Achieves record monthly production of 697,700 wmt and
strong operating cash flow of $89
million for the quarter
MONTREAL, Feb. 14, 2019 /CNW Telbec/ - Champion Iron
Limited (TSX: CIA) (ASX: CIA) ("Champion" or the "Company") is
pleased to announce operational and financial results for the third
quarter ended December 31, 2018.
For complete details of the unaudited Condensed Consolidated
Financial Statements and associated Management's Discussion and
Analysis please refer to the Company's filings on SEDAR
(www.sedar.com) or the Company's website (www.championiron.com).
All amounts are in Canadian dollars unless otherwise indicated.
1. HIGHLIGHTS
Operations
- Production of 1,791,300 wmt of high-grade 66.4% iron ore
concentrate and 5,815,800 wmt since the mine commenced operations
in February 2018;
- Total cash cost1 of $49.4/dmt (C1) and an all-in sustaining
cost1 of $55.5/dmt.
Financial
- Net income of $31.2 million for
the quarter and $119.4 million for
the nine-month period ended December 31, 2018;
- Revenues of $147.5 million for
the third quarter and $473.0 million
for the nine-month period ended December 31, 2018;
- Operating cash flow2 totalling $89.1 million for the quarter and $138.7 million for the nine-month period ended
December 31, 2018;
- Cash on hand3 of $185
million as of December 31, 2018, an increase of
$160 million compared to cash on hand
of $25 million as of April 1,
2018.
"We are extremely pleased with the strong performance delivered
by the operations team again this quarter which included a record
monthly production in October 2018 of
697,700 wmt of high-grade iron ore," commented Chairman and CEO
Michael O'Keeffe. "Our company
remains unhedged and looking ahead, the iron ore market looks
favourable, which positions us well to take advantage of servicing
the high-grade iron ore market." continued Mr. O'Keeffe.
2. BLOOM LAKE MINE OPERATING
ACTIVITIES4
|
Three Months
Ended
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
June
30,
|
|
September 30,
|
|
December 31,
|
|
December 31,
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Data
|
|
|
|
|
|
|
|
|
|
|
|
Waste mined
(wmt)
|
3,372,900
|
|
2,978,400
|
|
3,847,100
|
|
1,973,300
|
|
10,198,400
|
|
1,973,300
|
Ore mined
(wmt)
|
4,647,900
|
|
5,204,900
|
|
4,883,400
|
|
574,800
|
|
14,736,200
|
|
574,800
|
Strip
ratio
|
0.7
|
|
0.6
|
|
0.8
|
|
3.4
|
|
0.7
|
|
3.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore milled
(wmt)
|
4,244,000
|
|
4,964,200
|
|
4,531,400
|
|
—
|
|
13,739,600
|
|
—
|
Head grade
(g/t)
|
31.1
|
|
32.0
|
|
32.1
|
|
—
|
|
31.8
|
|
—
|
Recovery
(%)
|
77.1
|
|
79.6
|
|
80.7
|
|
—
|
|
79.2
|
|
—
|
% Fe
|
66.5
|
|
66.6
|
|
66.4
|
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—
|
|
66.5
|
|
—
|
Iron ore concentrate
produced (wmt)
|
1,542,900
|
|
1,858,300
|
|
1,791,300
|
|
—
|
|
5,192,500
|
|
—
|
Iron ore concentrate
sold (dmt)
|
1,740,400
|
|
1,931,700
|
|
1,711,500
|
|
—
|
|
5,383,600
|
|
—
|
|
|
|
|
|
|
|
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Financial
Data (in thousands of dollars)
|
|
|
|
|
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|
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Revenues
|
150,741
|
|
174,678
|
|
147,546
|
|
—
|
|
472,965
|
|
—
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Cost of
sales
|
95,767
|
|
87,265
|
|
84,482
|
|
—
|
|
267,515
|
|
—
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Other
expenses
|
10,032
|
|
6,091
|
|
(2,345)
|
|
38,422
|
|
13,778
|
|
59,148
|
Net finance
cost
|
14,239
|
|
7,106
|
|
9,279
|
|
14,502
|
|
30,624
|
|
15,606
|
Net income
|
20,748
|
|
67,497
|
|
31,199
|
|
(54,015)
|
|
119,444
|
|
(78,026)
|
EBITDA1
|
44,942
|
|
81,321
|
|
65,409
|
|
(38,422)
|
|
191,672
|
|
(59,148)
|
|
|
|
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|
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Statistics (in dollars per dmt
sold)
|
|
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Average realized
selling price1
|
86.6
|
|
90.4
|
|
86.2
|
|
—
|
|
87.9
|
|
—
|
Total cash cost (C1
cash cost)1
|
55.0
|
|
45.2
|
|
49.4
|
|
—
|
|
49.7
|
|
—
|
All-in sustaining
cost1
|
59.9
|
|
52.9
|
|
55.5
|
|
—
|
|
56.0
|
|
—
|
Cash operating
margin1
|
26.7
|
|
37.5
|
|
30.7
|
|
—
|
|
31.9
|
|
—
|
Operational Performance
During the quarter, 8.7 million tonnes of material were mined,
representing an increase of 7% over the previous quarter. The
increase reflects the focus on waste removal during the planned
major shutdown of the plant which contributed to a higher strip
ratio and higher pre-stripping capital expenditures quarter over
quarter.
The plant processed 4,531,400 tonnes of ore during the third
quarter, achieving a monthly production record of 697,700 wmt in
October. The production for the period was impacted by the planned
semi-annual shutdown of 8 days and by an additional 12 days to
redesign and modify the crushed ore warehouse chute located between
the inland conveyor and the mill. These factors contributed to the
variation of 8.7% when compared to the previous quarter. The
scheduled major shutdown was the first completed since Bloom Lake
achieved commercial production.
The recovery circuit continues to be optimized resulting in an
average recovery rate above 80% for the quarter. As the recovery
rate continues to improve every quarter reaching recovery rates as
high as 86%, the Company is confident that it will achieve the
target recovery rate of 83% once the whole circuit has been
adjusted.
Based on the foregoing, the Company produced 1,791,300 wmt of
high-grade 66.4% iron concentrate during the third quarter ended
December 31, 2018 for a total of 5,192,500 wmt of 66.5% iron
concentrate for the nine-month period ended
December 31, 2018.
3. FINANCIAL PERFORMANCE
A. Revenues
During the three-month period ended December 31, 2018,
a total of 1,711,500 tonnes of high-grade iron ore concentrate were
sold at a CFR China gross realized price of US$91.6/dmt before shipping. The gross sales
price of US$91.6/dmt represents a
premium of 27.9% over the benchmark P62 price compared to a premium
of 38% in the previous quarter as the price of the P62 strengthened
by 7% during the quarter. Deducting sea freight cost of
US$26.1/dmt, the Company obtained an
average realized price of US$65.5 per
tonne (CA$86.2 per tonne) for its high-grade iron ore delivered to
the end customer. As a result, revenues totaled $147,546,000 for the period. The sales variation
compared to the prior quarter relates to the lower production
resulting from the planned major shutdown and the unplanned
downtime as well as higher ocean freight costs associated with the
winter season.
For the nine-month period ended December 31, 2018, the
Company sold 5.4 million tonnes of iron ore concentrate shipped to
end customers located in China,
Europe, Japan and the Middle
East in 31 ChinaMax and Capesize vessels. The Company
realized revenues of $472,965,000
during its first nine months of operations for a CFR China gross
realized price of US$91.2 per tonne
before shipping or US$67.4 per tonne
(CA$ 87.9 per tonne) net of sea freight. There are no revenues for
the comparative periods as the Company shipped its first vessel of
iron ore concentrate on April 1,
2018.
B. Cost of sales
Cost of sales represent mining, processing, and mine
site-related general and administrative expenses.
During the three-month period ended December 31, 2018,
the total cash cost1or C1 cash cost1 per
tonne totalled $49.4/dmt. Higher
costs compared to the previous quarter stems from fixed costs over
lower volume resulting from the planned and unplanned downtime.
For the three first quarters of operations, the Company achieved
a total cash cost1 of $49.7/dmt. The C11 cost reflects the
impacts of the inefficiencies of the ramp-up period, the delays
associated with the completion of the first major planned shutdown
since the Company started its operations, combined with an
unplanned shutdown during the first winter season.
C. Net Income (Loss) & EBITDA1
The Company's net income for the three-month period ended
December 31, 2018 totaled $31,199,000. The Government of the province of
Quebec, through Ressources Québec,
Canada holds a 36.8% interest in
Quebec Iron Ore Inc. ("QIO") and as such, is considered Champion's
non-controlling interest. The Company holds the remaining interest
in QIO. The net income attributable to the Company's shareholders
totaled $21,672,000 representing
$0.05 earnings per share compared to
a loss of $37,341,000 representing a
loss of $0.09 per share for the
three-month period ended December 31,
2017. The variation period over period is associated with
the start of the commercialization on April
1, 2018.
For the nine-month period ended December 31, 2018, the
Company generated a net income of $119,444,000 translating to earnings per share of
$0.18. A net loss of $78,026,000 or a loss of $0.14 per share was realized in the nine-month
period ended December 31, 2017 as the Company completed
its construction in February 2018 and
shipped its first vessel of iron ore on April 1, 2018.
As a result, during the third quarter ended December 31, 2018, the Company generated an
EBITDA1 of $65,409,000 or
44% and $191,672,000 or 41% for the
nine-month period ended December 31, 2018.
D. All-in sustaining cost1 and cash operating
margin1
The Company believes that the all-in sustaining
costs1 and cash operating margin1 are
measures reflecting the costs associated with producing iron ore
and assessing the Company's ability to operate without reliance on
additional borrowing or usage of existing cash. The Company defines
all-in sustaining cost ("AISC")1 as the total costs
associated with producing iron ore concentrate. The Company's
AISC1 represents the sum of cost of sales, corporate
expenditures and sustaining capital expenditures, including
stripping activities, all divided by the iron ore concentrate dmt
sold to arrive at a per dmt figure.
During the quarter, the Company realized an AISC1 of
$55.5/dmt compared to $52.9/dmt in the previous quarter. The variation
between quarters is mainly due to higher production costs per unit
as a result of lower production and lower volume sold. Sustaining
capital expenditures included in the AISC1 decreased by
48% from $12,875,000 to $6,646,000 for the quarter ended December 31, 2018 due to reduced efforts on the
water and tailing facilities during the winter. Higher corporate
expenditures reflect additional expenses and corporate personnel
hired to position the Company for growth.
Since the start of its operating activities, the Company
produced high-grade iron concentrate at an AISC1 of
$56.0/dmt.
For the third quarter ended December 31,
2018, deducting the AISC1 of $55.5/dmt from the realized average selling
price1 of $86.2/dmt, the
Company generated a cash operating margin1 of
$30.7 for each tonne of high-grade
iron concentrate sold. For the nine-month period ended December 31, 2018 the Company generated a cash
operating margin1 of $31.9/dmt.
4. ORGANIC GROWTH
Champion's board of directors has approved a budget to complete
a feasibility study ("Feasibility Study") with respect to a
potential expansion of the operations at its flagship asset the
Bloom Lake mine ("Phase II"). The proposed expansion would
mainly involve the completion of construction work on a processing
plant and other supporting infrastructure which was interrupted in
November 2012 by the mine's previous
owner. The expansion aims at doubling the current operational
production capacity of 7.5 million tonnes of high-grade 66% iron
concentrate.
During the three months ended December
31, 2018, the Company continued with the Feasibility Study
and a significant milestone was completed in the beginning of
December with respect to the permitting process with the submission
of the Option Analysis Report to Environment Canada. The Company
aims at publishing the Feasibility Study by the summer of 2019.
Pending a positive decision resulting from an economical
feasibility study, construction could start in late 2019 or early
2020 with first production as early as 2021. Phase II could
potentially create over 500 jobs during construction and 200
permanent operational jobs.
During the quarter, expenditures totalling $2,140,000 were incurred for the Bloom Lake mine
Phase II Feasibility Study.
5. EXPLORATION ACTIVITIES
In addition to its 63.2% interest in the Bloom Lake property,
Champion has a 100% interest in the 752 km2 Fermont property located in the Fermont Iron
Ore District of Northeastern
Quebec and a 100% interest in the Gullbridge-Powderhorn
property ("Powderhorn") in Northern Central Newfoundland. The 63
km2 Powderhorn property is host to several Copper (Cu)
and Zinc (Zn) showings and is at an early exploration stage. The
Gullbridge Mine is a past copper producer and is located in the
northern part of the property.
Exploration Program for the quarter ended December 31,
2018
Assays are still pending following the 9,600 meters drilling
program at Powderhorn which was completed in December. Given the
encouraging results previously reported by the Company, a further
4,000 meters of drilling commenced in January, designed to benefit
from the winter conditions, thereby preventing environmental damage
to the wetlands. The exploration program at Powderhorn targets the
same volcanic units that host the Buchans Mine, located 60 km away,
a rich volcanogenic massive sulphide deposit. To date,
approximately 14,000 metres have been drilled. During the quarter
ended December 31, 2018, $1,117,000 in expenditures were incurred for the
Powderhorn property.
At the Company's Fermont
holdings, samples collected during the 2018 drilling at the Peppler
Lake property will be submitted for metallurgical testing in the
first half of 2019. Drill results will also be used for
geological modeling and an update of historical resources.
6. CONFERENCE CALL AND WEBCAST INFORMATION
A webcast and conference call to discuss these results will be
held on Thursday, February 14, 2019,
at 4:00 PM Eastern time. Listeners may access a live
webcast of the conference call from the Investors section of the
Company's website at www.championiron.com or by dialing
toll free 1-888-390-0546 within North
America or +1-888-076-068 from Australia.
An online archive of the webcast will be available by accessing
the Company's website at www.championiron.com. 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
702570 #.
Notes:
|
1
|
The Company provides
some non-IFRS measures as supplementary information that management
believes may be useful to investors to explain the Company's
financial results. Please refer to note 15 Non-IFRS financial
performance measures of the Company's MD&A dated
February 13, 2019, available on the Company's website at
www.championiron.com or on SEDAR at www.sedar.com for
reconciliation of these measures.
|
2
|
Operating cash flow
includes change in non-cash operating working capital.
|
3
|
Cash on hand includes
cash and cash equivalents and short-term investments.
|
4
|
The Company considers
that pre-commercial production operations at the Bloom Lake mine
commenced on April 1, 2018 upon the first shipment of
high-grade iron ore concentrate and that commercial production
began on June 30, 2018.
|
About Champion Iron Limited
Champion is a producing
iron development and exploration company, focused on developing its
significant iron resources in the south end of the Labrador Trough
in the province of Quebec.
Following the acquisition of its flagship asset, the Bloom Lake
iron ore property, the Company implemented upgrades to the mine and
processing infrastructure and has partnered in projects associated
with improving access to global iron markets, including rail and
port infrastructure initiatives with government and other key
industry and community stakeholders. Champion's management team
includes professionals with mine development and operations
expertise, who also have vast experience from geotechnical work to
green field development, brown field management including logistics
development and financing of all stages in the mining industry.
For additional information on Champion Iron Limited, please
visit our website at: www.championiron.com
Forward-Looking information
This news release includes certain information that may
constitute "forward-looking information" under applicable Canadian
securities legislation. All statements, other than statements of
historical facts, included in this news release that address future
events, developments or performance that Champion expects to occur
including management's expectations regarding (i) the recovery
rate; (ii) the Company's growth; (iii) the Company's
exploration activities and programs; (iv) the potential
expansion of the operations at Champion's flagship asset the Bloom
Lake mine; (v) the estimated future operation capacity of the
Bloom Lake mine; (vi) the anticipated construction schedule
for a potential expansion of the Bloom Lake mine; (vii) the
anticipated production schedule for such potential expansion of the
Bloom Lake mine; (viii) the potential job creation related to
the Bloom Lake mine; and (ix) the estimated date of
publication of the feasibility study; are forward-looking
statements. 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 including, without limitation, the
results of the feasibility study with regards to the potential
expansion of the Bloom Lake mine. Although Champion believes the
expectations expected 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 in forward-looking statements include,
without limitation: the results of the feasibility study; project
delays; 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; 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, as well as those factors discussed in the section
entitled "Risk Factors" of the Company's 2018 Annual
Information Form and the risks and uncertainties discussed in the
Company's MD&A for the year ended March
31, 2018, both available on SEDAR at www.sedar.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 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.
SOURCE Champion Iron Limited