ANNUAL REPORT
31 March 2018
REVIEW OF OPERATIONS
Champion Iron Limited (the “Company”) is pleased to provide its review of operations for the financial year ending March
31, 2018.
On April 11, 2016, the Company, through its subsidiary, Québec Iron Ore Inc. (“QIO”) acquired the Bloom Lake iron ore
mine (“Bloom Lake”) from affiliates of Cliffs Natural Resources Inc. that was subject to restructuring proceedings under the
Companies’ Creditors Arrangement Act (Canada). Following the completion of a Feasibility Study that demonstrated that
recommencing iron ore mining operations at Bloom Lake was financially viable, the Company made the decision to
recommence operations at Bloom Lake.
During the year ended March 31, 2018, the Company completed its transition from an exploration company to a producing
company. On February 16, 2018, the Company commenced production at Bloom Lake and made its first shipment of high
grade 66% iron ore concentrate on April 1, 2018. To date, the Company has sold 1,295,713 wet metric tonnes of iron ore
concentrate.
The following milestones were achieved as part of this transition:
Bloom Lake - Plant Commissioning
All of the mining equipment required for mining operations was operational ahead of schedule and within budget. The main
crusher and conveyor to plant crushed ore stockpile were commissioned and tested in December 2017. The AG mill, one
of the key manufacturing equipment, was refurbished by METSO, a world-leading industrial company, and work undertaken
by Mineral Technologies in connection with the recovery circuit replacement was completed.
Bloom Lake - Environmental Work and Tailings Dam
All the work required was completed by December 31, 2017.
Bloom Lake - Construction Work
The construction work defined in the Bloom Lake March 2017 feasibility study (see Bloom Lake Feasibility Study section)
was completed on time.
Impact and Benefits Agreement
On April 12, 2017, QIO and the band council, Innu of Takuaikan Uashat mak Mani-utenam 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, QIO signed a Framework Off-Take Agreement (the “Off-Take 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. The Off-Take 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 financing, comprised of a bridge loan of $26,000,000 and equity of $14,000,000. The debt component of
$26,000,000 was committed with Sojitz providing $20,000,000 and Ressources Québec Inc. (“RQ”) providing $6,000,000.
The equity component comprised a proportionate contribution of $8,848,000 and $5,152,000 from the shareholders of QIO,
being the Company and RQ, respectively.
The Bridge Loan bears interest at the rate of 12% per annum on the outstanding principal amount of the Bridge Loan and
a standby fee of 2% per annum on the undrawn portion of the Bridge Loan; is secured by a $26,000,000 hypothec over all
of QIO’s property, plant and equipment (excluding mining claims) and matures on July 15, 2018. Advances under the
Bridge Loan are available in up to 4 instalments until November 30, 2017.
Principal advances of $16,000,000 were drawn down and on October 16, 2017, the Bridge Loan was repaid.
Convertible debenture
On June 1, 2017, 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. 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”).
The principal amount of the Debenture may be prepaid in whole or in part by the Company subject to a minimum payment
representing 9 months of interest.
Financial assistance from Québec's Green Fund for Bloom Lake energy conversion projects
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. $1,304,185
was received on March 31, 2018.
Rail transportation contract
On June 8, 2017, QIO entered into a rail transportation agreement with Quebec North Shore and Labrador Railway
Company, Inc. ("QNS&L") for the transportation of iron ore concentrate from Bloom Lake by rail from the Wabush Lake
Junction in Labrador City, Newfoundland & Labrador to the Sept-Îles Junction in Sept-Îles, Quebec.
In connection with the agreement, QIO made an advance payment of $15,000,000 which is recovered monthly as a credit
on rail transportation costs as per the agreement.
On February 22, 2018, the first train to Sept-Îles left the mine and the advance reimbursement mechanism has started to
be applied.
Settlement agreement with the Port
On July 13, 2012, the Company’s subsidiary company, CIML 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, CIML was to pay $25,581,000 and take-or-pay
payments as an advance on its future shipping, wharfage and equipment fees. CIML 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 July 15, 2017, CIML and the Port entered into a conditional settlement agreement, providing for the settlement, without
admission, of the dispute with the Port. The settlement agreement provided for payments by CIML or QIO to settle in full
the remaining advance payment of $19,581,000 and interest by December 1, 2017. Upon signing of the conditional
settlement agreement, CIML made an advance payment of $2,400,000
On October 16, 2017, the conditions of the settlement agreement were met and QIO paid the remaining advance payments
of $17,181,000 and interest of $2,807,116 by December 1, 2017.
The Port operations are in ramp up mode, the loading of the first ship has been done in April 2018 and the advance payment
is being reimbursed monthly as a credit as per the agreement.
Public offering of subscription receipts
On September 29, 2017, the Company completed a public offering of 21,033,508 subscription receipts at a price of $0.90
per subscription receipt for gross proceeds of $18,930,157 which was placed in escrow pending the satisfaction of the
certain escrow release conditions. On October 16, 2017, the escrow release conditions were satisfied and the proceeds of
the subscription receipts were released to the Company and holders of the subscription receipts received one ordinary
share of Company for each subscription receipt held.
Rail transportation and port-facilities access agreement
On March 23, 2017, QIO entered into a memorandum of understanding to become a limited partner in Société Ferroviaire
2
et Portuaire de Pointe-Noire, S.E.C. (“SFPPN”). SFPPN was formed to manage and develop the industrial facilities (rail
lines, access to port facilities, rail yards, a pellet plant, administrative offices and other facilities) at Pointe-Noire in Sept-Îles,
Québec. QIO advanced $1,000,000 as a contribution to the capital of SFPPN pending the completion of a limited
partnership agreement.
On October 12, 2017, QIO entered into a railway and port facilities access agreement with SFPPN for the transportation,
unloading, stockpiling and loading of iron ore concentrate from Sept-Iles to Pointe-Noire, Québec. In connection with the
agreement, QIO made an advance payment of $5,000,000 which will be recovered as a credit to future costs owing under
the agreement. QIO has secured an annual 8 million tons capacity with associated storage capacity at Pointe-Noire
adjacent to the port of Sept-Îles.
QIO and Tata Steel Minerals Canada (“TSM”), another limited partner in SFPPN, will make their expertise available to help
manage operations at Pointe-Noire. Through SFPPN, the Quebec government will continue its active involvement to
maintain and assure a multi-user approach and increase benefits for current and future projects in the area covered by the
Plan Nord. All three parties agree that they will endeavor to ensure that the Pointe-Noire infrastructures are developed to
match anticipated needs while continuing to provide services at the lowest possible cost for all potential users. A phased
capacity enhancement plan will be drawn up as quickly as possible. The first action from this plan was to build a conveyer
to connect to the multi-user quay in the port of Sept-Îles. The conveyer was constructed and delivered on March 21, 2018.
Unsecured subordinated convertible debenture and off-take agreement with Glencore International AG
On October 13, 2017, the Company completed a non-brokered private placement of a $31,200,000 unsecured subordinated
convertible debenture (“Debenture”) to Glencore International AG (“Glencore”). The Debenture is unsecured; bears interest
at the rate of 12% for the first year, and thereafter, an interest rate linked to the price of iron ore; convertible into ordinary
shares of the Company at a conversion price of $1.125 per ordinary share; mandatory conversion into ordinary shares of
the Company at a conversion price of $0.85 per ordinary share upon (a) the occurrence of a mandatory conversion event
or (b) Sprott or Caisse, lenders for the debt financing of US$180,000,000 for QIO, exercising their respective option to
require a mandatory conversion.
In connection with the closing of the Debenture, QIO entered into an off-take agreement with Glencore to grant global off-
take rights for life-of-mine of Bloom Lake with fixed commercial terms for a 10-year period for all tonnes of future iron ore
production at Bloom Lake not sold in Japan under the existing off-take agreement with Sojitz. In the event of a Mandatory
Conversion, the off-take terms will apply for the life-of-mine of Phase 1 of Bloom Lake and Glencore will have the option to
convert the marketing fees under the off-take terms into a FOB-based royalty under certain circumstances. In addition,
Glencore has been granted a right of first refusal in connection with the financing and off-take rights for iron ore production
of Phase II of Bloom Lake not allocated to certain strategic investors.
Debt financing of US$180,000,000 for QIO
On October 10, 2017, QIO entered into definitive agreements for debt financing of US$180,000,000 from Sprott Private
Resource Lending (Collector), LP (“Sprott”) and CDP Investissements Inc. (“CDP”), a wholly-owned subsidiary of Caisse de
dépôt et placement du Québec to finance the restart of Bloom Lake.
Sprott provided US$80,000,000 by way of a 5-year senior secured loan bearing interest at 7.5% per annum plus the greater
of US dollar 3-month LIBOR and 1% per annum. CDP provided US$100,000,000 by way of a 7-year subordinated loan
bearing interest at 12% for the first year, and thereafter, at an interest rate linked to the price of iron ore.
In connection with the debt financing, the Company issued: (a) 3,000,000 common share purchase warrants to Sprott,
entitling the holder to purchase 3,000,000 ordinary shares of the Company for $1.125 until October 16, 2022 and (b)
21,000,000 common shares purchase warrants to CDP, entitling the holder to purchase 21,000,000 ordinary shares of the
Company for $1.125 after October 16, 2018 until October 16, 2024. Ressources Québec (“RQ”) will provide compensation
commensurate with their 36.8% interest in QIO to the Company for issuing the common share purchase warrants.
See note 19 to the audited Consolidated Financial Statements of the Company at March 31, 2018 for the terms and
conditions of the Sprott and CDP debt facilities.
Grant of stock options
On May 25, 2017, the Company granted 1,650,000 stock options to eligible individuals pursuant to the Company’s share
incentive plan 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.
3
After receiving shareholder approval on July 10, 2017, the Company granted 600,000 stock options to directors entitling the
holder to purchase one ordinary share for A$1.08 until July 11, 2020. The stock options vest, as follows: 200,000 on July
11, 2017, 200,000 on July 11, 2018 and 200,000 on July 11, 2019.
On August 21, 2017, the Company granted 500,000 stock options to a director entitling the holder to purchase one ordinary
share for A$1.00 until August 21, 2020. The stock options vest, as follows: 166,667 on August 21, 2017,166,666 on August
21, 2018 and 166,666 on August 21, 2019.
Grant of share rights
On May 25, 2017, the Company granted 1,250,000 share rights to employees entitling the holder to receive one ordinary
share per share right upon vesting. The share rights vest on the satisfaction of the key performance measures including
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 the actual recommissioning of the plant at Bloom Lake
at a capacity of 7 million tonnes per annum (“Recommissioning KPM”).
After receiving shareholder approval on July 10, 2017, the Company granted 1,000,000 share rights to a director entitling
the holder to receive one ordinary share per share right upon vesting. The share rights vest on the satisfaction of the
Financing KPM and Recommissioning KPM.
The Financing KPM was satisfied on October 16, 2017 when the Company raised the last tranche of a $326,000,000
financing package consisting of debt and equity and the Recommissioning KPM was satisfied when the Company
commenced first production of iron ore on 16 February 2018. As a result, the share rights vested and the holders received
one ordinary share for each share right.
Bloom Lake Feasibility Study
The Company completed a National Instrument 43-101 (NI43-101) Technical Report on the Bloom Lake Mine Re-Start dated
March 17, 2017 (“Feasibility Study”). The Feasibility Study demonstrates that recommencing iron ore mining operations at
Bloom Lake is financially viable and would be competitive in global iron ore markets with the potential to be one of the
region’s leading long-life iron ore mines. A production restart at Bloom Lake would be a major contributor to the provincial
and national economy.
Highlights (all quoted figures in C$ 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$78.40 provided by a market study by Metalytics, a specialist economics consultancy in the metals and mineral
resources sector.
Summary of Economic Parameters and Feasibility Results
Mining Parameters
Reserve (Mt)
Processed tonnage (Mtpa)
Average Fe processing recovery (%)
Average mining dilution (%)
Average Recovered concentrate (Mtpa)
Mine Life (years)
411.7
20.0
83.3%
4.3%
7.4
21 years
4
Cost Parameters
Revenue Parameters
Iron Ore Price Parameters
Valuation Parameters
Initial CAPEX including Working Capital (CA$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)
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
The JORC and Canadian 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%.
March 2017 Bloom Lake Mineral Resource Estimate at Cut-off 15% Fe
Category
Measured
Indicated
M+I Total
Inferred
Dry Tonnage
(Mt)
Fe (%)
CaO (%)
MgO (%)
Al2O3 (%)
439.7
471.9
911.6
80.4
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
Includes ore reserves
March 2017 Bloom Lake Ore Reserves Estimate at Cut-off 15% Fe
Category
Proven
Probable
Total
Dry Tonnage
(Mt)
Fe (%)
CaO (%)
MgO (%)
Al2O3 (%)
264.2
147.6
411.7
30.7
28.7
30.0
0.5
2.8
1.3
0.6
2.7
1.3
0.3
0.4
0.4
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, QIO.
5
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.
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. The Company is committed to ongoing
exploration and evaluation at CLFN.
Grant of option for Cluster 3 Properties to Cartier Iron Corporation
The Company granted an option to Cartier Iron Corporation (“Cartier”) to acquire a 55% interest in Audrey-Ernie, Black Dan,
Jeannine Lake and Penguin Lake (“Cluster 3 Properties”). On December 22, 2017, Cartier earned its 55% interest in the
Cluster 3 Properties. In order to earn its 55% interest, Cartier made option payments, issued common shares and incurred
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)
Option
payments
$
–
100,000
150,000
–
250,000
Common shares
Number
Exploration
Fair value expenditures
$
$
1,000,000
–
500,000
500,000
–
250,000
–
80,000
80,000
–
50,000
‒
500,000
–
12,500
–
–
–
500,000
750,000
–
–
1,800,000
6
December 31, 2017 (paid)
450,000
1,000,000
–
2,500,000
–
422,500
–
3,050,000
In respect of the option payment of $450,000 due on December 31, 2017, the Company accepted a cash payment of
$50,000 and 500,000 common shares of Eloro Resources Ltd. at a deemed value of $0.80 per share.
Upon Cartier earning its 55% interest, a joint venture was 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 has an 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 kilometers of the Cluster 3 Properties,
the acquirer must offer the property at cost to the other party for inclusion in the Cluster 3 Properties.
Liquidity and Capital Resources
At March 31, 2018, the Company had cash of $25,185,234 and undrawn lines of credit of US$34,740,000 and with the
recommencement of production at Bloom Lake, based on results to date and forecast production and sales for the remainder
of the financial year, the Company expects that it will have positive cash flows and sufficient funds to continue funding
monthly production cash costs of approximately $28,200,000 and current year sustaining capital expenditures of
$21,700,000.
Other developments
See “Directors Report, Matters Subsequent to the End of the Financial Year” on page 9 for other developments.
Subsequent events
See “Director’s Report, Matters Subsequent to the End of the Financial Year” on page 9.
7
Your directors present their report on Champion Iron Limited and its controlled entities (collectively, the “Company”) for the
financial year ended March 31, 2018.
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
Michelle Cormier
Wayne Wouters
Jyothish George
Executive Chairman and
Chief Executive Officer
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-independent director since August 13, 2013
Independent director since April 9, 2014
Independent director since April 9, 2014
Independent director since April 11,2016
Independent director since November 1, 2016
Independent director since October 16, 2017
Qualifications and experience of Directors’ are disclosed on page 18.
PRINCIPAL ACTIVITY
The Company’s principal activity is the production, exploration and development of iron ore properties in Québec, Canada.
REVIEW OF OPERATIONS AND RESULTS
For the year ended March 31, 2018, the Company recorded a consolidated loss of $107,330,901 (2017: $35,416,404) and
comprehensive loss of $107,340,646 (2017: $34,869,393). Details of the operations of the Company are set out in the
review of operations on page 2.
FINANCIAL POSITION
At March 31, 2018, the Company had net assets totaling $54,447,957 (2017 restated: $89,313,340) and cash and cash
equivalents and short-term investments $25,185,234 (2017: $13,329,084).
DIVIDENDS
No dividends were paid or recommended for the year ended March 31, 2018 (2017: Nil).
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
See 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, 2018 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.
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:
8
Directors
Meetings
Attended
Audit Committee
Attended
Meetings
Remuneration and
Nomination Committee
Meetings
Attended
Michael O’Keeffe
Gary Lawler
Andrew Love
Michelle Cormier
Wayne Wouters
Jyothish George
8
8
8
8
8
4
8
8
8
8
8
2
–
7
7
5
–
–
–
6
7
5
–
–
1
2
2
1
–
–
1
2
2
1
–
–
AUDIT COMMITTEE
The Company has established an Audit Committee that comprises Andrew Love (Chair), Gary Lawler and Michelle Cormier.
REMUNERATION AND NOMINATION COMMITTEE
The Company has established a Remuneration and Nomination Committee that comprises Gary Lawler (Chair), Andrew
Love and Michelle Cormier.
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, 2018 are disclosed in note 23 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. The information provided in the Remuneration Report has been audited as required by section 308(3C)
of the Corporations Act
Directors’ Remuneration Policy
(a) The policy of the Company is to ensure that remuneration packages adequately reward executives and non-executive
directors for their experience, duties, responsibilities and contribution to the Company's overall growth, development
and performance and are sufficient to ensure that the Company is in a position to retain and attract the highest calibre
executives and non-executive 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, 2018.
The following persons had authority and responsibility for planning, directing and controlling the activities of the Company,
directly or indirectly, during the financial year ended 31 March 2018:
Person
Michael O’Keeffe
Gary Lawler
Andrew Love
Michelle Cormier
Wayne Wouters
Jyothish George
David Cataford
Miles Nagamatsu
Jorge Estepa
Position
Executive Chairman and Chief Executive Officer
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Chief Operating Officer
Chief Financial Officer
Vice President, Corporate Secretary, Canada
Note
Appointed on October 16, 2017
9
Pradip Devalia
Beat Frei
Company Secretary, Australia
Senior Vice President Business Development and
Finance
Remuneration of directors and key management personnel
Remuneration paid in A$ has been converted to C$ using an exchange rate of $1.00.
The Company's performance in financial year 2018
On 11 April, 2016, the Company, through its subsidiary, Québec Iron Ore Inc. acquired the Bloom Lake iron ore mine
(“Bloom Lake”) from affiliates of Cliffs Natural Resources Inc. that was subject to restructuring proceedings under the
Companies’ Creditors Arrangement Act (Canada). Following the completion of a Feasibility Study that demonstrated that
recommencing iron ore mining operations at Bloom Lake was financially viable, the Company made the decision to
recommence operations at Bloom Lake.
During the year ended 31 March 2018, the Company completed its transition from an exploration company to a producing
company. On 16 February 2018, the Company commenced production at its Bloom Lake iron ore mine and made its first
shipment of Bloom Lake high grade 66% iron ore concentrate on 1 April, 2018. The following milestones were achieved as
part of this transition:
• On 9 April 2017, QIO entered into a memorandum of understanding with Société du Plan Nord and Tata Steel Minerals
Canada to work together, in a multi-user approach, to manage and develop the industrial facilities at Pointe-Noire in
Sept-Îles, Québec;
• On 12 April 2017, QIO and the band council, Innu of Takuaikan Uashat mak Mani-utenam (ITUM), entered into an
Impact and Benefits Agreement with respect to future operations at Bloom Lake;
• On 1 May 2017, QIO signed a Framework Off-Take Agreement with Sojitz Corporation (“Sojitz”), a major trading
company based in Tokyo, Japan, pursuant to which Sojitz agreed to purchase up to 3,000,000 DMT of iron ore per
annum.
• On 16 October 2017, QIO entered into a global off-take arrangement with Glencore International AG (“Glencore”)
pursuant to which Glencore agreed to purchase all iron production not sold in Japan under the off-take agreement with
Sojitz for life-of-mine with fixed commercial terms for a 10-year period.
• On 13 October 2017, QIO entered into a rail transportation and port facilities agreement with the Société Ferroviarie et
Portuaire de Pointe-Noire for the transportation, unloading, stockpiling and loading of iron ore from Pointe Noire, Québec
to Sept-Îles.
• On 16 October 2017, QIO completed a financing package of $326,000,000 required to finance the restart of Bloom
Lake, which included the following:
• Railcar financing of US$30,135,000:
• $31,200,000 debenture to Glencore;
• US$80,000,000 5-year senior secured loan provided by Sprott Private Resource Lending (Collector), LP;
• US$100,000,000 million 7-year subordinated loan provided by CDP Investissements Inc., a wholly-owned
subsidiary of Caisse de dépôt et placement du Québec;
• $26,163789 equity participation of Ressources Québec;
• public offering of 21,033,508 subscription receipts at a price of $0.90 per subscription receipt for gross proceeds of
$18,930,157;
• On 16 February 2018, the recommissioning of the plant at Bloom Lake was completed.
• On 1 April 2018, the first shipment of high-grade 66% Fe iron ore concentrate was made.
The following charts and table sets out the Company's market capitalisation and share price for the year ended 31 March
2018:
10
Market capitalization ($M)
Share price
600
500
400
300
200
100
0
Date
31 March 2016
31 March 2017
31 March 2018
1,6
1,4
1,2
1
0,8
0,6
0,4
0,2
0
Market capitalization
$millions
Share price
$
47
398
485
0.20
1.03
1.17
Executive bonuses relating to the financial year 2017
In April 2017 the Company awarded Michael O'Keeffe, David Cataford and Beat Frei bonuses in respect of the 2017 financial
year payable upon the satisfaction of the following key performance measures:
•
•
the completion of the raising by the Company of the total financing package required to facilitate the recommissioning
of the plant at Bloom Lake at a rated capacity of 7 million tonnes per annum (Financing KPM);
the actual recommissioning of the plant at Bloom Lake at a rated capacity of 7 million tonnes per annum
(Recommissioning KPM).
The bonuses and awards payable to Michael O'Keeffe, David Cataford and Beat Frei are set out below:
Michael O’Keeffe – Director and Executive Chairman
• 1,000,000 share rights which vested and converted into 1,000,000 ordinary shares following the satisfaction of the
Financing KPM and Recommissioning KPM. The grant of these share rights was approved by the Company's
shareholders on 18 August 2017.
David Cataford – Chief Operating Officer
• Cash bonus of $660,000, with $360,000 paid following the satisfaction of the Financing KPM and $300,000 paid
following the satisfaction of the Recommissioning KPM;
• 500,000 stock options each convertible into an ordinary share at an exercise price of A$1.00 until May 25, 2020;
• 250,000 share rights which vested and converted into 250,000 ordinary shares following the satisfaction of the Financing
KPM and Recommissioning KPM.
Beat Frei – Senior Vice President Business Development and Finance
• Cash bonus of $2,000,000 paid following the satisfaction of the Financing KPM;
• 1,000,000 share rights which vested and converted into 1,000,000 ordinary shares following the satisfaction of the
Financing KPM.
The Financing KPM was satisfied 16 October 2017 when the Company raised the last tranche of a $326,000,000 financing
package consisting of debt and equity which was required to finance the recommencement of operations at Bloom Lake
and the recommissioning of the plant at Bloom Lake at a rated capacity of 7 million tonnes per annum. As a result, the
above bonuses and awards payable on the satisfaction of the Financing KPM have been paid.
11
The Recommissioning KPM was satisfied when the Company commenced first production of iron ore on 16 February 2018.
As a result, the above bonuses and awards payable on the satisfaction of the Recommissioning KPM have been paid.
Executive remuneration for financial year 2018
In April 2017, after having received market data for comparable companies and obtaining third party advice, the Company
increased the remuneration packages of key management personnel to reflect market-based salary arrangements
accounting for the workload, expertise and responsibilities required to facilitate the recommencement of mining operations
at Bloom Lake.
During the financial year ended 31 March 2018, the Company entered into new service agreements with the Executive
Chairman, Michael O'Keeffe, the Chief Operating Officer, David Cataford and the Head of Finance, Beat Frei. The purpose
of entering into these arrangements was to better define the role and the responsibilities of these key executives and to
increase their base annual salary to more appropriately reflect market conditions and remunerate them for their workloads
and responsibilities.
Executive bonuses for financial year 2018
As a result of the achievements outlined in the section titled “The Company’s performance in the financial year 2018”, the
Company has awarded Michael O'Keeffe, David Cataford and Beat Frei bonuses in respect of the financial year ended 31
March 2018 as follows:
Michael O'Keeffe – Director and Executive Chairman
A grant of 751,900 share rights which will vest and convert into 751,900 ordinary shares following shareholder approval of
the grant. Shareholder approval to the grant will be sought at this year's annual general meeting. The bonus reflects the
significant overall role played by Michael O'Keeffe in the recommissioning of the Bloom Lake Plant and the commencement
of production at Bloom Lake ahead of schedule, under budget and with a quicker than anticipated production ramp up. It
also acknowledges the substantial increase in the Company's market capitalisation since 11 April 2016 when the Company
acquired the Bloom Lake Mine.
David Cataford – Chief Operating Officer
A cash bonus of $1,000,000 and 500,000 stock options entitling the holder to purchase one common share per stock option
for $1.33 for 3 years from the date of grant. The stock options will vest over 3 years with 166,666 stock options vesting on
the first and second anniversaries of the date of grant and 166,668 stock options vesting on the third anniversary of the date
of grant.
The bonus reflects the significant role played by David in the recommissioning of the plant at Bloom Lake ahead of schedule,
under budget and with a quicker than anticipated production ramp up and with an unblemished safety and environmental
record. He had principal responsibility for the appointments of a senior management team and securing the required
workforce to operate the mine. It also reflects the benefits which have accrued to the Company through the obtaining of
significant government grants, the successful management of a municipal taxes dispute and the successful negotiation of
a 3-year union contract.
Beat Frei – Senior Vice President Business Development and Finance
A cash bonus of $1,000,000 and the grant of 500,000 stock options entitling the holder to purchase one common share per
stock option for $1.33 for 3 years from the date of grant. The stock options will vest over 3 years with 166,666 stock options
vesting on the first and second anniversaries of the date of grant and 166,668 stock options vesting on the third anniversary
of the date of grant.
The bonus reflects the benefits which have accrued to the Company through various financing initiatives including the
negotiation of a revolving working capital facility to better manage inventory and the negotiation of an extension to the
company's railcar financing on favourable terms and the significant savings which have been achieved in the marketing,
sale and shipping of Bloom Lake high grade 66% FE iron ore concentrate.
Executive bonuses for financial year 2019
The bonuses for the 2017 and 2018 financial years reflect the specific project milestones which were achieved and the
special efforts which were required in order to redevelop, finance and recommence operations at Bloom Lake and to
transition the Company from an exploration company to a producing company within 2 years of the acquisition of Bloom
Lake. In the future, bonus arrangements will be normalized in line with those applicable to comparable resource companies
which are in the production phase. To this end, the Remuneration Committee has retained Mercer, International
Remuneration Consultants and Advisors, to assist in the design of suitable short-term incentive and long-term incentive
12
plans which will be effective in the financial year ending 31 March 2019 and future years for senior employees of the
Company, including key management personnel.
Statutory Remuneration Disclosures
The following tables set out the details of remuneration of key management personnel during the years ended 31 March
2018 and 31 March 2017:
Year ended
March 31, 2018
Short term
$
Salary
Consulting
fees
Bonus (h)
Non-
monetary
Termination
payments
$
$
Post
employment
Options/
share rights
$
Total
$
Performance
related
Consisting
of options/
share
rights
Michael O’Keeffe
Gary Lawler
Andrew Love
Michelle Cormier
Wayne Wouters (a)
Jyothish George (b)
David Cataford
Miles Nagamatsu (c)
Jorge Estepa (d)
Pradip Devalia
Beat Frei (e)
500,000
88,750
88,750
–
–
–
400,000
–
–
80,000
–
1,157,500
–
–
–
75,000
75,000
–
–
126,000
96,000
–
350,000
722,000
–
–
–
–
‒
–
1,660,000
–
–
–
3,000,000
4,660,000
26,388
–
–
–
‒
–
8,424
7,416
7,416
–
65,998
115,642
–
–
–
–
‒
–
–
–
–
–
–
(f) 2,797
(g) 8,431
(g) 8,431
–
‒
–
(f) 2,797
‒
–
(g) 7,600
‒
30,057
1,123,922
99,750
99,750
134,583
–
–
437,500
–
53,879
42,167
879,722
2,871,273
1,653,107
196,931
196,931
209,583
75,000
–
2,508,721
133,416
157,295
129,767
4,295,720
9,556,472
65.3%
–
–
‒
‒
–
74.8%
–
–
–
90.1%
68.0%
50.7%
50.7%
64.2%
–
–
17.4%
–
34.3%
32.5%
20.5%
(a) Paid to 2468435 Ontario Inc., a company controlled by Wayne Wouters.
(b) Appointed as a director on October 16, 2017.
(c) Paid to Marlborough Management Limited, a company controlled by Miles Nagamatsu.
(d) Paid to J. Estepa Consulting Inc., a company controlled by Jorge Estepa.
(e) Paid to Comforta GmbH, a company controlled by Beat Frei.
(f) Amount relates to employer portion of contributions to the Canada Pension Plan/Quebec Pension Plan.
(g) Amount relates to superannuation.
(h) 2,660,000 related to FY17 performance and 2,000,000 related to FY18 performance.
Year ended
March 31, 2017
Short term
$
Salary
Consulting
fees
Bonus
Non-
monetary
Termination
payments
$
$
Post
employment
Options/
share rights
$
Total
$
Performance
related
Consisting
of options/
share
rights
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%
61.5%
–
–
–
–
63.8%
8.5%
45.0%
–
–
–
47.5%
Notes:
(a) Resigned as a director on June 15, 2016.
(b) Appointed as a director on April 11, 2016, Consulting fees commenced on February 1, 2017.
(c) Appointed as a director 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 on December 31, 2016.
(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
13
Service agreements
Executives
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, 2018 are
set out below.
Michael O’Keeffe – Director and Executive Chairman
• Commencing 1 April 2017, annual salary was increased from $279,200 to $500,000; car lease payments of $2,135 per
month; 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.
• Commenced on 13 August 2015 and continues until termination.
• Can be terminated by the Company for cause or on 12 months' notice.
• Payment of termination benefits equal to annual salary for 12 months if terminated by the Company without cause.
David Cataford – Chief Operating Officer
• Annual salary $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. Payment of termination benefits equal to annual
salary for 12 months if terminated by the Company without cause.
• Commenced 1 April 2017 and continues until termination.
• Can be terminated by the Company for cause or on 60 days' notice.
Beat Frei – Senior Vice President Business Development and Finance
• Commenced 1 April 2017, annual fees increased from $240,000 to $350,000 payable to Comforta GmbH, a company
controlled by Beat Frei, pursuant to a professional services agreement which expires on 31 March 2019.
• The Company makes condominium rental payments of up to $50,000 per year, car lease payments of up to $20,000
per year and reimburses the cost of return-trip airline tickets between Zurich, Switzerland and Montreal, Canada of up
to $50,000 per year.
• Entitled to receive a performance bonus as determined by the Board in its discretion subject to satisfaction of
performance criteria.
• Continues until 31 March 2019 unless terminated by the Company earlier for cause or on 30 days' notice. Termination
benefit equal to 12 months fees payable if the Company terminates on giving 30 days' notice.
Miles Nagamatsu – Chief Financial Officer
• Annual consulting fees of $126,000 payable to Marlborough Management Limited, pursuant to an amended professional
services agreement, which unless terminated, renews automatically on 30 November. No termination benefits payable.
Jorge Estepa – Vice President and Corporate Secretary, Canada
• Commenced 1 May 2016.
• Annual consulting fees of $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. No termination benefits payable.
Pradip Devalia – Corporate Secretary, Australia
• Commenced 1 May 2014 and continues until termination for cause or on 3 months' notice.
• Annual salary of A$80,000 plus superannuation contributions.
• Payment of termination benefit equal to salary for 6 months in certain circumstances.
Non-executive director fees
Non-executive director fees were set at A$75,000 per annum on 9 April 2014. During the financial year ended 31 March
2018 the fees payable to each of Gary Lawler and Andrew Love were increased by A$15,000 from A$75,000 to A$90,000
per annum to more appropriately reflect the workload which is involved in the chairing of the Nominations and
Remuneration Committee and Audit and Risk Committee respectively.
14
Movement in key management personnel equity holdings
Ordinary shares
Michael O’Keeffe (a)
Gary Lawler (b)
Andrew Love (c)
Michelle Cormier
Wayne Wouters
Jyothish George
David Cataford (d)
Miles Nagamatsu
Jorge Estepa
Pradip Devalia
Beat Frei
Holding at
March 31, 2017
Acquired
Sold
March 31, 2018
Holding at
33,536,930
900,000
764,468
–
–
–
769,698
1,211,916
1,133,083
–
1,900,354
1,140,000
575,000
615,000
20,000
40,000
–
250,000
–
–
150,000
2,750,000
–
–
–
–
–
–
–
–
–
–
50,000
34,676,930
1,475,000
1,379,468
20,000
40,000
–
1,019,698
1,211,916
1,133,083
150,000
4,600,354
Notes:
(a) Holding at March 31, 2018 includes 31,176,930 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, 2018 includes 975,000 ordinary shares held indirectly by Parcent Holdings Pty Limited, a company controlled by Gary Lawler,
of which, 375,000 ordinary shares are held for its own account and 600,000 ordinary shares are held as trustee for G.K. Lawler Superannuation Fund.
(c) Holding at March 31, 2018 includes 84,648 ordinary shares held indirectly by Amanda G. Love, spouse of Andrew Love, and 835,000 ordinary shares
held indirectly by Love Superannuation Pty Ltd., a company controlled by Andrew Love, as trustee for Love Superannuation Fund.
(d) Holding at March 31, 2018 includes 214,285 ordinary shares held indirectly by Genevieve Robert, spouse of David Cataford.
Stock options
Each stock option has been issued for no consideration and entitles the holder to acquire 1 ordinary share at the respective
exercise price.
Michael O’Keeffe (a)
Gary Lawler
Andrew Love
Michelle Cormier
Wayne Wouters
Jyothish George
David Cataford
Miles Nagamatsu
Jorge Estepa
Pradip Devalia
Beat Frei
Holding at
March 31, 2017
Granted
Exercised
Holding at
March 31, 2018
Exercisable at
March 31, 2018
12,500,000
500,000
500,000
–
500,000
–
2,000,000
‒
‒
150,000
3,000,000
–
300,000
300,000
500,000
‒
–
500,000
–
300,000
150,000
–
–
(500,000)
(500,000)
–
‒
–
–
–
–
(150,000)
(1,750,000)
12,500,000
300,000
300,000
500,000
500,000
–
2,500,000
‒
300,000
150,000
1,250,000
12,166,667
100,000
100,000
166,667
500,000
–
2,500,000
–
100,000
50,000
1,250,000
Notes:
(a) Holding at March 31, 2018 includes 7,500,000 options held indirectly by Prospect AG Trading Pty. Ltd, a company controlled by Michael O’Keeffe.
Option compensation granted and vested during the year
Exercise
price
Number
granted
Grant date
Vested
in
period
%
Fair value
per option
at
grant
date
$
Fair value
of options
granted
$
Expiry &
exercise date
last
David Cataford (a)
Jorge Estepa (a)
A$1.00
A$1.00
500,000
300,000
May 25, 2017
May 25, 2017
100.0
33.3
0.44
0.44
220,000
84,333
May 25, 2020
May 25, 2020
15
A$1.00
Pradip Devalia (a)
A$1.08
Gary Lawler (b)
A$1.08
Andrew Love (b)
Michelle Cormier (b) A$1.00
150,000
300,000
300,000
500,000
May 25, 2017
July 11, 2017
July 11, 2017
August 21, 2017
33.3
33.3
33.3
33.3
0.44
0.57
0.57
0.51
66,000
171,000
171,000
255,000
May 25, 2020
July 11, 2020
July 11, 2020
August 21, 2020
Notes:
(a) Options were granted in recognition of the service of the option holder as an employee or consultant of the Company.
(b) 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 31 March 2018 (2017: no options).
Share rights
Each share right was issued for no consideration and vested and converted into 1 ordinary share on the satisfaction of key
performance measures.
Holding at
March 31, 2017 Granted
Vested
converted
and
Holding
at
March 31, 2018
Michael O’Keeffe
David Cataford
Beat Frei
–
–
–
1,000,000
250,000
1,000,000
(1,000,000)
(250,000)
(1,000,000)
–
–
–
Share rights granted and vested during the year
Number
granted
Grant date
and
in
Vested
converted
period
%
Fair value per
share right at
grant date
$
Fair value of
rights
share
granted
$
Michael O’Keeffe
David Cataford
Beat Frei
1,000,000
250,000
1,000,000
July 10, 2017
May 25, 2017
May 25, 2017
100.0
100.0
100.0
1.08
0.87
0.87
1,080,000
217,500
870,000
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
There are indemnities in place for directors and officers insurance policies in regard to their positions.
INDEMNITY OF AUDITORS
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young Australia, as part of the
terms of its audit engagement agreement against claims from third parties arising from the audit (for an unspecified amount).
No payment has been made to indemnify Ernst & Young during or since the end of the financial year.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any proceedings to
which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those
proceedings.
The Company was not a party to any such proceedings during the year.
NON-AUDIT SERVICES
Ernst & Young performed other services in addition to their statutory duties. The details and remuneration for these services
is disclosed in Note 32 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,
16
AUDITOR’S INDEPENDENCE DECLARATION
The lead auditor’s independence declaration for the year ended 31 March 2018 has been received, as set out on page •,
and forms part of this report.
Signed in accordance with a resolution of the Directors
Michael O’Keeffe, Executive Chairman
Andrew Love, Non-executive Director
Sydney, New South Wales
29 June 2018
17
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.
18
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.
Non-Executive Director
Jyothish George
Mr. George is currently Head of Glencore’s Iron Ore Division. He serves as Vice
Chairman of the Board of Directors of the El Aouj Mining Company SA in Mauritania
and a member of the Board of Directors of Jumelles Limited, the holding company
of the Zanaga iron ore mine in the Republic of Congo. Immediately prior to his
current role, Mr. George served as the Chief Risk Officer of Glencore. He earlier held
a number of roles at Glencore’s head office in Baar, Switzerland from 2009 onwards
focused on iron ore, nickel and ferroalloys physical and derivatives trading, and has
been involved with iron ore marketing since its inception at Glencore. Mr. George
joined Glencore in 2006 in London. He was previously a Principal at Admiral Capital
Management in Greenwich, Connecticut, a Vice President in equity derivatives
trading at Morgan Stanley in New York, and started his career at Wachovia
Securities in New York as a Vice President in convertible bonds trading. Mr. George
received a Bachelors in Technology from IIT Madras, India and a PhD in Mechanical
Engineering from Cornell University.
19
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 31 March 2018 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
31 March 2018 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 31 March 2018.
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
29 June 2018
20
21
Champion Iron Limited
(ACN: 119 770 142)
Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
22
__________________________________________________________________________________________________________
23
__________________________________________________________________________________________________________
24
__________________________________________________________________________________________________________
25
__________________________________________________________________________________________________________
26
__________________________________________________________________________________________________________
27
__________________________________________________________________________________________________________
28
__________________________________________________________________________________________________________
29
Champion Iron Limited
Consolidated Statements of Financial Position
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
Assets
Current
Cash and cash equivalents
Short-term investments
Receivables
Due from Cartier Iron Corporation
Prepaid expenses and advances
Inventories
Non-current
Receivables
Investments
Advance for investment in railway and port facilities partnership
Advance payments
Property, plant and equipment
Software
Exploration and evaluation assets
Liabilities
Current
Accounts payable and accrued liabilities
Convertible debenture, Altius
Note payable
Non-current
Note payable
Property taxes payable
Long-term debt
Convertible debenture, Glencore
Derivative liabilities
Royalty payable
Rehabilitation obligation
Deferred tax liability
Shareholders’ equity
Capital stock
Contributed surplus
Warrants
Foreign currency translation reserve
Non-controlling interest
Accumulated deficit
As at
March 31,
2018
Notes
$
As at
March 31,
2017
Restated*
$
5
6
7
8
9
6
10
12
13
14
15
16
17
14
14
18
19
20
20
21
22
25
23
7,894,505
17,290,729
25,839,669
-
15,897,677
48,170,918
115,093,498
-
4,250,000
1,000,000
36,516,981
171,819,414
899,718
72,136,511
401,716,122
1,863,387
11,465,697
6,644,087
348,003
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
63,180,892
9,790,998
36,437,761
109,409,651
1,667,502
-
5,994,977
7,662,479
-
16,275,960
141,225,222
14,016,128
24,683,000
300,000
35,893,491
5,464,713
347,268,165
224,336,103
21,203,767
17,730,000
578,455
822,684
(210,223,052)
54,447,957
37,613,355
7,713,000
-
-
-
300,000
25,155,500
5,464,713
83,909,047
201,989,902
20,120,494
-
588,200
2,362,819
(135,748,075)
89,313,340
401,716,122
173,222,387
Should be read in conjunction with the notes to the consolidated financial statements
*Certain amounts shown here do not correspond to the March 31, 2017 Consolidated Financial Report and reflect
adjustments made, refer to Note 25
30
Champion Iron Limited
Consolidated Statements of Loss and Comprehensive Loss
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
Revenue
Interest
Other income
Notes
Year ended
March 31,
2018
$
Year ended
March 31,
2017
$
171,036
221,753
392,789
246,980
50,979
297,959
Expenses
Professional fees
Salaries
Consulting fees
Share-based compensation
General and administrative
Investor relations
Travel
Exploration
Care and maintenance and restart costs of Bloom Lake
Depreciation
Gain on sale of property, plant and equipment
Foreign exchange loss (gain)
Unrealized gain on investments
Change in fair value of derivative liabilities
Accretion of borrowing costs and debt discount
Accretion of rehabilitation obligation
Transaction costs
Interest expense
24
14
22
10
1,648,338
5,046,061
1,731,392
3,179,273
1,803,402
332,112
287,012
200,692
66,993,531
4,244,149
301,436
441,988
701,563
1,331,920
904,980
77,554
443,687
80,619
26,669,074
2,586,047
(994,173) (433,038)
(987)
(1,056,000) (1,173,233)
-
3,590,000
-
4,206,818
632,500
695,000
2,623,874
-
526,379
13,231,056
35,714,363
107,723,690
2,585,027
Loss for the year
Loss attributable to:
Equity holders of Champion
Non-controlling interest
Loss
Other comprehensive income
Item that may be reclassified in future years to the statement of loss
Net movement in foreign currency translation reserve
Comprehensive loss
Comprehensive loss attributable to:
Equity holders of Champion
Non-controlling interest
Comprehensive loss
Loss per share - basic and diluted
(107,330,901) (35,416,404)
(74,474,977) (23,779,223)
(32,855,924) (11,637,181)
(107,330,901) (35,416,404)
(9,745)
547,011
(107,340,646) (34,869,393)
(74,484,722) (23,232,212)
(32,855,924) (11,637,181)
(107,340,646) (34,869,393)
26
(0.19)
(0.06)
Should be read in conjunction with the notes to the consolidated financial statements
31
Champion Iron Limited
Consolidated Statements of Changes in Equity
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
Ordinary shares
Shares
$
Warrants
Contributed
surplus
$
Foreign
currency
translation
reserve
$
Non-
controlling Accumulated
deficit
$
interest
$
Total
$
Balance, March 31, 2017
(Restated*)
385,934,339
201,989,902
-
20,120,494
588,200
2,362,819
(135,748,075)
89,313,340
Loss
-
-
Other comprehensive loss
-
-
Total comprehensive loss
-
-
Public offering of subscription
receipts
21,033,508
18,930,257
Private placement
Private placement
-
-
-
-
Exercise of stock options
5,400,000
1,703,335
Exercise of share rights
Fair value of stock options
exercised
Share-based compensation
Fair value of warrants issued
Derecognition of derivative
liability
2,250,000
2,167,500
-
660,500
-
-
Share issue costs
-
(1,115,391)
-
-
17,730,000
-
-
-
-
-
732,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,167,500)
(660,500)
3,179,273
-
-
(32,855,924)
(74,474,977)
(107,330,901)
-
(9,745)
-
-
(9,745)
-
(9,745)
(32,855,924)
(74,474,977)
(107,340,646)
-
-
-
-
-
-
-
-
-
-
-
-
18,930,257
5,152,000
-
5,152,000
26,163,789
-
26,163,789
-
-
1,703,335
-
-
-
-
-
-
-
-
3,179,273
-
-
17,730,000
-
-
732,000
-
-
(1,115,391)
Balance, March 31, 2018
414,617,847
224,336,103
17,730,000
21,203,767
578,455
822,684
(210,223,052)
54,447,957
198,319,784
174,509,902
-
16,268,574
41,189
-
(106,504,139)
84,315,526
Balance, March 31, 2016 –
as originally reported
Affect of restatement of
deferred tax liability
Balance, March 31, 2016 -
restated
-
-
198,319,784
174,509,902
Loss
-
-
Other comprehensive loss
-
-
Total comprehensive loss
-
-
Private placement of ordinary
shares
187,500,000
30,000,000
Private placement of QIO
-
-
Share-based compensation
Fair value of compensation
options
Conversion of exchangeable
share
Balance, March 31, 2017
(Restated*)
-
-
-
(2,520,000)
114,555
-
385,934,339
201,989,902
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,464,713)
(5,464,713)
16,268,574
41,189
-
(111,968,852)
78,850,813
-
-
-
-
-
1,331,920
2,520,000
-
-
(11,637,181)
(23,779,223)
(35,416,404)
547,011
-
-
547,011
547,011
(11,637,181)
(23,779,223)
(34,869,393)
-
-
-
-
-
-
-
30,000,000
14,000,000
-
14,000,000
-
-
1,331,920
-
-
-
-
-
-
20,120,494
588,200
2,362,819
(135,748,075)
89,313,340
Should be read in conjunction with the notes to the consolidated financial statements
*Refer to Note 25 for detail regarding the restatement adjustment
32
Champion Iron Limited
Consolidated Statements of Cash Flows
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
Year ended March 31
2018
$
Year ended March 31,
2017
$
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
Gain on sale of property, plant and equipment
Unrealized gain on investments
Change in fair value of derivative liability
Accretion of borrowing costs and debt discount
Accretion and reassessment of the rehabilitation obligation
Interest not paid
Changes in non-cash operating working capital
Receivables
Prepaid expenses and advances
Inventories
Deposit
Accounts payable and accrued liabilities
Financing activities
Proceeds of bridge loan
Repayment of bridge loan
Bridge loan transaction costs
Proceeds of convertible debenture, Altius
Proceeds of long-term debt
Borrowing costs
Proceeds of convertible debenture, Glencore
Public offering of subscription receipts
Share issue costs
Private placement of ordinary shares
Private placement of common shares of Quebec Iron
Exercise of stock options
Repayment of note payable
Investing activities
Receipt of refundable tax credit and credit on duties
Investment in term deposits
Proceeds on sale of investments
Received from Cartier Iron Corporation
Advance payments
Acquisition of Bloom Lake
Purchase of Quinto claims
Investment in port partnership
Purchase of railcars
Proceeds on sale of equipment
Purchase of property, plant and equipment
Purchase of leasehold improvements
Purchase of software
Exploration and evaluation
Transaction costs
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Effects of exchange rate changes on cash
Cash and cash equivalents, end of year
(107,330,901)
-
-
3,179,273
7,224,000
4,244,149
(994,173)
(1,056,000)
3,590,000
4,206,818
695,000
6,583,060
(79,658,774)
(19,195,582)
(15,618,653)
(48,170,918)
-
61,513,390
(101,130,537)
16,000,000
(16,000,000)
(501,413)
10,000,000
158,286,744
(3,848,902)
31,200,000
18,930,257
(1,115,391)
-
31,315,789
1,703,335
(7,170,571)
238,799,848
-
(5,825,032)
-
348,003
(30,516,981)
-
-
-
-
1,426,652
(96,669,555)
-
(899,718)
439,023
-
(131,697,608)
5,971,703
1,863,387
59,415
7,894,505
Should be read in conjunction with the notes to the consolidated financial statements
(35,416,404)
2,623,874
(22,500)
1,331,920
7,245,000
2,586,047
(433,038)
(1,173,233)
-
-
632,500
468,000
(22,157,834)
(477,807)
157,432
-
1,600,000
788,727
(20,089,482)
-
-
-
-
-
-
-
-
-
30,000,000
14,000,000
-
-
44,000,000
2,102,675
(10,088,395)
323,733
-
-
(9,800,000)
(776,818)
(1,000,000)
(3,087,613)
3,395,538
(3,522)
(351,787)
-
(977,793)
(2,623,874)
(22,887,856)
1,022,662
293,714
547,011
1,863,387
33
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(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 investments and derivative financial instruments 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, 2018 were approved and authorized for issue by the Board of Directors on June 29, 2018.
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 listed below:
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 14). There have been no changes in ownership percentages from the comparative
period.
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.
34
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(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 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.
35
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
The Company has classified accounts payable and accrued liabilities as other financial liabilities.
Impairment of non-derivative financial assets
A financial asset is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A
financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the
asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated
reliably.
Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred measured at acquisition date fair value. Acquisition-related costs are expensed
as incurred and included in administrative expenses.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration over the net identifiable assets
acquired and liabilities assumed. After initial recognition, goodwill is measured at cost less any accumulated impairment
losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date,
allocated to each of the Company's cash-generating units that are expected to benefit from the combination, irrespective of
whether other assets or liabilities of the acquiree are assigned to those units.
Cash and cash equivalents
Cash and cash equivalents consists of cash in bank, cash held in trust and short-term deposits with a maturity of less than
three months.
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:
Equipment
Rail and railcars
Software
Mine and mineral rights
Housing
Exploration and evaluation assets
Straight-line over 10 years or units-of-production over life of mine
Straight-line over 23 and 24 years
Straight-line over 5 years
Units-of-production over life of mine
Straight-line over 24 years
Recognition and measurement
Exploration and evaluation assets, including the costs of acquiring licenses and directly attributable general and
administrative costs, initially are capitalized as exploration and evaluation assets. The costs are accumulated by property
pending the determination of technical feasibility and commercial viability. Pre-license costs are expensed when incurred.
Pre-exploration costs are expensed unless it is considered probable that they will generate future economic benefits.
Mining tax credits earned in respect to costs incurred in Quebec are recorded as a reduction to exploration and evaluation
assets when there is reasonable assurance that the Company has complied with, and will continue to comply with, all
conditions needed to obtain the credits.
The recoverability of amounts shown for exploration and evaluation assets 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 assets
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 assets.
36
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
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 assets are 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 assets are 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 assets 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 an amount that represent the expenditure required to settle the present obligation at the end of
the reporting period. Where the effect of the time value of money is material, the Company will adjust the amount of the
provision which will be the present value of the expenditures expected to be required to settle the obligation, discounted by
the number of years between the reporting date and the rehabilitation date.
Royalties payable
Upon completion of a pre-feasibility study, royalties are recorded at estimated fair value as an acquisition cost of exploration
and evaluation assets and an offsetting royalty payable. Future adjustments of royalties payable will be reflected as an
adjustment to exploration and evaluation assets and an offsetting royalty payable.
Share capital
Share capital is classified as equity. Incremental costs directly attributable to the issue of common shares are recognized
as a deduction from equity, net of any tax effects.
Share-based payments
The Company offers a stock option plan for its officers, directors, employees and consultants. The fair value of stock options
for each vesting period is determined using the Black-Scholes option pricing model and is recorded over the vesting period
as an increase to stock-based compensation and contributed surplus. A forfeiture rate is estimated on the grant date and
is adjusted to reflect the actual number of options that vest. Upon the exercise of stock options, the proceeds received by
the Company and the related contributed surplus are recorded as an increase to share capital. In the event that vested
stock options expire, previously recognized share-based compensation is not reversed. In the event that stock options are
forfeited, previously recognized share-based compensation associated with the unvested portion of the stock options
forfeited is reversed.
The fair value of share-based payment transactions to non-employees and other share-based payments including shares
issued to acquire exploration and evaluation assets 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.
37
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
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.
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, 2018 and March 31, 2017, outstanding stock options and warrants are anti-dilutive.
Changes in accounting standards
On April 1, 2017, 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.
Effective April 1, 2017, the Company adopted the following accounting policies:
Long-term debt
The long-term are initially measured at fair value, net of transactions costs, and are subsequently measured at amortized
cost using the effective interest rate method, with interest expense recognized on an effective yield basis.
38
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
Convertible debenture - Altius
The convertible debentures are financial instruments consisting of a debt instrument, minimum interest obligation and an
equity conversion feature. The Company has identified the minimum interest obligation and equity conversion features as
embedded derivatives. At initial recognition, the Company estimated the fair value of the equity conversion feature and the
present value of the minimum interest obligation. The difference between the gross proceeds and these amounts was
allocated to the debt liability under the residual method. The debt balance will be unwound up to the maturity date using the
effective interest method.
Convertible debenture - Glencore
The convertible debentures are financial instruments consisting of a debt instrument with a derivative liability conversion
option. At initial recognition, the Company estimated the fair value of the derivative feature. The fair value of the derivative
is reassessed at each balance sheet date. The equity conversion feature is accounted for as a derivative liability on the
Company’s consolidated financial statements.
Care, maintenance and non-capital restart costs of Bloom Lake
Care and maintenance costs have been incurred during the period of operation idle. Day-to-day servicing expenses as well
as regular maintenance expenses to ensure assets integrity have been expensed. Most of 2018 fiscal year was not in a
care and maintenance mode. Non-capital restart costs, that cover the period from May 1st 2017 to January 31st, 2018,
includes all costs related to staff mobilization and training, expenses incurred to return an asset back to historical level and
other expenditures that did not increase capacity or life duration and have been expensed.
Inventories
Inventories of ore and concentrate are measured and valued at the lower of average production cost and net realizable
value. Net realizable value is the estimated selling price of the concentrates in the ordinary course of business based on
the prevailing metal prices on the reporting date, less estimated costs to complete production and to bring concentrates to
sale. Production costs that are inventoried include the costs directly related to bringing the inventory to its current condition
and location, such as materials, labour and manufacturing overhead costs, based on normal capacity of the production
facilities.
Stripping costs
The stripping ratio varies depending of the stage of the mine life. In the case of the Bloom Lake mine, the life of mine
stripping ratio is estimated at 0.5 based on the feasibility study. All costs related to a stripping ratio over the life of mine ratio
are capitalized and amortized over the life of mine. The capitalized expenses are revalued on a monthly basis. Stripping
costs incurred in the pre-production period have also been capitalized using the same methodology.
Foreign currency translation reserve
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 recognized directly in other comprehensive income and
accumulated in the foreign currency translation reserve with the exception of those balances that are within the scope of
AASB 139 Financial Instruments.
Government grants
The Company receives certain grants from the government. Those grants are recognized only when there is a reasonable
assurance that the Company will comply with any conditions attached to the grants and the grants will be received. Those
grants are recorded against the expenditure that they are intended to compensate.
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, 2018.
IFRS 9, Financial Instruments (“IFRS 9”)
In July 2014, the International Accounting Standards Board (“IASB”) issued IFRS 9, which represents the final version of
this standard and completes the IASB’s project to replace International Accounting Standard (“IAS”) 39, Financial
Instruments: Recognition and Measurement. This standard includes updated guidance on the classification and
39
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
measurement of financial assets and liabilities. This standard also introduces a new, expected loss impairment model that
will require more timely recognition of expected credit losses. IFRS 9 also introduces a substantially-reformed model for
hedge accounting with enhanced disclosures about risk management activity and aligns hedge accounting. This standard
is effective for annual periods beginning on or after January 1, 2018. For the Group, IFRS 9 will be applied from 1 April
2018. The adoption of IFRS 9 is expected to have a profit or loss impact for an amount estimated between $6M to $9M on
the Company’s separate financial statements, which represents write-downs or remeasurement of intercompany loans.
There is no impact for the Group as intercompany loans eliminate on consolidation.
IFRS 15, Revenue from contracts with customers (“IFRS 15”)
IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18, Revenue, IAS 11, Construction
Contracts, and several revenue-related interpretations. This standard establishes a control-based revenue recognition
model and provides additional guidance in many areas not covered in detail under existing IFRS, including how to account
for arrangements with multiple performance obligations, variable pricing, customer refund rights, supplier repurchase
options, and other common complexities. The Company did not have any revenues in the current financial year. The
company will adopt and apply IFRS 15 as of April 1, 2018.
IFRS 16, Leases (“IFRS 16”)
IFRS 16 will replace IAS 17 ‘Leases’ and three related Interpretations. It completes the IASB’s long-running project to
overhaul lease accounting. Leases will be recorded in the statement of financial position in the form of a right-of-use asset
and a lease liability. IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019. The Company
is yet to fully assess the impact of the Standard and therefore is unable to provide quantified information. However, in order
to determine the impact, the Company is in the process of:
• performing a full review of all agreements to assess whether any additional contracts will become lease contracts under
IFRS 16’s new definition of a lease;
• deciding which transitional provision to adopt; either full retrospective application or partial retrospective application (which
means comparatives do not need to be restated). The partial application method also provides optional relief from
reassessing whether contracts in place are, or contain, a lease, as well as other reliefs. Deciding which of these practical
expedients to adopt is important as they are one-off choices;
• determining which optional accounting simplifications are available and whether to apply them and assessing the additional
disclosures that will be required.
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 follow:
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 15.
Units of production depreciation
The units of production used in the depreciation calculation is based on the ore feed of the mill compared to the estimated
life of a mine feed.
40
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
Stripping costs
Stripping costs are estimated based on additional volume mined due to higher stripping ratio. A standard unit cost is applied
to the volume. The unit cost is revalued on a quarterly basis.
Impairment of exploration and evaluation assets
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 15.
Foreign currency transactions
Foreign currency transactions are translated into the functional currency of the Company’s entities using the exchange rates
prevailing at the dates of the transactions or an appropriate average exchange rate. Generally, foreign exchange gains and
losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in currencies other than the Company’s functional currency are recognized in
the statement of loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated
using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on
translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the
change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognized in OCI or
profit or loss are also recognized in OCI or profit or loss, respectively.
Functional and presentation currency
Items included in the financial statements of each consolidated entity of the Company are measured using the currency of
the primary economic environment in which the entity operates (the “functional currency”). The financial statements of
entities that have a functional currency different from the Company are translated into Canadian dollars as follows: assets
and liabilities are translated at the closing rate at the date of the statement of financial position, and income and expenses
are translated at the average rate during an appropriate year. Equity transactions are translated using the exchange rate at
the date of the transaction and all resulting changes are recognized in other comprehensive income as cumulative
translation adjustments
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 21.
Estimate of rehabilitation obligation
The rehabilitation obligation is based on the best estimate of the expenditures required to settle the present obligation at
the end of the reporting period. The best estimate of the expenditure required to settle the present obligation is the amount
that the company would rationally pay to settle obligation at the end of the reporting period or to transfer it to a third
party. 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 22.
41
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
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 23.
4. Acquisitions and private placement
Acquisition of Bloom Lake
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 production ramp-up 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
The Company has determined the acquisition date 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.
42
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
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 23 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.
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
43
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
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 23 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 23 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
April 15, 2017
April 21, 2017
August 9, 2017
March 30, 2018
March 30, 2018
April 15, 2018
April 23, 2018
June 4, 2018
June 4, 2018
August 8, 2018
October 30, 2018
October 30, 2018
March 30, 2019
March 30, 2019
Interest rate
As at March 31, 2018
As at March 31, 2017
0.80%
0.85%
0.85%
0.95%
0.50%
0.50%
0.50%
0.50%
1.62%
1.62%
0.50%
0.50%
0.50%
0.50%
0.50%
-
-
-
-
-
-
250,000
100,000
13,595,794
790,453
212,000
1,000,000
350,180
415,000
577,302
17,290,729
9,826,395
250,000
100,000
212,000
500,000
577,302
-
-
-
-
-
-
-
-
-
11,465,697
As of March 31, 2018, the short-term investments has been pledged either as security for letters of credit to third parties,
$16,940,729, (2017 - $1,077,302) or as security for credit card obligations, $350,000 (2017 - $350,000).
6. Receivables
The following table represents the detail of the receivables:
Sales tax (gst, hst and qst)
Government grants
Refundable tax credits
Other receivables
As at March 31, As at March 31,
2017
$
2018
$
20,060,436
4,228,724
1,213,176
337,333
25,839,669
6,541,921
-
-
102,166
6,644,087
The non-current receivables of $nil as of March 31, 2018 (2017 - $3,351,692) represents refundable tax credits. The
Company expect to receive $1,213,176 in the year ending March 31, 2019 and does not expect to receive the remaining
$1,913,577, therefore, the non-current receivable was reduced to nil and re-classified back to the exploration and
evaluation assets account from which the credits were initially deducted.
44
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
7. Due from Cartier Iron Corporation
The amount due from Cartier of $nil ($348,003 at March 31, 2017) was a term loan which was repaid on December 22,
2017. For the year ended March 31, 2018, interest of $6,141 was accrued ($22,500 for the year ended March 31, 2017).
One director of the Company is a director of Cartier.
8. Prepaid expenses and advances
The following table represents the detail of the prepaid expenses and advances:
Advances rail transportation
Advance port
Prepaid operational expenses
Prepaid rent and deposits
Prepaid others
Inventories
9.
The following table represents the detail of the inventories:
Raw materials
Concentrate inventories
Supplies and spare parts
As at March 31, As at March 31,
2017
$
2018
$
7,558,264
1,982,769
5,006,570
492,693
857,381
15,897,677
-
-
-
172,516
106,508
279,024
As at March 31, As at March 31,
2017
$
2018
$
8,080,654
36,448,962
3,641,302
48,170,918
-
-
-
-
10. Investments
The fair values of the Company’s investments in common shares are as follows:
Investment in listed common shares
Fancamp Exploration Ltd. (“Fancamp”)
Lamêlée Iron Ore Ltd. (“Lamêlée”)
Eloro Resources Ltd. (“Eloro”)
As at March 31, As at March 31,
2017
$
2018
$
1,980,000
95,000
2,175,000
4,250,000
1,320,000
34,000
1,440,000
2,794,000
Investments in common shares are classified as financial assets at fair value through profit or loss. For the year ended
March 31, 2018, the net increase in the fair value of investments in common shares of $1,056,000 has been recorded as
an unrealized gain on investments in the consolidated statement of loss and comprehensive loss. On December 22, 2017,
in connection with the Grant of option for Cluster 3 Properties to Cartier Iron Corporation (see note 15), the Company
received 500,000 common shares of Eloro at a deemed value of $0.80 per share (total of $400,000).
Fancamp
The Company holds 22,000,000 common shares of Fancamp (March 31, 2017 – 22,000,000). The Company and Fancamp
have entered into a reciprocal rights agreement governing certain investor rights and obligations as between them. The
Company and Fancamp were restricted from transferring securities of the other until May 17, 2018, after which time,
45
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
transfers will be permitted subject to certain restrictions.
Lamêlée
The Company holds 200,000 common shares of Lamêlée (March 31, 2017 – 200,000).
Eloro
The Company holds 2,500,000 common shares of Eloro (March 31, 2017 – 2,000,000). The Company has 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.
Two officers of the Company are officers of Eloro.
11. Investment in Cartier
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, 2018, the Company held 11,519,970 common shares of Cartier (March 31, 2017 – 11,519,970 common
shares), representing 24.4% of the issued and outstanding common shares of Cartier (March 31, 2017 – 32.3%).
The holdings of the Company in Cartier were subject to the terms of a pre-emptive rights agreement and an agreement
respecting board representation rights and standstill obligations which expired on December 31, 2017.
12. Advance for investment in railway and port facilities partnership
On March 23, 2017, the Company’s subsidiary, Québec Iron Ore Inc, (“QIO”) entered into a memorandum of understanding
to become a limited partner in Société Ferroviaire et Portuaire de Pointe-Noire, S.E.C. (“SFPPN”). SFPPN was formed to
manage and develop the industrial facilities (rail lines, access to port facilities, rail yards, a pellet plant, administrative offices
and other facilities) at Pointe-Noire in Sept-Îles, Québec. QIO advanced $1,000,000 as a contribution to the capital of
SFPPN pending the completion of a limited partnership agreement.
13. Advance payments
Port
Rail Transportation
Railway and port facilities
As at March 31, As at March 31,
2017
$
2018
$
23,546,119
6,920,862
6,050,000
36,516,981
6,000,000
-
-
6,000,000
Port
On July 13, 2012, the Company’s subsidiary company, Champion Iron Mines Limited (“CIML”) 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, CIML was
to make advance payments of $25,581,000 and take-or-pay payments as an advance on its future shipping, wharfage and
equipment fees. CIML 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, CIML sent to the Port a notice of termination of the Agreement and requested the repayment of advance
payment of $6,000,000 that had already been made. The Port disputed the right of CIML to terminate the Agreement.
On July 15, 2017, CIML and the Port entered into a conditional settlement agreement, providing for the settlement, without
admission, of the dispute with the Port. The settlement agreement provided for payments by CIML or QIO to settle in full
the remaining advance payment of $19,581,000 and interest by December 1, 2017. Upon signing of the conditional
settlement agreement, CIML made an advance payment of $2,400,000.
46
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
On October 16, 2017, the conditions of the settlement agreement were met and QIO paid the remaining advance payments
of $17,181,000 and interest of $2,832,740 by December 1, 2017.
As of March 31, 2018, the Company has started to recognize loading costs as per the contract with the Port.
Rail transportation
On June 8, 2017, QIO entered into a rail transportation agreement with Quebec North Shore and Labrador Railway
Company, Inc. (“QNS&L”) for the transportation of iron ore concentrate from Bloom Lake by rail from the Wabush Lake
Junction in Labrador City, Newfoundland & Labrador to the Sept-îles Junction in Sept-îles, Quebec. In connection with the
agreement, QIO made an advance payment of $15,000,000 which will be recovered as a credit to future costs owing under
the agreement. As of March 31, 2018, the Company has started to recognize transportation costs as per the contract with
QNS&L.
Railway and port facilities
On October 12, 2017, QIO entered into a railway and port facilities access agreement with SFPPN for the transportation,
unloading, stockpiling and loading of iron ore concentrate from Sept-Iles to Pointe-Noire, Québec. In connection with the
agreement, QIO made an advance payment of $5,000,000 which will be recovered as a credit to future costs owing under
the agreement. Future credits to operating costs needs to be agreed between parties by an addendum to the original
agreement. On March 26, 2018, QIO made an additional advance payment of $1,050,000 to SFPPN in regards of
requested deposit in trust for port facilities as per the agreement.
14. Property, plant and equipment
Equipment
Rail
and
railcars
$
$
Mine
and
mineral
rights
$
Assets
under
construction
Housing
Others
Total
$
$
$
$
and
Cost
March 31, 2017
Additions
Disposals
other
adjustments
Currency
translation
adjustment
March 31, 2018
and
Accumulated
depreciation
March 31, 2017
Depreciation
Disposals
other
adjustments
Currency
translation
adjustment
March 31, 2018
Net book value,
March 31, 2018
23,573,000
600,000
(406,538)
41,451,987
‒
(1,019)
3,000,000
‒
‒
‒
107,920,924
(26,500)
4,000,000
‒
‒
465,852
72,490,839
45,561 109,466,203
(434,057)
‒
‒
(1,918,949)
‒
‒
‒
‒
(1,918,949)
23,766,462
39,532,019
3,000,000
107,894,424
4,000,000
511,413 178,704,318
2,259,079
2,316,926
103,682
1,709,898
‒
‒
12,784
‒
4,150
‒
‒
‒
4,576,005
1,817,730
12,784
‒
‒
‒
‒
‒
159,722
166,666
‒
115,700
37,875
(1,578)
2,638,183
4,244,149
(1,578)
‒
‒
4,150
326,388
151,997
6,884,904
19,190,457
37,714,289
2,987,216
107,894,424
3,673,612
359,416
171,819,414
47
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
Equipment
Rail
and
railcars
$
$
Mine
and
mineral
rights
$
Assets
under
construction
Housing
Others
Total
$
$
$
$
Cost
March 31, 2016
Additions
Disposals
March 31, 2017
Accumulated
Depreciation
March 31, 2016
Depreciation
Disposals
March 31, 2017
Net book value,
March 31, 2017
‒
26,573,000
(3,000,000)
23,573,000
‒
41,451,987
‒
41,451,987
‒
3,000,000
‒
3,000,000
‒
2,296,579
(37,500)
2,259,079
‒
103,682
‒
103,682
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
4,000,000
‒
4,000,000
114,065
351,787
‒
465,852
114,065
75,376,774
(3,000,000)
72,490,839
‒
159,722
‒
159,722
92,999
26,067
(3,366)
115,700
92,999
2,586,050
(40,866)
2,638,183
21,313,921
41,348,305
3,000,000
‒
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, 2018:
Current
GST loan
QST loan
Consideration loan
Long-term
Consideration loan
As at March 31, As at March 31,
2018
$
-
-
36,437,761
36,437,761
2017
$
2,001,661
3,993,316
-
5,994,977
-
37,613,355
The loans have the following terms and conditions:
Maturity dates: Consideration loan: Matures on March 10, 2019; 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:
48
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
Dispositions
During the year, the Company received proceeds of $1,426,652 ($3,395,538 in 2017) on the disposition of equipment.
15. 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
Quinto
March 31,
2017
$
Acquisition
costs (other)
$
Exploration
$
Mining
tax
credits
$
Option
payment
$
March 31,
2018
$
54,724,202
6,599,646
2,931,650
3,222,378
1,282,294
863,671
69,623,841
March 31,
2016
$
54,199,922
6,584,301
2,930,272
3,217,816
1,276,060
–
68,208,371
50,839
1,633
3,166
10,394
–
50,000
116,032
489,686 1,913,577
–
9,800
–
–
–
25,285
–
269,295
138,995
–
933,061 1,913,577
–
–
–
–
(450,000)
–
(450,000)
57,178,304
6,611,079
2,934,816
3,258,057
1,101,589
1,052,666
72,136,511
Acquisition
costs (other)
$ Exploration
$
Mining tax
credits
$
Option
payment
$
March 31,
2017
$
13,624
3,871
1,378
4,562
6,234
863,671
893,340
849,798
11,474
–
–
–
–
861,272
(339,142)
–
–
–
–
–
(339,142)
–
–
–
–
–
–
–
54,724,202
6,599,646
2,931,650
3,222,378
1,282,294
863,671
69,623,841
Exploration and evaluation assets are reported net of option payments and mining tax credits received. The mining tax
credits of $1,913,577 represents refundable tax credits that the Company does not expect to receive anymore.
Fermont
The Company owns a 100% interest in Fermont consisting of 11 mineral concessions covering an area of 787 square
kilometres situated in northeastern Quebec (“Fermont”), subject to a net smelter return royalty of 1.5% (1.5% NSR”). 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, 2018, 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
The Company granted an option to Cartier Iron Corporation (“Cartier”) to acquire a 55% interest in Audrey-Ernie, Black Dan,
Jeannine Lake and Penguin Lake (“Cluster 3 Properties”). On December 22, 2017, Cartier earned its 55% interest in the
Cluster 3 Properties.
In respect of the option payment of $450,000 due on December 31, 2017, the Company accepted a cash payment of
$50,000 and 500,000 common shares of Eloro at a deemed value of $0.80 per share.
Upon Cartier earning its 55% interest, a joint venture was 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. From inception to March 31, 2018, the joint venture made exploration
49
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
expenditures of $5,395.
In the event that the Company or Cartier proposes to acquire any property within 10 kilometers of the Cluster 3 Properties,
the acquirer must offer the property at cost to the other party for inclusion in the Cluster 3 Properties.
16. Accounts payable and accrued liabilities
The following table represents the detail of the payables:
Trade payable and accrued liabilities
Accrued liabilities related to care and maintenance and restart
costs for Bloom Lake
Wages and benefits
Loans equipment
17. Convertible debenture, Altius
As at March 31, As at March 31,
2017
$
2018
$
45,330,031
12,765,994
5,031,824
53,043
63,180,892
1,245,025
-
422,477
-
1,667,502
Balance, March 31, 2017
Issue of convertible debenture on June 1, 2017
Fair value of derivatives
Accretion of debt discount
Change in fair value of derivative liabilities
Derecognition of derivative liabilities
Balance, March 31, 2018
Convertible
debenture
$
–
10,000,000
(1,191,000)
991,998
–
–
9,790,998
Derivative liabilities
Equity
conversion
option
$
Minimum
interest
obligation
$
–
–
800,000
–
(200,000)
(600,000)
–
–
–
391,000
–
(259,000)
(132,000)
–
Total
$
–
–
1,191,000
–
(459,000)
(732,000)
–
The convertible debenture of $10,000,000 is unsecured, bears interest at the rate of 8% payable quarterly in advance and
matures on June 1, 2018 (“Debenture”). The Debenture is convertible at the option of the holder at any time into ordinary
shares of the Company at a conversion price of $1.00 per share. 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 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 (“Royalty”). The Company’s option to extend the debenture has been
exercised and the new maturity date is December 31, 2018.
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.
The fair value of the equity conversion option at June 1, 2017 was calculated using the Black-Scholes option pricing model
with the following assumptions:
Date of grant
Conversion options granted
Exercise price
Share price
June 1, 2017
10,000,000
$1.00
$0.85
50
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
Risk-free interest rate
Expected volatility based on historical volatility
Expected life of conversion option
Expected dividend yield
Forfeiture rate
Fair value
2.5%
80%
2.5 months
0%
0%
$800,000
The fair value of the minimum interest obligation at June 1, 2017 of $391,000 was calculated as the present value of the
minimum 6 monthly interest payments of $66,667 discounted at 8%.
The minimum interest obligation and equity conversion feature were initially accounted for as derivative liabilities on the
statement of financial position. During the third quarter of the financial year, the conversion price became fixed and thus,
the equity conversion feature no longer met the definition of derivative.
18. 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 ton 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, 2018 of $16,275,960 (2017 – $7,713,000) includes property taxes of $14,469,000
(2017 – $7,245,000) and accrued interest of $1,806,960 (2017 – $468,000).
Property taxes for Bloom Lake of $9,024,000 (2017 – $8,890,930) are reflected in care and maintenance costs of Bloom
Lake within the consolidated statement of loss and comprehensive loss.
19. Long-term debt
Balance, March 31, 2017
Advances
Transactions costs
Commitment fees
Amortization of transaction costs
Amortization of commitment fees
Standby fees payable
Fair value of warrants
Accretion of debt discount
Interest capitalized
Foreign exchange unrealized
Balance, March 31, 2018
Sprott
$
CDP
$
Total
$
–
69,002,136
(1,391,450)
(1,328,273)
139,629
133,290
–
(1,980,000)
468,838
1,161,946
1,347,528
67,553,644
–
86,252,670
(766,445)
(2,156,317)
51,856
145,884
1,322,924
(15,750,000)
538,364
2,348,232
1,684,410
73,671,578
–
155,254,806
(2,157,895)
(3,484,590)
191,485
279,174
1,322,924
(17,730,000)
1,007,202
3,510,178
3,031,938
141,225,222
On October 10, 2017, QIO entered into definitive agreements for debt financing of US$180,000,000 with the following terms:
Lender:
Amount:
Maturity:
Work fee:
Interest:
Sprott Private Resource Lending (Collector), LP (“Sprott”)
US$80,000,000
June 30, 2022
0.50% of the Amount
7.5% per annum plus the greater of US dollar 3-month LIBOR and 1% per annum calculated,
compounded and payable quarterly. QIO has the option to pay or capitalize such interest.
51
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
Additional
interest:
Repayment:
1.75% of the principal amount of each advance.
Commencing on March 31, 2019, and quarterly thereafter, 1/14th of the principal balance outstanding on
March 31, 2019.
Prepayment: Option to prepay in whole or in part at any time.
Mandatory
prepayment:
Cash proceeds received on the disposal of any assets.
Provided that a default or event of default has occurred, cash proceeds received on the disposal of any
assets by a guarantor.
Proceeds of any equity or debt (including convertible debt) financings, excluding intercompany
financings.
In the event of a change of control, QIO will repay the principal and interest. No amount shall be payable
if the person acquiring control has financial strength equal to or superior to the financial strength of the
Guarantor, in the discretion of the Lender.
Insurance proceeds greater than $1,000,000 unless the QIO uses the proceeds to repair or purchase a
replacement for the asset which was subject to the insurable event.
Prepayment
premium:
Security:
Guarantors:
Lender:
Amount:
Maturity:
Interest:
Commitment
fee:
Standby fee:
Repayment:
Mandatory
Prepayment:
Until October 16, 2020, 3% of the principal amount prepaid
(i) a title insured first ranking hypothec over the universality of movable and immovable property,
corporeal and incorporeal, present and future, including all assets, titles and rights, in any nature
whatsoever, related to the Project (including for greater certainty, the Mining Lease and all mining
claims), subject only to Permitted Encumbrances;
(ii) a first ranking general security agreement under Newfoundland and Labrador law in respect of the
movable assets located in Newfoundland and Labrador, subject to Permitted Encumbrances;
(iii) a title insured first ranking mortgage under Newfoundland and Labrador law in respect of the
immovable assets located in Newfoundland and Labrador, subject only to Permitted Encumbrances;
(iv) subordination agreements in favour of the Lender with respect to all amounts due from time to time
by the Borrower to any Affiliates, including the Guarantor
(i) The Company, supported by a first ranking hypothec on securities pursuant to which the Company
pledged and granted a first-priority encumbrance over all of the issued and outstanding shares of
QIO held by the Company.
(ii) Lac Bloom Railcars Corporation Inc., supported by a second ranking hypothec over all of its present
and future movable property and a second ranking general security agreement over movable assets
in Newfoundland and Labrador.
CDP Investissements Inc.
US$100,000,000
7 years from the date of the initial advance
12% per annum for the first year, and thereafter, at an interest rate linked to the price of iron ore calculate
and capitalized monthly
2.5% payable of the date of each advance
1.0% on the undisbursed portion of the loan payable quarterly in arrears
6 years from the date of the initial advance - 50% of principal and capitalized interest
7 years from the date of the initial advance - the balance of the principal and capitalized interest, subject
to the option to defer the payment of capitalized interest for 1 year
In the event of a change of control or the closing of a public offering of QIO within 2 years from the date
of the initial advance, QIO will repay the principal and interest calculated at 14% per annum since the
date of the initial advance and a performance maintenance fee equal to the present value of all interest
payments from the date of the initial advance to the maturity date.
52
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
In the event of a change of control or the closing of a public offering of QIO after 2 years from the date
of the initial advance, QIO will repay the principal and capitalized interest and an early redemption fee of
6%, 5%, 3%, 2% and 1% in years 3, 4, 5, 6, and 7, respectively.
In the event of a change in control, no amount shall be payable if the person acquiring control has the
financial strength equal to or superior to the financial strength of the Guarantor, in the discretion of CDP.
Prepayment: After 2 years from the date of the initial advance, QIO has the option to prepay the principal and
capitalized interest subject to the payment of an early redemption fee of 6%, 5%, 3%, 2% and 1% in
years 3, 4, 5, 6, and 7, respectively
In connection with the debt financing, the Company issued: (a) 3,000,000 common share purchase warrants to Sprott,
entitling the holder to purchase 3,000,000 ordinary shares of the Company for $1.125 until October 16, 2022 and (b)
21,000,000 common share purchase warrants to Caisse, entitling the holder to purchase 21,000,000 ordinary shares of the
Company for $1.125 after October 16, 2018 until October 16, 2024. Ressources Québec (“RQ”) will provide compensation
commensurate with their 36.8% interest in QIO to the Company for issuing the common share purchase warrants.
The fair value of the common share purchase warrants was calculated using the Black-Scholes option pricing model with
the following assumptions:
Date of issue
Warrants issued
Exercise price
Share price
Risk-free interest rate
Expected volatility based on historical volatility
Expected life of warrant
Expected dividend yield
Forfeiture rate
Fair value
20. Convertible debenture, Glencore
Sprott
October 16, 2017
3,000,000
$1.125
$1.04
2.5%
80%
5 years
0%
0%
1,980,000
CDP
October 16, 2017
21,000,000
$1.125
$1.04
2.5%
80%
7 years
0%
0%
$15,750,000
Convertible
debenture
$
–
31,200,000
(20,634,000)
–
1,716,605
1,733,523
14,016,128
Derivative
asset
Prepayment
option
$
–
–
–
–
–
–
–
Conversion
option
$
–
–
20,634,000
4,049,000
–
–
24,683,000
Derivative
liabilities
Interest
rate
%
–
–
–
–
–
–
–
Total
$
–
–
20,634,000
4,049,000
–
–
24,683,000
Balance, March 31, 2017
Issue of convertible debenture
Fair value of derivatives
Change in fair value
Accretion of debt discount
Capitalized interest
Balance, March 31, 2018
On October 13, 2017, the Company completed a non-brokered private placement of a $31,200,000 unsecured
subordinated convertible debenture (“Debenture”) to Glencore International AG (“Glencore”) with the following terms:
Maturity:
Prepayment:
October 13, 2025
The Company has the option to prepay the Debenture in whole, but not in part. In the event the Company
elects to prepay the Debenture and the Debenture is not converted into ordinary shares of the Company
53
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
Interest:
Conversion:
Mandatory
Conversion:
Mandatory
Conversion
events:
prior to prepayment, the Company will grant 27,733,333 warrants to Glencore entitling the holder to
purchase one ordinary share for $1.125 until October 13, 2025.
12% for the first year, and thereafter, an interest rate linked to the price of iron ore, payable quarterly in
arrears commencing on December 31, 2018.
Glencore has the option to convert the Debenture into ordinary shares of the Company at a conversion
price of $1.125 per ordinary share (“Conversion Price”).
Mandatory conversion of the Debenture into ordinary shares of the Company at a conversion price of
$0.85 per ordinary share upon (a) the occurrence of a mandatory conversion event or (b) Sprott or
Caisse, lenders for the debt financing of US180,000,000 for QIO, exercises their respective option to
require a mandatory conversion.
(i) quarterly average iron ore prices during a quarter are such that the Bloom Lake financial model fails
to demonstrate that the Bloom Lake has the capacity to meet all future obligations as they become
due;
(ii) start-up of the Bloom Lake is delayed beyond April 30, 2018;
(iii) commercial production is not achieved by September 30, 2018 and the Bloom Lake financial model
fails during a quarter to demonstrate that Bloom Lake has the capacity to meet all future obligations
as they become due;
(iv) capital expenditures for the Bloom Lake exceed US$326,800,000;
(v) QIO is merged into, absorbed or acquired by the Company and total net debt (being debt minus freely
available cash and short-term investments) of the merged entity exceeds US$270,000,000; or
(vi) total net debt from the Company, QIO and Lac Bloom Railcars Corporation Inc. exceeds
US$250,000,000.
Restriction on
conversion:
A conversion or mandatory conversion may not have the effect of causing Glencore to own 20% or more
of the outstanding ordinary shares.
In connection with the closing of the Debenture, QIO entered into an off-take agreement with Glencore to grant global off-
take rights for life-of-mine of Bloom Lake with fixed commercial terms for a 10-year period for all tones of future iron ore
production at Bloom Lake not sold in Japan under the existing off-take agreement with Sojitz. In the event of a Mandatory
Conversion, the off-take terms will apply for the life-of-mine of Phase 1 of Bloom Lake and Glencore will have the option to
convert the marketing fees under the off-take terms into a FOB-based royalty under certain circumstances. In addition,
Glencore has been granted a right of first refusal in connection with the financing and off-take rights for iron ore production
of Phase II of Bloom Lake not allocated to certain strategic investors.
A prepayment option derivative exists in respect of the option of the Company to avoid future interest payments by prepaying
the convertible debenture and paying a penalty equal to 3 months of interest. The fair value of the prepayment option
derivative asset was calculated to be $Nil.
A conversion option derivative exists in respect of option of Glencore to convert and the option of Sprott and CDP to require
Glencore to convert the convertible debenture into ordinary shares of the company. The fair value of the conversion option
derivative liability was calculated using the Black-Sholes option pricing model with the following assumptions:
Valuation date
Conversion options granted
Exercise price
Share price
Risk-free interest rate
Expected volatility based on historical volatility
Expected life of conversion option
Expected dividend yield
Forfeiture rate
Fair value
March 31, 2018 October 13, 2017
27,733,333
$1.125
$0.99
2.5%
80%
8 years
0%
0%
$20,634,000
27,733,333
$1.125
$0.89
2.5%
80%
7.5 years
0%
0%
24,683,000
The equity conversion feature is accounted for as a derivative liability on the consolidated statement of financial position.
54
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
21. Royalty payable
Fermont is encumbered by a 1.5% net smelter royalty (‘NSR’) with no option to reduce the royalty.
On March 31, 2014, the Company recorded an estimate of the fair value of the 3% NSR as an acquisition cost of exploration
and evaluation assets 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, 2018, the fair
value of the 1.5% NSR has been estimated to be $300,000 (2017 - $300,000).
22. Rehabilitation obligation
Balance, beginning of year
Obligation arising on acquisition of Bloom Lake (note 4)
Increase due to reassessment of the rehabilitation
obligation
Accretion of rehabilitation obligation
Balance, end of year
As at March 31, As at March 31,
2017
$
2018
$
25,155,500
–
10,042,991
–
24,523,000
–
695,000
35,893,491
632,500
25,155,500
The accretion in rehabilitation obligation was evaluated as the amount of the expenditure required to settle the present
obligation at the end of the reporting period, discounted by the number of years between the reporting date and the
rehabilitation date (discount rate used of 1.0053). The future rehabilitation obligation was reassessed based on the new
reclamation plan submitted to the government in February 2018.
23. Capital stock
The Company is authorized to issue ordinary shares, performance shares and special voting shares.
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, 2016
Private placement (note 4)
Fair value of compensation warrants granted (note 4)
Conversion of exchangeable shares
Balance, March 31, 2017
Public offering of subscription receipts
Exercise of options
Share issue costs
Fair value of options exercised
Exercise of share rights
Balance, March 31, 2018
Number of
shares
$
198,319,784 174,509,902
187,500,000 30,000,000
(2,520,000)
–
114,555 –
385,934,339 201,989,902
21,033,508 18,930,257
5,400,000 1,703,335
– (1,115,391)
– 660,500
2,250,000 2,167,500
414,617,847 224,336,103
55
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
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.
Public offering of subscription receipts
On September 29, 2017, the Company completed a public offering of 21,033,508 subscription receipts at a price of $0.90
per subscription receipt for gross proceeds of $18,930,257 which was placed in escrow pending the satisfaction of the
certain escrow release conditions. On October 16, 2017, the escrow release conditions were satisfied and the proceeds of
the subscription receipts were released to the Company and holders of the subscription receipts received one ordinary
share of Company for each subscription receipt held.
Stock options
Balance, March 31, 2016
Granted
Expired
Balance, March 31, 2017
Granted
Exercised
Balance, March 31, 2018
Number of
stock options
10,000,166
8,000,000
(2,550,166)
15,450,000
2,750,000
(5,400,000)
12,800,000
Weighted-
average
exercise
price
$
0.62
0.21
1.28
0.30
1.00
0.32
0.44
A summary of the Company’s outstanding and exercisable stock options at March 31, 2018 is presented below:
Exercise price
Expiry date
A$0.30
A$0.50
A$0.30
A$0.20
A$1.00
A$1,08
A$1.00
August 20, 2018
November 29, 2018
November 4, 2019
April 11, 2020
May 25, 2020
July 11, 2020
August 21, 2020
Number of stock options
Outstanding
Exercisable
1,000,000
2,300,000
500,000
6,250,000
1,650,000
600,000
500,000
12,800,000
666,667
2,300,000
500,000
6,250,000
1,650,000
200,000
166,667
11,733,334
The exercise price of outstanding stock options ranges from A$0.20 to A$1.08 and the weighted-average remaining
contractual life of outstanding stock options is 1.68 years.
Grant of stock options
On May 25, 2017, the Company granted 1,650,000 stock options to eligible individuals pursuant to the Company’s share
incentive plan 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 the
key performance measure of recommissioning of the plant at Bloom Lake at a capacity of 7 million tonnes per annum.
After receiving shareholder approval on July 10, 2017, the Company granted 600,000 stock options to directors entitling the
holder to purchase one ordinary share for A$1.08 until July 11, 2020. The stock options vest, as follows: 200,000 on July
11, 2017, 200,000 on July 11, 2018 and 200,000 on July 11, 2019.
On August 21, 2017, the Company granted 500,000 stock options to a director entitling the holder to purchase one ordinary
56
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
share for A$1.00 until August 21, 2020. The stock options vest, as follows: 166,667 on August 21, 2017, 166,666 on August
21, 2018 and 166,666 on August 21, 2019.
A summary of the assumptions for the calculation of the fair value of those stock options using the Black-Scholes option
pricing model is presented below:
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
Fair value
Fair value per stock option
May 25, 2017
May 25, 2020
1,650,000
A$1.00
A$0.88
2.5%
80%
3 years
0%
0%
$726,000
$0.44
July 11, 2017
July 11, 2020
600,000
A$1.08
A$1.08
2.5%
80%
3 years
0%
0%
$342,000
$0.57
August 21, 2017
August 21, 2020
500,000
A$1.00
A$0.97
2.5%
80%
3 years
0%
0%
$255,000
$0.51
Stock options granted outside of the Share Incentive Plan
The Company is authorized to issue 82,923,569 stock options and share rights (March 31, 2017 – 77,185,986) equal to
20% of the issued and outstanding ordinary shares for issuance under the share incentive plan.
Exercise
price
Expiry date
Number of
options
outstanding
and
exercisable
Weighted-
average
exercise price
Balance, March 31, 2017 and March 31, 2018
$0.45 September 1, 2018
1,000,000
$0.45
Compensation options
Exercise
price
Expiry date
Number of
options
outstanding
and
exercisable
Weighted-
average
exercise price
Balance, March 31, 2017 and March 31, 2018
$0.25
February 1, 2020
21,000,000
$0.25
Share rights
Balance, March 31, 2017
Granted
Exercised
Balance, March 31, 2018
Number of
share rights
─
2,250,000
(2,250,000)
─
Grant of share rights
On May 25, 2017, the Company granted 1,250,000 share rights to employees entitling the holder to receive one ordinary
57
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
share per share right upon vesting. The share rights vest on the satisfaction of the key performance measures 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 tons per annum and the actual recommissioning of the plant at Bloom Lake at a capacity of 7 million
tons per annum.
After receiving shareholder approval on July 10, 2017, the Company granted 1,000,000 share rights to a director entitling
the holder to receive one ordinary share per share right upon vesting. The share rights vest on the satisfaction the key
performance measures 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 tons per annum and the actual recommissioning of the plant at Bloom
Lake at a capacity of 7 million tons per annum.
A summary of the assumptions for the calculation of the fair value of those share rights using the Black-Scholes option
pricing model is presented below:
Date of grant
Maturity
Share rights granted
Exercise price
Share price
Risk-free interest rate
Expected volatility based on historical volatility
Expected life of share rights
Expected dividend yield
Forfeiture rate
Fair value
Fair value per share right
Warrants
Exercise price
May 25, 2017
July 11, 2017
On satisfaction of key performance measures
1,000,000
$Nil
$1.08
2.5%
80%
12 months
0%
0%
$1,080,000
$1.08
1,250,000
$Nil
$0.88
2.5%
80%
9 months
0%
0%
$875,000
$0.87
Warrants
outstanding
and
exercisable
3,000,000
21,000,000
24,000,000
$1.125
$1.125 (exercisable after October 16, 2018)
Expiry date
October 16, 2022
October 16, 2024
24. Care and maintenance and restarts costs of Bloom Lake
Care and maintenance costs of Bloom Lake of $66,993,531 represent the costs incurred at Bloom Lake for the year ended
March 31, 2018 (2017 - $26,669,074). Costs include property taxes (note 18), salaries and wages, housing costs, utilities
and water management and environmental costs.
25. 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 26.70% (2017 – 26.90%) 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 and other deductible temporary differences not recognized
2018
$
2017
$
(28,657,351)
434,728
–
28,222,623
–
(9,393,619)
27,892
(4,183)
9,369,910
–
58
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
Deferred income tax assets and liabilities
The Company’s deferred income tax assets and liabilities are as follows:
Assets
Non-capital loss carry-forward and share issue costs
Asset retirement obligation
Investment tax credits
Liabilities
Property, plant and equipment
Exploration and evaluation assets
Other
Mining duties
As at March As at March
31 31
2017
Restated (a)
2018
41,756,998
9,511,775
1,306,838
52,575,612
16,652,999
6,666,208
1,306,838
24,626,045
(3,535,558)
(1,538,845)
(139,920)
(5,464,713)
(10,679,036)
(4,405,674)
(4,150,806)
–
(5,464,713)
(14,021,192)
Deferred income tax assets not recognized
(47,361,288) (16,069,565)
Net deferred tax liability
(5,464,713) (5,464,713)
Losses carried forward
At March 31, 2018, the Company had non-capital loss carryforwards which expire as follows:
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
$
153,000
406,000
1,089,000
1,812,000
4,314,000
5,989,000
5,638,000
9,332,000
4,481,000
2,192,000
27,815,000
93,980,000
157,201,000
Resource deductions
At March 31, 2018, the Company has cumulative Canadian exploration expenses of $36,402,396 (2017 - $32,343,122) and
cumulative Canadian development expenses of $7,027,538 (2017 - $6,911,506) which may be carried forward indefinitely
to reduce taxable income in future years.
(a) Restatement of deferred tax liability
During the current period, the Group identified a prior period adjustment in respect of accounting for deferred tax liabilities
arising in on mining duties. The adjustment required originated prior to the beginning of the comparative period and
involved the use of deferred tax assets arising in respect of non-capital loss carry-forwards originating from a separate tax
authority to offset the deferred tax liability arising in respect of mining duties. The restatement relates to non-cash
accounting entries only. The restatement does not impact the statements of comprehensive loss for the years ended March
31, 2016 or 2017.
59
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
The effect of the restatement on each of the affected financial statement line items as at April 1, 2016 and March 31, 2017
is as follows:
Increase to deferred tax liability
Decrease to opening retained earnings
March 31,
2017
April 1,
2016
5,464,713
5,464,713
5,464,713
5,464,713
26. 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.
2018
$
2017
$
Net loss attributable to equity holders of the parent
(74,474,977)
(23,779,223)
Basic and diluted weighted-average number of shares
398,125,332
380,212,024
Basic and diluted loss per share attributable to equity holders of the parent
(0.19)
(0.06)
All options and warrants that are anti-dilutive have been excluded from the diluted weighted-average number of common
shares.
27. Determination of fair values
A number of the Company's accounting policies and disclosures require the determination of fair value, for both financial
and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes
based on the following methods. When applicable, further information about the assumptions made in determining fair
values is disclosed in the notes specific to that asset or liability.
Cash and cash equivalents, short-term investments, receivables, due from Cartier and accounts payable and accrued
liabilities
The fair values of cash and cash equivalents, short-term investments, receivables, due from Cartier and accounts payable
and accrued liabilities approximate their carrying value due to their short term to maturity.
Investments
The fair values of the investment in common shares of Fancamp, Lamêlée and Eloro are measured at the bid market price
on the measurement date.
Convertible debenture
The convertible debentures are evaluated by the Company based on parameters such as interest rates and the risk
characteristics of the financial assets. As at March 31, 2018, the carrying amount of the convertible debentures was not
materially different from its calculated value.
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, 2018, 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
60
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
comparable companies), weighted average expected life and forfeiture rate (both based on historical experience and
general option holder behavior), expected dividends, and the risk-free interest rate (based on government bonds).
Classification and fair values
As at March 31, 2018
Assets
Current
Cash and cash equivalents
Short-term investments
Receivables
Non-current
Investments
Fair value
through
profit and
loss
$
Loans and
receivables
$
7,894,505
17,290,729
‒
‒
‒
24,626,493
4,250,000
29,435,234
‒
24,626,493
Other
liabilities
$
Total
carrying
amount
$
Total fair
value
$
‒
‒
‒
‒
‒
7,894,505
17,290,729
24,626,493
7,894,505
17,290,729
24,626,493
4,250,000
54,061,727
4,250,000
54,061,727
Liabilities
Current
Accounts payable and accrued liabilities
Convertible debenture, Altius
Note payable
Non-current
Property taxes payable
Long-term debt
Convertible debenture, Glencore
Royalty payable
As at March 31, 2017
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
63,180,892
9,790,998
36,437,761
63,180,892
9,790,998
36,437,761
63,180,892
9,790,998
36,437,761
16,275,960
16,275,960
‒
16,275,960
‒ 141,225,222 141,225,222 141,225,222
14,016,128
‒
300,000
‒
‒ 281,226,961 281,226,961 281,226,961
14,016,128
300,000
14,016,128
300,000
Assets
Current
Cash and cash equivalents
Short-term investments
Receivables
Due from Cartier
Non-current
Receivables
Investments
Fair value
through
profit and
loss
$
Loans and
receivables
$
Other
liabilities
$
Total
carrying
amount
$
Total fair
value
$
1,863,387
11,465,697
‒
‒
‒
‒
6,644,087
348,003
‒
2,794,000
16,123,084
3,351,692
‒
10,343,782
‒
‒
‒
‒
‒
‒
‒
1,863,387
11,465,697
6,644,087
348,003
1,863,387
11,465,697
6,644,087
348,003
3,351,692
2,794,000
26,466,866
3,351,692
2,794,000
26,466,866
61
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
Liabilities
Current
Accounts payable and accrued liabilities
Note payable
Non-current
Note payable
Royalty payable
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
1,667,504
5,994,977
1,667,504
5,994,977
1,667,504
5,994,977
37,613,355
300,000
45,575,836
37,613,355
300,000
45,575,836
37,613,355
300,000
45,575,836
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, 2018
Financial asset at fair value through profit and loss
Cash and cash equivalents and short-term investments
Investments
Common shares
Financial liability
Convertible debenture, Altius
Note payable
Long-term debt
Convertible debenture, Glencore
As at March 31, 2017
Financial asset at fair value through profit and loss
Cash and cash equivalents and short-term investments
Investments
Common shares
Financial liability
Note payable
Level 1
$
Level 2
$
Level 3
$
Total
$
25,185,234
4,250,000
–
–
–
–
–
–
9,790,998
36,437,761
141,225,222
14,016,128
–
–
–
–
–
–
25,185,234
4,250,000
9,790,998
36,437,761
141,225,222
14,016,128
Level 1
$
Level 2
$
Level 3
$
Total
$
13,329,084
2,794,000
–
–
–
–
13,329,084
944,500
‒
43,608,332
‒
43,608,332
28. 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.
62
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
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,
receivables 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.
Foreign currency risk
Foreign currency risk is the risk that the Company financial performance will be affected by fluctuations in the exchange
rates between currencies. The Company is subject to foreign exchange risk as some costs are denominated in United
States dollar and Australian dollar. Therefore, the Company is subject to gains and losses due to fluctuations of those
currencies. The Company does not use derivatives to manage the exposure to foreign exchange risk.
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, 2018 had changed
by 10%, with all other variables held constant, the loss would have decreased or increased by approximately $425,000.
Capital management
Capital of the Company consists the components of shareholders’ equity and debt facilities. 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 or new loans and borrowings. In order to
achieve its objectives, the Company intends to raise additional funds as required.
Certain debt facilities contain operating and financial covenants that could restrict the ability of the Company and its
subsidiaries to, among other things, incur additional indebtedness need to fund its respective operations. There are no other
restrictions or externally imposed capital requirements to the Company.
63
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
29. Related party transactions
General and administrative
Paid on market terms for rent to a company
controlled by a director and to a company with
two members of key management personnel
See note 7 for other related party transactions with Cartier.
Years ended March 31,
2017
2018
$
$
Outstanding at March 31,
2017
$
2018
$
102,136
54,540
–
–
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
30. Commitments and contingencies
Commitments for annual basic premises rent and contracts with vendors are as follows:
Years ended March 31,
2017
$
2018
$
1,157,500
722,000
4,660,000
115,642
30,057
-
2,871,273
9,556,472
746,141
686,250
175,000
144,084
42,725
90,000
1,232,920
3,117,120
Less than 1 year
1-5 years
More than 5 years
The Group does not have any contingent liabilities.
31. Parent entity information
Information relating to Champion Iron Limited:
Current assets
Non-current assets
Total assets
As at March 31, As at March 31,
2017
$
2018
$
173,920,286
272,592,796
8,459,041
454,972,123
202,680
819,878
1,188,990
2,211,728
2018
As at March 31, As at March 31,
2017
$
$
5,717,189
108,171,229
113,888,418
7,183,616
45,032,863
52,216,479
64
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
Current liabilities
Non-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
32. 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
10,094,816
38,699,128
6,000,000
54,793,944
258,320
–
6,000,000
6,258,320
59,094,474
45,958,159
78,590,008
9,078,918
(28,574,452)
59,094,474
56,243,809
4,932,824
(15,218,474)
45,958,159
Years ended March 31,
2017
$
2018
$
11,606,453
11,606,453
3,064,812
3,064,812
Years ended March 31,
2017
$
2018
$
125,000
70,500
–
155,000
62,973
24,650
438,123
88,000
46,000
15,000
25,000
89,626
10,000
273,626
33. Segment information
The Company operates in one business segment being iron ore exploration and development 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.
34. Subsequent events
Other than as described in the notes to the financial report, no matter or circumstance has arisen since March 31, 2018
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.
65
Champion Iron Limited
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
(expressed in Canadian dollars)
__________________________________________________________________________________________________________
35. Comparative figures
Certain of the prior year's comparative figures have been reclassified to conform to the current year's presentation.
66
STOCK EXCHANGE INFORMATION
The additional information set out below relates to shares and options as at 29 June 2018
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
Number of
ordinary shares
75,989
856,211
1,016,558
10,933,582
402,985,507
415,867,847
59 shareholders held less than a marketable parcel of ordinary shares at June 29, 2018.
ORDINARY SHARES
SUBSTANTIAL SHAREHOLDERS
Name of shareholder
WC Strategic Opportunity LP
Ressources Quebec Inc.
Michael O'Keeffe (and associates)
Number of
ordinary shares
66,944,444
37,500,000
34,676,930
% of issued
capital
16.10%
9.02%
8.34%
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
Ressources Quebec Inc
Prospect AG Trading PL
Baotou Chen Hua
GAB Super Fund PL
Fancamp Exploration Ltd
Zero Nom P/L
JP Morgan nominees
Metech Super PL
Comfortra GmbH
Marc Dorion
Gavin John Argyle
Eastbourne DP PL
Vision PL
Citicorp Nom PL
HSBC Custody Nominee Audt Ltd
Quartz Mountain Mining PL
Rowe Angela Maree
Bass Fam Foundation PL
Hayeem Gilad David
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Number of
ordinary shares
66,944,444
37,500,000
29,776,930
11,000,000
8,936,030
7,768,333
7,275,021
6,859,209
6,410,000
5,350,364
4,273,286
4,092,364
3,500,000
3,311,620
3,280,172
2,999,722
1,969,664
1,620,000
1,580,000
1,555,554
% of issued
capital
16.10%
9.02%
7.16%
2.65%
2.15%
1.87%
1.75%
1.65%
1.54%
1.29%
1.03%
0.98%
0.84%
0.80%
0.79%
0.72%
0.47%
0.39%
0.38%
0.37%
67
SCHEDULE OF TENEMENTS
The Company’s wholly owned subsidiary, Champion Iron Mines Limited, owns a 100% interest in the following properties:
Property-Québec
Consolidated Fire Lake North
Harvey-Tuttle
Moire Lake
O'Keefe-Purdy
Jeannine Lake (Note 1)
Round Lake (Notes 1 and 2)
Peppler
Lamelee
Hobdad
Property-Newfoundland
Powderhorn
Gullbridge
SNRC
23B06; 23B11; 23B12
23B12; 23B05
23B14
23B11; 23B12
22N16
23B04; 23C01; 23N16
23B05
23B05; 23B06; 23B11; 23B12
23B05; 23B06
11367M,
Licences
11346M,
15137M, 18969M, 19227M
11956M,
16261M
11960M,
15136M,
16260M,
Claims
569
191
36
203
21
178
118
236
93
185
67
Hectares
28,774.11
10,010.36
1,665.55
10,623.15
1,117.40
9,420.31
6,207.75
12,374.67
4,893.74
4,625.00
1,675.00
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
69
Hectares
6,857.63
3,224.20
68
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: June 2017 Champion Iron properties in the Fermont Iron Ore District
Cluster / Project
Deposit
Nb
claims
Area
(km sq.)
Champion
interest
Co-owner
NSR
Bloom
Mine
Lake
70*
Fire Lake North
100.8*
63.2%
Ressources
Québec
Consolidated
Fire Lake North
Don Lake
Bellechasse
Oil Can
569
287.7
100%
Moiré Lake
36
16.7
100%
Peppler Lake
Quinto Claims
Lamêlée Lake
435
228.4
100%
Hobdad Hill
Harvey-Tuttle
191
100.1
100%
O’Keefe-Purdy
203
106.2
100%
Penguin Lake
Cluster 3
Lac Jeannine
158
175.2
45%
Cartier
Iron
Corporation
Black Dan
* Includes a 68.7 sq. km mining lease
1.5%
1.5%
1.5%
1.5%
1.5%
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%.
69
Table 2: March 2017 Bloom Lake Mineral Resource Estimate at Cut-off 15% Fe
Category
Dry Tonnage
(Mt)
Fe (%)
CaO (%)
MgO (%)
Al2O3 (%)
Measured
432.2
Indicated
471.8
M+I Total
904.0
Inferred
80.4
Includes ore reserves
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)
Fe (%)
CaO (%)
MgO (%)
Al2O3 (%)
256.7
147.5
404.2
30.7
28.7
30.0
0.5
2.8
1.3
0.6
2.7
1.4
0.3
0.4
0.3
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
Dry Tonnage
(Mt)
Fe (%)
SiO2 (%)
Al2O3 (%)
P (%)
Measured
40.3
Indicated
715.0
M+I Total
755.3
Inferred
461.0
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
Dry Tonnage (Mt) Fe (%)
CaO (%)
Weight Recovery (%)
Proven
Probable
Total
23.7
440.9
464.6
36.0
32.2
32.4
0.5
2.8
1.3
45.0
39.6
39.9
70
*** 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 originally had 447 claims, but 12 claims were
let go. Now the property is composed of 435 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.
71
Cluster 3
A series of 158 claims located near the closed Lac Jeannine Mine, identified as Cluster 3 was optioned to Cartier Iron
Corporation. With completion of work and financial requirements, Champion Iron Mines Limited 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 drilling was done
in 2017 and early 2018.
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 targets at 200 metres depth. Although several 2018 drill holes have intersected Zn-Ag-
Cu mineralized zones (best assay has 16.4% Zn over 80cm), no mineral resources or ore reserves estimate are available
as the project enters its third phase of exploration. More drilling is expected in the second half of 2018 and will target the
area up-dip of the 2017-2018 discovery.
The Powderhorn/Gullbridge property has a 2.85% NSR to the previous owner (Copper Hill Resources and 3 individual
prospectors).
72
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.
The Company’s corporate governance policies are available in the corporate governance section of its website at
http://www.championiron.com. These policies and the Company’s corporate governance practices meet the requirements
of both the Corporations Act 2001 (Cth) and the 3rd edition of the Australian Securities Exchange Corporate Governance
Council’s Corporate Governance Principles and Recommendations (ASX Recommendations).
The Corporate Governance Statement was approved by the Board of the Company and is current as at 29 June 2018 in
accordance with ASX Listing Rule 4.10.3.
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
The Board periodically assesses the independence of each director having regard to the definition of independence set out
in the ASX Recommendations and the criteria set out set out in the Board Charter. It is considered that all of the non-
executive Directors of the Company during the year ended 31 March 2018 meet the criteria of an Independent Director. On
16 October 2017, Mr Jyothish George was appointed as non-executive Director to the 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.
73
Workplace Diversity Policy
Diversity includes, but is not limited to, gender, age, ethnicity and cultural background. The Company is committed to
diversity and recognises the benefits arising from employee and board diversity and the importance of benefiting from all
available talent. Accordingly, the Company has established a diversity policy which is available on the Company’s website.
The Board has a commitment to promoting a corporate culture that is supportive of diversity and encourages the
transparency of Board processes, review and appointment of Directors. The Board is responsible for developing policies 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 within 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), Mr Gary Lawler and Ms
Michelle Cormier all of whom are non-executive Directors.
The Company has also formed a Remuneration & Nomination Committee which comprises of Mr Gary Lawler (Chairman),
Ms Michelle Cormier and Mr Andrew Love.
With the appointment of the Committees, all audit matters, the nomination of new Directors and the setting, or review, of
remuneration levels of Directors and senior executives are reviewed by the relevant Committee and approved by resolution
of the Board (with abstentions for relevant Directors where there is a conflict of interest).
Where the Board considers that particular expertise or information is required, which is not available from within the Board,
appropriate external advice may be taken and received prior to a final decision being made by the Board. During the
financial year ended 31 March 2018, Ernst & Young was engaged as remuneration consultant to provide market
remuneration information for two executive roles.
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 $750,000. 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.
74
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.
75
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
board charter setting out
the
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
76
Principle
Number
Recommendation
Compliance
Reason for Non-compliance
1.5
1.6
1.7
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 2018 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 2018 financial year by
the Remuneration & Nomination
in accordance with
Committee
Company’s
performance
evaluation policy an approved by
the Board.
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 7 male executives,
2% of employees are women and
1 woman is currently represented
on the Board.
Not applicable
Not applicable
77
Principle
Number
Recommendation
2. Structure the Board to add value
Compliance
Reason for Non-compliance
2.1
2.2
2.3
committee
The Board should establish a
and
nomination
the
the charter of
disclose
committee, members of
the
committee and as at the end of
each reporting period, the number
of
the committee met
throughout the year and individual
attendances of the members of the
committee.
times
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
assessed at
the Company’s
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
Mr. O’Keeffe has
significant
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
78
Principle
Number
Recommendation
Compliance
Reason for Non-compliance
2.6
for
inducting
Have a program
directors and provide appropriate
development
professional
opportunities
to
perform their role as directors
effectively
for directors
The remuneration and nomination
committee has oversight for the
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
The Board should establish an
audit committee. The audit
committee should be structured
so that it has at least 3 members
• consists
of Non-
only
Executive Directors;
• consists of a majority of
•
independent Directors;
is chaired by an independent
chair, who is not chair of the
Board;
The charter of the committee, the
qualifications and experience of
the members and in relation to
the reporting period, the number
of
the committee met
throughout the period and the
individual
of
members during
the period
should be disclosed.
attendances
times
formal charter can be
the Company’s
The Board has established an
audit committee consisting of 3
independent directors.
The
accessed
website.
The number of meetings during the
year and attendances by members
is disclosed in the annual report.
at
Not applicable
79
Not applicable
has
Board
The
received
appropriate declarations from the
Executive Chairman and the Chief
Financial Officer in accordance
with
the
Corporations Act.
section
295A
of
4.2
Financial Officer
Before approving the financial
statements for a financial period,
the Board should receive from the
Chief Executive Officer and the
Chief
a
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
Principle
Number
Recommendation
4.3
The Company should ensure that
the external auditor attends its
AGM and is available to answer
questions from security holders
relevant to the audit.
5. Make timely and balanced disclosure
Compliance
Reason for Non-compliance
The Company auditor attends the
AGM and is available to answer
questions from security holders.
Not applicable
5.1
continuous
Establish written policy to comply
with
disclosure
obligations under the ASX Listing
Rules and disclose those policies or
a summary of those policies.
The Company has adopted a
Continuous Disclosure Policy
which can be accessed at the
Company’s website.
Not applicable
6. Respect the rights of security holders
6.1
6.2
6.3
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
facilitate
encourage
participation at meetings of
security holders.
and
The company has adopted a
Shareholder
Communications
Policy which can be accessed at
the Company’s website.
Not applicable
The company has adopted a
Communications
Shareholder
Policy which can be accessed at
the Company website.
Not applicable
80
6.4
Security holders should have the
option to receive communications
from, and send communications
to, the company and its security
registry electronically
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.
Security holders have the option to
receive and send communications
electronically.
Not applicable
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.
81
Principle
Number
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
7.2
7.3
7.4
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
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..
82
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.
Principle
Number
Recommendation
8.3
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.
Not applicable
from
The structure of non-executive
Directors’ remuneration is clearly
of
distinguished
Executive Directors and senior
executives, as described in the
Directors’ Report which
forms
part of the Company’s Annual
Report.
that
Compliance
Reason for Non-compliance
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
83
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)
Jyothish George (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:
(416) 361-0470
Facsimile:
STOCK EXCHANGES
The Company’s shares are listed on the Australian Stock Exchange (ASX) and Toronto Stock
Exchange (TSX)
ASX CODE AND
TSX SYMBOL
CIA (Fully Paid Ordinary Shares)
84