ANNUAL REPORT
31 March 2016
REVIEW OF OPERATIONS
Champion Iron Limited (the “Company”) is pleased to provide its review of operations for the financial year ending March
31, 2016.
Acquisition and Financing
At an Extraordinary General Meeting of the Company’s shareholders held on March 31, 2016, resolutions were passed to
approve the following transactions which were completed on April 11, 2016:
Acquisition of Bloom Lake and related rail assets
On April 11, 2016, the Company, through its wholly-owned subsidiary, Québec Iron Ore Inc. (“QIO”), acquired the Bloom
Lake mine and related rail assets (“Bloom Lake”) from affiliates of Cliffs Natural Resources Inc. that were subject to
restructuring proceedings under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”).
The Bloom Lake mine is located approximately 13 km north of Fermont, Quebec, in the Labrador Trough and consists of
Mining Lease BM877 and 114 mining claims. The Bloom Lake Mine is an open pit truck and shovel mine, a concentrator
that utilizes single-stage crushing and an autogenous mill and gravity separation to produce iron concentrate. From the
site, concentrate can be transported by rail, initially on the Bloom Lake Railway, to a ship loading port in Sept-Îles,
Québec. The Bloom Lake mine is currently in a care and maintenance mode.
The Bloom Lake rail assets consist of the provincially regulated short-line railway comprising a 32 km rail spur contained
wholly within Newfoundland and Labrador that connects the Bloom Lake mine to the railway owned by Northern Land
Company.
Set out below is the preliminary purchase price equation for the acquisition of Bloom Lake:
Consideration
Cash
Fair value recognized on acquisition
Assets
Property, plant and equipment
Liabilities
Asset retirement obligation
Total identifiable net assets at fair value
$
9,750,000
34,273,000
24,523,000
9,750,000
Acquisition of Quinto Claims
The Company, through its wholly-owned subsidiary, Champion Iron Mines Limited, acquired certain mineral claims
(“Quinto Claims”) from affiliates of Cliffs Natural Resources Inc. that were subject to restructuring proceedings under
the Companies’ Creditors Arrangement Act (Canada) (“CCAA”).
The Quinto Claims, which encompass the Peppler Property (264 claims) and the Lamelee Property (194 claims), are
located 50 km southwest of the Bloom Lake mine and 10 km from each other.
The Quinto Claims were acquired for cash consideration of $776,818.
Financings
Private placement by the Company
In order to fund the acquisition purchase price of Bloom Lake and to provide working capital, on April 11, 2016, the
Company completed a private placement of 187,500,000 ordinary shares at a price of $0.16 per share for gross proceeds
of $30,000,000 (“Private Placement”).
Subscribers to the financing included:
1
Subscriber
Ressources Québec
WC Strategic Opportunity, L.P. (a Wynnchurch Capital LLC portfolio company)(“Wynnchurch”)
Resource Capital Fund VI LP (“RCF”)
A company controlled by Michael O’Keeffe, the Company’s Chairman and CEO
Subscription
$
6,000,000
10,000,000
6,453,000
3,500,000
In connection with the Private Placement, the Company received commitments from two parties (“Initial Subscribers”) to
backstop up to $15,000,000 of the Private Placement. One of the Initial Subscribers was arm’s length while the other was
a company controlled by Michael O’Keeffe, the Company’s Chairman and CEO. The Initial Subscribers each agreed to
purchase 46,875,000 ordinary shares (the “Committed Shares”) under the Private Placement, subject to their right to
engage dealers to find substituted purchasers to purchase all or a portion of the Committed Shares. In connection with
their commitment to subscribe for the Committed Shares, the Company granted 15,000,000 compensation options to the
Initial Subscribers, entitling the holder to purchase one ordinary share for $0.25 until February 1, 2020. For one year after
the closing of the Private Placement, the Initial Subscribers are restricted from selling, pledging or granting any rights with
respect to the acquired ordinary shares, except in certain limited circumstances.
In connection with the Private Placement, subject to certain terms and conditions, Wynnchurch and RCF were both
granted the following rights for as long as they hold more than 10% of the issued and outstanding ordinary shares of the
Company:
1. The Subscriber is entitled to designate one nominee for election or appointment to the board of directors of the
Company and the Company agrees to include the Subscribers’ nominee in the slate of directors presented at any
meeting of shareholders at which directors are to be elected;
2. The Company undertakes that it will not grant any stock options unless such grant is unanimously approved by the
board of directors of the Company.
Private placement by QIO
On April 11, 2016, QIO completed a private placement of 14,000,000 ordinary shares to Ressources Québec at a price of
$1 per share for gross proceeds of $14,000,000, following which, the Company’s interest in QIO was reduced from 100%
to 63.2%.
In connection with the private placement by QIO, the Company granted 6,000,000 compensation options to Ressources
Québec entitling the holder to purchase one ordinary share of the Company at a price of $0.25 per share until February 1,
2020.
Consolidated Fire Lake North
The Company holds 100% of Consolidated Fire Lake North (“CFLN”), which is located adjacent (to the north) of
ArcelorMittal’s operating Fire Lake Mine and is 60 km to the south of the Company’s Bloom Lake Mine in northeastern
Quebec. CFLN is situated at the southern end of the Labrador Trough, which is known to contain coarser grained iron
deposits due to higher grade metamorphism nearer to the Grenville geological province. The Fermont-Wabush-Labrador
City Iron Ore District is a world-renowned iron ore mining camp and is considered to be an optimal location to develop iron
ore resource projects.
On February 7, 2013, Champion announced the results from its Prefeasibility Study (“PFS”) for the Fire Lake North West
and East deposits of the CFLN project that was performed by BBA Inc. of Montréal, Québec. A copy of the PFS is
available under Champion’s filings on SEDAR at www.sedar.com.
Subsequent to the release of the PFS, on June 28, 2013, Champion terminated the July 2012 agreement related to the
multi-user port facilities proposed at Pointe Noire, Sept-Îles, Québec. The Company remains committed to developing the
CFLN Project and securing transportation and port handling services that will permit the Company to place among the
lowest cost iron producers in the Labrador Trough.
The Company is planning on completing a full feasibility study (“Feasibility Study”) for the development of a long-life, low-
cost operation at CLFN yielding 9.3Mtpa of concentrate at 66% Fe. The Company continued work on reviewing and
preparing the Feasibility Study. The major improvements targeted are the increase in iron recovery with a better recovery
circuit and the decrease in stripping ratio resulting from the data from the 2014 geotechnical drill hole campaign. The
Company has also had discussions with major equipment suppliers to develop a long term partnership from the Feasibility
Study to the start-up/ramp-up phases of CFLN.
2
The Company expended $682,348 on exploration activity on CFLN during the year ended March 31, 2016. Following the
completion of the exploration phase of the CFLN, the exploration camp at the Fire Lake North site has been dismantled in
order to minimize costs.
In connection with working towards a rail solution, the Company is the general partner and a limited partner in La Société
ferroviaire du Nord québécois, société en commandite (“SFNQ”). The other limited partners in SFNQ are the Government
of Québec and Lac Otelnuk Mining Ltd., a joint arrangement between Adriana Resources Inc. and WISCO International
Resources Development & Investment Limited. SFNQ was formed as a partnership of government and industry to
complete a feasibility study for the construction of a new multi-user rail link giving mining projects in the Labrador Trough
access to the port at Sept-Ȋles at the lowest possible cost. The Government of Québec has set aside a maximum of
$20,000,000 from its Plan Nord Fund to contribute to SFNQ, while the Company’s contribution consisted of previously
incurred costs of $5,576,823.
On June 25, 2015 the Company completed an arrangement to reduce the NSR on the Fermont Holdings, including CFLN,
from 3% to 1.5% by paying $50,000 on closing and $250,000 on October 25, 2015.
Cluster 3 Properties
On September 28, 2012, the Company granted an option to Cartier Iron Corporation (“Cartier”) to acquire a 65% interest
in Aubertin-Tougard, Audrey-Ernie, Black Dan, Jeannine Lake, Penguin Lake, Silicate-Brutus and Three Big Lakes
(“Cluster 3 Properties”). In order to earn its interest, Cartier must make option payments, issue common shares and incur
exploration expenditures, as follows:
Upon execution of agreement (received)
Upon conditional approval from a stock exchange for
the listing of the common shares of Cartier (received)
December 10, 2013 (paid, issued and incurred)
December 10, 2014 (issued and incurred)
Extended from December 10, 2014 to the date that
Cartier received its refundable tax credit on eligible
expenditures incurred in Québec for the year ended
December 31, 2013 (paid)
December 10, 2015 (partially paid and issued)
December 10, 2016
Option
payments
$
–
100,000
150,000
–
250,000
Common shares
Number
Exploration
Fair value expenditures
$
$
1,000,000
–
500,000
500,000
–
250,000
–
80,000
80,000
–
–
–
500,000
750,000
–
250,000
250,000
1,000,000
500,000
–
2,500,000
12,500
–
422,500
–
4,750,000
6,000,000
Upon Cartier earning its 65% interest, a joint venture will be formed to incur additional exploration expenditures. If the
Company does not fund its proportionate interest in the joint venture, its interest will be diluted and, when its interest is
reduced below 10%, its interest would be reduced solely to a 1% royalty. Cartier will have the option to reduce the royalty
from 1% to 0.5% by making a payment of $3,000,000.
In the event that the Company or Cartier proposes to acquire any property within 10 kilometres of the Cluster 3
Properties, the acquirer must offer the property at cost to the other party for inclusion in the Cluster 3 Properties.
During the year ended March 31, 2016, in conjunction with Cartier, the Company decided to abandon Aubertin-Tougard,
Silicate-Brutus and Three Big Lake properties within Cluster 3 and the Cassé Lake, Claire Lake and Hope Lake properties
within Cluster 2 and recorded an impairment loss of $1,906,806 to write off those properties.
With respect to the option payment and common shares due on December 10, 2015, the Company received a partial
option payment of $50,000 and 500,000 common shares of Cartier with a fair value of $15,000. At March 31, 2016, the
Company and Cartier were in discussions with respect to the remaining option payment of $200,000 that remains unpaid.
See “Matters Subsequent to the End of the Financial Year” in the section “Directors’ Report” for amendments of the option
to acquire a 65% interest in Cluster 3 Properties.
3
Snelgrove Lake
At March 31, 2016, the Company had an option to acquire a 100% interest in 4 licenses covering 106 square kilometres
located approximately 55 kilometres southeast of Schefferville, Newfoundland. Snelgrove Lake is encumbered with a 3%
gross sales royalty. In order to earn its interest, the Company must issue Performance Shares, grant options, make
option payments and incur exploration expenditures, as follows:
Issue
Performance
shares
Grant
options
Option
payments
A$
Option
payments
$
Exploration
expenditures
$
October 2012 (issued and paid)
March 11, 2014 (incurred)
August 1, 2018
32,000,000
–
–
32,000,000
17,000,000
–
–
17,000,000
425,000
–
–
425,000
410,000
–
5,750,000
6,160,000
–
3,250,000
3,250,000
6,500,000
Up to March 31, 2016, the Company had incurred exploration expenditures of approximately $6,400,000.
During the year ended March 31, 2014, as the Company had not budgeted nor planned any substantive expenditure on
further exploration for and evaluation of mineral resources for Snelgrove Lake, the Company recorded an impairment loss
to write off Snelgrove Lake.
See “Matters Subsequent to the End of the Financial Year” in the section “Directors’ Report” for termination of the option
to acquire Snelgrove Lake.
Powderhorn and Gullbridge
The Company owns a 100% interest in:
(a) Powderhorn, which consists of 148 claims covering an area of 37 square kilometres situated in the Buchans-Robert's
Arm Belt in Central Newfoundland. Powderhorn is encumbered with a 2.85% net smelter royalty (“NSR”), of which,
1.85% can be purchased by the participants for $2,300,000 to reduce the NSR to 1%.
(b) Gullbridge, which consists of 179 claims covering 45 square kilometres situated in the Buchans-Robert's Arm Belt in
Central Newfoundland. Gullbridge is encumbered with a 1% net smelter royalty, which can be purchased for
$1,000,000 or the issue of 1,000,000 common shares of Champion Iron Mines Limited, the Company’s wholly-owned
subsidiary.
During the year ended March 31, 2015, as the Company had not budgeted nor planned any substantive expenditure on
further exploration for and evaluation of mineral resources for Powderhorn and Gullbridge, the Company recorded an
impairment loss to write off Powderhorn and Gullbridge.
Due from Cartier Iron Corporation
The principal amount of $1,284,716 due from Cartier is a demand loan, which is unsecured, bears interest at the rate of
LIBOR plus 2% and is due 6 months after the Company demands repayment (the “Demand Loan”). The Company has
the right to convert the Demand Loan, plus accrued but unpaid interest, into Cartier common shares at a conversion price
equal to the lowest subscription price per Cartier common share paid for the most recent capital raising undertaken by
Cartier at the time of the conversion, subject to the minimum pricing rules and stock exchange approval.
See “Matters Subsequent to the End of the Financial Year” in the section “Directors’ Report” for amendments to the
Demand Loan.
Investment in Cartier
At September 30, 2015, the Company compared the carrying value of investment in Cartier to the fair value less costs to
sell the common shares of Cartier as indicated by the trading price on the Canadian Securities Exchange. As the carrying
value exceeded the fair value, the Company recorded an impairment loss of $512,000.
For the year ended March 31, 2016, the Company’s share of Cartier’s net loss exceeded its remaining investment in
Cartier. Accordingly, the investment in Cartier was written down to nil.
4
At March 31, 2016, the Company held 11,519,970 common shares of Cartier, representing 34% of the issued and
outstanding common shares of Cartier and 6,176,470 warrants entitling the Company to purchase one common share of
Cartier for $0.22 until April 17, 2016. If the average closing price of common shares of Cartier is greater than $0.40 for 20
consecutive business days, the warrants must be exercised within 10 calendar days of Cartier providing written notice (or
such longer period as Cartier may provide), or they will be cancelled. The warrants expired on April 17, 2016 and there
was no financial impact on the Company.
The holdings of the Company in Cartier are subject to the terms of a pre-emptive rights agreement and an agreement
respecting board representation rights and standstill obligations entered into on December 10, 2012.
Until December 31, 2017, the Company shall not sell common shares of Cartier without the prior written consent of
Cartier, and thereafter, the Company shall not sell more than 2,000,000 common shares during any 30-day period.
Until December 31, 2017, provided that the Company owns at least 10% of the outstanding common shares of Cartier:
a) Cartier shall take all commercially reasonable steps to have a nominee of the Company elected as a director
(“Nominee”) the board of directors of the Company (“Board”).
b) The Company shall not vote against any shareholder resolution recommended by the Board, except in the event that
the Nominee dissented when the Board approved a shareholder resolution that proposes to: (i) reduce the voting or
dividend rights of the common shares; (ii) issue shares which carry a number of votes proportionately greater than the
capital to be represented thereby or which carry dividend rights at a rate which would substantially impair the
dividends ordinarily payable on the common shares; and (iii) approve a transaction with an arm’s length third party,
which must be passed by at least two-thirds of the votes cast and in respect of which a shareholder has dissent rights.
c) The Company shall not vote in favour of the election of nominees to the Board who are not proposed by the then
Board.
d) The Company shall not (i) participate in a take-over bid for any securities of Cartier; (ii) solicit proxies from any
shareholder or attempt to influence the voting by any shareholders other than in support of initiatives recommended
by the Board or (iii) seek to influence or control the management, Board or the policies or affairs of Cartier; or (iv)
make any public or private announcement or disclosure with respect to the foregoing.
5
Your directors present their report on Champion Iron Limited and its controlled entities (collectively, the “Company”) for
the financial year ended March 31, 2016.
DIRECTOR’S REPORT
DIRECTORS
The Directors of the Company at any time during or since the end of the year are:
Director
Position
Note
Michael O’Keeffe
Gary Lawler
Andrew Love
Paul Ankcorn
Executive Chairman and Chief Executive Officer
Non-executive Director
Non-executive Director
Non-executive Director
Michelle Cormier
Non-executive Director
Qualifications and experience of Directors’ are disclosed on page 13.
Independent director
Independent director
Independent director resigned on June 15,
2016
Independent director appointed on April 11,
2016
PRINCIPAL ACTIVITY
The Company’s principal activity is the exploration and development of iron ore properties in Québec, Canada.
REVIEW OF OPERATIONS AND RESULTS
For the year ended March 31, 2016, the Company recorded a consolidated loss and comprehensive loss of $7,298,651
(2015: $12,269,208). Details of the operations of the Company are set out in the review of operations on page 1.
FINANCIAL POSITION
At March 31, 2016, the Company had net assets totaling $84,315,526 (2015: $91,342,524) and cash and cash
equivalents and short-term investments $1,671,016 (2015: $2,646,685).
DIVIDENDS
No dividends were paid or recommended for the year ended March 31, 2016 (2015: Nil).
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
See “Acquisition of Bloom Lake Mine and Rail Assets” in the section “Review of Operations”.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
Other than those noted below, no matter or circumstance has arisen since March 31, 2016 that has significantly affected,
or may significantly affect:
The Company’s operations in the future financial years, or
The results of those operations in future financial years, or
The Company’s state of affairs in future financial years.
Acquisition of Bloom Lake and related rail assets
See “Acquisition of Bloom Lake Mine and Rail Assets” in the Review of Operations on page 1.
Due from Cartier Iron Corporation
On May 17, 2016, the Company converted the Demand Loan to a term loan, which is unsecured, bears interest at the
rate of LIBOR plus 2% and is due on September 30, 2017 (“Term Loan”). The Company has the right to convert the
Term Loan, plus accrued but unpaid interest, into Cartier common shares at a conversion price equal to the lowest
subscription price per Cartier common share paid for the most recent capital raising undertaken by Cartier at the time of
the conversion, subject to the minimum pricing rules and stock exchange approval.
Amendment of option for Cluster 3 Properties to Cartier
In order to reduce land maintenance expenditure commitments, the Company and Cartier agreed to an approximate 40%
reduction in the acreage of the original Cluster 3 Properties. On May 17, 2016, the Company and Cartier amended the
option for the Cluster 3 Properties. In order to earn a 55% interest (reduced from a 65% interest), Cartier must:
a) make option payments, issue common shares and incur exploration expenditures, as follows:
6
Option
payments
$
–
100,000
150,000
–
250,000
50,000
(Note 1)
450,000
(Note 2)
1,000,000
Upon execution of agreement (received)
Upon conditional approval from a stock exchange for
the listing of the common shares of Cartier (received)
December 10, 2013 (paid, issued and incurred)
December 10, 2014 (issued and incurred)
Extended from December 10, 2014 to the date that
Cartier received its refundable tax credit on eligible
expenditures incurred in Québec for the year ended
December 31, 2013 (paid)
December 10, 2015 (paid and issued)
December 10, 2016 (incurred)
December 10, 2016
Note 1: reduced to $50,000 from $250,000.
Note 2: increased from $250,000 to $450,000.
Note 3: reduced from $4,750,000 to $1,800,000.
Note 4: reduced from $6,000,000 to $3,050,000.
b) repay the Term Loan.
Common shares
Number
Exploration
Fair value expenditures
$
$
1,000,000
–
500,000
500,000
–
250,000
–
80,000
80,000
–
–
–
500,000
750,000
–
500,000
12,500
–
–
–
–
–
2,500,000
422,500
1,800,000
(note 3)
–
3,050,000
(note 4)
Grant of stock options
On April 12, 2016, the Company granted 7,500,000 to employees of the Company, entitling the holder to purchase one
ordinary share at the price of A$0.20 until April 12, 2020.
Expiry of warrants
At March 31, 2016, the Company held 6,176,470 warrants entitling the Company to purchase one common share of
Cartier for $0.22 until April 17, 2016. The warrants expired on April 17, 2016 and there was no financial impact on the
Company.
Snelgrove Lake
On May 17, 2017, the Company terminated the option to acquire Snelgrove Lake.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
Likely developments in the operations of the Company have been set out in the Review of Operations. Further
information on the likely developments and expected results of operations of the Company has not been included in this
report because the Directors believe it would be likely to result in unreasonable prejudice to the Company.
MEETINGS OF DIRECTORS
The number of meetings of directors of the Company (including meetings of committees of directors) held during the year
and the number of meetings attended by each director was as follows:
Directors
Audit Committee
Meetings
Attended
Meetings
Attended
Remuneration and
Nomination Committee
Meetings
Attended
Michael O’Keeffe
Gary Lawler
Andrew Love
Paul Ankcorn
10
10
10
10
10
10
9
10
–
7
7
7
–
7
5
7
2
2
2
–
2
2
2
–
AUDIT COMMITTEE
The Company has established an Audit Committee that comprises Andrew Love (Chair), Gary Lawler and Michelle
Cormier.
7
REMUNERATION AND NOMINATION COMMITTEE
The Company has established a Remuneration and Nomination Committee that comprises Gary Lawler (Chair), Michael
O’Keeffe and Andrew Love.
ENVIRONMENTAL ISSUES
The Company’s policy is to comply with all relevant legislation and the best practice conventions in respect of its
exploration and mining activities on the tenements it holds. There have been no significant known breaches of the
Company’s licence conditions or any environmental regulations to which it is subject.
OPTIONS
The unissued shares of the Company under option at March 31, 2016 are disclosed in note 14 of the consolidated
financial statements.
REMUNERATION REPORT – AUDITED
This report outlines the remuneration arrangements in place for the Directors and other Key Management Personnel
(“KMP”) of the Company.
Directors’ Remuneration Policy
(a) The policy of the Company is to pay remuneration of KMP in cash and in amounts in line with employment market
conditions relevant in the mining industry.
(b) The Company’s performance, and hence that of its KMP, is measured in terms of a combination of Company share
price growth, cash raised, exploration carried out and farm in expenditure attracted.
Remuneration Report
The directors of the Company present the Remuneration Report prepared in Accordance with Section 300A of the
Corporations Act for the Company for the year ended March 31, 2016.
The following persons had authority and responsibility for planning, directing and controlling the activities of the
Company, directly or indirectly, during the financial year:
Person
Michael O’Keeffe
Position
Executive Chairman and
Chief Executive Officer
Non-executive Director
Gary Lawler
Non-executive Director
Andrew Love
Paul Ankcorn
Non-executive Director
Alexander Horvath Chief Operating Officer
David Cataford
Miles Nagamatsu
Jorge Estepa
Pradip Devalia
Beat Frei
Vice President, Engineering
Chief Financial Officer
Vice President, Corporate Secretary ,Canada
Company Secretary, Australia
Head of Finance
Note
Appointed as Chief Executive Officer on October 3,
2014
Appointed on April 9, 2014
Appointed on April 9, 2014
Resigned on June 15, 2016
Appointed on October 16, 2014
Appointed on June 18, 2014
Remuneration of directors and key management personnel
Year ended
March 31, 2016
Short term
$
Termination
payments
$
Post
employment
$
Salary
Consulting
fees
Bonus
Non-
monetary
Equity
settled
share
based
$
Total
$
Performance
related
Consisting
of shares
and options
Michael O’Keeffe
Gary Lawler
Andrew Love
Paul Ankcorn
Alexander Horvath (a)
David Cataford
Miles Nagamatsu (b)
Jorge Estepa (c)
Pradip Devalia
Beat Frei (d)
156,876
75,000
75,000
48,000
–
240,000
–
–
80,004
–
674,880
–
–
–
–
240,000
–
90,000
72,000
–
240,000
642,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10,296
6,972
6,972
–
–
24,240
–
–
–
–
–
–
–
–
–
–
‒
(e) 14,904
(e) 7,128
(e) 7,128
(f) 2,376
–
(f) 2,691
‒
–
(e) 7,596
‒
41,823
106,316
–
–
–
16,668
‒
–
–
–
16,668
139,652
278,096
82,128
82,128
50,376
256,668
252,987
96,972
78,972
87,600
256,668
1,522,595
–
–
–
–
–
–
–
–
–
–
38.2%
–
–
–
6.5%
6.5%
–
–
–
–
8
Notes:
(a) Paid to A.S. Horvath Engineering Inc., a company controlled by Alexander Horvath.
(b) Paid to Marlborough Management Limited, a company controlled by Miles Nagamatsu.
(c) Paid to J. Estepa Consulting Inc., a company controlled by Jorge Estepa.
(d) Paid to Comforta GmbH, a company controlled by Beat Frei.
(e) Amount relates to superannuation.
(f) Amount relates to employer portion of contributions to the Canada Pension Plan.
Year ended
March 31, 2015
Short term
$
Termination
payments
$
Post
employment
$
Salary
Consulting
fees
Bonus
Non-
monetary
Equity
settled
share
based
$
Total
$
Performance
related
Consisting
of shares
and options
Michael O’Keeffe
Gary Lawler (a)
Andrew Love (a)
Paul Ankcorn
Alexander Horvath (b)
David Cataford (c)
Miles Nagamatsu (d)
Jorge Estepa (e)
Pradip Devalia (f)
Beat Frei (g)
Richard Wright (h)
Niall Lenahan (i)
Thomas Larsen (j)
Donald Sheldon (k)
James Wang (k)
142,657
75,000
75,000
48,000
–
110,000
–
–
57,500
–
–
15,000
–
–
–
523,157
–
–
–
–
240,000
–
157,500
153,000
–
240,000
–
–
125,000
–
–
915,500
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10,659
10,659
–
–
–
–
6,978
–
–
28,296
–
–
–
–
–
–
90,000
150,000
–
–
–
–
300,000
–
–
540,000
(l) 14,293
(l) 7,671
(l) 7,671
(m) 2,376
–
(m) 2,691
–
–
(l) 6,735
–
–
(l) 1,387
–
–
–
42,824
96,250
130,000
130,000
–
5,972
–
–
–
25,500
5,972
–
1,356
120,000
–
–
515,050
253,200
212,671
212,671
50,376
245,972
112,691
258,159
313,659
89,735
245,972
–
17,743
551,978
–
–
2,564,827
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
38.0%
61.0%
61.1%
–
2.4%
–
–
–
28.4%
2.4%
–
7.6%
21.7%
–
–
Notes:
(a) Appointed as director on April 9, 2014.
(b) Paid to A.S. Horvath Engineering Inc., a company controlled by Alexander Horvath.
(c) Appointed as Vice President, Engineering on October 16, 2014.
(d) Paid to Marlborough Management Limited, a company controlled by Miles Nagamatsu.
(e) Paid to J. Estepa Consulting Inc., a company controlled by Jorge Estepa.
(f) Appointed as Corporate Secretary on June 18, 2014.
(g) Paid to Comforta GmbH, a company controlled by Beat Frei.
(h) Left as director on April 9, 2014.
(i) Resigned as director on April 9, 2014; resigned as Company Secretary on June 18, 2014.
(j) Paid to Gambier Holdings Corp., a company controlled by Thomas Larsen. Term as director ended on August 29, 2014; resigned as Chief
Executive Officer on August 29, 2014.
(k) Term as director ended on August 29, 2014.
(l) Amount relates to superannuation.
(m) Amount relates to employer portion of contributions to the Canada Pension Plan.
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements.
Each of these agreements has the provision for performance-related cash bonuses, other benefits and participation in
Company’s long term incentive plans. Major provisions of the service agreements relating to remuneration as at March
31, 2016 are set out below.
Michael O’Keeffe – Director and Executive Chairman
Base salary and superannuation of A$109,250 per year up to June 30, 2014, and thereafter, A$171,780 to be
reviewed annually, with a 2 year term of agreement.
Payment of termination benefit equal to salary for 3 months annual package or salary for 1 year on a change of
control event.
Gary Lawler – Non-executive Director
Fees of A$75,000 per year until termination.
Andrew Love – Non-executive Director
Fees of A$75,000 per year until termination.
Paul Ankcorn- Non-Executive Director
Fees of $48,000 per year until termination.
9
Alexander Horvath – Chief Operating Officer
Fees of $180,000 up to March 31, 2014, and thereafter, $240,000 per year payable to A.S. Horvath Engineering
Inc. until December 31, 2016 pursuant to a professional services agreement.
Payment of termination benefit equal to fees for 1 year.
David Cataford – Vice President, Engineering
Salary of $240,000 per year pursuant to an employment agreement which continues for an indefinite period
subject to termination for cause or without cause.
Payment of termination benefit equal to salary for 6 months or salary for 1 year on a change of control event.
Miles Nagamatsu – Chief Financial Officer
Up to December 31, 2014, fees of $180,000 per year payable to Marlborough Management Limited, a company
controlled by Miles Nagamatsu, pursuant to a professional services agreement which, unless terminated, renews
automatically on November 30.
Effective January 1, 2015, a one-time fee of $90,000 was paid to reduce fees to $90,000 per year payable to
Marlborough Management Limited, pursuant to an amended professional services agreement, which unless
terminated, renews automatically on November 30.
Payment of termination benefit equal to fees for 6 months.
Jorge Estepa – Vice President and Corporate Secretary, Canada
Up to December 31, 2014, fees of $180,000 per year payable to J. Estepa Consulting Inc., a company controlled
by Jorge Estepa, pursuant to a professional services agreement, which unless terminated, renews automatically
on November 30.
Effective January 1, 2015, a one-time fee of $150,000 was paid to terminate the professional services agreement
and reduce fees to $72,000 per year payable to J. Estepa Consulting Inc., pursuant to an engagement letter,
which may be terminated by either party on 30 days advance notice.
Pradip Devalia – Corporate Secretary, Australia
Up to November 30, 2014, salary of A$50,000 per year pursuant to an employment agreement until termination
on 3 months written notice.
Effective December 1, 2014, salary of A$80,000 per year pursuant to an employment agreement until termination
on 3 months written notice.
Payment of termination benefit equal to salary for 6 months on a change of control event.
Beat Frei – Head of Finance
Fees of $240,000 per year payable to Comforta GmbH, a company controlled by Beat Frei, pursuant to a
professional services agreement, which, unless terminated, renews automatically on September 30.
Payment of termination benefit equal to fees for 12 months.
Movement in key management personnel equity holdings
Ordinary shares
Michael O’Keeffe
Gary Lawler
Andrew Love
Paul Ankcorn
Alexander Horvath
David Cataford
Miles Nagamatsu
Jorge Estepa
Pradip Devalia
Beat Frei
Holding at
March 31, 2015
Acquired
Sold
Other changes
Holding at
March 31, 2016
11,401,930
833,889
720,000
163,533
559,208
625,698
1,211,916
1,133,083
–
1,145,208
‒
–
–
–
–
–
–
–
–
805,156
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11,401,930
833,889
720,000
163,533
559,208
625,698
1,211,916
1,133,083
–
1,950,364
10
Stock options
Michael O’Keeffe
Gary Lawler
Andrew Love
Paul Ankcorn
Alexander Horvath
David Cataford
Miles Nagamatsu
Jorge Estepa
Pradip Devalia
Beat Frei
Holding at
March 31,
2015
1,000,000
500,000
500,000
110,000
701,667
–
165,000
183,333
150,000
866,667
Granted
Forfeited
Expired
Other
changes
Holding at
March 31,
2016
Exercisable
at March 31,
2016
1,000,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(36,667)
(91,667)
–
(91,667)
(110,000)
–
–
–
–
–
–
–
–
–
–
–
–
2,000,000
500,000
500,000
73,333
610,000
–
73,333
73,333
150,000
866,667
–
500,000
500,000
73,333
276,667
–
73,333
73,333
150,000
533,334
Each option entitles the holder to acquire 1 ordinary share and have been issued for no consideration.
Option compensation granted and vested during the year
Year ended
March 31, 2016
Exercise
price
Number
granted Grant date
Fair value
per option
at grant
date
$
Value of
options
granted
$
Vested in
period
%
Expiry & last
exercise date
Michael O’Keeffe A$0.30
1,000,000 August 20, 2015
‒
0.05
50,000
August 20, 2018
Upon receipt of shareholder approval on August 7, 2015, the Company granted 1,000,000 stock options to Michael
O’Keeffe, entitling him entitling to purchase one ordinary share for A$0.30 until August 20, 2018. These options will vest
in annual instalments over 3 years, subject to holder’s continued service with the Company, the satisfactory progression
towards the completion of a bankable feasibility study for Consolidated Fire Lake North by August 20, 2018 and the
satisfactory completion of a bankable feasibility study by August 20, 2018.
There were no options forfeited during the year ended March 31, 2016 (2015: 1,000,000).
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
There are indemnities in place for directors and officers insurance policies in regard to their positions.
INDEMNITY OF AUDITORS
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young Australia, as part of the
terms of its audit engagement agreement against claims from third parties arising from the audit (for an unspecified
amount). No payment has been made to indemnify Ernst & young during or since the end of the financial year.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any proceedings
to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of
those proceedings.
The Company was not a party to any such proceedings during the year.
NON-AUDIT SERVICES
Ernst & Young performed other services in addition to their statutory duties. The details and remuneration for these
services is disclosed in Note 22 of the consolidated financial statements.
AUDITOR’S INDEPENDENCE DECLARATION
The lead auditor’s independence declaration for the year ended March 31, 2016 has been received, as set out on page
15, and forms part of this report.
11
Signed in accordance with a resolution of the Directors
Michael O’Keeffe, Executive Chairman
Andrew Love, Non-Executive Director
Sydney, New South Wales
June 27, 2016
12
BOARD OF DIRECTORS IN OFFICE AT THE DATE OF THIS REPORT
Executive Chairman and Chief Executive Officer
Michael O’Keeffe B.App.Sc (Metallurgy)
Mr O’Keeffe was appointed executive Chairman of Champion Iron Limited on August 13,
2013. Mr O’Keeffe commenced work with MIM Holdings in 1975. He held a series of
senior operating positions, rising to Executive Management level in commercial activities.
In 1995 he became Managing Director of Glencore Australia (Pty) Limited and held the
position until July 2004. Mr O’Keeffe was the founder and Executive Chairman of
Riversdale Mining Limited. He has previously held directorships in Anaconda Nickel
Limited, Mt Lyell Mining Co Limited and BMA Gold Limited. Mr O’Keeffe is currently the
chairman of Riversdale Resources Limited.
Non-Executive Director
Gary Lawler BA, LLB, LLM (Hons), ASIA, Master of Laws (Applied Laws)(Wills and
Estates)
Mr. Lawler was appointed as a Non-Executive Director on April 9, 2014. He is a leading
Australian mergers and acquisitions lawyer who has been involved in some of Australia's
most notable merger and acquisition transactions. Mr Lawler has over 30 years’
experience as a practising corporate lawyer and has been a partner in a number of leading
Australian law firms. He is currently a consultant of the legal firm Ashurst Australia. Mr
Lawler was also previously a director of Riversdale Mining Limited and Dominion Mining
Limited. Mr Lawler is currently a director of Riversdale Resources Limited.
than 30 years of experience
Non-Executive Director
Andrew J. Love, FCA
Mr. Love was appointed as a Non-Executive Director on April 9, 2014. He is a Chartered
Accountant with more
in corporate recovery and
reconstruction in Australia. He was a senior partner of Australian accounting firm Ferrier
Hodgson from 1976 to 2013 and is now a consultant. In that time he advised major local
and overseas companies and financial institutions in a broad variety of restructuring and
formal insolvency assignments. During this time Mr. Love specialized in the Resources
Industry. Mr. Love has been an independent company director of a number of companies
over a 25-year period in the Resources, Financial Services and Property Industries. This
has involved corporate experience in Asia, Africa, Canada, United Kingdom and United
States. Mr. Love’s previous recent Board positions have included Chairman of ROC Oil
Ltd., Deputy Chairman of Riversdale Mining Ltd., Director of Charter Hall Office Trust and
Chairman of Museum of Contemporary Art. Mr. Love is currently a director of Gateway
Lifestyle Operations Ltd. and Scottish Pacific Group Ltd.
Non-Executive Director
Michelle Cormier, CPA, CA, ASC
Mrs. Cormier is a senior-level executive with experience in management including financial
management, corporate finance, turnaround and strategic advisory situations and human
resources. She has strong capital markets background with significant experience in public
companies listed in the United States and Canada. Mrs. Cormier spent 13 years in senior
management and as CFO of large North American forest products company and 8 years
in various senior management positions at Alcan Aluminum Limited (RioTinto). Mrs.
Cormier articled with Ernst & Young. She serves on the Board of Directors of Hydro-
Quebec, Dorel Industries Inc. and Uni-Select Inc.
13
1)
In the opinion of the Directors:
DIRECTORS' DECLARATION
(a) The accompanying financial statements and notes are in accordance with the Corporations Act 2001,
including:
giving a true and fair view of the Group's financial position as at March 31, 2016 and of its performance for the
year ended on that date; and
complying with Australian Accounting Standards and the Corporations Act 2001.
(b) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become
due and payable.
(c) the audited remuneration disclosure set out in the Remuneration Report of the Director's Report for the year
ended March 31, 2016 complies with section 300A of the Corporations Act 2001.
2) The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 for the
financial year ended March 31, 2016.
3) The Group has included in the notes to the financial statements a statement of compliance with International
Financial Reporting Standards.
Signed in accordance with a resolution of the Directors
Michael O’Keeffe, Executive Chairman
Andrew Love, Non-executive Director
Sydney, New South Wales
June 27, 2016
14
Champion Iron Limited
(ACN: 119 770 142)
Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
15
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Auditor’s Independence Declaration to the Directors of Champion Iron Limited
As lead auditor for the audit of Champion Iron Limited for the year ended 31 March 2016, I declare to the
best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation
to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Champion Iron Limited and the entities in it controlled during the financial
period.
Ernst & Young
Ryan Fisk
Partner
Sydney
28 June 2016
16
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Independent auditor's report to the members of Champion Iron
Limited
Report on the financial report
We have audited the accompanying financial report of Champion Iron Limited, which comprises the
consolidated statement of financial position as at 31 March 2016, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated statement of
cash flows for the year then ended, notes comprising a summary of significant accounting policies and other
explanatory information, and the directors' declaration of the consolidated entity comprising the company
and the entities it controlled at the year's end or from time to time during the financial year.
Directors' responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal controls as the directors determine are necessary to enable the preparation of the financial report
that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in
accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial
statements comply with International Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the auditor's judgment, including the assessment of the
risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal controls relevant to the entity's preparation and fair presentation
of the financial report in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity's internal controls. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy
of which is included in the directors’ report.
17
Page 2
Opinion
In our opinion:
a.
the financial report of Champion Iron Limited is in accordance with the Corporations Act 2001,
including:
i
ii
giving a true and fair view of the consolidated entity's financial position as at 31 March
2016 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
b.
the financial report also complies with International Financial Reporting Standards as disclosed in
Note 1.
Report on the remuneration report
We have audited the Remuneration Report included in pages 8 to 11 of the directors' report for the year
ended 31 March 2016. The directors of the company are responsible for the preparation and presentation of
the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Champion Iron Limited for the year ended 31 March 2016,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
Ryan Fisk
Partner
Sydney
28 June 2016
18
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
To the Shareholders of
Champion Iron Limited
We have audited the accompanying consolidated financial statements of Champion Iron Limited, which
comprise the consolidated statement of financial position as at March 31, 2016, and the consolidated
statement of operations, comprehensive income (loss), changes in equity and cash flows for the year
ended March 31, 2016, and a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal control
as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on the auditors’ judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditors consider internal control
relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of Champion Iron Limited as at March 31, 2016, and its financial performance and its cash flows
for the year then ended in accordance with International Financial Reporting Standards.
Chartered accountants
Sydney, Australia
June 28, 2016
19
Champion Iron Limited
Consolidated Statements of Financial Position
(expressed in Canadian dollars)
Assets
Current
Cash and cash equivalents
Short-term investments
Receivables
Due from SFNQ
Prepaid expenses
Deposits
Non-current
Receivables
Due from Cartier Iron Corporation
Investments
Investment in associate
Investment in SFNQ
Long-term advance
Property and equipment
Exploration and evaluation
Liabilities
Current
Accounts payable and accrued liabilities
Non-current
Royalty payable
Shareholders’ equity
Capital stock
Warrants
Contributed surplus
Foreign currency translation reserve
Accumulated deficit
On behalf of the Board:
Notes
4
5
10
6
5
7
8
9
10
11
12
13
14
14
As at March 31,
2015
$
2016
$
293,714
1,377,302
277,822
125,050
436,456
1,600,000
4,110,344
4,883,659
1,325,504
944,500
-
-
6,000,000
21,926
68,208,370
85,494,303
1,346,685
1,300,000
5,303,658
124,533
188,034
1,000,000
9,262,910
4,355,082
1,063,036
1,628,300
1,162,903
100
6,000,000
46,665
69,845,118
93,364,114
878,777
1,421,590
300,000
1,178,777
600,000
2,021,590
174,509,902
-
16,268,574
41,189
(106,504,139)
84,315,526
171,420,382
3,089,520
15,996,920
(429,098)
(98,735,201)
91,342,524
85,494,303
93,364,114
Director
Director
See accompanying notes to the consolidated financial statements
20
Champion Iron Limited
Consolidated Statements of Loss and Comprehensive Loss
(expressed in Canadian dollars)
Other income
Interest
Other
Expenses
Professional fees
Salaries
Consulting fees
Share-based compensation
General and administrative
Investor relations
Travel
Exploration
Foreign exchange loss (gain)
Unrealized loss (gain) on investments
Impairment of investment in associate
Impairment on exploration and evaluation
Transaction costs
Loss before share of net loss of an associate
Share of net loss of associate accounted
for using the equity method
Loss
Item that may be reclassified in future periods
to the statement of loss
Net movement in foreign currency
Total comprehensive loss
Loss per share - basic and diluted
Weighted average number of shares
outstanding - basic and diluted
Notes
10
Years ended March 31,
2015
$
2016
$
123,163
602,444
725,607
75,751
240,953
316,704
223,811
438,457
347,761
271,654
574,585
48,149
197,158
25,875
477,498
683,800
512,000
1,906,806
2,123,588
7,831,142
560,986
987,870
1,499,282
714,751
1,467,375
448,775
568,983
23,988
(443,523)
2,521,212
794,000
2,933,664
-
12,077,363
8
9
12
20
(7,105,535)
(11,760,659)
9
(663,403)
(7,768,938)
(79,450)
(11,840,109)
470,287
(7,298,651)
(429,098)
(12,269,208)
(0.039)
(0.060)
197,904,607
196,599,004
See accompanying notes to the consolidated financial statements
21
Champion Iron Limited
Consolidated Statements of Changes in Equity
(expressed in Canadian dollars)
Capital
stock
$
Warrants
$
Contributed
surplus
$
Foreign
currency
translation
reserve
$
Deficit
$
Total
$
Balance, March 31, 2015
171,420,382
3,089,520
15,996,920
(429,098)
(98,735,201)
91,342,524
Loss
Other comprehensive loss
Total comprehensive loss
-
-
-
-
-
-
-
-
-
-
470,287
470,287
(7,768,938)
-
(7,768,938)
(7,768,938)
470,287
(7,298,651)
Share-based compensation
Fair value of warrants expired
Balance, March 31, 2016
-
3,089,520
174,509,902
-
(3,089,520)
-
271,654
-
16,268,574
-
-
41,189
-
-
(106,504,139)
271,654
-
84,315,526
Balance, March 31, 2014
171,420,382
3,089,520
15,282,169
-
(86,895,091)
102,896,980
Loss
Other comprehensive loss
Total comprehensive loss
-
-
-
Share-based compensation
Balance, March 31, 2015
-
171,420,382
-
-
-
-
-
3,089,520
-
-
-
-
(429,098)
(429,098)
(11,840,109)
-
(11,840,109)
(11,840,109)
(429,098)
(12,269,207)
714,751
15,996,920
-
(429,098)
-
(98,735,200)
714,751
91,342,525
See accompanying notes to the consolidated financial statements
22
Champion Iron Limited
Consolidated Statements of Cash Flows
(expressed in Canadian dollars)
Cash provided by (used in)
Operating activities
Loss
Non-operating transaction costs
Items not affecting cash
Interest not received
Share-based compensation
Depreciation
Unrealized loss on investments
Impairment of investment in associate
Impairment of exploration and evaluation
Share of net loss of associate accounted
for using the equity method
Changes in non-cash operating working capital
Receivables
Due from SFNQ
Prepaid expenses
Deposit
Accounts payable and accrued liabilities
Investing activities
Receipt of refundable tax credit on exploration
Receipt of credit on duties refundable
Investment in term deposits
Deposit
Advances to Cartier Iron Corporation
Investment in joint venture
Purchase of property and equipment
Option payment from Cartier
Exploration and evaluation
Acquisition of royalty
Transaction costs
Net decrease in cash and cash equivalents
Cash and cash equivalents, beginning of period
Effects of exchange rate changes
Cash and cash equivalents, end of period
Non-cash transactions
Receipt of Cartier common shares
Years ended March 31,
2015
$
2016
$
Notes
8
9
12
9
5
5
3
12
13
(7,768,938)
2,123,588
(11,840,109)
-
(27,752)
271,654
24,740
683,800
512,000
1,906,806
663,403
-
714,751
40,754
2,521,212
794,000
2,933,664
79,450
(1,610,699)
(4,756,278)
(374,418)
(517)
(248,422)
(600,000)
(1,001,812)
(3,835,868)
(389,534)
(124,533)
(36,775)
-
(128,531)
(5,435,651)
1,135,539
3,736,138
(77,302)
-
(234,716)
-
-
50,000
(332,458)
(300,000)
(1,664,592)
2,312,609
1,649,157
1,325,433
(1,234,000)
(1,000,000)
(26,987)
(100)
(1,864)
150,000
(5,499,206)
-
(4,372,818)
(9,010,385)
(1,523,259)
1,346,685
470,287
293,713
(14,446,036)
16,221,821
(429,098)
1,346,685
See accompanying notes to the consolidated financial statements
23
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
1. Basis of preparation
The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of
the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian
Accounting Standards Board. The financial report has also been prepared on a historical cost basis, except for cash and
cash equivalent, short-term investments, investments, investment in associate and royalty payable which have been
measured at fair value.
The consolidated financial statements of Champion Iron Limited and its subsidiaries (collectively the “Company”) for the
year ended March 31, 2016 were approved and authorized for issue by the Board of Directors on June 28, 2016.
The nature of the operations and principal activities of the Company are described in the Directors’ Report.
Statement of compliance with IFRS
The financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board.
Presentation currency
These consolidated financial statements are presented in Canadian dollars.
2. Significant accounting policies and future accounting changes
The accounting policies set out below have been applied consistently to all years presented in these financial statements.
Basis of consolidation and functional currency
The consolidated financial statements include the accounts of the Company and its subsidiaries:
Subsidiary
Champion Iron Mines Limited
Champion Exchange Limited
Québec Iron Ore Inc.
Mambas Minerais Limitada
CIP Magnetite Pty Limited
CIP Magnetite Limited
Ownership
percentage
100.0%
100.0%
100.0%
97.5%
100.0%
100.0%
Country of
incorporation
Canada
Canada
Canada
Mozambique
Australia
Canada
Functional
currency
Canadian dollars
Canadian dollars
Canadian dollars
Australian dollars
Australian dollars
Canadian dollars
During the year ended March 31, 2014, Mambas Minerais Limitada was placed into liquidation.
Intercompany balances and any unrealized gains and losses or income and expenses arising from intercompany
transactions are eliminated on consolidation.
Financial instruments
Non-derivative financial assets
The Company initially recognizes loans and receivables and deposits on the date that they are originated. All other
financial assets (including assets designated at fair value through profit or loss) are recognized initially on the trade date,
which is the date that the Company becomes a party to the contractual provisions of the instrument.
The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it
transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all
the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is
created or retained by the Company is recognized as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and
only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the
asset and settle the liability simultaneously.
24
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
The Company classifies non-derivative financial assets into the following categories: financial assets at fair value through
profit or loss, held-to-maturity financial assets, loans and receivables and available-for-sale financial assets.
Financial assets at fair value through profit or loss
A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated as such
upon initial recognition. Financial assets are designated at fair value through profit or loss if the Company manages such
investments and makes purchase and sale decisions based on their fair value in accordance with the Company’s
documented risk management or investment strategy. Attributable transaction costs are recognized in profit or loss as
incurred. Financial assets at fair value through profit or loss are measured at fair value (i.e. quoted close price) and
changes therein are recognized in profit or loss.
The Company has classified cash and cash equivalents, short-term investments and investments as financial assets at
fair value through profit or loss.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market.
Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition, loans and receivables are measured at amortized cost using the effective interest method, less any
impairment losses.
The Company has classified receivables, due from SFNQ and due from Cartier Iron Corporation as loans and
receivables.
Non-derivative financial liabilities
The Company initially recognizes debt securities issued and subordinated liabilities on the date that they are originated.
All other liabilities (including liabilities designated at fair value through profit or loss) are recognized initially on the trade
date, which is the date that the Company becomes a party to the contractual provisions of the instrument.
The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire.
The Company classifies non-derivative financial liabilities into the other financial liabilities category. Such financial
liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition, these financial liabilities are measured at amortized cost using the effective interest method.
The Company has classified accounts payable and accrued liabilities as other financial liabilities.
Impairment of non-derivative financial assets
A financial asset is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A
financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the
asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated
reliably.
Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred measured at acquisition date fair value. Acquisition-related costs are expensed
as incurred and included in administrative expenses.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration over the net identifiable
assets acquired and liabilities assumed. After initial recognition, goodwill is measured at cost less any accumulated
impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Company's cash-generating units that are expected to benefit from the
combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Cash and cash equivalents
Cash and cash equivalents consists of cash in bank, cash held in trust and short-term deposits with a maturity of less than
three months.
25
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
Investment in associate
Associates are entities over which the Company has significant influence, but not control. Significant influence is
generally presumed to exist where the Company has between 20 percent and 50 percent of the voting rights of the
associate. The Company accounts for its investment in associate using the equity method, under which, the investment in
associate was initially recognized at fair value and the carrying amount is increased or decreased to recognize the
investor’s share of profit or loss of the associate. Dilution gains and losses arising from changes in the interest in
investment in associates where significant influence is retained are recognized in the statement of loss.
At each reporting date, the Company determines whether there is any objective evidence that the investment in associate
is impaired. If impairment is determined to exist, the amount of the impairment is recognized in the statement of loss. The
amount of impairment is calculated as the difference between the recoverable amount of the investment in associate and
its carrying value.
Property and equipment
Property and equipment is recorded at cost less accumulated amortization and provisions for impairment. Cost
consists of expenditures directly attributable to the acquisition of the asset.
Amortization is provided for on a
straight-line basis over the estimated useful lives of the assets at the rate of 20% to 40%. Residual values, useful
lives and methods of amortization are reviewed at each year end and adjusted prospectively.
Exploration and evaluation
Recognition and measurement
Exploration and evaluation, including the costs of acquiring licenses and directly attributable general and administrative
costs, initially are capitalized as exploration and evaluation. The costs are accumulated by property pending the
determination of technical feasibility and commercial viability. Pre-license costs are expensed when incurred. Pre-
exploration costs are expensed unless it is considered probable that they will generate future economic benefits.
Mining tax credits earned in respect to costs incurred in Quebec are recorded as a reduction to exploration and evaluation
assets when there is reasonable assurance that the Company has complied with, and will continue to comply with, all
conditions needed to obtain the credits.
The recoverability of amounts shown for exploration and evaluation is dependent upon the ability of the Company to
obtain financing to complete the exploration and development of its mineral resource properties, the existence of
economically recoverable reserves and future profitable production, or alternatively, upon the Company’s ability to recover
its costs through a disposition of its mineral resource properties. The amounts shown for exploration and evaluation do
not necessarily represent present or future value. Changes in future conditions could require a material change in the
amount recorded for exploration and evaluation.
The technical feasibility and commercial viability of extracting a mineral resource from a property is considered to be
determinable when proved and/or probable reserves are determined to exist and the necessary permits have been
received to commence production. A review of each property is carried out at least annually. Upon determination of
technical feasibility and commercial viability, exploration and evaluation is first tested for impairment and then reclassified
to property, plant and equipment and/or intangibles or expensed to the statement of loss and comprehensive loss to the
extent of any impairment.
Impairment
Exploration and evaluation is assessed for impairment if (i) sufficient data exists to determine technical feasibility and
commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount.
An impairment loss is recognized in the statement of loss and comprehensive loss if the carrying amount of a property
exceeds its estimated recoverable amount. The recoverable amount of property used in the assessment of impairment of
exploration and evaluation is the greater of its value in use (“VIU”) and its fair value less costs of disposal (“FVLCTS”).
VIU is determined by estimating the present value of the future net cash flows at a pre-tax discount rate that reflects
current market assessment of the time value of money and the risks specific to the property. FVLCTS refers to the price
that would be received to sell the property in an orderly transaction between market participants. For a property that does
not generate largely independent cash flows, the recoverable amount is determined for the cash-generating unit to which
the property belongs. Impairment losses previously recognized are assessed at each reporting date for any indications
26
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount only to the extent that the property's carrying amount does not
exceed the carrying amount that would have been determined if no impairment loss had been recognized.
Royalties payable
Upon completion of a pre-feasibility study, royalties are recorded at estimated fair value as an acquisition cost of
exploration and evaluation and an offsetting royalty payable. Future adjustments of royalties payable will be reflected as
an adjustment to exploration and evaluation and an offsetting royalty payable.
Share capital
Share capital is classified as equity. Incremental costs directly attributable to the issue of common shares are recognized
as a deduction from equity, net of any tax effects.
Share-based payments
The Company offers a stock option plan for its officers, directors, employees and consultants. The fair value of stock
options for each vesting period is determined using the Black-Scholes option pricing model and is recorded over the
vesting period as an increase to stock-based compensation and contributed surplus. A forfeiture rate is estimated on the
grant date and is adjusted to reflect the actual number of options that vest. Upon the exercise of stock options, the
proceeds received by the Company and the related contributed surplus are recorded as an increase to share capital. In
the event that vested stock options expire, previously recognized share-based compensation is not reversed. In the event
that stock options are forfeited, previously recognized share-based compensation associated with the unvested portion of
the stock options forfeited is reversed.
The fair value of share-based payment transactions to non-employees and other share-based payments including shares
issued to acquire exploration and evaluation are based on the fair value of the goods and services received. If the fair
value cannot be estimated reliably, the share-based payment transaction is measured at the fair value of the equity
instruments granted at the date the Company receives the goods or services.
Provisions
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that
can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized
as finance cost.
Income tax
Income tax expense comprises current and deferred taxes. Current tax and deferred tax is recognized in profit or loss
except to the extent that it relates to a business combination, or items recognized directly in equity or in other
comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination
and that affects neither accounting nor taxable profit or loss;
temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is
probable that they will not reverse in the foreseeable future; and
taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse,
based on the laws that have been enacted or substantively enacted by the reporting date.
27
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets,
and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but
they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized
simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent
that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are
reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will
be realized.
Loss per share
The Company presents basic and diluted loss per share data for its ordinary shares. Basic loss per share is calculated by
dividing the loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares
outstanding during the period, adjusted for any of its own shares held. Diluted loss per share is determined by adjusting
the loss attributable to shareholders and the weighted average number of ordinary shares outstanding, adjusted for any of
its own shares held, for the effects of all dilutive potential ordinary shares, which comprise outstanding warrants and stock
options. As at March 31, 2016 and March 31, 2015, outstanding stock options and warrants are anti-dilutive.
Changes in accounting standards
On April 1, 2015, the Company adopted all of the mandatorily applicable new Australian Accounting Standards and
International Financial Reporting Standards, amendments to standards and interpretations. The adoption of these
accounting standards had no impact on these financial statements.
New standards and interpretations not yet adopted
Australian Accounting Standards and International Financial Reporting Standards that have been issued but are not yet
effective have not been adopted by the Company for the year ended March 31, 2016. The Company has not determined
the extent of the impact of these standards and does not plan to early adopt these new standards.
3. Significant accounting judgments, estimates and assumptions
The preparation of financial statements in conformity with IFRS requires the Company's management to make judgments,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the year in which the estimates are revised and in any future years affected.
Estimates
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material
adjustment within the next financial year are as follows:
Estimates of mining tax credit receivables
The Company estimates amounts to be received for unassessed claims for Refundable Tax Credits and Credits on Duties
as a receivable and a reduction to exploration and evaluation assets when there is reasonable assurance that the
Company has complied with all conditions needed to obtain the credits. See note 5.
Estimates of mineral resources
The amounts used in impairment calculations are based on estimates of mineral resources. Resource estimates are
based on engineering data, estimated future prices, expected future rates of production and the timing of future capital
expenditures, all of which are subject to many uncertainties and interpretations. The Company expects that, over time, its
resource estimates will be revised upward or downward based on updated information such as the results of future
drilling, testing and production levels, and may be affected by changes in iron ore prices. See note 12.
28
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
Impairment of exploration and evaluation
Exploration and evaluation assets are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable through future exploitation or sale. Such circumstances include the
period for which the Company has the right to explore in a specific area, actual and planned expenditures, results of
exploration, whether an economically-viable operation can be established and significant negative industry or economic
trends. Management judgment is also applied in determining cash generating units, the lowest levels of exploration and
evaluation assets grouping, for which there are separately identifiable cash flows, generally on the basis of areas of
geological interest.
As at March 31, 2015, the Company determined that indicators of impairment existed on Powderhorn and Gullbridge
based on the fact that, in both cases, no exploration or evaluation expenditures were planned in the near future. As such,
the Company performed impairment assessments on both mining properties and in each case estimated the recoverable
amount of the exploration and evaluation assets at nil due to the fact that no commercially viable deposits have been
discovered. As such, for the year ended March 31, 2015, the Company recorded impairment losses in respect of
Powderhorn and Gullbridge amounting to $1,645,065 and $1,286,599 respectively. See note 12.
As at March 31, 2016, the Company determined that indicators of impairment existed on Aubertin-Tougard, Cassé Lake,
Claire Lake, Hope Lake, Silicate-Brutus and Three Big Lake properties based on the fact that no exploration or evaluation
expenditures were planned in the near future and the Company decided to abandon the properties. As such, the
Company recorded an impairment loss of $1,906,806 to write off those properties. See note 12.
Estimate of royalty payable
The Company used inputs that are not based on observable market data in determining the fair value of the royalty
payable. The Company expects that, over time, royalty payable will be revised upward or downward based on updated
information on production levels and changes in iron ore prices. See note 13.
Share-based payments
The Company uses the Black-Scholes option pricing model in determining share-based payments, which requires a
number of assumptions to be made, including the risk-free interest rate, expected life, forfeiture rate and expected share
price volatility. Consequently, actual share-based compensation may vary from the amounts estimated. See note 14.
4. Short-term investments
Maturity
May 31, 2016
October 13, 2016
March 30, 2017
March 30, 2017
Interest rate
Prime-1.8%
1.1%
1.0%
1.0%
$
200,000
100,000
500,000
577,302
1,377,302
A short-term investment of $500,000 has been pledged as security for a letter of credit of $500,000.
5. Receivables
The Company files a Québec Corporation Income Tax Return claiming a refundable tax credit on eligible exploration
expenditures incurred in Québec (“Refundable Tax Credits”) and a Québec Mining Duties Return claiming a credit on
duties refundable for losses (“Credit on Duties”).
29
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
Refundable Tax Credits
As filed (2016-to be filed)
238,821
1,697,062
1,410,115
7,555,705
Claims for years ended March 31,
2016
2015
2014
2013
Receivable as at March 31,
2015
2016
Receivable
Current
Non-current
Credit on Duties
As filed
Receivable
Current
Harmonized and Quebec
sales taxes and other
Receivable
Current
Total
Current
Non-current
‒
191,000
191,000
–
1,357,650
1,357,650
101,568
226,609
328,177
–
3,108,400
3,108,400
101,568
4,883,659
4,985,227
3,837,705
4,355,082
8,192,787
‒
‒
329,731
209,515
1,122,562
–
–
–
–
1,135,539
176,255
330,414
5,161,481
9,658,740
277,822
4,883,659
5,161,481
5,303,658
4,355,082
9,658,740
It is the Company’s policy to record an estimate of amounts to be received for unassessed claims for Refundable Tax
Credits and Credits on Duties as a receivable and a reduction to exploration and evaluation assets when there is
reasonable assurance that the Company has complied with all conditions needed to obtain the credits. Due to the
assessment process and the length of time involved, the Company estimates the amount of the receivables that it does
not expect to receive in the next 12 months and classifies the amount as a non-current receivable.
During the year, the Company received $1,135,539 in respect of its claim for Credit on Duties related to the year ended
March 31, 2013, an interim payment of $2,936,222 in respect of its claim for Refundable Tax Credit related to the year
ended March 31, 2013 and an interim payment of $799,916 in respect of its claim for Refundable Tax Credit related to
the year ended March 31, 2014.
The amount of the unassessed and uncollected claims are subject to audit by Revenu Québec and Ressources naturelles
et Faune Québec.
6. Deposits
Acquisition of an interest in rail and port infrastructure at Sept-Ȋsles
The Government of Québec, through Investissement Quebéc, will invest $68,000,000 in a limited partnership with other
industry partners (“Limited Partnership”) to acquire, hold and operate land, equipment and rights related to railway
operations, warehousing, pelletizing and transshipment owned by Wabush Mines Joint Venture and Cliffs Quebec Iron
Mining located in the Pointe-Noire sector in Sept-Îles.
The Company has expressed its interest in participating in the Limited Partnership and made a deposit of $1,000,000,
representing its contribution to the capital of the Limited Partnership.
Acquisition of Bloom Lake and related rail assets
The Company also made a deposit of $600,000 in respect of acquisitions completed subsequent to March 31, 2016.
See note 20 for additional information regarding the completion of the acquisition subsequent to year-end.
30
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
7. Due from Cartier Iron Corporation
As at March 31, 2014, the amount due from Cartier Iron Corporation (“Cartier”) was $2,100,000, of which, $100,000 was
unsecured, earned interest at the rate of LIBOR plus 2% and was due on September 13, 2014.
On October 17, 2014, Cartier completed a private placement of $500,000, and as agreed, the Company converted
$1,050,000 of the amount due from Cartier into 6,176,470 units of Cartier, with each unit consisting of one common share
and one warrant entitling the Company to purchase one common share of Cartier for $0.22 until April 17, 2016. If the
average closing price of Cartier’s common shares is greater than $0.40 for 20 consecutive business days, the warrants
must be exercised within 10 calendar days of Cartier providing written notice (or such longer period as Cartier may
provide), or they will be cancelled. The warrants expired on April 17, 2016 and there was no financial impact on the
Company.
The remaining $1,050,000 due from Cartier was converted to a demand loan, which is unsecured, bears interest at the
rate of LIBOR plus 2% and is due 6 months after the Company demands repayment (the “Demand Loan”). On December
31, 2015, the principal amount of the Demand Loan was increase from $1,050,000 to $1,284,716. The Company has the
right to convert the Demand Loan, plus accrued but unpaid interest, into Cartier common shares at a conversion price
equal to the lowest subscription price per Cartier common share paid for the most recent capital raising undertaken by
Cartier at the time of the conversion, subject to the minimum pricing rules and stock exchange approval.
Interest revenue includes interest of $27,481 (2015 - $13,036) related to the Demand Loan.
One director of the Company is a director of Cartier.
See note 20 for subsequent event.
Investments
8.
The fair values of the Company’s investments are as follows:
Fancamp Exploration Ltd. (“Fancamp”)
Common shares
Century Global Commodities Corporation (formerly Century Iron Mines Corporation) (“Century”)
Common shares
Warrants
Lamêlée Iron Ore Ltd. (“Lamêlée”)
Common shares
Warrants
As at March 31,
2015
$
2016
$
506,000
880,000
418,500
–
20,000
–
944,500
567,300
18,000
160,000
3,000
1,628,300
Investments in common shares are classified as financial assets at fair value through profit or loss and investment in
warrants are classified as derivative financial assets at fair value through profit or loss.
For the year ended March 31, 2016, the decrease in the fair value of investments of $683,800, comprised of $662,800 for
investment in common shares and $21,000 for investments in warrants, has been recorded as an unrealized loss on
investments in the consolidated statement of loss and comprehensive loss.
Fancamp
The Company holds 22,000,000 common shares of Fancamp. The Company and Fancamp have entered into a
reciprocal rights agreement governing certain investor rights and obligations as between them. The Company and
Fancamp will each be restricted from transferring securities of the other until May 17, 2018, after which time, transfers will
be permitted subject to certain restrictions.
31
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
As at March 31, 2015, the Company held 10,000,000 warrants entitling the Company to purchase one common share of
Fancamp for $0.60 between November 17, 2014 and May 17, 2015 (“Fancamp Warrants”). The Fancamp Warrants
expired on May 17, 2015 and there was no financial impact on the Company.
Century
The Company holds 1,860,000 common shares of Century. The Century common shares were subject to a hold period
which ended on November 29, 2015, after which, in the event that the Company seeks to sell Century common shares,
Century will have a right of first refusal to arrange sales.
The Company holds 930,000 warrants entitling it to purchase one common share of Century for:
Exercise price
$1.50
$2.00
$2.50
Exercise period
November 30, 2015 to November 29, 2016
November 30, 2016 to November 29, 2017
November 30, 2017 to November 29, 2018
Lamêlée
The Company holds 4,000,000 common shares of Lamêlée.
As at March 31, 2015, the Company held 1,000,000 warrants entitling it to purchase one common share of Lamêlée for
$0.15 until December 20, 2015 (“Lamêlée Warrants”). The Lamêlée Warrants expired on December 20, 2015 and there
was no financial impact on the Company.
Investment in associate
9.
As at June 30, 2014, the Company held a 19.9% interest in the outstanding common shares of Cartier. A director of the
Company was appointed to the board of directors of Cartier on June 30, 2014 and the Company determined that it
obtained significant influence over Cartier as of July 1, 2014. Accordingly, from that date onward, the investment in
Cartier has been accounted for as an associate using the equity method of accounting.
Fair value as at July 1, 2014
Fair value of Cartier common shares received
Conversion of receivable due from Cartier (note 9)
Option payments (note 12)
Share of net loss
Impairment
Balance at March 31, 2015
Option payment of 500,000 common shares of Cartier (note 12)
Share of net loss
Impairment
Balance at March 31, 2016
$
826,353
1,050,000
160,000
(79,450)
(794,000)
1,162,903
12,500
(663,403)
(512,000)
–
At March 31, 2015, the Company compared the carrying value of investment in Cartier to the fair value less costs to sell of
the common shares of Cartier as indicated by the trading price on the Canadian Securities Exchange. As the carrying
value exceeded the fair value, the Company recorded an impairment loss of $794,000.
At September 30, 2015, the Company compared the carrying value of investment in Cartier to the fair value less costs to
sell the common shares of Cartier as indicated by the trading price on the Canadian Securities Exchange. As the carrying
value exceeded the fair value, the Company recorded an impairment loss of $512,000.
For the year ended March 31, 2016, the Company’s share of Cartier’s net loss exceeded its remaining investment in
Cartier. Accordingly, the investment in associate was written down to nil.
32
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
At March 31, 2016, the Company held 11,519,970 common shares of Cartier (March 31, 2015 - 11,519,970 common
shares), representing 34% of the issued and outstanding common shares of Cartier (March 31, 2015 - 33%) and
6,176,470 warrants entitling the Company to purchase one common share of Cartier for $0.22 until April 17, 2016. If the
average closing price of common shares of Cartier is greater than $0.40 for 20 consecutive business days, the warrants
must be exercised within 10 calendar days of Cartier providing written notice (or such longer period as Cartier may
provide), or they will be cancelled. The warrants expired on April 17, 2016 and there was no financial impact on the
Company.
The holdings of the Company in Cartier are subject to the terms of a pre-emptive rights agreement and an agreement
respecting board representation rights and standstill obligations entered into on December 10, 2012.
Until December 31, 2017, the Company shall not sell common shares of Cartier without the prior written consent of
Cartier, and thereafter, the Company shall not sell more than 2,000,000 common shares during any 30-day period.
Until December 31, 2017, provided that the Company owns at least 10% of the outstanding common shares of Cartier:
a) Cartier shall take all commercially reasonable steps to have a nominee of the Company elected as a director
(“Nominee”) the board of directors of the Company (“Board”).
b) The Company shall not vote against any shareholder resolution recommended by the Board, except in the event that
the Nominee dissented when the Board approved a shareholder resolution that proposes to: (i) reduce the voting or
dividend rights of the common shares; (ii) issue shares which carry a number of votes proportionately greater than the
capital to be represented thereby or which carry dividend rights at a rate which would substantially impair the
dividends ordinarily payable on the common shares; and (iii) approve a transaction with an arm’s length third party,
which must be passed by at least two-thirds of the votes cast and in respect of which a shareholder has dissent rights.
c) The Company shall not vote in favour of the election of nominees to the Board who are not proposed by the then
Board.
d) The Company shall not (i) participate in a take-over bid for any securities of Cartier; (ii) solicit proxies from any
shareholder or attempt to influence the voting by any shareholders other than in support of initiatives recommended
by the Board or (iii) seek to influence or control the management, Board or the policies or affairs of Cartier; or (iv)
make any public or private announcement or disclosure with respect to the foregoing.
10. Investment in SFNQ
The Company is the general partner and a limited partner in La Société ferroviaire du Nord québécois, société en
commandite (“SFNQ”). The other limited partners in SFNQ are the Government of Québec and Lac Otelnuk Mining Ltd.,
a joint arrangement between Adriana Resources Inc. and WISCO International Resources Development & Investment
Limited. SFNQ was formed as a partnership of government and industry to complete a feasibility study for the
construction of a new multi-user rail link giving mining projects in the Labrador Trough access to the port at Sept-Ȋles at
the lowest possible cost. The Government of Québec has set aside a maximum of $20,000,000 from its Plan Nord Fund
to contribute to SFNQ, while the Company’s contribution consisted of previously incurred costs of $5,576,823.
The Company has accounted for previously incurred costs of $5,576,823, investment in SFNQ of $100 and future
advances to SFNQ as expenditures on exploration and evaluation.
Other income includes $484,000 (2015 - $264,953) for management services provided by the Company in its capacity of
general partner of SFNQ. As at March 31, 2016, $125,050 (2015 - $124,533) was due from SFNQ.
11. Long-term advance to Sept-Îles Port Authority (“Port”)
On July 13, 2012, the Company signed an agreement (“Agreement”) with the Sept-Îles Port Authority (“Port”) to reserve
annual loading capacity of 10 million metric tons of iron ore for an initial term of 20 years with options to renew for 4
additional 5-year terms. Pursuant to the Agreement, the Company was to pay $25,581,000 and take-or-pay payments as
an advance on the Company’s future shipping, wharfage and equipment fees. The Company provided the Port with
irrevocable guarantees in the form of a deed of hypothec regarding its mining rights, title and interest over Moire Lake and
Don Lake (“Mining Rights”) to secure its obligations under the Agreement.
33
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
On June 28, 2013, the Company sent to the Port a notice of termination of the Agreement and requested the repayment of
the $6,000,000 that had already been advanced (“Advances”). The Port registered a notice of hypothecary recourse
dated August 22, 2013 (“Notice”) that requested the Company to surrender the Mining Rights and advised of its intention
to have the Mining Rights sold under judicial authority. The Notice alleges that the Company is in default of a payment of
$19,581,000, accrued interest of $4,522,182 up to August 22, 2013, and thereafter, per diem interest of $10,729. Since
then and up to March 31, 2016, the Port has taken no further legal action.
On May 9, 2016, the Port delivered a notice that they consider the port facilities have been delivered and are operational
and in accordance with the Agreement and that the Company must pay take-or-pay payments as an advance on the
Company’s future shipping, wharfage and equipment fees.
Based on the advice of its legal counsel, the Company believes that it was entitled to terminate the Agreement, the
Company would be entitled to the repayment of the Advances and the Port would not be entitled to any payment under
the Agreement or recover the loss of profits. Accordingly, no amount has been recorded as a liability in these
consolidated financial statements.
12. Exploration and evaluation assets
Fermont
Consolidated Fire Lake North
Harvey-Tuttle
Moire Lake
O’Keefe Purdy
Other
Fermont
Consolidated Fire Lake North
Harvey-Tuttle
Moire Lake
O’Keefe Purdy
Other
Powderhorn
Gullbridge
March 31,
2015
$
Acquisition
costs(other)
$
Exploration
$
Mining tax
credits
$
Impairment
$
March 31,
2016
$
53,904,908
6,574,186
2,930,272
3,204,922
3,230,831
69,845,118
141,310
8,192
–
12,544
(49,465)
112,582
682,348
1,923
–
350
1,500
686,120
(528,644)
–
–
–
–
(528,664)
–
–
–
–
(1,906,806)
(1,906,806)
54,199,922
6,584,301
2,930,272
3,217,816
1,276,060
68,208,370
March 31,
2014
$
Acquisition
costs (other)
$
Exploration
$
Mining tax
credits
$
Impairment
$
March 31,
2015
$
68,438,585
6,573,514
3,045,597
3,319,458
3,755,817
85,132,971
1,630,771
1,286,098
88,049,840
(18,400,000)
–
–
–
(560,000)
(18,960,000)
–
–
(18,960,000)
6,677,607
12,297
1,710
4,349
56,522
6,752,485
14,294
500
6,767,279
(2,811,284)
(11,625)
(117,035)
(118,885)
(21,508)
(3,080,337)
–
–
(3,080,337)
–
–
–
–
–
–
(1,645,065)
(1,286,599)
(2,931,664)
53,904,908
6,574,186
2,930,272
3,204,922
3,230,831
69,845,118
–
–
69,845,118
Exploration and evaluation is reported net of option payments and mining tax credits received.
Fermont
The Company owns a 100% interest in Fermont consisting of 11 mineral concessions covering an area of 787 square
kilometres situated in northeastern Quebec (“Fermont”), subject to a net smelter return royalty of 1.5% (1.5% NSR”)
(March 31, 2015 - 3% (“3% NSR”)). For reporting purposes, Fire Lake North, Oil Can, Bellechasse and Midway
properties were consolidated into one property known as Consolidated Fire Lake North.
Other properties include Aubertin-Tougard, Audrey-Ernie, Big Three Lake, Black Dan, Casse Lake, Claire Lake, Hope
Lake, Jeannine Lake, Penguin, Silicate-Brutus Lakes properties.
34
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
Grant of option for Cluster 3 Properties to Cartier Iron Corporation
On September 28, 2012, the Company granted an option to Cartier Iron Corporation (“Cartier”) to acquire a 65% interest
in Aubertin-Tougard, Audrey-Ernie, Black Dan, Jeannine Lake, Penguin Lake, Silicate-Brutus and Three Big Lakes
(“Cluster 3 Properties”). In order to earn its interest, Cartier must make option payments, issue common shares and incur
exploration expenditures, as follows:
Upon execution of agreement (received)
Upon conditional approval from a stock exchange for
the listing of the common shares of Cartier (received)
December 10, 2013 (paid, issued and incurred)
December 10, 2014 (issued and incurred)
Extended from December 10, 2014 to the date that
Cartier received its refundable tax credit on eligible
expenditures incurred in Québec for the year ended
December 31, 2013 (paid)
December 10, 2015 (partially paid and issued)
December 10, 2016
Option
payments
$
–
100,000
150,000
–
250,000
Common shares
Number
Exploration
Fair value expenditures
$
$
1,000,000
–
500,000
500,000
–
250,000
–
80,000
80,000
–
–
–
500,000
750,000
–
250,000
250,000
1,000,000
500,000
–
2,500,000
12,500
–
422,500
–
4,750,000
6,000,000
Upon Cartier earning its 65% interest, a joint venture will be formed to incur additional exploration expenditures. If the
Company does not fund its proportionate interest in the joint venture, its interest will be diluted and, when its interest is
reduced below 10%, its interest would be reduced solely to a 1% royalty. Cartier will have the option to reduce the royalty
from 1% to 0.5% by making a payment of $3,000,000.
In the event that the Company or Cartier proposes to acquire any property within 10 kilometres of the Cluster 3
Properties, the acquirer must offer the property at cost to the other party for inclusion in the Cluster 3 Properties.
During the year ended March 31, 2016, in conjunction with Cartier, the Company decided to abandon Aubertin-Tougard,
Silicate-Brutus and Three Big Lake properties within Cluster 3 and the Cassé Lake, Claire Lake and Hope Lake properties
within Cluster 2 and recorded an impairment loss of $1,906,806 to write off those properties.
With respect to the option payment and common shares due on December 10, 2015, the Company received a partial
option payment of $50,000 and 500,000 common shares of Cartier with a fair value of $15,000. The Company and
Cartier are currently in discussions with respect to the remaining option payment of $200,000 that remains unpaid.
See note 20 for subsequent event.
Powderhorn and Gullbridge
The Company owns a 100% interest in:
(a) Powderhorn Lake Project (“Powderhorn”), which consists of 148 claims covering an area of 37 square kilometres
situated in the Buchans-Robert's Arm Belt in Central Newfoundland. Powderhorn is encumbered with a 2.85% net
smelter royalty (“NSR”), of which, 1.85% can be purchased for $2,300,000 to reduce the NSR to 1%.
(b) Gullbridge Property, which consists of 179 claims covering 45 square kilometres situated in the Buchans Robert's Arm
Belt in Central Newfoundland. Gullbridge is encumbered with a 1% net smelter royalty, which can be purchased for
$1,000,000 or the issue of 1,000,000 common shares of Champion Iron Mines Limited, the Company’s wholly-owned
subsidiary.
The Company has not budgeted nor planned any substantive expenditure on further exploration for and evaluation of
mineral resources for Powderhorn and Gullbridge. Accordingly, for the year ended March 31, 2015, the Company
recorded impairment losses of $1,645,065 and $1,286,599 to write off Powderhorn and Gullbridge, respectively.
35
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
Snelgrove Lake
The Company has an option to acquire a 100% interest in 5 licenses covering 106 square kilometres located
approximately 55 kilometres southeast of Schefferville, Newfoundland. Snelgrove Lake is encumbered with a 3% gross
sales royalty. In order to earn its interest, the Company must issue Performance Shares, grant options, make option
payments and incur exploration expenditures, as follows:
Issue
Performance
shares
Grant
options
Option
payments
A$
Option
payments
$
Exploration
expenditures
$
October 2012 (issued and paid)
March 11, 2014 (incurred)
August 1, 2018
32,000,000
–
–
32,000,000
17,000,000
–
–
17,000,000
425,000
–
–
425,000
410,000
–
5,750,000
6,160,000
–
3,250,000
3,250,000
6,500,000
Up to March 31, 2016, the Company has incurred exploration expenditures of approximately $6,400,000.
The decision to exercise the option will depend on the economic viability of Snelgrove Lake and the capacity to finance its
development. Given the advanced stage of Consolidated Fire Lake North and the significant funds that will be required for
its development, there is no certainty that the option for Snelgrove Lake Project will be exercised. Accordingly, prior to the
completion of the Arrangement, the Company recorded an impairment loss of $10,038,754 to write off the balance of
Snelgrove Lake.
On May 17, 2016, the Company terminated the option to acquire Snelgrove Lake.
13. Royalty payable
Fermont is encumbered by a 1.5% net smelter royalty with no option to reduce the royalty.
On March 31, 2014, the Company recorded an estimate of the fair value of the 3% NSR as an acquisition cost of
exploration and evaluation and an offsetting royalty payable. On June 25, 2015, the Company completed an arrangement
to reduce the 3% NSR to 1.5% NSR by paying $50,000 on closing and $250,000 on October 25, 2015 (“Arrangement”),
and therefore, the fair value of the 3% NSR was estimated to be $600,000 as at March 31, 2015. The Arrangement
remains the best indicator of the fair value of the 1.5% NSR, and therefore, the fair value of the remaining 1.5% NSR has
been estimated to be $300,000 as at March 31, 2016.
On September 24, 2015, the Company made a payment of $100,000 to eliminate the requirement to pay a 1.5% NSR on
other concessions acquired by the Company within 10 kilometres of Fermont.
14. Capital stock
The Company is authorized to issue ordinary shares, performance shares, exchangeable shares and special voting
shares.
Each Exchangeable Share will be exchangeable into an ordinary share at no cost to the holder from January 1, 2015 or
earlier on the occurrence of certain specified events. Upon conversion, application for the quotation of these ordinary
shares will be made. All exchangeable shares in existence on March 31, 2017 will be automatically converted into
ordinary shares on that date.
The Company has issued 1 special voting share (“SVS”) to a trustee which will hold the SVS on behalf of all holders of
exchangeable shares in order that holders of exchangeable shares will be able to vote at the Company’s shareholder
meetings. The SVS will carry as many votes at shareholder meetings of the Company as there are exchangeable shares
on issue at the voting eligibility cut-off time of the meeting. The SVS is not transferable, will not be listed and will cease to
have any voting rights at meetings of the Company’s shareholders once all exchangeable shares have been converted to
ordinary shares.
36
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
Issued
Ordinary shares
Balance, March 31, 2014
Cancelled
Conversion of exchangeable shares
Balance, March 31, 2015
Conversion of exchangeable shares
Fair value of warrants expired
Balance, March 31, 2016
Exchangeable shares of the Company
Balance, March 31, 2014
Conversion to ordinary shares
Balance, March 31, 2015
Conversion to ordinary shares
Balance, March 31, 2016
Warrants
A summary of the Company's warrants is presented below:
Balance, March 31, 2014 and 2015
Expired
Balance, March 31, 2016
Stock options
Balance, March 31, 2014
Granted
Expired
Cancelled
Balance, March 31, 2015
Granted
Expired
Balance, March 31, 2016
Number of shares
$
196,493,153
(13)
164,849
196,657,989
1,661,795
–
198,319,784
171,420,382
–
–
171,420,382
–
3,089,520
174,509,902
1,941,199
(164,849)
1,776,350
(1,661,795)
114,555
Weighted-
average
exercise price
$
1.5341
1.5341
–
Number of
warrants
16,133,333
(16,133,333)
–
Number of
stock options
27,744,667
5,150,000
(2,289,834)
(1,381,334)
29,223,499
1,000,000
(19,223,333)
11,000,166
Amount
$
3,089,520
(3,089,520)
–
Weighted-
average
exercise
price
$
0.53
0.37
0.83
0.92
0.46
0.30
0.36
0.60
A summary of the Company’s outstanding and exercisable stock options at March 21, 2016 is presented below:
37
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
Exercise price Expiry date
$2.0455
$0.5455
$1.7728
A$0.50
A$0.50
A$0.30
A$0.30
A$0.30
$0.45
A$0.50
September 9, 2016
December 20, 2016
December 23, 2016
April 8, 2017
June 18, 2017
October 31, 2017
December 11, 2017
August 20, 2018
September 1, 2018
November 29, 2018
Number of stock options
Outstanding
Exercisable
715,000
1,173,333
661,833
1,000,000
150,000
1,000,000
2,000,000
1,000,000
1,000,000
2,300,000
11,000,166
715,000
1,173,333
661,833
1,000,000
150,000
333,333
2,000,000
‒
1,000,000
800,000
7,833,499
A summary of the stock options granted and the assumptions for the calculation of the fair value of those stock options
using the Black-Scholes option pricing model is presented below:
Date of grant
Expiry date
Options granted
Exercise price
Share price
Risk-free interest rate
Expected volatility based on
historical volatility
Expected life of stock
options
Expected dividend yield
Forfeiture rate
Vesting
Fair value
Fair value per stock option
April 8,
2014
April 8,
2017
1,000,000
A$0.50
A$0.50
2.5%
80%
June 18,
2014
June 18,
2017
150,000
A$0.50
A$0.37
2.5%
80%
September
25, 2014
September 1,
2018
1,000,000
$0.45
$0.46
2.5%
80%
October 30,
2014
October 30,
2017
1,000,000
A$0.30
A$0.20
2.5%
80%
December 11,
2014
December 11,
2017
2,000,000
A$0.30
A$0.14
2.5%
80%
August 20,
2015
August 20,
2018
1,000,000
A$0.30
A$0.15
2.5%
80%
3 years
3 years
4 years
3 years
3 years
3 years
0%
0%
On date of
grant
$260,000
$0.26
0%
0%
On date of
grant
$25,500
$0.17
0%
0%
On date of
grant
$120,000
$0.12
0%
0%
3 years
$100,000
$0.10
0%
0%
On date of
grant
$100,000
$0.05
0%
0%
3 years
$50,000
$0.05
Upon receipt of shareholder approval on August 7, 2015, the Company granted 1,000,000 stock options entitling the
holder to purchase one ordinary share for A$0.30 until August 20, 2018. These options will vest in annual instalments
over 3 years, subject to holder’s continued service with the Company, the satisfactory progression towards the completion
of a bankable feasibility study for Consolidated Fire Lake North by August 20, 2018 and the satisfactory completion of a
bankable feasibility study by August 20, 2018.
15. Income taxes
The Company’s effective income tax rate differs from the amount that would be computed by applying the federal and
provincial statutory rate of 26.5% (2015 – 26.5%) to the loss for the year. The reasons for the difference are as follows:
Income tax recovery based on combined statutory rate
Share-based compensation and other non-deductible items
Effect of changes in rate on temporary items
Tax losses not recognized
2016
$
2015
$
(1,882,967)
902,129
‒
930,838
–
(3,116,575)
189,409
–
2,927,166
–
38
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
Deferred income tax assets and liabilities
The Company’s deferred income tax assets and liabilities are as follows:
Deferred tax asset
Non-capital loss carry-forward and share issue costs
Investments
Deferred income taxes not recognized
Liability
Exploration and evaluation assets
As at March 31,
2015
2016
10,006,188
(1,723,907)
(1,757,294)
6,524,987
8,030,812
(1,234,531)
(5,514,615)
1,281,666
(6,524,987)
–
(1,281,666)
–
Losses carried forward
At March 31, 2016, the Company had non-capital loss carryforwards which expire as follows:
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
$
153,000
406,000
1,089,000
1,812,000
4,291,000
5,789,000
5,644,000
9,181,000
4,469,000
3,701,000
36,535,000
Resource deductions
At March 31, 2016, the Company has cumulative Canadian exploration expenses of $31,959,974 (2015 - $31,024,954)
and cumulative Canadian development expenses of $6,420,632 (2015 - $6,408,050) which may be carried forward
indefinitely to reduce taxable income in future years.
16. Determination of fair values
A number of the Company's accounting policies and disclosures require the determination of fair value, for both financial
and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes
based on the following methods. When applicable, further information about the assumptions made in determining fair
values is disclosed in the notes specific to that asset or liability.
Cash and cash equivalents, short-term investments, receivables, due from Cartier and accounts payable and accrued
liabilities
The fair values of cash and cash equivalents, short-term investments, receivables, due from Cartier and accounts payable
and accrued liabilities approximate their carrying value due to their short term to maturity.
Investments
The fair values of the investment in common shares of Fancamp, Century and Lamêlée are measured at the bid market
price on the measurement date.
The fair value of the investment in warrants of Century is measured using a Black-Scholes option pricing model.
Measurement inputs include share price on the measurement date, exercise price, expected volatility (based on historical
volatility), expected life, expected dividends and the risk-free interest rate (based on government bonds).
39
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
Stock options
The fair value of stock options is measured using a Black-Scholes option pricing model. Measurement inputs include
share price on grant date, exercise price, expected volatility (based on historical volatility or historical volatility of securities
of comparable companies), weighted average expected life and forfeiture rate (both based on historical experience and
general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds).
Classification of fair value of financial instruments
The Company classified the fair value of its financial instruments measured at fair value according to the following
hierarchy based on the amount of observable inputs used to value the instrument:
Level 1 - quoted prices in active markets for identical assets and liabilities;
Level 2 - inputs, other than the quoted prices included in Level 1, that are observable for the asset or liability, either
directly or indirectly;
Level 3 - inputs for the asset or liability that are not based on observable market data.
As at March 31, 2016
Financial asset at fair value through profit and loss
Cash and cash equivalents and short-term investments
Investments
Common shares
Warrants
As at March 31, 2015
Financial asset at fair value through profit and loss
Cash and cash equivalents and short-term investments
Investments
Common shares
Warrants
Level 1
$
1,671,016
944,500
–
Level 1
$
2,651,832
1,607,300
–
Level 2
Level 3
$$
–
–
–
–
–
–
Level 2
Level 3
$$
–
–
21,000
–
–
–
Total
$
1,671,016
944,500
–
Total
$
2,651,832
1,607,300
21,000
17. Financial risk management
The Company's activities expose it to a variety of financial risks that arise as a result of its exploration, development and
financing activities, including credit risk, liquidity risk and market risk.
This note presents information about the Company's exposure to each of the above risks, the Company's objectives,
policies and processes for measuring and managing risk, and the Company's management of capital. Further quantitative
disclosures are included throughout these financial statements.
The Board of Directors oversees management's establishment and execution of the Company's risk management
framework. Management has implemented and monitors compliance with risk management policies. The Company's
risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk
limits and controls, and to monitor risks and adherence to market conditions and the Company's activities.
Credit risk
Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual
obligations. Credit risk arises principally from the Company’s cash and cash equivalents, short-term investments and
amount due from Cartier. The Company limits its exposure to credit risk on its cash and cash equivalents by holding its
cash and cash equivalents and short-term investments in deposits with high credit quality Australian and Canadian
chartered banks. The Company is able to limit the credit risk on the amount due from Cartier by settling the amount in
common shares of Cartier.
40
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial liabilities that are settled in cash
or other financial assets. The Company’s approach to managing liquidity risk is to ensure, as far as possible, that it will
have sufficient liquidity to meet its liabilities as they come due. The amounts for accounts payable and accrued liabilities
are subject to normal trade terms.
Market risk
Market risk is the risk that changes in market prices, such as equity prices, foreign exchange rates and interest rates will
affect the Company’s income or the value of its financial instruments. The Company is exposed to equity price risk with
respect to investments. The Company estimates that if the fair value of its investment as at March 31, 2016 had changed
by 10%, with all other variables held constant, the loss would have decreased or increased by approximately $94,450.
Capital management
Capital of the Company consists of capital stock, options, warrants, contributed surplus and deficit. The Company’s
objective when managing capital is to safeguard the Company’s ability to continue as a going concern so that it can
acquire, explore and develop mineral resource properties for the benefit of its shareholders. The Company manages its
capital structure and makes adjustments based on the funds available to the Company in light of changes in economic
conditions. The Board of Directors has not established quantitative return on capital criteria for management, but rather
relies on the expertise of the Company’s management to sustain the future development of the Company. In order to
facilitate the management of its capital requirements, the Company prepares annual expenditure budgets that consider
various factors, including successful capital deployment and general industry conditions. Management reviews its capital
management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is
reasonable.
The Company’s principal source of capital is from the issue of ordinary shares. In order to achieve its objectives, the
Company intends to raise additional funds as required.
The Company is not subject to externally imposed capital requirements and there were no changes to the Company’s
approach to capital management during the year.
18. Related party transactions
Years ended March 31, Outstanding at March 31,
2015
2015
2016
2016
Exploration and evaluation
Paid or payable to 2 companies controlled by former officers
Professional fees
Paid for legal fees to a firm, of which, a director was a partner
–
–
381,930
22,700
General and administrative
Paid for rent to a company controlled by a director
54,540
54,540
–
–
–
–
–
–
See notes 7, 9 and 12 for related party transactions with Cartier and note 10 for related party transactions with SFNQ.
Compensation of key management personnel
The Company considers its directors and officers to be key management personnel. Transactions with key management
personnel are set out as follows:
41
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
Salaries
Consulting fees
Bonus
Non-monetary benefits
Post-employment benefits
Termination benefits
Share-based payments, representing share-based compensation
Years ended March 31,
2015
$
2016
$
674,880
642,000
–
24,240
41,823
–
139,652
1,522,595
523,157
915,500
–
28,296
42,824
540,000
515,050
2,564,827
19. Commitments and contingencies
At March 31, 2016, contingent liabilities consist of a letter of credit of $500,000 provided by QIO to a third party.
Commitments for annual basic premises rent are as follows:
Less than 1 year
1-5 years
More than 5 years
As at March 31,
2015
$
2016
$
91,010
–
–
91,010
190,642
–
–
190,642
See note 11 for information regarding the Company’s contingent liabilities.
20. Subsequent events
Other than those noted below, no matter or circumstance has arisen since March 31, 2016 that has significantly affected,
or may significantly affect:
The Company’s operations in the future financial years, or
The results of those operations in future financial years, or
The Company’s state of affairs in future financial years.
Acquisition of Bloom Lake and related rail assets
On April 11, 2016, the Company, through its wholly-owned subsidiary, Québec Iron Ore Inc. (“QIO”), acquired the Bloom
Lake mine and related rail assets (“Bloom Lake”) from affiliates of Cliffs Natural Resources Inc. that were subject to
restructuring proceedings under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”).
The Bloom Lake mine is located approximately 13 km north of Fermont, Quebec, in the Labrador Trough and consists of
Mining Lease BM877 and 114 mining claims. The Bloom Lake Mine is an open pit truck and shovel mine, a concentrator
that utilizes single-stage crushing and an autogenous mill and gravity separation to produce iron concentrate. From the
site, concentrate can be transported by rail, initially on the Bloom Lake Railway, to a ship loading port in Sept-Îles,
Québec. The Bloom Lake mine is currently in a care and maintenance mode.
The Bloom Lake rail assets consist of the provincially regulated short-line railway comprising a 32 km rail spur contained
wholly within Newfoundland and Labrador that connects the Bloom Lake mine to the railway owned by Northern Land
Company.
Set out below is the preliminary purchase price equation for the acquisition of Bloom Lake:
42
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
Consideration
Cash
Fair value recognized on acquisition
Assets
Property, plant and equipment
Liabilities
Asset retirement obligation
Total identifiable net assets at fair value
$
9,750,000
37,273,000
24,523,000
9,750,000
At March 31, 2016, the Company had made a deposit of $572,500 and incurred transaction costs of $2,123,588 in
connection with the acquisition.
Acquisition of Quinto Claims
On April 11, 2016, the Company, through its wholly-owned subsidiary, Champion Iron Mines Limited, acquired certain
mineral claims (“Quinto Claims”) from affiliates of Cliffs Natural Resources Inc. that were subject to restructuring
proceedings under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”).
The Quinto Claims, which encompass the Peppler Property (264 claims) and the Lamelee Property (194 claims), are
located 50 km southwest of the Bloom Lake mine and 10 km from each other.
The Quinto Claims were acquired for cash consideration of $776,818.
In connection with the acquisition, the Company made a deposit of $37,500 which was outstanding at March 31, 2016.
Financings
Private placement by the Company
In order to fund the acquisition purchase price of Bloom Lake and to provide working capital, on April 11, 2016, the
Company completed a private placement of 187,500,000 ordinary shares at a price of $0.16 per share for gross proceeds
of $30,000,000 (“Private Placement”). In connection with the Private Placement, the Company received commitments
from two parties (“Initial Subscribers”) to backstop up to $15,000,000 of the Private Placement. One of the Initial
Subscribers was arm’s length while the other was a company controlled by a director and officer of the Company. The
Initial Subscribers each agreed to purchase 46,875,000 ordinary shares (the “Committed Shares”) under the Private
Placement, subject to their right to engage dealers to find substituted purchasers to purchase all or a portion of the
Committed Shares. In connection with their commitment to subscribe for the Committed Shares, the Company granted
15,000,000 compensation options to the Initial Subscribers, entitling the holder to purchase one ordinary share for $0.25
until February 1, 2020. For one year after the closing of the Private Placement, the Initial Subscribers are restricted from
selling, pledging or granting any rights with respect to the acquired ordinary shares, except in certain limited
circumstances.
In connection with the Private Placement, subject to certain terms and conditions, 2 subscribers were both granted the
following rights for as long as they hold more than 10% of the issued and outstanding ordinary shares of the Company:
a) The Subscriber is entitled to designate one nominee for election or appointment to the board of directors of the
Company and the Company agrees to include the Subscribers’ nominee in the slate of directors presented at any
meeting of shareholders at which directors are to be elected;
b) The Company undertakes that it will not grant any stock options unless such grant is unanimously approved by the
board of directors of the Company.
43
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
Private placement by QIO
On April 11, 2016, QIO completed a private placement of 14,000,000 ordinary shares at a price of $1 per share for gross
proceeds of $14,000,000, following which, the Company’s interest in QIO was reduced from 100% to 63.2%.
In connection with the private placement by QIO, the Company granted 6,000,000 compensation options entitling the
holder to purchase one ordinary share of the Company at a price of $0.25 per share until February 1, 2020.
Due from Cartier Iron Corporation
On May 17, 2016, the Company converted the Demand Loan to a term loan, which is unsecured, bears interest at the rate
of LIBOR plus 2% and is due on September 30, 2017 (“Term Loan”). The Company has the right to convert the Term
Loan, plus accrued but unpaid interest, into Cartier common shares at a conversion price equal to the lowest subscription
price per Cartier common share paid for the most recent capital raising undertaken by Cartier at the time of the
conversion, subject to the minimum pricing rules and stock exchange approval.
Amendment of option for Cluster 3 Properties to Cartier
In order to reduce land maintenance expenditure commitments, the Company and Cartier agreed to an approximate 40%
reduction in the acreage of the original Cluster 3 Properties. On May 17, 2016, the Company and Cartier amended the
option for the Cluster 3 Properties. In order to earn a 55% interest (reduced from a 65% interest), Cartier must:
a) make option payments, issue common shares and incur exploration expenditures, as follows:
Option
payments
$
–
100,000
150,000
–
250,000
50,000
(Note 1)
450,000
(Note 2)
1,000,000
Upon execution of agreement (received)
Upon conditional approval from a stock exchange for
the listing of the common shares of Cartier (received)
December 10, 2013 (paid, issued and incurred)
December 10, 2014 (issued and incurred)
Extended from December 10, 2014 to the date that
Cartier received its refundable tax credit on eligible
expenditures incurred in Québec for the year ended
December 31, 2013 (paid)
December 10, 2015 (paid and issued)
December 10, 2016 (incurred)
December 10, 2016
Note 1: reduced to $50,000 from $250,000.
Note 2: increased from $250,000 to $450,000.
Note 3: reduced from $4,750,000 to $1,800,000.
Note 4: reduced from $6,000,000 to $3,050,000.
b) repay the Term Loan.
Common shares
Number
Exploration
Fair value expenditures
$
$
1,000,000
–
500,000
500,000
–
250,000
–
80,000
80,000
–
–
–
500,000
750,000
–
500,000
12,500
–
–
–
–
–
2,500,000
422,500
1,800,000
(note 3)
–
3,050,000
(note 4)
Grant of stock options
On April 12, 2016, the Company granted 7,500,000 to employees of the Company, entitling the holder to purchase one
ordinary share at the price of A$0.20 until April 12, 2020.
A summary of the assumptions for the calculation of the fair value of those stock options using the Black-Scholes option
pricing model is presented below:
44
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
Date of grant
Expiry date
Options granted
Exercise price
Share price
Risk-free interest rate
Expected volatility based on historical volatility
Expected life of stock options
Expected dividend yield
Forfeiture rate
Vesting
Fair value
Fair value per stock option
21. Parent entity information
Information relating to Champion Iron Limited:
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Net assets
Issued capital
Reserves
Accumulated losses
Total equity
Loss of parent entity
Total comprehensive loss of the parent entity
22. Auditors remuneration
Total of all remuneration received or due and receivable by the auditors in connection with:
Ernst & Young Australian firm
Audit of the financial report
Review of interim financial statements
Ernst & Young Canadian firm
Transaction advisory services
Preparation of income tax returns
April 12, 2016
April 12, 2020
7,500,000
A$0.20
A$0.22
2.5%
80%
4 years
0%
0%
On date of grant
$1,050,000
$0.14
As at March 31,
2015
$
2016
$
393,629
17,602,231
17,995,860
730,139
17,932,402
18,662,541
307,897
307,897
87,882
87,882
17,687,963
18,574,659
28,259,111
3,678,556
(14,249,704)
17,687,963
28,259,111
2,689,210
(12,373,662)
18,574,659
Years ended March 31,
2015
$
2016
$
1,876,042
1,876,042
1,734,804
1,734,804
Years ended March 31,
2015
$
2016
$
80,000
42,000
67,500
42,000
89,424
10,830
222,254
–
‒
109,500
45
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2016 and 2015
(expressed in Canadian dollars)
23. Segment information
The Company operates in one business segment being iron ore exploration in Canada. As the Company is focused on
exploration, the Board monitors the Company based on actual versus budgeted exploration expenditure incurred by
project. The internal reporting framework is the most relevant to assist the Board with making decisions regarding this
Company and its ongoing exploration activities, while also taking into consideration the results of exploration work that
has been performed to date.
46
STOCK EXCHANGE INFORMATION
The additional information set out below relates to shares and options as at June 6, 2016
DISTRIBUTION OF EQUITY SECURITY HOLDERS
Size of Holding
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,000 and over
117 shareholders held less than a marketable parcel of ordinary shares at June 6, 2016
Number of
ordinary shares
21,731
411,715
621,404
6,534,856
378,230,224
385,819,930
ORDINARY SHARES
SUBSTANTIAL SHAREHOLDERS
Name of shareholder
WC Strategic Opportunity LP
Resource Capital Fund VI LP
Ressources Quebec Inc
William Michael O'Keeffe
Number of
ordinary shares
62,500,000
40,331,250
37,500,000
33,276,930
% of issued
capital
16.20
10.45
9.72
8.62
VOTING RIGHTS
All ordinary shares issued by the Company carry one vote per share without restriction.
TWENTY LARGEST SHAREHOLDERS
Name of shareholder
WC Strategic Opportunity LP
Resource Capital Fund VI LP
Ressources Québec Inc
Prospect AG Trading P/L
Fancamp Exploration Ltd
Baotou Chen Hua
JP Morgan nominees
Roytor & Co.
UBS Wealth Management Aust Nom
Zero Nom P/L
Jen Group LLC
Argyle Gavin John
GAB Super Fund P/L
Metech Super P/L
Eastbourne DP P/L
Citicorp Nom P/L
Nathanson Hilton Darren
Marc Dorion
Ogoula Trading Limited
Flue Holdings P/L
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Number of
ordinary shares
62,500,000
40,331,250
37,500,000
29,376,930
11,018,333
11,000,000
9,918,128
9,301,094
7,764,895
7,598,771
4,375,000
4,032,364
3,861,157
3,700,000
3,500,000
3,180,018
2,288,890
2,273,286
2,187,500
1,954,708
% of issued
capital
16.20
10.45
9.72
7.61
2.86
2.85
2.57
2.41
2.01
1.97
1.13
1.05
0.63
0.96
0.91
0.82
0.59
0.59
0.56
0.51
47
The Company owns a 100% interest in the following properties:
SCHEDULE OF TENEMENTS
Property-Québec
Consolidated Fire Lake North
(Note 3)
Harvey-Tuttle
Moire Lake
O'Keefe-Purdy
Cassé Lake
Claire Lake
Hope Lake
Aubertin Tougard (Note 3)
Jeannine Lake (Note 1)
Round Lake (Notes 1, 2 & 3)
Silicate-Brutus (Note 1)
Property-Newfoundland
Powderhorn
Gullbridge
SNRC
23B06; 23B11; 23B12
23B12; 23B05
23B14
23B11; 23B12
23B05; 23C08
23B06
23B06
22O13; 23B04
22N16
23B04; 23C01; 23N16
22O13
Licences
11346M, 11367M,
15136M, 15137M,
18969M, 19227M
11956M, 11960M,
16260M, 16261M
Claims
Hectares
569
189
36
201
100
33
20
10
21
326
16
148
179
28,773.51
9,905.65
1,665.56
10,518.46
5,261.40
1,739.67
1,054.12
530.29
1,117.40
17,250.36
849.87
3,700
4,475
Note 1. Currently under option to Cartier Iron Corporation.
Note 2. Round Lake includes Aubrey-Ernie, Black Dan, Penguin Lake and Round Lake claims.
Note 3. On March 31, 2016, the Company acquired from ArcelorMittal 100% interest in 10 claims added to the CFLN Property and 9 claims added to
Round Lake in exchange for the Company transferring to ArcelorMittal 100% interest in 9 claims from Three Big Lakes, 7 claims from the
Aubertin-Tougard and 13 claims from Round Lake. The transaction is reflected in the schedule of tenements shown above.
The Company has an option to purchase the following property:
Property-Labrador
Snelgrove Lake
Leases
017901M,
018333M,
018334M,
022461M
Holder
CIP Magnetite Limited
Claims
424
Hectares
10,600
Note 1. On May 17, 2016, the Company terminated the option to acquire Snelgrove Lake.
48
Fermont Holdings
MINERAL RESOURCE AND ORE RESERVES STATEMENT
The Company owns a 100% interest in 11 properties covering 786.7 square kilometres (collectively, the “Fermont
Holdings”) located in the Fermont Iron Ore District of northeastern Quebec, some 300 km north of the St. Lawrence River
port town of Sept-Iles, and ranging from 6 to 80 kilometres southwest of the Town of Fermont. The Consolidated Fire Lake
North Property (“CFLN”) is the Company’s flagship project.
All claims in the Fermont Holdings acquired prior to September 24, 2015 are subject to a 1.5% royalty.
The Fermont Holdings are grouped into three clusters from north to south, termed Clusters 1, 2 and 3. The Fermont
Holdings are located in proximity to and locally contiguous to an operating iron mine and a number of former operating
iron mines and projects currently being developed for iron mining.
Following completion of a prefeasibility study in February 2013 in respect of CLFN, work commenced to complete a full
feasibility study on the project. The Company completed a Joint Ore Reserves Committee (JORC) Resource and Reserve
Statement which was announced on 27 October 2014.
A JORC compliant resource of over 1.2 billion tonnes (Bt), including 755 million tonnes (Mt) of Measured and Indicated
metallurgically coarse grained hematite mineralisation for CLFN has been estimated. The successful spring 2014 drilling
campaign data was combined with data from the previous resource estimate reported under the Canadian National
Instrument 43-101 (“NI 43-101”) to produce the JORC estimate.
Table 1: October 2014 Fire Lake North Deposit Mineral Resource Estimate at Cut-off 15% Fe
Category
Tonnage (Mt)
Fe (%)
SiO2 (%)
Al2O3 (%)
Measured
Indicated
M+I Total
Inferred
40.3
715.0
755.3
461.0
34.19
31.42
31.57
31.83
48.31
51.38
51.22
49.64
1.28
1.56
1.55
2.22
P (%)
0.015
0.020
0.019
0.032
LOI (%)
0.21
0.31
0.30
0.37
Further to the Resource Statement, the Company also announced the first Reserve Statement for the Consolidated Fire
Lake North Project to comply with JORC. The JORC Reserve estimate totals approximately 464Mt of reserves with an
estimated 23Mt, in the Proved category.
Table 2: 2013 Fire Lake North Deposit Mineral Reserve Estimate at Cut-off 15% Fe
(These Ore Reserves were estimated from the Mineral Resources as reported in the January 25, 2013 PFS.
New Ore Reserves will be estimated during the Feasibility Study, based on the October 2014 Mineral Resource
Estimate as presented above)
Category
Proved
Probable
Total
Tonnage (Mt)
23.7
440.9
464.6
Fe (%)
35.96
32.17
32.37
Weight Recovery (%)
45.00
39.58
39.86
The Company is not aware of any new information or data that materially affects the information included in the JORC
report and confirms that all material assumptions and technical parameters underpinning the estimates in the JORC
Resource & Reserve statement continue to apply and have not materially changed.
49
The current Mineral Resource Estimate was calculated by P&E Mining Consultants Ltd. (“P&E”) of Brampton, Ontario
using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards on Mineral Resources and Reserves
and Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions. Mineral resources,
which are not mineral reserves, do not have demonstrated economic viability. The mineral resource estimate may be
materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues. In
addition, the quantity and grade of estimated Inferred Resources reported herein are uncertain and there has been
insufficient exploration to categorize them as an Indicated or Measured Resource. Furthermore, it is uncertain whether
further exploration will result in reclassification of Inferred Mineral Resources to the Indicated or Measured resource
categories. The tonnage numbers are rounded according to NI 43-101 standards.
The Snelgrove Lake Project
The Snelgrove Lake Project is located in western Labrador and is approximately 55 kilometres south east of the
community of Schefferville, Quebec and approximately 200 kilometres north of Labrador City, Labrador. The project
consists of four contiguous map-staked licences totaling 424 mineral claims of 10,600 hectares. All the claims are located
on NTS map sheets 23J08, 23J09, 23I05 and 23I/12 and overlap UTM zones 19 and 20. The claims are in good standing
to January 2018 with the majority valid up to 2023-2024 where more assessment work needs to be filed. Three licences
require payment of Renewal Fees January 2016.
The Company’s wholly-owned Canadian subsidiary, CIP Magnetite Ltd., has an option with Altius Minerals Inc. to acquire
100% of the Snelgrove Project for expenditures of $6.5 million within three years after the initiation of the Option
Agreement on May 2012 with a 3% gross revenue royalty afterwards. In July 2013, the Issuer and Altius agreed to a
modification of the Option Agreement that extends the final date two years to May 2017. As at March 31, 2016, the
Company has incurred expenditure of $6.4 million.
The Snelgrove Project does not have any mineral resource or ore reserves and is at an early stage of exploration and
development. Hence, no material work was conducted on the project during the year as company efforts were directed
towards the development of the more advanced flagship Fire Lake North Project.
On May 17, 2017, the Company terminated the option to acquire Snelgrove Lake.
.
50
CORPORATE GOVERNANCE STATEMENT
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Champion
have adhered to the principles of corporate governance. A description of the main corporate governance practices is set
out below. Unless otherwise stated, the practices were in place for the entire year.
Board of Directors
The Board of Directors of the Company is responsible for the corporate governance of the Company. The Board guides
and monitors the business and affairs of the Company on behalf of shareholders by whom they are elected and to whom
they are accountable.
As the Board acts on behalf of shareholders, it seeks to identify the expectations of shareholders, as well as other ethical
expectations and obligations. In addition, the Board is responsible for identifying areas of significant business risk and
ensuring arrangements are in place to adequately manage those risks.
formulation and approval of strategic direction, objectives and goals of the Company;
The primary responsibilities of the Board include:
monitoring the financial performance of the Company, including approval of the Company’s financial statements;
ensuring that adequate internal control systems and procedures exist and that compliance with these systems and
procedures is maintained;
the identification of significant business risk and ensuring that such risks are adequately managed;
the review of performance and remuneration of Executive Directors; and
the establishment and maintenance of appropriate ethical standards.
The Company’s operational performance is assessed on an ongoing basis by the Board, to ensure that the operation and
administration of the Company are being performed in alignment with expectations and risks identified by the Board.
Independent Directors
In accordance to ASX Guidelines it is considered that all of the non-executive Directors of the Company during the year
ended 31 March 2016 meet the criteria of an Independent Director. All appointments of non-executive Directors are
considered to be Independent Directors.
Communication to Market & Shareholders
The Board aims to ensure that shareholders, on behalf of whom they act, are informed of all information necessary to
assess the performance of the Directors and the Company. Information is communicated to shareholders and the market
through:
the Annual Report which is distributed to all shareholders;
the periodic reports which are lodged with ASX and TSX are available for shareholder scrutiny;
other announcements made in accordance with ASX and TSX Listing Rules;
special purpose information memoranda issued to shareholders as appropriate; and
the Annual General Meeting (“AGM”) and other meetings called to obtain approval for Board action as appropriate.
Board Composition
When the need for a new Director is identified, selection is based on the skills and experience of prospective Directors,
having regard to the present and future needs of the Company. Any Director so appointed must then stand for election at
the next Annual General Meeting of the Company.
Terms of Appointment as a Director
The constitution of the Company provides that a Director must retire each year and is eligible for re-election. All the
Directors retire at each Annual General Meeting.
Workplace Diversity Policy
Diversity includes, but is not limited to, gender, age, ethnicity and cultural background. The Company is committed to
diversity and recognises the benefits arising from employee and board diversity and the importance of benefiting from all
available talent. Accordingly, the Company has established a diversity policy which is available on the Company’s
website.
The Board has a commitment to promoting a corporate culture that is supportive of diversity and encourages the
transparency of Board processes, review and appointment of Directors. The Board is responsible for developing policies
51
in relation to the achievement of measurable diversity objectives and the extent to which they will be linked to the Key
Performance Indicators for the Board and senior executives.
The Company’s strategies may include:
recruiting from a diverse range of candidates for all positions, including senior executive roles and Board positions;
reviewing pre-existing succession plans to ensure that there is a focus on diversity;
encourage female participation across a range of roles across the Company;
review and report on the relative proportion of women and men in the workforce at all levels of the Company;
articulate a corporate culture which supports workplace diversity and in particular, recognizes that employees at all
levels of the Company may have domestic responsibilities;
develop programs to encourage a broader pool of skilled and experienced senior management and Board
training and
candidates,
development; and
any other strategies that the Board or the Nomination Committee develops from time to time.
including, workplace development programs, mentoring programs and
targeted
Board Committee
During the period, in view of the size of the Company and the nature of its activities, the audit, nomination and
remuneration committees comprised all members of the Board as constituted during the period.
The Company has formed an Audit Committee which comprises of Mr Andrew Love (Chairman), Mr Gary Lawler and Mrs
Michelle Cormier, all of who are non-executive Directors. The Company has also formed a Remuneration & Nomination
Committee which comprises of Mr Gary Lawler (Chairman), Mr Michael O’Keefe and Mr Andrew Love. With the
appointment of the Committees, all audit matters, the nomination of new Directors and the setting, or review, of
remuneration levels of Directors and senior executives are reviewed by the relevant Committee and approved by
resolution of the Board (with abstentions for relevant Directors where there is a conflict of interest). Where the Board
considers that particular expertise or information is required, which is not available from within the Board, appropriate
external advice may be taken and received prior to a final decision being made by the Board.
Remuneration
The Constitution of the Company provides that the non-executive Directors may collectively be paid as remuneration for
their services a fixed sum not exceeding the aggregate maximum sum per annum from time to time determined by the
Company in general meeting. The current aggregate maximum is $500,000. A Director may be paid fees or other
amounts as the Directors may determine where a Director performs special duties or otherwise performs services outside
the scope of the ordinary duties of a director. A Director may also be reimbursed for out of pocket expenses incurred as a
result of their directorship or any special duties.
Independent Professional Advice
Directors have the right, in connection with their duties and responsibilities as Directors, to seek independent professional
advice at the Company’s expense. Prior approval of the Chairman is required, which will not be unreasonably withheld.
Share Trading
The Board has adopted a Securities Trading Policy, which complies with the requirements of Listing Rule 12.12, which
regulates dealings by Directors, officers and employees in securities issued by the Company.
The policy, which is available on the Company’s website, includes the Company’s closed periods, restrictions on trading
that apply to the Company’s key management personal, trading that is not subject to the policy, exceptional
circumstances in which key management personnel may be permitted to trade during a prohibited period with prior written
clearance and the procedure for obtaining written clearance. The policy provides that employees, directors and officers
must not enter into transactions or arrangements, which operate to limit the economic risk of their security holding in the
Company without first seeking and obtaining written acknowledgement from the Board.
Code of Conduct
The Board has adopted a Code of Conduct policy to guide executives, management and employees in carrying out their
duties and responsibilities. The policy is available on the Company’s website.
52
CORPORATE GOVERNANCE STATEMENT
In fulfilling its obligations and responsibilities to its various stakeholders, the Board of Champion Iron Limited (“Company”)
is a strong advocate of corporate governance. The Board has adopted corporate governance policies and practices
consistent with the ASX Corporate Governance Council’s “Corporate Governance Principles and Recommendations 3rd
edition” (Recommendations) where considered appropriate for a company of the Company’s size and nature. The
Company’s website may be accessed at www.championiron.com
Principle
Number
Recommendation
Compliance
Reason for Non-compliance
1.
Lay solid foundation for management and oversight
1.1
1.2
1.3
1.4
1.5
Establish the functions reserved to
the Board and those delegated to
senior executives and disclose
those functions.
The Board has adopted a formal
the
board charter setting out
responsibilities of the Board.
Not applicable
Undertake appropriate
checks
before appointing a person or
putting
for
election as a director and provide
all material information to security
holders.
forward a person
Not applicable
has
Company
This charter can be accessed at
the Company’s website.
The
a
Remuneration & Nomination
Committee which assists
the
Board in identifying and selecting
directors.
Committee
The
undertakes appropriate checks
before putting forward a person
for
All material
information is provided to security
holders
appointing
directors.
election.
when
Each director and senior executive
should have a written agreement
setting out
their
appointment.
terms of
the
All directors and senior executives
have a written agreement with the
Company which sets out
the
terms of their appointment.
Not applicable
The Company has two company
for each of
secretaries, one
The
Australia & Canada.
company
are
secretaries
accountable to the Board and
their roles and responsibilities are
outlined in the board charter.
The Company has adopted a
Diversity Policy, which can be
accessed at
the Company’s
website.
The company secretary should be
accountable directly to the Board,
through the chair, on all matters to
do with the proper functioning of
the Board.
Establish a policy concerning
diversity and disclose the policy or
a summary of that policy.
objectives
Disclose in each annual report the
measurable
for
achieving gender diversity set by
the Board in accordance with the
diversity policy and progress
towards achieving them.
in
Companies should disclose
each annual report the proportion
of women employees in the whole
organization, women
in senior
executive positions and women on
the Board.
Not applicable
Due to the current size, nature
and scale of
the Company’s
activities the Board has not yet
regarding
developed objectives
gender diversity. As the size and
scale of the company grows the
Board will set and aim to achieve
gender diversity objectives as
director and senior executive
positions become vacant and
appropriately qualified candidates
become available.
At the date of this report the
Company has 7 male executives,
2% of employees are women and
1 woman is currently represented
on the Board.
53
Recommendation
Compliance
Reason for Non-compliance
for
process
the
Disclose
evaluating
the performance of
the Board, its committees and
individual directors and disclose
reporting
in
period whether a performance
evaluation was undertaken in the
reporting period in accordance
with that process.
to each
relation
The Board has adopted a Board
performance evaluation policy
which can be accessed at the
Company’s website.
Due to size and nature of the
Company’s business and
the
level of activity, no performance
evaluation was carried out during
the year.
Principle
Number
1.6
1.7
relation
executives
senior
in
the
for
process
Disclose
the performance of
evaluating
and
the
to each
disclose
reporting period whether a
evaluation was
performance
undertaken
reporting
period in accordance with that
process.
the
in
the
performance
The Board will meet annually to
of
review
senior
executives.
is
executives’
the
assessed
performance of the Company as
a whole.
performance
against
The
2. Structure the Board to add value
2.1
2.2
2.3
committee
The Board should establish a
and
nomination
the
disclose
the charter of
committee, members of
the
committee and as at the end of
each reporting period, the number
of
the committee met
throughout the year and individual
attendances of the members of
the committee.
times
has
Company
a
The
Remuneration and Nomination
Committee. The Remuneration
and
Committee
charter can be assessed at the
Company’s website.
Nomination
of
Details
at
committee meetings is disclosed
in the annual report.
attendance
The Company should have and
disclose a Board skills matrix
and diversity
the Board
currently has or is looking to
achieve.
that
The Company does not have a
skill matrix.
of
names
The
directors
considered to be independent
and the length of service of each
director should be disclosed. If a
director has an interest, position,
association or relationship as
described in Box 2.3 of guidance
to Principle 2, an explanation of
why the Board is of the opinion
that it does not compromise the
independence of the director.
their
independent
The names of
length of
directors and
service is disclosed in the annual
report. Mr. Michael O’Keeffe is a
substantial shareholder and may
not
be
considered
be
independent.
to
Not applicable
Not applicable
Due to the size and current level
of activity the Company has not
developed a skill matrix. This
will be prepared as the business
develops.
The Board is of the opinion that
interests of Mr. Michael
the
O’Keeffe and
those of other
security holders are aligned and
his
shareholding does not
compromise those interests.
54
Principle
Number
2.4
2.5
2.6
Recommendation
Compliance
Reason for Non-compliance
A majority of the Board should
be independent Directors.
Box
The Board has considered the
guidance to Principle 2: Structure
the Board to Add Value and in
particular,
2.3, which
contains a list of “relationships
affecting independent status”.
The Board comprises of 5
Directors,
are
considered to be Independent in
accordance to the relevant ASX
Guidelines.
of who
4
chair
should
The
an
independent Director and should
not be the same person as the
CEO
be
The Company’s current Chairman
is not
Mr. Michael O’Keeffe
considered to be an Independent
Director.
o f
Company Chairman and Chief
Executive Officer have been
exercised by Mr. Michael
O’Keeffe
r o l e s
The
for
inducting
Have a program
directors and provide appropriate
development
professional
opportunities
to
perform their role as directors
effectively
for directors
The remuneration and nomination
committee has oversight for the
All
induction of directors.
directors are encouraged
to
undergo continual professional
development.
Not applicable
Mr. O’Keeffe has significant
experience and knowledge of
the mining
industry, corporate
and operating matters of the
Company.
Given the size and development
of the Company at the present
time, the Board believes it is
acceptable to have Mr. O’Keeffe
filling the dual roles.
Not applicable
3. Act ethically and responsibly
3.1
Establish a code of conduct for
directors, senior executives and
employees and disclose the code
or a summary of the code.
The Company has adopted a
Code of Conduct, which can be
accessed at
the Company’s
website.
Not applicable
4. Safeguard integrity in corporate reporting
Not applicable
formal charter can be
the Company’s
The Board has established an
audit committee which meets
these criteria..
The
accessed at
website.
The number of meetings during
the year and attendances by
members
the
annual report.
is disclosed
in
4.1
The Board should establish an
audit
committee. The audit
committee should be structured
so that it has at least 3 members
consists
of Non-
only
Executive Directors;
consists of a majority of
independent Directors;
is chaired by an independent
chair, who is not chair of the
Board;
The charter of the committee,
the qualifications and experience
of the members and in relation to
the reporting period, the number
the committee met
of
throughout the period and the
individual
of
members during
the period
should be disclosed.
attendances
times
55
Principle
Number
4.2
Recommendation
Compliance
Reason for Non-compliance
Not applicable
has
Board
received
The
appropriate declarations from the
the
Executive Chairman and
Chief
in
Financial Officer.
accordance with section 295A of
the Corporations Act
Before approving the financial
statements for a financial period,
the Board should receive from
the Chief Executive Officer and
the Chief Financial Officer a
declaration that, in their opinion,
the financial records have been
properly maintained and that the
financial statements comply with
accounting
appropriate
standards and give a true and
fair view of the financial position
and performance of the company
and that the opinion has been
formed on the basis a sound
system of risk management and
internal
is
operating effectively.
control
which
4.3
The Company should ensure
that the external auditor attends
its AGM and
to
answer questions from security
holders relevant to the audit.
is available
The Company auditor attends
the AGM and is available to
answer questions from security
holders.
Not applicable
5. Make timely and balanced disclosure
5.1
continuous
Establish written policy to comply
with
disclosure
obligations under the ASX Listing
Rules and disclose those policies
or a summary of those policies.
The Company has adopted a
Continuous Disclosure Policy
which can be accessed at the
Company’s website.
Not applicable
6. Respect the rights of security holders
6.1
6.2
6.3
6.4
Provide information about itself
and its governance to investors via
its website
This
accessed at
website
information
be
can
the Company’s
implement
and
relations program
Design
investor
facilitate
communication with investors
an
to
two-way
effective
The company has adopted a
Shareholder
Communications
Policy which can be accessed at
the Company’s website
Not applicable
Not applicable
the
policies
Disclose
and
processes it has in place to
facilitate
encourage
participation at meetings of
security holders.
and
Security holders should have the
option to receive communications
from, and send communications
to, the company and its security
registry electronically
The company has adopted a
Shareholder
Communications
Policy which can be accessed at
the Company’s website
Not applicable
Security holders have the option
to
send
communications electronically.
receive
and
Not applicable
56
Principle
Number
Recommendation
Compliance
Reason for Non-compliance
7. Recognise and manage risk
7.1
7.2
7.3
7.4
least
The Board should have a
committee (s) to oversee risk
and each committee should have
three members, a
at
are
majority
whom
of
independent directors and
is
chaired by an
independent
director.
the
review
The Board or a committee
should
risk
management framework at least
annually to satisfy itself that it
continues
to be sound and
disclose in each reporting period
whether such a review has taken
place.
Due to the size and level of
operations, the Company does
not have a committee to oversee
risk.
Not applicable
control
responsibility
the Company with
Director
The Board is responsible for the
oversight of risk management
framework.
and
Responsibility for control and risk
management is delegated to the
appropriate level of management
the
within
having
Executive
ultimate
the
to
Board.
risk
The
management policies set
the
guidelines for management who
have
for
implementation and monitoring
risk
compliance
management policies. The Board
undertakes continuous review of
risk management.
responsibility
Company’s
with
Not applicable
Disclose whether or not
the
Company has an internal audit
function and if not, the processes
for evaluating and
employed
improving
continually
risk
effectiveness
its
management
internal
control.
of
and
Due to the size of the operations,
the Company does not have an
internal audit function.
The Board and management have
responsibility
continuous
for
evaluation of risk management
and internal control within the
framework of the Company’s Risk
Management Policy.
to
The company should disclose
it has any material
whether
economic,
exposure
environmental
social
sustainability risks and if it does,
how it manages or intends to
manage those risks.
and
Disclosure is made in the annual
report of any material exposure
to risk.
Not applicable
57
8. Remunerate fairly and responsibly
8.1
The Board should establish a
remuneration committee which
should be structured so that it has
at least three members,
The Company has established a
remuneration and nomination
committee which meets
these
criteria.
Not applicable.
The charter for the committee can
be accessed via the Company’s
at
attendance
website
meetings of
is
the committee
disclosed in the annual report.
and
consists of a majority of
independent directors; and
is chaired by an independent
director;
and disclose:
of
the charter of the committee
the members
the
committee and at the end of
the
reporting period,
the
number
the
committee met
throughout
the period and individual
attendance by members at
those meetings.
times
of
8.2
8.3
Companies should separately
disclose its policies and practices
regarding the
r e m u n e r a t i o n
o f Non-Executive Directors’ and
that of Executive Directors and
senior executives.
A company which has an equity
based
scheme
remuneration
should have a policy on whether
participants are permitted to enter
into transactions which limit the
economic risk of participating in
the scheme and disclose
the
policy or a summary of the policy.
that
from
The structure of non-executive
Directors’ remuneration is clearly
distinguished
of
Executive Directors and senior
executives, as described in the
Directors’ Report which
forms
part of the Company’s Annual
Report.
The Company has a share
trading policy which includes a
prohibition on entering
into
transactions or arrangements
which operate
the
economic risk of their security
holding in the company. The
trading policy can be
share
the Company’s
accessed on
website.
limit
to
Not applicable
Not applicable
58
DIRECTORS
COMPANY
SECRETARIES
REGISTERED
& PRINCIPAL
OFFICE
COMPANY DIRECTORY
Michael O’Keeffe (Executive Chairman and Chief Executive Officer)
Gary Lawler (Non-Executive Director)
Andrew Love (Non-Executive Director)
Michelle Cormier (Non-Executive Director)
Jorge Estepa and Pradip Devalia
Level 1, 91 Evans Street
Rozelle NSW 2039
Telephone:
Facsimile:
Website:
ACN 119 770 142
+61 2 9810 7816
+61 2 8065 5017
http://www.championiron.com
AUDITORS
Ernst & Young
680 George Street
Sydney 2000 NSW
SHARE REGISTRIES
Security Transfer Registrars Pty Ltd
Suite 1, Alexandria House
770 Canning Highway
Applecross WA 6153
Telephone:
Facsimile:
+61 8 9315 2333
+61 8 9315 2233
TMX Equity Transfer Services
200 University Avenue, Suite 300
Toronto, ON, Canada M5H 4H1
(416) 361-0930
Telephone:
(416) 361-0470
Facsimile:
STOCK EXCHANGES
The Company’s shares are listed on the Australian Stock Exchange (ASX) and Toronto
Stock Exchange (TSX)
ASX CODE AND
TSX SYMBOL
CIA (Fully Paid Ordinary Shares)
59