ANNUAL REPORT
31 March 2017
This page has been left blank intentionally.
REVIEW OF OPERATIONS
Champion Iron Limited (the “Company”) is pleased to provide its review of operations for the financial year ending March
31, 2017.
Acquisition of Bloom Lake and related rail assets
On April 11, 2016, the Company, through its 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 purchase price equation for the acquisition of Bloom Lake:
Consideration
Cash
Deposit
Fair value recognized on acquisition
Assets
Property, plant and equipment
Mobile equipment and parts
Rail
Mine
Mineral rights
Housing
Deferred tax asset
Liabilities
Rehabilitation obligation
Deferred tax liability
Total identifiable net assets at fair value
QIO is currently employing 54 workers in care and maintenance of the property.
$
9,237,500
562,500
9,800,000
26,573,000
750,000
1,500,000
1,500,000
4,000,000
34,323,000
6,499,000
40,822,000
24,523,000
6,499,000
31,022,000
9,800,000
As at March 31, 2017, $26,669,074 has been expended on care and maintenance and property taxes at the Bloom Lake
project.
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 (447 claims), which encompass the Peppler Property (118 claims), the Lamelee Property (236 claims)
and the Hobdad Property (93 claims), are located approximately 50 km southwest of the Bloom Lake mine.
Set out below is the purchase price for the acquisition of Quinto Claims which was recorded as exploration and evaluation
assets.
1
Consideration
Cash
Deposit
Financings
$
739,318
37,500
776,818
Private placement by the Company
On April 11, 2016, in order to fund the acquisition purchase price of Bloom Lake and to provide working capital, 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:
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 were 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.
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.
In addition, QIO issued 3,000,000 ordinary shares to the Company to settle an amount due to Company and issued another
6,000,000 ordinary shares to the Company for providing a guarantee of $6,000,000, following which, the Company’s interest
in QIO was reduced from 100% to 63.2%.
Feasibility study
The Company completed a National Instrument 43-101(“NI43-101”) Technical Report on the Bloom Lake Mine Re-Start
dated March 17, 2017 (“Feasibility Study”). The Feasibility Study demonstrates that recommencing iron ore mining
operations at Bloom Lake is financially viable and would be competitive in global iron ore markets with the potential to be
one of the region’s leading long-life iron ore mines. A production restart at Bloom Lake would be a major contributor to the
provincial and national economy.
2
Highlights (all quoted figures in C$ unless stated otherwise)
Net after-tax cash flow of $2.3 billion (including all forecasted CAPEX);
After-tax net present value at 8% discount rate of $984 million and an internal rate of return of 33.3% after tax;
Total revenue over life-of-mine of $15.1 billion;
Total capital costs of $326.8 million including mine upgrade capital cost of $157.2 million;
Mineral Reserves for the Bloom Lake Project are estimated at 411.7 million tonnes at an average grade of 30.0% Fe;
Concentrate production averages 7.4 million tonnes per annum at an assumed steady state over the 21-year life-of-
mine. The concentrate, at 66.2% Fe is obtained with an expected metallurgical recovery that averages 83.3% Fe relative
to plant feed at the 30% Fe average feed grade;
Plant and processing upgrades are expected to deliver improvements in Fe recovery. The upgraded recovery circuit
flowsheet replaces the existing 3-stage spiral circuit with a new gravity circuit that limits the recirculating process streams
and reduces the chance of losses of iron to the rougher stage tailings. The recovery of additional iron minerals will also
be achieved by a magnetic scavenging circuit;
Life-of-mine average operating cost of production of $44.62 per dry metric tonne, FOB Sept-Iles;
Life-of-mine average iron ore price at 66.2% Fe CFR China (62% Fe index plus premium for extra Fe content) of
US$78.40 provided by a market study by Metalytics, a specialist economics consultancy in the metals and mineral
resources sector.
Summary of Economic Parameters and Feasibility Results
Mining Parameters
Cost Parameters
Revenue Parameters
Iron Ore Price Parameters
Valuation Parameters
Reserve (Mt)
Processed tonnage (Mtpa)
Average Fe processing recovery (%)
Average mining dilution (%)
Average Recovered concentrate (Mtpa)
Mine Life (years)
Initial CAPEX including Working Capital (CA$M)
LOM CAPEX (CA$M)
LOM OPEX (CA$/t of ore)
LOM OPEX (CA$/t dry concentrate)
Gross Revenue (CA$M)
Shipping Costs (CA$M)
Cash Operating Margin (CA$M)
Operating Margin %
After Tax Net Cash-Flow (CA$M)
LOM Av Iron Price at 66.2%Fe CFR China (US$/ton)
Inflation
Average Exchange Rate
NPV – 8% Pre-Tax (CA$M)
IRR (pre-tax)
NPV – 8% After-Tax (CA$M)
IRR (after-tax)
Pay-back (pre-tax) (years)
Pay-back (after-tax) (years)
411.7
20.0
83.3%
4.3%
7.4
21 years
326.8
329.5
16.85
44.62
15,116
3,748
4,432
29.3%
2,335
78.40
Nil
0.79 US$:1.0
CA$
1,675
43.9%
984
33.3%
2.5
3.1
Mineral Resource and Reserve Estimates
See “Mineral Resource and Ore Reserves Statement” on page 52.
Updated Mine Plan
The restart of operations at Bloom Lake is based on different operating assumptions which include an upgrade to the
concentrator plant and a mineral reserve and mining scenario updated for the current iron ore market.
The operation consists of a conventional surface mining method using an owner mining approach with electric hydraulic
shovels and mine trucks. All major mine equipment required for the restart of Bloom Lake is present on-site as this equipment
was among the assets purchased by the Company’s subsidiary, Quebec Iron Ore Inc.
3
Updated Concentrator Plant
QIO intends to use Bloom Lake’s existing crushing and storage facilities, along with the mill and the rail load-out facilities to
produce 7.4 Mtpa of concentrate, with an expected recovery of 83.3% from the ore mined from the main pit.
The proposed concentrator plant upgrade was developed to improve the overall iron recovery previously achieved by the
existing concentrator when Bloom Lake was in production from 2010 until 2014. The specific goal was to improve the
recovery of both the coarser (+425 microns) and fine (-106 microns) iron minerals, while having no adverse effect on the
recovery of other size fractions.
The concentrator upgrade development was based on proven technology for Labrador Trough iron ore deposits.
Logistics
The mine already has operational processing facilities and rail loop infrastructure, with access to end markets via port and
rail. The rail access consists of three separate segments. The first is the 31.9 km rail spur on-site that is operational and
connects to the Quebec North Shore & Labrador (QNS&L) railway at the Wabush Mines facilities in Wabush, Labrador. The
second segment uses the QNS&L railway between Wabush to the Arnaud junction in Sept-Iles. The third segment is from
Arnaud to Pointe-Noire port facilities (Sept-Iles) where the concentrate will be unloaded, stockpiled and then loaded onto
vessels for export.
Bloom Lake benefits from excellent access to power, water, roads, rail, ports and a highly professional mining labour market,
as well as a government that continues to be supportive of new investment and mining.
Acquisition of railcars
On March 10, 2017, the Company, through its wholly-owned subsidiary, Lac Bloom Railcars Corporation Inc. (“Lac Bloom
Railcars”), entered into a Railcar Instalment Sale Agreement to acquire 735 specialized iron ore railcars for consideration
of US$30,077,570 plus Goods and Services Tax (“GST”) of US$1,503,879 and Quebec Sales Tax (“QST”) of US$3,000,238.
The Company made a down payment of US$1,818,100 with the balance of the consideration, including HST and QST being
financed by a note owing to the vendor.
Memorandum of Understanding for the Development of Pointe-Noire
The Company, through QIO, Société du Plan Nord and Tata Steel Minerals Canada entered into a memorandum of
understanding to work together, in a multi-user approach, to manage and develop the industrial facilities (rail lines, access
to port facilities, rail yards, a pellet plant, administrative offices and other facilities) on a site of around 1,200 hectares at
Pointe-Noire in Sept-Îles, Québec, via the limited partnership Société Ferroviaire et Portuaire de Pointe-Noire (“SFPPN”).
SFPPN will develop an innovative business model that meets the needs of the private sector while also promoting maximum
benefits for future projects in the region.
On March 23, 2017, the Company contributed $1,000,000 to the capital of the limited partnership.
Other developments
See “Directors Report, Matters Subsequent to the End of the Financial Year” on page 6 for other developments.
Fermont
Consolidated Fire Lake North
Consolidated Fire Lake North (“CFLN”) 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.
With the completion of the exploration phase and the PFS, the Company dismantled the exploration camp in order to
minimize costs and has significantly curtailed exploration and development expenditures at CFLN. Expenditures in the
current year were undertaken primarily to maintain current claim holdings.
4
The Company is planning on completing a full feasibility study (“CFLN Feasibility Study”) for the development of a long-life,
low-cost operation at the Consolidated Fire Lake North Property (“Consolidated Fire Lake North” or “CFLN”) yielding
9.3Mtpa of concentrate at 66% Fe. The Company continued work on reviewing and preparing the CFLN 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. Champion 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 the CFLN project.
The Company intends to finance its CFLN Feasibility Study from its working capital resources
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 reduce land maintenance expenditure commitments, the Company and Cartier agreed to an approximate 40%
reduction in the acreage of the original Cluster 3 Properties, abandoning Aubertin-Tougard, Silicate-Brutus and Three Big
Lake properties within Cluster 3.
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:
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 31, 2017 (extended from 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.
Option
payments
$
Common shares
Number
Fair value
$
Exploration
expenditures
$
–
100,000
150,000
–
250,000
1,000,000
–
250,000
–
500,000
500,000
–
80,000
80,000
–
–
–
500,000
750,000
–
50,000
(Note 1)
450,000
(Note 2)
1,000,000
500,000
12,500
–
–
–
–
–
2,500,000
422,500
1,800,000
(note 3)
–
3,050,000
(note 4)
b) repay the Term Loan which had a balance of $348,003 at March 31, 2017.
Upon Cartier earning its 55% 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.
Snelgrove Lake
On May 17, 2016, the Company terminated the option to acquire Snelgrove Lake.
Subsequent events
See “Director’s Report, Matters Subsequent to the End of the Financial Year” on page 6.
5
Your directors present their report on Champion Iron Limited and its controlled entities (collectively, the “Company”) for the
financial year ended March 31, 2017.
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
Wayne Wouters
Non-executive Director
Qualifications and experience of Directors’ are disclosed on page 14.
Independent director
Independent director
Independent director resigned on June 15,
2016
Independent director appointed on April 11,
2016
Independent director appointed on
November 1, 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, 2017, the Company recorded a consolidated loss of $35,416,404 (2016: $7,768,938) and
comprehensive loss of $34,869,393 (2016: $7,298,651). Details of the operations of the Company are set out in the review
of operations on page 1.
FINANCIAL POSITION
At March 31, 2017, the Company had net assets totaling $94,778,051 (2016: $84,315,527) and cash and cash equivalents
and short-term investments $13,329,084 (2016: $1,671,016).
DIVIDENDS
No dividends were paid or recommended for the year ended March 31, 2017 (2016: 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, 2017 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.
Impact and Benefits Agreement
The Company, through QIO, and the band council, Innu of Takuaikan Uashat mak Mani-utenam have entered into an Impact
and Benefits Agreement (the “IBA”) with respect to future operations at the Bloom Lake.
The IBA is a life-of-mine agreement and provides for real participation in Bloom Lake for the Uashaunnuat in the form of
training, jobs and contract opportunities, and ensures that the Innu of Takuaikan Uashat mak Mani-utenam will receive fair
and equitable financial and socio-economic benefits. The IBA also contains provisions which recognize and support the
culture, traditions and values of the Innu of Takuaikan Uashat mak Mani-utenam, including recognition of their bond with the
natural environment.
6
Off-take agreement
On May 1, 2017, the Company has signed a Framework Off-Take Agreement (the “Agreement”) with Sojitz Corporation
(“Sojitz”), a major trading company based in Tokyo, Japan, pursuant to which Sojitz would purchase up to 3,000,000 DMT
per annum from QIO after the re-commencement of commercial operations at the Bloom Lake Iron Mine (“Bloom Lake”).
The Agreement is for an initial five-year term from the date that commercial operations commence at Bloom Lake and shall
automatically extend for successive terms of five-years.
$40,000,000 bridge financing
On May 17, 2017, to finance required upgrades to the tailings management system, other process plant upgrades and long-
lead items in connection with the recommencement of operations at Bloom Lake, the Company arranged, on behalf of QIO,
a $40,000,000 bridge financing, comprised of debt of $26,000,000 and equity of $14,000,000. The debt component consists
of a one-year term loan secured against the Bloom Lake fixed assets and large-scale mining equipment. The equity
component consists of a proportionate contribution of $8,800,000 and $5,200,000 from the shareholders of QIO, the
Company and the Government of Québec, respectively.
In connection with its $8,800,000 equity contribution into QIO, the Company completed the sale of a $10,000,000 unsecured
convertible debenture bearing interest at the rate of 8% payable quarterly and maturing on June 1, 2018 (“Debenture”). The
Debenture is convertible at the option of the holder at any time into ordinary shares of the Company (“Shares”) at a
conversion price of $1.00 per Share. Should the Company not complete a master financing of a minimum of $212,000,000
(“Master Financing”) by November 30, 2017, the conversion price will be adjusted to the lesser of $1.00 or the 5-day
weighted average trading price of Shares on the TSX determined as of the date of conversion. The maximum number of
Shares that may be issued upon conversion of the Debenture is 50,000,000 Shares, with the balance of the unconverted
principal amount of the Debenture to be repaid in cash or converted into a proportion of the Royalty (as defined hereinafter)
at the option of the Company. If the principal amount is not repaid in full on or before June 1, 2019, the holder will have the
right to convert the entire outstanding principal amount into a 0.21% gross overriding royalty on Bloom Lake (the “Royalty”).
Following completion of the Master Financing, the principal amount of the Debenture may be prepaid in whole or in part by
the Company subject to a minimum payment representing 6 months of interest.
Grant of stock options and share rights
On May 25, 2017, the Company granted 1,650,000 stock options to employees entitling the holder to purchase one ordinary
share for A$1.00 until May 25, 2020. The stock options vest, as follows: 650,000 on May 25, 2017, 150,000 on May 25,
2018, 150,000 on May 25, 2019 and 700,000 on satisfaction of vesting conditions set by the Board.
On May 25, 2017, the Company granted 1,250,000 share rights convertible into ordinary shares. The share rights vest on
the satisfaction of vesting conditions set by the Board.
Financial assistance
On June 5, 2017, the Company announced that QIO has been granted financial assistance of $3,085,089 and $2,131,656
from the Government of Québec's Green Fund in connection with two energy conversion projects at Bloom Lake.
Rail transportation contract
On June 19, 2017, the Company entered into a transportation agreement with the Quebec North Shore & Labrador Railway
Company Inc. ("QNS&L") for the transportation of iron ore from Bloom Lake by way of the QNS&L railway for approximately
400 kilometres from the Wabush Lake Junction in Labrador City, Newfoundland & Labrador to the Sept-Ȋles Junction in
Sept-Ȋles, Québec.
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:
7
Directors
Audit Committee
Meetings
Attended
Meetings
Attended
Remuneration and
Nomination Committee
Attended
Meetings
Michael O’Keeffe
Gary Lawler
Andrew Love
Paul Ankcorn
Michelle Cormier
Wayne Wouters
8
8
8
1
7
3
6
7
7
1
6
2
–
7
7
1
–
–
–
6
5
1
–
–
5
5
5
–
–
–
2
5
5
–
–
–
AUDIT COMMITTEE
The Company has established an Audit Committee that comprises Andrew Love (Chair) and Gary Lawler.
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, 2017 are disclosed in note 18 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 ensure that remuneration packages adequately reward executives and directors for
their experience, duties, responsibilities and contribution to the Company's growth and development and are sufficient
to ensure that the Company is in a position to retain and attract the highest calibre executives and directors.
(b) Executive remuneration comprises a mix of base remuneration, short-term incentives and long-term incentives.
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, 2017.
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
Gary Lawler
Non-executive Director
Non-executive Director
Andrew Love
Non-executive Director
Paul Ankcorn
Non-executive Director
Michelle Cormier
Wayne Wouters
Non-executive Director
Alexander Horvath Chief Operating Officer
Chief Operating Officer
David Cataford
Miles Nagamatsu
Jorge Estepa
Pradip Devalia
Beat Frei
Chief Financial Officer
Vice President, Corporate Secretary, Canada
Company Secretary, Australia
Head of Finance
Remuneration of directors and key management personnel
Note
Resigned on June 15, 2016
Appointed on April 11, 2016
Appointed on November 1, 2016
Retired on December 31, 2016
Promoted from Vice President, Engineering to Chief
Operating Officer on March 20, 2017
Remuneration paid in A$ has been converted to C$ using an exchange rate of $1.00.
8
Year ended
March 31, 2017
Short term
$
Termination
payments
$
Post
employment
$
Equity settled
share based
$
Total
$
Performance
related
Salary
Consulting
fees
Bonus
Non-
monetary
Michael O’Keeffe
Gary Lawler
Andrew Love
Paul Ankcorn (a)
Michelle Cormier (b)
Wayne Wouters (c)
Alexander Horvath (d)
David Cataford
Miles Nagamatsu (e)
Jorge Estepa (f)
Pradip Devalia
Beat Frei (g)
252,804
75,000
75,000
10,000
–
‒
–
253,333
–
–
80,004
–
746,141
–
–
–
–
12,500
31,250
180,000
–
124,500
98,000
–
240,000
686,250
–
–
–
–
–
‒
–
75,000
–
–
–
100,000
175,000
52,020
–
–
–
–
‒
–
10,296
7,410
7,410
–
65,856
144,084
–
–
–
–
–
‒
–
–
90,000
–
–
–
90,000
(h) 17,641
(h) 7,128
(h) 7,128
(i) 495
–
‒
–
(i) 2,737
‒
–
(h) 7,596
‒
42,725
514,584
–
–
–
–
55,000
16,668
280,000
–
–
–
366,668
1,232,920
837,049
82,128
82,128
10,495
12,500
86,250
196,668
622,458
221,910
105,410
87,600
772,524
3,117,120
–
–
–
–
‒
‒
–
12.0%
–
–
–
12.9%
Consisting
of shares
and
options
61.5%
–
–
–
–
63.8%
8.5%
45.0%
–
–
–
47.5%
Notes:
(a) Resigned on June 15, 2016.
(b) Appointed on April 11, 2016, Consulting fees commenced on February 1, 2017.
(c) Appointed on November 1, 2016. Consulting fees commenced on November 1, 2016 and are paid to 2468435 Ontario Inc., a company controlled
by Wayne Wouters.
(d) Paid to A.S. Horvath Engineering Inc., a company controlled by Alexander Horvath.
(e) Paid to Marlborough Management Limited, a company controlled by Miles Nagamatsu.
(f) Paid to J. Estepa Consulting Inc., a company controlled by Jorge Estepa.
(g) Paid to Comforta GmbH, a company controlled by Beat Frei.
(h) Amount relates to superannuation.
(i) Amount relates to employer portion of contributions to the Canada Pension Plan/Quebec Pension Plan.
Year ended
March 31, 2016
Short term
$
Termination
payments
$
Post
employment
$
Equity settled
share based
$
Total
$
Performance
related
Consisting
of shares
and
options
Salary
Consulting
fees
Bonus
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
–
–
–
–
–
–
–
–
–
–
–
Non-
monetary
(g)
97,620
–
–
–
–
10,296
6,972
6,972
–
65,856
187,716
–
–
–
–
–
–
–
–
–
–
‒
(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
375,716
82,128
82,128
50,376
256,668
252,987
96,972
78,972
87,600
322,524
1,682,071
–
–
–
–
–
–
–
–
–
–
28.3%
–
–
–
6.5%
‒
–
–
–
5.2%
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.
(g) Table was updated to include disclosure of non-monetary remuneration for Michael O’Keeffe and Beat Frei of $96,720 and $65,856.
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, 2017 are
set out below.
9
Michael O’Keeffe – Director and Executive Chairman
Annual salary and superannuation was A$171,780 and the Company made condominium rental payments of
$6,600 per month and car lease payments of $2,135 per month on his behalf. Effective May 1, 2016, annual salary
increased to $200,000 and the Company made condominium rental payments of $6,600 per month and car lease
payments of $2,135 per month on his behalf. Effective August 1, 2016, in lieu of making condominium rental
payments of $6,600 per month, annual salary increased to $279,200 and the Company continued to make car
lease payments of $2,135 per month on his behalf.
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
Annual fees of A$75,000 until termination.
Andrew Love – Non-executive Director
Annual fees of A$75,000 until termination.
Michelle Cormier – Non-executive Director
Commencing February 1, 2017, annual fees of $75,000 until termination.
Wayne Wouters – Non-executive Director
Commencing November 1, 2016, annual fees of $75,000 until termination.
David Cataford – Chief Operating Officer
Effective March 1, 2017, upon his promotion to Chief Operating Officer, annual salary increased from $240,000 to
$400,000 year plus pension participation; annual participation in the Company’s short-term incentive bonus plan
of between 50% and 100% of base salary at the Board’s discretion, but subject to the satisfaction of agreed key
performance measures; annual participation in the Company’s long-term incentive plan at the Board’s discretion,
but subject to the satisfaction of agreed key performance measures.
Miles Nagamatsu – Chief Financial Officer
Effective February 17, 2017, retroactive to April 14, 2016, annual consulting fees increased from $90,000 to
$126,000 payable to Marlborough Management Limited, pursuant to an amended professional services
agreement, which unless terminated, renews automatically on November 30.
Jorge Estepa – Vice President and Corporate Secretary, Canada
Effective May 1, 2016, annual consulting fees increased from $72,000 to $96,000 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
Annual salary of A$80,000 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
Annual fees of $240,000 payable to Comforta GmbH, a company controlled by Beat Frei, pursuant to a professional
services agreement, which, unless terminated, renews automatically on September 30.
The Company makes condominium rental payments of $4,175 per month and car lease payments of $1,313 per
month on his behalf.
Payment of termination benefit equal to fees for 12 months.
Remuneration approved subsequent to March 31, 2017
On April 28, 2017, the Company approved bonuses and awards for certain employees. The bonuses and awards are
subject to the completion of the key performance measure of the completion of the total financing package required to
facilitate the recommissioning of the plant at the Bloom Lake at a rated capacity of 7 million tonnes per annum (“Financing
KPM”) and/or key performance measure of the actual recommissioning of the plant at the mine at a capacity of 7 million
tonnes per annum (“Recommissioning KPM”).
Michael O’Keeffe – Director and Executive Chairman
1,000,000 share rights which will vest and be convertible into 1,000,000 ordinary shares on the satisfaction of the
Financing KPM and Recommissioning KPM.
10
David Cataford – Chief Operating Officer
500,000 stock options entitling the holder to purchase 1 ordinary share for A$1.00 until May 25, 2020;
cash bonus of $660,000, with $360,000 payable on the satisfaction of the Financing KPM and $300,000 on the
satisfaction of the Recommissioning KPM;
250,000 share rights which will vest and be convertible into 250,000 ordinary shares on the satisfaction of the
Financing KPM and Recommissioning KPM.
Beat Frei – Head of Finance
Cash bonus of $2,000,000 payable on the satisfaction of the Financing KPM;
1,000,000 share rights which will vest and be convertible into 1,000,000 ordinary shares on the satisfaction of the
Financing KPM.
Movement in key management personnel equity holdings
Ordinary shares
Holding at
March 31, 2016
Acquired
Sold
Other changes
March 31, 2017
Holding at
Michael O’Keeffe (a)
Gary Lawler (b)
Andrew Love (c)
Paul Ankcorn (d)
Michelle Cormier
Wayne Wouters
Alexander Horvath (e)
David Cataford (f)
Miles Nagamatsu
Jorge Estepa
Pradip Devalia
Beat Frei
11,401,930
833,889
720,000
163,533
–
–
559,208
625,698
1,211,916
1,133,083
–
1,950,364
22,135,000
66,111
44,468
–
–
–
–
144,000
–
–
–
‒
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(163,533)
–
–
(559,208)
–
–
–
–
–
33,536,930
900,000
764,468
‒
–
–
‒
769,698
1,211,916
1,133,083
–
1,950,364
Notes:
(a) Holding at March 31, 2017 includes 30,036,930 ordinary shares held indirectly by Prospect AG Trading Pty. Ltd. as trustee for O’Keeffe Family, a
company controlled by Michael O’Keefe and 3,500,000 ordinary shares held indirectly by Eastbourne DP Pty Ltd. as trustee for The O’Keeffe
Superannuation Fund, a company controlled by Michael O’Keeffe.
(b) Holding at March 31, 2017 includes 600,000 ordinary shares held indirectly by Parcent Holdings Pty Limited, as trustee for G.K. Lawler
Superannuation Fund, a company controlled by Gary Lawler.
(c) Holding at March 31, 2017 includes 44,648 ordinary shares held indirectly by Amanda G. Love, spouse of Andrew Love and 720,000 ordinary shares
held indirectly by Love Superannuation Pty Ltd. as trustee for Love Superannuation Fund, a company controlled by Andrew Love.
(d) Ceased to be a member of key management personnel on June 15, 2016.
(e) Ceased to be a member of key management personnel on December 31, 2016.
(f) Holding at March 31, 2017 includes 214,285 ordinary shares held indirectly by Genevieve Robert, spouse of David Cataford.
Stock options
Each option entitles the holder to acquire 1 ordinary share and have been issued for no consideration.
Holding at
March 31,
2016
Granted
Forfeited
Expired
Other
changes
Holding at
March 31,
2017
Exercisable
at March 31,
2017
Michael O’Keeffe (a)
Gary Lawler
Andrew Love
Paul Ankcorn
Michelle Cormier
Wayne Wouters
Alexander Horvath
David Cataford
Miles Nagamatsu
Jorge Estepa
Pradip Devalia
Beat Frei
2,000,000 10,500,000
–
–
–
–
500,000
–
2,000,000
–
–
–
2,500,000
500,000
500,000
73,333
–
‒
610,000
–
73,333
73,333
150,000
866,667
–
–
–
–
–
‒
–
–
–
–
–
–
–
–
–
(73,333)
–
‒
(100,000)
–
(73,333)
(73,333)
–
–
– 12,500,000 11,330,000
500,000
–
500,000
–
–
–
–
‒
500,000
‒
330,000
–
2,000,000
–
–
–
–
–
150,000
–
2,830,000
–
500,000
500,000
‒
–
500,000
500,000
2,000,000
‒
‒
150,000
3,000,000
Notes:
(a) Holding at March 31, 2017 includes 7,500,000 options held indirectly by Prospect AG Trading Pty. Ltd, a company controlled by Michael O’Keeffe.
11
Option compensation granted and vested during the year
Exercise
price
Number
granted Grant date
Michael O’Keeffe (a)
Michael O’Keeffe (b)
David Cataford (b)
Beat Frei (b)
Wayne Wouters (c)
$0.25
A$0.20
A$0.20
A$0.20
A$0.30
7,500,000 April 11, 2016
3,000,000 April 11, 2016
2,000,000 April 11, 2016
2,500,000 April 11, 2016
500,000 November 4, 2016
Vested
in
period
%
100%
100%
100%
100%
100%
Fair value
per option
at grant
date
$
Value of
options
granted
$
Expiry & last
exercise date
0.12 900,000
0.14 420,000
0.14 280,000
0.14 350,000
0.11
February 1, 2020
April 11, 2020
April 11, 2020
April 11, 2020
55,000 November 4, 2019
Notes:
(a) Options were granted to Prospect AG Trading Pty. Ltd., a company controlled by Michael O’Keeffe, as compensation for providing a backstop of
$7,500,000 for a $30,000,000 private placement completed by the Company on April 11, 2016.
(b) Options were granted in recognition of the significant contribution of the option holder with respect to the Company’s acquisition of Bloom Lake.
(c) Options were granted in recognition of the service of the option holder as a director of the Company.
There were no options forfeited during the year ended March 31, 2017 (2016: no options).
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.
REMUNERATION CONSULTANT
Ernst & Young (“EY”) was engaged as a remuneration consultant to provide market remuneration information for two
executive roles. The report provided factual information relating to remuneration quantum of executives in the companies
selected by the Company and did not contain a remuneration recommendation in relation to key management personnel.
In respect of the engagement, the Company paid $15,000 to EY.
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 27 of the consolidated financial statements. The Directors have considered the non-audit services
provided during the year by the auditor, and are satisfied that the provision of non-audit services by the auditor during the
year is compatible, and not compromise, the auditor independence requirements of the Corporations Act 2001 for the
following reasons:
(a) All non-audit services were subject to the corporate governance procedures adopted by the Company and have been
reviewed by the audit committee to ensure they do not impact the integrity and objectivity of the auditor; and
(b) The non-audit services provided do not undermine the general principles relating to auditor independence as set out in
APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own
work, acting in a management or decision-making capacity for the Company, acting as an advocate for the Company
or jointly sharing risks and rewards,
AUDITOR’S INDEPENDENCE DECLARATION
The lead auditor’s independence declaration for the year ended March 31, 2017 has been received, as set out on page 16,
and forms part of this report.
12
Signed in accordance with a resolution of the Directors
Michael O’Keeffe, Executive Chairman
Andrew Love, Non-executive Director
Sydney, New South Wales
June 28, 2017
13
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.
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 than 30 years of experience in corporate recovery
and reconstruction in Australia. He was a senior partner of Australian accounting
firm Ferrier Hodgson from 1976 to 2008 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 Cascades Inc., Dorel Industries Inc.
and Uni-Select Inc.
Non-Executive Director
Wayne Wouters
The Honourable Wayne G. Wouters is a Strategic and Policy Advisor with McCarthy
Tétrault LLP. Before joining the private sector, Mr. Wouters had a long and
illustrious career in the Public Service of Canada. His last assignment was the Clerk
of the Privy Council, Secretary to the Cabinet, and Head of the Public
Service. Appointed by Prime Minister Harper, Mr. Wouters served from July 1, 2009
until October 3, 2014, at which time he retired from the Public Service of
Canada. Prior to this, Mr. Wouters was a Deputy Minister in several departments,
including the Deputy Minister of Human Resources and Skills Development Canada
and Secretary of the Treasury Board. In 2014, Mr. Wouters was inducted as a
Member of the Privy Council by the Prime Minister.
14
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, 2017 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, 2017 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, 2017.
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 28, 2017
15
Ernst & Young
200 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 financial year ended 31 March 2017, 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 it controlled during the
financial year.
Ernst & Young
Ryan Fisk
Partner
Sydney
28 June 2017
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
16
Champion Iron Limited
(ACN: 119 770 142)
Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
17
Ernst & Young
200 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 Audit of the Financial Report
Opinion
We have audited the financial report of Champion Iron Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 31 March
2017, the consolidated statement of comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows for the year then ended, notes to the financial statements,
including a summary of significant accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
a)
giving a true and fair view of the consolidated financial position of the Group as at 31 March 2017
and of its consolidated financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the
Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial report of the current year. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate
opinion on these matters. For each matter below, our description of how our audit addressed the matter
is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the financial report. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit opinion on the accompanying
financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
18
2
Impairment assessment of exploration and evaluation assets
Why significant
How our audit addressed the key audit matter
Capitalised exploration and evaluation assets
represent 40% of the Group’s total assets. The
ability to recognise and to continue to defer
exploration evaluation assets under AASB 6 is
impacted by the Group’s ability, and intention, to
continue to explore the tenements or its ability
to realise this value through development or
sale. Due to the significance of exploration and
evaluation assets and the subjectivity involved in
assessing the ability to continue to defer these
assets, this is a key audit matter.
Refer to Note 14 – Exploration and evaluation
assets to the financial statements for the
amounts held on the Balance sheet by the Group
as at 31 March 2017 and related disclosure.
Our procedures to address the Group’s assessment
of the ability to continue to defer the exploration and
evaluation assets included:
• Consideration of the Company’s right to explore
in the relevant exploration areas which included
obtaining and assessing relevant documentation
such as license agreements; and
• Considered the Group’s intention to continue to
carry out exploration and evaluation activity in
the relevant exploration area which included
assessment of the Group’s cash-flow forecast
models and discussions with senior management
and Directors as to the intentions and strategy of
the Group
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the information
included in the Company’s 2017 Annual Report, but does not include the financial report and our
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors 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 control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
19
3
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to continue as
a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
20
4
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 3 to 7 of the directors' report for the year
ended 31 March 2017.
In our opinion, the Remuneration Report of Champion Iron Limited for the year ended 31 March 2017,
complies with section 300A of the Corporations Act 2001.
Responsibilities
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.
Ernst & Young
Ryan Fisk
Partner
Sydney
28 June 2017
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
21
Ernst & Young
200 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, 2017 and 2016, and the
consolidated statement of comprehensive loss, changes in equity and cash flows for the year ended March
31, 2017 and 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, 2017 and 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, 2017
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
22
Champion Iron Limited
Consolidated Statements of Financial Position
(expressed in Canadian dollars)
Assets
Current
Cash and cash equivalents
Short-term investments
Receivables
Due from Cartier Iron Corporation
Due from SFNQ
Prepaid expenses
Deposits
Non-current
Receivables
Due from Cartier Iron Corporation
Investments
Investment in port partnership
Long-term advance
Property, plant and equipment
Exploration and evaluation
Liabilities
Current
Accounts payable and accrued liabilities
Note payable
Non-current
Note payable
Property taxes payable
Royalty payable
Rehabilitation obligation
Shareholders’ equity
Capital stock
Contributed surplus
Foreign currency translation reserve
Non-controlling interest
Accumulated deficit
On behalf of the Board:
Notes
As at March 31,
2016
$
2017
$
5
6
7
8
6
7
9
10
12
13
14
13
13
15
16
17
18
1,863,387
11,465,697
6,541,921
348,003
102,166
279,024
-
20,600,198
3,351,692
-
2,794,000
1,000,000
6,000,000
69,852,656
69,623,841
173,222,387
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
1,667,502
5,994,977
7,662,479
878,777
-
878,777
37,613,355
7,713,000
300,000
25,155,500
78,444,334
-
-
300,000
-
1,178,777
201,989,902
20,120,494
588,200
2,362,819
(130,283,362)
94,778,053
174,509,902
16,268,574
41,189
-
(106,504,139)
84,315,527
173,222,387
85,494,303
Director
Director
See accompanying notes to the consolidated financial statements
23
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 expense
Care and maintenance of Bloom Lake
Depreciation
Foreign exchange loss (gain)
Gain on sale of property, plant and equipment
Unrealized (gain) loss on investments
Impairment of investment in associate
Impairment of exploration and evaluation
Transaction costs
Interest-accretion of asset
Interest
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 years to the statement of loss
Net movement in foreign currency
Comprehensive loss
Loss attributable to:
Equity holders of Champion
Non-controlling interest
Loss
Comprehensive loss attributable to:
Equity holders of Champion
Non-controlling interest
Comprehensive loss
Loss per share - basic and diluted
Notes
Years ended March 31,
2016
$
2017
$
19
9
246,980
50,979
297,959
123,163
602,444
725,607
301,436
441,988
701,563
1,331,920
904,980
77,554
443,687
80,619
26,669,074
2,586,047
(987)
(433,038)
(1,173,233)
-
-
2,623,874
632,500
526,379
35,714,363
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
(35,416,404)
-
(35,416,404)
(7,105,535)
(663,403)
(7,768,938)
547,011
(34,869,393)
470,287
(7,298,651)
(23,779,223)
(11,637,181)
(35,416,404)
(7,768,938)
-
(7,768,938)
(23,232,212)
(11,637,181)
(34,869,393)
(7,298,651)
-
(7,298,651)
21
(0.06)
(0.04)
See accompanying notes to the consolidated financial statements
24
Champion Iron Limited
Consolidated Statements of Changes in Equity
(expressed in Canadian dollars)
Capital
stock
$
Warrants
$
Contributed
surplus
$
Foreign
currency
translation
reserve
$
Non-
controlling
interest
$
Accumulated
deficit
$
Total
$
Balance, March 31, 2016
174,509,902
Loss
Other comprehensive loss
Total comprehensive loss
-
-
-
Private placement of ordinary shares
Private placement
Share-based compensation
Fair value of compensation options
Balance, March 31, 2017
30,000,000
-
-
(2,520,000)
201,989,902
-
-
-
-
-
-
-
-
16,268,574
41,189
-
(106,504,139)
84,315,527
-
-
-
-
547,011
547,011
(11,637,181)
-
(11,637,181)
(23,779,223)
-
(23,779,223)
(35,416,404)
547,011
(34,869,393)
-
-
1,331,920
2,520,000
20,120,494
-
-
-
588,200
-
14,000,000
-
-
2,362,819
-
-
-
-
(130,283,362)
30,000,000
14,000,000
1,331,920
-
94,778,053
Balance, March 31, 2015
171,420,382
3,089,520
15,996,920
(429,098)
Loss
Other comprehensive loss
Total comprehensive loss
-
-
-
Share-based compensation
Fair value of expired warrants
Balance, March 31, 2016
-
3,089,520
174,509,902
-
-
-
-
-
(3,089,520)
-
-
-
-
271,654
-
16,268,574
-
470,287
470,287
-
-
41,189
-
-
-
-
-
-
-
(98,735,201)
91,342,524
(7,768,938)
-
(7,768,938)
(7,768,938)
470,287
(7,298,651)
-
-
(106,504,139)
271,654
-
84,315,527
See accompanying notes to the consolidated financial statements
25
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
Property taxes not paid
Depreciation
Accretion of rehabilitiation obligation
Gain on sale of equipment
Unrealized (gain) 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
Interest not paid
Changes in non-cash operating working capital
Receivables
Due from SFNQ
Prepaid expenses
Deposit
Accounts payable and accrued liabilities
Financing activities
Private placement of ordinary shares
Private placement of common shares of Quebec Iron
Investing activities
Receipt of refundable tax credit on exploration
Receipt of credit on duties refundable
Investment in term deposits
Advances to Cartier Iron Corporation
Acquisition of Bloom Lake
Purchase of Quinto claims
Purchase of railcars
Purchase of property, plant and equipment
Purchase of leasehold improvements
Investment in port partnership
Proceeds on sale of investments
Proceeds on sale of 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 year
Effects of exchange rate changes
Cash and cash equivalents, end of year
Non-cash transactions
Receipt of Cartier common shares
Option payment from Cartier
Receipt of Eloro common shares
Repayment of Term Loan
Note payable issued for acquisition of railcars
Consideration
Payment of HST and QST
Years ended March 31,
2016
$
2017
$
Notes
(35,416,404)
2,623,874
(7,768,938)
2,123,588
9
(22,500)
1,331,920
7,245,000
2,586,047
632,500
(433,038)
(1,173,233)
-
-
-
468,000
(22,157,834)
(500,691)
22,884
157,432
1,600,000
788,727
(20,089,482)
30,000,000
14,000,000
44,000,000
(27,752)
271,654
-
24,740
-
-
683,800
512,000
1,906,806
663,403
-
(1,610,699)
(374,418)
(517)
(248,422)
(600,000)
(1,001,812)
(3,835,868)
-
-
-
4
6 1,763,536
6
339,139
5
(10,088,395)
-
(9,800,000)
(776,818)
(3,087,613)
(3,522)
(351,787)
(1,000,000)
323,733
3,395,538
-
(977,793)
-
(2,623,874)
(22,887,856)
9
12
1,022,661
293,714
547,011
1,863,387
1,135,539
3,736,138
(77,302)
(234,716)
-
-
-
.
-
-
-
50,000
(332,458)
(300,000)
(1,664,592)
2,312,609
(1,523,260)
1,346,685
470,287
293,713
15,000
12,500
1,000,000
38,241,678
6,095,122
-
-
-
See accompanying notes to the consolidated financial statements
26
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
1. Basis of preparation
The financial report is a general purpose financial report which has been prepared for a for-profit enterprise 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, 2017 were approved and authorized for issue by the Board of Directors on June 28, 2017.
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.
CIP Magnetite Pty Limited
CIP Magnetite Limited
Lac Bloom Railcars Corporation Inc.
Ownership
percentage
100.0%
100.0%
63.2%
100.0%
100.0%
100.0%
Country of
incorporation
Canada
Canada
Canada
Australia
Canada
Canada
Functional
currency
Canadian dollars
Canadian dollars
Canadian dollars
Australian dollars
Canadian dollars
US dollars
During the year ended March 31, 2017, Lac Bloom Railcars Corporation Inc. was incorporated as a wholly-owned subsidiary
of the Company to acquire railcars (note 13).
Consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. Control is
achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee. Specifically, the Company controls an investee if, and
only if, the Company has all of the following:
• power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
• exposure, or rights, to variable returns from its involvement with the investee; and
• the ability to use its power over the investee to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes
to one or more of the three elements of control. Consolidation of a subsidiary begins when the Company obtains control
over the subsidiary and ceases when the Company loses control of the subsidiary.
All intra-group assets and liabilities, revenues, expenses and cash flows relating to intra-group transactions are eliminated.
27
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
Non-controlling interest
Non-controlling interest represents the minority shareholder’s portion of the profit or loss and net assets of subsidiaries and
is presented separately in the statement of financial position and statement of loss and comprehensive loss. Losses within
a subsidiary are attributable to the non-controlling interests even if that results in a deficit balance.
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.
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.
28
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
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.
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, plant and equipment
Property, plant and equipment are carried at historical cost less any accumulated depreciation and impairment losses.
Depreciation is calculated on following basis over the estimated useful lives of property, plant and equipment:
Mobile equipment and parts
Rail
Railcars
Mine
Mineral rights
Housing
Exploration and evaluation
Straight-line over 10 years
Straight-line over 24 years
Straight-line over 23 years
Unit-of-production over life of mine
Unit-of-production over life of mine
Straight-line over 24 years
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.
29
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
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 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.
Rehabilitation obligation
The Company records a rehabilitation obligation for legal and constructive asset retirement obligations. Rehabilitation
obligation is recorded for restoration in the financial period upon business combination or when the related environmental
disturbance occurs, based on the estimated future costs and timing of expenditures using information available at year end.
The obligation is discounted using a pre-tax rate that reflects the risk specific to the rehabilitation liabilities and the unwinding
of the discount is recognized in the pro forma statement of loss and comprehensive loss as accretion of rehabilitation
obligation.
Subsequent changes in the estimated costs are recognized within property, plant and equipment. The estimated future
costs of rehabilitation are reviewed on a regular basis for changes to obligations, timing of expenditures, legislation or
discount rates that impact estimated costs. The cost of the related asset is adjusted for changes in the provision resulting
from changes in the estimated cash flows or discount rate and the adjusted cost of the asset is depreciated prospectively
unless the corresponding asset is fully depreciated in which case the change is recognized immediately in the consolidated
statements of loss and comprehensive loss.
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.
30
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
Reserves
Exchange differences relating to the translation of the results and net assets of the Company’s foreign operations from
their functional currency to the Company’s presentation currency are recognised directly in other comprehensive income
and accumulated in the foreign currency translation reserve.
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.
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.
31
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
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, 2017 and March 31, 2016, outstanding stock options and warrants are anti-dilutive.
Changes in accounting standards
On April 1, 2016, 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, 2017. 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.
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.
See note 14.
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 16.
32
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
Estimate of rehabilitation obligation
The rehabilitation obligation represents the present value of rehabilitation costs relating to Bloom Lake which are expected
to be incurred when Bloom Lake is expected to cease operations. The rehabilitation obligation has been determined based
on the Company’s internal estimates. Assumptions based on the current economic environment have been made, which
management believes are a reasonable basis upon which to estimate the future liability. These estimates are reviewed
regularly to take into account any material changes to the assumptions. However, actual rehabilitation costs will ultimately
depend upon future market prices for the necessary rehabilitation works required that will reflect market conditions at the
time. Furthermore, the timing of rehabilitation is likely to depend on when the Bloom Lake ceases to produce at economically
viable rates. This, in turn, will depend upon future iron ore prices, which are inherently uncertain. See note 14.
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 18.
4. Acquisitions and private placement
On April 11, 2016, the Company, through its wholly-owned subsidiary, Québec Iron Ore Inc. (“QIO”), acquired Bloom Lake
from affiliates of Cliffs Natural Resources Inc. that were subject to restructuring proceedings under the Companies’ Creditors
Arrangement Act (Canada)(“CCAA”).
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. 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 purchase price equation for the acquisition of Bloom Lake:
Consideration
Cash
Deposit
Fair value recognized on acquisition
Assets
Property, plant and equipment
Mobile equipment and parts
Rail
Mine
Mineral rights
Housing
Deferred tax asset
Liabilities
Rehabilitation obligation
Deferred tax liability
Total identifiable net assets at fair value
$
9,237,500
562,500
9,800,000
26,573,000
750,000
1,500,000
1,500,000
4,000,000
34,323,000
6,499,000
40,822,000
24,523,000
6,499,000
31,022,000
9,800,000
33
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
The Company has determined the fair value of its rehabilitation liabilities by using a discount rate of 2.5%. The liabilities
accrete to their future value until the obligations are completed. The estimated rehabilitation expenditures may vary based
on changes in operations, cost of rehabilitation activities, and legislative or regulatory requirements. Although the ultimate
amount to be incurred is uncertain, the liability for rehabilitation on an undiscounted basis is estimated to be approximately
$41,700,000. The cash flows required to settle the liability are expected to be incurred primarily in 2037.
As the acquisition was completed on April 11, 2016, the impact on revenue and loss for the year as though the acquisition
had been at the beginning of the year would be insignificant.
Acquisition of Quinto Claims
In addition, on April 11, 2016, the Company, through its wholly-owned subsidiary, Champion Iron Mines Limited, acquired
the Quinto Claims from affiliates of Cliffs Natural Resources Inc. that were subject to restructuring proceedings under
the CCAA.
The Quinto Claims (458 claims), which encompass the Peppler Property (118 claims), the Lamelee Property (236 claims)
and the Hobdad Property (93 claims), are located approximately 50 km southwest of the Bloom Lake mine and 10 km from
each other.
Set out below is the purchase price for the acquisition of Quinto Claims which will be recorded as exploration and evaluation
assets.
Consideration
Cash
Deposit
$
739,318
37,500
776,818
Private placement
On April 11, 2016, in order to fund the Acquisitions and to provide for working capital requirements, 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.
See note 18 for a summary of the assumptions for the calculation of the fair value of those stock options using the Black-
Scholes option pricing model.
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) Each 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.
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.
34
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
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.
In addition, QIO issued 3,000,000 ordinary shares to the Company to settle an amount due to Company and issued another
6,000,000 ordinary shares to the Company for providing a guarantee of $6,000,000, following which, the Company’s interest
in QIO was reduced from 100% to 63.2%. There were no consequences to the reduction of the Company’s interest in QIO.
See note 18 for a summary of the assumptions for the calculation of the fair value of those stock options using the Black-
Scholes option pricing model.
Grant of stock options
On April 12, 2016, in connection with the Acquisitions, the Company granted 7,500,000 to employees of the Company,
entitling the holder to purchase one ordinary share at the price of Australian $0.20 until April 12, 2020.
See note 18 for a summary of the assumptions for the calculation of the fair value of those stock options using the Black-
Scholes option pricing model.
5. Short-term investments
Maturity
On demand
March 30, 2018
March 30, 2018
April 15, 2017
April 21, 2017
August 9, 2017
Interest rate
0.80%
0.50%
0.50%
0.85%
0.85%
0.95%
9,826,395
500,000
577,302
250,000
100,000
212,000
11,465,697
Short-term investments of $1,077,302 have been pledged as security for letters of credit of $1,077,302, $350,000 have
been pledged as security for credit card obligations and $212,000 have been pledged as security for a letter of credit to
secure obligations under a lease agreement for office premises.
6. 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”).
35
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
Claims for years ended March 31,
2014
2016
2015
2017
Receivable as at
March 31,
2016
2017
2013
Refundable Tax Credits
As filed (2017 to be filed)
Receivable
Current
Non-current
Credit on Duties
As filed (2017 to be filed)
Receivable
Current
Harmonized and Quebec
sales taxes and other
Receivable
Current
Total
Current
Non-current
238,000
163,857
1,697,062
1,410,115 7,555,705
‒
190,000
190,000
‒
131,000
131,000
–
1,357,650
1,357,650
‒
–
–
– 1,673,042 3,351,692
‒ 1,673,042 3,351,692
101,568
4,883,659
4,985,227
42,000
33,726
329,731
209,515 1,122,562
‒
‒
–
–
–
–
–
6,541,921
176,255
9,893,613
5,161,481
6,541,921
3,351,692
9,893,613
277,822
4,883,659
5,161,481
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:
a) $1,435,358 in respect of its claim for the Refundable Tax Credit related to the year ended March 31, 2013;
b) $328,178 in respect of its claim for the Refundable Tax Credit related to the year ended March 31, 2014;
c) $209,142 in respect of its claim for Credits on Duties 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.
7. Due from Cartier Iron Corporation
At March 31, 2016, the principal amount of $1,284,716 due from Cartier Iron Corporation (“Cartier”) was a demand loan,
which was unsecured, bore interest at the rate of LIBOR plus 2% and was due 6 months after the Company demanded
repayment (the “Demand Loan”). The Company had 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.
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.
36
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
On November 15, 2016, the Company received a repayment of $1,000,000 of the Term Loan in the form of 2,000,000
common shares of Eloro Resources Ltd. (“Eloro”) at a deemed price of $0.50 per common share. The Company agreed to
provide Eloro with 30 days written notice of its intention to sell common shares of Eloro, during which time, Eloro may
identify purchasers and the Company shall sell to such identified purchasers at a mutually acceptable price. The Company
also agreed to extend the due date of the repayment of the balance of the Term Loan from September 30, 2017 to December
31, 2017.
At March 31, 2017, the principal amount of the Term Loan and accrued interest was $348,003 and for the year ended March
31, 2017, interest of $22,500 was accrued.
One director of the Company is a director of Cartier.
8. Due from 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.
Other income includes nil (2016 - $484,000 for management services provided by the Company in its capacity as general
partner of SFNQ. As at March 31, 2017, $102,166 (2016 - $125,050) was due from SFNQ.
Investments
9.
The fair values of the Company’s investments in common shares are as follows:
Investment in common shares
Fancamp Exploration Ltd. (“Fancamp”)
Century Global Commodities Corporation (“Century”)
Lamêlée Iron Ore Ltd. (“Lamêlée”)
Eloro Resources Ltd. (note 7)
2017
$
As at March 31,
2016
$
1,320,000
‒
34,000
1,440,000
2,794,000
506,000
418,500
20,000
‒
944,500
Investments in common shares are classified as financial assets at fair value through profit or loss. For the year ended
March 31, 2017, the net increase in the fair value of investments in common shares of $1,173,233 has been recorded as
an unrealized gain 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.
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
During the period, the Company sold its holdings in the common shares of Century for proceeds of $323,733.
The Company holds 930,000 warrants entitling it to purchase one common share of Century for:
37
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
Exercise price
$2.00
$2.50
Exercise period
November 30, 2016 to November 29, 2017
November 30, 2017 to November 29, 2018
At March 31, 2017, the fair value of the warrants is $nil (2016 - $nil).
Lamêlée
The Company holds 200,000 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.
10. Acquisition of an interest in rail and port infrastructure at Sept-Ȋles
The Company, through QIO, Société du Plan Nord and Tata Steel Minerals Canada entered into a memorandum of
understanding to work together, in a multi-user approach, to manage and develop the industrial facilities (rail lines, access
to port facilities, rail yards, a pellet plant, administrative offices and other facilities) on a site of around 1,200 hectares at
Pointe-Noire in Sept-Îles, Québec, via the limited partnership Société Ferroviaire et Portuaire de Pointe-Noire (“SFPPN”).
SFPPN will develop an innovative business model that meets the needs of the private sector while also promoting maximum
benefits for future projects in the region.
On March 23, 2017, the Company contributed $1,000,000 to the capital of the Limited Partnership.
11. Investment in Cartier
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 and March 31, 2017
$
1,162,903
12,500
(663,403)
(512,000)
–
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.
At March 31, 2017, the Company held 11,519,970 common shares of Cartier (2016 - 11,519,970 common shares),
representing 32.3% of the issued and outstanding common shares of Cartier (2016 - 34%) and 6,176,470 warrants entitling
the Company to purchase one common share of Cartier for $0.22 which expired on April 17, 2016 with 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”).
38
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
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.
12. 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.
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 termination was made under the Renunciation provision
of the Quebec Civil Code. The Renunciation provision allows cancellation of a contract if one party cannot perform under
the contract. The Company terminated under this provision given that the Port could not provide access as contemplated in
the Agreement at the time the payments were due. The Port subsequently issued the Company a notice of default with
respect to the Company missing the payment due in July 2013.
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.
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. The Port has advised that take-or-pay payments were
$3,701,400 at March 31, 2017.
The Port is disputing the Company’s entitlement to terminate the Agreement and on June 21, 2016, the Port sent the
Company a notice of arbitration to have the dispute between the Company and Port referred to arbitration pursuant to the
terms of the Agreement. As part of this arbitration, it is expected that the Port will be seeking an order forcing the payment
of the unpaid advances of $19,581,000 plus interest, while the Company will contest this claim and ask for the
reimbursement of the Advances paid plus interest.
The arbitration process is involved and will take some months to complete. The actual hearing is not scheduled to take
place until August/September 2017 and it will not be until then that the outcome of the process will be known. The arbitration
process is at an early stage and it is not possible now to make any realistic prediction about the outcome of the arbitration
proceedings. The outcome will be influenced by various things which may include matters or issues identified during the
arbitration process of which the parties to the arbitration are unaware at this stage. Accordingly, no amount has been
recorded as a liability in these consolidated financial statements.
39
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
13. Property, plant and equipment
Mobile
equipment
and parts
$
Rail
$
Railcars
Mine
$
Mineral
rights
$
Housing
$
Other
$
Total
$
Cost
‒
March 31, 2016
Additions
26,573,000
(3,000,000)
Disposals
March 31, 2017 23,573,000
Accumulated
depreciation
March 31, 2016
–
2,297,579
Depreciation
(37,500)
Disposals
March 31, 2017 2,259,079
Net book value,
March 31, 2017 21,313,921
‒
‒
‒
750,000 40,701,987 1,500,000
‒
750,000 40,701,987 1,500,000
‒
‒
‒
1,500,000
‒
1,500,000
‒
4,000,000
‒
4,000,000
114,065
351,787
‒
465,852
114,065
75,376,774
(3,000,000)
72,490,839
‒
29,948
‒
29,948
‒
73,734
‒
73,734
‒
–
‒
‒
‒
–
‒
‒
‒
159,722
‒
159,722
92,999
26,067
(3,366)
115,700
92,999
2,586,049
(40,866)
2,638,182
720,052 40,628,253 1,500,000
1,500,000
3,840,278
350,152
69,852,656
Acquisition of railcars
On March 10, 2017, the Company, through its wholly-owned subsidiary, Lac Bloom Railcars Corporation Inc. (“Lac Bloom
Railcars”), entered into a Railcar Instalment Sale Agreement to acquire 735 specialized iron ore railcars for consideration
of $40,700,968 (US$30,077,570) plus Goods and Services Tax (“GST”) of $2,035,099 (US$1,503,879) and Quebec Sales
Tax (“QST”) of $4,060,023 (US$3,000,238). The Company made a down payment of $2,460,315 (US$1,818,100) with the
balance of the consideration, including GST and QST being financed by a note owing to the vendor.
Loan balances at March 31, 2017:
Current
GST loan
QST loan
Long-term
Consideration loan
US$
1,503,879
3,000,238
4,504,117
$
2,001,661
3,993,316
5,994,977
28,259,470
37,613,355
The loans have the following terms and conditions:
Maturity dates: Consideration loan: March 10, 2019; however, between October 1, 2018 and December 31, 2018, in
the event that the Company has not yet begun to ship iron ore from Bloom Lake and provided that no
event of default has occurred and is continuing, the Company may provide written notice and make a
payment of US$1,986,525 (less all rental payments received by the Company) to extend the maturity
date to March 10, 2020. In the event that the vendor consents to the lease of railcars by the Company,
all rental payments received by the Company will be paid to the vendor. The Company has the right to
repay the loan at any time without penalty or other cost.
GST loan and QST loan: the earlier of 2 business days after the Company receives the input tax credit
claimed to recover the GST and QST paid and August 31, 2017.
LIBOR plus 1.75% compounded monthly and payable monthly.
$60,000,000 hypothec covering all the present and future moveable property of Lac Bloom Railcars.
Interest rate:
Security:
40
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
Dispositions
During the year, the Company received proceeds of $3,395,538 on the disposition of mobile equipment and parts.
14. Exploration and evaluation assets
Fermont
Consolidated Fire Lake North
Harvey-Tuttle
Moire Lake
O’Keefe Purdy
Other
Quinto
Fermont
Consolidated Fire Lake North
Harvey-Tuttle
Moire Lake
O’Keefe Purdy
Other
March 31,
2016
$
Acquisition
costs (other)
$
Exploration
$
Mining tax
credits
$
Impairment
$
54,199,922
6,584,301
2,930,272
3,217,816
1,276,060
‒
68,208,371
13,624
3,871
1,378
4,562
6,234
863,671
893,340
849,798
11,474
‒
‒
‒
‒
861,272
(339,142)
‒
‒
‒
‒
‒
(339,142)
‒
‒
‒
‒
‒
‒
‒
March 31,
2017
$
54,724,202
6,599,646
2,931,650
3,222,378
1,282,294
863,671
69,623,841
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
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 7 mineral concessions covering an area of 700 square
kilometres situated in northeastern Quebec (“Fermont”), subject to a net smelter return royalty of 1.5% (1.5% 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 Audrey-Ernie, Black Dan, Jeannine Lake and Penguin
properties.
As at March 31, 2017, the Company assessed its remaining properties for indicators of impairment and none were noted.
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”).
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. In conjunction with Cartier, the Company decided to abandon the properties.
As such, for the year ended March 31, 2016, the Company recorded an impairment loss of $1,906,806 to write off those
properties.
At March 31, 2016, the Company and Cartier were in discussions with respect to the unpaid option payment of $200,000
that was due on December 10, 2015. The Company did not record a receivable for the option payment.
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:
41
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
c) 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 31, 2017 (extended from 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.
d) repay the Term Loan.
Common shares
Number
Fair value
$
250,000
–
Exploration
expenditures
$
–
–
80,000
80,000
–
500,000
750,000
–
1,000,000
–
500,000
500,000
–
500,000
12,500
–
–
–
–
–
1,800,000
(note 3)
–
2,500,000
422,500
3,050,000
(note 4)
Upon Cartier earning its 55% 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.
15. Property taxes payable
The Company and the Town of Fermont have agreed that the Company will make monthly instalments payments of
$150,000 on the account of property taxes for Bloom Lake and the arrears of property taxes shall bear interest at the rate
of 12%. Upon recommencement of commercial operations of Bloom Lake and provided that the price of 62% Fe iron ore
minus an agreed upon transportation cost is greater than US$75 per metric tonne for a period of 90 consecutive days, the
Company will pay the arrears in 24 monthly installments, subject to the condition that the arrears shall be paid in full by
December 11, 2025.
Property taxes payable as at March 31, 2017 of $7,713,000 includes property taxes of $7,245,000 and accrued interest of
$468,000.
Property taxes for Bloom Lake of $8,990,930 are reflected in Care and Maintenance Expenses of Bloom Lake within the
consolidated statement of loss and comprehensive loss.
16. Royalty payable
Fermont is encumbered by a 1.5% net smelter royalty (‘NSR’) with no option to reduce the royalty.
42
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
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”). The
Arrangement remains the best indicator of the fair value of the 1.5% NSR, and therefore, as at March 31, 2017, the fair
value of the 1.5% NSR has been estimated to be $300,000 (2016 - $300,000).
17. Rehabilitation obligation
Balance, March 31, 2016
Obligation arising on acquisition of Bloom Lake (note 4)
Accretion of rehabilitation obligation
Balance, March 31, 2017
$
‒
24,523,000
632,500
25,155,500
The accretion in rehabilitation obligation arises from the unwinding of the discount rate used to record the liability as if the
liability were incurred in the current period.
18. 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.
Issued
Ordinary shares
Balance, March 31, 2015
Conversion of exchangeable shares
Fair value of warrants expired
Balance, March 31, 2016
Private placement (note 4)
Fair value of compensation warrants granted (note 4)
Conversion of exchangeable shares
Balance, March 31, 2017
Number of shares
$
196,657,989
1,661,795
–
198,319,784
187,500,000
‒
114,555
385,934,339
171,420,382
–
3,089,520
174,509,902
30,000,000
(2,520,000)
‒
201,989,902
All issued ordinary shares are fully paid and have no par value. The holders of ordinary shares are entitled to receive
dividends as declared and are entitled to one vote per share. All shares rank equally with regard to the Company’s residual
assets in the event of a wind-up.
Exchangeable shares of the Company
Balance, March 31, 2015
Conversion to ordinary shares
Balance, March 31, 2016
Conversion to ordinary shares
Balance, March 31, 2017
Number of shares
1,776,350
(1,661,795)
114,555
(114,555)
‒
43
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
Warrants
A summary of the Company's warrants is presented below:
Balance, March 31, 2015
Expired
Balance, March 31, 2016 and 2017
Stock options
Balance, March 31, 2015
Granted
Expired
Balance, March 31, 2016
Granted
Expired
Balance, March 31, 2017
Weighted-
average
exercise price
$
Amount
$
1.5341
1.5341
–
3,089,520
(3,089,520)
–
Number of
warrants
16,133,333
(16,133,333)
–
Number of
stock options
29,223,499
1,000,000
(19,223,333)
11,000,166
29,000,000
(2,550,166)
37,450,000
Weighted-
average
exercise
price
$
0.46
0.30
0.36
0.60
0.24
1.28
0.27
A summary of the Company’s outstanding and exercisable stock options at March 31, 2017 is presented below:
Exercise price
Expiry date
A$0.50
A$0.50
A$0.30
A$0.30
A$0.30
$0.45
A$0.50
A$0.30
$0.25
A$0.20
April 8, 2017 (exercised subsequent to March 31,2017)
June 18, 2017 (exercised subsequent to March 31, 2017)
October 31, 2017
December 11, 2017
August 20, 2018
September 1, 2018
November 29, 2018
November 4, 2019
February 1, 2020 (Note 3)
April 11, 2020 (Note 3)
Number of stock options
Outstanding
Exercisable
1,000,000
150,000
1,000,000
2,000,000
1,000,000
1,000,000
2,300,000
500,000
21,000,000
7,500,000
37,450,000
1,000,000
150,000
660,000
2,000,000
330,000
1,000,000
1,550,000
500,000
21,000,000
7,500,000
35,690,000
The exercise price of outstanding stock options ranges from A$0.20 to A$0.50 and the weighted-average remaining
contractual life of outstanding stock options is 2.46 years.
A summary of the stock options and compensation 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:
44
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(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
April 11, 2016
August 20, 2015
April 11, 2016 April 12, 2016
August 20, 2018 February 1, 2020 February 1, 2020 April 12, 2020
7,500,000
A$0.20
A$0.22
2.5%
15,000,000
$0.25
$0.21
2.5%
80%
1,000,000
A$0.30
A$0.15
2.5%
80%
6,000,000
$0.25
$0.21
2.5%
80%
3 years
0%
0%
4 years
0%
0%
On date of
grant
$1,800,000
April 11, 2016
4 years
0%
0%
On date of
grant
$720,000
April 11, 2016
4 years
0%
0%
On date of
grant
$1,050,000
$0.14
November 4, 2016
November 4, 2019
500,000
A$0.30
A$0.23
2.5%
80%
3 years
0%
0%
On date of grant
$55,000
$0.11
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.
19. Care and maintenance of Bloom Lake
Care and maintenance costs of Bloom Lake of $26,669,074 (2016 - $nil) represent the costs incurred at Bloom Lake since
its acquisition on April 11, 2016. Costs include property taxes (note 15), salaries and wages, housing costs, utilities and
water management and environmental costs.
20. 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 26.9% (2016 – 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
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
2017
$
2016
$
(9,393,619)
27,892
(4,183)
9,417,328
–
(1,882,967)
902,129
‒
930,838
–
As at March 31,
2016
2017
19,193,727
482,586
(12,244,649)
7,431,664
10,006,188
(1,723,907)
(1,757,294)
6,524,987
(7,431,664)
–
(6,524,987)
–
45
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
Losses carried forward
At March 31, 2017, the Company had non-capital loss carryforwards which expire as follows:
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
$
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
34,817,000
71,352,000
Resource deductions
At March 31, 2017, the Company has cumulative Canadian exploration expenses of $32,208,540 (2016 - $31,959,974) and
cumulative Canadian development expenses of $6,512,801 (2016 - $6,420,632) which may be carried forward indefinitely
to reduce taxable income in future years.
21. Loss per share
Loss per share amounts are calculated by dividing the net loss attributable to shareholders for the year by the weighted-
average number of shares outstanding during the year.
2017
$
2016
$
Net loss attributable to equity holders of the parent
(23,232,212)
(7,298,651)
Basic and diluted weighted-average number of shares
380,212,024
197,904,607
Basic and diluted loss per share attributable to equity holders of the parent
(0.06)
(0.04)
All options and warrants that are anti-dilutive have been excluded from the diluted weighted-average number of common
shares.
22. 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, due from SNFQ and accounts payable
and accrued liabilities
The fair values of cash and cash equivalents, short-term investments, receivables, due from Cartier, due from SFNQ 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, Lamêlée and Eloro are measured at the bid market price
on the measurement date.
46
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
Note payable
The note payable is evaluated by the Company based on parameters such as interest rates and the risk characteristics of
the financed assets. As at March 31, 2017, the carrying amount of the note payable was not materially different from its
calculated fair value.
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 and fair values
As at March 31, 2017
Assets
Current
Cash and cash equivalents
Short-term investments
Receivables
Due from Cartier
Due from SFNQ
Non-current
Receivables
Investments
Liabilities
Current
Accounts payable and accrued liabilities
Note payable
Non-current
Note payable
Royalty payable
Fair value
through
profit and
loss
$
Cash, loans
and
receivables
$
Other
liabilities
$
Total
carrying
amount
$
Total fair
value
$
‒
‒
‒
‒
‒
1,863,387
11,465,697
6,541,921
348,003
102,166
‒
2,794,000
2,794,000
3,351,692
‒
23,672,866
‒
‒
‒
‒
‒
‒
‒
‒
1,863,387
11,465,697
6,541,921
348,003
102,166
1,863,387
11,465,697
6,541,921
348,003
102,166
3,351,692
2,794,000
26,466,866
3,351,692
2,794,000
26,466,866
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
1,667,504
5,994,977
1,667,504
5,994,977
1,667,504
5,994,977
37,613,355
300,000
45,757,836
37,613,355
300,000
45,757,836
37,613,355
300,000
45,757,836
47
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
As at March 31, 2016
Assets
Current
Cash and cash equivalents
Short-term investments
Receivables
Due from Cartier
Due from SFNQ
Non-current
Receivables
Due from Cartier
Investments
Liabilities
Current
Accounts payable and accrued liabilities
Non-current
Royalty payable
Fair value
through
profit and
loss
$
Cash, loans
and
receivables
$
Other
liabilities
$
Total
carrying
amount
$
Total fair
value
$
‒
‒
‒
‒
‒
‒
944,500
944,500
‒
‒
‒
293,714
1,377,302
277,822
‒
125,050
4,883,659
1,325,504
‒
8,283,051
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
293,714
1,377,302
277,822
‒
125,050
293,714
1,377,302
277,822
‒
125,050
4,883,659
1,325,504
944,500
9,227,551
4,883,659
1,325,504
944,500
9,227,551
878,777
878,777
878,777
300,000
1,178,777
300,000
1,178,777
300,000
1,178,777
Fair value measurements recognized in the consolidated statement of loss and comprehensive loss
Subsequent to initial recognition, the Company measures financial instruments at fair value grouped into the following levels
based on the degree to which the fair value is observable.
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical
assets;
Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or
liability that are not based on observable market data (unobservable inputs).
As at March 31, 2017
Level 1
$
Level 2
$
Level 3
$
Total
$
Financial asset at fair value through profit and loss
Cash and cash equivalents and short-term investments
Investments
Common shares
13,329,084
2,794,000
–
–
Financial liability
Note payable
‒
43,608,332
–
–
‒
13,329,084
2,794,000
43,608,332
48
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
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
1,671,016
944,500
–
–
–
–
1,671,016
944,500
Level 1
$
Level 2
$
Level 3
$
Total
$
23. 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.
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 investments as at March 31, 2017 had changed
by 10%, with all other variables held constant, the loss would have decreased or increased by approximately $279,400.
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.
49
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
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.
24. Related party transactions
Years ended March 31,
2016
2017
$
$
Outstanding at March 31,
2016
$
2017
$
General and administrative
Paid on market terms for rent to a company
controlled by a director
54,540
54,540
–
–
See notes 7, 9, 11 and 14 for other related party transactions with Cartier and note 8 for other 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:
Salaries
Consulting fees
Bonus
Non-monetary benefits
Post-employment benefits
Termination payments
Share-based payments, representing share-based compensation
Years ended March 31,
2016
$
2017
$
746,141
686,250
175,000
144,084
42,725
90,000
1,232,920
3,117,120
674,880
642,000
–
24,240
41,823
–
139,652
1,522,595
25. Commitments and contingencies
At March 31, 2017, contingent liabilities consist of letters of credit $212,000 provided to secure obligations under a lease
agreement for office premises and letters of credit for $1,077,302 provided by QIO to third parties.
Commitments for annual basic premises rent are as follows:
Less than 1 year
1-5 years
More than 5 years
See note 12 for information regarding the Company’s contingent liabilities.
26. Parent entity information
Information relating to Champion Iron Limited:
As at March 31,
2016
$
2017
$
202,860
819,878
1,188,990
2,211,728
91,010
–
–
91,010
50
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
Current assets
Non-current assets
Total assets
Current liabilities
Due to QIO
Total liabilities
Net assets
Issued capital
Reserves
Accumulated losses
Total equity
Loss of parent entity
Total comprehensive loss of the parent entity
27. 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
Remuneration consulting services
Ernst & Young Canadian firm
Audit of the financial statements of QIO
Transaction advisory services
Preparation of income tax returns
As at March 31,
2016
$
2017
$
7,183,616
45,032,863
52,216,479
393,629
17,602,231
17,995,860
258,320
6,000,000
6,258,320
307,897
‒
307,897
45,958,159
17,687,963
55,634,352
5,152,823
(15,218,474)
45,958,159
28,259,111
3,678,556
(14,249,704)
17,687,963
Years ended March 31,
2016
$
2017
$
3,064,812
3,064,812
1,876,042
1,876,042
Years ended March 31,
2016
$
2017
$
88,000
46,000
15,000
25,000
89,626
10,000
273,626
80,000
42,000
‒
‒
89,424
10,830
222,254
28. 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.
29. Subsequent events
Other than those noted below, no matter or circumstance has arisen since March 31, 2017 that has significantly affected,
or may significantly affect:
51
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
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.
Impact and Benefits Agreement
The Company, through QIO, and the band council, Innu of Takuaikan Uashat mak Mani-utenam have entered into an Impact
and Benefits Agreement (the “IBA”) with respect to future operations at the Bloom Lake.
The IBA is a life-of-mine agreement and provides for real participation in Bloom Lake for the Uashaunnuat in the form of
training, jobs and contract opportunities, and ensures that the Innu of Takuaikan Uashat mak Mani-utenam will receive fair
and equitable financial and socio-economic benefits. The IBA also contains provisions which recognize and support the
culture, traditions and values of the Innu of Takuaikan Uashat mak Mani-utenam, including recognition of their bond with the
natural environment.
Off-take agreement
On May 1, 2017, the Company has signed a Framework Off-Take Agreement (the “Agreement”) with Sojitz Corporation
(“Sojitz”), [a major trading company based in Tokyo, Japan], pursuant to which Sojitz would purchase up to 3,000,000 DMT
per annum from QIO after the re-commencement of commercial operations at the Bloom Lake Iron Mine (“Bloom
Lake”) pursuant to the Agreement, Sojitz will purchase up to 3,000,000 DMT per annum from QIO, upon re-commencement
of commercial operations at Bloom Lake. The Agreement is for an initial five-year term from the date that commercial
operations commence at Bloom Lake and shall automatically extend for successive terms of five-years.
$40,000,000 bridge financing
On May 17, 2017, to finance required upgrades to the tailings management system, other process plant upgrades and long-
lead items in connection with the recommencement of operations at Bloom Lake, the Company arranged, on behalf of QIO,
a $40,000,000 bridge financing, comprised of debt of $26,000,000 and equity of $14,000,000. The debt component consists
of a one-year term loan secured against the Bloom Lake fixed assets and large-scale mining equipment. The equity
component consists of a proportionate contribution of $8,800,000 and $5,200,000 from the shareholders of QIO, the
Company and the Government of Québec, respectively.
In connection with its $8,800,000 equity contribution into QIO, the Company completed the sale of a $10,000,000 unsecured
convertible debenture bearing interest at the rate of 8% payable quarterly and maturing on June 1, 2018 (“Debenture”). The
Debenture is convertible at the option of the holder at any time into ordinary shares of the Company (“Shares”) at a
conversion price of $1.00 per Share. Should the Company not complete a master financing of a minimum of $212,000,000
(“Master Financing”) by November 30, 2017, the conversion price will be adjusted to the lesser of $1.00 or the 5-day
weighted average trading price of Shares on the TSX determined as of the date of conversion. The maximum number of
Shares that may be issued upon conversion of the Debenture is 50,000,000 Shares, with the balance of the unconverted
principal amount of the Debenture to be repaid in cash or converted into a proportion of the Royalty (as defined hereinafter)
at the option of the Company. If the principal amount is not repaid in full on or before June 1, 2019, the holder will have the
right to convert the entire outstanding principal amount into a 0.21% gross overriding royalty on Bloom Lake (the “Royalty”).
Following completion of the Master Financing, the principal amount of the Debenture may be prepaid in whole or in part by
the Company subject to a minimum payment representing 6 months of interest.
Financial assistance
On June 5, 2017, the Company announced that QIO has been granted financial assistance of $3,085,089 and $2,131,656
from the Government of Québec's Green Fund in connection with two energy conversion projects at Bloom Lake.
Grant of stock options and share rights
On May 25, 2017, the Company granted 1,650,000 stock options to employees entitling the holder to purchase one ordinary
share for A$1.00 until May 25, 2020. The stock options vest, as follows: 650,000 on May 25, 2017, 150,000 on May 25,
2018, 150,000 on May 25, 2019 and 700,000 on satisfaction of vesting conditions set by the Board.
On May 25, 2017, the Company granted 1,250,000 share rights convertible into ordinary shares. The share rights vest on
the satisfaction of vesting conditions set by the Board.
52
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2017 and 2016
(expressed in Canadian dollars)
Rail transportation contract
On June 19, 2017, the Company entered into a transportation agreement with the Quebec North Shore & Labrador Railway
Company Inc. ("QNS&L") for the transportation of iron ore from Bloom Lake by way of the QNS&L railway for approximately
400 kilometres from the Wabush Lake Junction in Labrador City, Newfoundland & Labrador to the Sept-Ȋles Junction in
Sept-Ȋles, Québec.
53
STOCK EXCHANGE INFORMATION
The additional information set out below relates to shares and options as at June 7, 2017
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
54 shareholders held less than a marketable parcel of ordinary shares at June 7, 2017.
Number of
ordinary shares
31,589
424,612
626,894
7,696,188
378,155,056
386,934,339
ORDINARY SHARES
SUBSTANTIAL SHAREHOLDERS
Name of shareholder
WC Strategic Opportunity LP
Resource Capital Fund VI LP
Ressources Quebec Inc.
Michael O'Keeffe (and associates)
Number of
ordinary shares
62,500,000
40,331,250
37,500,000
33,536,930
% of issued
capital
16.15%
10.42%
9.69%
8.67%
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 Quebec Inc
Prospect AG Trading PL
Fancamp Exploration Ltd
Baotou Chen Hua
GAB Super Fund PL
Zero Nom P/L
JP Morgan nominees
Metech Super PL
Jen Group LLC
Gavin John Argyle
Citicorp Nom PL
Eastbourne DP PL
Vision PL
HSBC Custody Nominee Audt Ltd
Marc Dorion
Flue Holdings PL
Rowe Angela Maree
Fareast Enterprises PL
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
30,036,930
11,018,333
11,000,000
8,936,030
7,850,021
5,758,852
4,950,000
4,375,000
4,032,364
3,530,898
3,500,000
3,157,500
2,317,585
2,273,296
1,694,708
1,620,000
1,556,668
% of issued
capital
16.15%
10.42%
9.69%
7.76%
2.85%
2.84%
2.31%
2.03%
1.49%
1.28%
1.13%
1.04%
0.91%
0.90%
0.82%
0.60%
0.59%
0.44%
0.42%
0.40%
54
The Company’s wholly owned subsidiary, Champion Iron Mines Limited, owns a 100% interest in the following properties :
SCHEDULE OF TENEMENTS
Property-Québec
Consolidated Fire Lake North
Harvey-Tuttle
Moire Lake
O'Keefe-Purdy
Jeannine Lake (Note 1)
Round Lake (Notes 1 and 2)
Silicate-Brutus (Note 1)
Peppler
Lamelee
Hobdad
Property-Newfoundland
Powderhorn
Gullbridge
SNRC
23B06; 23B11; 23B12
23B12; 23B05
23B14
23B11; 23B12
22N16
23B04; 23C01; 23N16
22O13
23B05
23B05; 23B06; 23B11; 23B12
23B05; 23B06
Licences
11346M, 11367M, 15136M,
15137M, 18969M, 19227M
11956M, 11960M, 16260M,
16261M
Claims
569
191
36
203
21
318
19
118
236
93
101
212
Hectares
28,774.11
10,010.36
1,665.55
10,623.15
1,117.40
16,826.93
1,009.25
6,207.75
12,374.67
4,893.74
2,525.00
5,300.00
Note 1. Currently under option to Cartier Iron Corporation.
Note 2. Round Lake includes Aubrey-Ernie, Black Dan, Penguin Lake and Round Lake claims.
The Company’s 63.2% owned subsidiary, Québec Iron Ore Inc., owns a 100% interest in the following properties:
Property-Québec
Bloom Lake Mining Lease
Bloom Lake claims
SNRC
23B14
23B14
Claims
1
64
Hectares
6,857.63
3,224.20
55
MINERAL RESOURCE AND ORE RESERVES STATEMENT
Fermont Iron Ore District
The Company owns interest in 14 iron ore deposits located in the Fermont Iron Ore District of northeastern Québec, some
300 km north of the City of Sept-Ȋles, and ranging from 6 to 80 kilometers west and southwest of Fermont. Table 1 lists the
various projects with their status, surface area, NSR and other such information. The 14 deposits may be grouped into
larger “clusters”. All claims and leases are in good standing.
Table 1: April 2017 Champion Iron properties in the Fermont Iron Ore District
Cluster / Project
Deposit
Nb
claims
Area
(km sq.)
Champion
interest
Co-owner
NSR
Bloom Lake
Mine
Fire Lake North
Don Lake
Bellechasse
Oil Can
Consolidated
Fire Lake North
71*
100.8*
63.2%
Ressources
Québec
569
287.7
100%
1.5%
Moiré Lake
36
16.7
100%
1.5%
Peppler Lake
Quinto Claims
Lamêlée Lake
447
234.7
100%
Hobdad Hill
Harvey-Tuttle
191
100.1
100%
O’Keefe-Purdy
203
106.2
100%
Penguin Lake
Cluster 3
Lac Jeannine
341
189.5
45%**
Black Dan
1.5%
1.5%
1.5%
Cartier
Iron
Corporation
* Includes a 68.7 sq. km mining lease
** Pending required expenditures and loan repayment before December 31, 2017.
Bloom Lake Mine
The idled Bloom Lake Mine was acquired from Cliffs Natural Resources in April of 2016. A Feasibility Study was completed
by Ausenco Canada Inc. in order to identify areas for improvement or correction prior to the re-start. The associated costs
estimates were used to develop a financial model and therefore mineral resources and ore reserves were recalculated. The
JORC and Canadian National Instrument NI 43-101 compliant Measured and Indicated resources adds to a total of 911 Mt
while there is an additional 80 Mt of Inferred resources (table 2). The Bloom Lake Mine holds 411 Mt of ore reserves at
30.0% Fe and a dilution factor of 4.3%.
56
Table 2: March 2017 Bloom Lake Mineral Resource Estimate at Cut-off 15% Fe
Category
Measured
Indicated
M+I Total
Inferred
Dry Tonnage
(Mt)
439.7
471.9
911.6
80.4
Includes ore reserves
Fe (%)
CaO (%)
MgO (%)
Al2O3 (%)
31.0
28.5
29.7
25.6
0.6
2.5
1.6
1.9
0.7
2.3
1.5
1.7
0.3
0.4
0.4
0.3
Table 3: March 2017 Bloom Lake Ore Reserves Estimate at Cut-off 15% Fe
Category
Proven
Probable
Total
Dry Tonnage
(Mt)
264.2
147.6
411.7
Fe (%)
CaO (%)
MgO (%)
Al2O3 (%)
30.7
28.7
30.0
0.5
2.8
1.3
0.6
2.7
1.3
0.3
0.4
0.4
Consolidated Fire Lake North
The Consolidated Fire Lake North (CFLN) project includes four deposits, the Fire Lake North, Don Lake, Bellechasse and
Oil Can deposits. All deposits are located north of ArcelorMittal’s Fire Lake mine. No work was done on the CFLN asset
following the 2014 drilling and Joint Ore Reserves Committee (JORC) Resources and Reserves Statement of October 27th
2014 for the Fire Lake North (FLN) deposit. The JORC compliant resources of over 1.2 Bt have been estimated for FLN
(table 4) while the reserves are estimated at 464 Mt (table 5).
Table 4: October 2014 Fire Lake North Mineral Resource Estimate at Cut-off 15% Fe
Category
Measured
Indicated
M+I Total
Inferred
Dry Tonnage
(Mt)
40.3
715.0
755.3
461.0
Fe (%)
SiO2 (%)
Al2O3 (%)
P (%)
34.2
31.4
31.6
31.8
48.3
51.4
51.2
49.6
1.28
1.56
1.55
2.22
0.015
0.020
0.019
0.032
Table 5: 2013 Fire Lake North Ore Reserves Estimate at Cut-off 15% Fe***
Category
Proven
Probable
Total
Dry Tonnage
(Mt)
23.7
440.9
464.6
Fe (%)
CaO (%)
Weight Recovery (%)
36.0
32.2
32.4
0.5
2.8
1.3
45.0
39.6
39.9
57
*** Estimate from the 2013 prefeasibility study. New ore reserves estimation following the new resources calculation was
not made.
Resources estimates (NI 43-101 compliant) were done for the Oil Can and Bellechasse deposits, both part of the CFLN
property. The estimates include only inferred resources (table 6). No NI 43-101 resources estimate is available for the Don
Lake deposit.
Table 6: Inferred Resources for other CFLN deposits at Cut-off 15% Fe
Deposit
Bellechasse
Oil Can (oxides)
Oil Can (mixed)****
NI 43-101 release Dry Tonnage (Mt)
Fe (%)
2009
2012
2012
215.1
972
924
28.7
33.2
24.1
**** Mix of iron oxides and iron silicates
Moiré Lake
Moiré Lake is a stand-alone deposit located approximately 6 km west from the city of Fermont. It is the far extension of
ArcelorMittal’s Mont-Wright Mine. While ArcelorMittal’s ore is hematite-rich, the Moiré Lake deposit is a mix of hematite and
magnetite. A NI 43-101 resources estimate published in 2012 has total resources of 581 Mt with a grade of 29.7% Fe (table
7).
Table 7: 2012 Moiré Lake Resources Estimate at Cut-off 15% Fe
Category
Measured
Indicated
M+I total
Inferred
Total M+I+I
Dry Tonnage (Mt)
Fe (%)
-
163.9
163.9
416.7
580.6
-
30.5
30.5
29.4
29.7
Quinto Claims Property
The Quinto Claims were acquired in the Bloom Lake transaction. The holding has 447 claims and holds several iron ore
deposits and occurrences. The property is adjacent to the CFLN project. All the deposits have more magnetite than
hematite. They also have small amount of iron silicates.
There are no NI 43-101 compliant resources estimates for the Quinto claims.
The Quinto Claims include Hobdad Hill which was partially drilled in 2012. The deposits hold oxide iron formation, but
resources were not estimated. Other occurrences, Faber and Lac Jean, were drilled in 2007 but results indicate a silicates-
dominated iron formation and therefore no further work was done.
Harvey-Tuttle
The Harvey-Tuttle property is located northwest of the Quinto Claims. It holds several small deposits, although one of them,
Turtleback Mountain, holds significant resources. The project was drilled in 2010 and a NI 43-101 resources estimate was
published in 2011. As a whole, the Harvey-Tuttle property has 947 Mt of inferred resources at 23.2% FeT.
O’Keefe-Purdy
There are no NI 43-101 compliant resources estimates for the O’Keefe-Purdy deposits.
58
Cluster 3
A series of 358 claims located near the closed Lac Jeannine Mine, identified as Cluster 3 was optioned to Cartier Iron
Corporation. Upon completion of work and financial requirements, Champion Iron Mines Limited would still hold 45% of the
property. The main asset in Cluster 3 is the Penguin Lake deposits. A 2014 NI 43-101 reports 534.8 Mt of inferred resources
at 33.1% Fe with a cut-off at 15%Fe. Cluster 3 also holds a series of small deposits near Round Lake (NW of Penguin).
Finally, tailings for the Lac Jeannine have been considered as a source of iron ore as they are fairly coarse and have an
average grade of 13% Fe. However, no tonnage has been evaluated.
Powderhorn / Gullbridge
Besides its iron ore assets in Québec, Champion Iron Mines Limited also owns 100% right to 7 exploration licenses (63 km
sq.) in the vicinity of the closed Gullbridge mine in North central Newfoundland (NTS map sheet 12H01). It is located
approximately 25 km south of the town of Springdale. The licenses are in good standing and exploration work is expected
for summer of 2017.
The Powderhorn/Gullbridge project targets base metal deposits (Cu-Zn) as either extension of the Gullbridge copper mine
or other zones related to the same mineralization system. Several Cu or Zn showings are spread out on the licenses and
geophysical survey suggest several target at 200 meters depth. No mineral resources or ore reserves estimate are available
as the project enters its second phase of exploration with the drilling of the aforementioned geophysical targets.
The Powderhorn/Gullbridge property has a 2.85% NSR to the previous owner (Copper Hill Resources and 3 individual
prospectors).
59
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 2017 meet the criteria of an Independent Director. All appointments of non-executive Directors are
considered to be Independent Directors. On 1 November 2016, Mr. Wayne Wouters was appointed as non-executive
Director to Board.
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.
60
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 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 candidates,
including, workplace development programs, mentoring programs and targeted training and development; and
any other strategies that the Board or the Nomination Committee develops from time to time.
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)and Mr Gary Lawler who
are non-executive Directors. Ms Michelle Cormier acted as an observer on the audit committee. The Company has also
formed a Remuneration & Nomination Committee which comprised of Mr Gary Lawler (Chairman), Mr Michael O’Keefe and
Mr Andrew Love. On 27 April 2017, Mr Michael O’Keeffe retired from the Committee and Ms Michelle Cormier was appointed
to the Committee. 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.
61
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
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.
This charter can be accessed at
the Company’s website.
Not applicable
appropriate
checks
Undertake
before appointing a person or
putting forward a person for election
as a director and provide all material
information to security holders.
Not applicable
The Company has a Remuneration
& Nomination Committee which
assists the Board in identifying and
selecting directors. The Committee
undertakes appropriate checks
before putting forward a person for
election. All material information is
provided to security holders when
appointing directors.
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 secretary should be
accountable directly to the Board,
through the chair, on all matters to
do with the proper functioning of the
Board.
The Company has two company
secretaries, one
for each of
Australia & Canada. The company
secretaries are accountable to the
Board and
roles and
their
responsibilities are outlined in the
board charter.
Not applicable
62
Principle
Number
1.5
1.6
1.7
Recommendation
Compliance
Reason for Non-compliance
Due to the current size, nature
and scale of
the Company’s
activities the Board has not yet
developed objectives regarding
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 6 male executives,
5% of employees are women and
1 woman is currently represented
on the Board.
Not applicable
Not applicable
objectives
Establish a policy concerning
diversity and disclose the policy or
a summary of that policy.
Disclose in each annual report the
for
measurable
achieving gender diversity set by
the Board in accordance with the
diversity policy and progress
towards achieving them.
Companies should disclose
in
each annual report the proportion
of women employees in the whole
in senior
organization, women
executive positions and women
on the Board.
Disclose the process for evaluating
the performance of the Board, its
committees
individual
and
directors and disclose in relation to
each reporting period whether a
performance
evaluation was
undertaken in the reporting period
in accordance with that process.
Disclose the process for evaluating
the performance of the senior
executives and disclose in relation
to each reporting period whether a
evaluation was
performance
undertaken in the reporting period
in accordance with that process.
The Company has adopted a
Diversity Policy, which can be
accessed at
the Company’s
website.
The Board has adopted a Board
performance evaluation policy
which can be accessed at the
Company’s website. A review of
Board
was
performance
undertaken in respect of the 31
March 2017 financial year by the
& Nomination
Remuneration
in accordance with
Committee
Company’s
performance
evaluation policy and approved by
the Board.
the
performance
The Board will meet annually to
review
of
executives. The senior executives’
performance is assessed against
the performance of the Company
as a whole.
A review of Board performance
was undertaken in respect of the
31 March 2017 financial year by
the Remuneration & Nomination
in accordance with
Committee
Company’s
performance
evaluation policy an approved by
the Board.
63
Principle
Number
Recommendation
Compliance
Reason for Non-compliance
2. Structure the Board to add value
2.1
2.2
2.3
The Board should establish a
and
committee
nomination
the
the charter of
disclose
committee, members of
the
committee and as at the end of
each reporting period, the number
the committee met
of
throughout the year and individual
attendances of the members of the
committee.
times
The Company should have and
disclose a Board skills matrix and
diversity that the Board currently
has or is looking to achieve.
The Company has a Remuneration
and Nomination Committee. The
Remuneration and Nomination
Committee
be
charter
can
the Company’s
assessed at
website.
Details of attendance at committee
meetings is disclosed in the annual
report.
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.
names
The
independent
of
directors and their length of service
is disclosed in the annual report.
is a
Mr. Michael O’Keeffe
substantial shareholder and may
not
be
considered
independent.
be
to
2.4
A majority of the Board should be
independent Directors.
2.5
chair
should
The
an
independent Director and should
not be the same person as the
CEO
be
The Board has considered the
guidance to Principle 2: Structure
the Board to Add Value and in
particular, Box 2.3, which contains
list of “relationships affecting
a
independent status”.
The Board
comprises of 5
Directors, 4 of who are considered
to be Independent in accordance to
the relevant ASX Guidelines.
The Company’s current Chairman
Mr. Michael O’Keeffe
is not
considered to be an Independent
Director. The roles of Company
Chairman and Chief Executive
Officer have been exercised by Mr.
Michael O’Keeffe.
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 the
interests of Mr. Michael O’Keeffe
are aligned and his shareholding
those
does not compromise
interests.
Not applicable
matters
significant
Mr. O’Keeffe has
experience and knowledge of the
industry, corporate and
mining
operating
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.
of
64
Principle
Number
2.6
Recommendation
Compliance
Reason for Non-compliance
Have a program for inducting
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
induction of directors. All directors
undergo
are
professional
continual
development.
encouraged
to
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
4.1
4.2
Not applicable
Not applicable
The Board should establish an
audit committee. The audit
committee should be structured
so that it has at least 3 members
of Non-
consists
only
Executive Directors;
consists of a majority of
independent Directors;
is chaired by an independent
chair, who is not chair of the
Board;
The Board has established an
audit committee consisting of 2
independent directors and one
director acting observer.
The
accessed
website.
The number of meetings during the
year and attendances by members
is disclosed in the annual report.
formal charter can be
the Company’s
at
The charter of the committee, the
qualifications and experience of
the members and in relation to
the reporting period, the number
of
the committee met
throughout the period and the
individual
of
members during
the period
should be disclosed.
attendances
times
Financial Officer
Before approving the financial
statements for a financial period,
the Board should receive from the
Chief Executive Officer and the
a
Chief
declaration that, in their opinion,
the financial records have been
properly maintained and that the
financial statements comply with
appropriate
accounting
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
control which
operating
effectively.
is
has
Board
received
The
appropriate declarations from the
Executive Chairman and the Chief
Financial Officer in accordance
the
with
Corporations Act.
section
295A
of
65
Principle
Number
4.3
Recommendation
Compliance
Reason for Non-compliance
The Company should ensure that
the external auditor attends its
AGM and is available to answer
questions from security holders
relevant to the audit.
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
disclosure
with
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 information can be accessed
at the Company’s website.
Not applicable
implement
and
relations program
Design
investor
facilitate
communication with investors
an
to
two-way
effective
the
policies
Disclose
and
processes it has in place to
encourage
facilitate
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
The company has adopted a
Shareholder
Communications
Policy which can be accessed at
the Company website.
Not applicable
Security holders have the option to
receive and send communications
electronically.
Not applicable
7. Recognise and manage risk
7.1
The Board should have a
committee (s) to oversee risk and
each committee should have at
least three members, a majority of
whom are independent directors
and is chaired by an independent
director.
Due to the size and level of
operations, the Company does not
have a committee to oversee risk.
The Board is responsible for the
oversight of risk management and
control framework. Responsibility
for control and risk management is
delegated to the appropriate level of
management within the Company
with the Executive Director having
ultimate responsibility to the Board.
66
Recommendation
Compliance
Reason for Non-compliance
the
The Board or a committee should
review
risk management
framework at least annually to
satisfy itself that it continues to be
in each
sound and disclose
reporting period whether such a
review has taken place.
the
Disclose whether or not
Company has an internal audit
function and if not, the processes
for evaluating and
employed
improving
continually
effectiveness
risk
its
management and internal control.
of
who
The Company’s risk management
policies set the guidelines for
management
have
responsibility for implementation
and monitoring compliance with
risk management policies. The
Board undertakes
continuous
review of risk management.
Due to the size of the operations,
the Company does not have an
internal audit function.
Not applicable
The Board and management have
responsibility
continuous
for
evaluation of risk management and
internal
the
framework of the Company’s Risk
Management Policy.
control
within
Principle
Number
7.2
7.3
7.4
Disclosure is made in the annual
report of any material exposure to
risk.
Not applicable
Not applicable.
The Company has established a
remuneration and nomination
committee which meets
these
criteria.
The charter for the committee can
be accessed via the Company’s
website and attendance at
meetings of the committee is
disclosed in the annual report..
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
to
8. Remunerate fairly and responsibly
8.1
The Board should establish a
remuneration committee which
s h o u l d be structured so that it has
at least three members,
consists of a majority of
independent directors; and
is chaired by an independent
director;
and disclose:
the charter of the committee
the members of the committee
and at the end of the reporting
period, the number of times the
committee met throughout the
period
individual
attendance by members at
those meetings.
and
8.2
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.
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.
that
Not applicable
67
Principle
Number
8.3
Recommendation
Compliance
Reason for Non-compliance
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.
includes
The company has a share trading
a
policy
which
prohibition on entering
into
transactions or arrangements
the
which operate
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
68
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)
Wayne Wouters (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
200 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
TSX Trust Company
200 University Avenue, Suite 300
Toronto, ON, Canada M5H 4H1
(416) 361-0930
Telephone:
Facsimile:
(416) 361-0470
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)
69
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