Champion Iron (ASX:CIA) - CEO, David Cataford
CEO, David Cataford
Source: Champion Iron
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  • Despite COVID-19 disruptions in the June quarter, Champion Iron (CIA) achieved a record net income of C$75.6 million (roughly A$78.9 million)
  • As of June 30, Champion had C$347.5 million (roughly A$362.5 million) cash on hand, which is a significant increase from C$298.7 million (roughly A$311.6 million) at the end of the previous quarter
  • Unfortunately, COVID-19 regulations led to a drop in revenue, EBITDA and gross profit
  • Because of the pandemic, the company was forced to ramp down operations on March 24
  • However, in late April, production at the Bloom Lake Project in Canada resumed
  • Despite the ramp down, nearly 1.8 million wet metric tonnes of high-grade iron ore concentrate was processed
  • This is in line with the plant’s nameplate capacity and is a minor 10 per cent decrease on the prior corresponding period in 2019
  • Company shares are trading 1.09 per cent higher at $2.79

Champion Iron (CIA) has achieved a record net income of C$75.6 million (roughly A$78.9 million) during the June quarter of the fiscal year ending March 31, 2021.

Champion Iron is a Canada-based miner focused on exploring and developing iron ore projects — namely the Bloom Lake Mine in Québec.

Financials

This quarter’s record net income favourably compares to the C$74.2 million (roughly A$77.4 million) achieved in the same period of the prior year.

Meanwhile, earnings before interest, taxes, depreciation and amortisation (EBITDA) came in at C$127.7 million (roughly A$133.2 million), representing an EBITDA margin of 52 per cent. This compares to an EBITDA of C$166.9 million (roughly A$174.1 million) for the same period in the prior year and an EBITDA margin of 60 per cent.

The company recorded C$244.6 million (roughly A$255.2 million) in revenue over the quarter. This compares to C$277.9 million (roughly A$290 million) in 2019’s corresponding period.

Excluding incremental costs related to COVID-19, which totalled C$4,562,000 (roughly A$4,759,787), Champion Iron generated an adjusted net income of C$78 million (roughly A$81.3 million).

Gross profit for the quarter totalled C$128,296,000 (roughly A$133,877,645) compared to C$170,693,000 (roughly A$178,118,159) for the same period in the prior year.

While the iron ore concentrate price was trending upwards in the period, the lower average realised selling price was C$139.1 (around A$145.17). This compares to C$145.7 (roughly A$152.06) in the same period last year. Therefore, a decrease in the gross profit is attributable to lower revenue as a result of a lower average selling price and lower volumes of iron ore concentrate.

Positively, Champion Iron ended the June quarter with C$347.5 million (roughly A$362.5 million) cash on hand, as opposed to C$298.7 million (roughly A$311.6 million) at the end of the March quarter.

Operational performance

On March 24, 2020, Champion Iron announced it would ramp down operations due to COVID-19. However, on April 23, the company announced it was granted permission to resume production at its Bloom Lake Project in Quebec, Canada.

While the miner was operating at a minimal capacity and activities at the mine were disrupted, early mitigation measures allowed production to reach nearly 1.8 million wet metric tonnes (WMT) of 66.5 per cent iron high-grade iron ore concentrate.

This is in line with the plant’s nameplate capacity and represents a small 10 per cent reduction compared to the prior corresponding period in 2019.

7,295,400 WMT of material were mined, which represents a 16 per cent decrease on the 8,686,000 WMT mined in the prior corresponding period of 2019.

This is due to COVID-19-related reductions in mining activities and equipment maintenance, as well as the arrival of seasonal workers who required training.

At Bloom Lake, the plant milled 4,604,600 WMT of ore, which is a slight four per cent decrease from the 4,780,000 WMT processed in the prior corresponding period. This is a direct result of COVID-19 ramp downs.

Positively, Champion Iron achieved an average recovery rate of 82.3 per cent, compared to 82.1 per cent in the same period last year.

Following the successful commercial production test last quarter, Bloom Lake’s ability to produce DR-quality iron ore concentrate has been confirmed. With the confirmed product specification, the company produced an extra 207,900 wet metric tonnes of DR-quality iron ore concentrate at 67.8 per cent iron, with a combined silica and alumina content of 2.68 per cent.

The second shipment confirms Champion’s ability to sell its ore to DR pellet producers, which can be converted and used in electric arc furnaces.

This positions the company to potentially increase its customers and confirms Bloom Lake as one of the few producing global deposits that can transition its product offering to meet the growing steelmaking demand.

Company shares are trading 1.09 per cent higher at $2.79 each at 12:57 pm AEST.

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