CHAMPION IRON REPORTS ITS FY2022 THIRD QUARTER RESULTS, DECLARES AN INAUGURAL DIVIDEND AND ADVANCES THE BLOOM LAKE PHASE II EXPANSION PROJECT Announces an inaugural dividend payment of $0.10 per ordinary shares; Quarterly Production of 2.01M wmt, Net Income of $68.0M, EPS of $0.13 and EBITDA of $122
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PRESS RELEASE
CHAMPION IRON REPORTS ITS FY2022 THIRD QUARTER RESULTS, DECLARES AN
INAUGURAL DIVIDEND AND ADVANCES THE BLOOM LAKE PHASE II EXPANSION
PROJECT
Announces an inaugural dividend payment of $0.10 per ordinary shares;
Quarterly Production of 2.01M wmt, Net Income of $68.0M, EPS of $0.13 and EBITDA of $122.1M
Montréal, January 26, 2022 - Champion Iron Limited (TSX: CIA) (ASX: CIA) (OTCQX: CIAFF) (“Ch ampion” or the “Company”) is pleased to
announce operational and financial results for the fiscal third quarter ended December 31, 2021.
Conference Call Details
Champion will host a conference call and webcast on January 27, 2022 at 8:30 AM (Montréal time) / January 28, 2022 at 12:30 AM (Sydney
time) to discuss the results for the fiscal third quarter ended December 31, 2021. Call details are outlined at the end of this release.
1. Highlights
Health & Safety and Sustainability
• No serious injuries reported and no major environmental issues during the period;
• Health and safety awareness campaigns are in place and continuous improvement efforts are deployed throughout the organization;
• Fully operational COVID -19 testing laboratory and prevention measures maintained in line with the Government of Québec's (the
“Government”) directives to mitigate risks related to COVID-19 and limit the spread of the Omicron variant;
• In commemoration of its First Nation communities' tragic and painful history, Champion declared that September 30, the Nation al
Day for Truth and Reconciliation, will be treated as a statutory holiday for all its employees;
• In collaboration with our partners, contributed a significant donation to Cancer Fermont, a charitable organization improving the
quality of life for local residents fighting cancer; and
• In support of the International Day for the Elimination of Violence against Women, the Company sponsored “Autour d'elles”, a shelter
for local women who are victims of domestic violence, and “Hommes Sept -Ils”, a help center which provides support for local men
facing personal challenges.
Dividend on Ordinary Shares
• The Board of Directors (the “Board”) declares an inaugural dividend of $0.10 per ordinary share in respect to the semi-annual results
for the period end ed September 30, 2021 , payable on M arch 1, 2022, to registered shareholders at the close of business in Australia
and Canada on February 8, 2022 (local time). The ordinary shares will begin trading on an ex -dividend basis at the open of trading in
Australia and Canada on February 7, 2022.
Financial
• Revenues of $253.0M and $1,129.4M for the three and nine -month periods ended December 31, 2021, respectively, compared to
$329.5M and $885.1M for the same periods in 2020;
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• EBITDA1 of $122.1M for the three-month period ended December 31, 2021, compared to $214.6M for the same period in 2020. EBITDA 1
of $727.9M for the nine-month period ended December 31, 2021, compared to $543.7M for the same period in 2020;
• Net income of $68.0M for the three-month period ended December 31, 2021 (EPS of $0.13), compared to $120.8M for the same period
in 2020 (EPS of $0.25). Net income of $406.9M for the nine -month period ended December 31, 2021 (EPS of $0.80), compared to
$308.5M for the same period in 2020 (EPS of $0.65);
• Net cash flow from operating activities of $105.6M for the three -month period ended December 31, 2021, representing an operating
cash flow per share 1 of $0.21, compared to $188.2M or $0.40 for the same period in 2020. Net cash flo w from operating activities of
$467.1M for the nine-month period ended December 31, 2021, representing an operating cash flow per share 1 of $0.92, compared to
$394.9M or $0.83 for the same period in 2020; and
• Cash on hand1 and restricted cash of $543.4M as at December 31, 2021, compared to $567.5M as at September 30, 2021 and $680.5M
as at March 31, 2021.
Operations
• Record production for a quarter with scheduled maintenance of 2,013,200 wmt of high-grade 66.2% iron ore (“Fe”) concentrate for the
three-month period ended December 31, 2021, compared to 1,922,100 wmt of high-grade 66.4% Fe concentrate for the same period in
2020. Production of 6,038,300 wmt of high -grade 66.2% Fe concentrate for the nine- month period ended December 31, 2021,
compared to 5,989,700 wmt of high-grade 66.3% Fe for the same period in 2020;
• Fe recovery rate of 83.9% and 83.3% for the three and nine -month periods ended December 31, 2021, respectively, compared to a
Fe recovery rate of 83.6% and 83.8%, respectively, for the same periods in 2020; and
• Free on Board (“FOB”) total cash cost1 of $59.5/dmt (US$47.22/dmt) (C1) and $58.6/dmt (US$46.92/dmt) for the three and nine-month
periods ended December 31, 2021, respectively, compared to $56.2/dmt (US$43.12/dmt) and $54.1/dmt (US$40.42/dmt), respectively,
for the same periods in 2020.
Growth and Development
• Ongoing feasibility study evaluating the reprocessing and infrastructure required to commercially produce a 69% Fe d irect reduction
pellet feed product. The study of this prop osed project, scaled to convert approximately half of Bloom Lake’s expected nameplate
capacity following the completion of the Phase II Expansion Project (“Phase II”), is expected to be completed by mid-2022; and
• In connection with the Company’s strategy to evaluate its growth alternatives within its property portfolio, the Kamistiatusset iron ore
project's (the “Kami Project”) updated feasibility study is advancing and expected to be completed in the second half of cale ndar
2022.
Phase II Milestones
• Several critical construction items were completed, including the major tie -in between Phase I and Phase II, enabling the
advancement of the expected commissioning of the project to April 2022, with commercial production anticipated by the end o f
calendar 2022;
• Receipt of the majority of the 450 railcars required for the Phase II production volume, enabling the Company to gradually ship more
iron ore concentrate to Sept-Îles;
• Advancing remaining work programs, with more than 400 individuals actively working on the project despite challenges related to the
COVID-19 pandemic; and
• Capital expenditures and start-up costs of $93.7M and advance payments and deposits related to existing port, rail and transboarding
infrastructure totalling $27.4M incurred in the three-month period ended December 31, 2021, with $534.3M invested to date.
Champion’s CEO, Mr. David Cataford, said: “I am honored to recognize our First Nation communities’ difficult history by declaring that the
National Day for Truth and Reconciliation will be treated as a statutory holiday for all our employees. Our people’s perseverance and agility have
always been our Company’s strength, and it has enabled us to report r ecord production for a quarter with scheduled maintenance, resulting in
strong profitability, despite the challenges imposed by the pandemic. As our Company continues to focus on growth opportunities to meet the
rising demand for high -grade iron ore produc ts, the near completion of the Phase II expansion project and our cumulative efforts to operate
sustainably creates the stability required to continue deploying our capital returns strategy by declaring an inaugural dividend.”
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2. Dividend on Ordinary Shares
The Board declared an inaugural dividend of $0.10 per ordinary share on January 26, 2022 (Montréal time) / January 27, 2022 (Sydney time) in
respect to the semi-annual results for the period end ed September 30, 2021, payable on March 1, 2022, to registered shareholders at the close
of business in Australia and Canada on February 8, 2022 (local time). The ordinary shares will begin trading on an ex-dividend basis at the open
of trading in Australia and Canada on February 7, 2022.
The Board will evaluate any potential future dividends concurrently with the release of the Company’s semi-annual and annual results.
For shareholders holding ordinary shares on the Australian share register, the dividend will be paid in Australian dollars. T he dividend amounts
received will be calculated by converting the dividend determined to be paid using the exchange rates applicable to Australian dollars five
business days prior to the dividend payment date as published by the Bank of Canada.
For additional details on ordinary dividends, visit our website at www.championiron.com.
3. 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 m ine (“LoM”) of
20 years. On June 20, 2019, the Company announced the findings of the updated 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.
Bloom Lake Phase II reserves are based on the technical report titled “Bloom Lake Mine – Feasibility Study Phase II”, prepared pursuant to
National Instrument 43 -101 – Standards of Disclosure for Mineral Projects (“NI 43 -101”) 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.
During the three-month period ended December 31, 2021, $93,696,000 in capital expenditures and start -up costs and $27,358,000 in advance
payments were incurred for the Phase II project, with $534,270,000 invested to date, including $97,011,000 in advance payments and deposits
related to existing port, rail and transboarding infrastructure.
As at December 31, 2021, the Company had total cash on hand 1 and restricted cash of $543,404,000. The Company also had a total undrawn
credit facility of US$220,000,000, a financing agreement with Caterpillar Financial Services Limited for an undrawn amount of US$56,639,000,
to fund Phase II mining equipment, and a seven -year loan agreement with Fonds de Solidarité des Travailleurs du Québec for an undrawn
amount of $45,000,000, as at December 31, 2021, maturing on May 21, 2028. Additionally, the Company had an undrawn term loan of
$30,000,000 with Investissement Québec to part ially finance a total investment of $85,000,000 related to upgrades at Société Ferroviaire et
Portuaire de Pointe-Noire and budgeted in the overall Phase II capital expenditures. Accordingly, as at December 31, 2021, the Company had a
total $425,723,000 of undrawn available financing.
Based on the foregoing and the utilization of ongoing operational cash flows, the Company is fully funded for the remaining w ork programs
required to complete the Phase II project estimated at $105,530,000, including deposits . Despite a challenging health context, the Company
continues to advance the project with final work programs required for ongoing commissioning. With critical construction work programs
completed and with more than 400 individuals actively working on the project, the Phase II project commissioning schedule is moving forward
to April 2022, with commercial production anticipated by the end of calendar 2022. As the Company approaches the end of the project, it is
currently carrying out other important steps, such as commissioning the mill and finalizing its hiring campaign.
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Milestones
The construction is progressing well with several critical construction work programs completed in the three -month period ended
December 31, 2021, including the successful tie -in between the Phase I and Phase II projects. The Company continues to advance the
remaining work programs despite operational challenges related to the global pandemic. Project milestones that were achieved and related
works undertaken during the three-month period ended December 31, 2021 include:
• Finalization of the detailed engineering;
• Completion of the major tie-in between the Phase I and Phase II projects;
• Completion of the Jean River crossing, required to accommodate a second rail track siding;
• Receipt of the majority of the 450 railcars, which will allow to gradually ship more iron ore concentrate to Sept-Îles; and
• Commencement of pre-operational verifications.
4. Bloom Lake Mine Operating Activities
Three Months Ended Nine Months Ended
December 31, December 31,
2021 2020 Variance 2021 2020 Variance
Operating Data
Waste mined and hauled (wmt) 5,441,700 4,957,600 10% 15,440,800 11,684,800 32%
Ore mined and hauled (wmt) 5,517,200 5,183,000 6% 16,875,000 15,935,600 6%
Material mined and hauled (wmt) 10,958,900 10,140,600 8% 32,315,800 27,620,400 17%
Strip ratio 0.99 0.96 3% 0.92 0.73 26%
Ore milled (wmt) 5,161,000 5,193,700 (1%) 16,068,000 15,360,900 5%
Head grade Fe (%) 30.6 29.7 3% 29.8 30.6 (3%)
Fe recovery (%) 83.9 83.6 —% 83.3 83.8 (1%)
Product Fe (%) 66.2 66.4 —% 66.2 66.3 —%
Iron ore concentrate produced (wmt) 2,013,200 1,922,100 5% 6,038,300 5,989,700 1%
Iron ore concentrate sold (dmt) 1,832,100 1,891,300 (3%) 5,760,700 5,713,500 1%
Financial Data (in thousands of dollars)
Revenues 253,016 329,545 (23%) 1,129,430 885,113 28%
Cost of sales 110,290 108,506 2% 342,020 318,583 7%
Other expenses 23,350 9,135 156% 58,223 29,102 100%
Net finance costs 3,377 11,323 (70%) 8,776 16,998 (48%)
Net income 67,997 120,771 (44%) 406,932 308,491 32%
EBITDA1 122,127 214,579 (43%) 727,879 543,713 34%
Statistics (in dollars per dmt sold)
Gross average realized selling price 195.0 194.8 —% 232.1 169.2 37%
Net average realized selling price1 138.1 174.2 (21%) 196.1 154.9 27%
Total cash cost (C1 cash cost)1 59.5 56.2 6% 58.6 54.1 8%
All-in sustaining cost1 76.0 64.8 17% 74.0 62.0 19%
Cash operating margin1 62.1 109.4 (43%) 122.1 92.9 31%
Operational Performance
Third Quarter of the 2022 Fiscal Year vs Third Quarter of the 2021 Fiscal Year
In the three-month period ended December 31, 2021, 10,958,900 tonnes of material were mined and hauled, compared to 10,140,600 tonnes
for the same period in 2020, an increase of 8%. The current strip ratio is in line with the mine plan in conne ction with the preparation for the
Phase II operations. The strip ratio of 0.96 achieved in the comparative period ended December 31, 2020 reflected the Company 's efforts to
recover the waste backlog accumulated during the first quarter of the 2021 fiscal year when Champion's operations were negatively impacted
by the Government's imposed COVID -19 directives. The overall increase in material movement was enabled by additional equipment in
operation compared to the same period last year, offset by a longer haul cycle as the material was sourced from different pits.
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The iron ore head grade for the three -month period ended December 31, 2021 was 30.6%, compared to 29.7% for the same period in 2020. The
increase in head grade is attributable to the presence of higher-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.
Bloom Lake produced 2,013,200 wmt of 66.2% Fe high-grade iron ore concentrate during the three-month period ended December 31, 2021, an
increase of 5%, compared to 1,922,100 wmt of 66.4% Fe for the same period in 2020. The record production for a quarter with s cheduled
maintenance is essentially a result of higher head grade and stable mill productivity.
First Nine Months of the 2022 Fiscal Year vs First Nine Months of the 2021 Fiscal Year
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 pandem ic minimized its
impact on the Company and its operations. Once government restrictions were lifted, the Company accelerated its mining activities and fully
resumed its production capacity.
The Company mined and hauled 32,315,800 tonnes of material durin g the nine -month period ended December 31, 2021, compared to
27,620,400 tonnes for the same period in 2020. This increase in material mined and hauled is mainly attributable to the negat ive impact of the
COVID-19 pandemic on several of the Company's other activities early in the comparative period. The strip ratio increased to 0.92 for the nine -
month period ended December 31, 2021, compared to 0.73 for the same period in 2020. The strip ratio is consistent with the mine plan for this
period of the year and the preparation for Phase II project operations.
The plant processed 16,068,000 tonnes of ore during the nine-month period ended December 31, 2021, an increase of 5% over the same period
in 2020. The variation reflects the impact of the COVID -19 imposed ramp-down in the comparative period and the higher mill throughput rate
achieved for the current period. The continuous improvements and operational innovations allowed the Company to increase throughput
stability and reach a higher level of mill productivity. The iron ore head grade of 29.8% for the nine-month period ended December 31, 2021 was
attributable to different sourcing pits, compared to 30.6% for the same period in 2020 and is consistent with the LoM. Based on the foregoing,
the iron ore concentr ate produced remained stable during the nine -month period ended December 31, 2021, compared to the same period in
2020.
5. Financial Performance
A. Revenues
Third Quarter of the 2022 Fiscal Year vs Third Quarter of the 2021 Fiscal Year
During the three-month period ended December 31, 2021, 1,832,100 tonnes of high-grade iron ore concentrate were sold at the CFR China gross
average realized price of US$154.8/dmt, before provisional sales adjustments and shipping costs. The gross average realized s elling price of
US$154.8/dmt represents a premium of 41.2% over the benchmark IODEX 62% Fe CFR China Index (“P62”) price for the period, compared to a
premium of 12.4% for the same period in 2020. The gross average realized selling price of US$154.8/dmt was higher than the IODEX 65% Fe CFR
China Index (“P65”) average price of US$128.9 for the period due to the positive impact of sales based on backward -looking iron ore prices,
when prices were substantially higher than the P65 index average for the period. The gross average realized selling price also reflects sales at a
determined price based on the average forward price of US$142.3 at the expected settlement date for 856,200 tonnes which were in transit at
the end of the period.
During the three -month period ended December 31, 2021, the global economic recovery, rising fuel prices and decreased vessel availability,
due to high levels of port congestion in Asian ports, contributed to the rising sea freight index, when compared to t he previous comparative
period. The average C3 Baltic Capesize Index (“C3”) for the period was US$31.0/t compared to US$15.6/t for the same period in 2020,
representing an increase of 99%. As a result, the Company incurred higher freight costs in the three -month period ended December 31, 2021,
compared to the same period in 2020. The freight costs variation relative to the C3 index during the period is mainly due to the timing of the
vessels' booking. The Company expects to benefit from the recent decline i n the freight index in the upcoming period as it contracts vessels
three to four weeks prior to the desired laycan period.
The net average realized selling price 1 of US$109.5 for the three- month period ended December 31, 2021, was negatively impacted by the
increase in the C3 index. Freight and other costs represented 27% of the gross average realized selling price for the period, compared to 15% for
the same period in 2020, which represents a variation of US$19.9/dmt. Provisional pricing adjustments on p revious sales, which were directly
correlated to the decrease in the P65 index early in the quarter, also contributed to reducing the net average realized selli ng price1. During the
three-month period ended December 31, 2021, the final price was establishe d for the 781,900 tonnes of iron ore that were in transit as at
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September 30, 2021. Accordingly, during the three -month period ended December 31, 2021, net negative provisional pricing adjustments were
recorded as a reduction in revenues for the 781,900 to nnes, representing a negative impact of US$3.3/dmt for the period, compared to a
positive impact of US$6.3/dmt for the same period in 2020.
After taking into account sea freight and other costs of US$42.0/dmt and the negative provisional sales adjustment of US$3.3/dmt, the
Company obtained a net average realized selling price 1 of US$109.5/dmt (CA$138.1/dmt) for its high -grade iron ore delivered to the end
customer. Revenues totalled $253,016,000 for the three -month period ended December 31, 2021 compared t o $329,545,000 for the same
period in 2020 reflecting the lower net average realized selling price1.
First Nine Months of the 2022 Fiscal Year vs First Nine Months of the 2021 Fiscal Year
For the nine-month period ended December 31, 2021, the Company sold 5,760,700 tonnes of iron ore concentrate mainly to customers in China,
Japan, South Korea and Europe. While the high -grade iron ore P65 index price fluctuated between a low of US$101.8/dmt and a high of
US$264.2/dmt during the nine-month period ended December 31, 2021, the Company sold its product at a gross average realized selling price
of US$186.7/dmt. The gross average realized selling price is comparable to the average P65 high -grade index of US$183.2/dmt for the period.
The Company expects its iron ore concentrate pricing to continue tracking the P65 index in the long term.
Combining the gross average realized selling price with the positive provisional sales adjustment of US$5.9/dmt, the Company sold its high -
grade iron ore material at a price of US$192.6/dmt during the nine -month period ended December 31, 2021, compared to the P65 high -grade
index average of US$183.2/dmt. Deducting sea freight costs of US$34.7/dmt, the Company obtain ed a net average realized selling price 1 of
US$157.9/dmt (CA$196.1/dmt) for its high -grade iron ore. The increase in freight and other costs in the nine -month period ended
December 31, 2021, compared to the same period in 2020, negatively impacted the net average realized selling price 1 for the period by
US$15.1/dmt. As a result, revenues totalled $1,129,430,000 for the nine-month period ended December 31, 2021, compared to $885,113,000 for
the same period in 2020.
B. Cost of Sales
Cost of sales represent s mining, processing, and mine site -related general and administrative (“G&A”) expenses as well as rail and port
operation costs. It also includes specific and incremental costs related to COVID-19.
For the three-month period ended December 31, 2021, the cost of sales totalled $110,290,000, compared to $108,506,000 for the same period
in 2020. During the three -month period ended December 31, 2021, the total cash cost 1 or C1 cash cost 1 per tonne , excluding specific and
incremental costs related to COVID -19, totalled $59.5/dmt, compared to $56.2/dmt for the same period in 2020. Fuel price increases, longer
haul cycle time associated with the current mine plan, combined with additional mining equipment in operation negatively impacted the total
cash cost1 for the three-month period ended December 31, 2021. Maintenance work initially planned for the forthcoming periods in preparation
for Phase II also contributed to the variation.
For the nine-month period ended December 31, 2021, total cash cost 1 amounted to $58.6/dmt, compared to $54.1/dmt for the same period in
2020. The variation is due to the same factors that affected the total cash cost1 for the three-month period ended December 31, 2021.
C. Net Income & EBITDA1
Third Quarter of the 2022 Fiscal Year vs Third Quarter of the 2021 Fiscal Year
For the three -month period ended December 31, 2021, the Company generated net income of $67,997,000 (EPS of $0.13), compared to
$120,771,000 (EPS of $0.25) for the same period in 2020. The net income was mainly affected by higher sea freight costs during the period and
negative provisional adjustments, compared to the same previous-year period.
For the three -month period ended December 31, 2021, the Comp any generated EBITDA 1 of $122,127,000, including non -cash share -based
compensation and pre -commercial start -up costs for Phase II totalling $9,461,000, representing an EBITDA margin 1 of 48%, compared to
$214,579,000, representing an EBITDA margin 1 of 65% for the same period in 2020. The decrease in EBITDA 1 period over period is primarily due
to lower revenue from lower net average realized selling prices1.
First Nine Months of the 2022 Fiscal Year vs First Nine Months of the 2021 Fiscal Year
For the nine -month period ended December 31, 2021, the Company generated net income of $406,932,000 (EPS of $0.80), compared to
$308,491,000 (EPS of $0.65) for the same period in 2020. The increase in net income is mainly due to higher gross profits par tially offset by
Bloom Lake Phase II start-up costs, higher G&A expenses and higher current income and mining taxes, as a result of higher operating earnings.
For the nine-month period ended December 31, 2021, the Company generated an EBITDA 1 of $727,879,000, representing an EBITDA margin 1 of
64%, compared to $543,713,000, representing an EBITDA margin 1 of 61% for the same period in 2020. This increase in EBITDA 1 is mainly
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attributable to the increase in the net average realized selling price 1 and slightly higher volumes of iron ore concentrate sold, partially offset by
higher production costs.
D. All-In Sustaining Cost1 (“AISC”) and Cash Operating Margin1
During the three -month period ended December 31, 2021, the Company realized an AISC 1 of $76.0/dmt, compared to $64.8/dmt for the same
period in 2020. The variation relates to higher total cash costs 1 and higher sustaining capital expenditures associated with preventive and
corrective interventions on two specific dikes associated with the Company's safe strategy and higher stripping and mining activities.
Deducting the AISC1 of $76.0/dmt from the net average realized selling price 1 of $138.1/dmt, the Company generated a cash operating margin 1
of $62.1/dmt for each tonne of high -grade iron ore concentrate sold during the three -month period ended December 31, 2021, compared to
$109.4/dmt for the same period in 2020.
During the nine -month period ended December 31, 2021, the Company recorded an AISC 1 of $74.0/dmt, compared to $62.0/dmt for the same
period in 2020. The variation is due to the factor previously described which affected the AISC 1 for the three-month period ended
December 31, 2021. The cash operating margin 1 totalled $122.1/dmt for the ni ne-month period ended December 31, 2021, compared to
$92.9/dmt for the same period in 2020. The variation is mainly due to a higher net average realized selling price1.
6. Exploration Activities
During the three and nine -month periods ended December 31, 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 and nine -month periods ended December 31, 2021, $585,000 and $3,311,000
in exploration and evaluation expenditures were incurred, respectively, compared to $91,000 and $355,000 for the same periods in 2020.
During the three and nine-month periods ended December 31, 2021, exploration expenditures included co sts associated with minor exploration
work, claim renewal fees and preliminary work related to updating the Kami Project feasibility study. During the nine -month period ended
December 31, 2021, exploration expenditures also consisted of $1,300,000 in acquisition costs for the Lac Lamêlée South property.
In the comparative periods, exploration expenditures mainly consisted of fees required to maintain the Company's exploration properties,
exploration expenses related to drilling and geophysical work at the Company’s Gullbridge-Powderhorn property, located in Northern Central
Newfoundland, and the staking costs for additional exploration claims.
7. Cash Flows — Purchase of Property, Plant and Equipment
During the three and nine -month periods ended December 31, 2021, the Company invested $137,951,000 and $401,543,000, respectively, in
addition to property, plant and equipment, compared to $49,744,000 and $100,150,000, respectively, for the same periods in 2020. The
following table details these investments:
Three Months Ended Nine Months Ended
December 31, December 31,
2021 2020 2021 2020
(in thousands of dollars)
Tailings lifts 7,000 423 27,512 7,326
Stripping and mining activities 10,948 8,440 28,166 15,485
Mining equipment rebuild 4,037 2,579 9,535 6,754
Sustaining capital expenditures 21,985 11,442 65,213 29,565
Phase II 86,522 31,949 270,366 51,116
Other capital development expenditures at Bloom Lake 29,444 6,353 65,964 19,469
Purchase of property, plant and equipment as per cash flows 137,951 49,744 401,543 100,150
Sustaining Capital Expenditures
Early in the 2021 fiscal year, the Company ramped- down its operations following Government directives in response to the COVID -19 pandemic
and implemented several measures in its efforts to mitigate the risks related to the spread of the virus . As a result, the overall sustaining
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capital expenditures were lower and delayed in the 2021 fiscal year, compared to the 2022 fiscal year.
The increase in tailings-related investments for the three and nine- month periods ended December 31, 2021, compared to the same periods in
2020, is due to preventive works performed on the dikes. As part of the Company's ongoing and thorough tailings infrastructure monitoring and
inspections, the Company continues to invest in its safe tailings strategy. Preventive a nd corrective interventions on two specific d ikes were
scheduled for the 2022 fiscal year, with $27,512,000 spent to correct identified discrepancies on specific d ikes from their original designs,
compared to work s completed by the asset’s previous owner. The extent of investments in tailings were anticipated to be lower in the 2021
fiscal year since an accelerated $30M work program for the raising of the tailings containment dam, to ensure safe tailings deposition, was
completed during the 2020 fiscal year.
Stripping activities for the three -month period ended December 31, 2021 were higher, as anticipated with the preparation for Phase II project
operations, compared to the same period in 2020 (refer to section 4 - Bloom Lake Mine Operating Activities). The increase in stripping and
mining activities during the nine -month period ended December 31, 2021, compared to the same period in 2020, is also attributable to the
ramp-down of operations in the first quarter of t he 2021 fiscal year, mandated by the Government's COVID -19 containment directives, whereby
operations were negatively affected in the comparable period.
The Company's mining equipment rebuild program reflects the work planned and undertaken during the th ree and nine -month periods ended
December 31, 2021.
Phase II
For the nine-month period ended December 31, 2021, $270,366,000 was spent in capital expenditures. As at December 31, 2021, the Phase II
project advanced considerably with $534,270,000 invested by that date, including start -up costs and $97,011,000 in advance payments and
deposits related to existing port, rail and transboarding infrastructure.
Other Capital Development Expenditures at Bloom Lake
During the three and nine -month periods ended D ecember 31, 2021, other capital development expenditures at Bloom Lake totalled
$29,444,000 and $65,964,000, respectively.
During the three -month period ended December 31, 2021, other capital development expenditures at Bloom Lake mainly consisted of
$11,313,000 in deposits for production equipment to be commissioned and financed in the future through the finance agreement with
Caterpillar Financial Services Limited, an investment of $10,064,000 to improve mill and other infrastructure capacity and $4 ,146,000 in
borrowing costs capitalized during the development period of the Phase II project.
During the nine -month period ended December 31, 2021, cash outflows include an additional investment of $3,851,000 in lodging
infrastructure at the mine site, in or der to accommodate a larger workforce, $23,751,000 in deposits for production equipment to be
commissioned, an investment of $24,611,000 to increase mill capacity and other infrastructure improvements, and capitalized borrowing costs
of $10,675,000, relate d to the Phase II project. During the nine -month period ended December 31, 2021, other capital development
expenditures were offset by the receipt of a government grant totalling $6,234,000, related to the Company’s greenhouse gas emissions and
energy consumption reduction initiatives. The Company qualified for a grant of up to $21,817,000.
During the three and nine -month periods ended December 31, 2020, other capital development expenditures at Bloom Lake totalled
$6,353,000 and $19,469,000, respectively. The investment for the nine -month period ended December 31, 2020 mainly consisted of
infrastructure upgrades at the mine, the commissioning of new service equipment and the acquisition of 100 additional used ra ilcars which
cost $5,500,000.
8. Qualified Person and Data Verification
Mr. Vincent Blanchet, P. Eng., Engineer at Quebec Iron Ore Inc., the Company’s subsidiary and operator of Bloom Lake, is a “q ualified 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 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.