Champion Iron Reports Record Production FOR Its FY2023 Third Quarter with Phase Ii Reaching Commercial Production, and Announces the Positive Findings of the Direct Reduction Pellet Feed Project Feasibility Study
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PRESS RELEASE
CHAMPION IRON REPORTS RECORD PRODUCTION FOR ITS FY2023 THIRD
QUARTER WITH PHASE II REACHING COMMERCIAL PRODUCTION, AND ANNOUNCES
THE POSITIVE FINDINGS OF THE DIRECT REDUCTION PELLET FEED PROJECT
FEASIBILITY STUDY
▪ Record quarterly production of 3.0M wmt, EPS of $0.10 and EBITDA1 of $118.2 million
▪ Bloom Lake Phase II expansion reaches commercial production
▪ Direct Reduction Pellet Feed (“DRPF”) Project Feasibility Study resulting in an after-tax NPV of
$738.2 million and IRR of 24.0%
Montréal, January 26, 2023 (Sydney, January 27, 2023) - Champion Iron Limited (TSX: CIA) (ASX: CIA) (OTCQX: CIAFF) (“Champion” or the
“Company”) is pleased to announce operational and financial results for the financial third quarter ended December 31, 2022.
Conference Call Details
Champion will host a conference call and webcast on January 27, 2023 at 8:30 AM (Montréal time) / January 28, 2023 at 12:30 AM (Sydney
time) to discuss the results for the third quarter ended December 31, 2022. Call details are outlined at the end of this press release.
Champion’s CEO, Mr. David Cataford, said: “In addition to reporting another quarterly production record, the Phase II expansion project reaching
commercial production is a significant milestone that culminates years of work by our dedicated workforce. The Phase II investments at Bloom
Lake should contribute to normalizing operating costs per tonne sold as we continue to ramp up the project towards nameplate capacity, which
we anticipate achieving in the near term. Additionally, our commitment to reduce emis sions in the steelmaking process continues as we
announce the positive findings of the feasibility study which evaluated the further upgrading of Bloom Lake’s iron ore concentrate to a DRPF
quality iron ore product. The project, leveraging the rare purity of our resources, positions our Company to participate in the accelerating
transition in the steel industry to reduce emissions, and offers the opportunity to generate significant returns on investmen ts while creating
additional positive impact with quality jobs for the region.”
1. Highlights
Sustainability
• No major environmental issues reported during the period;
• Environment and Climate Change Canada performed a regulatory audit of the Bloom Lake facilities and reported no instances of non-
compliance; and
• In keeping with Champion's corporate values and recognizing the importance of their relationship with local communities, all
employees completed training sessions on diversity and culture, developed in collaboration with the Company's First Nations
partners.
Operations and Financial
• Record production of 2,962,500 wmt of high -grade 66.0% Fe concentrate for the three -month period ended December 31, 2022,
representing an increase of nearly 50% compared to 2,013,200 wmt for the same period in 2021. Higher production during the pe riod
was driven by achieving commercial production of the Phase II concentrator in December. Quarterly production from the two
concentrators was negatively impacted by third- party delays in delivering mining equipment, which impacted mining capacity,
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together with significant electrical failures and operational interruptions following abnormal weather events, impacting the greater
Québec province in late December 2022. Longer than planned shutdowns, as well as unplanned outages during the commissioning o f
the new crusher's conveyor systems, also negatively impacted production in the period;
• Revenues of $351.2 million ($253.0 million for the same period in 2021), net cash flow from operating activities of $13.4 million
($104.6 million for the same period in 2021), EBITDA 1 of $118.2 million ($122.1 million for the same period in 2021) and net income of
$51.4 million (EPS of $0.10) ($68.0 million and EPS of $0.13 for the same period in 2021);
• Financial results during the quarter, compare d to the prior-year period, were positively impacted by the increase in iron ore sold. This
was offset by lower iron ore index prices compared to the same period last year, expected transitional start-up costs to support Phase
II commercial production and higher operating costs. Volume of sales in the period was negatively impacted by significant electrical
failures and operational interruptions following abnormal weather events in late December 2022, resulting in delayed iron ore
shipments due to power outages at the port of Sept-Îles;
• C1 cash cost 1 of $76.0/dmt ( US$56.0/dmt)2 for the three -month period ended December 31, 2022, compared to $59.5/dmt
(US$47.2/dmt)2 for the same period in 2021. The higher cost was attributable to higher fuel and explosives prices, higher site- related
G&A expenses attributable to inflationary pressures, higher maintenance costs due to unscheduled work during the commissioning of
the new crusher's conveyor systems and delays in mining equipment deliv eries, which contributed to incremental contractor
spending at the mine to support higher production volumes. Unit cost during the period was als o impacted by higher fixed costs to
support the future run rate while production ramps up to nameplate capacity. The economic benefits of the Phase II expansion project
should be progressive as throughput gradually increases towards Bloom Lake's revised nameplate capacity of 15 Mtpa3;
• Available liquidity1 of $476.0 million as at December 31, 2022, including $166.3 million of cash and cash equivalents and short -term
investments, compared to $586.4 million as at September 30, 2022; and
• Dividend of $0.10 per ordinary share paid on November 29, 2022, in connection with the semi- annual results for the period ended
September 30 , 2022, totalling $51.7 million. Additional details on the dividends and related tax information can be found on the
Company’s website at www.championiron.com under the section Investors – Dividend Information.
Phase II Milestones
• Phase II plant demonstrated the ability to achieve nameplate capacity on several days during the period and achieved its comm ercial
production in December 2022;
• While plant related work programs have been completed earlier than anticipated, off -site work programs, including third- party
infrastructure, continue to advance with slight delays related to labour availability and late delivery of some key components; and
• The Company expects the Bloom Lake site's throughput and Fe recoveries to benefit from ongoing optimization work programs,
mining equipment deliveries, and completion of ore crushing system commissioning, while off -site infrastructure capacity increases
are advancing, positioning the mine to achieve its expected increased nameplate capacity in the near term3.
Direct Reduction Pellet Feed Project Feasibility Study
• Announces positive results of the Feasibility Study, evaluating flowsheet modifications to the Phase II plant and infrastructure
required to upgrade its current production to DRPF grade iron ore, resulting in an average life of mine production of approximately
7.5 Mtpa of DRPF quality iron ore at 69% Fe with combined silica and alumina content below 1.2% (the “Project”);
• Project construction period estimated at 30 months with total capital expenditures of $470.7 million, including additional power and
port-related infrastructure, resulting in a Net Present Value (“NVP”) of $738.2 million and Internal Rate of Return (“IRR”) of 24. 0%
after-tax;
• Project could produce one of the highes t DRPF quality products available on the seaborne market, which can expect to attract a
substantial premium over the Company’s current high-grade 66.2% Fe iron ore concentrate;
• Production of DRPF product would enhance the Company’s ability to further contribute to the green steel supply chain by engaging
with additional customers focused on the Direct Reduced Iron (“DRI”) and Electric Arc Furnaces (“EAF”) steelmaking route, whi ch
reduces emissions in the steelmaking process by approximately half, compared to the traditional steelmaking route using Blast
Furnace (“BF”) and Basic Oxygen Furnace (“BOF”); and
• Approval by the Board of an initial budget of $10 million to advance the Project during the remainder of calendar 2023 has be en
obtained, to be funded fro m existing liquidity, with a Final Investment Decision (“FID”) to complete the Project pending securing
additional power capacity and non-dilutive funding.
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Other Growth and Development
• The Kamistiatusset iron ore project's (the “Kami Project”) feasibility study, which is evaluating the project's capability to produce
Direct Reduction (“DR”) grade pellet feed product, is expected to be completed in the second half of calendar 20233; and
• In collaboration with a ma jor international steelmaking partner, a feasibility study evaluating the re- commissioning of the Pointe -
Noire Iron Ore Pelletizing Facility to produce DR grade pellets is advancing, with an anticipated completion date in the second half of
calendar 20233.
2. Direct Reduction Pellet Feed Project
DRPF Product and Pricing
With an increased focus to reduce greenhouse gas emissions in the steelmaking processes, the steel industry is experiencing a structural shift
in its production methods. This dynamic is expected to create additional demand for higher -purity iron ore products, as the industry transitions
towards using reduction technologies to produce liquid iron, such as the use of DRI in EAF instead of BF-BOF.
Benefiting from high- purity reserves and resources, Bloom Lake is one of the few iron -ore deposits in the world capable of upgrading its
product to DRPF quality iron ore, requiring both elevated Fe content and low impurities. The Project, proposing to produce 69 % Fe with
combined silica and alumina content below 1.2%, is expected to produce one of the world’s highest purity DRPF quality iron ore. High purity
DRPF product is a primary ingredient required in the green steel supply chain to produce high quality and complex steel in th e DRI/EAF process,
reducing CO2 equivalent emissions by more than 50%, compared to the conventional steelmaking route utilizing BF-BOF.
DR grade iron ore is generally pelletized to produce DR grade pellets. DR grade pellets are then processed in a DR reactor, r emoving oxygen
from the iron oxide concentrate to produce metallic iron (DRI or HBI), which can be a substitute or blended with scrap steel to produce steel in
the EAF steelmaking method.
As DR grade quality iron ore represents a niche product in the iron ore industry, representing approximately 5% of the global seaborne iron ore
production, pricing tends to be directly negotiated between producers and sellers without an available global pricing index. Du e to its higher Fe
content and lower impurities, pricing for DR grade iron ore product, used as a raw material input to make DR grade pellets, is expected to attract
a significant premium over the traditional high -grade iron ore P65 index and correlate with the DR grade pellet indices. The Company believes,
in tandem with several market experts, that the accelerating transition to reduce emissions in the steelmaking process will result in rising
demand for DRPF products. As of result of this expected rising demand and product scarcity, the Company believes that its industry leading
DRPF quality product will attract increasing premiums over time. Additionally, production of DRPF quality iron ore is expected to enable the
Company to further diversify its customer mix, including steelmakers in closer proximity to Bloom Lake, which could result in freight
advantages for the Company.
Project Feasibility Study Highlights
The Feasibility Study for the DRPF Project, conducted in partnership with BBA, evaluated the equipment and infrastructure required to upgrade
the Bloom Lake phase II plant to produce approximately 7.5 Mtpa of DRPF quality iron ore at 69% Fe with combined silica and alumina content
below 1.2%. To integrate the Project with Bloom Lake’s existing infrastructure, the Feasibility Study evaluated additional on site work programs,
including modifications and tie-ins to the Phase II plant, a modification to its access road and an upgrade to the site’s electricity transport and
distribution systems. To facilitate the handling of two different quality iron ore products, the Feasibility Study also asses sed modifications to
the Société fe rroviaire et portuaire de Pointe -Noire (“SFPPN”) facilities, including additional conveyor systems and modifications to existing
transfer towers.
The Project proposes to deploy proven technologies to regrind iron ore concentrate prior to submitting it to a reverse flotation process to further
remove silica from iron oxides while reducing energy consumption and improving iron recovery compared to traditional flowsheets.
Benefiting from expected access to renewable hydro-electric power, the Project is designed to be carbon neutral, and is not expected to create
any additional environmental impacts. In addition to the Project’s anticipated positive local economic impact, the constructi on phase of the
Project is expected to create ~ 150 jobs over a period of approximately two years with ~ 70 additional permanent quality jobs once completed.
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Item C$ US$
NPV Pre-tax NPV8% of $1,230.1 million
After-tax NPV8% of $738.2 million
Pre-tax NPV8% of $918.0 million
After-tax NPV8% of $550.9 million
IRR Pre-tax IRR of 30.1%
After-tax IRR of 24.0%
Capital expenditures (“CAPEX”) $470.7 million $351.3 million
Estimated operating cost (over Bloom Lake’s
current Total cash cost)
$9.63/dmt DRPF $7.19/dmt DRPF
Production volume Estimated average annual production of approximately 7.5 Mt DRPF quality iron ore at 69% Fe
with combined silica and alumina content below 1.2%
Construction period 30 months
Project estimated life Project life estimated at 20 years
Capital Cost
CAPEX Pre-Production C$ million US$ million
Phase II circuit optimization 348.1 259.8
Electrical upgrade and port-related infrastructure 46.4 34.6
Contingencies 76.2 56.9
Total 470.7 351.3
Key Assumptions
Item Metric Assumption
Construction period Months 30
Project life Years 20
Operating costs (over Bloom Lake’s cash cost) C$/t 9.6
Assumed Diesel price C$/l 2.0
Assumed Electricity tariff C$/kwh 0.05
Implied tax rate post allowances including provincial, federal and mining
duties % 36.3
Average foreign exchange rate C$/US$ 1.34
Conversion of 66.2% to DRPF % 96.0
Project Timeline and Funding
The Project, designed to be an extension to the operating Phase II plant, is expected to require minor modifications to its existing permits and
will require an estimated construction period of approximately 30 months. To maintain the Project’s timeline, the Board approved an initial
budget of $10 million, to be funded from existing liquidity, to advance the Project during the remainder of calendar 2023. The Company expects
to fund the remainder of the Project through existing liquidity, including cash flow from operations, and additional non-dilutive funding sources.
The Board expects to review the Project’s FID, pending securing additional power and non-dilutive funding.
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3. Bloom Lake Mine Operating Activities
Three Months Ended Nine Months Ended
December 31, December 31,
2022 2021 Variance 2022 2021 Variance
Operating Data
Waste mined and hauled (wmt) 4,371,500 5,441,700 (20%) 14,550,400 15,440,800 (6%)
Ore mined and hauled (wmt) 8,840,400 5,517,200 60% 23,248,200 16,875,000 38%
Material mined and hauled (wmt) 13,211,900 10,958,900 21% 37,798,600 32,315,800 17%
Strip ratio 0.49 0.99 (51%) 0.63 0.92 (32%)
Ore milled (wmt) 8,503,400 5,161,000 65% 22,628,300 16,068,000 41%
Head grade Fe (%) 28.5 30.6 (7%) 29.6 29.8 (1%)
Fe recovery (%) 80.1 83.9 (5%) 79.6 83.3 (4%)
Product Fe (%) 66.0 66.2 —% 66.1 66.2 —%
Iron ore concentrate produced (wmt) 2,962,500 2,013,200 47% 8,102,400 6,038,300 34%
Iron ore concentrate sold (dmt) 2,694,200 1,832,100 47% 7,501,500 5,760,700 30%
Phase II Commercial Production
During the first quarter of the 2023 financial year, the Company successfully commissioned its second ore processing plant an d the first
shipment of concentrate produced from that plant was railed in May 2022. In the second quarter, the last major on -site work programs relating
to the Phase II infrastructure were completed, enabling the Company's two crushers to feed both processing facilities and reduce bottlenecks
during maintenance periods. Commissioning activities progressed as scheduled during the thre e-month period ended December 31, 2022,
enabling the Company to reach commercial production in December 2022. The Company will continue to make adjustments and improvements
in some areas to stabilize and optimize operations, including work to increase throughput and recovery ratio as well as activities to complete
ore crushing system commissioning, positioning the Company to achieve nameplate capacity in the first half of calendar year 2 0233. While
major on -site work programs were completed ahead of schedule, off -site work programs, including third -party infrastructure, continue to
advance with slight delays related to labour availability and late delivery of some key components. While Phase II demonstrated its ability to
reach nameplate capacity on several operating days and achieved commercial production in December 2022, production of the mining
complex was limited during the period by the unplanned work during the commissioning of the new crusher's conveyor systems and third-party
delays in delivering mining equipment, which impacted the Company's mine operations. Most of the on- site equipment required to increase
mining capacity towards Phase II's expected nameplate capacity has now arrived on site and is in the process of being assembled.
Operational Performance
Third Quarter of the 2023 Financial Year vs Third Quarter of the 2022 Financial Year
In the three-month period ended December 31, 2022, 13.2 million tonnes of material were mined and hauled, compared to 11.0 million tonnes
during the same period in 2021, an increase of 21%. The increase in material movement was enabled through the utilization of additional
equipment compared to the same prior-year period, partially offset by a longer haul cycle as material was sourced from different pits, including
those that deepened with mining activities over time. Delays in the delivery of haul trucks and drills limited the material mined and hauled in
the three-month period ended December 31, 2022. Most of the equipment has now arrived at the site and is in the process of being assembled
and commissioned.
The strip ratio for the three- month period ended December 31, 2022, was impacted by the limited number of available trucks due to delivery
delays. The Company chose to reduce the waste mined and hauled and focused on ore in order to optimize plant operations in co nnection with
transitional incremental feed requirements during the Phase II ramp- up period. The Company intends to gradually recover accumulated waste
backlog in future periods. The iron ore head grade for the three-month period ended December 31, 2022, was 28.5%, compared to 30.6% for the
same period in 2021. The variation in head grade is attributable to the presence of some lower -grade ore being sourced and blended from
different pits, which was anticipated and is in line with the mine plan and the LoM head grade average.
The Company's average Fe recovery rate for the three-month period ended December 31, 2022, was negatively impacted by lower recoveries
during the commissioning of the Phase II concentrator. This was expected at this stage of the Phase II commissioning. The improvement of the
Phase II stability circuit during the three-month period ended December 31, 2022, allowed an increase in the Fe recovery rate, compared to the
second quarter. The Company remains confident in its ability to reach the average LoM expected Fe recovery rate target of 82. 4% at Bloom
Lake, as detailed in the Phase II Feasibility Study, in the near term3.
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Bloom Lake achieved record production of 3.0 million wmt of high -grade iron ore concentrate during the three-month period ended
December 31, 2022, an increase of nearly 50%, compared to 2.0 million wmt during the same period in 2021, positively impacted by the ongoing
commissioning of the Phase II plant. During the quarter, the Phase II project reached the commercial production milestone. Management
expects to benefit from optimization work programs and equipment deliveries, which should result in improved combined production of Bloom
Lake's plants in the near term. Production during the quarter was negatively impacted by the unplanned work during the commissioning of the
new crusher's conveyor systems. Higher throughput also contributed to higher production volumes, compared to the prior-year period, despite a
lower global recovery. The commissioned Phase II project's production compares favourably to the scheduled ramp-up production volumes.
The plants processed 8.5 million tonnes of ore during the three -month period ended December 31, 2022, compared to 5.2 million tonnes for the
same prior-year period. The throughput for the period was positively affected by higher availability of mined ore and the co mmissioning of
Phase II operations in the previous quarters.
First Nine Months of the 2023 Financial Year vs First Nine Months of the 2022 Financial Year
The Company mined and hauled 37.8 million tonnes of material during the nine -month period ended Dece mber 31, 2022 , compared to 32.3
million tonnes for the same period in 2021. This increase in material mined and hauled is attributable to the commissioning of additional
operational equipment compared to the same prior -year period. The strip ratio was 0.63 for the nine-month period ended December 31, 2022,
compared to 0.92 for the same period in 2021, and is consistent with the revised mine plan.
The iron ore head grade of 29.6% for the nine-month period ended December 31, 2022, was in line with the same period in 2021, and is
consistent with the LoM head grade average. The lower average Fe recovery rate for the nine-month period ended December 31, 2022, was
attributable to the commissioning of the Phase II concentrator, as detailed above.
The plant processed 22.6 million tonnes of ore during the nine -month period ended December 31, 2022 , an increase of 41% over the same
period in 2021, and produced 8.1 million wmt of high- grade iron ore concentrate, compared to 6.0 million wmt for the same period in 2021,
mainly attributable to the commissioning of the Phase II project.
4. Financial Performance
Three Months Ended Nine Months Ended
December 31, December 31,
2022 2021 Variance 2022 2021 Variance
Financial Data (in thousands of dollars)
Revenues 351,233 253,016 39% 931,175 1,129,430 (18%)
Cost of sales 209,070 110,290 90% 578,318 342,020 69%
Other expenses 23,780 23,350 2% 56,224 58,223 (3%)
Net finance costs 1,858 3,377 (45%) 16,813 8,776 92%
Net income 51,406 67,997 (24%) 112,490 406,932 (72%)
EBITDA1 118,206 122,127 (3%) 297,467 727,879 (59%)
Statistics (in dollars per dmt sold)
Gross average realized selling price1 171.6 195.0 (12%) 171.2 232.1 (26%)
Net average realized selling price1 130.4 138.1 (6%) 124.1 196.1 (37%)
C1 cash cost1 76.0 59.5 28% 71.7 58.6 22%
All-in sustaining cost (“AISC”)1 86.7 76.0 14% 86.7 74.0 17%
Cash operating margin1 43.7 62.1 (30%) 37.4 122.1 (69%)
A. Revenues
Third Quarter of the 2023 Financial Year vs Third Quarter of the 2022 Financial Year
Revenues totalled $351.2 million for the three-month period ended December 31, 2022, compared to $253.0 million for the same period in 2021,
reflecting a significantly higher sales volume over the same prior -year period and the weakening Canadian dollar, partially offset by the lo wer
net average realized selling price1.
During the three -month period ended December 31, 2022, 2.7 million tonnes of high-grade iron ore concentrate were sold at a gross average
realized price1 of US$126.5/dmt, before freight and other costs and provisional pricing adjustments, compared to 1.8 million tonnes sold at a
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gross average realized price1 of US$154.8/dmt for the same period in 2021. Volume of sales was up almost 50% over the prior-year period due to
incremental production driven by the Phase II ramp-up. Volume of sales in the period was 0.1 million tonnes lower than in the second quarter as
the loading of vessels was impacted by severe weather in late December, which contributed to a power outage at the port of Sept -Îles, whereby
it took more than five days to resume loading operations. As a result, the loading of some vessels was postponed until January 2023 and will be
recognized as revenue in the next quarter. The decrease in the gross average realized selling price 1 reflects the lower index prices during the
three-month period ended December 31, 2022, compared to the same prior -year period. The gross average realized selling price 1 of
US$126.5/dmt represents a premium of 27.8% over the benchmark IODEX 62% Fe CFR China Index (“P62”) price for the period, compared to a
premium of 41.2% for the same period in 2021.
During the three-month period ended December 31, 2022, the IODEX 65% Fe CFR China Index (“P65”) for high-grade iron ore fluctuated from a
low of US$91.0/dmt to a high of US$130.9/dmt. The P65 index average price for the period was US$110.9/dmt, a decrease of 14% from the same
prior-year quarter, resulting in an average premium of 12.0% over the P62 reference price of US$99.0 /dmt. The gross average realized selling
price1 of US$126.5/dmt was higher than the P65 index average price for the period of US$110.9/dmt due to 1.7 million tonnes in transit as at
December 31, 2022, which were provisionally priced using an average forward price of US$129.5/dmt, which was significantly higher than the
P65 index average price for the period. In addition, the gross average realized selling price 1 was positively impacted by certain sales using
backward-looking iron ore index prices, when prices were also higher than the P65 index average for the three-month period ended
December 31, 2022.
The average C3 Baltic Capesize Index for the three-month period ended December 31, 2022, was US$20.6/t compared to US$31.0/t for the
same period in 2021, representing a decrease of 34%, which contributed to lower freight costs in the three-month period ended
December 31, 2022, compared to the same prior-year period. The lower freight rates for the three-month period ended December 31, 2022, can
be attributed to the partial removal of COVID -19 lockdowns in China and lower seaborne iron ore volumes, as marginal suppliers facing
profitability challenges curtailed operations. Champion typically contracts vessels three to five weeks prior to the desired laycan period. This
creates a delay between the freight paid and the C3 index price. The effects of these delays are eventually reconciled since the Company ships
its high -grade iron ore concentrate uniformly throughout the year. After accounting for sea freight and other costs and provisional pr icing
adjustments, the Company's net realized FOB selling price1 was US$96.1/dmt, compared to US$109.5/dmt for the same period in 2021.
Provisional pricing adjustments on previous quarterly sales, which were impacted by the decrease in the P65 index in the firs t half of the
quarter, negatively impacted the net average realized selling price 1. During the three -month period ended December 31, 2022, a final price of
US$109.4/dmt was established for the 1.3 million tonnes of iron ore that were in transit as at September 30, 2022, and which were previously
evaluated using an average expected price of US$112.3/dmt. Accordingly, during the three-month period ended December 31, 2022, net
negative provisional pricing adjustments of $5.2 million ( US$3.8 million) were recorded as a decrease in revenues for the 1.3 million tonnes,
representing a negative impact of US$1.4/dmt over the total volume of 2.7 million dmt sold during the current period, which was slightly lower
than the negative impact for the same period in 2021.
After taking into account sea freight and other costs of US$29.0/dmt and the negative provisional pricing adjustment of US$1.4/dmt, the
Company obtained a net average realized selling price 1 of US$96.1/dmt (C$130.4/dmt) for its high-grade iron ore delivered and in transit at the
end of the period.
First Nine Months of the 2023 Financial Year vs First Nine Months of the 2022 Financial Year
Revenues totalled $931.2 million for the nine-month period ended December 31, 2022, compared to $1,129.4 million for the same period in
2021, mainly as a result of a lower U.S. dollar net average realized selling price 1, partially offset by a significantly higher sales volume and the
weakening Canadian dollar.
For the nine-month period ended December 31, 2022, the Company sold 7.5 million tonnes of iron ore concentrate, mainly to customers in
China, Japan, South Korea and Europe, compared to 5.8 million tonnes for the same prior-year period. This represents an increase of 30% year-
over-year driven by the ramp-up of the Phase II production in the last two quarters.
While the high-grade iron ore P65 index price fluctuated between a low of US$91/dmt and a high of US$185/dmt during the nine-month period
ended December 31, 2022, it averaged US$128.5 /dmt, representing a decrease of 30% from the same period in 2021. The Company sold its
product at a gross average realized selling price 1 of US$130.5/dmt. Combining the gross average realized selling price 1 with the negative
provisional pricing adjustment of US$4.2/dmt, the Company sold its high -grade iron ore at a price of US$126.3/dmt during the nine-month
period ended December 31, 2022, compared to the P65 high -grade index average of US$128.5/dmt. The Comp any expects its iron ore
concentrate pricing to continue tracking the P65 index in the long term. Deducting sea freight and other costs of US$31.6/dmt, the Company
obtained a net average realized selling price1 of US$94.7/dmt (C$124.1/dmt) for its high-grade iron ore.
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B. Cost of Sales and C1 Cash Cost1
The cost of sales represents mining, processing, and site-related G&A expenses as well as rail and port operation costs. It also includes specific
and incremental costs related to COVID -19 and, starting in April 2022, it includes Bloom Lake Phase II start -up costs incurred after
commissioning. These start -up costs mainly include abnormal operational costs attributable to the facility not having reached commercial
production.
For the three-month period ended December 31, 2022, the cost of sales totalled $209.1 million, compared to $110.3 million for the same period
in 2021. During the three-month period ended December 31, 2022, the C1 cash cost 1 per tonne totalled $76.0/dmt, compared to $59.5/dmt for
the same period in 2021.
The C1 cash cost 1 per dmt sold for the three-month period ended December 31, 2022, benefited from increased production volumes from the
Phase II project. However, this was offset by the rising cost of fuel used in the Company's mining activities, workforce fly -in fly-out and land
transportation costs, higher explosives costs and global inflationary pressures affecting food services, contractors, and rail and port
operations. Cost of sales and C1 cash cost 1 were also impacted by higher fixed costs required to support the Company's increasing nameplate
capacity while ramping up production. Locomotive and mining equipment delivery delays also created inefficiencies and incremental increases
in contractor spending. In addition, the unplanned work for the repair and modification of the new cr usher's conveyor systems during the
commissioning also contributed to a higher cash cost for the three-month period ended December 31, 2022. Finally, longer haul cycle times
associated with the current mine plan also contribute quarter over quarter to high er mining costs. Despite factors contributing to higher cash
cost1 per dmt sold in the period, the economic benefits of the Phase II expansion project should be progressive as throughput gradu ally
increases and should contribute to normalizing C1 cash cost 1 per dmt sold as Bloom Lake reaches the expected revised nameplate capacity of
15 Mtpa.
The life of mine stripping ratio used for cost capitalization was revised upward in December 2021 concurrently with the comme ncement of
Phase II operations. During the three -month period ended December 31, 2022, the actual strip ratio of 0.49 was lower tha n the life of mine
stripping ratio, therefore no mining costs were capitalized during the period. The prior -year actual strip ratio of 0.99 was significantly higher
than the life of mine stripping ratio of 0.48 b efore Phase II considerations, positively impacting the cash cost 1 for the comparative period
because it resulted in capitalization of mining costs.
For the nine-month period ended December 31, 2022, the Company produced high -grade iron ore at a C1 cash cost 1 of $71.7/dmt, compared to
$58.6/dmt for the nine-month period ended December 31, 2021. The variation is attributable to the same factors that affected the C1 cash cost1
for the three-month period ended December 31, 2022. In addition, unplanned third- party shutdowns, planned maintenance of the C ompany's
additional facilities, as well as increased headcount and subcontractor usage in relation to the commissioning of the Phase II project occurred
during the nine-month period ended December 31, 2022.
C. Net Income & EBITDA1
For the three -month period ended December 31, 2022, the Company generated EBITDA 1 of $118.2 million, representing an EBITDA margin 1 of
34%, compared to $122.1 million, representing an EBITDA margin1 of 48%, for the same period in 2021. The year-over-year decrease in EBITDA1 is
primarily due to higher cost of sales and lower net average realized selling prices 1, partially offset by a higher sales volume driven by the ramp-
up of Phase II.
For the three -month period ended December 31, 2022, the Company generated net income of $51.4 million (EPS of $0.10 ), compared to
$68.0 million (EPS of $0.13) for the same period last year. The year-over-year decrease in net income was mainly affected by lower EBITDA1 and
higher depreciation.
For the nine-month period ended December 31, 2022, the Company generated an EBITDA 1 of $297.5 million, representing an EBITDA margin 1 of
32%, compared to $727.9 million, representing an EBITDA margin 1 of 64%, for the same prior -year period. This year -over-year decrease in
EBITDA1 is mainly attributable to the decrease in the net average realized selling price 1 and higher production costs, partially offset by a higher
sales volume following the commissioning of Phase II.
For the nine-month period ended December 31, 2022 , the Company generated net income of $112.5 million (EPS of $0.22), compared to
$406.9 million (EPS of $0.80 ) for the same prior -year period. The year -over-year decrease in net income is mainly due to lower EBITDA 1 and
higher depreciation, partially offset by lower current and deferred income and mining taxes.