaluation and/or further exploration work, the historical estimates will be able to be reported as mineral resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition). Champion Iron Limited is not treating the historical estimates as current mineral resources, mineral reserves or ore reserves. These reserves and resources are not material mining projects and are for properties adjacent to or near Champion Iron Limited’s existing mining tenements and therefore the reports on these mineralizations have not been prepared in accordance with the JORC Code (2012 edition) and the ASX Listing Rules.
5. Certain resources mentioned are foreign estimates from an Australian perspective.

 

  1. Cash Flows — Purchase of Property, Plant and Equipment

 

During the three-month period ended June 30, 2021, the Company invested $109,939,000 in property, plant and equipment, compared to $22,796,000 for the same period in 2020. The following table summarizes the investments made:

 

Three Months Ended
June 30,
2021 2020
(in thousands of dollars)
Tailings lifts 6,338 554
Stripping and mining activities 8,534 2,630
Mining equipment rebuild 1,895 2,762
Sustaining capital expenditures 16,767 5,946
Phase II 77,925 5,839
Other capital development expenditures at Bloom Lake 15,247 11,011
Purchase of property, plant and equipment as per cash flows 109,939 22,796

 

The increase in tailings-related investments for the three-month period ended June 30, 2021, compared to the same period in 2020, is due to preventive work performed on the dykes. As part of the Company’s ongoing and thorough monitoring and inspections of its tailings infrastructure, the Company continues to invest in its safe tailings strategy. Accordingly, some preventive and corrective interventions on two specific dykes are scheduled for the 2022 fiscal year, with an estimated cost of approximately $23,000,000.

 

The variance in the costs related to stripping and mining activities is attributable to the ramp-down of operations in the first quarter of the 2021 fiscal year, mandated by the Government’s COVID-19 containment directives, whereby operations were negatively affected in the comparable period. The stripping activities for the three-month period ended June 30, 2021 were higher, as anticipated, compared to the same period in 2020 as a result of the mine plan. Refer to Section 4 – Bloom Lake Mine Operating Activities.

 

The Company’s mining equipment rebuild program reflects the work planned and undertaken during the three-month period ended June 30, 2021.

 

Following the Board’s final approval on November 12, 2020, to complete the Phase II project, the Company accelerated its expenditures related to the Phase II project and expects to continue to do so over the coming quarters. During the three-month period ended June 30, 2021, the Phase II project advanced considerably and totalled $77,925,000 in capital expenditures and $40,338,000 in advance payments to SFPPN and QNS&L. Major milestones achieved during the three-month period ended June 30, 2021 include the commencement of the load-out conveyors’ installation, structural steel erection in the milling and screening area, continuation of piping installation inside the plant and mechanical and electrical installation of the mill recirculation conveyors, whereas in the same period in 2020, the work consisted of detailed engineering and the production of spirals.

 

During the three-month period ended June 30, 2021, other capital development expenditures at Bloom Lake totalled $15,247,000 and include an additional investment of $3,800,000 in lodging infrastructure at the mine site to accommodate the increasing workforce, deposits of $4,500,000 for production equipment to be commissioned and financed through the master lease agreement with Caterpillar Finance Services in the future and an investment of $4,100,000 to increase mill capacity and other infrastructure improvements. During the three-month period ended June 30, 2020, other capital development expenditures at Bloom Lake totalled $11,011,000 and consisted of infrastructure upgrades at the mine, the commissioning of new service equipment and the acquisition of 100 additional used railcars at a cost of $5,500,000.

 

  1. Qualified Person and Data Verification

 

Mr. Vincent Blanchet, P. Eng., Engineer at QIO, the Company’s subsidiary and operator of Bloom Lake, is a “qualified person” as defined by NI 43-101 and has reviewed and approved, or has prepared, as applicable, the disclosure of the scientific and technical information contained in this press release. Mr. Blanchet’s review and approval does not include statements as to the Company’s knowledge or awareness of new information or data or any material changes to the material assumptions and technical parameters underpinning the Feasibility Study. Mr. Blanchet is a member of the Ordre des ingénieurs du Québec.

 

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, adjacent to established iron ore producers. Bloom Lake is an open-pit truck and shovel operation with a concentrator, and it ships iron ore concentrate from the site by rail, initially on the Bloom Lake Railway, to a ship loading port in Sept-Îles, Québec. The Bloom Lake Phase I plant has a nameplate capacity of 7.4 Mtpa and produces a high-grade 66.2% Fe iron ore concentrate with low contaminant levels, which has proven to attract a premium to the Platts IODEX 62% Fe iron ore benchmark. In addition to the partially completed Bloom Lake Phase II project, 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 Fire Lake North iron ore project, located approximately 40 km south of Bloom Lake. The Company sells its iron ore concentrate globally, including customers in China, Japan, the Middle East, Europe, South Korea, India and Canada.

 

 

 

Posted July 29, 2021

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