TD Securities Flash Note

Champion Iron Ltd. (CIA-T) C$5.18 Another Record Quarterly Earnings Result Craig Hutchison, P. Eng Joel Brown, P.Eng. (Associate) Event Champion reported its Q3/F21 financial results (period ending December 31). Conference call is at 8:30 a.m. ET today; 416-764-8688.
Impact: POSITIVE

Champion reported quarterly production of 1.92Mt of 66% iron ore concentrate vs. our estimate of 1.87Mt and consensus of 1.91Mt. Ore mined was generally in line with our estimate, while mill throughput exceeded our expectations and was up 12% y/y.

EBITDA in the quarter was a record $212mm vs. our estimate of $194mm and consensus of $204mm. Adjusted EPS was $0.26 vs. our estimate of $0.21 and consensus of $0.23. The beat relative to our estimate was largely driven by higher sales.

Revenues totalled $330mm (TD: $298mm) on sales of 1.89Mt (TD: 1.80Mt). The net realized price in the quarter averaged $174/t-FOB, Sept-Iles. C1 cash costs in the quarter were $56/t (FOB, Sept-Iles), above our estimate of $53/t. Ocean freight costs in the quarter were US$22.1/t vs. our estimate of US$19.50/t.

We calculate that the company generated $92mm (TD: $70mm) in FCF in the quarter (operating cash flow before changes in working capital, less capex). The company invested $50mm in capital expenditures, $39mm of which was related to Phase 2.

Balance sheet. Champion ended Q3/F21 (December 31) with working capital of $446mm, including cash of $507mm. Net cash continues to improve, placing the company in a very solid financial position to fund Phase 2.

Phase 2 remains on target for mid-2022. The company noted that Phase 2 engineering work is 65% complete as of December 31 along with the installation of the rougher spiral banks. The company continues to forecast a 21-month construction period with start-up in mid-2022.