Champion Iron Limited

Good morning, ladies and gentlemen, and welcome to Champion's Q1 results of the financial year 2026 conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, July 30th, 2025. I would now like to turn the conference over to Michael Marcotte. Please go ahead.

Thank you, Operator, and thank you, everyone, for joining us to discuss our results today. Before I turn it over to David, our CEO, for the presentation, I'd like to remind you that throughout this presentation, we'll be making forward-looking statements. If you'd like to read more about forward-looking statements, risk, and assumptions, you can visit our MD&A, which is available on our website at championiron.com. I'd also like to remind people that our presentation to be used on the webcast is also available on our website under the Investor tab. Joining me here today is David Catterford, our CEO, who's going to do the formal presentation, or COO Alexandre Bello, and our CFO, Dan Alkambli. With that, I'll turn it over to David.

Thanks, Michael. Thanks, everyone, for being here today. So very happy to be able to present the fiscal year 2026 first quarter results. So if we look in terms of the quarter, I think two of the main highlights were definitely the fact that we've managed to rail and haul About 3.8 million tons dry, so close to 4 million tons wet of material on our rail. So a very big positive for us during the quarter. Also managed with a more challenging quarter to be able to realize an EPS of 5 cents per share. If we look at community governance and sustainability, again, continuing to work with our First Nations partners and local communities, mainly in Quebec. Very happy also to have received a prize from the Quebec Mining Association for one of the projects that we've been doing with the First Nations community, which is an immersion project that we've done with some of our employees to be able to go visit First Nations community and be fully immersed in the actual community. In terms of our operational financial results, so one of the elements that was a bit underwhelming during the quarter is definitely our production, so around 3.5 million tons that were produced during the quarter. Main elements that impacted us have been the ore hardness, so we've seen that last quarter and we're seeing it again. The good news is that we seem to have identified the element that is causing it, but if you combine the ore hardness and the lower head grade during the quarter, Well, that definitely reduced our throughput of concentrate. And also, when we have ore that's hard, well, it typically creates more fines within the mill, and that material, the fines are more difficult to recover. So, we see a double impact, throughput and iron ore recovery. So, those are the main elements that have impacted us. On top of that, we did have a Hydro-Quebec shutdown of about two days. So that impacted our production as well. If you combine the ore hardness with the Hydro-Quebec shutdown, we're talking roughly of about 300,000 tons during the quarter. So that would have brought our production closer to 3.8. If we look at one of the highlights during the quarter, it's the fact that we did move about 440,000 tons from the stockpile, bringing our stockpile down to about 2.1 million tons during the quarter. If we look at the rail operation, As we mentioned, had a run rate of roughly about 4 million tons during the quarter, so net positive. Obviously, this will have a small impact in the next quarter. As you might remember, every September there is a significant shutdown on the rail from the rail operator, roughly usually between 10 to 12 days where they shut down the rail to do summer maintenance on the rail facilities. In terms of the ore hardness, so if we look at our mining sequence and what impacted us, so if you look on the map here, you can see the south of what we call Pignac or our center pit. We have an extension, a small zone that we added in our reserves a few years ago when we updated our mine plan. We thought this material would be actually positive for us and would allow us to lower our operating costs because as you can see on the map, it's much closer to our waste dumps. So we did feel that there was a potential advantage because the hauling was so short for the strip material from that zone. Unfortunately, what we saw is that the material from the zone is much harder. And if you look at the last quarter, we were mining roughly about 12% of our blend into that area. So if you account for the fact that this material has reacted in a more difficult way. What typically happens at our site is that the mill gets choked up and gets stuck with this type of material and we don't have any grinding media that's hard enough to be able to remove it. So what we're looking to do in the second half of this year, financial year, is to be able to reduce the amount of tons that come from this zone and get closer eventually, gradually down to the about 4% of ore blend, which is the average of this material over the life of mine. So we were mining a little bit more aggressively in that zone because we did think this would be positive, but because we've seen that this material is more difficult, we'll definitely, we'll cut it back down in the second half of this year. In terms of our mining operations, I do think that there's quite a lot of positives. If you look at how the mine has performed, so record combined ore and waste mine and hauled in the period. So all the new mining equipment and the work that we're doing at the mine to be able to optimize our operations has been paying off. Unfortunately, we haven't seen it in the results because of the ore hardness and the difficulty to be able to process the material. But realistically, I think the mine is very healthy, and we've proven this in the last quarter. If we look at the industry, so the R&R or the P65 material declined in the past quarter. We since have seen that recover. So we do see some positive signs in terms of R&R pricing. We have seen the spread for the high-grade versus low-grade change as well. So we have seen the spread go from around $9 to $14 per tonne. So showing signs that the high grade is coming back as a desired material, and hopefully with steel margins that are improving in China, we should be able to see that continuing to improve in the near future. When you look at the freight, freight was also positive for us as the C3 index decreased slightly and our shipping costs reduced during the quarter. If we look at the iron ore price, well, definitely that's what impacted us in terms of provisional price adjustment. So we had a negative of about $20 million per ton or roughly about $5 per ton. That's mainly due to the fact that at the end of last quarter, on the 31st of March, we expected a settlement price of about $111 per ton, but managed to realize about $103. So that impacted us negatively. This might turn the other side in the next quarter because at the end of June, what we expected to have are 2.5 million tons on the water to settle at around $100 per ton. And since then, we have seen the iron ore price increase. So there is a potential for us to have a positive provisional price adjustment. In terms of realized price, when we looked at freight, provisional price adjustments and the FX conversion, we realized a net price of around 102 Canadian dollars per ton. If we look at our cash costs, definitely one element that's a bit underwhelming during the quarter. Realistically, if we look at our 82 Canadian dollars per ton delivered in the vessel, the two main elements that impacted us was the use of stockpiled material and the ore hardness. If we look at the ore hardness reducing our throughput and reducing our ore recovery, the total volume effect during the quarter has been roughly about $4 per ton. So if we would have managed to hit a more stable production target, we would have been able to reduce those costs by reducing the fixed cost by about $4 per ton. The other impact has been from using stockpile materials. So as you know, when we use stockpile material, well, we have to account for the fact that it was hauled to the stockpiles and the fact that we're also hauling material from stockpiles to the loadout area. So that is reflected on the cost of those tons. And if you look at the advantage of us bringing so many tons from the stockpile, 440,000 tons, definite positive in terms of our cash, but a negative in terms of our operating costs for the quarter. So if you account for the volume effect and for the inventory effect, while combining those is roughly about $8 per ton, so that would have reduced our operating costs to mid 70s. In terms of financial highlights, so you as we've mentioned on the first slide, around $390 million of revenues, a bit just shy of $60 million, and an EPS of about 5 cents per share. In terms of cash change during the quarter, so we had a few positives, one being the fact that the Ks exercised their warrants, bringing in roughly around $37 million. So they did that ahead of the expiration date. showing their positive view on the company today. So if we look at our cash variation, it went from $117 million to just over $176 million during the quarter. In terms of our balance sheet, so a very healthy position to allow us to finalize the patient report. and still benefiting from roughly around 2.1 million tons of stock power material that we should be able to continue to haul down in the coming quarters. One element that we delivered post quarter was the high yield bond that we have in place. We had a successful first time issue and very happy with the result. But as you know, next year we had to start to repay the capital on our existing term loans so we definitely wanted to have a more permanent structure in place. We had also drawn down from the revolving facility mainly to build a flotation plant, so we wanted to be able to reimburse the revolving facility. So all in all, we had about $335 million U.S. to reimburse, and we secured a note of about $500 million U.S. to be able to increase our liquidity, but at the same time repay all of our other debts. Turning to the flotation plant, so as you probably know, here in Quebec now we're on construction vacation, so the teams are coming back next week to be able to do the finalizing steps to be able to deliver our plant before the end of this calendar year. So what's the main targets now is doing all the piping at site, finalizing the connection of the various equipments, doing the electrical work, So quite a lot of work to be able to finalize the plant, but we're still comfortable in saying that we'll be able to deliver the project by the end of this year and be able to deliver the project within the $470 million budget. So if you remember when we did the phase two construction, piping was one of the elements that was a bit more complex in the region. There's quite a lot of projects here in Quebec that are currently working on piping mainly in the battery factories that they're building in south of Quebec, but we still feel confident we'll be able to reach our target of December this year to be able to finalize the various remaining parts of the project. In terms of negotiating with our various clients, So continuing to advance those negotiations, we still feel comfortable in saying that our first sales are gonna be in North Africa and Middle East. We do believe that's the first market that will be able to materialize the best gains for our material. Eventually we wanna be able to sell tons into Europe as well. We have seen various companies in Europe continue their transition towards lower CO2 intensity steel. Even if we see quite a lot of negative output in terms of steel use out of Europe, we still see various companies, mainly out of Germany, that are continuing their transition to electric arc furnaces and DRI facilities. So even if we do expect to start selling tons into the Middle East and North Africa, I do think that in the near future we'll be able to also sell tons into Europe. We expect to sign our first contract by the end of this calendar year or beginning of next calendar year to be able to be ready for, call it, April or May of next year. Well, we're going to be in a position to start selling full cargoes of this DRPF material. One other big highlight that we've just announced is us entering into a definitive framework agreement with Nippon Steel and SOGITS. So very positive signing ceremony that we did last week. We had executives from Nippon Steel and Sojits visit our site, but also fly to Cami. So very positive to have two strong partners to be able to help us to advance the next steps of Cami. Just to remind the next steps, so what we're working on right now is to finalize the feasibility study to confirm the numbers from our pre-feasibility study and potentially improve certain areas. and also do the permit for the modified project of CAMI. So as you remember, when you look at the CAMI project, we've increased the volume compared to the previous feasibility studies and also significantly improved the grade of our material to be able to counter what we're pretty much seeing in other jurisdictions where the quality is going down, we actually see our material and our niche to be able to produce the highest grade type of material in the world. Just turning to our quality. So one of the main elements that we've been flagged by a lot of our clients is the fact that the Australian majors quality has declined over the past decade. Contaminants have increased by about 12%. So we do see our type of material as being something that will be able to counter those reduction in grades and be able to benefit us or help us benefit from higher premiums in the near future. So with that being said, I'd like to turn it over to the Q&A portion of the call to be able to respond to any questions you might have.