Q4 2025 Champion Iron Ltd Earnings Call
Okay.
Good morning, ladies and gentlemen, and welcome to the champion Iron Limited is for sports the results of the financial year 'twenty 'twenty five conference call.
At this time all lines are in listen only mode.
Following the presentation, we will conduct a question and answer session.
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This call is being recorded and Thursday may 29th at 20 to 25 or <unk>.
I would now like to turn to conference over to Mr. Michael and Mark. Please go ahead.
Michael: Thank you operator, and thank you everybody for joining our call today to discuss the fourth quarter results over a 2025 financial year before I get going I'd, just remind people that would be using a presentation, which is available on a webcast at champion Island dotcom.
The tab events and presentations.
Michael: To remind people that throughout this call, we'll be making forward looking statements relate to read more about these forward looking statements risks and assumptions. Please go and visit our M. D N. A N which is also available on our website.
Speaker Change: Joining me here today to do the presentation includes our CEO, David Catford will be doing the formal presentation and Q&A and also we have our C O alexon below and our CFO, then I'll, probably with that I'll pass it over to David to do the formal presentation.
David Catford: Thanks, Michael and thanks, everyone for being here very happy to be able to present, the fourth quarter highlights for fiscal year 2025. So during the quarter, we produced about $3 2 million tonnes and the big either for the quarter as we manage to set a record of $3 5 million tons of conscience concentrates sold even in a more challenging them.
David Catford: Winter environment, where logistics are typically a little bit more complex.
Speaker Change: Turning over to community governance and sustainability are one important highlight is that we've continued to work closely with our first nation partner not only on operations in our mining side, but also on the culture side, where we participated in various events during the quarter to be able to continue strengthening our relationships.
Speaker Change: With the first nation community.
In terms of our ESG disclosure and performance. So it wouldn't be highlight is that during the fiscal year 2025, we successfully met or exceeded 13 out of the 14 sustainability targets for 2025 year again, one of the elements to highlight is that we continue to be an industry leader by risk.
Cycling about 99% of the water at Bloom Lake.
In terms of operational and financial results. So as we mentioned produced about $3 2 million tons. During the quarter. There were some issues. During this quarter. One that was forecasted. So we did have our send me your annual shutdowns for plant number one and flat number two but we did have some grinding difficulties with some harder ore.
Speaker Change: Or in one of the he's pits at the Bloom Lakes site in the past what we have done is increase the blending ratio to be able to mitigate that but now due to the fact that we've got a significant stock pilot site decided to be able to hit that material more head on and be able to to.
Speaker Change: The continued destocking the stockpile at Bloom Lake if we look at our stockpile, we managed to decrease it by about a 300000 tons. So we're down to about $2 6 million tons on the site at the end of the last quarter.
Speaker Change: In terms of our operations, if we dig a little bit deeper we can see that all the new equipment and the mining fleet that we have in place allows us to move more material and we've managed to move quite a lot of waste during the quarter, increasing our strip ratio to about 115, allowing us to maintain the mine in the <unk>.
The position open up new faces and make sure we've got some decent blending capacity for the future.
Speaker Change: Okay.
If we look at the industry in terms of the P. 65 index was fairly flat during the quarter about a 1% decrease where we did see some movement was on the C. Three afraid index were decreased by about 10% quarter over quarter and that's even despite what's going on in the middle East in the.
Fact that certain routes had to be or has to be changed with the current conflict that we see in the in the middle East.
Speaker Change: Yeah.
In terms of our provisional price adjustment so during the quarter at the end of last quarter, we had forecasted selling the tons that were on the water at about $110. We managed to sell them at about 112, So had a positive provisional price adjustment of about $3 $7 million during the quarter.
If we look at what's for the next quarter. So we had about $2 7 million tons that were on the water and we expect to have a settlement price or we expect it to have a settlement price of about $111 at the end of last quarter.
Speaker Change: Okay.
Speaker Change: Turning over to our average realized selling price. So obviously, having $2 7 million tonnes set at 111 at the end of the quarter has impacted our gross realized price during the quarter. So you can see that.
Speaker Change: If you look at the average P 65 during the quarter, our gross realized price was slightly lower to two main reasons, one well as we mentioned those tonnes on the water at the end of the quarter, but also when we look at the current situation in China. So a high grade material like what we produce at Bloom Lake we had.
We had told the market last quarter that we were having slight discounts in China to be able to sell our material again, we don't do not have long term contracts for about half our tons as we're transitioning towards DRP F. A material are higher grade type material, so which meant that we had slight discounts.
Speaker Change: During the quarter, but I just want to tell the market that we did not have any quality issues or not getting any discounts because we've got increased contaminants are decreased quality, we still managed to deliver every single vessel on spec and we do not have any significant contaminants in our material.
Speaker Change: In terms of our operating costs slightly higher at about $80 Canadian per tonne.
Speaker Change: Two main reasons, while one obviously the two semi annual shutdowns during the quarter did impact our costs and at the same time, having lower production of $3 2 million tonnes has also increased our cost are the best way for us to be able to reduce our cost is to increase productivity and to increase the amount of tonnes that we.
Speaker Change: Produce at Bloom Lake, So that's definitely going to be the priority for this year.
Speaker Change: In terms of our financial highlights.
Speaker Change: $425 million of revenues of $130 million of EBITDA and earnings per share of about eight cents per share.
Speaker Change: That allowed us to have a positive increase in terms of our cash position of about $24 million, even while we've invested about $50 million on our ERP project. So to finalize the flotation plant and also reinvesting about $50 million in sustaining capex.
Speaker Change: To maintain our assets in great condition.
Speaker Change: If we look at our balance sheet are still very healthy balance sheet with about $1 billion of available liquidity.
Speaker Change: And when we look at the at the results allowed us to be able to declare our 10th or <unk>, a semiannual dividend of <unk> 10 per share.
Speaker Change: Well, it's interesting when we take a little step back and we look at what's happened over the past years. So since 2017, we've generated quite a lot of cash from our operations over $2 $6 billion of cash generated from our operations in the past years, which allowed us to return directly above.
Speaker Change: $400 million to our shareholders, but also invest about $2 billion in our growth Capex and self fund all of this without issuing any equity.
Speaker Change: Allows us to have a very strong foundation and come next year, while we get out of a seven year capex run to grow organically our business. So we're finally going to be able to start benefiting from all of those investments and being able to benefit.
Speaker Change: Benefit from lower Capex for.
Speaker Change: For the next few years as all we will have as sustaining capex.
Speaker Change: In the next few years, so very well positioned to increase in the cash flow generation in.
Speaker Change: In the coming years.
Speaker Change: Turning over to our projects. So we have two major projects that we're working on right now one where we're investing and one where we will have minimal shareholder money that will be invested in the next years. The Academy project, which we're now doing the permitting and doing the feasibility study along.
Speaker Change: Side with our partners.
Speaker Change: Of.
Speaker Change: Upon steel in <unk>. So when we look at the Academy project, we'd have about them just shy of two years to be able to finalize the permitting and the feasibility study at the end of those two years, we'll be in a position to see where the market. What's the demand for Dr type material and what's the right potential timing for this.
Speaker Change: Projects. So we still have about two years, we're very minimal cash from champion will be invested most of the cash will be invested by our partners and as we go forward, we'll be able to update the market on the next steps for the <unk> project.
Speaker Change: But the most interesting project right now shorter term for US is the investment that we're making to transition our material to Dr. Grade, we've already invested about 72% of the capex to be able to deliver the flotation plant, we have about 28% remaining capex to invest in the coming months and we still feel confident we'll be able.
Speaker Change: To deliver the plant by the end of this calendar year.
Speaker Change: I don't think its possible to do a call without addressing the tariffs are one interesting highlight for US is as you know, we do not sell our tons into the.
Speaker Change: Into the U S market. So we don't have direct sales impact in terms of our.
Speaker Change: In terms of our sales due to tariffs short term, you've probably seen a global economy uncertainty and potential.
Speaker Change: Potential slight reduction steel output.
Speaker Change: But realistically we haven't seen a significant impact right now in the world in terms of steel demand and steel production longer term, we do see some potential benefit for US has the U S potentially increases the amount of steel that they produce today. The U S is a net exporter of scrap and.
Speaker Change: <unk> has potentially more tons get produced in the U S. While those scrap exports might be reduced in the future which means the.
Speaker Change: Clients for that scrap will then search for other types of metallics, including DRA type materials. So again, when we look at our longer term strategy of producing a material even if we see that today that premiums for higher grade might be a little bit pressured we do still think that the strategy longer term is to go.
Speaker Change: Towards higher grade go towards Dr grade and be able to produce this type of material.
Speaker Change: In terms of Greenfield transition.
Speaker Change: So when when were in North America. It seems that de carbonization has been put on pause, but when we look at the rest of the world that's not necessarily what's happening.
Speaker Change: Again, when we look to Japan recently, what was announced to be able to.
Speaker Change: Have subsidies of about 350 U S dollars per vehicle that uses lower emission steel we do see that there are paths right now that are continuing to be able to reduce the cotr missions in the steel production. If we turn to China. We also see China included the steel industry and its emission tree.
Speaker Change: Aiding scheme. So we do see that even if today the higher grade type material is maybe not the most favorite material I do still believe that that will be back more.
Speaker Change: More in Vogue, and we'll be able to continue benefiting from a higher premiums in the future for higher grade type material.
Speaker Change: So all in all I would like to thank our team to having allowed us to reach those results and being able to deliver yet another quarter and another year, where we generated significant cash flows for our shareholders and be able to return another dividend of <unk> 10 per share.
Speaker Change: That being said I'll turn it over to the Q&A part of the call.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the number one on your Touchtone phone and you'll hear you prompted that your hand has been raised should.
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Speaker Change: Your first question comes from the line of ours silica now from Scotiabank. Please go ahead.
Silica: Hi, good morning.
Speaker Change: Some color. Please on this ore hardness issue that you flagged.
Speaker Change: Is that.
Speaker Change: I guess first question how long is that expected to continue and is that impacting both throughput and recoveries or just recoveries.
Speaker Change: Yeah.
Speaker Change: Yes. Thanks for the question <unk>. So when we look at the impact one well as you know we have Tawdriness mills, so when we have harder type material.
Speaker Change: Do you see it impacts throughput at our.
Speaker Change: At our plant and typically will produce a little bit more fines, which.
Speaker Change: Are more complicated to recover in a recovery circuit.
Speaker Change: This is not new type materials. So when we look at the Chiefs peak, which is on the eastern part of our.
Speaker Change: Of our site typically material that we've learned in the past and hasn't necessarily impacted our our operations now we got pretty much about 100% of the feed during the quarter from that.
Speaker Change: From that area. So that's why we saw a bit of a larger a larger impact, but realistically there is ways for us to be able to.
Speaker Change: On the recovery as we get towards the flotation plant as well, while obviously, that's going to have less of an impact when we have potentially a quarter or because the flotation plant. We are re grinding our material anyways and will be easier to recover finer iron particles, but for the ore hardness. The strategy that we've had in the past was more.
Speaker Change: To be able to blend that that type of material.
Speaker Change: But.
Speaker Change: Sorry, but can you give us some sense of like if you're taking on head on here, how long is that expected to be the majority of the feet.
Speaker Change: Yes, when we look at even what we've seen more recently I mean, we've rarely had 100% of that material fed into the plants, but realistically we can react when we see that type of material. That's why you see that.
Speaker Change: We've invested.
Speaker Change: Constantly on the stripping side to make sure that we have a lot of faces that are open but our strategy. This year is really to try to bring down as much as we can the stockpile and if we can potentially.
Speaker Change: Put a little bit more of that harder ore during the year.
Speaker Change: Into our plants, while it's definitely a strategy that we're that we're going to do this year, but it's not as if if you look at our.
Speaker Change: At our project and a mine life of about 18 years, while definitely that's not something that is going to be consistent of having harder ore without us blending.
Speaker Change: Okay.
Speaker Change: Are you seeing that youre actually purposefully taking down production I suppose to deal with the harder ore because you have the ability to destock inventory.
Speaker Change: I mean, if you look realistically there is no.
Speaker Change: We're not purposely reducing the throughput and if you look at our.
Speaker Change: Our grinding if we would put this material with material that is.
Speaker Change: Let's say easier to pass through our mills, while we would have slightly improved productivity, but on the other hand, if we would put exclusively material that goes well through the plans, while we would far surpassed our nameplate capacity. So if you look at our ore body. It doesn't change. So if you look at the.
Speaker Change: Sort of ratio of this harder ore that we put its either we blend it in a more.
Speaker Change: Yeah stable way.
Speaker Change: Or we put it a little bit more head on into our plan. So we're not purposely reducing the production, but if we didn't have the stockpile onsite right now definitely we'd be lending, but right now the strategy. We're taking is to be able to pass more of that material into the plant.
Speaker Change: Okay and just a final one quickly is are you still taking a discount on sale.
Speaker Change: Iron ore is now passed in the market.
Speaker Change: We still have a discount right now I mean, it's mainly due to the fact that.
Speaker Change: Little bit less in terms of the Canadian or a little bit more due to the fact that we've got about $8 million of our tons that are sold on spot. So the spot market right now it gives discounts to the $2 65 for material like ours, when we get to the DRP, we're going to sign longer term contracts and then we're going to.
Speaker Change: More on a contracted basis, but on the spot market right now, we still have discounts for our material compared to the 65.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of feathers Shoveling from B Riley financial Please go ahead.
Speaker Change: Good morning, everyone and thank you alright.
Speaker Change: My first question is about the cadence of Destocking, So youll apply and 340.
Speaker Change: <unk> thousand metric tons of iron ore concentrate.
Speaker Change: Bouts of Bloom Lake reduced which is a strong start.
Speaker Change: How should we think about the pace of that you still can go into Florida.
Speaker Change: I mean is it reasonable to expect a similar rate or could we see.
Speaker Change: And acceleration to around say four or 500000 tons per quarter.
Speaker Change: Although the strategy for us is not to hold any tonnes on the stockpile. So we're not going to.
Speaker Change: To go slower than what the rail operator can.
Speaker Change: And be able to pass we're working closely with them to be able to maximize every single opportunity we have to be able to destock those stockpiles and it's really something that we're working day to day with the operations to make sure that we can bring them down as quickly as possible realistically when we look at what's been invested on the rail in the.
Speaker Change: In the past so there are some new logos and quite a lot of new <unk>.
Speaker Change: Our railcars that are now delivering.
Speaker Change: <unk> and the function, we have had some creative strategies with the rail operator to be able to improve efficiencies and will take all of those opportunities but at the same time, we are getting into summer months, where there is some maintenance on the rails and there will be some some slots of time that are put aside for ret.
Speaker Change: Or for repairs on the actual rail so again, our strategy is to be able to maximize that as quickly as possible. Our understanding is that the rail operator is also aligned to be able to.
Speaker Change: Respect their contract and make sure that we bring down all of the tons and we'll try to get those tons down as quickly as possible.
Speaker Change: Thank you for that but could you provide more detail in nature.
Speaker Change: Maintenance work at the mine.
Speaker Change: On the rail network.
Speaker Change: Specifically, what kind of activities planned and how should we think about the operational impact of.
Speaker Change: It's my opinions or thoughts on production.
Speaker Change: And how it's coming.
Speaker Change: Coming quarters.
Speaker Change: Well we've had.
Speaker Change: I mean in the past probably 50 years, that's always been the.
Speaker Change:
Speaker Change: The way the rail operator from the June to September period. There is some scheduled maintenance on the rail as we do have on our plants and to make sure that we keep all the equipment in line. So they need to replace certain rail they need to do some reparations. So that's typical and that'd be more.
Speaker Change: Something happening during the quarter I mean, it's not it's not something that shuts down the rail for a month's time, but there are some days that are.
Speaker Change: That are used to be able to repair the rail during the quarter.
Speaker Change: Thank you for that color and my last one is about the macro environment.
Speaker Change: What are you hearing about the current state of the Asian steel markets and.
Speaker Change: Given the VP of sales in the region and how is demand for for your product evolving that's region. Additionally, if you can provide some color.
Speaker Change: And to the appetite for Dr grade material, specifically from each region.
Speaker Change: Now when we look at the our main focus obviously for the Dr material is to be able to sell closer to home. So yes, we're spending time understanding the demand in China and potentially in Japan, but realistically. Our main focus for us is to be able to sell more into Europe, North Africa and the middle.
Speaker Change: So that's where we're spending most of our time understanding the market and the demand for the Dr material and we do see some significant demand for this type of material at.
Speaker Change: When we look at what's happening in China.
Speaker Change: Yesterday, there is a little bit less appetite for them for the higher grade, but at some point. If you look at what China is doing to be able to.
Speaker Change: To add steel in their sort of emissions regulations, while definitely at some point, they're going to start shutting down some less efficient.
Speaker Change: Steel mills and be able to focus more on the newer more productive ones, which is probably going to in turn bring back the demand for higher grade type material like ours and even we've been question quite a lot in the past on what happens when the timing of New project comes on everybody is talking about the iron ore content, but I think it is important too.
Speaker Change: Take a look all soybean contaminants potentially in.
Speaker Change: In <unk> and what we've been hearing is alu is going to be quite quite high for material from that region. We're already seeing some strategies in China to have blending hubs to be able to blend material from some and do with lower <unk>.
Speaker Change: Alumina type materials. So the advantage when you look at Bloom Lake material.
Speaker Change: Well, we've got a very very stable quality, we've got potential to be able to increase the grade as we're doing right now and we've got basically no contaminants. So not only where are we good as a high grade Dr material, but we are an amazing blending material as well and if you look around the world, while Rio has announced that they've lowered their quality, we've seen valet announce.
Speaker Change: The same as well and yet we're still theyre, making one of the highest quality materials in the world. So I do think that there is some upside for premiums in the future not just in Asia, but also around the world.
Speaker Change: David and the team. Thank you very much forward color.
Speaker Change: Best of luck.
Speaker Change: Thanks for your question.
Speaker Change: Your next question comes from the line of Craig Hutchison from TD Cowen. Please go ahead.
Craig Hutchison: Hi, good morning, guys.
Speaker Change: Can you just provide some context in terms of what your strategy is for marketing the Dr. Material I guess, you have 8 million tons available.
Speaker Change: Is the strategy kind of out of the gate to blend the 69%, which was 66 and kind of produce and intimate intermediary product or do you plan to market the 69% of the gate.
Speaker Change: Yes. Thanks for the question. So our strategy is definitely to be able to sell a distinct product so to sell 69%. That's our current strategy. Obviously, when we start up the plant and we ramp up the plant. Our main focus is going to be to minimize the impact on our production. So the first few months definitely will be.
Speaker Change: Blending the material with our 66% and demonstrating the.
Speaker Change: The plant and all of the operations of the plant, but it's not our longer term strategy our longer term strategy is to be able to sell a distinct 69% material. The way that we're negotiating all of our contracts right now is to have a distinct and 69% type material.
Speaker Change: Okay, and when do you expect to have contracts in place.
Speaker Change: Yes, we'd like to have the first contracts in place by the end of this calendar year. So I think thats a good timeframe allows us a little bit more time to be able to negotiate with our clients to make sure that we have the best win win solutions to be able to sell our material.
Speaker Change: Okay.
Speaker Change: How about on costs I know you guys are trying to drive down costs and you have been impacted by some of these issues with rail but.
Speaker Change: What's your long term goal, assuming a steady state operation in terms of your all in sustaining costs at Bloom Lake.
Speaker Change: Yes, so it depends what longer term is when we look at the at the next sort of two years. There is still investments may being made on our tailings facilities to make sure that we get them too.
Speaker Change: To the.
Speaker Change: So the right expansion level also on the waste dumps so as per our feasibility studies. So that's going to eventually ran down so that's going to bring down our all in sustaining costs because apart from the tailings.
Speaker Change: Well there is.
Speaker Change: Pretty much the mining equipment.
Speaker Change: It takes up.
Speaker Change: Large portion of the sustaining capex and there is pretty minimal capex being invested on other.
Speaker Change: Other elements, so that definitely is going to drive down our cost in terms of our operation as you know the best way for us to be able to reduce our cost is to maximize production. So that's definitely something that we're working on and the final part that's really.
Speaker Change: A big focus for this year is to work on making sure we can get that recovery of iron ore back to the levels, where we had in the past. So that's definitely going to drive down the cost as well so I think that the.
Speaker Change: The main ways that we'll be able to drive down the cost short term is with these elements and the final piece, where I think we're going to be able to.
Speaker Change: Save quite a lot is going to be on the shipping as well. So when you look at selling our Dr material, if we sell it to Europe sell it to North Africa, that's definitely going to reduce our shipping costs as well.
Speaker Change: Okay, great. Thanks, guys.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press star followed by the number one.
Speaker Change: If you are using a speaker phone. Please make sure you lift your handset before you press any keys.
Speaker Change: Your next question comes from the line of Scott Taylor from timber management. Please go ahead.
Speaker Change: Good morning.
Speaker Change: Reaching quarterly report mentioned that you've now spent almost around $340 million on your Dr project against an estimated total cost.
Speaker Change: $470 million, but there was a date given of that cost being January 23. So I was just wondering how good of an estimate is that at this stage for the final completion estimate.
Speaker Change: Yes. Thanks for the question Scott. So the estimate is still it's still good. So we're still on track to be able to deliver the project on time and on budget.
Speaker Change: That's very commendable and one last quick question, the $2 6 million tonnes of extra inventory that you had if that was all.
Speaker Change: Fight today theoretically what would that represent in terms of after tax cash to your to the company.
Speaker Change: Okay.
Speaker Change: That would be about $250 million of EBITDA.
Speaker Change: So if you look at our effective tax rate probably around 100.
Speaker Change: Hundred 70 ish.
Speaker Change: Okay, great. Okay. Thank you very much.
Speaker Change: Thanks for the question Scott.
Speaker Change: There are no further questions at this time I would like to turn the call over to Mr. David <unk> for closing comments Sir. Please go ahead.
Speaker Change: Yes, thanks, everyone for being on the call.
Speaker Change: Thanks for your support as well I think the.
Speaker Change: We've been on a on a journey to be able to produce one of the highest grade materials in the world. There is a bit of noise in the world right now, but I still think it's the right strategy to maximize revenues and to maximize our margins in the future feel very happy about the way that the teams have been managing as well because I mean to deliver three major projects on time and on Bud.
Speaker Change: <unk> in the mining space is quite rare and very proud of what we've been able to achieve to be able to set the foundation of this company for.
Speaker Change: For the next the next decades I think finally, we will be able to be out of a large capex run at the end of this year and be able to fully benefit from all of the investments that we've made in the past I would like to thank all of our shareholders support for the.
Speaker Change: For the support that you've given us over the years to be able to achieve that.
Speaker Change: That position I know, there's a bit of questions on what will be the exact premium how are we going to benefit from this project, but I do feel confident that we're going to sign the right contracts for this material and we will generate significant premiums for our shareholders. So we're still very big believers in the high grade material and as we see other players around the world.
Speaker Change: Lower their quality, it's again another testament.
Speaker Change: Other.
Speaker Change: Great.
Speaker Change: A great sort of differentiator that we have at Bloom Lake to have the type of ore that we have and also to have the significant resources that we have I mean, you saw recently deals being made $5 billion for four.
Speaker Change: Sure.
Speaker Change: In Australia, and when you look realistically at our company people don't value any of the actual orders that we have apart from Bloom Lake, but we've got significant resources over and above that 5 billion tonnes that sit in one of the best jurisdictions in the world. So as the world starts needing more and more high grade I do think we're going to be able to generate quite.
Speaker Change: A lot of revenues and quite a lot of returns for our loyal shareholders. So again, thanks, a lot for your support and looking forward to speak to you in just two months for the fiscal year 2026 quarter. One thanks, everyone.
Speaker Change: This concludes today's conference call. Thank you very much for your participation you may now disconnect.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: [music].