• Production: Over 3.6 million tonnes produced; just under 3.3 million tonnes sold.
• Revenue: Approximately $363 million.
• EBITDA: $88 million.
• Operating Costs: Approximately CAD79 per tonne delivered.
• Provisional Price Adjustments: Negative USD4 per tonne on 3.3 million tonnes sold.
• Cash Position: Decreased from $180 million to about $90 million.
• Dividend Payment: $52 million.
• Investment in Flotation Plant: Around $70 million.
• Net Debt Increase: $100 million associated with mobile equipment and lease financing.
• Realized Selling Price: Impacted by lack of long-term contracts and exposure to spot pricing.

• Warning! GuruFocus has detected 5 Warning Signs with CIAFF.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Champion Iron Ltd (CIAFF) managed to produce over 3.6 million tonnes and sell just under 3.3 million tonnes despite a challenging quarter.
• The company reported no significant environmental issues during the quarter.
• Champion Iron Ltd (CIAFF) continued to strengthen partnerships with First Nations and Newfoundland and Labrador communities.
• The company achieved a record quarter in terms of waste mined and ore mined, indicating successful investments in mining equipment.
• Champion Iron Ltd (CIAFF) signed an agreement with Nippon Steel and Sojitz for the Kami Project, valuing it at CAD500 million, which will be funded by partners.

Negative Points

• An unplanned event at the load-out resulted in a 14-day halt, impacting shipping and sales capacity.
• The company faced a provisional price adjustment of USD4 per tonne negative on the 3.3 million tonnes sold.
• Operating costs remained high, with extra maintenance and re-handling of material contributing to costs.
• Champion Iron Ltd (CIAFF) experienced a significant cash reduction from $180 million to $90 million, partly due to high CapEx and dividend payments.
• The company missed EPS consensus forecasts due to a noncash impact from exchange rate changes affecting debt facilities.

Q & A Highlights

Q: The sustaining capital over the last two quarters seems elevated. Should we expect this trend to continue, or will it decrease? A: David Cataford, CEO: The recent high levels were due to investments in mining equipment and railcars, which are not typical. Moving forward, we expect sustaining capital to align more closely with the $60 million per quarter level, as outlined in our feasibility study.

Q: Is the DRPF product intended for US customers, and what is the status of contract negotiations? A: David Cataford, CEO: Currently, the DRPF product is not intended for US customers due to their preference for pellets. We are targeting markets in the Middle East, North Africa, and Europe. Negotiations have been ongoing for over a year, and we anticipate signing our first contracts by October or November 2025.

Q: Can you provide an update on the shipping run rate and stockpile reduction? A: David Cataford, CEO: If IOC's production is at the lower end of their guidance, we have flexibility to reduce stockpiles significantly this year. Even at the higher end, we can still start reducing stockpiles. We expect 2025 to be a good year for destocking, especially after winter.

Q: What is the estimated cost of the Kami Project feasibility study, and how will it be funded? A: David Cataford, CEO: The feasibility study, including permitting and infrastructure improvements, is estimated at $60 million. This cost will primarily be covered by our partners, Nippon Steel and Sojitz, so Champion should not need to invest its own cash over the next two years.

Q: How will the DRPF commissioning process unfold, and what is the current market price for DR-grade products? A: David Cataford, CEO: We plan to have two separate products initially, focusing on volume over quality. If the market remains as it is, we may blend products for an entry-level DR grade. Currently, DR pellet premiums are around $45, but there is no public pricing for DR-grade concentrate.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.