From Champion to Challenger

FromChampion to Challenger: The Iron Awakening Investors Can’t Afford to Miss

Champion Iron’s $3.9B Green Steel Bet Has Put theLabrador Trough Back on the Map, and One Under-the-Radar Junior May HaveAlready Stolen the March.

Champion Iron (ASX: CIA) turned heads last week, announcing a $245m funding package to develop its Kami Project. A high-grade, direct-reduction (DR) iron ore asset in Canada’s Labrador Trough, in partnership with a Japanese consortium led by Nippon Steel (Japan’s largest steelmaker).

The deal sees Champion retain 51% ownership while offloading 49% to its Japanese partners. Powered by Quebec’s hydro grid, Kami is targeting 9Mtpa of premium DR pellet feed. This is the kind needed for the growing push toward low-carbon steel.

It’s a milestone moment. Not just for Champion, but for the region and for the future of DR-grade iron ore, where demand is expected to triple by 2040. Capital is now moving decisively toward ESG-compliant iron projects in Tier 1 jurisdictions, and Kami is the latest confirmation of that trend.

For those of us looking to take advantage of this trend and leverage a potential investment opportunity, Champion Iron’s already valued at a nearly $3billion market cap (roughly) and with Kami’s NPV pegged at just $2.2 billion, most of Champion’s blue-sky value appears to be already priced in.

Which begs the question: if Champion is the proof of concept, where’s the next high-upside opportunity?

The Dark Horse in the Labrador Trough: Cyclone Metals(ASX: CLE)

While Champion grabbed headlines, another ASX-listed company has been quietly pulling together the pieces for something even larger. At this somewhat advanced and de-risked (to a degree) stage, the numbers are looking likely to dwarf Champion Iron’s operation in size, grade, and scale. The most recent economic study updated in 2020 arrived at a CAD$7bn plus NPV, and with the DFS on the way, some back of the envelope pundits (me included) have attempted to project what these numbers may look like with the new info factored in. I came to an eye-watering conclusion that a $30bn NPV could well be achievable, however this was the most conservative out of all the figures I have heard thrown around – some speculating that a figure of up to $300bn is more likely.

Cyclone Metals owns the Iron Bear Project, a DR-grade iron ore asset located in the same mineral belt. Until recently, it flew mostly under the radar. That was until global mining heavyweight Vale stepped in.

In January, Vale signed a transformational agreement with Cyclone, securing a 75% stake in Iron Bear and committing to fund the project through to a Final Investment Decision (DTM). It’s an unusually strong vote of confidence from one of the world’s most experienced players in the iron ore and green steel space.

Kami vs. Iron Bear — A Side-by-Side Look

	Metric	Champion Iron (Kami)	Cyclone Metals (Iron Bear)
1	Ownership	51% Champion, 49% Nippon Steel-led consortium	75% Vale, 25% Cyclone
2	Stage	DFS complete, targeting FID in 2026	Pre-DFS, fully funded to DTM
3	Production	9Mtpa	20Mtpa ramping to 100Mtpa
4	CapEx	$3.86B	$6.0B (staged)
5	NPV (8%)	$2.2B	Current $7.2bn Ballpark figure I’m expecting in DFS - $30.0B (Cyclone share = $7.5B)
6	IRR	14.8%	21%
7	Payback	9–10 years	7–8 years
8	Power	Hydro (Quebec)	100% renewable (secured)
9	Green Steel Alignment	Strong	Best-in-class

On nearly every metric of scale, IRR, ESG alignment etc. Iron Bear looks like the bigger play. In fact, with staged development from 20Mtpa to a potential 100Mtpa, it could become the largest DR-grade iron ore project in the Western world.

The Valuation Disconnect

Despite these fundamentals, Cyclone’s market cap has hovered around $40-80m, compared to Champion’s $3 billion. That’s a staggering gap given Cyclone’s attributable NPV of $7.5 billion, based on current deal terms with Vale. The shares have been rallying after a stellar run followed by a healthy correction, which now looks to have played out.

	Company	Market Cap	Attributable NPV	NPV/MC Ratio
1	Champion (CIA)	~$3.5B	$1.12B	~0.32x
2	Cyclone (CLE)	~$78M	$7.5B	~96x

This places Cyclone’s NPV-to-market cap ratio just shy of 100x — a level of disconnect rarely seen in today’s market, particularly with a major like Vale now de-risking the early spend.

Momentum Is Building

Since the Vale deal was announced, Cyclone’s share price has lifted from 2c to over 7c — a move that’s coincided with rising volumes and clean breakouts through key technical levels.

The first massive rally could’ve been put down to speculation. However, since Vale ultimately came through with the goods and put pen to paper committing $120m to see Iron Bear through DFS, economic studies, right the way through to DTM, any concerns of this being a flash in the rumour pan have been put to bed. And the response since completing a healthy correction has been nothing short of enthusiastic. Together with the strong volume and this looks to be the start of a structural re-rating as institutional capital begins to recognise Iron Bear’s strategic value.

The Bottom Line

Champion Iron has done the industry a service: it’s validated the Labrador Trough, shown that DR-grade ore is now a bankable commodity, and demonstrated that serious capital is being deployed into green steel supply chains. Vale and Cyclone did it first, but it’s easy to miss those announcements when it’s a junior behind the wheel. Champion Iron might as well have titled their announcement: ‘Hey, if you think we’re doing something good – come and have a look at these guys!’ The growth that investors will be looking for as this new trend begins to attract waves of capital is no longer a Champion Iron story. It’s Cyclone Metals, where Vale is footing the bill, the upside is many multiples higher, the numbers are far superior, and the market cap is well under $100m. This is not an early-stage company either, they have done mammoth amounts of groundwork having already significantly de-risked the project in key areas. Essentially, a lot of the downside risks are being checked off one-by-one and a methodical and strategic approach from management, while the upside is still yet to be priced in despite looking more and more realistic. The risk/reward here is what we refer to as extremely asymmetrical!

Time, not conviction, is the biggest risk from here. Cyclone has moved, but it’s nowhere near priced for what’s coming if Vale follows through.