Champion Iron Limited

Good morning, ladies and gentlemen, and welcome to the Champions Q2 results of the financial year 2027 conference call. At this time, all lines are in a 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 Thursday, October 29, 2026. I would now like to turn the conference over to Michael Marcotte, Chief Financial Officer. Please go ahead.

Thank you, operator, and thank you, everyone, for joining this call. Before I turn it over to our speaker, I'd like to highlight that throughout this call, we'll be making forward-looking statements. If you would like to read about our forward-looking statement of risk and assumptions, please visit our website at championiron.com and our MD&A. We'll also be using a presentation for this webcast, which is available under the Investor tab at the website. Joining me here for this call includes many of our executives. David Catterford, CEO, will do the formal presentation. Our chairman, Michael O'Keefe, will do closing remarks. And I'm also joined by Alexandre Bello, our COO, and other executives. With that, I'll turn it over to David.

Hi, thanks, Michael. Thanks, everyone, for being on the call. So if we dive into the fiscal year 2027 second quarter highlights, we managed to produce roughly about 3.9 million tons during the quarter, sold just shy of 4.5 million tons during the quarter as well. Cash sat at the end of the quarter at roughly around $267 million. In terms of operational and sales highlights, so if we look at the highlights for this quarter, I mean the increase of 35% quarter over quarter on the sales were driven not only by Bloom Lake but also by Ranner Gruber, so that managed to wind down a portion of the inventory. Also completed the inaugural commercial shipment of our DRPF product during the quarter, so our first vessel that left the port and that has now arrived at our client's facilities. for this new, very high-grade product. Turning to community governance and sustainability, so we continue to work closely with our local communities and First Nation partners, so did quite a lot of work during the last quarter to continue to support the various organizations near our operations. If we dive into the actual operations of Bloom Lake and Rana Gruber, starting with Bloom Lake, so in terms of the results of the mine, So we managed to produce roughly about 3.3 million tons in a quarter that had two major shutdowns for plant number one and plant number two, and also a major shutdown in our flotation plant. Also continued commissioning activities at our DRPF project, make sure that we can get the plant as quickly as possible in commercial production. Slight decrease on a recovery that is explained mostly due to the fact that we are now commissioning the flotation plant. and when you look at the actual operations in terms of the mine, so the mine is very healthy with a lot of waste material moved, strip ratio of roughly about 1.2, and the head grade at the mine of roughly about 30%. In terms of financial results, so cash cost at the mine, about $60 Canadian per ton, land transport lower, compared to last quarter. Last quarter was roughly about $30 per ton, this quarter about 24, mostly explained by the fact that we've diluted down the fixed cost at the port by a higher amount of tons sold. In terms of our all-in sustaining cost, also reduced compared to last quarter as we slowly exit seasonal work, and this will continue in the next quarters, and also the higher tons that were sold. I think the major highlight for us is really the work that's being done on the flotation plant. So the project was completed within the $500 million budget and we're continuing the ramp up, still expect to be able to complete the ramp up to be in full commercial production at the end of the 27 fiscal year. The volumes, if you look quarter over quarter, were fairly flat, but that's due to the fact that we had a major shutdown within our flotation plant. The positive is really the fact that we're hitting the planned quality not only on the iron ore units but also on the contaminant side. We secured additional test cargoes during the quarter and also some commercial agreements for this material going into Q3 and going into Q4. So very happy with the progress that's being done on this flotation plant and especially the segment that we're entering which is the DR market. Turning to Randall Gruber, so if you remember last quarter, there was quite a bit of headwind in terms of production and also sales, but that really turned around with an increase of about 40% quarter over quarter in terms of production and about 180% in terms of the actual sales. So that helped reduce the Alden sustaining cost at Randall Gruber to around $97 Canadian dollars per tonne. In terms of the consolidated results, a little bit of noise in terms of our gross realized price. This is not due to the fact that we're getting hit with much larger discounts. It's really a timing issue during the quarter. So if you look at the last quarter, we had roughly about 3.4 million tons still on the water as at September 30th. And that really impacted us because if you look at the forward curve in terms of iron ore price, we had to book those tons at $103 per tonne. 103 is significantly lower than the actual average P65 average during the quarter. So that's why you see a big discrepancy between the actual quarter average and the gross realized price. Now, obviously, those tons, we have not settled on the price yet. So we will settle the price once the material gets to our clients' facilities. And we'll see how that impacts the provisional pricing for the next quarter. We were also hit by higher freight costs, roughly about $40 per ton during the quarter. We've since seen those prices come down, but during the quarter we did see a larger impact in terms of freight. Again, when you look at those results, I think it really highlights why this flotation plant was important for us, because the last thing we want going forward is to sell all those tons into China and be impacted significantly when there are swings on the C3 index. So by selling closer to home to Europe, North Africa, Middle East, we will be able to be less impacted by those freight swings in the future. In terms of consolidated financial highlights, quarterly revenues are about $400 million and adjusted BDA of $23 million for the quarter. In terms of cash, when you look at the company quarter over quarter, roughly one from about $200 million to $214 million during the quarter, so still very well positioned for the next few quarters. In terms of balance sheet and liquidity position, so the company is still in very good condition in terms of liquidity, so we have access to around $800 million of assets cash and undrawn loans. We did go see our financial partners. I mean, when you look at the financial partners that we have that have supported us for the past 10 years, went to see them to amend the financial covenants under the senior secured credit facility just to provide additional flexibility during the current market environment and maintain our access to that liquidity. If we turn towards the market, If you look at the last quarter, pretty abnormal when you look at the C3 freight compared to the actual P65 index. Typically what we see is iron ore and freight being very well correlated. When iron ore price goes up, so does shipping and vice versa. What we saw in the last quarter is an abnormal disconnect between the C3 index and the P65 index. So C3 went up, mostly due to elements that... are a little unrelated to the actual iron ore markets. We saw a lot of tons of bauxite leave Guinea to be able to access the Asian market. There was a lot of weather elements in the Pacific that created congestions at various ports in Asia that also reduced the amount of C3 vessels that were available. A little bit more coal as well that was transiting on the seaborne market due to mine closures in China following accidents last year. But when you look at a lot of those elements, well, they seem to be changing in the other direction. So the weather has been better now in Asia and more importantly in the Pacific. And we've also seen more mines reopen in China on the coal side, which should relieve some pressure on the actual C3 index. Very easy to see. see the increase on the C3 and just think that it's due to the conflict in the Middle East, but the conflict in the Middle East accounts for a portion of this increase. The other elements account for the rest. When you look at the market in general, if you look at the forward curves on C3 over the next year and the next two years, the market does expect that that will turn, and we've already started to see the C3 index come down from the peaks that we saw in the recent weeks. One interesting element as well when you look at our strategy to be able to make DR material, I think it was definitely the right strategy because when you look in the last year, the DR pellet premium is pretty much one of the only commodities that has risen close to 50% in just 12 months. So when you look at the DR pellet premium rose from around $40 US per ton to close to $60 US per ton. in the past year, and that's directly the market that we're targeting. I do think it's the right strategy, a bit of headwind when you look at the pricing environment, the fact that we're finalizing the ramp-up of the flotation plant, but I think we've built the right foundation to be able to be in the right segment of the iron ore space. Just to close on where our company sits today. When you look at our company, we've invested quite significantly in the past years to create the foundation we have today. Over $6.7 billion have been invested at Bloom Lake to be able to create this foundation now that will allow us to enter the DR market and make sure that we benefit from this higher premium segment. But when you look at the sort of multi-year capex cycle, this is now behind us. So we've delivered on our plants. We've delivered on our flotation plant. The construction is finalized. we're just finalizing the ramp up but all of this investment is behind us and now we'll be able to start benefiting from these extra premiums in the coming quarters. So with that being said, I'd like to thank all of our staff for all of the work that they've done to allow us to navigate through these more challenging times and I'll turn it over to the Q&A portion of the call.