CHAMPION IRON REPORTS RECORD REVENUES, EBITDA, NET INCOME AND NET CASH FLOW FROM OPERATIONS FOR ITS FY2021 THIRD QUARTER RESULTS Net income of $120.8M, EBITDA of $211.9M and net cash flow from operations of $185.3M; Advances work
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PRESS RELEASE
CHAMPION IRON REPORTS RECORD REVENUES, EBITDA, NET INCOME AND NET CASH
FLOW FROM OPERATIONS FOR ITS FY2021 THIRD QUARTER RESULTS
Net income of $120.8M, EBITDA of $211.9M and net cash flow from operations of $185.3M; Advances work
programs on the fully financed Phase II expansion expected to be completed by mid-2022
Montréal, January 27, 2021 - Champion Iron Limited (TSX: CIA) (ASX: CIA) (“Champion” or the “Company”) is pleased to announce strong
operational and financial results for the third quarter ended December 31, 2020 of the fiscal year ending March 31, 2021.
Conference Call Details
Champion will host a conference call and webcast on Thursday January 28, 2021 at 8:30 AM EST (Montréal Time) / Friday
January 29, 2021 at 12:30 AM AEDT (Sydney time) to discuss the FY2021 third quarter results. Call details are outlined at the end of this release
(the “document”).
1. Highlights
Health and Safety
• Implemented a rapid testing laboratory using a technology approved and certified by Health Canada at the mine site, allowing the
screening of employees and contractors to further mitigate COVID-19 related risks;
• Established a contingency plan for each sector of activity in the event of multiple COVID-19 detections; and
• Implemented and continuously reviews measures and protocols in order to minimize the risks related to COVID-19, which are expected
to remain in place, in order to safeguard the health and safety of its employees, partners and local communities.
Financial
• Revenues of $329.5M and $885.1M for the three and nine -month periods ended December 31, 2020, respectively, compared to
$171.1M and $609.4M, respectively, for the same periods in 2019;
• Record EBITDA1 of $211.9M for the three -month period ended December 31, 2020, compared to an EBITDA 1 of $57.9M for the same
period in 2019. EBITDA1 of $537.4M for the nine-month period ended December 31, 2020, compared to $287.4M for the same period in
2019;
• Net income of $120.8M for the three-month period ended December 31, 2020 (EPS of $0.25), compared to a net income of $30.2M for
the same period in 2019 (EPS of $0.07). Net income of $308.5M for the nine-month period ended December 31, 2020 (EPS of $0.65),
compared to a net income of $102.7M for the same period in 2019 (EPS of $0.16);
• Net cash flow from operations of $185.3M for the three-month period ended December 31, 2020, representing operating cash flow per
share1 of $0.39, compared to $28.1M or $0.06 per share1 for the same period in 2019. Net cash flow from operations of $388.9M for the
nine-month period ended December 31, 2020, representing operating cash flow per share 1 of $0.82, compared to $225.0M or $0.52
per share1 for the same period in 2019; and
• Cash on hand2 of $507.2M (excluding restricted cash of $44.6M) as at December 31, 2020, compared to cash on hand 2 of $298.7M as
at March 31, 2020.
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Operations
• Production of 1,922,100 wmt of high -grade 66.4% Iron ore (“Fe”) concentrate for the three -month period ended December 31, 2020,
compared to 1,832,800 wmt for the same period in 2019. Production of 5,989,700 wmt of high -grade 66.3% Fe concentrate for the
nine-month period ended December 31, 2020, compared to 6,011,900 wmt for the same period in 2019;
• Recovery rate of 83.6% and 83.8% for the three and nine -month periods ended December 31, 2020, respectively, compared to a
recovery rate of 81.7% and 82.7%, respectively, for the same periods in 2019; and
• Free on Board (“FOB”) total cash cost1 of $56.2/dmt (US$43.1/dmt) (“Total Cash Cost” or “Cash Cost”) and $54.1/dmt (US$40.4/dmt)
for the three and nine-month periods ended December 31, 2020, respectively, compared to $54.2/dmt (US$41.1/dmt) and $52.3/dmt
(US$39.4/dmt), respectively, for the same periods in 2019.
Other Developments
• Received final Board approval on November 12, 2020 to complete the Phase II expansion project (“Phase II”) and advanced work
programs required to maintain the project completion timeline, scheduled for mid-2022;
• Increased the senior secured Credit Facility from US$200.0M to US$400.0M, providing an additional US$200.0M to finance the Phase
II expansion, which remains undrawn as at December 31, 2020. Together with cash on hand2 and ongoing cash flows from operations,
the Company expects to be fully funded to complete the Phase II project;
• Received approval from the Supreme Court of Newfoundland and Labrador for the acquisition of the mining properties of the
Kamistiatusset iron ore project (the “ Kami Project”) located in the Lab rador Trough geological belt in southwestern Newfoundland,
near the Québec border, and certain related contracts. The acquisition is expected to secure an additional 8 Mtpa of port capacity at
the multi-user berth of the port of Sept-Îles and is expected to position the Company for growth opportunities; and
• Entered into a freight contract for one vessel per month, from January 2021 to March 2021, at an agreed upon price of US$17.5 0 per
tonne plus freight commissions.
Champion’s CEO, Mr. David Cataford, said “Despite the challenges imposed by the COVID -19 pandemic, Champion achieved several record
financial results in the period, benefiting from rising iron ore prices and the support of our employees, partners and communities. Building on
this momentum, the Bloom Lake Phase II expansion project is well underway with our Company successfully increasing its senior secured
Credit Facility, which together with cash on hand 2 and cash flows fro m operations, is expected to fully fund the completion of the project and
double the nameplate capacity of Bloom Lake to 15 Mtpa of high -grade iron ore concentrate by mid -2022. Additionally, in order to strategically
position our Company for growth opportunities, and pursuant to its recently announced acquisition plans, our technical team will be mandated
to review and revise the feasibility study of the Kami Project, located only a few kilometers south-east of our current operations. Lastly, I wish to
acknowledge that even with our record financial performance and our growth trajectory, our focus remains on the health and safety of our
workers who continue to prove their dedication and positively impact our Company.”
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2. Response to the COVID-19 Pandemic
The COVID -19 pandemic continues to impact the global economy, creating significant economic uncertainty and disruption to financial
markets.
Health and safety of the Company’s employees, partners and local communities
Since the beginning of the pandemic, the Company has consistently and proactively deployed several measures in its efforts to mitigate risks
related to COVID-19, in line with or exceeding the Government of Québec's (the “Government”) guidelines, including the following:
• Established an executive committee to monitor and adapt to the ongoing challenges created by the COVID-19;
• Adapted work environments and implementation of safety rules and protocols;
◦ Established a rapid testing COVID -19 laboratory using technology approved and certifi ed by Health Canada at the mine site,
providing the Company with the ability to screen employees and contractors;
◦ Established a contingency plan for each sector of activity in the event of multiple COVID-19 detections;
◦ Temperature monitoring and control prior to traveling and entering Bloom Lake mine site;
◦ Disinfection stations across the mine site and adoption of social distancing protocols;
◦ Adoption of isolation measures from the nearby communities and self-isolation for workforce who exhibit symptoms;
◦ Additional transportation capacity to allow for adequate social distancing; and
◦ Employees' contact register to trace potential infections and to launch disease protocol for suspected cases.
• Mandatory information session for new contractors and employees and communication of updated measures;
• Monitoring of COVID-19 related measures adopted by contractors; and
• Monthly and daily audit to review the effectiveness of the Company's adopted measures.
The Company's COVID-19 plan is currently available on its website at www.championiron.com.
Financial and operational impacts
Despite the economic impact of the COVID -19 pandemic, iron ore prices remained robust throughout the three and nine -month periods ended
December 31, 2020. To date, the Company's risk mitigating actions have proven to be successful at minimizing the pandemic's impact, with
Bloom Lake operating at full capacity and delivering strong net cash flow from operations.
The Company implemented best practices in managing its response to the COVID -19 pandemic resulting in direct and incremental operating
costs during the three and nine-month periods ended December 31, 2020, which totalled $2.2 million or $1.2/dmt1 and $9.4 million or $1.7/dmt1,
respectively. Additional indirect operational costs were also incurred since the beginning of the pandemic, including ineffic iency-related costs
across several areas of the Company's operations. These COVID -19 specific and indirect costs could continue to be incurred in the foreseeable
future.
Uncertainties due to COVID-19
Although the Company is managing its operations and liquidity to mitigate risks related to COVID -19, the extent to which the pandemic could
impact operations and cash flows in future is uncertain and will depend on future developments given the significant uncertai nty regarding the
ultimate impact that the COVID-19 pandemic will have on the overall economy and the demand for iron ore concentrate.
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3. Bloom Lake Phase II Update
Bloom Lake Feasibility Study (the "Feasibility Study")
On June 20, 2019, the Company announced the findings of the Feasibility Study, prepared pursuant to National Instrument 43 -101 – Standards
of Disclosure for Mineral Projects (“NI 43-101”) and Joint Ore Reserves Committee (“JORC”) Code (2012 edition) (see p ress release dated June
20, 2019 available under the Company’s filings on SEDAR at www.sedar.com , the ASX at www.asx.com.au and the Company's website at
www.championiron.com), including proven and probable mineral reserve estimates of 807.0 Mt (346.0 Mt proven reserves and 461.0 Mt
probable reserves) at an average grade of 29.0% Fe. The Phase II project, as detail ed in the Feasibility Study, 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
completed by the mine's former owner. Based on the new optimized mine plan, the Bloom Lake mining rate would also be increased to
accelerate the supply of ore to the expanded facilities, while maintaining a life of mine (“LoM”) of 20 years.
The Feasibility Study proposed a 21-month construction period with estimated capital expenditures of $633.8 million, including $44.0 million in
deposits. Project economics, based on a US$83.9/t IODEX 65% Fe CFR China Index (“P65” or “Platts 65”) iron price, indicate an after-tax 8% net
present value (“NPV”) of $2,384 million, combin ing Phase I & II, and an after -tax internal rate of return (“IRR”) of 33.4%. During the LoM, total
cash costs1 are projected to be $46.6/t with an average all-in sustaining cost1 of $52.3/t.
Financing
Subsequent to the Board's final approval (on November 12, 2020), to complete the Phase II project, the Company increased its Credit Facility on
December 23, 2020 by US$200.0 million (to US$400.0 million), which together with cash on hand2 and ongoing cash flows from operations, are
expected to fully fund the project, scheduled for completion by mid-2022.
On December 23, 2020, Champion received a credit approved commitment letter for US$75.0 million, in connection with financing Phase II
equipment from Caterpillar Financial Services Limited, subject to the ex ecution of definitive documentation, which is expected to occur in the
near term.
As detailed in the Feasibility Study and with the anticipated port related work programs required to support the additional v olumes from the
Phase II project, the Company and Société du Plan Nord planned to jointly invest $135.0 million in Société Ferrovière du Port de Pointe- Noire
("SFPPN"), of which $85.0 million will be invested by the Company. The Company's contribution will be partially financed for an amount up to
$70.0 million by "Fonds du développement économique" (“Term Loan”). The Term Loan will have an 11.5- year maturity and will bear interest at
3.7% and annual repayments of $6.0 million, commencing on April 1, 2022.
Milestones
During the three -month period ended December 31, 2020, $31,949,000 was incurred on the project, and a total of $115,145,000 invested to
date, which included $6,010,000 in advance payment to SFPPN. The following work was undertaken and the following milestones w ere
achieved:
• Engineering work 65% complete as at December 31, 2020;
• Installation of the rougher spiral banks;
• Installation of the grinding area conveyors;
• Continuation of electrical work on Z3 substation;
• Completion of the A-Frame conveyor modification and commissioning;
• Completion of the A-Frame dust control work;
• Finalization of the extension shelters of the load-out area;
• Selection of major mine equipment supplier; and
• Commencement of diverse mechanical installations, including pan filters and vacuum pumps.
Bloom Lake Phase II reserves and resources are based on the Feasibility Study, prepared by BBA Inc., Soutex and WSP Canada Inc., with an
effective date of June 20, 2019 and filed on August 2, 2019. The Company is not aware of any new information or data that mat erially affects
the information included in the Feasibility Study and confirms that all material assumptions and technical parameters underpi nning 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, the ASX at www.asx.com.au and the Company's website at www.championiron.com.
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4. Acquisition of the Kami Project
On November 13, 2020, the Supreme Court of Newfoundland and Labrador approved the acquisition by the Company and certain of its affiliates
of the mining properties of the Kami Project and certain related contracts (the "Acquisition"), from Deloitte Restruc turing Inc. (the “Receiver”),
as receiver for Alderon Iron Ore Corp. (“Alderon”). The Kami Project and the related mining properties are located in the Lab rador Trough
geological belt in southwestern Newfoundland, near the Québec border.
The consideration for the Acquisition consists of $15.0 million in cash, the extinguishment of approximately $19.4 million in Alderon secured
debt (the "Secured Debt") through the issuance of 4,200,000 Champion's ordinary shares and an undertaking in favor of the Receiver to make a
finite production payment on a fixed amount of future iron ore concentrate production from the Kami Project. As part of the t ransaction,
Champion also exercised, through an affiliate, an option to purchase the Secured Debt from Sprott Private Re source Lending (Collector), LP
(“Sprott”) and became a senior secured creditor of Alderon and its affiliates. Closing of the Acquisition is subject to the c onsent of the Ministry
of Industry, Energy and Technology of Newfoundland and Labrador, as well as o ther customary closing conditions. At the closing date, as
consideration for the Secured Debt, Champion will issue 4,200,000 Champion's ordinary shares to Sprott and Altius Resources Inc. and the
Secured Debt will be extinguished as partial consideration for the Kami Project.
The Kami Project is a high -grade iron ore project situated only a few kilometers south -east of the Company's operating Bloom Lake Mine and
near available infrastructure. Alderon previously disclosed historical resources estimated at 1, 274.5 Mt of measured and indicated resources
(536.9 Mt measured and 737.6 Mt indicated) and proven and probable reserves of 517.2 Mt (392.7 Mt proven and 124.5 Mt probabl e), with such
reserves being inclusive of such resources. Alderon completed an updated feasibility study on the Kami Project in September 2018. The
Company expects to revise the project's scope and update the feasibility study in the near term. As part of the Acquisition, Champion expects to
secure an additional 8 Mtpa of port capacity, inc luding a pre -payment of port related fees, at the multi -user berth of the port of Sept -Îles,
currently being used by the Company to export Bloom Lake's iron ore concentrate.
Note: Moiré Lake historical measured and indicated resources of 164.0 Mt (164.0 Mt indicated). The other reserves and resources are historical
estimates and, from an Australian perspective, foreign estimates.
The historical mineral reserve and resources mentioned are strictly historical in n ature and are non -compliant with NI 43-101 neither the JORC
Code (2012 edition) and should therefore not be relied upon. A Qualified Person, as defined in NI 43-101, has not done sufficient work to upgrade
or classify the historical estimates as current mi neral resources or mineral reserves and Champion is not treating the historical estimates as
current mineral resources or mineral reserves. Such historical estimates are based on the NI 43 -101 technical reports: (i) with respect to the
Moiré Lake property, entitled “Technical Report and Mineral Resource Estimate on the Moiré Lake Property” by P&E Mining Consultants Inc.
dated May 11, 2012 and having an effective date of March 28, 2012; and (ii) with respect to the Kami Project, entitled “Updat ed Feasibility Study
of the Kamistiatusset (Kami) Iron Ore Property, Labrador” prepared for Alderon by BBA Inc., Gemtec Ltd., Watts, Griffis and M cOuat Ltd. and
Golder Associates Ltd. dated October 31, 2018 and having an effective date of September 26, 2018. There is no obligation on Champion Iron
Limited to report on these foreign estimates of mineralisation in accordance with ASX Listing Rule 5 since each of the aforem entioned pre-
feasibility studies and technical reports were prepared for properties adjacent to or near Champion Iron Limited's mining tenements.
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5. Bloom Lake Mine Operating Activities
Three Months Ended Nine Months Ended
December 31, December 31,
2020 2019 Variance 2020 2019 Variance
Operating Data
Waste mined (wmt) 4,957,600 3,409,200 45 % 11,684,800 10,562,300 11 %
Ore mined (wmt) 5,183,000 4,905,300 6 % 15,935,600 15,404,300 3 %
Material mined (wmt) 10,140,600 8,314,500 22 % 27,620,400 25,966,600 6 %
Strip ratio 0.96 0.70 37 % 0.73 0.69 6 %
Ore milled (wmt) 5,193,700 4,639,000 12 % 15,360,900 14,869,800 3 %
Head grade Fe (%) 29.7 32.0 (7 %) 30.6 32.3 (5 %)
Recovery (%) 83.6 81.7 2 % 83.8 82.7 1 %
Product Fe (%) 66.4 66.4 — % 66.3 66.3 — %
Iron ore concentrate produced (wmt) 1,922,100 1,832,800 5 % 5,989,700 6,011,900 — %
Iron ore concentrate sold (dmt) 1,891,300 1,922,100 (2 %) 5,713,500 5,689,200 — %
Financial Data (in thousands of dollars)
Revenues 329,545 171,100 93 % 885,113 609,384 45 %
Cost of sales 106,291 104,119 2 % 309,135 297,647 4 %
Cost of sales - incremental costs related to COVID-19 2,215 — — % 9,448 — — %
Other expenses 9,135 9,071 1 % 29,102 24,316 20 %
Net finance costs 8,648 4,718 83 % 10,713 80,203 (87 %)
Net income 120,771 30,184 300 % 308,491 102,699 200 %
EBITDA1 211,904 57,910 266 % 537,428 287,421 87 %
Statistics (in dollars per dmt sold)
Gross average realized selling price 194.8 140.1 39 % 169.2 146.5 15 %
Net average realized selling price1 174.2 89.0 96 % 154.9 107.1 45 %
Total cash cost (C1 cash cost)1 56.2 54.2 4 % 54.1 52.3 3 %
All-in sustaining cost1 65.0 62.2 5 % 62.2 63.7 (2 %)
Cash operating margin1 109.2 26.8 307 % 92.7 43.4 114 %
Operational Performance
On March 24, 2020, the Company announced the ramp down of its operations following directives from the Government in response to the
COVID-19 pandemic, which required mining activities to be reduced to a minimum within the province of Québec. As announced by the
Company on April 23, 2020, operations gradually ramped up, following the Government's announcement that mining activities wer e to be
considered a "priority service" in Québec. Although the Company was operating at a minimal capacity for a period of time, disrupting mining and
operating activities, early actions implemented by Management in response to the COVID -19 pandemic minimized its impacts on the Company
and its operations. Despite earlier disruptions to operations, the Company produced nearly 6.0 million wmt of high -grade iron ore concentrate
during the nine -month period ended December 31, 2020. In addition, during the three -month period ended December 31, 2020, the Company
successfully conducted its second scheduled semi-annual shutdown at the mill.
i. Third Quarter of Fiscal Year 2021 vs Third Quarter of Fiscal Year 2020
During the three -month period ended December 31, 2020, 10,140,600 tonnes of material were mined, compared to 8,314,500 tonnes for the
same period in 2019, representing an increase of 22%. This increase in material mined is a direct benefit of the Company's mi ning equipment
rebuild program resulting in higher equipment utilization rate and additional equipment availability.
The increased strip ratio in the three -month period ended December 31, 2020 to 0.96, compared to 0.70 for the same period in 2019, is in line
with the annual mine plan and the anticipated strip ratio for the quarter. The strip ratio was also affected by 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 plant processed 5,193,700 tonnes of ore during the three -month period ended December 31, 2020, compared to 4,639,000 tonnes for the
same period in 2019, representing an increase of 12%. The higher throughput resulted from higher mined ore availability and a higher mill
utilization rate. The improvements and operational innovations implemented during the fiscal year ended March 31, 2020 allowe d the Company
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to increase throughput stability and reach a higher level of mi ll productivity, despite the inefficiencies created by COVID -19 and the mill
scheduled shutdown, which allowed the Company to take advantage of the elevated iron ore price.
The iron ore head grade in the three -month period ended December 31, 2020 was 29.7%, compared to 32.0% for the same period in 2019. The
decrease in head grade is attributable to the presence of some lower grade ore being sourced and blended from different pits, when compared
to the prior year and, which is in line with the mining plan and the LoM head grade average.
The Company achieved an average recovery rate of 83.6% during the three -month period ended December 31, 2020, compared to a recovery
rate of 81.7% for the same period in 2019, which is attributable to higher recovery circuit stability.
Based on the foregoing, Bloom Lake produced 1,922,100 wmt of 66.4% Fe high-grade iron ore concentrate during the three-month period ended
December 31, 2020, an increase of 5%, compared to 1,832,800 wmt for the same period in 2019. The higher production is mainly a result of
higher ore mined and higher throughput, combined with a higher average recovery rate, despite being partially offset by a lower head grade. The
variation between iron ore concentrate produced and sold during the quarter is due to the timing of shipments.
ii. First Nine Months of Fiscal Year 2021 vs First Nine Months of Fiscal Year 2020
During the first quarter of the 2021 fiscal year, the COVID-19 pandemic had a negative impact on several of the Company's activities, including:
reduced mining activities due to the compliance with the public health directives issued by the Government; reduced equipment maintenance
due to COVID-19-related resource limitations, which had adverse repercussions on equipment availability; the arrival of the seasonal workforce,
which required integration and training; and the operation of only one of the Company's two production lines for a period of time stemming from
the Government's COVID -19-related directives. Once the governmental restrictions were lifted, the Company accelerated its mining activities
and fully resumed its production capacity.
The Company mined 27,620,400 tonnes of material during the nine -month period ended December 31, 2020, compared to 25,966,600 tonnes
for the same period in 2019, while the plant processed 15,360,900 tonnes of ore during the nine -month period ended December 31, 2020, an
increase of 3% over the same period in 2019. These increases are attributable to investments made in the mining equipment reb uild program,
along with the improvements and operational innovations accomplished at the plant in the past, which enabled the Company to max imize
current productivity, partially offset by the slowdown resulting from the COVID -19 pandemic during the first quarter of the 2 021 fiscal year. In
addition, the recovery rate improved from 82.7% to 83.8%, in line with the Company’s target. Based on the foregoing, Bloom La ke produced a
total of 5,989,700 wmt of Fe 66.3% high -grade iron ore concentrate during the nine -month period e nded December 31, 2020, compared to
6,011,900 wmt for the same period in 2019.
During the nine -month period ended December 31, 2020, the Company received confirmation that its initial commercial production test,
completed during the fourth quarter of the 2 020 fiscal year, qualified as Direct Reduction (“DR”) iron ore concentrate from DR pellet producers
and direct reduced iron (“DRI”) plant operators. With this confirmed product specification, the Company produced an additional 207,900 wmt of
DR quality iro n ore concentrate at 67.8% Fe, with a combined silica and alumina content of 2.68%, at the request of a customer in the Middl e
East during the first quarter of the Company’s 2021 fiscal year. This second shipment confirmed the ability of the Company to sell its ore to
producers of DR pellets, which can be converted by DRI producers and utilized in electric arc furnaces, which represent a gro wing subset of
global steelmaking capacity. This strategically positions the Company to potentially increase its custo mer base and confirms that Bloom Lake
is one of the few producing deposits globally that can transition its product offering in response to potential shifts in ste elmaking methods in
the coming years.
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6. Financial Performance
A. Revenues
During the three -month period ended December 31, 2020, 1,891,300 tonnes of high -grade iron ore concentrate were sold at the CFR China
gross average realized price of US$150.3/dmt, before provisional sales adjustments and shipping costs. The gross average realized selling
price of US$150.3/dmt represents a premium of 12.4% over the benchmark P62 price, compared to a premium of 3.4% for the previ ous quarter.
The gross average realized selling price reflects the sales at a determined price, as well as the forward price at the expected settlement date for
601,000 tonnes which were in transit at the end of the period. The higher gross average realized selling price of US$150.3/dmt for the recently
completed quart er, compared to the average P65 for the quarter of US$146.1/dmt, demonstrates the Company's ability to benefit from its
premium high -grade iron ore material pricing over the P62 index reference price, despite the fact that some contracted volumes were sold
based on previous months' prices, when P65 prices were significantly lower.
Benefiting from rising pellet premiums and the global economic recovery in the period, the Company reduced or cancelled disco unted pricing
on some sales to the P65 index, previou sly required to compete with the pricing of pellets at multi -year lows in previous periods. As such, the
Company expects its iron ore concentrate pricing to continue tracking the P65 index in the long-term. In addition, the Company should continue
to benef it from the current period prices for its contracted volumes, based on previous month's P65 prices in the upcoming period end ing
March 31, 2021. Other factors influencing the Company’s realized price included the increasing demand in low silica and alumina products due
to rising coking coal prices and falling levels of iron ore inventories at Chinese ports, further tightening iron ore availability.
During the third quarter of the Company’s 2021 fiscal year, low fuel prices and a greater vessel availability, due to the Chinese ban on Australian
coal, contributed to depressed sea freight costs when compared to the same period last year . The freight costs variation relative to the Baltic
Exchange C3 index during the period is mainly due to the timing of the ve ssels' booking and the fact that the Company benefited from a freight
contract at a fixed price of US$15.46 per tonne plus freight commissions for one vessel per month until December 2020.
During the three-month period ended December 31, 2020, the final price was established for all of the 1,188,000 tonnes of iron ore that was in
transit as at September 30, 2020. Accordingly, during the three -month period ended December 31, 2020, provisional pricing adjustments of
$15,376,000 were recorded in additional revenues for the 1,188,000 tonnes, representing a positive impact of US$6.3/dmt.
After taking into account sea freight costs of US$22.1/dmt and the provisional sales adjustment of US$6.3/dmt, the Company ob tained a net
average realized price of US$134.5/dmt (CA$174.2/dmt) for its high -grade iron ore delivered to the end customer. Revenues totalled
$329,545,000 for the three- month period ended December 31, 2020 compared to $171,100,000 for the same period in 2019. The increase is
attributable to a higher net average realized selling price1.
For the nine -month period ended December 31, 2020, the Company sold 5,713,500 tonnes of iron ore concentrate shipped in 33 vessels to
customers, whose location included China, Japan, South Korea, Europe and the Middle East. While the high -grade iron ore P65 index price
fluctuated between a low of US$96.5/dmt and a high of US$187.9/dmt during the nine -month period ended December 31, 2020, the Company
sold its product at a gross average realized selling price of US $127.1/dmt. Combining the gross average realized selling price with the
provisional sales adjustment of US$8.8/dmt, the Company sold its high -grade iron ore material at a price of US$135.9/dmt during the nine -
month period ended December 31, 2020, which con tinued to structurally track the P65 high -grade index average of US$128.2/dmt. Deducting
sea freight costs of US$19.6/dmt, the Company obtained a net average realized selling price 1 of US$116.3/dmt (CA$154.9/dmt) for its high -
grade iron ore. As a result, revenues totalled $885,113,000 for the nine-month period ended December 31, 2020, compared to $609,384,000 for
the same period in 2019. Although the sales increase is mainly attributable to the net average realized selling price 1, the slight positive volume
impact during the COVID-19 pandemic illustrates the benefit the Company yielded by investing in production reliability and having the ability to
increase its throughput capacity when the price of high-grade iron ore is elevated.
B. Cost of Sales
Cost of sales represent mining, processing, and mine site-related general and administrative ("G&A") expenses.
During the three -month period ended December 31, 2020, the total cash cost 1 or C1 cash cost 1 per tonne, excluding specific incremental and
non-recurring COVID-19 related costs, totalled $56.2/dmt, compared to $54.2/dmt for the same period in 2019. The total cash cost 1 for the
period was higher due to lower head grade, combined with a longer planned shutdown at Québec North Shore & Labrador Railway, whereas the
Company maximized the shutdown period by advancing work initially planned for the forthcoming periods. The Company is benefit ing from its
previous and continuous investments in plant innovation and improvements as well as the mining equipment reb uild program, enabling it to
maximize productivity during the pandemic period.