Mr. David Cataford reports
CHAMPION IRON REPORTS FOURTH QUARTER PRODUCTION OF THE 2020 FISCAL YEAR
Champion Iron Ltd. has released the production results and the mining operation expenditures for the fourth quarter ended March 31, 2020, of the fiscal year ended March 31, 2020, in compliance with the Australian Securities Exchange listing rules applicable to mining entities. Detailed operational and financial results, including audited financial statements, management's discussion and analysis, and an annual information form, in compliance with Canadian securities and regulatory requirements, are expected to be released on May 20, 2020.
Health and safety:
No known cases of COVID-19 have been confirmed in the company;
In close collaboration with its unionized work force, its contractors and the local communities, the company has adopted or exceeded the government guidelines in response to COVID-19;
Rapidly and diligently implemented measures in response to COVID-19, including amended work schedules to reduce travel volumes, increased transportation capacity to maintain adequate social distancing, isolation from nearby communities, and additional health monitoring and screening;
Continuous focus on overall health and safety.
Cash on hand (1) of $298.7-million as of March 31, 2020, including $20-million (U.S.) available from the revolving facility drawn on March 31, 2020, compared with $153.3-million as of March 31, 2019;
No near-term debt maturity from the company's senior secured credit facility totalling $180-million (U.S.) maturing on Aug. 16, 2024, with no required capital repayment prior to June 30, 2021;
Term facility bearing interest at London interbank offered rate plus 2.85 per cent, respecting all covenants;
Accruing undeclared dividends on the $185-million perpetual preferred shares of the company's operating subsidiary, Quebec Iron Ore Inc. (QIO), outstanding, bearing interest at 9.25 per cent, further improving cash flow flexibility.
Quarterly production of 1,891,800 wet metric tonnes (wmt) of high-grade 66.5-per-cent-iron-ore concentrate compared with 1,802,000 wmt during the same period of the prior year;
Quarterly recovery rate of 82.3 per cent compared with a recovery rate of 80.4 per cent during the same period of the prior year;
Total cash cost (2) of $53.90 per dry metric tonne (dmt) (C1) during the fourth quarter, compared with $48.40 per dmt in the same period of the prior year affected by scheduled downtime and higher port costs.
- Termination of the previously announced proposal to redomicile from Australia to Canada by way of a scheme of arrangement under Part 5.1 of the Corporations Act 2001 (Cth) and the liquidation of the company due to market volatility and global uncertainty associated with the COVID-19 pandemic.
$58-million deployed as of March 31, 2020, from the previously approved $68-million work program for the Bloom Lake phase 2 expansion project, as detailed in the phase 2 feasibility study, the findings of which were released on June 20, 2019;
The company had previously communicated its intentions to address the Bloom Lake's phase 2 expansion plans by the middle of the current calendar year, but as announced on March 24, 2020, given the uncertainties created by the COVID-19 pandemic, the company's discretionary capital expenditures in connection with the phase 2 expansion project have been delayed and the timeline to communicate further details on the phase 2 plans will be postponed to a later time;
Work programs completed to date have significantly derisked the construction timeline of the phase 2 growth project initially estimated at 21 months; the phase 2 growth project has optionality to progress at a reduced pace while the company generates cash flow from current operations;
- Completed a 132,000-wet-metric-tonne production test of 67.98-per-cent-iron-ore concentrate with a combined silica and alumina content of 2.57 per cent; this custom production test was completed at the request of an important customer and could enable the company to procure more diverse customers globally if the product confirms intended qualifications as direct reduction (DR) pellet feed material.
Champion's chief executive officer, David Cataford, said: "In the midst of the unprecedented challenges posed by the COVID-19 global pandemic, I am pleased to report that we have no known cases confirmed in our organization. Even prior to the provincial government's directive to ramp down our operations, Champion had implemented measures to mitigate COVID-19-related risks, in keeping with our priority to keep our work force and communities safe. With the government's decision to allow miners to resume normal operations, conditional on the implementation of COVID-19 risk-containing guidelines, we recently announced the gradual ramp-up of Bloom Lake. In connection with our quarterly reporting, today's results announced a new annual production record at Bloom Lake. While we continue to manage the business diligently, including consideration to complete our previously announced phase 2 growth project, our cash balance continues to increase, now standing at its highest level in corporate history. Our high-grade iron ore concentrate continues to attract new customers globally, and a recent production test confirms that Bloom Lake can produce concentrate, which could further expand our customer base."
2. COVID-19 response
The health and safety of the company's employees, partners and communities are a priority for Champion. With a continuous commitment to protect the health and safety for stakeholders, the company rapidly collaborated with the government and local communities to implement adaptive actions to participate in the collective effort to contain COVID-19.
On March 24, 2020, the company announced the rampdown of operations at Bloom Lake, following a directive from the Quebec government, which required mining activities to be reduced to a minimum in the province of Quebec, Canada. In line with government-issued directives, all discretionary work had been suspended, and operations were restricted to a single production line, tailings management, water treatment and overall maintenance. On April 23, 2020, the company announced it will gradually ramp up operations at Bloom Lake following a subsequent announcement from the government that effective April 15, 2020, mining activities were to be considered a priority service and allowed to resume normal operations, conditional on the implementation of guidelines aiming to contain the risks related to COVID-19.
In line with government guidelines, Champion has implemented several measures in its efforts to mitigate risks related to COVID-19. Implemented safety precautions include: additional monitoring of employees' health, temperature control prior to travelling and entering Bloom Lake, isolation measures from the nearby communities, additional transportation capacity to enable adequate social distancing, amended work schedules to reduce travel volumes, additional medical support, and new disinfection and distancing protocols at the mine site. The current measures in place are monitored and enhanced or revised when required by the company's executive team.
3. Bloom Lake mine operating activities
BLOOM LAKE OPERATING DATA
Three months ended Year ended
March 31, March 31,
2020 2019 2020 2019
Waste mined (wmt) 3,180,100 3,481,500 13,742,400 13,679,900
Ore mined (wmt) 5,413,100 4,975,500 20,817,400 19,711,700
Strip ratio 0.6 0.7 0.7 0.7
Ore milled (wmt) 4,880,000 4,754,200 19,749,800 18,493,800
Head grade Fe (%) 31.7 30.6 32.1 31.5
Recovery (%) 82.3 80.4 82.6 79.5
Product Fe (%) 66.5 66.3 66.4 66.4
Iron ore concentrate produced (wmt) 1,891,800 1,802,000 7,903,700 6,994,500
Iron ore concentrate sold (dmt) 1,888,200 1,744,000 7,577,400 7,127,600
Statistics (in Canadian dollars per dmt sold)
Total cash cost (C1 cash cost) (2) $53.90 $48.40 $52.70 $49.40
During the three-month period ended March 31, 2020, 8.6 million tonnes of material was mined, an improvement of 2 per cent compared with the same quarter of the prior year. The increase is mainly due to higher equipment availability, following investments made in the mining equipment rebuild program since the start of operations in February, 2018.
The plant processed 4,880,000 tonnes of ore during the fourth quarter, compared with 4,754,200 tonnes in the comparable prior-year period. The increase of 3 per cent is due to the improvement completed during the previous planned shutdown to the inner discharge grates, allowing to sustain a higher plant throughput.
The company achieved an average recovery of 82.3 per cent during the fourth quarter, compared with 80.4 per cent in the same period of the prior year. The higher recovery rate compared with the prior year is attributable to better throughput stability following the operational innovations implemented during the first half of the fiscal year ended March 31, 2020. The recovery rate of the fourth quarter was negatively affected by 0.3 per cent following the successful production test of 132,000 wmt of 67.87 per cent high-grade iron ore with a combined silica plus alumina content of 2.57 per cent, which impacted ore recovery. This commercial production test, assuming confirmed intended specifications, could position the company to qualify for sales to producers of DR pellets, which can be converted by direct reduced iron (DRI) producers and utilized in electric arc furnaces, representing a growing subset of the global steelmaking capacity. This commercial production test enables the company to potentially procure new customers and confirm that Bloom Lake is one of few producing deposits globally that could transition its product offering in response to potential shifts in steelmaking methods in the coming years.
Based on the foregoing, Bloom Lake produced 1,891,800 wmt of 66.5-per-cent-high-grade-iron-ore concentrate during the three-month period ended March 31, 2020, compared with 1,802,000 wmt in the same period of the prior year, an increase of 5 per cent.
The company mined 34.6 million tonnes of material during the 12 months ended March 31, 2020, compared with 33.4 million tonnes of material in the same period of the prior year. The increase is attributable to the improvement in mining equipment reliability and increased productivity resulting from the mining equipment rebuild program.
The decision to invest in operational improvements yielded positive results. The Bloom Lake plant processed 19,749,800 tonnes of ore during the 12 months ended March 31, 2020, an increase of 7 per cent over the same period of the prior year, while the recovery rate improved from 79.5 per cent to 82.6 per cent, in line with the company's target. Based on the foregoing, Bloom Lake produced a total of 7,903,700 wmt of 66.4-per-cent-high-grade-iron-ore concentrate during the fiscal year ended March 31, 2020.
4. Mining operations expenditures
During the three-month period ended March 31, 2020, the total cash cost (2) or C1 cash cost (2) per tonne totalled $53.90 per dmt, compared with $48.40 per dmt in the same period of the previous year. The C1 cash cost (2) for the period was impacted by various factors, including scheduled downtimes, lower truck availability, lower recovery rate associated with the production test of 132,000 wmt of high-grade iron ore with a silica plus alumina content of 2.57 per cent, and higher costs from the Societe Ferroviaire et Portuaire de Pointe-Noire (SFPPN) port operations. Since the beginning of the restart of SFPPN's operations in 2018, SFPPN costs have increased beyond the indexation rate and faster than the improvement of the operational efficiency, leading to a negative impact for this quarter compared with the same period last year. As previously announced, the board of directors of SFPPN, of which QIO has a representative, elected to strengthen the leadership of SFPPN to revamp operational processes and improve asset maintenance, overall availability and efficiency while reducing operational costs. As the newly appointed chief executive officer of SFPPN operations has many years of experience in managing railway and port facilities, the company's and SFPPN's board of directors are confident that SFPPN's operational efficiency will improve. Should SFPPN's corrective actions lower port operation costs, the company would benefit from such potential cost reductions.
5. Conference call and webcast information
A webcast and conference call to discuss these results will be held on May 20, 2020, at 8:30 a.m. EST. Listeners may access a live webcast of the conference call from the investors section of the company's website or by dialling toll-free 1-888-390-0546 within North America or 1-888-076-068 from Australia.
An on-line archive of the webcast will be available by accessing the company's website. A telephone replay will be available for one week after the call by dialling 1-888-390-0541 within North America or 1-416-764-8677 overseas, and entering passcode 989322 followed by the number sign.
(1) Cash on hand includes cash and cash equivalents and short-term investments.
(2) Total cash cost or C1 cash cost are non-international financial reporting standard performance measures with no standard definition under IFRS. Total cash cost includes production costs such as mining, processing and site administration, and excludes depreciation to arrive at total cash cost per dmt sold. Other companies may calculate this measure differently.
About Champion Iron Ltd.
The company, through its subsidiary Quebec Iron Ore, owns and operates the Bloom Lake mining complex, located on the south end of the Labrador Trough, approximately 13 kilometres north of Fermont, Que., adjacent to established iron ore producers. Bloom Lake is an open-pit truck-and-shovel operation, with a concentrator, and it ships iron concentrate from the site by rail, initially on the Bloom Lake railway, to a shiploading port in Sept-Iles, Que.
The company acquired the Bloom Lake assets from bankruptcy protection in April, 2016, and following the release of a feasibility study on Feb. 16, 2017, the company recommissioned Bloom Lake in February, 2018, and completed its first shipment of iron ore on April 1, 2018. On Aug. 16, 2019, the company acquired Ressources Quebec's 36.8-per-cent equity interest in Quebec Iron Ore and now owns 100 per cent of Quebec Iron Ore, which owns Bloom Lake.
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