Champion Iron Reports robust Fourth Quarter and FY2023 Annual Results and Declares Dividend

• FY2023 revenue of $1,395M, EBITDA¹ of $493M and EPS of $0.39
• Declares a dividend of $0.10 per ordinary share
• Advances the DRPF project while the Bloom Lake Phase II ramp-up continues

MONTRÉAL, May 30, 2023 – (Sydney, May 31, 2023) – Champion Iron Limited (TSX: CIA) (ASX: CIA) (OTCQX: CIAFF) (“Champion” or the “Company”) is pleased to report its operational and financial results for the fourth quarter and financial year ended March 31, 2023.

Conference Call Details

Champion will host a conference call and webcast on May 31, 2023, at 8:30 AM (Montréal time) / 10:30 PM (Sydney time) to discuss the fourth quarter and annual results for the financial year ended March 31, 2023. Call details are outlined at the end of this press release.

Champion’s CEO, Mr. David Cataford, said: “Thanks to our team’s perseverance and efforts, we delivered another robust financial year as we complete the ramp-up of our Phase II project, enabling us to continue to actively pursue our organic growth projects. The positive impacts that can be measured locally, including through our partnerships with First Nations and our 1000 quality jobs, are extending globally through our products that serve as a leading solution to decarbonize the steelmaking process. Our dedicated team, who successfully recommissioned Bloom Lake and completed the Phase II expansion project, are actively participating in a rare global opportunity to produce direct reduction quality iron ore, enabling steelmaking without the use of coal. In tandem with the benefits from our local investments, including a recent increase to the initial budget to advance our DRPF project, we are proud to declare another dividend for our shareholders.”

1. Highlights

Sustainability and Health & Safety

• No serious injuries during the quarter and no major environmental issues reported in the period, or since the recommissioning of Bloom Lake in 2018;
• Fully compliant result following a site inspection by the Québec Ministry of Environment, Fight Against Climate Change, Wildlife and Parks;
• Employee recordable injury frequency rate of 1.53 for the year, down significantly from 2.98 last year and better than Québec’s open pit industry performance; and
• Optimized the Company’s 2022 Sustainability Report, incorporating industry best practice disclosure frameworks, specifically, the Global Reporting Initiative (“GRI”), Sustainability Accounting Standard Board (“SASB”) and Task Force on Climate-Related Financial Disclosure (“TCFD”). The Sustainability Report is available on the Company’s website at www.championiron.com.

Operations and Finance

• Record quarterly production of 3.1 million wmt of high-grade 66.1% Fe concentrate for the three-month period ended March 31, 2023, an increase of 4% and 65% compared to the previous quarter and the same period of the previous financial year, respectively. Annual production of 11.2 million wmt of high-grade 66.1% Fe concentrate, up 41% from the previous financial year. This was attributable to the strong performance following Phase II achieving commercial production in December 2022;
• Quarterly record iron ore concentrate sales of 3.1 million dmt for the three-month period ended March 31, 2023, up 15% and 64% from the previous quarter and the same period of the previous financial year, respectively. For the year, a record 10.6 million dmt were sold by the Company, up from 7.7 million dmt in the previous financial year;
• While the Company’s facilities reached their designed nameplate capacity on several operating days during the quarter, results were impacted by previously disclosed delays in the delivery and commissioning of mining equipment and locomotives required to service third-party rail capacity in Sept-Îles, limiting mining and haulage capacity. Quarterly production results were also impacted by a longer than expected planned maintenance shutdown of one of Bloom Lake’s two crushers. A four-day power outage which impacted third-party infrastructure at the port facility in Sept-Îles impacted the Company’s shipments. With the recent delivery and assembly of mining equipment, the progress on third-party infrastructure work programs and near-term anticipated locomotives delivery, the path towards reaching Bloom Lake’s expanded nameplate capacity of 15 Mtpa in the near term has significantly improved;
• Revenues of $463.9 million for the three-month period ended March 31, 2023 ($331.4 million for the same period in 2022), net cash flow from operating activities of $167.7 million ($4.3 million for the same period in 2022), EBITDA¹ of $195.7 million ($197.9 million for the same period in 2022) and net income of $88.2 million with EPS of $0.17 ($115.7 million with EPS of $0.23 for the same period in 2022);
• For the year ended March 31, 2023, revenues totalled $1,395.1 million ($1,460.8 million for the same period in 2022), with net cash flow from operating activities of $236.0 million ($470.4 million for the same period in 2022), EBITDA¹ of $493.2 million ($925.8 million for the same period in 2022) and net income of $200.7 million ($522.6 million for the same period in 2022). Revenues, EBITDA¹, net cash flow from operating activities and net income were all impacted by lower cash operating margins¹, driven by lower realized selling prices compared to the previous year, as well as higher operating costs attributable to start-up costs and cost inflation;
• For the three-month period ended March 31, 2023, C1 cash cost¹ was $79.0/dmt (US$58.4/dmt)², compared to $60.0/dmt (US$47.4/dmt)² for the same period in 2022, due to higher fixed costs required to support nameplate capacity. Cash cost¹ for the fourth quarter was slightly higher than cash cost¹ for the previous quarter of $76.0/dmt (US$56.0/dmt)²_, mainly due to the impact of the change in concentrate inventory valuation;
• C1 cash cost¹ of $73.9/dmt (US$55.9/dmt)² for the year ended March 31, 2023, compared to $58.9/dmt (US$47.0/dmt)² for the same period in 2022, was negatively impacted by fixed costs incurred to support the infrastructure required to achieve the higher anticipated production prior to achieving nameplate capacity. The Company expects those costs to decrease and to normalize as production gradually ramps up towards Bloom Lake’s expanded production nameplate capacity of 15 Mtpa. Cash cost¹ during the year was also impacted by inflationary pressures on fuel, explosives and site-related G&A expenses, additional maintenance costs and a higher reliance on contractors at the mine due to delays in mining equipment deliveries;
• $327.1 million of cash and cash equivalents and short-term investments as at March 31, 2023, compared to $352.7 million at the same time last year. Available liquidity¹, including amounts available on the Company’s credit facilities, totalled $673.7 million at year-end, compared to $476.0 million at the end of the previous quarter, an increase of $197.7 million, mostly driven by the level of net free cash flow; and
• Dividend of $0.10 per ordinary share declared on May 30, 2023 (Montréal time) / May 31, 2023 (Sydney time), in connection with the semi-annual results for the period ended March 31, 2023.

Direct Reduction Pellet Feed Project (“DRPF Project”) Update

• In connection with the recently announced positive findings of the DRPF Project feasibility study, the Board of Directors approved an increase of $52 million to the initial budget of $10 million announced on January 26, 2023, in order to maintain the DRPF Project’s estimated 30-month construction period and a potential commissioning of the project in the second half of the calendar year 2025; and
• The DRPF Project remains on schedule with detailed engineering work advancing as planned.

Other Growth and Development

• The Company continues to evaluate organic growth opportunities, including the Kamistiatusset iron ore project’s (the “Kami Project”) feasibility study which is evaluating the project’s capability to produce a Direct Reduction (“DR”) grade pellet feed product, and a feasibility study evaluating the re-commissioning of the Pointe-Noire Iron Ore Pelletizing Facility and its ability to produce DR grade pellets, in collaboration with a major international steelmaking partner. Both feasibility studies are expected to be completed in the second half of calendar year 2023.

2. Bloom Lake Mine Operating Activities

Phase II Commercial Production

During the first quarter of the 2023 financial year, the Company successfully commissioned its second ore processing plant with its first shipment of concentrate railed in May 2022. In the second quarter of the 2023 financial year, the last major on-site Phase II infrastructure work programs were completed, enabling the Company’s two crushers to feed both processing facilities and reducing bottlenecks during maintenance periods. With major on-site work programs completed ahead of schedule, Phase II reached commercial production in December 2022 and the Company continued to make improvements to stabilize and optimize operations.

While Phase II demonstrated its ability to reach the designed nameplate capacity on several operating days since reaching commercial production, production during the fourth quarter of the 2023 financial year was negatively impacted by the longer than expected maintenance shutdown of the Company’s newly commissioned crusher due to winter challenges, as well as previously disclosed mining equipment delivery and commissioning delays, which limited mining capacity. This short-term limitation in mining and crushing capacity created some inefficiencies across the site, restricting the ongoing ramp-up during the quarter. With the recent delivery and assembly of mining equipment and current work to increase throughput and the recovery ratio, the path towards Bloom Lake reaching its expanded nameplate capacity of 15 Mtpa in the near term has significantly improved.

Off-site work programs, including third-party infrastructure, continued to advance during the quarter, further positioning the Company to benefit from additional flexibility and capacity in Sept-Îles to handle the Company’s full nameplate capacity. During the three-month period ended March 31, 2023, downstream limitations, including locomotive delivery delays and a four-day power outage at the port, negatively impacted the Company’s shipments.

While the Company is experiencing a short-term disconnect in upstream and downstream capacity, compared to the completed infrastructure at Bloom Lake, Management is confident that a stable and operational balance state will be reached in the near term. Teams at Bloom Lake are currently working at optimizing and synchronizing the operations and adapting the maintenance practices to achieve the expected reliability, an important step towards achieving nameplate capacity on a consistent basis. Due to third-party delays to increase infrastructure capacity, including locomotive deliveries, the Company anticipates potential sales limitations, compared to its production capacity in the near term.

Operational Performance

Fourth Quarter of the 2023 Financial Year vs Fourth Quarter of the 2022 Financial Year

In the three-month period ended March 31, 2023, 14.2 million tonnes of material were mined and hauled, compared to 10.5 million tonnes during the same period in 2022, an increase of 36%. The increase in material movement was enabled through the utilization of additional equipment. Tonnage mined and hauled for the fourth quarter of the 2023 financial year was lower than anticipated, compared to the initial Phase II ramp-up schedule, due to previously disclosed delivery delays of required mining equipment. With the recent delivery and assembly of equipment required to increase mining capacity towards Phase II’s expected nameplate capacity, Management is confident its operations can deliver a stronger performance in the upcoming months.

The stripping ratio for the three-month period ended March 31, 2023, was affected by delivery delays that impacted the number of drills and haul trucks available during the quarter. In order to optimize plant operations in connection with transitional incremental feed requirements during the Phase II ramp-up period, the Company chose to reduce mined waste. The Company intends to gradually recover accumulated waste backlog in future periods as additional mining equipment becomes available.

The plants processed 9.1 million tonnes of ore during the three-month period ended March 31, 2023, compared to 4.9 million tonnes for the same prior-year period. The mining capacity limitations resulting from previously disclosed equipment delivery delays negatively impacted the tonnage processed during the quarter. The plants’ performance during the three-month period ended March 31, 2023, was also impacted by a longer than expected maintenance shutdown of one of the Company’s two crushers.

The iron ore head grade for the three-month period ended March 31, 2023, was 28.4%, compared to 30.3% for the same period in 2022. The variation in head grade is attributable to the presence of some lower-grade ore being sourced and blended from different pits, which was anticipated and is in line with the mine plan and the LoM head grade average.

The Company’s average Fe recovery rate of 78.6% for the three-month period ended March 31, 2023, was negatively impacted by the unstable recoveries of the Phase II concentrator, which were to be expected at this stage of the Phase II commissioning, the limited mining capacity reflecting the unavailability of mining equipment as well as the short-term instability of the crushing systems. The Company remains confident in its ability to reach the average LoM expected Fe recovery rate target of 82.4% in the near term at Bloom Lake, as detailed in the Phase II feasibility study.

Bloom Lake achieved record production of 3.1 million wmt of high-grade iron ore concentrate during the three-month period ended March 31, 2023, an increase of 65%, compared to 1.9 million wmt during the same period in 2022, positively impacted by the ongoing commissioning of the Phase II plant. Management expects to benefit from optimization work programs and recent equipment deliveries, which should result in improved combined production of Bloom Lake’s plants in the near term.

2023 Financial Year vs 2022 Financial Year

The Company mined and hauled 52.0 million tonnes of material during the year ended March 31, 2023, compared to 42.8 million tonnes for the same period in 2022. The increase in volume of material moved at the mine was driven by additional mining equipment in operation. However, total volume moved during the year was negatively impacted by mining equipment delivery delays.

The stripping ratio was 0.60 for the year ended March 31, 2023, compared to 0.92 for the same period in 2022, and was lower than the LoM stripping plan as the Company strategically focused on mining ore due to the restricted availability of mining equipment caused by equipment delivery delays, as previously detailed. The iron ore head grade of 29.2% for the year ended March 31, 2023, was comparable to last year, and is consistent with the LoM head grade average. The lower average Fe recovery rate for the year ended March 31, 2023, was attributable to the commissioning of the Phase II concentrator during the year. The Company is confident to reach LoM recovery rate in the near term.

The two plants processed 31.7 million tonnes of ore during the year ended March 31, 2023, an increase of 51% over the same period in 2022, and produced a record of 11.2 million wmt of high-grade iron ore concentrate, compared to 7.9 million wmt for the same period in 2022, benefiting from the commissioning of the Phase II project during the first quarter of the 2023 financial year.

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