This Appendix should be read in conjunction with the Company's Annual Report for the year ended March 31, 2021.
1. Name of Entity
Champion Iron Limited
ACN 119 770 142
2. Reporting Period
Reporting period: For the year ended March 31, 2021
Previous corresponding period: For the year ended March 31, 2020
3. Results for Announcement to the Market
Revenue from ordinary activities
Profit from ordinary activities after tax attributable to members
Net profit attributable to members
Year Ended March 31,
Up/(Down)
% Movement
2021
(in thousands of CA$)
1,281,815
464,425
464,425
2020
(in thousands of CA$)
785,086
89,426
89,426
(in thousands of CA$)
496,729 63%
374,999 419%
374,999 419%
4. Dividends
No interim or final dividend has been declared for the year ended March 31, 2021 (year ended March 31, 2020: nil). Dividends paid by
subsidiaries are not included.
5. Net Tangible Assets per Security
Net tangible assets per security
As at March 31,
2021
(CA$ per share)
1.70
2020
(CA$ per share)
0.81
6. Associates and Joint Venture Entities
Associates are not considered to be material to the Company. The Company does not have joint venture entities.
7. Commentary on the Results for the Period
A commentary on the results for the period is contained within the Annual Report, including the Directors' Report and the Financial Statements
that accompany this Appendix.
8. Status of Audit
This report is based on Financial Statements for the year ended March 31, 2021, which have been audited by Ernst & Young.
Champion Iron Limited, through its subsidiary Quebec Iron Ore Inc. (“QIO”), owns and operates the Bloom Lake Mining Complex (“Bloom Lake” or
“Bloom Lake Mine”), located on the south end of the Labrador Trough, approximately 13 km north of Fermont, Québec, adjacent to established
iron ore producers. Bloom Lake is an open-pit truck and shovel operation with a concentrator, and it ships iron ore concentrate from the site by
rail, initially on the Bloom Lake Railway, to a ship loading port in Sept-Îles, Québec. The Bloom Lake Phase I plant has a nameplate capacity of
7.4 Mtpa and produces a high-grade 66.2% Fe iron ore concentrate with low contaminant levels, which has proven to attract a premium to the
Platts IODEX 62% Fe iron ore benchmark. In addition to the partially completed Bloom Lake Phase II expansion project (“Phase II”), Champion
owns a portfolio of exploration and development projects in the Labrador Trough, including the Kamistiatusset iron ore project (the “Kami
Project”) located a few kilometres south east of Bloom Lake, and the Fire Lake North iron ore project, located approximately 40 km south of
Bloom Lake. The Company sells its iron ore concentrate globally, including customers in China, Japan, the Middle East, Europe, South Korea,
India and Canada.
7,684,500 dmt
Concentrate Sold
US$139.1
Gross Realized Price
$1,281.8M
Revenues
8,001,200 wmt
Record Concentrate
Produced
$819.5M
Record EBITDA1
$0.97
EPS
83.5%
Ore Recovery Rate
$636.5M
Cash on Hand1
$54.2 /dmt sold
Total Cash Cost1
66.4%
Iron Ore Concentrate
2.45
Recordable Injury
Frequency Rate
1
This is a non-IFRS financial performance measure with no standard definition under IFRS. See the “Non-IFRS Financial Performance Measures” section of the Directors' Report.
8 Page
PHASE II
RECEIVED
final Board of Directors' approval, on
November 12, 2020, to complete the Phase II
project and subsequently advanced work
programs required to maintain the project's
timeline, scheduled for completion in mid-2022
INCREASED
the senior secured Credit Facility from
US$200.0M to US$400.0M, providing additional
financing to support and fund the Phase II
expansion
AGREED
to expand the existing long-term rail contract
with Quebec North Shore and Labrador Railway
to accommodate anticipated increased
Phase II production volumes
CARRIED OUT
the planned construction work with more than
200 individuals actively working on the Phase II
project
PURCHASED
major mining equipment and ordered long lead
time items, including the stacker reclaimer by
Société Ferroviaire et Portuaire de Pointe-Noire
GROWTH & DEVELOPMENTS
CLOSED
the Kami Project acquisition and its related
mining properties, on April 1, 2021, and initiated
work related to revising the Kami Project’s
scope and feasibility study
INCREASED
its exploration mineral rights adjacent to Bloom
Lake mining lease by over 175% with the
acquisition of 152 claims (38 km2) and staking
of 127 claims (32 km2)
PRODUCED & SHIPPED
575,700 wmt of Direct Reduction (“DR”) quality
iron ore concentrate at 67.7% Fe with a
combined silica and alumina content of 2.8%
ADVANCED
Laboratory testing for the production of iron ore
concentrate, grading more than 69% Fe
PROGRESSED
Laboratory testing and development of cold
pelletizing technologies
INCLUDED
in the S&P/ASX 200 Index, Australia's
preeminent benchmark index, which measures
the performance of the 200 largest index-
eligible stocks listed on the ASX
QUALIFIED
to trade on the OTCQX Best Market, the highest
market tier of OTC Market Groups, under the
symbol CIAFF
9 Page
Opportunities arise in challenging times. In light of the unprecedented year that was globally marked by
the COVID-19 pandemic, I would first and foremost like to thank our workers, partners, local communities
and shareholders for their continuous support and commitment. I am grateful for the considerable
efforts made by our employees and their flexibility to rapidly adapt to the new reality imposed by the
pandemic. Such a commitment allows our Company to maintain its positive impact on the region and to
continue its journey to build a sustainable mining company. Together with our exemplary teams and
various partners, Champion achieved record financial and operational results for its 2021 fiscal year,
positioning our Company to deploy its growth initiatives.
Focus on Growth
The 2021 fiscal year marked several milestones as our Company set the foundation for additional growth.
In addition to adapting operations in response to the pandemic, we announced the approval and decision
to complete the Phase II expansion project, intended to double Bloom Lakes’ production capacity to 15
Mtpa. In April 2021, we also completed the acquisition of the Kami Project, a high-grade iron ore project
located a few kilometers southeast of Bloom Lake. Responsible growth requires us to adapt our
operations to reduce our environmental footprint, continue to build our partnerships with local
communities and improve our health and safety measures. I am excited by the prospect of our Company
which continues to participate in the fight against climate change as we adapt our product to further
reduce emissions in the steelmaking process. In addition to our high-quality iron ore concentrate already
contributing to emissions reduction in the steel industry, we have now proven our ability to produce a DR
quality iron ore concentrate, which can ultimately be used and converted by Direct Reduced Iron
producers and consumed by electric arc furnaces, which is a cleaner steelmaking process. Our
successful commercial production and sales of DR iron ore concentrate further positions our Company
as part of the solution in the fight against climate change.
10 Page
A Word from the Executive Chairman (continued)
Focus on Local economic Revival and Local Communities
Over the past three years, local communities have supported and trusted us in our daring vision to restart
Bloom Lake. For that reason, Champion takes pride in being a key partner in the economic revival of the
northern region. Through the Plan Nord program and in connection with the ongoing Phase II project,
Champion committed to a joint investment of $135M with Société du Plan Nord in the upcoming years. As
the Phase II project progresses towards its planned commissioning in mid-2022, we expect to create
nearly 400 additional full-time and quality jobs, positioning Champion as an important contributor to the
Québec economy.
I am grateful for our host communities and Indigenous peoples, for supporting our activities and allowing
us to contribute to the economic stability of the region. It is through their confidence in our vision that we
can today hold the honour of being the largest employer of First Nations in the region.
New Appointments to our Management Team and Board of Directors
Our success lies in our ability to attract and promote top talent for positions in our executive team and
Board of Directors. In July 2020, we appointed Alexandre Belleau as Chief Operating Officer, following his
remarkable contributions in commissioning Bloom Lake in 2018 and his proven leadership capabilities to
build on our values while continuing to grow our team and operations. In August 2020, we welcomed
Louise Grondin as a member of the Board of Directors. Her distinguished career and extensive leadership
experience in multiple facets of the mining industry, including environment, health and safety,
community and human resources will be invaluable to our organization. In April 2021, we appointed
François Lafrenière as Chief People and Sustainability Officer. His passion for sustainability, innovations
and human capital has been instrumental since he joined the Quebec Iron Ore team in 2016.
Our focus on the Future
With our ability to rely on our partners and with our proven operational track record, our Company is well
positioned to continue its growth trajectory. Our Phase II expansion project, currently under construction,
the recently acquired Kami Project and our product development securely position Champion with an
organic growth strategy for the foreseeable future.
In closing, it is not commonplace that a company can boast of beating its own operational and financial
performance records year after year. On behalf of the Board of Directors, I want to express our sincere
appreciation to our investors and partners, who shared our vision to restart the Bloom Lake Mine. It is
with their support over the past five years, as well as our dedicated employees, that Champion can
capitalize on its current operations and unlock the value of its future potential.
Looking Back on a Year Like No Other
Despite the severe impacts of the COVID-19 pandemic on the local and global economy, our Company
can be proud of several accomplishments in our 2021 fiscal year. Even while adapting to the challenges
imposed by the pandemic, our resilient workforce and partners delivered remarkable progress for our
Company. Our operational successes include improvements in our occupational health and safety
systems, the ongoing optimization of our industry-leading environmental practices, our focus on
reducing greenhouse gas emissions in the steelmaking process, the acquisition of the Kami Project, the
commencement of work programs for our Phase II growth project and its related ongoing hiring
campaign, expected to contribute to the post-pandemic economic recovery of Québec.
Health and Safety at the Core of All our Decisions and Actions
Against the backdrop of the challenges created by the pandemic, we established a COVID-19 screening
laboratory directly at our mine site during the 2021 fiscal year, to better protect the physical and
psychological welfare of our employees, partners and host communities. This laboratory allowed us to
mitigate the risks of the pandemic and largely contributed to the stability of our operations, allowing our
Company to deliver record production results for the 2021 fiscal year.
We are extremely proud that our values are deeply rooted in our workforce's daily tasks, allowing our
Company to live up to its ambitions and meet the high health and safety standards that our human
capital deserves – Our people are our most valuable asset.
12 Page
A Word from the Chief Executive Officer (continued)
Continuous Improvement of our Environmental Performance
In addition to our diligent local environmental management practices, we are proud that our products
contribute in the fight against global climate change. Given its exceptional purity and quality, Bloom
Lake’s 66.2% Fe iron ore concentrate significantly contributes to the reduction of greenhouse gas
emissions in the steelmaking industry.
Our commitment to innovate led us to develop a DR concentrate during 2020 fiscal year, enabling our
Company to engage with different customers and further contribute to emissions reduction in the steel
industry. This innovation creates opportunities to ultimately contribute to the supply chain utilized by
electric arc furnaces, which are seen by many experts as the ultimate solution to help decarbonize the
steel industry, and this positions our Company to play an active role in the “green” transition of the iron
ore industry.
An Employer of Choice for the Québec Economy
We are proud of our relationship with First Nations, highlighted by our position as the largest First Nations
employer in the region. As our Phase II project continues to progress, our Company is preparing to recruit,
over the coming months, 400 additional talented team members to help us reach our operational
production objectives. This represents a significant increase of our human capital over a one-year period,
solidifying our Company as a key employer in the Québec North Shore region, where we have
continuously strived to create permanent local employment.
Conclusion
Despite unprecedented challenges, I would like to highlight the courage and strength displayed and
demonstrated by our people during the past year. I am excited for our Company’s growth prospects as we
rapidly advance our Phase II project and continue to work on our product development initiates, further
positioning us to capitalize from the global rising demand for high-grade iron ore. We look forward to
completing the Phase II expansion with the same diligent approach and values that have contributed to
our success since recommissioning the Bloom Lake Mine.
Michael O’Keeffe, B AppSc (Metallurgy)
Executive Chairman and Former Chief Executive Officer
Mr. O’Keeffe was appointed executive Chairman of Champion Iron Limited on August 13, 2013. On April 1, 2019, Mr. O’Keeffe stepped down as
CEO and remains Executive Chairman of the Board. 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.
Mr. O’Keeffe is presently a member of the Board of Directors of Burgundy Diamond Mines Ltd. and Mount Royal Resources.
David Cataford, Eng
Chief Executive Officer and Director
Mr. Cataford was appointed to the position of President and Chief Executive Officer on April 1, 2019. Mr. Cataford had been Chief Operating
Officer of the Company since March 20, 2017. Prior to joining Champion in 2014, Mr. Cataford held several management positions within Cliffs
Natural Resources Inc., including key positions in their main iron ore deposit at Bloom Lake Mine in Fermont, Québec. At Bloom Lake,
Mr. Cataford played an important role in the management team, which increased drilling capacity by 80%, and helped in the Phase I expansion
of the plant. His experience in iron ore mining includes mineral characterization projects at Bloom Lake and for ArcelorMittal at Mont Wright, as
well as adapting the recovery circuit to meet new customer demands. Mr. Cataford is cofounder of the North Shore and Labrador Mineral
Processing Society.
Natacha Garoute, CPA, CA
Chief Financial Officer
With more than 20 years of finance experience as a CPA, Natacha has developed a strong focus in mining and publicly-listed corporations with
extensive international exposure. Thanks to her legal background, Natacha optimized tax structures and financed development and production
stage companies through project debt and equity financing. Prior to joining Champion, Natacha was Chief Financial Officer of Roxgold Inc. and
Corporate Controller at Semafo Inc. and held senior positions at Canadian National Railway Inc. and PwC. Natacha also sits on the Board of
Directors, Audit Committee and Special Governance Committee of Corem.
Alexandre Belleau, Eng
Chief Operating Officer
M. Belleau joined the team in 2016, following the Company's decision to acquire and recommission the sidelined Bloom Lake Mine. With his
career as entrepreneur in various lines of business, Alexandre’s versatility allowed him to successfully head the Bloom Lake restart. Recently
promoted to his current role as Chief Operating Officer, M. Belleau is closely involved in many aspects of the Company where logistics,
operations, human resources and financing, all benefit from his expertise in business development and project management. Alexandre is also
an executive member of the Québec Mining Association.
15 Page
Steve Boucratie
Vice-President, General Counsel and Corporate Secretary
Steve Boucratie joined Champion Iron in May 2019 as Vice-President, General Counsel and Corporate Secretary. Steve brings more than 13
years of legal and transaction experience. Prior to joining Champion, Steve was serving as Director, Legal Affairs and Assistant Corporate
Secretary for Osisko Gold Royalties Ltd. Before Osisko, Steve was a partner of the law firm Fasken Martineau Dumoulin LLP where he practiced
corporate law.
Michael Marcotte, CFA
Vice-President Investor Relations
Michael joined Champion Iron in 2018 as Vice-President Investor Relations. Prior to joining Champion Iron Limited, Michael worked as Vice-
President and Partner at Orion Financial Inc. from 2004 to 2007, which was then acquired by Macquarie Capital Markets Canada Ltd., where he
worked as Associate Director, engaging institutional investors across North America and Europe from 2007 to 2018. His previous experience
included equity research focused on resource equities at various institutional asset managers. Michael was recognized as a leading
institutional sales professional in 2017 and 2018, when he was awarded the ‘TopGun’ award by Brendan Wood International. Michael also sits
on the Board of Directors of Ruelle de l’Avenir, a nonprofit organization contributing to the learning and academic success of young people in
greater Montréal.
François Lafrenière
Chief People and Sustainability Officer
After joining the Quebec Iron Ore team in 2016, François Lafrenière was recently appointed Chief People and Sustainability Officer in April 2021,
a role where he is responsible for talent deployment and the implementation of sustainability principles throughout the Company. In his past
positions during the previous fifteen years, Mr. Lafrenière held a variety of senior management roles with consulting firms and in the mining
industry. Today, his passion for people and sustainability inspires him to develop innovative, socially and environmentally responsible
approaches to mining production.
Pradip Devalia
Company Secretary – Australia
Mr. Devalia joined Champion Iron Limited as Company Secretary in June 2014. Prior to joining Champion Iron Limited, Mr. Devalia was a senior
tax partner of PwC in Sydney and has expertise in the resources sector reporting to the Executive team and the Board of Directors of major
multinational companies. Since leaving PwC, Mr. Devalia has worked as a consultant to various companies, including Riversdale Mining Limited
and Rio Tinto. Mr. Devalia is a member of the Institute of Chartered Accountants in England & Wales and a Fellow of Chartered Accountants
Australia New Zealand.
16 Page
Champion diligently assumes its responsibilities with regard to environmental, societal and ethical issues. As part of our ongoing commitment
to implement a sustainable development approach and ethical practices across all our activities, we have adopted policies and documented
practices, which include, amongst others, a Modern Slavery Statement, a Responsible Procurement Corporate Policy and a Sustainable Report.
The latest versions available on our website at www.championiron.com.
Modern Slavery Statement
As part of its long-term vision to create a sustainable and innovative business that aims to minimize social inequities and impacts on the
natural environment, Champion is committed to protecting human rights wherever they operate. Champion’s accountability in its rejection of
modern slavery falls within its overall approach to protect human rights.
Champion recognizes that its activities can have an impact on human rights either through its operations or through its relationships with
subcontractors and suppliers. This is why the Company is committed to implementing the means to ensure respect for human rights in its
assets and to ensure that its employees and business partners understand and respect this commitment. Respect for human rights is one of
the fundamental elements of Champion's overall strategy aimed at integrating the principles of sustainable development throughout the
organization.
Champion has zero tolerance for any form of modern slavery, including forced, compulsory or child labour, and is committed to operating in a
transparent and responsible manner to prevent modern slavery and human trafficking in all of its activities. The Company also seeks to avoid
being complicit in or facilitating human rights violations or modern slavery throughout its supply chain.
Responsible Procurement Corporate Policy
The adoption by Champion of a responsible procurement policy is part of its continuous approach aimed at applying the principles of
sustainable development within its organization.
The implementation of such a policy helps support Champion's procurement process in a way that ensures it receives the best value for its
money when purchasing goods and services, while helping to stimulate the economy of local communities and Indigenous groups. This policy
is also part of a global perspective aimed at enabling Champion to diligently fulfill its responsibilities in the face of environmental, societal and
ethical issues inherent to the Company's procurement processes.
In the course of its activities, Champion will seek to diligently implement the principles and commitments set out in this policy.
Sustainability Report
We envision the success of our business by creating value in a way that meets long-term business needs while considering our stakeholders
and the environmental, social and economic context in which we operate. Integrating sustainable practices while conducting our business is
an essential element since this allows for risk reduction, lower costs, better access to opportunities, and above all the creation of long-term
value for stakeholders.
The management team sets the strategic direction for sustainable development and ensures the development and implementation of strategic
sustainability programs. Through its sustainable development policies, Champion seeks to obtain the best value for its money from the goods
and services it procures, while stimulating the economy of local communities and Indigenous groups.
20 Page
Michael O’Keeffe, B AppSc (Metallurgy)
Executive Chairman Former Chief Executive Officer (non-independent)
Mr. O’Keeffe was appointed executive Chairman of Champion Iron Limited on August 13, 2013. On April 1, 2019, Mr. O’Keeffe stepped down as
CEO and remains Executive Chairman of the Board. 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.
Mr. O’Keeffe is presently a member of the Board of Directors of Burgundy Diamond Mines Ltd. and Mount Royal Resources.
Andrew J. Love, FCA
Lead Director (independent)
Mr. Love was appointed as a Non-Executive Director on April 9, 2014. He has more than 35 years of experience in corporate recovery and
reconstruction in Australia. He was initially a member and then on retirement a senior partner of Australian accounting firm Ferrier Hodgson in
the period 1976 to 2013. He then acted as a consultant to the firm until 2019. He has advised major local and overseas companies and financial
institutions in a broad variety of restructuring and formal insolvency assignments and specialized in the resources industry. Mr. Love has been
an independent director of a number of listed companies over a 30-year period in the resources, financial services and property industries. This
has involved corporate experience in Asia, Africa, Canada, the United Kingdom and the United States. Mr. Love’s previous board positions have
included Chairman of ROC Oil Ltd., Deputy Chairman of Riversdale Mining Limited, Director of Charter Hall Office Trust, Chairman of Museum of
Contemporary Art, Chairman of Gateway Lifestyle Operations Ltd. and Director of Scottish Pacific Group Ltd.
David Cataford, Eng
Chief Executive Officer and Director (non-independent)
Mr. Cataford was appointed to the position of President and Chief Executive Officer on April 1, 2019. Mr. Cataford had been Chief Operating
Officer of the Company since March 20, 2017. Prior to joining Champion in 2014, Mr. Cataford held several management positions within Cliffs
Natural Resources Inc., including key positions in their main iron ore deposit at Bloom Lake Mine in Fermont, Québec. At Bloom Lake,
Mr. Cataford played an important role in the management team, which increased drilling capacity by 80%, and helped in the Phase I expansion
of the plant. His experience in iron ore mining includes mineral characterization projects at Bloom Lake and for ArcelorMittal at Mont Wright, as
well as adapting the recovery circuit to meet new customer demands. Mr. Cataford is cofounder of the North Shore and Labrador Mineral
Processing Society.
Michelle Cormier, CPA, CA, ASC
Non-Executive Director (independent)
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 a strong capital markets background, with significant experience in public
companies listed in the United States and Canada. Mrs. Cormier has been Operating Partner at Wynnchurh Capital Canada, Ltd. since 2014.
Mrs. Cormier spent 13 years in senior management and as Chief Financial Officer of a large North American forest products company, and eight
years in various senior management positions at Alcan Aluminum Limited (Rio Tinto). Mrs. Cormier articled with Ernst & Young. She serves on
the Board of Directors of Cascades Inc. and Uni-Select Inc.
25 Page
Jyothish George
Non-Executive Director (independent)
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
Bachelor's in Technology from IIT Madras, India and a PhD in Mechanical Engineering from Cornell University.
Louise Grondin
Non-Executive Director (independent)
Ms. Grondin has been, since January 2021, working as an independent consultant after retiring from Agnico Eagle Mines Ltd, a Canadian-based
international gold producer. Over her almost twenty years with Agnico Eagle, she held various leadership positions as Senior Vice President,
People and Culture, Senior Vice President Environment, Sustainable Development and People, Regional Director Environment and
Environmental Superintendent. Prior to working with Agnico Eagle, Ms. Grondin was Director of Environment, Human Resources and Safety for
Billiton Canada Ltd.
Gary Lawler BA, LLB, LLM (Hons), ASIA, Master of Laws (Applied Laws) (Wills and Estates)
Non-Executive Director (independent)
Mr. Lawler was appointed as a Non-Executive Director on April 9, 2014. He is a leading Australian corporate lawyer who has specialized as a
mergers and acquisitions lawyer for over 35 years. Mr. Lawler has been a partner of a number of leading Australian law firms and is currently a
Senior Advisor at Ashurst Australia. Mr. Lawler is also the Chairman of Mont Royal Resources Limited. Mr. Lawler has previously held board
positions with Dominion Mining Limited, Riversdale Mining Limited, Riversdale Resources Limited and Cartier Iron Corporation and brings a
wealth of experience to the Board.
The Honourable Wayne G. Wouters, P.C., O.C.
Non-Executive Director (independent)
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 and in 2017, he was made an Officer of the Order of Canada.
26 Page
Corporate Governance Statement
The Company’s Board is committed to protecting and enhancing shareholder value and conducting the Company’s business ethically and in
accordance with the highest standards of corporate governance. In determining those standards, Champion supports the intent of the 4th
Edition ASX Corporate Governance Principles and Recommendations (“Principles and Recommendations”) and meets the specific
requirements of the Principles and Recommendations, unless otherwise disclosed.
Champion believes that its practices are substantially consistent with the ASX Recommendations and will continue to adapt its governance
practices to be consistent with them and make changes as appropriate, having regard to the nature and scale of the Company's business.
A full copy of the Corporate Governance Statement is available on the Company's website at www.championiron.com. The corporate
governance section of Champion's website also provides further information in relation to Champion’s corporate governance policies and
whistleblower policy.
Diversity Policy
The Company has adopted a Diversity Policy within Champion Iron Limited Corporate Governance Policies, which can be accessed at the
Company’s website at www.championiron.com.
The Board aims to achieve gender diversity as Director and Senior Management positions become vacant and appropriately qualified
candidates become available. At the date of this report, 17% of the Company's Senior Executive team and 25% of the Board are women. As at
December 31, 2020, 11% of the whole organization are women.
27 Page
The following Champion Iron Limited (“Champion” or the “Company”) Directors' Report has been prepared as of May 27, 2021. This Directors'
Report is intended to supplement the audited consolidated financial statements for the year ended March 31, 2021 and related notes thereto
(“Financial Statements”), which have been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting
Standards, other authoritative pronouncements of the Australian Accounting Standards Board (AASB), including Australian Interpretations and
the International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). The Financial
Statements and other information pertaining to the Company are available on SEDAR at www.sedar.com, the ASX at www.asx.com.au and the
Company's website at www.championiron.com.
Champion's management team (“Management”) is responsible for the preparation and integrity of the Financial Statements, including the
maintenance of appropriate information systems, procedures and internal controls. Management is also responsible for ensuring that
information disclosed externally, including the Financial Statements and Directors' Report, is complete and reliable.
Unless otherwise specified, all dollar figures stated herein are expressed in Canadian dollars, except for: (i) tabular amounts which are in
thousands of Canadian dollars; and (ii) per share or per tonne amounts. The following abbreviations are used throughout this Directors' Report:
US$ (United States dollar), CA$ (Canadian dollar), t (tonnes), wmt (wet metric tonnes), dmt (dry metric tonnes), Mtpa (million tonnes per
annum), M (million), km (kilometers), m (meters) and EPS (earnings per share). The utilization of “Champion" or the “Company” refers to
Champion Iron Limited and/or one, or more, or all of its subsidiaries, as applicable.
Non-IFRS Financial Performance Measures
Certain financial performance measures with no standard meaning under IFRS are included in this Directors' Report. Champion believes that
these measures, in addition to conventional measures prepared in accordance with IFRS, provide investors with an improved ability to evaluate
the underlying performance of the Company. These measures are intended to provide additional information and should not be considered in
isolation, or as a substitute for, measures of performance prepared in accordance with IFRS. These measures do not have any standardized
meaning prescribed under IFRS and therefore may not be comparable to other issuers. The non-IFRS financial performance measures included
in this Directors' Report are: total cash cost or C1 cash cost, incremental costs related to COVID-19 per dmt sold, all-in sustaining costs
(“AISC”), net average realized selling price, cash operating margin and cash profit margin, earnings before interest, tax, depreciation and
amortization (“EBITDA”), EBITDA margin, adjusted net income, adjusted net income attributable to Champion shareholders, adjusted EPS,
operating cash flow per share and cash on hand. For a detailed description of each of the non-IFRS measures used in this Directors' Report and
a detailed reconciliation to the most directly comparable measure under IFRS, please refer to the “Non-IFRS Financial Performance Measures”
section of this Directors' Report.
YEAR-ON-YEAR STRONG FINANCIAL PERFORMANCE
“Our Company reports another strong year of operating results. The
commitment and agility of our workforce, partners and communities
enabled us to mitigate the impacts of the pandemic, allowing our Company
to deliver a new annual production record and capitalize on the rising global
demand for high-grade iron ore.”
David Cataford
30 Page
Champion Iron Limited
Directors' Report
(Expressed in Canadian dollars, except where otherwise indicated)
1. Financial and Operating Highlights
Iron ore concentrate produced (wmt)
Iron ore concentrate sold (dmt)
Financial Data (in thousands of dollars, except per share amounts)
Revenues
Gross profit
EBITDA1
EBITDA margin1
Net income
Adjusted net income1
Net income attributable to Champion shareholders
Adjusted net income attributable to Champion shareholders1
Basic earnings per share
Adjusted earnings per share1
Net cash flow from operations
Cash and cash equivalents
Short-term investments
Total assets
Total non-current financial liabilities
Statistics (in dollars per dmt sold)
Gross average realized selling price
Net average realized selling price1
Total cash cost1 (C1 cash cost)
All-in sustaining cost1
Cash operating margin1
Statistics (in US dollars per dmt sold)
Gross average realized selling price
Net average realized selling price1
Total cash cost1 (C1 cash cost)
All-in sustaining cost1
Cash operating margin1
Three Months Ended
March 31,
2021
2020
Year Ended
March 31,
2021
2020
2019
2,011,400
1,971,100
1,891,800
1,888,200
8,001,200
7,684,500
7,903,700
7,577,400
6,994,500
7,127,600
396,702
277,116
275,764
70 %
155,934
155,499
155,934
155,499
0.32
0.31
228,566
609,316
27,200
1,496,906
214,951
220.0
201.3
54.4
65.1
136.2
173.9
159.3
43.0
51.4
107.9
175,702
64,918
60,655
35 %
18,351
18,351
18,351
18,351
0.04
0.04
84,614
281,363
17,291
882,598
275,968
130.5
93.1
53.9
59.8
33.3
96.9
69.7
40.1
44.5
25.2
1,281,815
817,756
819,477
64 %
464,425
470,681
464,425
470,681
0.97
0.98
623,476
609,316
27,200
1,496,906
214,951
182.3
166.8
54.2
62.8
104.0
139.1
127.3
41.0
47.5
79.8
785,086
363,717
347,433
44 %
121,050
172,691
89,426
141,067
0.20
0.32
309,567
281,363
17,291
882,598
275,968
142.5
103.6
52.7
62.7
40.9
107.2
78.0
39.6
47.1
30.9
655,129
288,632
276,575
42 %
147,599
147,599
83,046
83,046
0.20
0.20
176,698
135,424
17,907
672,017
262,864
120.6
91.9
49.4
55.8
36.1
91.9
70.0
37.7
42.5
27.5
1
This is a non-IFRS financial performance measure with no standard definition under IFRS. See the “Non-IFRS Financial Performance Measures” section of this Directors' Report
included in note 20.
31 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
2. Quarterly and Year-to-Date Highlights
Health & Safety
•
•
Expansion of Bloom Lake’s COVID-19 laboratory testing capacity, allowing ongoing and uninterrupted operational activities; and
An employee recordable injury frequency rate of 2.45, which is in line with Québec's open pit industry standards.
Financial
•
•
•
•
•
•
Revenues of $396.7M and $1,281.8M for the three-month period and year ended March 31, 2021, respectively, compared to $175.7M
and $785.1M, respectively, for the same periods in 2020;
Record EBITDA1 of $275.8M for the three-month period ended March 31, 2021, compared to $60.7M for the same period in 2020.
Record EBITDA1 of $819.5M for the year ended March 31, 2021, compared to $347.4M for the same period in 2020;
Record net income of $155.9M for the three-month period ended March 31, 2021 (EPS of $0.32), compared to $18.4M for the same
period in 2020 (EPS of $0.04). Record net income of $464.4M for the year ended March 31, 2021 (EPS of $0.97), compared to $121.1M
for the same period in 2020 (EPS of $0.20);
Net cash flow from operations of $228.6M for the three-month period ended March 31, 2021, representing operating cash flow per
share1 of $0.46, compared to $84.6M or $0.18 per share1 for the same period in 2020. Net cash flow from operations of $623.5M for
the year ended March 31, 2021, representing operating cash flow per share1 of $1.30, compared to $309.6M or $0.70 per share1 for the
same period in 2020;
Cash on hand1 and restricted cash totaled $680.5M as at March 31, 2021, compared to $551.8M as at December 31, 2020 and $298.7M
as at March 31, 2020; and
Full repayment of the US$20.0M revolving credit facility (the “Revolving Facility”) on March 30, 2021, bringing the total undrawn and
available credit facilities (“Credit Facility”) to US$220.0M as at March 31, 2021.
1
This is a non-IFRS financial performance measure with no standard definition under IFRS. See the “Non-IFRS Financial Performance Measures” section of this Directors' Report
included in note 20.
32 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
2. Quarterly and Year-to-Date Highlights (continued)
Operations
•
•
•
Production of 2,011,400 wmt of high-grade 66.5% iron ore (“Fe”) concentrate for the three-month period ended March 31, 2021,
compared to 1,891,800 wmt for the same period in 2020, contributing to a record annual production of 8,001,200 wmt of high-grade
66.4% Fe concentrate for the year ended March 31, 2021, compared to 7,903,700 wmt for the same period in 2020;
Recovery rate of 82.6% and 83.5% for the three-month period and year ended March 31, 2021, respectively, compared to a recovery
rate of 82.3% and 82.6%, respectively, for the same periods in 2020; and
Total cash cost1 of $54.4/dmt (US$43.0/dmt) (C1) and $54.2/dmt (US$41.0/dmt) for the three-month period and year ended
March 31, 2021, respectively, compared to $53.9/dmt (US$40.1/dmt) and $52.7/dmt (US$39.6/dmt), respectively, for the same
periods in 2020.
Growth and Development
•
•
•
•
•
Progression of laboratory testing for the production of iron ore concentrate, grading more than 69% Fe, enabling the Company to
engage with Direct Reduction (“DR”) iron and steel producers, and help support decarbonization initiatives;
Ongoing laboratory testing and development of cold pelletizing technologies;
Quarterly and annual production of 374,400 wmt and 575,700 wmt, respectively, of DR quality iron ore concentrate, grading 67.7% Fe
with a combined silica and alumina content of 2.8%;
Inclusion in the S&P/ASX 200 Index, Australia's preeminent benchmark index, which measures the performance of the 200 largest
index-eligible stocks listed on the ASX; and
Acquisition of the Kami Project and its related mining properties on April 1, 2021, and initiation of work related to revising the Kami
Project’s feasibility study, as the Company evaluates its growth alternatives within its portfolio.
Phase II Milestones
•
•
•
•
Construction work is progressing as planned with more than 200 individuals actively working on the Phase II project, which is
expected to be completed by mid-2022;
Agreement to expand the existing long-term rail contract with Quebec North Shore and Labrador Railway (“QNS&L”) to accommodate
the anticipated increased Phase II production volumes;
Receipt and installation of most of the spirals required for the Phase II plant; and
Ordering of long lead time items, including the stacker reclaimer by Société Ferroviaire et Portuaire de Pointe-Noire (“SFPPN”).
1
This is a non-IFRS financial performance measure with no standard definition under IFRS. See the “Non-IFRS Financial Performance Measures” section of this Directors' Report
included in note 20.
33 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
3. Response to the COVID-19 Pandemic
The COVID-19 pandemic continues to impact the global economy, creating significant economic uncertainty.
Health and Safety of the Company’s Employees, Partners and Local Communities
Since the beginning of the pandemic, the Company has consistently and proactively deployed several measures in its efforts to mitigate risks
related to COVID-19, in line with or exceeding the Government of Québec's (the “Government”) guidelines. Despite the acceleration of COVID-19
vaccination efforts in the Province of Québec, the Company continues to enforce all of its measures, including the following:
Established an executive committee to monitor and adapt to the ongoing challenges created by COVID-19;
•
• Adapted work environments and implementation of safety rules and protocols;
◦
Establishment and expansion of a rapid-testing COVID-19 laboratory using technology approved and certified by Health Canada
at the mine site, allowing the Company to screen all employees and contractors in order to prevent outbreaks;
Establishment of a contingency plan for each sector of activity in the event of multiple COVID-19 detections;
Temperature monitoring and control prior to traveling and entering the Bloom Lake Mine site;
◦
◦
◦ Disinfection stations across the mine site and adoption of social distancing protocols;
◦ Adoption of isolation measures from the nearby communities and self-isolation for workforce who exhibit symptoms;
◦ Additional transportation capacity to allow for adequate social distancing; and
◦
Employees' contact register to trace potential infections and to launch disease protocol for suspected cases.
• Mandatory information session for new contractors and employees and communication of updated measures;
• Monitoring of COVID-19 related measures adopted by contractors; and
• Monthly and daily audit to review the effectiveness of the Company's adopted measures.
In addition, the Company is participating to the establishment of the Côte-Nord Industry Vaccination Center (the “Vaccination Center”), in
collaboration with Rio Tinto IOC, ArcelorMittal Mines and Infrastructure Canada and Aluminerie Alouette. Located in Sept-Îles, the Vaccination
Center’s operations began on May 13, 2021 when vaccination was available to the adult population. The collective effort to establish the
Vaccination Center supports the Government’s initiative to increase immunization capacity in the region by providing greater vaccination
access for local communities.
The Company's full COVID-19 plan is available on its website at www.championiron.com.
Financial and Operational Impacts
To date, the Company's risk-mitigating actions have proven successful in minimizing the pandemic's impact, with Bloom Lake operating at full
capacity. During the three-month period ended March 31, 2021, there were no significant operational disruptions caused by COVID-19.
The Company implemented best practices in managing its response to the COVID-19 pandemic resulting in direct and incremental operating
costs during the three-month period and year ended March 31, 2021, which totaled $3.2 million or $1.6/dmt1 and $12.6 million or $1.6/dmt1,
respectively. Additional indirect operational costs were incurred since the beginning of the pandemic, including inefficiency-related costs
across several areas of the Company's operations.
Uncertainties due to COVID-19
Although the Company is managing its operations and liquidity to mitigate risks related to COVID-19, given the significant uncertainty
regarding the ultimate impact that the COVID-19 pandemic will have on the overall economy and the demand for iron ore concentrate, the
extent to which the pandemic could impact operations and cash flows in the future remains uncertain and will depend on future developments,
such as the duration of the pandemic, the emergence of virus variants, the efficacy and availability of vaccines and regulatory actions to
contain the virus.
1
This is a non-IFRS financial performance measure with no standard definition under IFRS. See the “Non-IFRS Financial Performance Measures” section of this Directors' Report
included in note 20.
34 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
4. Bloom Lake Phase II Update
Bloom Lake Feasibility Study (the "Feasibility Study")
On June 20, 2019, the Company announced the findings of the Feasibility Study, prepared pursuant to National Instrument 43-101 – Standards
of Disclosure for Mineral Projects (“NI 43-101”) and the Joint Ore Reserves Committee (“JORC”) Code (2012 edition) (see press release dated
June 20, 2019 available under the Company’s filings on SEDAR at www.sedar.com, the ASX at www.asx.com.au and the Company's website at
www.championiron.com), including proven and probable mineral reserve estimates of 807.0 Mt (346.0 Mt proven reserves and 461.0 Mt
probable reserves) at an average grade of 29.0% Fe. The Phase II project, as detailed in the Feasibility Study, aims to double Bloom Lake's
nameplate capacity to 15 Mtpa of 66.2% Fe iron ore concentrate by completing the construction of the second plant which was partially
completed by the mine's former owner. Based on the new optimized mine plan, the Bloom Lake mining rate would also be increased to
accelerate the supply of ore to the expanded facilities, while maintaining a life of mine (“LoM”) of 20 years.
Financing
Subsequent to the Board of Directors' (the “Board”) final approval (on November 12, 2020) to complete the Phase II project, the Company
increased its Credit Facility on December 23, 2020 by US$200.0 million (to US$400.0 million). Given the Company's robust financial position,
including its reported total cash on hand1 and restricted cash of $680.5M as at March 31, 2021, it did not draw on its available US$200.0M
Credit Facility and was able to repay the US$20.0M Revolving Facility. As at March 31, 2021, the Company had a total undrawn Credit Facility of
US$220.0M, which together with available liquidity and ongoing cash flows from operations, are expected to fully fund the project, scheduled
for completion by mid-2022.
Milestones
During the three-month period ended March 31, 2021, $45,971,000 in capital expenditures and $9,200,000 in advance payments were incurred
for the project, for a total of $170,317,000 invested to date, which included $15,211,000 in advance payments to SFPPN. There are currently
more than 200 employees, consultants and subcontractors actively working on-site to meet the Bloom Lake Phase II completion objectives
and consequently, construction work is progressing as planned. The following work was undertaken and the following milestones were
achieved during the three-month period ended March 31, 2021:
•
•
•
•
•
•
Agreement to expand the existing long-term rail contract with QNS&L to support the expected Phase II production volumes;
Stacker reclaimer ordered by SFPPN;
Receipt and installation of most of the Phase II plant spirals;
Purchase of major mining equipment;
Modifications made to the loading tower to accommodate Phase II operations; and
Award of contracts for summer works in the tailings facility.
The Company intends to deliver the project by mid-2022 with the construction work to reach its peak between May and October 2021.
Bloom Lake Phase II reserves are based on the technical report entitled “Bloom Lake Mine – Feasibility Study Phase II”, prepared pursuant to
NI 43-101 and JORC Code (2012 edition) by BBA Inc., Soutex and WSP Canada Inc., having an effective date of June 20, 2019 and filed on
August 2, 2019 (the “Feasibility Study”). Bloom Lake Phase II mineral reserves include Bloom Lake Phase I mineral reserves as of the effective
date of the mineral reserve estimate reported in the Feasibility Study. The Company is not aware of any new information or data that materially
affects the information included in the Feasibility Study and confirms that all material assumptions and technical parameters underpinning
the estimates in the Feasibility Study continue to apply and have not materially changed. The Feasibility Study is available under the
Company's filings at www.sedar.com, on the ASX at www.asx.com.au or the Company's website at www.championiron.com.
1
This is a non-IFRS financial performance measure with no standard definition under IFRS. See the “Non-IFRS Financial Performance Measures” section of this Directors' Report
included in note 20.
35 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
5. Acquisition of the Kami Project
On April 1, 2021, the Company completed the acquisition of the Kami Project and certain related contracts (the “Acquisition”) pursuant to an
asset purchase agreement among certain affiliates of the Company and Deloitte Restructuring Inc. (the “Receiver”), as receiver for Alderon Iron
Ore Corp. and certain of its affiliates (collectively, “Alderon”). The Kami Project and the related mining properties are located in the Labrador
Trough geological belt in southwestern Newfoundland, near the Québec border.
The consideration for the Acquisition consisted of $15.0M in cash, the extinguishment of approximately $19.4M of Alderon’s secured debt (the
“Secured Debt”) and an undertaking in favour of the Receiver to make a finite production payment on a fixed amount of future iron ore
concentrate production from the Kami Project. In connection with the Acquisition, Champion purchased the Secured Debt from Sprott Private
Resource Lending (Collector), LP (“Sprott”). The Secured Debt was purchased for an aggregate consideration of 4,200,000 Champion's ordinary
shares issued to Sprott and Altius Resources Inc., who held a participation in the Secured Debt.
The Kami Project is a high-grade iron ore project near available infrastructure, situated only a few kilometers south-east of the Company's
operating Bloom Lake Mine. Alderon previously disclosed historical resources estimated at 1,274.5 Mt of measured and indicated resources
(536.9 Mt measured and 737.6 Mt indicated) and proven and probable reserves of 517.2 Mt (392.7 Mt proven and 124.5 Mt probable). The
historical mineral resources and reserves mentioned are strictly historical in nature, are non-compliant with NI 43-101 and the JORC Code
(2012 edition) and should therefore not be relied upon. A qualified person or competent person has not done sufficient work to upgrade or
classify the historical estimates as current "mineral resources" or "mineral reserves" or "ore reserves", as such terms are defined in NI 43-101
and the JORC Code (2012 edition), and it is uncertain whether, following evaluation and/or further exploration work, the historical estimates will
be able to be reported as mineral resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition).
Champion is not treating the historical estimates as current mineral resources, mineral reserves or ore reserves. Refer to the notes
accompanying the figure below.
Alderon completed an updated feasibility study on the Kami Project in September 2018. The Company has initiated work to revise the Kami
Project's scope and update the feasibility study, as it evaluates its growth alternatives within its property portfolio. As part of the Acquisition,
Champion secured an additional 8 Mtpa of port capacity, including a pre-payment of port-related fees, at the multi-user berth at the port of
Sept-Îles, currently being used by the Company to export Bloom Lake's iron ore concentrate.
36 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
5. Acquisition of the Kami Project (continued)
Notes
1. The historical Kami Project resource estimates are based on the NI 43-101 technical report entitled “Feasibility Study of the Rose Deposit and
Resource Estimate for the Mills Lake Deposit of the Kamistiatusset (Kami) Iron Ore Property, Labrador” prepared for Alderon Iron Ore Corp. by BBA
Inc., Stantec and Watts, Griffis and McOuat Ltd. dated January 9, 2013 and having an effective date of December 17, 2012. The historical Kami
Project reserve estimates are based on the NI 43-101 technical report entitled “Updated Feasibility Study of the Kamistiatusset (Kami) Iron Ore
Property, Labrador” prepared for Alderon Iron Ore Corp. by BBA Inc., Gemtec Ltd., Watts, Griffis and McOuat Ltd. and Golder Associates Ltd. dated
October 31, 2018 and having an effective date of September 26, 2018. Kami Project mineral resources include Kami Project mineral reserves. The
historical mineral resources and reserves mentioned are strictly historical in nature, are non-compliant with NI 43-101 and the JORC Code (2012
edition) and should therefore not be relied upon. A qualified person or competent person has not done sufficient work to upgrade or classify the
historical estimates as current "mineral resources", "mineral reserves" or "ore reserves", as such terms are defined in NI 43-101 and the JORC
Code (2012 edition), and it is uncertain whether, following evaluation and/or further exploration work, the historical estimates will be able to be
reported as mineral resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition). Champion is not
treating the historical estimates as current mineral resources, mineral reserves or ore reserves. These reserves and resources are not material
mining projects and are for properties adjacent to or near the Company's existing mining tenements and therefore the reports on these
mineralisations have not been prepared in accordance with the JORC Code (2012 edition) and the ASX Listing Rules. As stated above, the
Company has initiated work to revise the Kami Project's scope and update the feasibility study.
2. The historical Moiré Lake resource estimates are based on the NI 43-101 technical report entitled “Technical Report and Mineral Resource
Estimate on the Moire Lake Property” by P&E Mining Consultants Inc. dated May 11, 2012 and having an effective date of March 28, 2012. The
historical mineral resources mentioned are strictly historical in nature, are non-compliant with NI 43-101 and the JORC Code (2012 edition) and
should therefore not be relied upon. A qualified person or competent person has not done sufficient work to upgrade or classify the historical
estimates as current "mineral resources", "mineral reserves" or "ore reserves", as such terms are defined in NI 43-101 and the JORC Code (2012
edition), and it is uncertain whether, following evaluation and/or further exploration work, the historical estimates will be able to be reported as
mineral resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition). Champion is not treating the
historical estimates as current mineral resources, mineral reserves or ore reserves. These reserves and resources are not material mining projects
and are for properties adjacent to or near the Company's existing mining tenements and therefore the reports on these mineralisations have not
been prepared in accordance with the JORC Code (2012 edition) and the ASX Listing Rules.
3. Bloom Lake Phase II reserves are based on the technical report entitled “Bloom Lake Mine – Feasibility Study Phase II”, prepared pursuant to
NI 43-101 and JORC Code (2012 edition) by BBA Inc., Soutex and WSP Canada Inc., having an effective date of June 20, 2019 and filed on
August 2, 2019 (the “Feasibility Study”). Bloom Lake Phase II mineral reserves include Bloom Lake Phase I mineral reserves as of the effective
date of the mineral reserve estimate reported in the Feasibility Study. The Company is not aware of any new information or data that materially
affects the information included in the Feasibility Study and confirms that all material assumptions and technical parameters underpinning the
estimates in the Feasibility Study continue to apply and have not materially changed. The Feasibility Study is available under the Company's
filings at www.sedar.com, on the ASX at www.asx.com.au or the Company's website at www.championiron.com.
4. Certain resources mentioned are foreign estimates from an Australian perspective.
37 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
6. Product Research and Development
The Company believes that the steel industry is undergoing a structural shift in its steelmaking methods, including an increased focus on
reducing greenhouse gas emissions from the iron and steelmaking processes. This dynamic could create rising demand for higher grade raw
materials and a shift towards reduction technologies used to produce liquid iron, such as the use of DR in EAF instead of the BF for liquid iron
production.
Accordingly, the Company has decided to deploy a Research and Development ("R&D") program which aims to develop technologies and
products to support the steelmaking transition from the BF method to the DR-EAF method, while supporting emissions reduction in the BF
process.
During the three-month period and year ended March 31, 2021, the Company incurred product "R&D" expenses of $336,000 and $1,258,000,
respectively. During the 2021 fiscal year, the program focused on three main areas:
1.
2.
3.
Development of an iron ore pellet feed of more than 69% Fe;
Optimization of DR quality iron ore concentrate production of an average of 67.7% Fe; and
Development of a cold pelletizing technology.
Utilization of the DR process requires higher quality raw materials. Given the high-quality nature of the iron ore concentrate produced at the
Bloom Lake Mining Complex, the Company believes it can become a key player in reducing greenhouse gas emissions in the steelmaking
process. During the year, the Company has demonstrated, at laboratory scale, its ability to upgrade its current iron ore concentrate product to
more than 69% Fe using a flotation process.
During the first half of the year ended March 31, 2021, the Company also received confirmation from DR pellet producers and DR plant
operators that its initial commercial production test, completed during the fourth quarter of the 2020 fiscal year, qualified as DR iron ore
concentrate. With this confirmed product specification, in the three-month period and year ended March 31, 2021, the Company produced
respectively 374,400 wmt and 575,700 wmt of DR quality iron ore concentrate, at an average of 67.7% Fe, with an average combined silica and
alumina content of 2.8%. This demonstrates the ability of the Company to produce and sell higher quality iron ore products. DR quality iron ore
production strategically positions the Company to potentially increase its customer base and confirms that Bloom Lake is one of the few
producing deposits globally that can transition its product offering in response to a potential shift in the steelmaking methods in the coming
years.
Additionally, as part of its commitment to participate in the iron and steel industry decarbonization, the Company has financed and
collaborated with a European-based company which holds a proprietary cold agglomeration technology. The objective of the cold pelletizing
technology is to substantially reduce the emissions linked to the agglomeration of its material. Promising laboratory results demonstrated that
carbon emissions related to agglomeration could be reduced by more than 95% with this technology. The Company intends to further explore
the potential of cold pelletizing technologies towards industrial trials, with this European-based company.
38 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
7. Key Drivers
A. Iron Ore Concentrate Price
The price of iron ore concentrate is the most significant factor affecting the Company’s financial results. As such, net cash flow from
operations and the Company’s development may, in the future, be significantly and adversely affected by a decline in the price of iron ore. The
iron ore concentrate price fluctuates daily and is affected by several industry and macroeconomic factors beyond the Company's control.
Due to the high-quality properties of its 66.2% iron ore concentrate, the Company’s iron ore sales attract a premium over the IODEX 62% Fe CFR
China Index (“P62”), widely used as the reference price in the industry. As such, the Company quotes its products on the high-grade CFR China
Index (“P65” or “Platts 65”). The premium captured by the P65 index is attributable to two main factors: steel mills recognizing that higher iron
ore grades offer the benefit of optimizing output while also significantly decreasing CO2 emissions in the steelmaking process.
During the three-month period ended March 31, 2021, many factors contributed to elevate the iron price as well as the higher premium for
high-grade material. China's industrial activities, which usually come to a near stop during the Lunar New Year holiday, proved to be shorter
than usual as most workers were restricted from traveling to their hometowns due to COVID-19 governmental restrictions. As such, China’s
economic recovery continued in the period. This dynamic contributed to steel profit margins rising steadily until the end of the period which,
combined with high coking coal prices, supported the demand for high-grade iron ore in order to reduce dependence on coking coal in the
steelmaking process. The strong economic recovery in the world ex-China, namely in India, Europe and the USA, also had direct repercussions
on the global steel demand. The iron ore imports from these regions continued to rise throughout the period, leaving the global supply and
demand fundamentals in deficit, contributing to the rising iron ore price.
During the three-month period ended March 31, 2021, the premium captured by the P65 index relative to the P62 index was influenced by three
main factors: (i) a significant resurgence in Japanese steel production, which increased iron ore demand, (ii) a decrease in supply from lower
Brazilian exports as a consequence of the rainfall season, and (iii) a shift in the product demand mix in China, composed of higher quality iron
ore to reduce emissions, further to China's restrictions on its steel mills. The global economic recovery and its impact on steel demand,
combined with the consequences of higher prices for coking coal used in the steelmaking process, contributed to a steel capacity deficit in
several regions, which supported rising iron ore prices. Given this context, the Company has significantly reduced or cancelled discounted
pricing on its sales to the P65 index, previously required to compete with the pricing of pellets at multi-year lows in previous periods.
During the three-month period ended March 31, 2021, the P65 price for high-grade iron ore fluctuated from a low of US$174.1/dmt to a high of
US$203.0/dmt. The P65 index average price for the period was US$191.2/dmt, an increase of 31% from the previous quarter, resulting in a
premium of 14.6% over the P62 reference price of US$166.9/dmt. The Company’s gross average realized selling price for the quarter was
US$173.9/dmt, before adjustments related to provisional sales and ocean freight, resulting in a realized selling price representing a premium of
4.2% over the P62 index. Approximately 75% of Champion’s iron ore sales contracts are structured on a provisional pricing basis, where the
final sales price is determined using the iron ore price indices on or after the vessel’s arrival to the port at discharge. Accordingly, the gross
realized price upon shipment is estimated using the forward iron prices. As the timing of a majority of shipments were made at the end of the
quarter ended March 31, 2021, a large portion of the sales are based on the forward iron price, which was at a significant discount to the
average market prices prevailing during the quarter, as the average P62 for the period was US$166.9/dmt while the forward P62 iron price for
the second quarter of calendar 2021 was US$156.0/dmt. In addition, the lower realized price recognized compared to the P65 Index for the
three-month period ended March 31, 2021, was attributable to some of the Company's contracted volumes that are sold based on previous
months' prices, when the P65 prices were significantly lower. The Company should benefit from the current period prices for its contracted
volumes based on previous months' P65 prices in the upcoming fiscal period ending June 30, 2021. Taking into account sales adjustments and
sea freight costs, the Company's net realized FOB price was US$159.3/dmt (CA$201.3/dmt). The Company remains well positioned to benefit
from higher iron ore prices as it has no fixed price contracts in place, and the Bloom Lake Mine is not subject to royalties.
39 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
7. Key Drivers (continued)
A. Iron Ore Concentrate Price (continued)
During the year ended March 31, 2021, the P65 index price of high-grade iron ore fluctuated from a low of US$96.5/dmt to a high of US$203.0/
dmt. The P65 index average price for the period was US$143.7/dmt, an increase of 35% from the same period in 2020, resulting in a premium
of 12.1% over the P62 index reference price of US$128.2/dmt. The gross average realized selling price for the year was US$139.1/dmt, before
adjustments related to provisional sales and ocean freight, resulting in a premium of 8.5%. The lower premium realized is attributable to the
timing of the Company's contracted volumes, as 25% of Champion sales are determined using the iron price indices approximately three-
months prior to shipment, while 75% of the sales are based on the iron ore price indices on or after the vessel’s arrival to the port at discharge.
The significant discount that existed as of March 31, 2021 between the forward iron price and the average iron price during the last quarter of
the Company's fiscal year end contributed to a reduced premium between the P62 and the P65. The gross realized selling price was also
influenced by the fact that, in the second quarter of the 2021 fiscal year, some products were sold at a discounted selling price in order to
compete with the pricing of pellets, which were priced at multi-year lows. Given that current spot price of high-grade iron ore is significantly
higher than the forward price utilized to estimate the sales at year end, the Company should benefit from the current period prices for its
contracted volumes, based on previous months' P65 prices in the upcoming fiscal period ending June 30, 2021. Taking into account the latter,
and sea freight costs, the net realized FOB price was US$127.3/dmt (CA$166.8/dmt), compared to US$78.0/dmt (CA$103.6/dmt) for the same
period in 2020.
As previously mentioned, approximately 75% of Champion’s iron ore sales contracts are structured on a provisional pricing basis, where the
final sales price is determined using the iron ore price indices on or after the vessel’s arrival to the port at discharge. The Company recognizes
revenues from iron ore sales contracts upon vessel departure. In order to estimate the final sales price as assigned by sales contracts, the
Company assigns a provisional price upon vessel departure. The estimated gross consideration in relation to the provisionally priced contracts
is accounted for using the average between the P65 forward iron ore price at the expected settlement date and the P62 forward iron ore price,
subject to the historical P65 premium over the P62 price at the expected settlement date. Once the vessel arrives at its destination, the impact
of the iron ore price fluctuations, compared to the estimated price at the time of departure, is accounted for as a provisional pricing adjustment
to revenue.
As the Company's sales are subject to freight routes that take up to 55 days before reaching its customers, and since vessels subject to
provisional price adjustments are already in transit at quarter end, the final price adjustments to the provisional price are structurally more
exposed in the earlier months of each quarter. During the three-month period ended March 31, 2021, a final price was established for the
601,000 tonnes of iron ore that were in transit as at December 31, 2020. Accordingly, during the three-month period ended March 31, 2021,
provisional pricing adjustments of $20,449,000 were recorded as additional revenues for the 601,000 tonnes, representing a positive impact
of US$8.4/dmt (CA$$10.37/dmt). As at March 31, 2021, 1,007,000 tonnes of iron ore sales remained subject to provisional pricing adjustments,
with the final price to be determined in the subsequent reporting periods (March 31, 2020: 931,000 tonnes). A provisional price of US$182.7/
dmt has been used as at March 31, 2021, to estimate the sales of the Company's iron ore that remain subject to setting a final price.
40 Page
US$ Spot Price of Iron Ore Fines per dmt (As per Platts IODEX Index)Average Monthly Iron Ore Price IODEX 65% Fe CFR ChinaAverage Monthly Iron Ore Price IODEX 62% Fe CFR ChinaJun'19Sep'19Dec'19Mar'20Jun'20Sep'20Dec'20Mar'21$80.00$100.00$120.00$140.00$160.00$180.00$200.00 Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
7. Key Drivers (continued)
A. Iron Ore Concentrate Price (continued)
The following table sets out the Company’s exposure, as at March 31, 2021, in relation to the impact of movements in the iron ore price for the
provisionally invoiced sales volumes:
(in U.S. dollars)
Tonnes (dmt) subject to provisional pricing adjustments
10% increase in iron ore prices
10% decrease in iron ore prices
As at March 31,
2021
1,007,000
18,393
(18,393)
The sensitivities demonstrate the monetary impact on ore sales revenues resulting from a 10% increase and a 10% decrease in the realized
selling prices at each reporting date, while holding constant all other variables, including foreign exchange rates. The relationship between iron
ore prices and exchange rates is complex, and movements in exchange rates can impact commodity prices. The above sensitivities should
therefore be used with caution.
B. Sea Freight
Sea freight is an important component of the Company’s cost structure as it ships most of its iron ore concentrate to China, Japan, Europe and
the Middle East via sea routes. The common reference route for dry bulk material from the Americas to Asia is the Tubarao (Brazil) to Qingdao
(China) route which encompasses 11,000 nautical miles. The freight cost per tonne associated with this route is captured in the C3 Baltic
Capesize Index (“C3”) which is considered the reference ocean freight cost for iron ore shipped from Brazil to the Far East. There is no index for
the route between the port of Sept-Îles, Canada and China. The route from Sept-Îles to the Far East totals approximately 14,000 nautical miles
and is subject to different weather conditions during the winter season. Therefore, the freight cost per tonne associated with this voyage is
generally higher than the C3 index price.
In the past decade, the industry has identified a relationship between the iron ore price and the freight cost for the Tubarao to Qingdao route
captured in the C3 freight rate. Based on this observed correlation, when the price of iron ore fluctuates, the ocean freight rate usually
fluctuates in tandem. As the freight cost for the ocean transport between Sept-Îles and China is largely influenced by the C3 cost, a decrease in
iron ore prices should result in a lower ocean freight cost for the Company, resulting in a natural hedge for one of the Company's largest
operating costs.
41 Page
US$ Sea Freight Cost per wmt – C3 Baltic Capesize Index (Brazil to China)Jun'19Sep'19Dec'19Mar'20Jun'20Sep'20Dec'20Mar'21$5.00$10.00$15.00$20.00$25.00$30.00
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
7. Key Drivers (continued)
B. Sea Freight (continued)
The tragic event of the Brumadinho dam rupture in Brazil in January 2019 altered the connection between iron ore prices and the C3 freight
rate, as one of the largest producers of iron ore globally experienced a significant production curtailment, impacting export volumes from
Brazil since the first half of 2019. In the second half of 2019, some operations affected by these events resumed production, which contributed
to an increase in exports and thus contributed to the increase in the C3 route index. By the start of January 2020, world freight had stabilized
until the COVID-19 pandemic negatively impacted shipments.
In early 2020, the C3 index fell and tested historically low levels due to several factors, including: the Chinese New Year holidays, which
reduced demand for iron ore imports; heavy rains in Brazil, which negatively impacted exports of iron ore; ongoing supply issues related to the
2019 Brumadinho dam rupture; the temporary reduction of activities at several mining operations worldwide due to the COVID-19 pandemic;
and a significant drop in bunker fuel prices, which is a main component of the operating cost for dry bulk vessel operators. The slow ramp-up
of operations in 2020 contributed to maintaining lower sea freight prices, until the start of the three-month period ended March 31, 2021. A
lighter than usual rainy season combined with improved shipments from Brazil likely influenced the rising prices of the C3 index, which
experienced the largest price increase for the period since 2014. In addition to the above, the capesize market experienced the ripple effect
from rising demand for small ship freight where the container rates reached historical highs during the period. Several shippers were said to
combine parcels to ship in larger size vessels in an attempt to avoid the rising freight costs. This surge in smaller parcel freight cost was likely
impacted by rising fuel prices throughout the period, as well as the global economic recovery.
Due to its distance from main shipping hubs, Champion typically books vessels and their prices prior to the desired laycan period. This creates
a natural delay between the freight paid and the C3 route index price. The effects of these delays are eventually reconciled since Champion
ships its high-grade iron ore concentrate evenly throughout the year. In the previous quarter, the Company entered into a freight contract for a
portion of its expected volumes. This contract allowed for the shipment of one vessel per month from January 2021 to March 2021 at a fixed
price of US$17.50 per tonne plus freight commissions, resulting in important savings for the Company for the three-month period ended
March 31, 2021.
C. Currency
The Canadian dollar is the Company’s functional and reporting currency. Consequently, the Company’s operating results and cash flows are
influenced by changes in the exchange rate for the Canadian dollar against the U.S. dollar. The Company's sales, sea freight costs and long-
term debt are denominated in U.S. dollars. As such, the Company benefits from a natural hedge from its revenues with its sea freight costs and
long-term debt. Despite this natural hedge, the Company is exposed to foreign currency fluctuations as its mining operating expenses are
mainly incurred in Canadian dollars. Subsequent to March 31, 2021, the Company entered into forward foreign exchange contracts to reduce
the risk of variability of future cash flows resulting from forecasted sales. These contracts were approved by the Board to minimize its
exposure to foreign exchange rate fluctuations. The Company is continuously evaluating its currency exposure and opportunities to reduce its
impacts on the Company's results.
The strengthening of the U.S. dollar would positively impact the Company’s net income and cash flows while the strengthening of the Canadian
dollar would reduce its net income and cash flows. As the Company's long-term debt is denominated in U.S. dollars, the Company is subject to
ongoing non-cash foreign exchange adjustments, which may impact its financial results. Assuming a stable selling price, a variation of
CA$0.01 against the U.S. dollar will impact gross revenues by approximately 1%. Assuming a stable long-term debt balance, a variation of
CA$0.01 against the U.S. dollar will impact the debt revaluation by approximately 1%.
42 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
7. Key Drivers (continued)
C. Currency (continued)
Exchange rates are as follows:
Q1
Q2
Q3
Q4
Year-end as at March 31
CA$ / US$
Average
Closing
FY2021
FY2020
Variance
FY2021
FY2020
Variance
1.3853
1.3321
1.3030
1.2660
1.3219
1.3377
1.3204
1.3200
1.3449
1.3308
4 %
1 %
(1) %
(6) %
(1) %
1.3628
1.3339
1.2732
1.2575
1.2575
1.3087
1.3243
1.2988
1.4187
1.4187
4 %
1 %
(2) %
(11) %
(11) %
Apart from these key drivers, the potential impact of the COVID-19 pandemic and the risk factors described in the “Risk Factors” section of this
Directors' Report, Management is not aware of any other trends, commitments, events or uncertainties that would have a material effect on
the Company’s business, financial condition or results of operations.
43 Page
Monthly Closing Exchange Rate – CA$/US$Jun'19Sep'19Dec'19Mar'20Jun'20Sep'20Dec'20Mar'21$1.26$1.29$1.32$1.35$1.38$1.41 Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
8. Bloom Lake Mine Operating Activities
Operating Data
Waste mined and hauled (wmt)
Ore mined and hauled (wmt)
Material mined and hauled (wmt)
Strip ratio
Ore milled (wmt)
Head grade Fe (%)
Recovery (%)
Product Fe (%)
Iron ore concentrate produced (wmt)
Iron ore concentrate sold (dmt)
Financial Data (in thousands of dollars)
Revenues
Cost of sales
Cost of sales - incremental costs related to COVID-19
Other expenses
Net finance costs
Net income
EBITDA1
Statistics (in dollars per dmt sold)
Gross average realized selling price
Net average realized selling price1
Total cash cost (C1 cash cost)1
All-in sustaining cost1
Cash operating margin1
Operational Performance
Three Months Ended
March 31,
Year Ended
March 31,
2021
2020
Variance
2021
2020
Variance
3,796,300
5,636,100
9,432,400
3,180,100
5,413,100
8,593,200
0.67
0.59
5,237,800
30.7
82.6
66.5
2,011,400
1,971,100
4,880,000
31.7
82.3
66.5
1,891,800
1,888,200
19%
4%
10%
14%
15,481,100
21,571,700
37,052,800
13,742,400
20,817,400
34,559,800
0.72
0.66
7%
(3%)
—%
—%
6%
4%
20,598,700
30.7
83.5
66.4
8,001,200
7,684,500
19,749,800
32.1
82.6
66.4
7,903,700
7,577,400
396,702
107,137
3,162
14,591
5,430
155,934
275,764
220.0
201.3
54.4
65.1
136.2
175,702
101,721
—
12,862
4,684
18,351
60,655
130.5
93.1
53.9
59.8
33.3
126%
5%
—%
13%
16%
750%
355%
69%
116%
1%
9%
309%
1,281,815
416,272
12,610
43,693
22,428
464,425
819,477
182.3
166.8
54.2
62.8
104.0
785,086
399,368
—
37,178
84,244
121,050
347,433
142.5
103.6
52.7
62.7
40.9
13%
4%
7%
9%
4%
(4%)
1%
—%
1%
1%
63%
4%
—%
18%
(73%)
284%
136%
28%
61%
3%
—%
154%
On March 24, 2020, the Company announced the ramp down of its operations following directives from the Government in response to the
COVID-19 pandemic, which required mining activities to be reduced to a minimum within the province of Québec. As announced by the
Company on April 23, 2020, operations gradually ramped up following the Government's announcement that mining activities were to be
considered a "priority service" in Québec. Early actions implemented by the Company in response to the COVID-19 pandemic minimized
impacts on the Company and its operations. Despite disruptions to operations in the first quarter of the fiscal year ended March 31, 2021, the
Company was able to set a new annual record production of 8,001,200 wmt of high-grade iron ore concentrate during the fiscal year ended
March 31, 2021.
i. Fourth Quarter of the 2021 Fiscal Year vs Fourth Quarter of the 2020 Fiscal Year
During the three-month period ended March 31, 2021, 9,432,400 tonnes of material was mined and hauled, compared to 8,593,200 tonnes for
the same period in 2020, an increase of 10%. This increase in material mined and hauled is attributable to the Company's ongoing mining
equipment rebuild program, which provided a higher equipment utilization rate and additional equipment availability. The higher volume mined
is also attributable to the commissioning of an additional haul truck during the year ended March 31, 2021.
The strip ratio increased to 0.67 for the three-month period ended March 31, 2021, compared to 0.59 for the same period in 2020. Although the
strip ratio is in line with the annual mine plan, it was negatively impacted by the Company's efforts to recover the waste backlog accumulated
during the first quarter of the 2021 fiscal year, when Champion's operations were disrupted by the Government's imposed COVID-19 directives.
1
This is a non-IFRS financial performance measure with no standard definition under IFRS. See the “Non-IFRS Financial Performance Measures” section of this Directors' Report
included in note 20.
44 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
8. Bloom Lake Mine Operating Activities (continued)
i. Fourth Quarter of the 2021 Fiscal Year vs Fourth Quarter of the 2020 Fiscal Year (continued)
The Bloom Lake plant processed 5,237,800 tonnes of ore during the three-month period ended March 31, 2021, compared to 4,880,000 tonnes
for the same period in 2020, representing an increase of 7%. The higher throughput resulted from higher mined ore availability and a higher mill
utilization rate. The continuous improvements and operational innovations allowed the Company to increase throughput stability and reach a
higher level of mill productivity, despite the inefficiencies created by COVID-19, enabling the Company to capitalize on elevated iron ore prices.
The iron ore head grade for the three-month period ended March 31, 2021 was 30.7%, compared to 31.7% for the same period in 2020. The
decrease in head grade is attributable to the presence of some lower grade ore being sourced and blended from different pits when compared
to the prior year, which is in line with the mining plan and the LoM head grade average.
During the three-month period ended March 31, 2021, the Company produced 374,400 wmt of DR quality iron ore concentrate at 67.7% Fe, with
a combined silica and alumina content of 2.8%. This production has been sold during the three-month period ended March 31, 2021,
demonstrating the Company’s ability to adapt to meet demand for higher quality iron ore products. The Company’s average recovery rate of
82.6% remained stable during the three-month period ended March 31, 2021 despite being adversely impacted by the production of low-silica
concentrate, compared to a recovery rate of 82.3% for the same period in 2020.
Bloom Lake produced 2,011,400 wmt of 66.5% Fe high-grade iron ore concentrate during the three-month period ended March 31, 2021, an
increase of 6%, compared to 1,891,800 wmt for the same period in 2020. The higher production is mainly a result of higher throughput, despite
being partially offset by a lower head grade.
ii. 2021 Fiscal Year vs 2020 Fiscal Year
During the first quarter of the 2021 fiscal year, the COVID-19 pandemic had a negative impact on several of the Company's activities, including:
reduced mining activities due to the compliance with public health directives issued by the Government; reduced equipment maintenance due
to COVID-19-related resource limitations which had adverse repercussions on equipment availability; the arrival of the seasonal workforce and
the operation of only one of the Company's two production lines for a period of time stemming from the Government's COVID-19-related
directives. Once the Government's restrictions were lifted, the Company accelerated its mining activities and fully resumed its production
capacity without subsequent interruption, demonstrating the Company’s agility to maximize its operations while minimizing the overall impact
of the pandemic.
The Company mined and hauled 37,052,800 tonnes of material during the year ended March 31, 2021, compared to 34,559,800 tonnes for the
same period in 2020, while the plant processed 20,598,700 tonnes of ore during the year ended March 31, 2021, an increase of 4% over the
same period in 2020. These increases are attributable to investments made in the mining equipment rebuild program, along with the
improvements and operational innovations accomplished at the plant in the past, which enabled the Company to maximize current
productivity, partially offset by the slowdown resulting from the COVID-19 pandemic during the first quarter of the 2021 fiscal year. In addition,
the recovery rate improved to 83.5%, compared to 82.6% for the same period in 2020, which is in line with the Company’s target.
The iron ore head grade for the year ended March 31, 2021 was 30.7%, compared to 32.1% for the same period in 2020, attributable to different
sourcing pits.
During the year ended March 31, 2021, the Company produced 575,700 wmt of DR quality iron ore concentrate at an average of 67.7% Fe, with
an average combined silica and alumina content of 2.8%.
Bloom Lake achieved a record production with 8,001,200 wmt of Fe 66.4% high-grade iron ore concentrate produced during the year ended
March 31, 2021, compared to 7,903,700 wmt for the same period in 2020.
45 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
9. Financial Performance
A. Revenues
(in U.S. dollars per dmt sold)
Index P62
Premium over P62
US$ Gross average realized selling price
Freight and other costs
Provisional pricing adjustments
US$ Net average realized FOB selling price1
CA$ Net average realized FOB selling price1
Three Months Ended
March 31,
Year Ended
March 31,
2021
2020 Variance
2021
2020 Variance
166.9
7.0
173.9
(23.0)
8.4
159.3
201.3
89.0
7.9
96.9
(25.8)
(1.4)
69.7
88%
(11%)
79%
(11%)
(700%)
129%
93.1
116%
128.2
10.9
139.1
(20.5)
8.7
127.3
166.8
94.9
12.3
107.2
(25.7)
(3.5)
78.0
35%
(11%)
30%
(20%)
(349%)
63%
103.6
61%
During the three-month period ended March 31, 2021, 1,971,100 tonnes of high-grade iron ore concentrate were sold at the CFR China gross
average realized price of US$173.9/dmt, before provisional sales adjustments and shipping costs. The gross average realized selling price of
US$173.9/dmt represents a premium of 4.2% over the benchmark P62 price, compared to a premium of 8.9% for the same period in 2020. The
gross average realized selling price reflects the sales at a determined price, as well as the forward price at the expected settlement date for
1,007,000 tonnes which were in transit at the end of the period. The gross average realized selling price of US$173.9/dmt is lower for the
quarter, compared to the average P65 of US$191.2/dmt for the same period. The difference is due to the fact that the majority of the gross
realized selling price is determined using the forward price when on or after the vessel’s arrival to the port at discharge, which was at a
significant discount compared to the average P65 during the period.
Benefiting from rising pellet premiums and the global economic recovery during the period, the Company reduced or cancelled discounted
pricing on some sales to the P65 index, previously required to compete with the pricing of pellets which experienced multi-year lows in
previous periods. As such, the Company expects its iron ore concentrate pricing to continue tracking the P65 index in the long-term. In
addition, the Company should continue to benefit from the current period prices for its contracted volumes, based on previous months' P65
prices in the upcoming fiscal period ending June 30, 2021. Other factors influencing the Company’s realized price included the increasing
demand for low silica and alumina products, due to rising coking coal prices and falling levels of iron ore inventories at Chinese ports, further
tightening iron ore availability.
During the three-month period ended March 31, 2021, the global economic recovery, rising fuel prices and decreased vessel availability
contributed to the rising sea freight index, when compared to the previous quarter. The Company paid lower freight costs in the three-month
period ended March 31, 2021, compared to the same period in 2020, even if the C3 index was higher. The freight costs variation relative to the
Baltic Exchange C3 index during the period is mainly due to the timing of the vessels' booking and the fact that the Company benefited from a
freight contract at a fixed price of US$17.50 per tonne plus freight commissions for one vessel per month through March 2021.
1
This is a non-IFRS financial performance measure with no standard definition under IFRS. See the “Non-IFRS Financial Performance Measures” section of this Directors' Report
included in note 20.
46 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
9. Financial Performance (continued)
A. Revenues (continued)
During the three-month period ended March 31, 2021, the final price was established for the 601,000 tonnes of iron ore that were in transit as
at December 31, 2020. Accordingly, during the three-month period ended March 31, 2021, provisional pricing adjustments of $20,449,000 were
recorded as additional revenues for the 601,000 tonnes, representing a positive impact of US$8.4/dmt.
After taking into account sea freight costs of US$23.0/dmt and the provisional sales adjustment of US$8.4/dmt, the Company obtained a net
average realized selling price of US$159.3/dmt (CA$201.3/dmt) for its high-grade iron ore delivered to the end customer. Revenues totaled
$396,702,000 for the three-month period ended March 31, 2021 compared to $175,702,000 for the same period in 2020. The increase is
attributable to a higher net average realized selling price1.
For the year ended March 31, 2021, the Company sold 7,684,500 tonnes of iron ore concentrate shipped to 22 customers located in China,
Japan, South Korea, Europe, the Middle East and Canada. While the high-grade iron ore P65 index price fluctuated between a low of US$96.5/
dmt and a high of US$203.0/dmt during the year ended March 31, 2021, the Company sold its product at a gross average realized selling price
of US$139.1/dmt. Combining the gross average realized selling price with the provisional sales adjustment of US$8.7/dmt, the Company sold
its high-grade iron ore material at a price of US$147.8/dmt during the year ended March 31, 2021, which continued to structurally track the P65
high-grade index average of US$143.7/dmt. Deducting sea freight costs of US$20.5/dmt, the Company obtained a net average realized selling
price1 of US$127.3/dmt (CA$166.8/dmt) for its high-grade iron ore. As a result, revenues totaled $1,281,815,000 for the year ended March 31,
2021, compared to $785,086,000 for the same period in 2020. Although the sales increase is mainly attributable to the net average realized
selling price1, the slight positive volume impact during the COVID-19 pandemic illustrates the benefit the Company yielded by investing in
initiatives to improve production reliability and having the ability to increase its throughput capacity when the price of high-grade iron ore is
elevated.
1
This is a non-IFRS financial performance measure with no standard definition under IFRS. See the “Non-IFRS Financial Performance Measures” section of this Directors' Report
included in note 20.
47 Page
$ per dmt soldQ4 FY2021 Net Realized Selling Price from P62US$166.9US$7.0US$173.9US$(23.0)US$8.4US$159.3CA$42.0CA$201.3Index P62Premium over P62Gross Realized PriceFreight and Other CostsProvisional Sales AdjustmentNet Realized PriceFX ConversionCAD Net Realized Price$100$150$200$250 Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
9. Financial Performance (continued)
B. Cost of Sales
Cost of sales represents mining, processing, and mine site-related general and administrative ("G&A") expenses.
During the three-month period ended March 31, 2021, the total cash cost1 or C1 cash cost1 per tonne, excluding specific and incremental costs
related to COVID-19, totaled $54.4/dmt, compared to $53.9/dmt for the same period in 2020. The total cash cost1 for the period was higher
mainly due to a lower head grade and the negative impact of inefficiencies related to COVID-19 preventive measures involving social
distancing protocols.
For the year ended March 31, 2021, the Company produced high-grade iron ore at a total cash cost1 of $54.2/dmt, compared to $52.7/dmt for
the same period in 2020. The C1 cash cost1 for the year includes the negative impact of inefficiencies related to COVID-19. In the first quarter of
the 2021 fiscal year, the Company opted to keep its full workforce on its payroll, despite the reduced operating activities imposed in
compliance with the Government’s public health directives. The increase in total cash cost1 was partially offset by higher iron ore concentrate
sold, stemming from its operational productivity.
In general, the Company's total cash cost1 remained relatively stable through the quarters even if the year ended March 31, 2021 was
negatively impacted by the inefficiencies related to COVID-19.
C. Cost of Sales - Incremental Costs Related to COVID-19
In line with the Government's directives, the Company implemented several measures in its efforts to mitigate the risks related to the COVID-19
pandemic. The Company incurred direct, incremental and non-recurring operating costs of $3,162,000 or $1.6/dmt1 and $12,610,000 or $1.6/
dmt1 for the three-month period and year ended March 31, 2021, respectively. These specific costs are mainly comprised of on-site COVID-19
testing and laboratory costs and incremental costs for cleaning and disinfecting facilities, premiums paid to employees from adjusted work
schedules and incremental transportation costs, and do not include the inefficiency costs associated with the COVID-19 pandemic across all
areas of the Company’s operations. While the work schedules were adapted and related premiums to payroll were paid during the first quarter
of the Company’s 2021 fiscal year, the Company resumed its normal work schedules at the end of June 2020. Despite the fact that the costs
associated with the revised schedules and the related premiums are not expected to be recurring, the Company will continue to deploy
measures to mitigate the risks from COVID-19 on site and at the local community level.
D. Gross Profit
The gross profit for the three-month period ended March 31, 2021 totaled $277,116,000, compared to $64,918,000 for the same period in 2020.
The increase in gross profit is mainly attributable to higher revenues, as a result of a higher net average realized selling price1 of $201.3/dmt
for the three-month period ended March 31, 2021, compared to $93.1/dmt for the same period in 2020.
The gross profit for the year ended March 31, 2021 totaled $817,756,000, compared to $363,717,000 for the same period in 2020. The increase
is largely driven by the higher net average realized selling price1 of $166.8/dmt for the year ended March 31, 2021, compared to $103.6/dmt for
the same period in 2020. The higher revenues are partially offset by higher production costs and higher depreciation expenses attributable to
previous investments which were made to increase throughput and surpass the mine’s nameplate capacity, and have enabled the Company to
take advantage of the elevated iron ore price.
1
This is a non-IFRS financial performance measure with no standard definition under IFRS. See the “Non-IFRS Financial Performance Measures” section of this Directors' Report
included in note 20.
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Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
9. Financial Performance (continued)
E. Other Expenses
(in thousands of dollars)
Share-based payments
General and administrative expenses
Product research and development expenses
Sustainability and other community expenses
Three Months Ended
March 31,
Year Ended
March 31,
2021
2020
Variance
2021
2020
Variance
2,439
7,905
336
3,911
14,591
389
8,422
—
4,051
12,862
527 %
(6) %
— %
(3) %
13 %
3,983
23,594
1,258
14,858
43,693
2,551
21,087
—
13,540
37,178
56 %
12 %
— %
10 %
18 %
The variation in other expenses for the three-month period and year ended March 31, 2021, compared to the same periods in 2020, mainly
reflects higher non-cash share-based payments associated with the timing of stock option grants and their related costs, as the Company's
share price has significantly increased, compared to the prior year. Further to this grant, stock options outstanding totaled 0.4% of the total
ordinary shares issued and outstanding.
During the three-month period and year ended March 31, 2021, the Company incurred R&D expenses of $336,000 and $1,258,000, respectively.
Refer to section 6 — Product Research and Development.
The variation in other expenses for the year ended March 31, 2021, compared to the previous year, is also due to higher salaries and benefits
from a higher headcount and higher administration costs. In addition, higher sustainability and other community expenses in the year ended
March 31, 2021 contributed to the variation, reflecting the Company's increased focus on sustainability.
F. Net Finance Costs
(in thousands of dollars)
Loss on debt refinancing
Realized and unrealized foreign exchange loss
Interest on long-term debt and Debenture
Other
Three Months Ended
March 31,
Year Ended
March 31,
2021
2020
Variance
2021
2020
Variance
—
2,108
1,349
1,973
5,430
—
3,028
1,758
(102)
4,684
— %
(30) %
(23) %
(2034) %
16 %
1,863
7,782
6,624
6,159
22,428
57,274
3,199
16,920
6,851
84,244
(97) %
143 %
(61) %
(10) %
(73) %
Fourth Quarter of the 2021 Fiscal Year vs Fourth Quarter of the 2020 Fiscal Year
Net finance costs slightly increased and totaled $5,430,000 for the three-month period ended March 31, 2021, compared to $4,684,000 for the
same period in 2020. The standby commitment fees on the undrawn portion of the Credit Facility, included in other finance costs, contributed
to increase the net finance costs for the three-month period ended March 31, 2021, compared to the same period in 2020.
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Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
9. Financial Performance (continued)
F. Net Finance Costs (continued)
2021 Fiscal Year vs 2020 Fiscal Year
Lower net finance costs for the year ended March 31, 2021, compared to the same period in 2020, are mainly due to a lower loss on debt
refinancing and lower interest on long-term debt, partially offset by higher realized and unrealized foreign exchange losses.
Expenses associated to loss on debt refinancing are non-cash losses. During the year ended March 31, 2020. these expenses reflect non-cash
items associated with the refinancing of the long-term debt which occurred on August 16, 2019, including the write-off of capitalized past
transaction fees, the write-off of derivative financial instruments and the write-off of the unamortized book value of the previous credit
facilities.
The Company benefits from a natural hedge between its revenues generated in U.S. dollars and its U.S. denominated Credit Facility. The
decrease in net finance costs is partially offset by higher realized and unrealized foreign exchange losses, due to the revaluation of its net
monetary assets denominated in U.S. dollars, following an appreciation of the Canadian dollar against the U.S. dollar as at March 31, 2021,
compared to March 31, 2020. The appreciation of the Canadian dollar contributed to a foreign exchange gain on the Company's long-term debt
and an unrealized foreign exchange loss on its accounts receivable and cash on hand1, both of which are denominated in U.S. dollars.
Lower net finance costs are also attributable to the reduction in interest, following the refinancing transaction which closed on
August 16, 2019, which reflects the lower cost of debt, in addition to the capitalization of borrowing costs on qualifying assets during the
development period of the Phase II expansion project, which amounted to $3,793,000 for the year ended March 31, 2021, compared to
$1,405,000 for the same period in 2020.
G. Other Income (Expense)
(in thousands of dollars)
Change in fair value of non-current investments
Gain on disposal of non-current investments
Three Months Ended
March 31,
Year Ended
March 31,
2021
2020
Variance
2021
2020
Variance
1,620
2,332
3,952
(464)
—
(464)
(449) %
— %
(952) %
7,905
2,332
10,237
(1,107)
—
(1,107)
(814) %
— %
(1025) %
Non-current investments in listed common shares are classified as financial assets at fair value through profit or loss. During the three-month
period and year ended March 31, 2021, the net increase in the fair value of non-current investments represented $1,620,000 and $7,905,000,
respectively, and resulted from higher share price of its equity investments, while in the comparative period of 2020, the net decrease was
$464,000 and $1,107,000, respectively, and resulted from the depreciation of share prices. During the three-month period and year ended
March 31, 2021, Champion partially sold an equity investment to realize a gain on disposal of $2,332,000.
1
This is a non-IFRS financial performance measure with no standard definition under IFRS. See the “Non-IFRS Financial Performance Measures” section of this Directors' Report
included in note 20.
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Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
9. Financial Performance (continued)
H. Income Taxes
The Company and its subsidiaries are subject to tax in Australia and Canada. As a result of accumulated losses before tax, there are no current
or deferred income taxes related to the Australian activities. There is no deferred tax asset recognized in respect of the unused losses in
Australia as the Company believes it is not probable that there will be a taxable profit available against which the losses can be used. QIO is
subject to Québec mining taxes at a progressive tax rate ranging from 16% to 28%, for which each rate is applied to a bracket of QIO’s mining
profit, depending on the mining profit margin for the year. The mining profit margin represents the mining profit, as defined by the Mining Tax
Act (Québec), divided by revenues. The progressive tax rates are based on the mining profit margins as follows:
Mining Profit Margin Range
Mining profit between 0% to 35%
Incremental mining profit over 35%, up to 50%
Incremental mining profit over 50%
Tax Rate
16 %
22 %
28 %
In addition, QIO is subject to income taxes in Canada where the combined provincial and federal statutory rate was 26.50% for the year ended
March 31, 2021 (2020: 26.58%).
During the three-month period and year ended March 31, 2021, current income and mining tax expenses totaled $100,638,000 and
$280,855,000, respectively, compared to $19,027,000 and $89,657,000, respectively, for the same periods in 2020. The variation is mainly
due to higher taxable profit associated with higher iron ore prices.
During the three-month period and year ended March 31, 2021, deferred income and mining tax expenses totaled $4,475,000 and $16,592,000,
respectively, compared to $9,530,000 and $30,481,000, respectively, for the same periods in 2020. The decrease for the three-month period
and year ended March 31, 2021 is mainly due to lower accelerated depreciation, resulting from increases in the temporary difference in both
years but in lower proportion in the current periods.
Combining the provincial, federal statutory tax rates and mining taxes, the Company’s effective tax rates ("ETR") were 40% and 39%,
respectively, for the three-month period and year ended March 31, 2021, compared to 61% and 50%, respectively, for the same periods in 2020.
Higher ETR for the year ended March 31, 2020 is mainly related to the 2020 early debt repayment, which was not subject to tax recovery. The
ETR of 39% was due to the Company's higher mining profit resulted in the application of a higher tax rate of 22%, as per the progressive mining
tax rates schedule detailed above.
The Company benefited from the temporary tax relief programs offered by the Federal and Provincial Governments in Canada in response to
the COVID-19 pandemic, which allowed the deferral of tax payments until September 30, 2020. The Company paid all of the deferred payments
for the fiscal year ended March 31, 2020, as well as monthly installments for the April to September 2020 period, in the second quarter of the
2021 fiscal year.
During the year ended March 31, 2021, the Company paid $147,074,000 in income and mining taxes. The Company also recorded income and
mining taxes payable of $191,542,000 as at March 31, 2021, which was paid in May 2021 and which has contributed to the increase in current
liabilities.
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Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
9. Financial Performance (continued)
I. Net Income & EBITDA1
Fourth Quarter of the 2021 Fiscal Year vs Fourth Quarter of the 2020 Fiscal Year
For the three-month period ended March 31, 2021, the Company generated a record net income of $155,934,000 (EPS of $0.32), compared to
$18,351,000 (EPS of $0.04) for the same period in 2020. The increase in net income is mainly due to higher gross profit and higher other
income, partially offset by higher income and mining taxes from increased taxable income.
For the three-month period ended March 31, 2021, the Company generated a record EBITDA1 of $275,764,000 including non-cash share-based
payments, representing an EBITDA margin1 of 70%, compared to $60,655,000, representing an EBITDA margin1 of 35% for the same period in
2020. The variation in EBITDA1 period over period is primarily due to the higher revenue from higher net average realized selling price1, partially
offset by higher production costs and incremental costs related to COVID-19.
2021 Fiscal Year vs 2020 Fiscal Year
For the year ended March 31, 2021, the Company generated a net income of $464,425,000 (EPS of $0.97), compared to $121,050,000 (EPS of
$0.20) for the same period in 2020. The increase in net income is mainly due to higher gross profit and lower net finance costs, partially offset
by higher income and mining taxes from increased taxable income. Lower net finance costs are mainly attributable to the amendment to the
Credit Facility and its related non-cash loss.
For the year ended March 31, 2021, excluding the incremental costs related to COVID-19, which totaled $12,610,000 or $1.6/dmt1, the non-cash
loss on debt refinancing of $1,863,000, and the gain on disposal of non-current investments of $2,332,000, and their related tax impact, the
Company generated adjusted net income1 of $470,681,000 (adjusted EPS1 of $0.98). For the year ended March 31, 2020, mainly excluding the
non-recurring non-cash transactions associated with the repayment of the previous credit facilities on August 16, 2019, the Company would
have generated an adjusted net income1 of $172,691,000 (adjusted EPS1 of $0.32).
For the year ended March 31, 2021, the Company generated an EBITDA1 of $819,477,000, representing an EBITDA margin1 of 64%, compared to
$347,433,000, representing an EBITDA margin1 of 44% for the same period in 2020. This increase in EBITDA1 is mainly attributable to the
increase in the net average realized selling price1, partially offset by higher production costs and incremental costs related to COVID-19.
J. All-In Sustaining Cost1 and Cash Operating Margin1
Fourth Quarter of the 2021 Fiscal Year vs Fourth Quarter of the 2020 Fiscal Year
During the three-month period ended March 31, 2021, the Company realized an AISC1 of $65.1/dmt, compared to $59.8/dmt for the same
period in 2020. The variation mainly relates to higher sustaining capital expenditures related to higher stripping and mining activities. As these
activities were negatively impacted by the reduced level of operations at the onset of the COVID-19 pandemic early in the fiscal year end, the
Company intensified its investment in the last quarter of the year to complete its plan for the fiscal year end.
Deducting the AISC1 of $65.1/dmt from the net average realized selling price1 of $201.3/dmt, the Company generated a cash operating margin1
of $136.2/dmt for each tonne of high-grade iron ore concentrate sold during the three-month period ended March 31, 2021, compared to
$33.3/dmt for the same period in 2020. The variation is essentially attributable to a higher net average realized selling price1.
2021 Fiscal Year vs 2020 Fiscal Year
During the year ended March 31, 2021, the AISC1 remained stable at $62.8/dmt compared to $62.7/dmt for the same period in 2020.
The cash operating margin1 totaled $104.0/dmt for the year ended March 31, 2021, compared to $40.9/dmt for the same period in 2020. The
variation is mainly due to a higher net average realized selling price1.
K. Non-Controlling Interest
Following Champion's acquisition of Investissement Québec's 36.8% equity interest in QIO on August 16, 2019, the Non-Controlling Interest
("NCI") in QIO no longer exists. Consequently, Champion's shareholders are now benefiting from 100% of QIO's net profit.
1
This is a non-IFRS financial performance measure with no standard definition under IFRS. See the “Non-IFRS Financial Performance Measures” section of this Directors' Report
included in note 20.
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Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
10. Exploration Activities
During the year ended March 31, 2021, the Company continued to maintain all of its properties in good standing and did not enter into farm-in/
farm-out arrangements. During the three-month period and year ended March 31, 2021, $226,000 and $581,000 were incurred, respectively, in
exploration and evaluation expenditures, compared to $189,000 and $691,000, respectively, for the same periods in 2020. The exploration
expenditures mainly consist of fees required to maintain the Company's exploration properties, minor exploration work and the acquisition of
claims.
On April 1, 2021, Champion acquired and now holds a 100% interest in the Kami Project. Refer to section 5 — Acquisition of the Kami Project.
11. Cash Flows
The following table summarizes cash flow activities:
(in thousands of dollars)
Operating cash flows before working capital
Changes in non-cash operating working capital
Net cash flow from operating activities
Net cash flow from investing activities
Net cash flow from financing activities
Net increase in cash and cash equivalents
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents, beginning of the period
Cash and cash equivalents, end of the period
Operating cash flow per share1
Operating
Three Months Ended
March 31,
Year Ended
March 31,
2021
2020
2021
2020
168,693
59,873
228,566
(91,439)
(15,314)
121,813
(2,137)
489,640
609,316
0.46
42,247
42,367
84,614
(23,374)
42,754
103,994
7,094
170,275
281,363
0.18
519,097
104,379
623,476
(244,142)
(26,300)
353,034
(25,081)
281,363
609,316
1.30
220,452
89,115
309,567
(152,892)
(14,890)
141,785
4,154
135,424
281,363
0.70
During the three-month period ended March 31, 2021, the Company generated operating cash flows of $168,693,000 before working capital
items, compared to $42,247,000 for the same period in 2020. The variation, period over period, is mainly attributable to the higher EBITDA1,
which resulted primarily from a higher net average realized selling price1. Changes in working capital items for the period were affected by the
timing of customer receipts and supplier payments, but mainly due to the mining and income taxes payable balance in the three-month period
ended March 31, 2021. Based on the foregoing, the operating cash flow per share1 for the three-month period ended March 31, 2021 was $0.46,
compared to $0.18 for the same period in 2020.
During the year ended March 31, 2021, the Company's operating cash flows before working capital items totaled $519,097,000, compared to
$220,452,000 for the same period in 2020. The variation is mainly attributable to a higher EBITDA1, largely driven by a higher net average
realized selling price1 and slightly higher volumes of iron ore concentrate sold. Changes in working capital items are due to the timing effect of
receipts and payments, and also the deferred tax payment of $57,761,000 made in the second quarter of the 2021 fiscal year. The latter
represented income and mining taxes related to the fiscal year ended March 31, 2020. After working capital items, the operating cash flow per
share1 for the period totaled $1.30, compared to $0.70 for the same period in 2020.
As the iron ore concentrate price remained elevated during the 2021 fiscal year, it resulted in a higher taxable income in the current fiscal year.
As the monthly tax installments are based on the previous fiscal year's taxable income, the amount of income and mining taxes payable for
the period from April 1, 2020 to March 31, 2021, which was paid in May 2021, totaled $191,542,000, as currently reflected in the Company's
statements of financial position.
1
This is a non-IFRS financial performance measure with no standard definition under IFRS. See the “Non-IFRS Financial Performance Measures” section of this Directors' Report
included in note 20.
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Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
11. Cash Flows (continued)
Investing
Purchase of Property, Plant and Equipment
During the three-month period and the year ended March 31, 2021, the Company invested $74,500,000 and $174,650,000, respectively, in
addition to property, plant and equipment, compared to $19,684,000 and $147,304,000, respectively, for the same periods in 2020. The
following table summarizes the investments made:
(in thousands of dollars)
Tailings lifts
Stripping and mining activities
Mining equipment rebuild
Sustaining capital expenditures
Phase II
Other capital development expenditures at Bloom Lake
Purchase of property, plant and equipment as per cash flows
Three Months Ended
March 31,
2021
2020
Year Ended
March 31,
2021
839
7,346
5,008
13,193
45,971
15,336
74,500
1,426
636
2,546
4,608
10,864
4,212
19,684
8,165
22,831
11,762
42,758
97,087
34,805
174,650
2020
28,787
10,700
17,937
57,424
58,019
31,861
147,304
The decrease in tailings-related investments for the three-month period and the year ended March 31, 2021, compared to the same periods
2020, was anticipated. In 2019, the Company announced an accelerated $30.0 million work program for the raising of the tailings containment
dam to ensure safe tailings deposition, which was completed in 2020. During the fiscal year ended March 31, 2021, the expenditures were
related to the construction work on the dykes project and the raising of the tailings dam associated with a new coarse tailings line.
Stripping and mining activities were reduced in the first quarter of the 2021 fiscal year, due to the ramp down of operations as mandated by the
Government's COVID-19 containment directives, but resumed during the second quarter of the 2021 fiscal year. During the three-month period
ended March 31, 2021, the effort to recover the waste mining activities backlog accumulated during the ramp down of the operations
contributed to increasing stripping activities. Stripping activities for the three-month period and the year ended March 31, 2021 were
anticipated to be higher compared to the same periods in 2020 as a result of the mine plan.
The Company's mining equipment rebuild program reflects the work planned during the three-month period ended March 31, 2021, despite a
slowdown during the first quarter of the 2021 fiscal year. Higher investments in the mining equipment rebuild program in the year ended
March 31, 2020 is attributable to capital expenditures to increase mining equipment fleet availability and performance, whereby the required
expenditures were lower for the same period in 2021.
Following the Board's final approval on November 12, 2020, to complete the Phase II project, the Company accelerated its expenditures related
to the Phase II project and expects to continue to do so over the coming quarters. For the year ended March 31, 2021, the investment in the
Phase II project totaled $112,298,000, which includes $97,087,000 in capital expenditures and $15,211,000 in advance payments to SFPPN as
discussed below.
During the three-month period and year ended March 31, 2021, other capital development expenditures at Bloom Lake totaled $15,336,000 and
$34,805,000, respectively. During the three-month period ended March 31, 2021, the Company invested in lodging infrastructure at the mine
site to accommodate the increasing workforce. The Company also made prepayments for production equipment. During the year ended
March 31, 2021, the investments consisted primarily in infrastructure upgrades at the mine, the commissioning of new equipment, the
acquisition of additional used railcars and the expansion of the lodging installation. During the quarter and year ended March 31, 2020, other
capital development expenditures at Bloom Lake totaled $4,212,000 and $31,861,000, respectively. These investments related to the
completion of the Feasibility Study, some infrastructure upgrades at the mine and the commissioning of additional service equipment.
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(Expressed in Canadian dollars, except where otherwise indicated)
11. Cash Flows (continued)
Investing (continued)
Other Investing Activities
During the three-month period ended March 31, 2021, the Company increased its short-term investments, which are essentially collateral
pledged as security for an agreement. The Company also partially disposed some of its marketable securities investment for net proceeds of
$3,022,000.
During the year ended March 31, 2021, the Company transferred funds to a restricted account as a condition to the closing of the amended and
restated Credit Facility.
During the three-month period and year ended March 31, 2021, the Company invested $349,000 and $1,705,000, respectively, in computer
software required to support the expansion of its operations, compared to $3,501,000 and $5,513,000, respectively, for the same periods in
2020.
Finally, the Company made advance payments which totaled $9,200,000 and $15,211,000, respectively, to SFPPN for infrastructure upgrades
in order to accommodate the anticipated increased Phase II production volumes.
Financing
In line with its conservative cash management principles, the Company fully drew its available Revolving Facility of US$20,000,000 to face
global uncertainty associated with the COVID-19 pandemic at the end of the fiscal year ended March 31, 2020. Given its current liquidity
position, during the three-month period ended March 31, 2021, the Company fully repaid the Revolving Facility of $25,262,000
(US$20,000,000).
During the three-month period ended March 31, 2021, 12,733,000 warrants and 110,000 stock options were exercised for proceeds totaling
$14,485,000, compared to 11,500,000 compensation options and 22,500,000 stock options exercised for proceeds totaling $15,261,000
during the same period in 2020.
QIO declared and paid the accumulated dividends on its preferred shares, which are held by the Caisse de dépôt et placement du Québec, for
the period from January 1, 2021 to March 31, 2021, inclusively, for a total disbursement of $4,219,000, representing the current dividend rate of
9.25%.
During the year ended March 31, 2021, the Company repaid the $25,262,000 (US$20,000,000) Revolving Facility. The Company also incurred
and paid $7,888,000 for transaction costs related to the amendment of the Credit Facility, which was increased to fund the completion of the
Phase II project. In addition, 27,733,000 warrants and 6,694,000 stock options were exercised for proceeds totaling $36,277,000. Additionally,
QIO declared and paid the accumulated dividends on its preferred shares for the period from August 17, 2019 to March 31, 2021, inclusively, for
a total disbursement of $28,439,000. The Company does not have any arrears with respect to QIO's preferred dividends and has the ability to
redeem all of QIO's preferred shares on August 16, 2021.
During the year ended March 31, 2020, the Company completed the re-financing of the previous credit facilities, which consisted of two term
loans with CDP Investissements Inc. ("CDPI") (US$100,000,000) and Sprott (US$80,000,000), both of which were fully repaid for
CA$234,464,000 on August 16, 2019. A drawdown on the original US$200,000,000 (CA$267,522,000) credit facilities, including the
US$20,000,000 Revolving Facility, was also completed. Transaction costs of $8,985,000 were incurred for this transaction, where $1,663,000
was paid during the 2019 fiscal year, resulting in a net payment of $7,322,000 during the year ended March 31, 2020. The refinancing reduced
the cost of debt from a 10%-14% range to a 3.25%-4.5% range.
In addition, during the year ended March 31, 2020, the Company completed the acquisition of Investissement Québec's 36.8% equity interest in
QIO for a consideration of $211,000,000. Investissement Québec is a successor to Ressources Québec Inc., which held the equity interest in QIO
at the time of the transaction. Following the acquisition, the Company is no longer subject to an NCI in its flagship asset, the Bloom Lake Mine,
enabling Champion's shareholders to fully benefit from the EBITDA margin generated by the Bloom Lake Mining Complex. Concurrently, the
Company issued QIO's preferred shares to CDPI for proceeds of $181,795,000, net of transaction costs, and reimbursed the unsecured
subordinated convertible debenture (“Debenture”) with Glencore International AG (“Glencore”) for a total cost of $31,980,000.
Additionally, during the year ended March 31, 2020, 21,000,000 compensation options, 13,719,000 warrants and 25,000,000 stock options
were exercised, for proceeds totaling $21,181,000.
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(Expressed in Canadian dollars, except where otherwise indicated)
12. Financial Position
As at March 31, 2021, the Company held $680,528,000 in cash on hand1 and restricted cash. The Company is well positioned to fund all its cash
requirements for the next 12 months with its existing cash balance, its forecasted cash flows from operations, its available portion of the
undrawn long-term debt of US$220,000,000, its master lease agreement with SMBC Rail Services Canada ULC to finance Phase II mining
equipment and railcars of approximately US$30,000,000 and its master lease agreement with Caterpillar Financial Services Limited of
US$75,000,000 signed in April 2021. Moreover, Investissement Québec, a member of the senior debt syndicate, and the Fonds du
développement économique have committed to partially fund (up to $70.0M) QIO's $85.0M investment required to upgrade SFPPN's existing
infrastructure.
The Company's cash requirements for the next 12 months relate primarily to the following activities:
– Mine operating costs;
– Remaining expenditures in relation to the Phase II expansion project;
– Sustaining capital expenditures;
– Payment of mining and income taxes, including a payment of $191,542,000 completed in May 2021; and
– Acquisition of the Kami Project, where $15,000,000 was paid in April 2021 as part of the consideration.
The first capital repayment of the Company's amended long-term debt is scheduled for June 30, 2022, while dividends on QIO's preferred
shares may be accumulated on a quarterly basis at the Company's discretion. As of March 31, 2021, the Company had no capitalized,
undeclared and unpaid dividends on QIO's preferred shares.
The following table details the changes to the statement of financial position at March 31, 2021 compared to March 31, 2020:
As at March 31,
2021
As at March 31,
2020
Variance
(in thousands of dollars)
Cash and cash equivalents
Short-term investments
Cash on hand1
Other current assets
Total Current Assets
Restricted cash
Property, plant and equipment
Exploration and evaluation assets
Other non-current assets
Total Assets
Total Current Liabilities
Long-term debt
Rehabilitation obligation
Other non-current liabilities
Total Liabilities
Equity attributable to Champion shareholders
Total Equity
Total Liabilities and Equity
609,316
27,200
636,516
171,023
807,539
44,012
504,985
76,106
64,264
1,496,906
293,767
214,951
45,074
90,097
643,889
853,017
853,017
1,496,906
281,363
17,291
298,654
102,895
401,549
—
365,470
75,525
40,054
882,598
112,919
275,968
42,836
74,253
505,976
376,622
376,622
882,598
117%
57%
113%
66%
101%
—%
38%
1%
60%
70%
160%
(22%)
5%
21%
27%
126%
126%
70%
1
This is a non-IFRS financial performance measure with no standard definition under IFRS. See the “Non-IFRS Financial Performance Measures” section of this Directors' Report
included in note 20.
56 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
12. Financial Position (continued)
The Company’s total current assets as at March 31, 2021 increased by $405,990,000 since March 31, 2020. The increase was mainly
attributable to cash flows from operations, higher trade receivables impacted by a favourable price adjustment and an increase in inventories.
The increase is partially offset by a reclassification of $44,012,000 (US$35,000,000) to non-current restricted cash for a contingent fund
deposit required under the amended Credit Facility, to cover potential Phase II cost overruns as a condition for the closing of the amended
agreement.
The increase in non-current assets consists primarily of capitalized stripping activities, mining equipment overhaul, investments made in the
Phase II project and other investments made towards the property, plant and equipment and intangible assets. The Company's other non-
current assets increased by $24,023,000 since March 31, 2020 mainly due to the investments made in SFPPN, in line with the Feasibility
Study.
Higher total current liabilities are mainly due to higher income and mining taxes payable of $191,542,000 as at March 31, 2021, resulting from
higher profits since the start of the current fiscal year. In addition, higher accounts payable related to Phase II projects also contributed to the
increase in total current liabilities. The income and mining taxes payable for the 2021 fiscal year were paid in May 2021.
The decrease in long-term debt is mainly due to the repayment of the US$20,000,000 Revolving Facility on March 30, 2021 and the unrealized
foreign exchange gain on the long-term debt denominated in U.S. dollars.
The increase in total equity is mainly attributable to the Company’s net income of $464,425,000 for the year ended March 31, 2021 and the
exercise of warrants and stock options for an additional $36,277,000 amount in cash and equity. The increase in total equity is partially offset
by the payment of the accumulated dividends on QIO's preferred shares, for the period from August 17, 2019 to March 31, 2021, inclusively,
totaling $28,439,000.
13. Financial Instruments
The nature and the extent of risks arising from the Company’s financial instruments are summarized in note 25 of the Financial Statements for
the year ended March 31, 2021.
14. Contingencies
The Company is and may be from time to time subject to legal actions, including arbitrations and class actions, arising in the normal course of
business. It is inherently difficult to predict the outcome of any of these proceedings with certainty, and it is possible that an adverse resolution
could have a material adverse effect on the consolidated financial position of the Company. However, based on currently available information,
it is not expected that any of the existing legal actions, either individually or in the aggregate, will have a material adverse effect on the
consolidated financial position of the Company.
57 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
15. Contractual Obligations, Commitments and Off-Balance Sheet Arrangements
Contractual Obligations and Commitments
The following are the contractual maturities of liabilities (with estimated future interest payments) and the future minimum payments of
commitments as at March 31, 2021:
(in thousands of dollars)
Accounts payable and other
Long-term debt, including capital and future interest payment
Lease liabilities, including future interest
Commitments as per note 28 of the Financial Statements
Less than a
year
101,724
9,315
577
155,068
266,684
1 to 5 years
—
239,773
1,146
63,729
304,648
More than 5
years
—
—
454
201,939
202,393
Total
101,724
249,088
2,177
420,736
773,725
Other Off-Balance Sheet Arrangements
The undrawn portion of the Credit Facility totaled US$220,000,000, which is composed of a term facility of US$170,000,000 only available
during the pre-completion period of Phase II and a Revolving Credit Facility of US$50,000,000, both subject to standby commitment fees.
16. Critical Accounting Estimates and Judgments
The Company’s significant accounting judgments, estimates and assumptions are summarized in note 2 of the Financial Statements for the
year ended March 31, 2021.
17. New Accounting Standards Issued and Adopted by the Company
The new accounting standards issued and adopted by the Company are disclosed in note 2 to the Financial Statements for the year ended
March 31, 2021.
18. New Accounting Standards Issued and but not yet in Effect
The new accounting standards issued but not yet in effect are disclosed in note 2 to the Financial Statements for the year ended
March 31, 2021.
19. Related Party Transactions
Related party transactions consist of transactions with key management personnel. The Company considers its members of the Board and
senior officers to be key management personnel. Transactions with key management personnel are disclosed in note 27 of the Financial
Statements for the year ended March 31, 2021.
58 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
20. Non-IFRS Financial Performance Measures
The Company has included certain non-IFRS measures in this Directors' Report. The Company believes that these measures, in addition to
conventional measures prepared in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of
the Company. The non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with IFRS. These measures do not have any standardized meaning prescribed
under IFRS, and therefore may not be comparable to other issuers.
A. Total Cash Cost
Total cash cost, or C1 cash cost, is a common financial performance measure in the iron ore mining industry but has no standard meaning
under IFRS. Champion reports total cash cost on a sales basis. The Company believes that, in addition to conventional measures prepared in
accordance with IFRS, such as sales, certain investors use this information to evaluate the Company’s performance and ability to generate
operating earnings and cash flows from its mining operations. This measure also enables investors to better understand the performance of
the Company's iron ore operations in comparison to other iron ore producers who present results on a similar basis. Management uses this
metric as an important tool to monitor operating cost performance. Total cash cost includes production costs such as mining, processing and
site administration and excludes depreciation to arrive at total cash cost per dmt sold. Other companies may calculate this measure
differently.
The total cash cost excludes the "cost of sales - incremental costs related to COVID-19" totaling $3,162,000 or $1.6/dmt for the three-month
period ended March 31, 2021 and $12,610,000 or $1.6/dmt for the year ended March 31, 2021.
Per tonne sold
Iron ore concentrate sold (dmt)
(in thousands of dollars except per tonne)
Cost of sales
Total cash cost (per dmt sold)
Three Months Ended
March 31,
2021
2020
Year Ended
March 31,
2021
2020
1,971,100
1,888,200
7,684,500
7,577,400
107,137
54.4
101,721
53.9
416,272
399,368
54.2
52.7
B. Incremental Costs Related to COVID-19 (per dmt sold)
The Company incurred direct, incremental and non-recurring costs resulting from its COVID-19 safety measures that are mainly comprised of
premium payroll costs from adjusted work schedules, higher transportation costs, on-site COVID-19 testing and laboratory costs, and
additional costs for cleaning and disinfecting facilities. The incremental costs related to COVID-19 exclude inefficiency costs attributable to
COVID-19 preventive measures especially related to maintaining social distancing in operational procedures as well as higher costs charged by
subcontractors and consultants which include COVID-19 inefficiencies. The incremental costs related to COVID-19 per dmt sold allow
Management to assess the impact of the incremental COVID-19 costs on the operating cost performance of the Company.
Per tonne sold
Iron ore concentrate sold (dmt)
(in thousands of dollars except per tonne)
Cost of sales - incremental costs related to COVID-19
Incremental costs related to COVID-19 (per dmt sold)
Three Months Ended
March 31,
Year Ended
March 31,
2021
2020
2021
2020
1,971,100
1,888,200
7,684,500
7,577,400
3,162
1.6
—
—
12,610
1.6
—
—
59 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
20. Non-IFRS Financial Performance Measures (continued)
C. All-In Sustaining Cost
The Company believes that AISC defines the total cost associated with producing iron ore concentrate more accurately as this measure
reflects all the sustaining expenditures incurred to produce high-grade iron ore concentrate. The Company calculates AISC as the sum of total
cash cost (as described above), G&A expenses and sustaining capital, including deferred stripping cost, divided by the iron ore concentrate sold
(in dmt) to arrive at a per dmt figure. Other companies may calculate this measure differently because of differences in underlying principles
and policies applied. Differences may also arise due to a different definition of sustaining versus non-sustaining capital. The sustaining capital
included in the AISC calculation excludes development capital expenditures such as capacity increase projects and studies for future
expansion projects.
As this measure is intended to represent the cost of selling iron ore concentrate from current operations, it does not include capital
expenditures attributable to development projects or mine expansions that would increase production capacity or mine life, including
economic evaluations for such projects. It also excludes product research and development expenses and exploration expenses that are not
sustainable in nature, income and mining taxes expenses, working capital, defined as current assets less current liabilities, or interest costs.
The AISC excludes the “cost of sales — incremental costs related to COVID-19” totaling $3,162,000 or $1.6/dmt for the three-month period
ended March 31, 2021 and $12,610,000 or $1.6/dmt for the year ended March 31, 2021.
The following table sets forth the calculation of AISC per tonne:
Per tonne sold
Iron ore concentrate sold (dmt)
(in thousands of dollars except per tonne)
Cost of sales
Sustaining capital expenditures
General and administrative expenses
Non-recurring expenses related to re-domiciliation
AISC (per dmt sold)
Three Months Ended
March 31,
2021
2020
Year Ended
March 31,
2021
2020
1,971,100
1,888,200
7,684,500
7,577,400
107,137
13,193
7,905
—
128,235
65.1
101,721
4,608
8,422
(1,907)
112,844
59.8
416,272
42,758
23,594
—
482,624
62.8
399,368
57,424
21,087
(2,569)
475,310
62.7
60 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
20. Non-IFRS Financial Performance Measures (continued)
D. Net Average Realized Selling Price, Cash Operating Margin and Cash Profit Margin
Net average realized selling price and cash operating margin per dmt sold are used by Management to better understand the iron ore
concentrate price and margin realized throughout a period. Net average realized selling price is calculated as revenues divided by iron ore
concentrate sold (in dmt). Cash operating margin represents the net average realized selling price per dmt sold less AISC per dmt sold. Cash
profit margin represents the cash operating margin per dmt sold divided by the net average realized selling price per dmt sold.
Per tonne sold
Iron ore concentrate sold (dmt)
(in thousands of dollars except per tonne)
Revenues
Net average realized selling price (per dmt sold)
AISC (per dmt sold)
Cash operating margin (per dmt sold)
Cash profit margin
E. EBITDA and EBITDA Margin
Three Months Ended
March 31,
2021
2020
Year Ended
March 31,
2021
2020
1,971,100
1,888,200
7,684,500
7,577,400
396,702
201.3
65.1
136.2
68 %
175,702
93.1
59.8
33.3
36 %
1,281,815
166.8
62.8
104.0
62 %
785,086
103.6
62.7
40.9
39 %
The following table sets forth the calculation of EBITDA, a non-IFRS measure which the Company believes to be relevant to assess the
Company’s ability to generate liquidity by producing operating cash flows to fund working capital needs, service debt obligation and fund
capital expenditures. EBITDA margin represents the EBITDA divided by the revenues.
EBITDA is intended to provide additional information to investors and does not have any standardized definition under IFRS. The measure
excludes the impact of net finance (income) costs, taxes and depreciation, and is not necessarily indicative of operating profit or cash flows
from operations as determined under IFRS. For simplicity and comparative purposes, the Company did not exclude non-cash share-based
payments or COVID-19-related expenditures. Other companies may calculate EBITDA differently.
(in thousands of dollars)
Income before income and mining taxes
Net finance costs
Depreciation
EBITDA
Revenues
EBITDA margin
Three Months Ended
March 31,
2021
2020
Year Ended
March 31,
2021
261,047
5,430
9,287
275,764
396,702
70%
46,908
4,684
9,063
60,655
175,702
35%
761,872
22,428
35,177
819,477
1,281,815
64%
2020
241,188
84,244
22,001
347,433
785,086
44%
61 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
20. Non-IFRS Financial Performance Measures (continued)
F. Adjusted Net Income, Adjusted Net Income Attributable to Champion Shareholders and Adjusted EPS
Management uses adjusted net income and adjusted EPS to evaluate the Company’s operating performance and for planning and forecasting
future business operations. The Company believes the use of adjusted net income and adjusted EPS allows investors and analysts to
understand the results of operations of the Company by excluding certain items that have a disproportionate impact on the results for a period.
The tax effect of adjustments is presented in the tax effect of adjustments line and is calculated using the applicable tax rate. Management’s
determination of the components of adjusted net income and adjusted EPS is evaluated periodically and is based, in part, on its review of non-
IFRS financial measures used by mining industry analysts.
For the year ended March 31, 2021, the Company believes that identifying certain costs directly resulting from the impact of the COVID-19
pandemic and excluding these amounts from the calculation of the non-IFRS measures described below helps Management, analysts and
investors assess the direct and incremental impact of COVID-19 on the business as well as the general economic performance during the
period. During the three-month period and year ended March 31, 2021, the Company incurred direct, incremental and non-recurring costs of
$3,162,000 and $12,610,000, respectively, resulting from the COVID-19 safety measures that are mainly comprised of premium payroll costs
from adjusted work schedules, higher transportation costs, on-site COVID-19 testing and laboratory costs, and additional costs for cleaning
and disinfecting facilities.
During the year ended March 31, 2021, the Company recorded a non-cash loss of $1,863,000 resulting from the debt modification following the
amendment to the Credit Facility (refer to note 13 of the Financial Statements). During the three-month period and the year ended
March 31, 2021, the Company reported a gain on disposal of non-current investments of $2,332,000. Management is of the opinion that by
excluding these non-recurring items, it presents the results related directly to the Company's recurring business.
Unadjusted
Non-cash item
Loss on debt refinancing
Cash items
Gain on disposal of non-current investments
Cost of sales - incremental costs related to COVID-19
Tax effect of adjustments listed above
Adjusted
Three Months Ended
March 31, 2021
Year Ended
March 31, 2021
Net Income
EPS
Net Income
EPS
155,934
0.32
464,425
0.97
—
—
(2,332)
3,162
830
(1,265)
155,499
—
—
(0.01)
0.01
—
(0.01)
0.31
1,863
1,863
(2,332)
12,610
10,278
(5,885)
470,681
—
—
(0.01)
0.03
0.02
(0.01)
0.98
62 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
20. Non-IFRS Financial Performance Measures (continued)
F. Adjusted Net Income, Adjusted Net Income Attributable to Champion Shareholders and Adjusted EPS (continued)
The refinancing of the Sprott and CDPI credit facilities completed in the three-month period ended September 30, 2019, resulted in non-cash
financing costs associated with derivative instruments that were embedded in the previous credit facilities. Management is of the opinion that
by excluding the non-recurring non-cash transactions, it presents the quarterly results related directly to the Company's recurring business.
Three Months Ended
March 31, 2020
Net Income
attributable
to Champion
Shareholders
Net Income
Year Ended
March 31, 2020
Net Income
attributable
to Champion
Shareholders
EPS
Net Income
18,351
18,351
0.04
121,050
89,426
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
18,837
15,976
5,966
1,336
5,603
5,768
53,486
3,788
3,788
18,837
15,976
5,966
1,336
5,603
5,768
53,486
3,788
3,788
(5,633)
(5,633)
Unadjusted
Non-cash items
Write-off - book value of Debenture
Write-off - book value of CDPI debt facility
Write-off - book value of Sprott debt facility
Write-off - Glencore derivative asset
Write-off - CDPI derivative asset
Write-off - Sprott derivative asset
Cash items
Debt prepayment penalty fees
Tax impact of adjustments listed above
Adjusted
18,351
18,351
0.04
172,691
141,067
EPS
0.20
0.04
0.04
0.02
—
0.01
0.01
0.12
0.01
0.01
(0.01)
0.32
G. Operating Cash Flow per Share
The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use operating cash flow
per share to assess the Company’s ability to generate and manage liquidity. This measure does not have a standard meaning and is intended
to provide additional information. It should not be considered in isolation or as a substitute for measures of performance prepared in
accordance with IFRS. Operating cash flow per share is determined by applying net cash flow from operating activities to the weighted average
number of ordinary shares outstanding used in the calculation of basic earnings per share.
Net cash flow from operating activities
Weighted average number of ordinary shares outstanding - Basic
Operating cash flow per share
228,566
494,403,000
0.46
84,614
462,730,000
0.18
623,476
478,639,000
1.30
309,567
441,620,000
0.70
Three Months Ended
March 31,
2021
2020
Year Ended
March 31,
2021
2020
63 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
20. Non-IFRS Financial Performance Measures (continued)
H. Cash on Hand
Cash on hand is defined as accessible cash or which can be converted quickly into cash, and includes cash held in financial institutions, short-
term deposits that mature within twelve months and all other cash equivalents. The Company uses cash on hand to measure its liquidity to
meet the requirement of lenders, fund capital expenditures and support operations. This measure is also monitored by Management to
prudently manage its liquidity.
Cash and cash equivalents
Short-term investments
Cash on hand
21. Share Capital Information
As at March 31,
2021
As at March 31,
2020
609,316
27,200
636,516
281,363
17,291
298,654
The Company’s share capital consists of ordinary shares without par value. As of May 26, 2021, there are 506,316,164 ordinary shares issued
and outstanding.
In addition, there are 4,395,665 ordinary shares issuable pursuant to options, restricted share units, deferred share units and performance
share units and 25,281,250 ordinary shares issuable pursuant to warrants.
64 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
22. Summary of Quarterly Results
The following information is derived from and should be read in conjunction with the Financial Statements for the year ended March 31, 2021
and the unaudited interim consolidated financial statements for the previous quarters as well as with the audited annual financial statements
for the year ended March 31, 2020.
The Company’s fiscal year ends on March 31. All amounts are stated in millions of dollars except for the earnings per share.
Financial Data ($ millions)
Revenues
Operating income
EBITDA1
Net income (loss)
Adjusted net income1
Net income attributable to Champion shareholders
Earnings per share - basic
Earnings per share - diluted
Adjusted earnings per share - basic1
Net cash flow from operations
Operating Data
Waste mined and hauled (thousands of wmt)
Ore mined and hauled (thousands of wmt)
Strip ratio
Ore milled (thousands of wmt)
Head grade Fe (%)
Recovery (%)
Product Fe (%)
Iron ore concentrate produced (thousand wmt)
Iron ore concentrate sold (thousands of dmt)
Statistics (in dollars per dmt sold)
Gross average realized selling price
Net average realized selling price1
Total cash cost1
All-in sustaining cost1
Cash operating margin1
Statistics (in US dollars per dmt sold)
Gross average realized selling price
Net average realized selling price1
Total cash cost1 (C1 cash cost)
All-in sustaining cost1
Cash operating margin1
Q4 2021 Q3 2021 Q2 2021
Q1 2021 Q4 2020 Q3 2020 Q2 2020 Q1 2020
396.7
262.5
275.8
155.9
155.5
155.9
0.32
0.30
0.31
228.6
3,796
5,636
0.67
5,238
30.7
82.6
66.5
2,011
1,971
220.0
201.3
54.4
65.1
136.2
173.9
159.3
43.0
51.4
107.9
329.5
203.3
214.6
120.8
123.4
120.8
0.25
0.24
0.26
188.2
4,958
5,183
0.96
5,194
29.7
83.6
66.4
1,922
1,891
311.0
189.5
199.0
112.2
113.8
112.2
0.24
0.22
0.24
131.4
4,114
6,070
0.68
5,563
30.9
85.2
66.1
2,269
2,063
244.6
118.8
130.2
75.6
78.0
75.6
0.16
0.15
0.17
75.3
2,613
4,683
0.56
4,605
31.3
82.3
66.5
1,799
1,759
175.7
52.1
60.7
18.4
18.4
18.4
0.04
0.04
0.04
84.6
171.1
53.3
57.7
30.2
30.2
30.2
0.07
0.06
0.07
28.1
160.4
57.9
62.2
(1.7)
49.9
2.1
0.00
0.00
0.11
104.9
277.9
163.3
166.9
74.2
74.2
38.8
0.09
0.08
0.09
91.9
3,180
5,413
0.59
4,880
31.7
82.3
66.5
1,892
1,888
3,409
4,905
0.70
4,639
32.0
81.7
66.4
1,833
1,922
3,572
5,394
0.66
5,451
32.3
83.9
66.3
2,190
1,860
3,581
5,105
0.70
4,780
32.5
82.1
66.2
1,989
1,907
194.8
174.2
56.2
65.0
109.2
150.3
134.5
43.1
49.9
84.6
162.8
150.7
48.5
57.4
93.3
122.2
113.2
36.4
43.1
70.1
149.2
139.1
58.4
64.8
74.3
107.8
100.3
42.2
46.8
53.5
130.5
93.1
53.9
59.8
33.3
96.9
69.7
40.1
44.5
25.2
140.1
89.0
54.2
62.2
26.8
106.2
67.4
41.1
47.1
20.3
140.3
86.2
48.3
66.2
20.0
106.2
65.1
36.6
50.1
15.0
158.9
145.7
54.3
62.8
82.9
119.3
109.6
40.6
46.9
62.7
1
This is a non-IFRS financial performance measure with no standard definition under IFRS. See the “Non-IFRS Financial Performance Measures” section of this Directors' Report
included in note 22.
65 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
23. Nature of Securities
The purchase of the Company’s securities involves a high degree of risk and should be undertaken only by investors whose financial resources
are sufficient to enable them to assume such risks. The Company’s securities should not be purchased by persons who cannot afford the
possibility of the loss of their entire investment. Furthermore, an investment in the Company’s securities should not constitute a major portion
of an investor's portfolio.
24. Additional Information
Additional information related to the Company is available for viewing under the Company's filings on SEDAR at www.sedar.com, the ASX at
www.asx.com.au and the Company's website at www.championiron.com.
25. Qualified Person and Data Verification
Mr. Vincent Blanchet, P. Eng., Engineer at QIO, the Company’s subsidiary and operator of Bloom Lake, is a “qualified person” as defined by NI
43-101 and has reviewed and approved, or has prepared, as applicable, the disclosure of the scientific and technical information contained in
this Annual Report. Mr. Blanchet’s review and approval does not include statements as to the Company’s knowledge or awareness of new
information or data or any material changes to the material assumptions and technical parameters underpinning the Feasibility Study. Mr.
Blanchet is a member of the Ordre des ingénieurs du Québec.
66 Page
Unless otherwise noted, the following information is for the Company’s last completed financial year which ended March 31, 2021 and, since
the Company had one or more subsidiaries during that year, is disclosed on a consolidated basis. The information in this Remuneration Report
has been audited pursuant to section 308 (3C) of the Corporations Act 2001 (Cth) (“Corporations Act”) of Australia. All monetary amounts are
disclosed in Canadian dollars unless expressly stated otherwise.
Key Management Personnel and Named Executive Officers
In compliance with Section 300A of the Corporations Act and Canadian National Instrument 51-102 - Continuous Disclosure Obligations, this
Remuneration Report covers Key Management Personnel (“KMP”) including Named Executive Officers (“NEO”), who were actively employed by
the Company as at the end of the fiscal year (March 31, 2021).
KMP is defined as “those persons having authority and responsibility for planning directing and controlling the activities of the entity, directly or
indirectly, including any director (whether executive or otherwise) of Champion. NEO of the Company means each of the following individuals:
a)
b)
c)
d)
the Chief Executive Officer (“CEO”) of the Company or each individual who acted in a similar capacity for any part of the most
recently completed financial year;
the Chief Financial Officer (“CFO”) of the Company or each individual who acted in a similar capacity for any part of the most
recently completed financial year;
each of the three most highly compensated executive officers, or the three most highly compensated individuals acting in a
similar capacity, other than the Chief Executive Officer and Chief Financial Officer, at the end of the most recently completed
financial year whose total compensation was, individually, more than $150,000, as determined in accordance with applicable law
at the end of that financial year; and
each individual who would be a named executive officer under paragraph (c) but for the fact that the individual was not an
executive officer of the company, and was not acting in a similar capacity, at the end of that financial year.
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(Expressed in Canadian dollars, except where otherwise indicated - audited)
Key Management Personnel and Named Executive Officers (continued)
The following persons were the KMP, and NEOs of the Company during the financial year ended March 31, 2021.
Name
Michael O’Keeffe (NEO and KMP) (1)
David Cataford (NEO and KMP) (2)
Natacha Garoute (NEO and KMP)
Alexandre Belleau (NEO and KMP)
Position
Executive Chairman
CEO
CFO
Chief Operating Officer
Appointment Date
April 1, 2019
April 1, 2019
August 13, 2018
July 22, 2020
Steve Boucratie (NEO and KMP)
Vice-President, General Counsel and Corporate Secretary
May 20, 2019
Gary Lawler (KMP)
Michelle Cormier (KMP)
Jyothish George (KMP)
Louise Grondin (KMP)
Andrew Love (KMP)
Wayne Wouters (KMP)
Notes:
Director
Director
Director
Director
Lead Director
Director
April 9, 2014
April 11, 2016
October 16, 2017
August 27, 2020
April 9, 2014
November 1, 2016
(1) Mr. O’Keeffe was appointed Executive Chairman on August 13, 2013 and CEO on October 3, 2014. Mr. O’Keeffe stepped down as CEO on April 1, 2019 and continues in his role as
Executive Chairman.
(2) Mr. Cataford was appointed Chief Executive Officer on April 1, 2019 and appointed to the Board of Directors on May 21, 2019. Prior to this, he had been Chief Operating Officer of
the Company and a NEO since March 20, 2017.
The term "executives" refers to the Company's NEOs and the members of the Company's senior management team from time to time.
A. Role of Remuneration and Nomination Committee
The role of the Remuneration and Nomination Committee is to advise the Board on remuneration for senior executives and directors. As at
March 31, 2021, the Remuneration and Nomination Committee was comprised of Gary Lawler (Chairman), Andrew Love and Michelle Cormier,
each of whom is an independent director and has direct knowledge and experience that is relevant to his or her responsibilities in executive
compensation as set out below. The Remuneration and Nomination Committee has access to independent experts to provide advice in the
conduct of its duties. The Committee members are:
Gary Lawler (Chairman) - Mr. Lawler has over 35 years of experience as a practicing corporate lawyer and has been a partner in a number of
leading Australian law firms. Mr. Lawler has been a director of, and involved in compensation matters for, numerous companies throughout the
years.
Andrew J. Love - Mr. Love is a Chartered Accountant with more than 35 years of experience in corporate recovery and reconstruction in
Australia. Mr. Love has been an independent company director of a number of companies over a 30-year period.
Michelle Cormier - Mrs. Cormier is a CPA, CA with over 30 years of experience in senior executive level positions in management including
human resources.
The Remuneration and Nomination Committee makes recommendations to the Board on the executive remuneration framework and the
remuneration level of executives including all awards under the long-term incentive plan, and the short-term incentive award and
remuneration levels for directors. The aim is to ensure that remuneration policies align with the long-term objectives of the Company, are fair
and competitive and reflective of generally accepted market practices of its peers.
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(Expressed in Canadian dollars, except where otherwise indicated - audited)
B. Remuneration Philosophy & Approach
The objective of Champion’s executive remuneration program and strategy is to attract, retain, and motivate talented executives and provide
incentives for executives to create sustainable shareholder value over the long term, by driving a performance culture that is closely aligned to
the achievement of the Company’s strategy and business objectives. To achieve this objective, executive remuneration is designed and based
on the following principles:
•
•
•
•
•
To align with Champion’s business - reflect the Company’s strategic goals and performance as an iron ore exploration, development
and, particularly, a production company. Accordingly, executive performance targets are directly aligned with activities that create
long term shareholder value by developing and operating iron ore assets efficiently and effectively to generate free cash flow from
shareholder capital deployed and share appreciation in recognition of that investment, and by adopting and implementing
sustainability practices for the benefit of the communities in which the Company operates its workforce and its various stakeholders;
Pay competitively - reflect each executive’s performance, expertise, responsibilities, complexity and length of service to the
Company and to set overall target remuneration to ensure it remains competitive;
Pay for performance - align with Champion’s desire to create a performance culture and create direct tangible relationships between
pay and performance. Champion does not “pay for failure” nor does it incentivize undue risk taking to achieve performance
objectives;
To align the interests of executives with those of the shareholders of the Company (the “Shareholders”) through a compensation
structure where the majority of an executive’s compensation is “at risk”, as short-term incentive (bonus) and long-term incentive
remuneration are tied directly or indirectly to Company performance and relative and/or absolute shareholder returns. Specifically,
the use of awards which increase in value when the Company’s share price performance exceeds that of its peers and reduces in
value when it trails the performance of its peers. In addition to financial alignment, Champion believes in the importance of aligning
executive interests with Shareholders’ Environmental, Social and Governance (“ESG”) expectations. The compensation plan
incorporates operational performance with 25% of total bonus awards under the short-term incentive plan tied to sustainability
targets designed to protect the safety, health and well-being of employees, stakeholders and the environment; and
Corporate governance - continually review and, as appropriate for Champion, adopt executive remuneration practices that align with
current market practices and the competitive landscape, and provide Shareholders with robust disclosure to enable them to fully
evaluate compensation practices.
The Remuneration and Nomination Committee has implemented a compensation regime that is structured to reflect the above objectives.
Executive remuneration consists of a combination of salary, annual performance bonus awards or short-term incentives and longer-term
equity-based incentives. A foundation principle of the Company’s remuneration philosophy is the promotion of a strong “performance culture”
within senior management. The Company’s Remuneration Reports over the last three years have received strong support from Shareholders at
the 2018-2020 Annual General Meetings, with a 3-year average of 90.87% of votes cast in favour of the respective Remuneration Reports.
During the financial year ended March 31, 2021, the Company reviewed the reports of proxy advisors and engaged with major Shareholders in
relation to the affairs of the Company and remuneration matters.
In determining the level of annual performance bonus awards, the Remuneration and Nomination Committee takes into account overall
corporate performance against pre-determined performance objectives and metrics. In setting equity-based incentive awards, the
Remuneration and Nomination Committee establishes time-based and performance-based vesting criterion in line with retention and reward
objectives. If it is deemed appropriate, the Remuneration and Nomination Committee have the authority to seek advice from outside
consultants. A more detailed explanation of the various components of Executive Remuneration can be found at paragraph “Elements of
Executive Remuneration” below.
Based on these assessments and within the context of pay for performance principles, the Remuneration and Nomination Committee make its
recommendation to the Board for approval. These recommendations may reflect factors and considerations other than those indicated by
market data or provided by advisors, including a consideration of prevailing economic conditions - both on a corporate level and on a national
and international level, industry norms for such awards and other elements of NEO compensation.
The Remuneration and Nomination Committee and the Board as a whole has discretion to reward above the noted plan parameters when an
individual or team has made an exceptional contribution to the performance of the Company. Compensation is about incenting the right
behaviour and Champion does not want to cap the incentive to outperform.
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(Expressed in Canadian dollars, except where otherwise indicated - audited)
B. Remuneration Philosophy & Approach (continued)
The Remuneration and Nomination Committee has considered the implications of the risks associated with the Company’s remuneration
program by structuring executive remuneration in which a significant portion of overall remuneration is subject to the achievement of certain
milestones, including: (i) criteria relating to annual performance, in the case of bonus payments, (ii) vesting periods for restricted share units
(“RSUs”), which vest over three years and (iii) the achievement of performance criteria for performance share units over a period of three years
(“PSUs”).
The Remuneration and Nomination Committee evaluates all executive compensation policies and programs with a view to confirming that the
policies and programs do not drive behaviours that would result in inappropriate or excessive risk taking, and that the Company’s
compensation policies and practices do not result in identified risks that are likely to have a material effect on the Company. This evaluation
process focuses on five areas: 1) strategic / operational risk; 2) compliance risk; 3) reputational risk; 4) talent risk; and 5) financial / economic
risk. Risks are assessed and considered on both an individual element basis and in totality.
Policies of the Company include certain prohibitions which prevent KMPs from engaging in short term dealings or short selling. KMPs are also
prohibited from engaging in derivatives in respect of ordinary shares of the Company (such as put and call options), or any other hedging or
equity monetization transaction in which the individual’s economic interest and risk exposure in ordinary shares is changed (such as collars or
forward sales contracts).
The Board will continue to review executive remuneration to ensure that it continues to align with the Company’s strategy, motivate
management, reflect market practices and support the delivery of sustainable long-term returns to shareholders. As part of the review
process, the Board will continue to engage with major Shareholders, and receive advice from independent experts.
C. External Advice
During the 2021 fiscal year, the Board engaged Mercer Canada Limited (“Mercer”) to provide an independent, third party analysis of the
remuneration levels and practices for the Company’s executive team as well as the remuneration for the Board of Directors. Mercer provided
advice and recommendations on the remuneration program for KMPs during each of the fiscal years ended March 31, 2021 and 2020. The
Remuneration and Nomination Committee exercises oversight over the retention of and interaction with remuneration consultants to ensure
that remuneration recommendations are made free from undue influence by KMP to whom they relate.
The table below provides an overview of the total fees paid to Mercer for services rendered during the fiscal years ended March 31, 2021 and
2020.
(in Canadian dollars)
2021
2020
Fees for services related to executive team and Board of Directors compensation
All other fees(1)
Total
$
$
$
39,000 $
19,036 $
58,036 $
29,500
123,184
152,684
Note:
(1) Mercer received advisory fees for other services of $19,036 during the year ended March 31, 2021 (including providing advice as to salaries of employees other than the
executive team) and $123,184 during the year ended March 31, 2020 (including the implementation of a group insurance plan and governance framework for the Company
pension plan).
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(Expressed in Canadian dollars, except where otherwise indicated - audited)
D. Compensation Peer Group Selection and Benchmarking
When developing and implementing compensation packages for KMPs, it is standard practice to benchmark total compensation for KMPs
against a group of companies at similar stages of development, operations, regional geography and of similar size in terms of market
capitalization and revenue (peer group).
In order to implement market-competitive compensation arrangements for Champion’s executive team, the Company’s independent directors,
and the Remuneration and Nomination Committee identified a peer group of mining companies with similar stage of development and with
similar operations in consultation with Mercer. Two companies (Detour Gold Corporation and North American Palladium Ltd.) were removed as a
result of being acquired in 2019 or 2020. The Remuneration and Nomination Committee has approved the following compensation peer group
for the fiscal year ended March 31, 2021 that includes 11 similarly-sized publicly-traded mining peers that are generally within 0.5x to 2x of
Champion’s market capitalization, total revenues, assets and/or number of employees, as of April 30, 2020:
Alamos Gold - Centerra Gold - Pretium Resources - SSR Mining - Wesdome Gold Mines - TMAC Resources - New Gold - Premier Gold Mines -
Imperial Metals Corporation - Capstone Mining Corp. - Copper Mountain Mining
In order to benchmark relative total shareholder return for purposes of grants of performance share units, the Company’s independent
directors and the Remuneration and Nomination Committee also identified a second peer group of mining companies further described under
the heading “Long-Term Incentives – Equity Incentives - 2021 RSU and PSU Grant”.
E. Key Achievements of the Named Executive Officers in the Fiscal Year Ended March 31, 2021
Champion became a producing company in 2019 and, further to achieving this milestone, delivered significant increases in market
capitalization and cash flow production for Shareholders. During the fiscal year ended March 31, 2021, management of the Company continued
to coordinate the determination and implementation of the Company’s long-term strategy. Key achievements of the management team during
the year ended March 31, 2021 include:
•
•
•
•
•
•
•
•
•
•
•
•
•
successful implementation of health and safety measures, including a rapid testing laboratory at the mine site in order to minimize
the risks related to COVID-19 and safeguard the health and safety of our employees, partners and local communities while allowing
ongoing and uninterrupted operational activities;
an employee recordable injury frequency rate of 2.45 in the fourth quarter of 2021, which is in line with Québec’s open pit industry
standards;
record annual production of 8,001,200 wet metric tonnes (wmt) of high-grade 66.4% Fe concentrate;
increased annual EBITDA by 136% compared to the prior year, achieving a record EBITDA of $819.5 million for the year;
progression of laboratory testing for the production of iron ore concentrate, grading more than 69% Fe, enabling the Company to
engage with Direct Reduction (“DR”) iron and steel producers as well as to support decarbonization initiatives;
ongoing laboratory testing and development of cold pelletizing technologies;
produced 575,700 wmt of DR quality iron ore concentrate, grading 67.7% Fe with a combined silica and alumina content of 2.8%;
inclusion in the S&P/ASX 200 Index, Australia's preeminent benchmark index, which measures the performance of the 200 largest
index-eligible stocks listed on the ASX;
acquisition of the mining properties of the Kamistiatusset iron ore project (the “Kami Project”) located in the Labrador Trough
geological belt in southwestern Newfoundland, near the Québec border;
final Board approval to complete the Phase II expansion project (“Phase II”) and advanced work programs required to maintain the
project completion timeline, scheduled for mid-2022;
increased the senior secured credit facility from US$200.0M to US$400.0M, providing an additional US$200.0M to finance the Phase
II expansion. Together with cash on hand and ongoing cash flows from operations, the Company expects to be fully funded to
complete the Phase II expansion project;
contributing to reducing emissions in the steel industry with our high-grade iron ore concentrate; and
development and commercialization of a new 67.7% Fe product which creates opportunities to enter the Electric Arc Furnace market
and get a higher premium for the Company’s product.
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(Expressed in Canadian dollars, except where otherwise indicated - audited)
F. Remuneration of Executive Chairman
Mr. O’Keeffe was Chairman and CEO of the Board for the period August 13, 2015 to March 31, 2019. On April 1, 2019 as part of the
implementation of Champion's succession plan, Mr. O'Keeffe stepped down as CEO and was named Executive Chairman of the Board of
Directors. In view of his ongoing contribution to the affairs of the Company as well as the responsibilities and duties performed, Mr. O'Keeffe
remained a member of the executive team for the fiscal year ended March 31, 2021. Mr. O'Keeffe is paid an annual base salary but is not
eligible to receive annual short and long-term incentives in the form of annual bonus or equity-based compensation.
G. Elements of Executive Remuneration
As is the prevailing practice in the mineral exploration and mining industry, remuneration of the NEOs is comprised of four components:
a)
b)
c)
d)
base salary (fixed);
short-term incentive (“STI”) in the form of annual bonus awards (at-risk);
long-term incentive (“LTI”) in the form of equity-based compensation (at-risk); and
personal benefits and perquisites (fixed).
The Remuneration and Nomination Committee determined the following elements to be key to executive compensation for the 2021 fiscal year.
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(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2021 Executive Performance Metrics and Incentives
Overall Company Strategic Objective:
•
To maximize operational performance and continue its organic growth.
Key Deliverables:
The executive team needed to:
•
•
•
•
•
deliver operational performance while ensuring strict adherence to the Company's safety
culture;
pursue the Company’s organic growth, by financing and starting the construction of the
Phase II expansion of the Bloom Lake Mine, its flagship asset.
The target bonus was set as a percentage of each NEO’s base salary. The actual bonus
was dependent on performance against agreed baseline benchmarking. Individual
benchmarks were agreed upon with each employee to reflect key areas of their focus /
responsibility.
The Company utilized time vesting RSU grants to incentivize and retain the executive
team in accordance with Canadian practice for the compensation of executives of public
companies.
The Company utilized PSU grants, the vesting of which is based on the performance of
the Company against a set of peer companies.
Short-term Incentives:
(Annual Bonus)
Long-term Incentives:
(RSUs)
Long-term Incentives:
(PSUs)
i) Base Salary
The Company provides executive officers with base salaries that represent a fixed element of compensation and their minimum compensation
for services rendered or expected to be rendered. The base salary of executive officers depends on the scope of their experience,
responsibilities, leadership skills, performance, length of service, general industry trends and practices, competitiveness and the Company's
existing financial resources. Base salaries are determined annually based on the Remuneration and Nomination Committee's
recommendations to the Board. In making its recommendations, the Remuneration and Nomination Committee with the assistance of third-
party advisors annually reviews the base salaries of the executive officers of the Company against the base salaries of executive officers in
comparable positions at public companies in our peer group of mining companies.
2021 Base Salary
The NEO’s base salaries are intended to be competitive with those paid in the mining industry and align with the Company’s performance.
There had been minimal salary increases in the years preceding the commencement of production by the Company. Upon achieving production
in 2019 and delivering significant shareholder value, it is now crucial to reward and retain the executive team that delivered such shareholder
value and that is tasked with the Phase II expansion of the Bloom Lake project. The CEO’s base salary has increased by $150,000 in 2021. The
compensation is now aligned with the median of the comparator group.
The 2021 salary for each NEO is set out in a table under the heading “2021 Remuneration Awards for the Named Executive Officers”.
ii) Short-Term Incentives (Annual Bonus)
Target bonus levels (as a percentage of salary) are established to achieve total cash compensation (salary + bonus) at or below the median of
the market when performance is at target levels. In determining annual bonus awards, Champion aims to achieve certain strategic objectives
and milestones, which are further described below. An annual target performance bonus award is set for each NEO. The actual performance
bonus paid in any year will be based on the performance of the NEOs against pre-determined Key Performance Indicators ("KPIs"). KPIs will
reflect key deliverables for a particular year.
The STI is an annual incentive plan designed to reward executives for meeting or exceeding financial and non-financial objectives over a one-
year period. The STI has been designed to foster an organisational culture of collaboration, co-operation and mutual respect which supports
the objective of a long-term outperformance in both the financial and non-financial areas of the business, mainly with annual measures linked
to the business strategy, set at levels that are challenging, yet achievable.
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(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2021 Executive Performance Metrics and Incentives (continued)
ii) Short-Term Incentives (Annual Bonus) (continued)
2021 Bonus Awards
For 2021, the Board set a target bonus for each NEO as follows, based on Mercer’s recommendation:
NEO
Michael O'Keeffe
David Cataford
Natacha Garoute
Alexandre Belleau
Steve Boucratie
Target Bonus
(% Salary)
Nil
120%
75%
75%
75%
For the fiscal year ended March 31, 2021, the following financial and operating KPIs were established and evaluated:
•
45% of total bonus - Financial performance objectives set against the fiscal year ended March 31, 2021 budget:
◦
◦
EBITDA1: The EBITDA target was selected as it is a direct financial measurement of the Company’s performance, providing a
strong alignment to the interests of Shareholders. It provides a strong reflection of production delivery, operational
efficiency and cost management.
Free cash flow (“FCF”)2: FCF was selected as it is a highly relevant short and long term measure. It reflects cost and capital
management and production efficiencies.
•
•
30% of total bonus: based on meeting the production volume during the fiscal year ending March 31, 2021 of 7,357,000 dmt at a total cash
cost per tonne sold of no more than $56.25/dmt, excluding COVID-19 costs. The Board selected production volume and production costs as
key performance metrics given that high production volume and costs efficiency represent meaningful operating measures for an iron ore
producer.
25% of total bonus: based on overall performance imperatives comprising sustainable development objectives, health and safety targets
including no fatalities and minimal time lost due to injuries as well as no harmful event to the environment. Such performance criteria were
selected to address the health and safety, sustainability and environmental goals of the Company, for the benefit of the local communities
in which it operates.
The Board also determined that all objectives were subject to a gradation scale allowing them to be met either at 0% or anywhere from 50% to
150%. No amount of STI is payable in relation to a KPI unless the minimum performance level for that KPI is met. As a result of the application
of the gradation scale (0% to 150%) to the target bonus (as a % of salary), the total annual bonus payable to the NEOs is capped at 180% of base
salary for the CEO and 112.5% of base salary for the other NEOs.
1 EBITDA is a non-IFRS measure which does not have a standardized definition under IFRS. The measure is calculated based on the cash generating net income to which income tax
expenses, net finance costs and depreciation expenses are added. It excludes non-cash working capital and is not necessarily indicative of operating profit or cash flows from
operations as determined under IFRS. Other companies may calculate EBITDA differently.
2 FCF is a non-IFRS financial measure which does not have any standardized definition under IFRS. For the fiscal year ended March 31, 2021, FCF was calculated based on net
increase in cash and cash equivalents, excluding investments in the Lake Bloom Phase II expansion project (composed of property, plant and equipment expenditures and long-term
advance payment) and financing activities. FCF for the year includes all tax payments including true-up payments made in relation to prior income tax expenses. As such FCF
generated by Champion for the 2021 fiscal year included payments of $58M related to the 2020 income tax expenses. Other companies may calculate FCF differently.
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(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2021 Executive Performance Metrics and Incentives (continued)
ii) Short-Term Incentives (Annual Bonus) (continued)
2021 Bonus Awards (continued)
The Budget for 2021 was approved in March 2020 as part of the regular Board approval timetable. The iron ore price assumptions were set
through a consensus of various market forecasts for the forthcoming year, plus a critical assessment and scenario analysis by management.
Both the timeline and budget preparation approach were consistent with previous years, although the 2021 budget process was against a
backdrop of significant uncertainty in the global economy due to the onset of the COVID-19 pandemic. The 2021 targets for the STI incentive
program were approved by the Remuneration and Nomination Committee in May 2020.
As outlined below, the Company achieved EBITDA of $819.5 million in the financial year ended March 31, 2021. The combination of focused
production management to achieve increased throughput and overall production uplift, prudent cost control and demand driven iron ore prices,
all contributed to record production, EBITDA and FCF outperformance against rigorously set targets.
The following 2021 bonus score card table outlines the weighting, performance objectives, actual results and payout factor for the bonus
awards for the year ended March 31, 2021.
KPIs
Weighting
Minimum
Threshold (50%
Performance
Level)
Target
(100%
Performance
Level)
Stretch
(150% Performance
Level)
Actual Results
Payout Factor
EBITDA
FCF
Production
metric tonnes)
(dry
Total Cash Cost ($
per tonne)
Meet Sustainable
Development
Objectives1
Incident
Frequency (QIO)
Incident
Frequency
(Contractor)
25% $
20% $
15%
233,000,000 $
291,000,000 $
340,000,000 $
819,477,000
72,000,000 $
7,128,000
77,000,000 $
7,357,000
80,000,000 $
7,584,000
491,000,000
7,763,464
15%
10%
7.5%
7.5%
59.25
56.25
53.25
54.17
3 objectives
6 objectives
9 objectives
8 objectives
3.25
5.20
2.50
4.00
2.13
3.40
2.25
4.25
150%
150%
150%
134.7%
133.3%
133.8%
89.6%
Total 2021 Bonus Payout Factor
140.3%
1 Sustainable development objectives include a total of nine objectives which relate to (i) the formation of a business ethics committee, (ii) training and awareness programs on
Aboriginal rights and Innu culture, and other community initiatives, (iii) programs and corporate policies with respect to diversity and equal employment opportunities, (iv) the
establishment of programs to reduce green house gas and energy consumption in the medium and long term and responsible procurement policies, and (v) water stewardship and
biodiversity.
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(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2021 Executive Performance Metrics and Incentives (continued)
ii) Short-Term Incentives (Annual Bonus) (continued)
2021 Bonus Awards (continued)
The following table sets out the tabulations for 2021 NEO bonus awards:
NEO
Michael O'Keeffe
David Cataford
Natacha Garoute
Alexandre Belleau
Steve Boucratie
Target Bonus
(% Salary)
Weighted
Score
Actual Bonus
(% Salary)
Annual Bonus
($)
Nil
120 %
75 %
75 %
75 %
Nil
140 %
140 %
140 %
140 %
Nil
168 %
105 %
105 %
105 %
Nil
1,262,573
452,422
452,422
420,858
iii) Long-Term Incentive - Equity-Based Incentives
Equity-based incentives are a particularly important component of compensation in the mining industry given the long lifecycle of mining and
are a critical component of the Company’s remuneration philosophy. These plans are designed to align the interests of the NEOs and other
participating employees with the interests of Shareholders by linking a component of compensation to the long-term performance of the
ordinary shares of the Company (the “Shares”) through “at risk” pay. Awards under these arrangements for the NEOs are structured to create
total direct compensation (i.e., the combination of salary + bonus + equity-based incentives) at median market positioning, or above median
when performance warrants.
The table under the section "2021 RSU and PSU (”LTIP”) Grant" sets out the tabulation for the 2021 NEO LTIP awards.
2018 Omnibus Plan
The 2018 Omnibus Incentive Plan (the “LTIP” or “Omnibus Incentive Plan”) provides flexibility to the Company to grant, in addition to stock
options, deferred share units (“DSUs”), PSUs, RSUs, and other forms of equity-based incentive awards. Following the approval of the LTIP by
the Shareholders at the 2018 annual and special meeting, all grants of equity-based awards are made pursuant to, or as otherwise permitted
by, the LTIP.
The purpose of the LTIP is to provide eligible persons with an opportunity to share in the growth in value of the Company and to encourage
them to improve the longer-term performance of the Company and its returns to Shareholders. The LTIP assists the Company in attracting and
retaining skilled and experienced employees and aligns their incentives with the longer-term goals of the Company.
The LTIP replaces the prior incentive plan (the “Previous Plan”) which was adopted by the Company in October 2013, and was subsequently
amended in August 2017 with the approval of the Shareholders of the Company to comply with Canadian regulatory requirements. The Previous
Plan was also amended on January 27, 2021 in order to implement a minor amendment relating to administrative matters. The Previous Plan
remained in effect only in respect of outstanding awards issued under that plan. As at March 31, 2021, no awards remain outstanding under the
Previous Plan.
Stock Options
At the discretion of the Board, options may be granted under the LTIP to NEOs taking into account a number of factors, including the amount
and term of options previously granted, base salary and bonuses and competitive market factors. The Board has the ability to establish the
expiry date for each stock option, provided that in no event will the expiry date be later than the date which is ten years following the grant
date. Typically, stock options granted by the Board vest one third (1/3) on each of the grant date and 12 and 24-month anniversaries of grant
and are issued with a three-year or four-year term before expiring.
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(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2021 Executive Performance Metrics and Incentives (continued)
iii) Long-Term Incentive - Equity-Based Incentives (continued)
2018 Omnibus Plan (continued)
Stock Options (continued)
Fiscal year ended March 31, 2021 Option Grants
A breakdown of the 2021 option grant for each NEO is shown in a table under the heading “2021 Remuneration Awards for the Named Executive
Officers”.
The following table provides the annual burn rate associated with the Previous Plan and the LTIP for each of the Company’s three most recent
fiscal years (2021, 2020 and 2019):
Equity Compensation Plan
LTIP(4)
Previous Plan(5)
Notes:
Fiscal Year
Ended March 31,
2021
Ended March 31,
2020
Ended March 31,
2019
Ended March 31,
2021
Ended March 31,
2020
Ended March 31,
2019
Number of
Securities Granted
under the Plan(1)
Weighted Average
Number of
Securities
Outstanding(2)
Annual
Burn Rate(3)
2,906,499
1,833,455
1,351,946
—
—
700,000
478,639,000
441,620,000
420,677,000
N/A
N/A
420,677,000
0.61 %
0.42 %
0.32 %
N/A
N/A
0.17 %
(1) Corresponds to the number of dilutive securities granted under each of the Previous Plan or the LTIP in the applicable fiscal year.
(2) The weighted average number of securities outstanding during the period corresponds to the number of securities outstanding at the beginning of the period, adjusted by the
number of securities bought back or issued during the period multiplied by a time-weighting factor.
(3) The annual burn rate percent corresponds to the number of dilutive securities granted under the LTIP or Previous Plan divided by the weighted average number of securities
outstanding.
(4) The LTIP came into effect on August 17, 2018.
(5) Further to the implementation of the LTIP on August 17, 2018, no new grants have been made under the Previous Plan.
i
Type of Awards under the LTIP
The following types of awards may be made under the LTIP: stock options, RSUs, PSUs, DSUs, or other share-based awards (collectively, the
“Awards”). All of the Awards described below are subject to the conditions, limitations, restrictions, exercise price, vesting and forfeiture
provisions determined by the Board in its sole discretion, and subject to such limitations provided in the LTIP, and will be evidenced by an
award agreement. In addition, subject to the limitations provided in the LTIP and in accordance with applicable law, the Board may accelerate
or defer the vesting or payment of Awards, cancel or modify outstanding Awards, and waive any condition imposed with respect to Awards or
Shares issued pursuant to Awards.
Stock Options
A stock option is a right to purchase Shares upon the payment of a specified exercise price as determined by the Board at the time the stock
option is granted. The exercise price shall not be less than the “Market Price” of a Share at the time the option is issued, determined as the
volume weighted average price on the ASX if the Eligible Person is resident in Australia and otherwise the volume weighted average price on
the Toronto Stock Exchange (“TSX”), calculated by dividing the total value by the total volume of securities traded during the period of 5 trading
days immediately prior to the date of issue.
Stock options may be subject to vesting conditions as determined by the Board. The Board will establish the expiry date for each stock option,
provided that in no event will the expiry date be later than the date which is ten years following the grant date.
The exercise notice of such option must be accompanied by payment in full of the purchase price for the Shares underlying the options to be
acquired. No Shares will be issued upon the exercise of stock options in accordance with the terms of the grant until full payment therefore has
been received by the Company.
77 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2021 Executive Performance Metrics and Incentives (continued)
iii) Long-Term Incentive - Equity-Based Incentives (continued)
Type of Awards under the LTIP (continued)
Restricted Share Units (RSUs)
A RSU is a unit equivalent in value to a Share credited by means of a bookkeeping entry in the books of the Company which entitles the holder
to receive Shares or cash based on the price of the Shares at some future date.
A RSU will be subject to time based vesting conditions, timing of settlement and other terms and conditions, not inconsistent with the
provisions of the LTIP, as the Board shall determine; provided that no RSU granted shall vest and be payable after December 31st of the third
calendar year following the year of service for which the RSU was granted. While vesting of the RSUs is based on time based vesting conditions
rather than performance based vesting conditions, the Company believes that the grant of RSUs is an effective manner of retaining executives
and tying executive remuneration to long term performance of the Company.
Performance Share Units (PSUs)
A PSU is a unit equivalent in value to a Share credited by means of a bookkeeping entry in the books of the Company which entitles the holder
to receive Shares, or cash based on the price of the Shares at some future date, subject to the achievement of performance goals established
by the Board over a period of time.
The Board shall have the authority to determine any vesting and settlement terms applicable to the grant of PSUs, provided that no PSU
granted shall vest and be payable after December 31st of the third calendar year following the year of service for which the PSU was granted. It
is currently intended that PSUs granted under the LTIP will be subject to such performance-based vesting conditions as the Board shall
determine from time to time designed to align the participant with the Company’s corporate objectives.
All vesting conditions shall be such that the PSUs will comply with the exception to the definition of “salary deferral arrangement” contained in
paragraph (k) of subsection 248(1) of the Income Tax Act (Canada) or any successor provision thereto.
Deferred Share Units (DSUs)
A DSU is a unit equivalent in value to a Share credited by means of a bookkeeping entry in the books of the Company which entitles the holder
to receive Shares or cash based on the price of the Shares on a future date, provided that in no event shall a DSU be settled prior to the
applicable participant’s date of termination of service to the Company. If DSUs are settled in Shares, the rules of the LTIP require that the
Shares be purchased on-market.
DSUs will only be issued to directors of the Company or any of its affiliates who are not employees (the “Directors”). Subject to certain
limitations, any Director may, on an annual basis, elect to receive DSUs in lieu of such Director’s annual fees or in lieu of a portion of such
Director’s annual fees by giving written notice of such election to the Board.
Other Share-Based Awards
The Board may grant to an Eligible Person, subject to the terms of the LTIP, such awards, other than those described above, that are
denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Ordinary Shares (including, without
limitation, securities convertible into Shares), as are deemed by the Board to be consistent with the purpose of the LTIP.
The Board deems equity awards as a valuable retention and incentive mechanism for senior management at this critical stage of the
Company’s development. Retention of executives and highly skilled staff continues to be a high priority for the Company for the following
reasons:
•
•
•
The market for executives with experience in development of mining assets, mining operations in the Province of Québec and public
company experience is very competitive;
It requires a significant amount of lead time for executives to become totally familiar with the Company’s operations and assets; and
If there is an interruption to production for any number of reasons, the Company needs to be able to restart production as soon as
reasonably and safely possible. The necessary skills that have been developed internally to deal with these challenges cannot be
procured easily outside the Company.
78 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2021 Executive Performance Metrics and Incentives (continued)
iii) Long-Term Incentive - Equity-Based Incentives (continued)
Type of Awards under the LTIP (continued)
2021 RSU and PSU (”2021 LTIP”) Grant
The grants of RSU and PSU awards, which take into consideration annual performance for the fiscal year ended March 31, 2021, will be made in
the 2022 fiscal year, following the publication of the annual financial results. For 2021, the Board set a target for the long-term incentive for
each NEO as follows, based on Mercer’s recommendation. The number of PSU or RSU that is granted is determined according to the volume
weighted average price (“VWAP”) per Share on the TSX during the period of 5 trading days immediately prior to the date of grant.
NEO
David Cataford
Natacha Garoute
Alexandre Belleau
Steve Boucratie
LTIP Target
(% salary)
Value of Annual
Equity Awards
($)
RSU
($)
PSU
($)
200 %
120 %
120 %
120 %
1,500,000
516,000
516,000
480,000
600,000
206,400
206,400
192,000
900,000
309,600
309,600
288,000
The 2021 LTIP grant consisted of the following components:
•
•
RSU Grant (40% of LTIP): vesting equally over a 3-year period and subject to no performance hurdles; and
PSU Grant (60% of LTIP): measured against certain performance conditions over the 3 years following the date of grant and which
vest at the end of that 3-year period subject to the key performance measures having been met.
79 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2021 Executive Performance Metrics and Incentives (continued)
iii) Long-Term Incentive - Equity-Based Incentives (continued)
Type of Awards under the LTIP (continued)
2021 RSU and PSU (”2021 LTIP”) Grant (continued)
The Board has established the following key performance measures for the PSUs.
•
•
40% of the grant based on the performance of the Company’s Share price (or total shareholder return (“TSR”)) relative to a peer
group, between the date of grant and March 31st, 2024. The 175% of the TSR portion of the PSU's grant will vest if the Company's TSR
reaches the 75% percentile of the peer group, 100% of the TSR portion of the PSUs grant will vest if the Company's TSR is at the 50%
percentile of the peer group and 50% of the TSR portion of the PSUs grant will vest if the Company's TSR is at the 37.5% percentile of
the peer group. Proportional vesting will occur between the 25% and 75% percentiles. No vesting will occur if Champion's TSR is less
than the 25% percentile of the peer group. This approach as to vesting relative to the peer group is customary in the North American
mining industry.
Relative TSR provides a relative, external market performance measure having regard to a peer group of companies with which the
Company competes for capital, customers and talent. The use of relative TSR ensures that executives are motivated to deliver
returns that are superior to what a shareholder could achieve in the broader market and ensures senior management maintain a
strong focus on shareholder outcomes. In order to benchmark relative TSR for purposes of the grants of PSUs made during the fiscal
year ended March 31, 2021, the Company’s independent directors and the Remuneration and Nomination Committee, in consultation
with Mercer, identified a peer group of mining companies with generally similar stage of development operations, annual revenues
and market capitalization. The group has been designed to include (i) internationally listed companies that are involved in the same
commodity, and (ii) companies that are involved in metallurgical coal, or companies having thermal coal exposure, given its
correlation to iron ore (since both are used in steel-making process).
Arch Resources, Inc. (NYSE)
Cleveland-Cliffs Inc. (NYSE)
Ero Copper Corp. (TSX)
Ferrexpo Plc (LSE)
Grange Resources Limited (ASX)
Hudbay Minerals Inc. (TSX)
Labrador Iron Ore Royalty Corporation (TSX)
Lundin Mining Corporation (TSX)
Mount Gibson Iron Limited (ASX)
New Hope Corporation Limited (ASX)
Turquoise Hill Resources Ltd. (TSX)
Warrior Met Coal, Inc. (NYSE)
Whitehaven Coal Limited (ASX)
60% of the grant based on an actual ratio of cash flow return on capital employed (“ROCE”) compared to a target ratio set by the
Company. The actual ratio is measured over a three-year period by dividing (i) average EBITDA for each year in the three-year period
by (ii) average capital employed (long term debt plus Champion Iron consolidated total equity, including options and warrants) for
each year in the three-year period. While the disclosure in this remuneration report has been enhanced and supplemented this year to
provide additional information on the computation and target ratio, we note that the method of calculation of the ratio used by the
Company has remained consistent since the initial grants of PSUs under its LTIP.
If the actual ratio represents more than 120% of the corresponding target ratio based on the Company's budget for the three-year
reference period (which was set at 0.36 for the financial year ended March 31, 2021), 175% of that portion of the PSUs grant will vest
at the end of the three-year period. If the actual ratio equals the corresponding target ratio based on the Company's budget for the
three-year reference period, 100% of that portion of the PSUs grant will vest at the end of the reference period. If the actual ratio is
less than the target ratio based on the Company's budget for the three-year reference period, a reduced percentage of this portion of
the PSUs grant will vest. Proportional vesting will occur if the actual ratio represents between 70% to 100% of the target ratio. No
vesting will occur if the actual ratio is less than 70% of the target ratio based on the Company's budget for the three-year reference
period.
80 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2021 Executive Performance Metrics and Incentives (continued)
iii) Long-Term Incentive - Equity-Based Incentives (continued)
Type of Awards under the LTIP (continued)
2021 RSU and PSU (”2021 LTIP”) Grant (continued)
The following table outlines the payout percentages associated to the specific ranges of actual ratio of ROCE, for the financial year
ended March 31, 2021:
2021 Objectives - ROCE
Vesting of 60% Portion of PSU Grants
0.44 and above
0.36
0.25
Less than 0.25
175%
100%
75%
Nil
The Board believes that the performance criteria for PSU grants under the LTI provides the most suitable link to long-term shareholder value
creation. Specifically, the criteria encourages executives to focus on the key performance drivers which underpin the Company’s strategy to
deliver long term growth in shareholder value. The potential “maximum” earning opportunity is not expected to be achieved each year, but is
designed to only be achieved in respect of exceptional performance or circumstances. The value of the long-term incentive plan and related
grants are reported in a table below under the heading “Summary Compensation Table”, irrespective of whether the performance criteria for
vesting had been achieved during such period. The portion of any such long-term incentives awards that vested during any year is shown in the
table presented in the section “Incentive Plan Awards - Value Vested or Earned During the Year”.
81 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2021 Executive Performance Metrics and Incentives (continued)
iv) Retirement plan contributions and personal benefits
Champion adopted two different pension plans for its employees, including the NEOs, effective as of April 1, 2017 as well as a non-registered
savings plan. Personal group health and life insurance benefits provided to the NEOs are available to all permanent full-time employees of the
Company. At the discretion of the Board and based on market-prevalent practices, other perquisites may be provided to NEOs in relation to the
specific office held by each NEO.
Eligibility
Participation
Contributions
Upon start of employment for all employees
Full-time employees: compulsory
Employee: 3% of base salary
Additional contributions permitted
Employer: 6% of base salary and additional employee’s contributions matched from 100% to 200%
based on age plus years of service
Maximum Contributions
18% of base salary, up to a maximum of $26,500 for the calendar year 2020 within the pension fund or
retirement and saving plan, excessed in non-registered savings plan
Vesting
Locking-in
Immediate
Yes, except for employee voluntary contributions
Transfers from Other Plans
Permitted
The following table lays out, for each NEO, the accumulated value at start of fiscal year, the compensatory value and the accumulated value at
the end of the fiscal year ended March 31, 2021.
Name
Michael O'Keeffe
David Cataford
Natacha Garoute
Alexandre Belleau
Steve Boucratie
Accumulated Value
at Start of Year
Employer’s
Contribution
Employee’s
Contribution
Accumulated Value
at Year End
94,500
242,248
105,735
125,571
39,329
—
80,850
47,250
45,237
42,000
—
46,200
27,000
25,848
24,000
94,500
369,298
179,985
196,656
105,329
82 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2021 Executive Performance Metrics and Incentives (continued)
2021 Remuneration Awards for the Named Executive Officers
Annual base salary, bonus, PSU grants, RSU grants and option grants in relation to the 2021 fiscal year to the NEOs were as follows. In
compliance with the Company share trading policy, the RSU and PSU with respect to the annual performance for the fiscal year ended
March 31, 2021 will be granted in the 2022 fiscal year, after the publication of the annual financial results. In the 2021 fiscal year, the Company
granted 300,000 options to each of its NEOs in recognition of their hard work, exceptional service and time commitment in maintaining the
operations of the Company in accordance with health and safety standards while minimizing operational disruptions and achieving record
production during the period affected by COVID-19 restrictions. Each of the NEOs received the same number of options to reflect the team
effort in successfully addressing the challenges relating to COVID-19 during the year.
Name
Michael O'Keeffe
Executive Chairman
David Cataford
CEO
Natacha Garoute
CFO
Alexandre Belleau
Chief Operating Officer
Steve Boucratie
Vice-President, General Counsel
and Corporate Secretary
Annual Base Salary
($)
Bonus
($)
Total Option Grant
(#)
Total RSU Grant
($)
Total PSU Grant
($)
550,000
—
—
—
—
750,000
1,262,573
300,000
600,000
900,000
430,000
452,422
300,000
206,400
309,600
430,000
452,422
300,000
206,400
309,600
400,000
420,858
300,000
192,000
288,000
Further information pertaining to the NEO's remuneration for the past three fiscal years is found in the section, “Tabular Remuneration
Disclosure for the Named Executive Officers - Summary Remuneration Table”, below.
83 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2021 Executive Performance Metrics and Incentives (continued)
Tabular Remuneration Disclosure for the Named Executive Officers - Summary Remuneration Table
The following table discloses a summary of remuneration earned by each of Champion’s NEOs for each of the three most recently completed
financial years ended March 31, 2021, 2020 and 2019.
When determining the grants of long-term equity awards made by the Company during each financial year ended March 31, the Board takes
into consideration annual performance for the previous financial year. Accordingly, grants are typically made after the publication of the
annual results for such financial year. For example, long-term incentive equity award which are granted taking into consideration the annual
performance for the fiscal year ended March 31, 2021 will be granted in the fiscal year ending March 31, 2022, after the publication of the
annual financial results for the year ended March 31, 2021. The value of an incentive award is included below in the year during which the grant
of the award was made. Further information pertaining to the NEOs LTI remuneration for the 2021 fiscal year is presented in the section, “2021
Remuneration Awards for the Named Executive Officers”, above.
Non-Equity incentive
Plan Compensation
Salary
($)
Year
550,000
2021
2020 550,000
2019 550,000
2021
750,000
2020 600,000
2019 500,000
2021
430,000
2020 400,000
2019 234,375
(5)
Share-
based
Awards(1)
($)
—
687,500
1,000,027
900,000
500,000
—
400,000
733,295
—
Option-based
Awards(2)
($)
—
—
—
645,000
—
350,000
645,000
192,092
114,531
(4)
(5)(i)
(5)(i)
(5)(i)
Annual
Incentive
Plans
($)
—
—
550,000
1,262,573
753,399
500,000
452,422
375,000
281,250
2021
430,000
236,250
645,000
452,422
2020 319,730
182,001
124,000
328,381
2019 256,099
—
—
225,079
2021
400,000
228,000
645,000
420,858
2020 238,365
(6)
—
560,988
(6)(i)
214,719
2019
—
—
—
—
Name and
Principal Position
Michael O'Keeffe
Executive Chairman
David Cataford
CEO
Natacha Garoute
CFO
Alexandre Belleau
Chief Operating
Officer
Steve Boucratie
Vice-President,
General Counsel and
Corporate Secretary
Notes:
Long-
term
Incentive
Plans
($)
—
—
—
—
—
—
—
—
—
Pension
Value
($)
—
—
33,000
80,850
65,098
48,750
47,250
44,317
22,969
(3)(i)
(3)(i)
(3)(ii
All
Other
Compensation
($)
52,250
52,250
1,288,293
40,380
43,528
12,557
28,045
32,032
78,814
(5)(ii
)
)
—
45,237
—
31,553
—
24,341
—
42,000
—
25,028
—
—
7,454
6,647
6,624
8,152
6,316
—
Total
($)
602,250
1,289,750
3,421,320
3,678,803
1,962,025
1,411,307
2,002,717
1,776,736
731,939
At
Risk
(%)
— %
53 %
83 %
76 %
64 %
61 %
75 %
73 %
54 %
1,816,363
73 %
992,312
64 %
512,143
44 %
1,744,010
74 %
1,045,416
74 %
—
—
(1) Share-based awards consist of RSUs or PSUs which are subject to vesting criteria. The Share-based awards value is based on the fair market value of the stock price at the time
of the grant. For the awards granted in the year ended March 31, 2021 taking into consideration the annual performance for the year ended March 31, 2020, the fair market value
of the stock at the time of grant was at $2.33. For the awards granted in the year ended March 31, 2020, taking into consideration the annual performance for the year ended
March 31, 2019, the RSU granted to Mrs. Garoute in relation with her appointment as CFO was measured on a fair market value of the stock of $2.21 for a value amounting to
$358,295. The remaining part ($375,000) relates to the 2019 grant. The RSUs and PSUs to be granted taking into consideration the annual performance for the fiscal year ended
March 31, 2021 will be granted in the 2022 fiscal year, after the publication of the annual financial results, according to the VWAP per Share on the TSX during the period of 5
trading days immediately prior to grant.
(2) Option-based awards represent the fair value of stock options granted or recognized in the year under the Company’s LTIP or the Previous Plan. Grant date fair value calculations
for option grants are based on the Black-Scholes Option Price Model which used the following assumptions determined on the date of grant:
Option-pricing models require the use of highly subjective estimates and assumptions including the expected stock price volatility. Changes in the underlying assumptions can
materially affect the fair value estimates and therefore, in management’s opinion, existing models do not necessarily provide a reliable measure of the fair value of the
Company’s option-based awards.
(3)
(i) Includes non-monetary compensation in the amount of $52,250 paid to a superannuation on behalf of the NEO (ii) Of this amount, $1,262,500 represents a special bonus
awarded to Mr. O’Keeffe for recognition of salary foregone during the formative years of the Company as the Company moved from an exploration company to a company in
production. (iii) Includes non-monetary compensation in the amount of $26,388 and $2,797 paid to a superannuation on behalf of the NEO.
(4) Option-based awards for Mr. Cataford represent the fair value of the 500,000 stock options granted in June 2018 with respect to the fiscal year ended March 31, 2018.
(5) Mrs. Garoute was appointed CFO of Champion on August 13, 2018 and did not earn any remuneration from Champion prior to such date. (i) Upon joining the Company,
Mrs. Garoute was awarded 200,932 stock options on September 14, 2018 for a fair value of $114,531 and 174,502 on April 15, 2019 for a fair value of $192,092. (ii) includes a
signing bonus of $75,000.
(6) Mr. Boucratie was appointed Vice-President, General Counsel and Corporate Secretary of the Company on May 20, 2019 and did not earn any remuneration from the Company
prior to such date. Upon joining the Company, Mr. Boucratie was granted 360,000 stock options with a value of $560,988.
84 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2021 Executive Performance Metrics and Incentives (continued
Tabular Remuneration Disclosure for the Named Executive Officers - Summary Remuneration Table (continued)
Fiscal Year End
Grant Date
Risk Free
Interest Rate
Expected
Average Life
Expected
Volatility
Exercise Price
($)
Fair Value
($)
2021
2020
2020
2019
2019
February 5, 2021
April 15, 2019
May 20, 2019
September 14, 2018
June 24, 2018
0.39 %
1.79 %
1.79 %
2.23 %
2.50 %
4 years
3 years
3 years
3 years
3 years
55 %
86 %
86 %
68 %
80 %
5.00
2.21
2.53
1.24
1.33
2.15
1.10
1.56
0.57
0.70
85 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2021 Executive Performance Metrics and Incentives (continued)
Tabular Remuneration Disclosure for the Named Executive Officers (continued)
Outstanding Share-Based Awards and Option-Based Awards
The following table sets out the outstanding option-based and share-based awards for NEOs as at March 31, 2021, the end of the Company’s
most recently completed financial year.
Option-based Awards
Share-based Awards(2)
Number of
Securities
Underlying
Unexercised
Options
(#)
Option
Exercise
Price
($)
Option
Expiration Date
(M/D/Y)
Value of
Unexercised
In-the-money
Options
($) (1)
Number of
Shares or Units
of Shares that
Have not Vested
(#)
Market or
Payout Value of
Share-based
Awards that
Have not Vested
($)
Market or
Payout Value
of Vested
Share-based
Awards not
Paid Out or
Distributed
($)
—
—
—
—
278,427
1,436,683
221,029
300,000
5.00
February 5, 2025
48,000
588,758
3,037,991
160,748
300,000
5.00
February 5, 2025
48,000
377,585
1,948,338
678,268
300,000
5.00
February 5, 2025
48,000
172,128
888,180
56,151
120,000
2.53
May 20, 2022
315,600
300,000
5.00
February 5, 2025
48,000
97,854
504,929
—
Name
Michael O’Keeffe
Executive Chairman
David Cataford
CEO
Natacha Garoute
CFO
Alexandre Belleau(3)
Chief Operating Officer
Steve Boucratie(4)
Vice-President, General
Counsel and Corporate
Secretary
Notes:
(1) The value of unexercised in-the-money options noted above is based on the difference between the closing market price of the Company’s Shares on the TSX of $5.16 on
March 31, 2021, and the exercise price of the option.
(2) Share-based awards consist of RSUs and PSUs and are settled in Shares or cash in accordance with the Company’s Omnibus Incentive Plan. RSUs vest over a specific period of
time while PSUs vest upon meeting predetermined performance criteria. For more information regarding RSU and PSU vesting please see Incentive Plan Awards. The market or
payout value is based on the TSX market closing price of the Shares on March 31, 2021 being $5.16.
(3) Mr. Belleau joined the Company in 2016 and was appointed Chief Operating Officer of the Company on July 22, 2020.
(4) Mr. Boucratie was appointed Vice-President, General Counsel and Corporate Secretary of the Company on May 20, 2019.
Incentive Plan Award - Value Vested or Earned During the Year
The following table discloses incentive plan awards, including annual incentive bonuses and contracted milestone bonuses, vested or awarded
during the financial year ended March 31, 2021 (all dollar amounts in Canadian dollars):
Name
Michael O’Keeffe
David Cataford
Natacha Garoute
Alexandre Belleau
Steve Boucratie
Value Vested
During the Year ($)
Option-based Awards
Share-based Awards
Value Earned
During the Year ($)
Non-equity Incentive Plan
Compensation
—
800,000
147,558
5,000
125,000
76,246
55,452
194,526
19,479
—
—
1,262,573
452,422
452,422
420,858
Note:
Option-based awards value vested during the year is the difference between the market price of the underlying securities at vesting date and the exercise price of the
options under the option-based award. Share-based award value vested during the year is calculated using the Company’s share price on the vesting date. Share-based
awards consisted of RSUs and PSUs.
86 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2021 Executive Performance Metrics and Incentives (continued)
Agreements with Named Executive Officers (NEOs)
The Company has written employment agreements with its NEOs. Some of the contracts provide for the payment and provision of other
benefits triggered by a termination without cause as described below. None of the contracts provide for the payment and provision of other
benefits triggered as a result of a change of control.
Michael O’Keeffe - Executive Chairman
Mr. O’Keeffe was appointed interim CEO on August 13, 2015. On November 29, 2016 Mr. O’Keefe and Champion entered into an employment
agreement under which Mr. O’Keeffe is entitled to participate in all elements in the executive remuneration program as well as any group
insurance or health benefit plans the Company establishes. Mr. O’Keeffe does not receive any additional remuneration for his services as a
director. On April 1, 2019, Mr. O’Keeffe stepped down as CEO and remains Executive Chairman of the Board.
Mr. O’Keeffe’s employment agreement includes termination remuneration and benefit scenarios. Under the terms of Mr. O’Keeffe’s
employment agreement, no compensation other than compensation earned prior to the date of termination is payable by the Company in the
event the employment agreement is terminated for just cause, voluntarily terminated or terminated due to death.
The Company may terminate the employment agreement at any time without cause by providing 12 months’ notice, pay in lieu of notice or a
combination of notice or pay in lieu thereof which covers the 12-month notice period. The amount of severance pay payable if the Company
terminates the employment agreement under this scenario would be an amount equal to the total of the then current 12 month base salary. If
Mr. O’Keeffe resigns due to an event that constitutes constructive dismissal under common law and constructive dismissal did, in fact, exist at
the time of Mr. O’Keeffe’s resignation, the Company will be required to pay severance equal to that which would have been payable had Mr.
O’Keeffe been terminated without cause above.
David Cataford - Chief Executive Officer
Mr. Cataford was appointed Chief Executive Officer of the Company on April 1, 2019. Mr. Cataford had been Champion's Chief Operating Officer
since March 20, 2017. Mr. Cataford and Champion entered into an employment agreement under which Mr. Cataford is entitled to participate of
all elements in the executive remuneration program as well as any group insurance or health benefit plans the Company establishes.
Mr. Cataford’s employment agreement includes termination remuneration and benefit scenarios. Under the terms of Mr. Cataford’s
employment agreement no remuneration other than remuneration earned prior to the date of termination is payable by the Company in the
event the employment agreement is terminated for just cause, voluntarily terminated or terminated due to death.
The Company may terminate the employment agreement at any time without cause by providing 60 days’ notice, pay in lieu of notice or a
combination of notice or pay in lieu thereof which covers the 60 days’ notice period. The amount of severance pay payable if the Company
terminates the employment agreement under this scenario would be an amount equal to the total of Mr. Cataford's then current 12-month base
salary. If Mr. Cataford resigns due to an event that constitutes constructive dismissal under common law and constructive dismissal did, in
fact exist at the time of Mr. Cataford’s resignation the Company will be required to pay severance equal to that which would have been payable
had Mr. Cataford been terminated without cause.
Natacha Garoute - Chief Financial Officer
Mrs. Garoute was appointed Chief Financial Officer of the Company on August 13, 2018. Mrs. Garoute and Champion entered into an
employment agreement under which Mrs. Garoute is entitled to participate of all elements in the executive remuneration program as well as
any group insurance or health benefit plans the Company establishes.
Mrs. Garoute’s employment agreement includes termination remuneration and benefit scenarios. Under the terms of Mrs. Garoute’s
employment agreement, no compensation other than compensation earned prior to the date of termination is payable by the Company in the
event the employment agreement is terminated for just cause, voluntarily terminated or terminated due to death.
The Company may terminate the employment agreement at any time without cause by providing 60 days’ notice, pay in lieu of notice or a
combination of notice or pay in lieu thereof which covers the 60 days’ notice period. The amount of severance pay payable if the Company
terminates the employment agreement under this scenario would be an amount equal to the total of Mrs. Garoute's then current 12-month
base salary. If Mrs. Garoute resigns due to an event that constitutes constructive dismissal under common law and constructive dismissal did
in fact exist at the time of Mrs. Garoute’s resignation, the Company will be required to pay severance equal to that which would have been
payable had Mrs. Garoute been terminated without cause.
87 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2021 Executive Performance Metrics and Incentives (continued)
Agreements with Named Executive Officers (NEOs) (continued)
Alexandre Belleau – Chief Operating Officer
Mr. Belleau was appointed Chief Operating Officer of the Company on July 22, 2020. Mr. Belleau and Champion entered into an employment
agreement under which Mr. Belleau is entitled to participate of all elements in the executive remuneration program as well as any group
insurance or health benefit plans the Company establishes.
Mr. Belleau’s employment agreement includes termination remuneration and benefit scenarios. Under the terms of Mr. Belleau’s employment
agreement no remuneration other than remuneration earned prior to the date of termination is payable by the Company in the event the
employment agreement is terminated for just cause, voluntarily terminated or terminated due to death.
The Company may terminate the employment agreement at any time without cause by providing 60 days’ notice, pay in lieu of notice or a
combination of notice or pay in lieu thereof which covers the 60 days’ notice period. The amount of severance pay payable if the Company
terminates the employment agreement under this scenario would be an amount equal to the total of Mr. Belleau's then current 12-month base
salary. If Mr. Belleau resigns due to an event that constitutes constructive dismissal under common law and constructive dismissal did in fact
exist at the time of Mr. Belleau’s resignation, the Company will be required to pay severance equal to that which would have been payable had
Mr. Belleau been terminated without cause.
Steve Boucratie - Vice-President, General Counsel and Corporate Secretary
Mr. Boucratie was appointed Vice-President, General Counsel and Corporate Secretary of the Company on May 20, 2019. Mr. Boucratie and
Champion entered into an employment agreement under which Mr. Boucratie is entitled to participate of all elements in the executive
remuneration program as well as any group insurance or health benefit plans the Company establishes.
Mr. Boucratie’s employment agreement includes termination remuneration and benefit scenarios. Under the terms of Mr. Boucratie’s
employment agreement no remuneration other than remuneration earned prior to the date of termination is payable by the Company in the
event the employment agreement is terminated for just cause, voluntarily terminated or terminated due to death.
The Company may terminate the employment agreement at any time without cause by providing 60 days’ notice, pay in lieu of notice or a
combination of notice or pay in lieu thereof which covers the 60 days’ notice period. The amount of severance pay payable if the Company
terminates the employment agreement under this scenario would be an amount equal to the total of Mr. Boucratie's then current 12-month
base salary. If Mr. Boucratie resigns due to an event that constitutes constructive dismissal under common law and constructive dismissal did,
in fact exist at the time of Mr. Boucratie’s resignation the Company will be required to pay severance equal to that which would have been
payable had Mr. Boucratie been terminated without cause.
Executive Employment Agreements – Non-Competition, Non-Solicitation and Confidentiality Restrictions
NEOs gain strategic business knowledge during their employment. Champion ensures that this information is not used to the detriment of the
Company by any executive following termination. To protect the Company’s interests, Champion has entered into employment agreements
including customary non-competition and non-solicitation covenants during the term of the agreements and for a period of twelve months
following the end of employment, together with customary confidentiality clauses.
88 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2021 Executive Performance Metrics and Incentives (continued)
Agreements with Named Executive Officers (NEOs) (continued)
Name and Principal Position
Michael O’Keeffe
Executive Chairman
David Cataford
CEO
Natacha Garoute
CFO
Alexandre Belleau
Chief Operating Officer
Steve Boucratie
Vice-President, General Counsel and Corporate Secretary
Note:
Estimated Cash Payout on Termination
Without Cause
($)
Change of Control(1)
($)
Estimated Value Vested
Option Awards on
Termination without
Cause(1)
($)
550,000
750,000
430,000
430,000
400,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
(1) The NEOs contracts do not provide for the payment and provision of other benefits triggered as a result of a change of control.
I. Performance
i. Performance Graph
The following graph and table are a reporting requirement under Canadian securities laws, and compares the Company’s five-year cumulative
total shareholder return had $100 been invested in the Company on the first day of the five-year period at the closing price of the Ordinary
Shares on that date being April 1, 2016, with the cumulative total return of the S&P/TSX Composite Index and the S&P/TSX Global Mining Index
over the five most recently completed fiscal years ended on March 31.
89 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
I. Performance (continued)
ii. Performance Metrics
The following table discloses key production, revenue, profit (loss), EBITDA and share price metrics for each of the financials years during the
period from April 1, 2016 to March 31, 2021:
Production (wet metric tonnes)
Revenue
EBITDA
Net profit (loss)
Share price at March 31
Share price at March 31 (A$)
Year Ended
March 31, 2021
Year Ended
March 31, 2020
Year Ended
March 31, 2019
Year Ended
March 31, 2018
Year Ended
March 31, 2017
8,001,200
1,281,815,000
819,477,000
464,425,000
5.16
5.48
7,903,700
785,086,000
347,433,000
121,050,000
1.35
1.51
6,994,500
655,129,000
276,575,000
147,599,000
1.96
2.16
623,300
—
(80,006,000)
(107,331,000)
1.17
1.18
—
—
(30,953,000)
(35,416,000)
1.03
1.02
From April 1, 2016 to March 31, 2021, the share price of the Company increased by 2,480% compared to an increase of 39% and 121% in the
S&P/TSX Composite and in the S&P/TSX Global base Metal Index, respectively, during the corresponding five-year period. During the same
period, the aggregate remuneration of all individuals acting as NEOs increased by 571%, from a base of $1,467,439 in 2016 to $9,844,143 in
2021.
This increase in aggregate remuneration for all NEOs over the five-year period can be attributed to several factors, including the ongoing
growth in the size and complexity of the business, which resulted in the addition of new officers, along with the development of the Company
as it transitioned from development to production and is now focused on its Phase II expansion and the tightening of the employment market
for mining executives over that period.
Accordingly, the Company’s share price has significantly outperformed its peers over since April 1, 2016, while also outpacing the growth in
NEO remuneration. The Board is of the view that this has been driven by:
• management’s advancement of the Bloom Lake Mine through stages of evaluation, financing, acquisition restart of the operation,
production ramp-up and planning for the Phase II expansion, on an expedited basis and within budgeted constraints;
•
•
the operational and financial performance generated by the Bloom Lake iron ore mine since it went into production; and
achieving a record production to capture elevated Fe price and generate record EBITDA during the COVID-19 pandemic while
progressing the construction of the Phase II expansion aiming at doubling Bloom Lake iron mine production.
As discussed above, the majority of NEO remuneration is “at risk”, as short-term incentive (bonus) and long-term incentive remuneration are
tied directly or indirectly to Company performance and relative and/or absolute shareholder returns. As a consequence, actual NEO
remuneration will increase with the out-performance of the Company’s share price, but conversely decrease in the face of an underperforming
share price. The Board believes this is the ultimate test of the “pay-for-performance” principle and true alignment of NEO remuneration with
shareholder returns.
90 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
J. DIRECTOR REMUNERATION
i. Remuneration Philosophy and Approach
The remuneration arrangements for non-executive directors are intended to attract highly qualified individuals with the capability to meet the
challenging oversight responsibilities of a mining company and to closely align non-employee directors’ interests with shareholder interests.
Since the introduction of the Omnibus Incentive Plan, non-employee directors may receive equity-based remuneration in the form of DSU
grants in lieu of the whole or part of their annual compensation. See “Equity Remuneration Arrangements for Directors”, below for details on
the Omnibus Incentive Plan.
The Remuneration and Nomination Committee reviews director compensation at least once a year and makes remuneration recommendations
to the Board for its review and approval. Recommendations take into consideration the directors’ time commitment, duties and responsibilities,
and director remuneration practices and levels at comparable companies.
ii. Remuneration Arrangements for Directors
In conjunction with the review of executive compensation conducted for the year ended March 31, 2019, the Remuneration and Nomination
Committee of the Board engaged Mercer to provide an independent, third party analysis of the Company’s director compensation levels and
practices. Based on the findings and recommendations of the 2019 Mercer report, the Board set the following non-executive director
remuneration framework starting August 2018, paid in Canadian dollars for Canadian based directors and in Australian dollars for Australian
based directors:
•
•
•
•
•
annual cash retainer of $135,000 for non-executive directors;
cash retainer of $15,000 for Chair of Audit and Remuneration and Nomination Committees;
cash retainer of $5,000 for Committee members;
no additional fees are paid for attendance at Board or committee meetings; and
directors have all reasonable expenses covered when travelling on Company business.
In addition, based on the findings and recommendations of Mercer, the Board adopted the Omnibus Incentive Plan on June 24, 2018 to more
closely align non-employee directors directly with the interests of Shareholders. The Omnibus Incentive Plan was subsequently ratified by
Shareholders at annual shareholder meeting held on August 17, 2018. The purpose of the DSU portion of the Omnibus Incentive Plan is to
promote the alignment of interests between directors and Shareholders and it is an important component of non-employee director
Remuneration because it:
•
•
•
provides a remuneration system for directors that is reflective of the responsibility, commitment and risk accompanying Board
membership;
assists the Company to attract and retain individuals with experience and ability to serve as members of the Board; and
allows the directors to participate in the long-term success of the Company.
Directors may elect to receive all or a portion of any of their annual fees in DSUs. The Board's current policy is that until directors obtain a
shareholding which satisfies a share ownership level equivalent to three times their annual cash retainer (See “Share Ownership Policy”
Section below), Directors must elect to receive a portion of their annual fees in DSUs. All DSU grants are approved by the Board. DSUs are
priced at the greater of the five (5) day volume weighted average price of the Shares over the last five (5) trading days preceding the grant, and
the closing price of the Shares on the last trading day preceding the grant. DSUs issued under the Omnibus Incentive Plan may be settled in
shares acquired on ASX or TSX at the time of the directors’ retirement from all positions with the Company.
Mr. O'Keeffe and Mr. Cataford hold management positions in the fiscal year ended March 31, 2021, and consequently did not receive
compensation for their service as directors.
91 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
J. DIRECTOR REMUNERATION (continued)
iii. Share Ownership Policy
Champion established share and share-based ownership requirements (the “Share Ownership Policy”) for the non-executive directors (“NED”)
of Champion who are compensated in their capacity as a director of Champion (collectively the “Compensated Directors”). The policy is
designed to align the interests of those subject to the policy with the long-term interests of Shareholders. Each NED is required to hold that
aggregate number of Shares, and vested DSUs (collectively “Champion Equity”) having an aggregate value of at least three times his or her
board retainer over a five-year period. Each Compensated Director is required to hold Champion Equity having an aggregate value of at least
three times the value of the annual base cash retainer paid to the director as of the date of such individual becoming a Compensated Director.
The required level of ownership of Champion Equity Compensated Directors is referred to as the “Relevant Threshold”. Neither Mr. O'Keeffe nor
Mr. Cataford were compensated in the fiscal year ended March 31, 2021 for acting as a director by virtue of their employment with Champion. In
addition, Mr. Jyothish George has elected not to receive compensation and, as such, is not considered a Compensated Director. Consequently,
the Share Ownership Policy did not require either of Mr. O'Keeffe, Mr. Cataford or Mr. George to hold Shares under the Share Ownership Policy.
Compensated Directors are deemed to have permanently satisfied the Share Ownership Policy following the date on which either of the
following values exceeds the Relevant Threshold:
•
•
the aggregate price paid for the Champion Equity held by the Compensated Director; or
the fair market value of the Champion Equity held by the Compensated Director.
Compensated Directors are required to comply with the policy requirements by the later of the fifth anniversary of such individual’s date of
hire, appointment or election. As of the date of this Remuneration Report, all Compensated Directors have met the minimum share ownership
requirements, other than Ms. Louise Grondin who joined the board recently in August 2020 and is in transition towards satisfying her minimum
ownership requirements.
Once the applicable ownership guideline is deemed to have been satisfied, the Compensated Director is deemed to meet the applicable
ownership guideline on an on-going basis, provided that such Compensated Director does not dispose of Shares which causes such individual
to fail to meet the Relevant Threshold immediately following such disposition based on the Champion Equity then held or deemed to be held by
such individual.
iv. Tabular Remuneration Disclosure for the Directors
Director Remuneration Table
The following table discloses all compensation provided to the directors, other than any directors who are NEOs of the Company, for the
Company’s most recently completed financial year ending March 31, 2021. Fees are paid on a monthly basis. All DSUs, were fully vested on
March 31, 2021.
Fees Earned
in Cash
($)
Fees Earned
in DSU
($)
Other Share-
based Awards
($)
Option-based
Awards
($)
All other
Compensation
($)
Total
($)
140,210
151,760
Nil
92,094
83,344
16,141
11,550
Nil
Nil
53,739
52,489
67,500
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
151,760
151,760
Nil
145,833
135,833
83,641
Name
Gary Lawler(1)
Andrew Love(1)
Jyothish George
Michelle Cormier
Wayne Wouters
Louise Grondin(2)
Notes:
(1) Paid in Australian dollars and converted to Canadian dollars in this table.
(2) Ms. Grondin was elected as a director of the Company on August 27, 2020.
92 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
J. DIRECTOR REMUNERATION (continued)
iv. Tabular Remuneration Disclosure for the Directors (continued)
Fees paid
The following table discloses a detailed breakdown of the fees paid to the directors, other than any directors who are NEOs of the Company, for
the Company's most recently completed financial year ending March 31, 2021. Fees are paid quarterly on a monthly basis. All DSUs were fully
vested on March 31, 2021.
Name
Gary Lawler(3)
Andrew Love(3)
Jyothish George
Michelle Cormier
Wayne Wouters
Louise Grondin(4)
Notes:
Board
Retainer Fee
($)
Committee
Retainers
($)
Meeting
Fees
($)
128,048
128,048
Nil
135,000
135,000
80,308
23,712
23,712
Nil
10,833
833
3,333
Nil
Nil
Nil
Nil
Nil
Nil
Total
($)
151,760
151,760
Nil
145,833
135,833
83,641
Fees Paid
in Cash(1)
($)
Fees Earned
in DSUs(2)
($)
Total
Fees
($)
140,210
151,760
Nil
92,094
83,344
16,141
11,550
Nil
Nil
53,739
52,489
67,500
151,760
151,760
Nil
145,833
135,833
83,641
(1) Portion of total fees paid to the non-employee directors in cash.
(2) Portion of the total fees paid to the non-employee directors in DSUs.
(3) Paid in Australian dollars and converted to Canadian dollars in this table.
(4) Ms. Grondin was elected as a director of the Company on August 27, 2020.
Outstanding Share-Based Awards and Option-Based Awards
Outstanding option-and share-based awards for non-executive directors as at March 31, 2021, the end of the Company’s most recently
completed financial year, are set out in the following table:
Option-based Awards
Share-based Awards
Number of
Securities
Underlying
Unexercised
Options
(#)
Option
Exercise
Price
($)
Option
Expiration Date
(M/D/Y)
Value of
Unexercised
In-the-money
Options
($)(1)
Number of
Shares or
Units of
Shares that
Have not
Vested
(#)
Market or
Payout Value
of
Share‑based
Awards that
Have not
Vested
($)
Market or
Payout Value of
Vested
Share‑based
Awards not
Paid Out or
Distributed
($)
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
235,110
83,221
Nil
241,571
284,053
141,327
Name
Gary Lawler
Andrew Love
Jyothish George
Michelle Cormier
Wayne Wouters
Louise Grondin(2)
Notes:
(1) The value of DSUs noted above is based on the TSX market closing price of the Shares on March 31, 2021, being $5.16.
(2) Ms. Grondin was elected as a director of the Company on August 27, 2020.
93 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
J. DIRECTOR REMUNERATION (continued)
iv. Tabular Remuneration Disclosure for the Directors (continued)
Incentive Plan Awards - Value Vested or Earned During the Year
The following table discloses incentive plan awards to non-executive directors for the year ended March 31, 2021. All of the share-based
awards vested during the year which are referred to in the following table represent DSUs which directors elected to receive in lieu of annual
fees paid in cash.
Name
Gary Lawler
Andrew Love
Jyothish George
Michelle Cormier
Wayne Wouters
Louise Grondin
Notes:
Option-based Awards
Value Vested
During the Year (1)
($)
Share-based Awards
Value Vested
During the Year (1)(2)
($)
Non-equity Incentive
Plan Compensation
Value Earned
During the Year
($)
Nil
Nil
Nil
Nil
Nil
Nil
51,349
Nil
Nil
70,997
54,002
135,001
Nil
Nil
Nil
Nil
Nil
Nil
(1) Option-based awards value vested during the year are calculated using the Company’s share price on March 31, 2021 and the exercise price. The share-based awards value
vested during the year are calculated using the Company’s share price on the vesting date.
(2) Share-based awards value vested during the year include DSUs related to the 2022 fiscal year and issued in March 2021 of $36,529, $35,998, $20,252 and $67,501 for Gary
Lawler, Michelle Cormier, Wayne Wouters and Louise Grondin, respectively.
94 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
K. Details of Total Remuneration for KMP (NEOs and Directors)
Short Term
($)
Year ended
March 31, 2021
Michael O’Keeffe
Gary Lawler(1)
Andrew Love(1)
Michelle Cormier
Wayne Wouters
Louise Grondin
Jyothish George
David Cataford
Natacha Garoute
Alexandre Belleau
Steve Boucratie
Total
Note:
Year ended
March 31, 2020
Michael O’Keeffe
Gary Lawler(1)
Andrew Love(1)
Michelle Cormier
Wayne Wouters
Jyothish George
Louise Grondin
David Cataford
Natacha Garoute
Alexandre Belleau
Steve Boucratie
Total
Note:
Salary
550,000
140,210
151,760
92,094
83,344
16,141
—
750,000
430,000
430,000
400,000
3,043,549
Salary
550,000
108,450
138,816
111,251
101,251
—
—
600,000
400,000
319,730
238,365
2,567,863
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1) Paid in Australian dollars and converted to Canadian dollars in this table.
Short Term
($)
Consulting
Fees
Consulting
Fees
Bonus
Non-
monetary
52,250
—
—
—
—
—
—
—
—
—
—
—
—
—
40,380
1,262,573
28,045
452,422
7,454
452,422
420,858
8,152
2,588,275 136,281
Termination
Payments
($)
—
—
—
—
—
—
—
—
—
—
—
—
Pension
($)
—
—
—
—
—
—
—
80,850
47,250
45,237
42,000
215,337
Options
($)
—
11,550
—
53,739
52,489
67,500
—
1,545,000
1,045,000
881,250
873,000
4,529,528
Total
($)
602,250
151,760
151,760
145,833
135,833
83,641
—
3,678,803
2,002,717
1,816,363
1,744,010
10,512,970
Performance
Related
— %
7.61 %
— %
36.85 %
38.64 %
80.70 %
— %
34.32 %
22.59 %
24.91 %
24.13 %
Consisting
of Options
— %
7.61 %
— %
36.85 %
38.64 %
80.70 %
— %
42.00 %
52.18 %
48.52 %
50.06 %
Bonus
—
—
—
—
—
—
—
753,399
375,000
328,381
214,719
1,671,499
Non-
monetary
52,250
—
—
—
—
—
—
43,528
32,032
6,647
6,136
140,593
Termination
Payments
($)
—
—
—
—
—
—
—
—
—
—
—
—
Pension
($)
—
—
—
—
—
—
—
65,098
44,317
31,553
25,028
165,996
Options
($)
687,500
43,380
—
33,749
33,749
—
—
500,000
925,387
306,001
560,998
3,090,764
Total
($)
1,289,750
151,830
138,816
145,000
135,000
—
—
1,962,025
1,776,736
992,312
1,045,246
7,636,715
Performance
Related
53.30 %
28.57 %
—
23.28 %
25.00 %
—
—
38.40 %
21.11 %
33.09 %
20.54 %
Consisting
of Options
53.30 %
28.57 %
—
23.28 %
25.00 %
—
—
25.48 %
52.08 %
30.84 %
53.67 %
(1) Paid in Australian dollars and converted to Canadian dollars in this table.
95 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
L. Movement of Equity Held by Management Personnel (NEOs and Directors)
Stock Options as at March 31, 2021
Name
Michael O'Keeffe
David Cataford
Natacha Garoute
Alexandre Belleau
Steve Boucratie
Gary Lawler
Andrew Love
Jyothish George
Michelle Cormier
Wayne Wouters
Louise Grondin
Balance
April 1, 2020
Grant
Exercised
Cancelled
Held and Vested
Unvested
3,000,000
1,000,000
375,434
200,000
360,000
300,000
300,000
—
500,000
—
—
—
300,000
300,000
300,000
300,000
—
—
—
—
—
—
3,000,000
1,000,000
375,434
200,000
240,000
300,000
300,000
—
500,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
100,000
100,000
100,000
100,000
—
—
—
—
—
—
—
200,000
200,000
200,000
320,000
—
—
—
—
—
—
Ordinary Shares as at March 31, 2021
Name
Michael O'Keeffe
Gary Lawler
Andrew Love
Michelle Cormier
Wayne Wouters
Jyothish George
Louise Grondin
David Cataford
Natacha Garoute
Alexandre Belleau
Steve Boucratie
Balance
April 1, 2020
Purchased
Acquired Upon
Exercise of Equity
Award
44,023,830
1,500,000
1,545,281
20,000
440,000
—
—
2,119,698
12,500
176,200
16,000
—
—
—
—
—
—
—
—
—
—
—
3,000,000
300,000
300,000
500,000
—
—
—
1,000,000
375,434
200,000
240,000
Sold
(2,000,000)
(100,000)
(100,000)
(63,500)
—
—
—
(683,333)
(286,000)
(116,000)
(195,000)
Balance
March 31, 2021
45,023,830
1,700,000
1,745,281
456,500
440,000
—
—
2,436,365
101,934
260,200
61,000
96 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
M. Outstanding Grants of PSUs and Related Performance Periods
Name
David Cataford
CEO
Natacha Garoute
CFO
Alexandre Belleau
Chief Operating Officer
Steve Boucratie
Vice-President, General
Counsel and Corporate
Secretary
Grant Date
Performance
Period
Number of
PSUs Granted
Value per
PSU Granted
at Grant Date
($)
Value of
PSUs Granted
at Grant Date
($)
% of Performance
Achieved, and Vested
vs Forfeited PSUs
April 30, 2019
May 28, 2020
April 30, 2019
May 28, 2020
May 14, 2019
May 28, 2020
April 1, 2019 to
March 31, 2022
April 1, 2020 to
March 31, 2023
April 1, 2019 to
March 31, 2022
April 1, 2020 to
March 31, 2023
April 1, 2019 to
March 31, 2022
April 1, 2020 to
March 31, 2023
140,187
231,760
105,140
103,004
48,969
60,837
2.14
2.33
2.14
2.33
2.23
2.33
300,000
540,000
225,000
240,000
109,200
141,750
May 28, 2020
April 1, 2020 to
March 31, 2023
58,712
2.33
136,800
Will be determined in
May 2022
Will be determined in
May 2023
Will be determined in
May 2022
Will be determined in
May 2023
Will be determined in
May 2022
Will be determined in
May 2023
Will be determined in
May 2023
N. Securities Authorized for Issuance under Equity Compensation Plans
The following table sets out, as at March 31, 2021, the end of the Company’s last completed financial year, information regarding outstanding
options, RSUs, PSUs and DSUs granted by the Company under the Omnibus Incentive Plan and the Previous Plan. As at March 31, 2021, the
number of issued and outstanding Shares of the Company was 502,116,164.
Equity Compensation Plan Information
Number of Securities to be
Issued upon Exercise of
Outstanding Options,
PSUs, RSUs and DSUs
Weighted-average
Exercise Price of
Outstanding Options
Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans (excluding securities
reflected in column (a))
Plan Category
Equity Compensation plans approved by security
holders
(a)
1,920,000 (Options)
194,296 (DSUs)
1,009,823 (RSUs)
1,271,547 (PSUs)
(b)
(c)
$4.85 (Options)
45,815,950
Equity Compensation plans not approved by
security holders
Total
Nil
N/A
N/A
4,395,666
$4.85 (Options)
45,815,950
97 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
O. Other Information
Indebtedness of Directors and Executive Officers
As at the date of this Remuneration Report or within 30 days of this date, no executive officer, director, employee or former execute officer,
director or employee of the Company or any of its subsidiaries is indebted to the Company, or any of its subsidiaries, nor are any of these
individuals indebted to another entity, which indebtedness is the subject of a guarantee, support agreement, letter of credit or other similar
arrangement or understanding provided by the Company, or its subsidiaries with the exception of Mr. Cataford. On June 24, 2018, the Board of
directors approved the issuance of a 5-year interest free loan of $500,000 to Mr. Cataford. The loan is secured by way of mortgage over a
property.
Interest of Informed Persons in Material Transactions
None of the directors or executive officers of the Company, persons beneficially owning, directly or indirectly, Shares carrying more than 10% of
the voting rights attached to all outstanding shares of the Company nor any associate or affiliate of the foregoing persons has any material
interest, direct or indirect, in any transaction since the commencement of the Company’s last completed financial year or in any proposed
transaction which has or will materially affect the Company except as disclosed elsewhere in this report.
Management Contracts
Except as set out in the Remuneration Report, there are no management functions of the Company which are to any substantial degree
performed by a person or company other than the directors or executive officers of the Company.
Director's Attendance for the Fiscal Year Ended March 31, 2021
Name
Michael O'Keeffe
David Cataford
Gary Lawler
Andrew Love
Jyothish George
Michelle Cormier
Wayne Wouters
Louise Grondin(1)
Note:
Board of Directors
Meetings
Audit Committee
Meetings
Remuneration Committee
Meetings
7 of 7
7 of 7
7 of 7
7 of 7
7 of 7
7 of 7
7 of 7
4 of 4
N/A
N/A
5 of 5
5 of 5
N/A
5 of 5
N/A
N/A
N/A
N/A
5 of 5
5 of 5
N/A
5 of 5
N/A
N/A
(1) Ms. Grondin was elected to the board of directors of the Company on August 27, 2020.
98 Page
Principal Activities
Champion’s principal activities include the production of iron ore concentrate and the development and exploration of its iron ore properties in
Québec and in the Labrador Trough, Canada.
Operating and Financial Review
The review of operations and financials is set out in Section II and forms part of this Directors' Report.
Events Occurring After the Reporting Period
On April 1, 2021, the Company acquired the Kami Project. Refer to Section II of the Directors' Report, note 5.
On April 1, 2021, the Company signed a master lease agreement for an amount up to US$75,000,000 with Caterpillar Financial Services Limited
in connection with the financing of Phase II mining equipment.
On May 21, 2021, Champion signed a financing agreement with Fonds de Solidarité des Travailleurs du Québec for an amount up to
$75,000,000.
Starting on May 10, 2021, the Company entered into forward foreign exchange contracts to sell US$220,000,000 for $266,376,000 maturing
between June 2021 and April 2022 to reduce the risk of variability of future cash flows resulting from forecasted sales.
Other than elements listed above, there are no significant matters, circumstances or events that have arisen since the end of the financial year
that have significantly affected, or may significantly affect, the Company’s operations, the results of those operations, or the Company’s state
of affairs, in the financial years subsequent to the financial year ended March 31, 2021.
Directors
The Directors of the Company in office during the year and until the date of this report, their qualifications and experience are set out in Section
03 - Corporate Governance of the Annual Report.
Company Secretary and Corporate Secretary
Pradip Devalia is the Company Secretary - Australia and Steve Boucratie is the Corporate Secretary. Details of their qualifications and
experience are set out in Section 01 - Overview (Management Team) of the Annual Report.
99 Page
Champion Iron Limited
Directors' Report - Specific and General Information
Dividends
No interim or final dividend has been declared for the year ended March 31, 2021. Dividends paid by subsidiaries were not included.
Environmental Regulation and Compliance
Champion's operations are located in Canada and, as such, it is not subject to the environmental laws or regulations of the Commonwealth of
Australia or any State or Territory in Australia.
Indemnification and Insurance of Directors and Officers
There are indemnities in place for Directors and Officers and insurance policies in regard to their positions. Since the end of the previous year,
the Company has paid premiums to insure the Directors and Officers of Champion. No payment has been made to indemnify any director or
officer during or since the year ended March 31, 2021.
Significant Changes in the State of Affairs
There have been no significant changes in the state of affairs of Champion, other than those disclosed in this report.
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.
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.
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 31 of the Financial Statements (Section 06 — Financial Report of the Annual Report). 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 does not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:
(a)
(b)
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
The non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or
decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.
Auditor's Independence Declaration
The lead auditor’s independence declaration for the year ended March 31, 2021 has been received, as set out in Section 06 - Financial Report of
the Annual Report.
Rounding
The Company is of a kind referred to in ASIC Corporation (Rounding in Financial/Directors’ report) Instruments 2016/191 issued by the
Australian Securities and Investments Commission. In accordance with the class order, amounts in this report and in the financial report have
been rounded to the nearest thousand dollars unless specifically stated to be otherwise.
Signed in accordance with a resolution of the Directors
/s/ Michael O’Keeffe
Michael O’Keeffe, Executive Chairman
/s/ Andrew Love
Andrew Love, Lead Director
100 Page
Tonnage and quality information contained in the following tables have been rounded and as a result, the figures may not add up to the totals
quoted.
1. Governance Arrangements and Internal Controls
A technical external audit of the Phase II resources and reserves is planned for the year ended March 31, 2022.
2. Historical Mineral Reserves and Resources
The historical mineral reserves and resources mentioned in this document are strictly historical in nature, are non-compliant with National
Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) or the Joint Ore Reserves Committee (“JORC”) Code (2012
edition) and should therefore not be relied upon. Historical estimates have not been verified in accordance with the Appendix 5A (JORC Code)
since their last technical report. A “qualified person”, as defined in NI 43-101, or a “competent person”, as defined in JORC Code (2012 edition),
has not done sufficient work to upgrade or classify the historical estimates as current mineral resources or mineral reserves and Champion is
not treating the historical estimates as current mineral resources or mineral reserves, and it is uncertain whether, following evaluation or
further exploration work, the historical estimates will be able to be reported as mineral resources, mineral reserves or ore reserves in
accordance with NI 43-101 or the JORC Code (2012 edition).
Certain resources mentioned are foreign estimates from an Australian perspective.
3. Bloom Lake Feasibility Study (the "Feasibility Study")
The Phase II reserves and resources are based on the technical report entitled “Bloom Lake Mine – Feasibility Study Phase II”, prepared
pursuant to NI 43-101 and JORC Code (2012 edition) by BBA Inc., Soutex and WSP Canada Inc., having an effective date of June 20, 2019 and
filed on August 2, 2019. Bloom Lake Phase II mineral reserves include Bloom Lake Phase I mineral reserves as of the effective date of the
mineral reserve estimate reported in the Feasibility Study. The Company is not aware of any new information or data that materially affects the
information included in the Feasibility Study and confirms that all material assumptions and technical parameters underpinning the estimates
in the Feasibility Study continue to apply and have not materially changed. The Feasibility Study is available under the Company's filings at
www.sedar.com, on the ASX at www.asx.com.au or the Company's website at www.championiron.com.
4. Reserves and Resources — Bloom Lake Phase I as at March 31, 2021
The Bloom Lake Phase I reserves and resources are based on the technical report on the Bloom Lake Mine Re-Start Feasibility Study, prepared
pursuant to NI 43-101 and JORC Code (2012 edition) by Ausenco Canada Inc., G Mining, Met-Chem/DRA and WSP Canada Inc. dated
March 17, 2017 (the “Phase I Feasibility Study”), subject to adjustments for depletion due to the iron ore mined as of March 31, 2021. The Phase I
Feasibility Study is available under the Company's filings at www.sedar.com, on the ASX at www.asx.com.au or the Company's website at
www.championiron.com.
• Total Bloom Lake Phase I measured and indicated resources totaled 842.9 Mt as at March 31, 2021, compared to 864.5 Mt as at
March 31, 2020;
• Bloom Lake Phase I inferred resources totaled 78.7 Mt as at March 31, 2021, compared to 80.4 Mt as at March 31, 2020; and
• Total Bloom Lake Phase I proven and probable mineral reserves stood at 344.9 Mt averaging 30.0% Fe as at March 31, 2021 compared to
364.6 Mt at 29.7% Fe as at March 31, 2020.
102 Page
Champion Iron Limited
Mineral Resources and Ore Reserves Statement
4. Reserves and Resources — Bloom Lake Phase I as at March 31, 2021 (continued)
All Bloom Lake Mine Phase I mineral resources reported are inclusive of the Bloom Lake Phase I mineral reserves. The Bloom Lake Phase I
mineral reserves and resources reported were estimated using iron ore prices of US$50/dmt and US$60/dmt, respectively, based on CFR China
Index P62. The Bloom Lake Phase I proven reserves and measured resources as at March 31, 2021 include 840,000 tonnes of pre-
concentration stockpiles at 30% Fe, whereas no stockpiles were included as at March 31, 2020. The decrease in resources and reserves as at
March 31, 2021 is due to ore depletion as Champion mined 19.7 Mt of reserves and 23.3 Mt of resources of iron ore since March 31, 2020.
Table 1: Bloom Lake Phase I Mineral Resource Estimate (at 15% Fe Cut-off)
Category
Measured
Indicated
Total measured and indicated
resources
Inferred
Mt Tonnage
(dmt)
378.5
464.4
842.9
78.7
As at March 31,
2021
Fe (%)
31.0
28.5
29.6
25.6
CaO (%)
0.7
2.5
1.7
2.0
MgO (%)
0.7
2.3
1.6
1.7
As at March 31,
2020
Mt Tonnage
(dmt)
392.6
471.9
864.5
80.4
AI2O3 (%)
0.3
0.4
0.4
0.3
Table 2: Bloom Lake Phase I Mineral Reserve Estimate (at 15% Fe Cut-off)
As at March 31,
2021
Category
Proven
Probable
Total proven and probable
Mt Tonnage
(dmt)
201.7
143.2
344.9
Fe (%)
31.0
28.8
30.0
CaO (%)
0.5
2.8
1.5
MgO (%)
0.6
2.7
1.5
AI2O3 (%)
0.3
0.4
0.4
As at March 31,
2020
Mt Tonnage
(dmt)
217.0
147.6
364.6
5. Consolidated Reserves and Resources as at March 31, 2021
Bloom Lake Phase II mineral resources and reserves are based on the Feasibility Study, include Bloom Lake Phase I resources and reserves
and do not take into account the depletion. Bloom Lake Phase II mineral resources and reserves will be adjusted for depletion once the Phase II
expansion project reaches commercial production.
The reserves and resources mentioned below (except the Bloom Lake Phase II reserves and resources) are historical estimates. The historical
mineral reserves and resources mentioned in this document are strictly historical in nature, are non-compliant with NI 43-101 or the JORC Code
(2012 edition) and should therefore not be relied upon. Historical estimates have not been verified in accordance with the Appendix 5A (JORC
Code) since their last technical report. A “qualified person”, as defined in NI 43-101, or a “competent person”, as defined in JORC Code (2012
edition), has not done sufficient work to upgrade or classify the historical estimates as current mineral resources or mineral reserves and
Champion is not treating the historical estimates as current mineral resources or mineral reserves, and it is uncertain whether, following
evaluation or further exploration work, the historical estimates will be able to be reported as mineral resources, mineral reserves or ore
reserves in accordance with NI 43-101 or the JORC Code (2012 edition).
103 Page
Champion Iron Limited
Mineral Resources and Ore Reserves Statement
5. Consolidated Reserves and Resources as at March 31, 2021 (continued)
Table 3: Consolidated Mineral Resources (million dmt)
Property
Bloom Lake Phase II
Consolidated Fire Lake1
Moiré Lake2
Quinto Claims3
Harvey-Tuttle4
Total as at March 31, 2021
Total as at March 31, 2020
Group
Bloom Lake Phase II
Fire Lake North1
Bellechasse
Oil Can
Total
Moiré Lake
Peppler Lake
Lamelée
Total
Harvey-Tuttle
Measured
Indicated
Total Measured
& Indicated
379.1
26.6
—
—
26.6
—
—
—
—
—
514.4
666.9
—
—
666.9
163.9
327.0
272.0
599.0
—
893.5
693.5
—
—
693.5
163.9
327.0
272.0
599.0
—
405.7
405.7
1,944.2
1,944.2
2,349.9
2,349.9
Table 4: Consolidated Mineral Reserves (million dmt)
Property / Group
Bloom Lake Phase II
Fire Lake North5
Total as at March 31, 2021
Total as at March 31, 2020
Proven
Fe (%)
Probable
346.0
23.7
369.7
369.7
29.9
36.0
30.3
30.3
461.0
440.8
901.8
901.8
Fe (%)
28.2
32.2
30.1
30.1
Reserves Proven
& Probable
807.0
464.5
1,271.5
1,271.5
Inferred
53.5
521.6
215.1
967.0
1,703.7
416.9
216.0
653.0
869.0
947.0
3,990.1
3,990.1
Fe (%)
29.0
32.4
30.2
30.2
1 The historical Consolidated Fire Lake resource estimates are based on the NI 43-101 technical reports entitled “Preliminary Feasibility Study of the West and East Pit Deposits of the Fire Lake
North Project” by BBA Inc., P&E Mining Consultants Inc. and Rail Cantech Inc. dated February 22, 2013 and having an effective date of January 25, 2013 (as regards Fire Lake North), “Technical
Report and Resource Estimate on the Bellechasse and Fire Lake North Properties, Fermont Project Area, Québec, Canada” prepared by P&E Mining Consultants Inc. dated December 23, 2009
and having an effective date of November 10, 2009 (as regards Bellechasse) and “Technical Report and Mineral Resource Estimate on the Oil Can Deposit of the Consolidated Fire Lake North
Property, Fermont Area, Quebec, Canada” by P&E Mining Consultants Inc. dated August 17, 2012 and having an effective date of July 1, 2012 (as regards Oil Can). The historical mineral
resources mentioned are strictly historical in nature, are non-compliant with NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied upon. A “qualified person”, as defined
in NI 43-101, or a “competent person”, as defined in JORC Code (2012 edition), has not done sufficient work to upgrade or classify the historical estimates as current mineral resources or
mineral reserves and Champion is not treating the historical estimates as current mineral resources or mineral reserves, and it is uncertain whether, following evaluation or further exploration
work, the historical estimates will be able to be reported as mineral resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition).
2 The historical Moiré Lake resource estimates are based on the NI 43-101 technical report entitled “Technical Report and Mineral Resource Estimate on the Moire Lake Property” by P&E Mining
Consultants Inc. dated May 11, 2012 and having an effective date of March 28, 2012. The historical mineral resources mentioned are strictly historical in nature, are non-compliant with
NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied upon. A “qualified person”, as defined in NI 43-101, or a “competent person”, as defined in JORC Code (2012
edition), has not done sufficient work to upgrade or classify the historical estimates as current mineral resources or mineral reserves and Champion is not treating the historical estimates as
current mineral resources or mineral reserves, and it is uncertain whether, following evaluation or further exploration work, the historical estimates will be able to be reported as mineral
resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition).
3 The historical Quinto resource estimates are based on the NI 43-101 technical reports entitled “Mineral Resource Technical Report, Peppler Project, Quebec” (as regards Peppler Lake) and
“Mineral Resource Technical Report, Lamelée Project, Quebec” (as regards Lamelée), each by G H Wahl & Associates Consulting dated February 15, 2013 and having an effective date of
December 31, 2012. The historical mineral resources mentioned are strictly historical in nature, are non-compliant with NI 43-101 and the JORC Code (2012 edition) and should therefore not be
relied upon. A “qualified person”, as defined in NI 43-101, or a “competent person”, as defined in JORC Code (2012 edition), has not done sufficient work to upgrade or classify the historical
estimates as current mineral resources or mineral reserves and Champion is not treating the historical estimates as current mineral resources or mineral reserves, and it is uncertain whether,
following evaluation or further exploration work, the historical estimates will be able to be reported as mineral resources, mineral reserves or ore reserves in accordance with NI 43-101 or the
JORC Code (2012 edition).
4 The historical Harvey-Tuttle resource estimates are based on the NI 43-101 technical report entitled “Technical Report and Resource Estimate on the Harvey-Tuttle Property Québec, Canada” by
P&E Mining Consultants Inc. dated April 13, 2011 and having an effective date of February 25, 2011. The historical mineral resources mentioned are strictly historical in nature, are non-compliant
with NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied upon. A “qualified person”, as defined in NI 43-101, or a “competent person”, as defined in JORC Code (2012
edition), has not done sufficient work to upgrade or classify the historical estimates as current mineral resources or mineral reserves and Champion is not treating the historical estimates as
current mineral resources or mineral reserves, and it is uncertain whether, following evaluation or further exploration work, the historical estimates will be able to be reported as mineral
resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition).
5 The historical Fire Lake North reserve estimates are based on the NI 43-101 technical report entitled “Preliminary Feasibility Study of the West and East Pit Deposits of the Fire Lake North
Project” by BBA Inc., P&E Mining Consultants Inc. and Rail Cantech Inc. dated February 22, 2013 and having an effective date of January 25, 2013. The historical mineral reserves mentioned are
strictly historical in nature, are non-compliant with NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied upon. A “qualified person”, as defined in NI 43-101, or a
“competent person”, as defined in JORC Code (2012 edition), has not done sufficient work to upgrade or classify the historical estimates as current mineral resources or mineral reserves and
Champion is not treating the historical estimates as current mineral resources or mineral reserves, and it is uncertain whether, following evaluation or further exploration work, the historical
estimates will be able to be reported as mineral resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition).
104 Page
Champion Iron Limited
Mineral Resources and Ore Reserves Statement
5. Consolidated Reserves and Resources (continued)
I. Bloom Lake Phase II (inclusive of Phase I)
Bloom Lake Phase II mineral resources and reserves are based on the Feasibility Study, include Bloom Lake Phase I resources and reserves
and do not take into account the depletion. Bloom Lake Phase II mineral resources and reserves will be adjusted for depletion once Phase II
expansion project reaches commercial production.
Table 5: March 31, 2021 Bloom Lake Phase II Mineral Resource Estimate (at 15% Fe Cut-off)
Category
Measured
Indicated
Total measured and indicated
Inferred
Mt Tonnage
(dmt)
379.1
514.4
893.5
53.5
Fe (%)
30.2
28.7
29.3
26.2
CaO (%)
1.4
2.5
2.1
2.8
MgO (%)
1.4
2.3
1.9
2.4
Table 6: March 31, 2021 Bloom Lake Phase II Mineral Reserve Estimate (at 15% Fe Cut-off)
Category
Proven
Probable
Total proven and probable
Mt Tonnage
(dmt)
346.0
461.0
807.0
Fe (%)
29.9
28.2
29.0
CaO (%)
MgO (%)
1.5
2.6
2.2
1.4
2.5
2.0
AI2O3 (%)
0.3
0.4
0.4
0.4
AI2O3 (%)
0.3
0.6
0.5
In addition to the Bloom Lake Mine, the Company owns interests in 13 other iron ore deposits (total of 14 deposits) located in the Labrador
Trough, some 300 km north of the City of Sept-Îles and ranging from 6 to 80 km west and southwest of Fermont. The other projects with
historical reserves and resources are as follows:
II. Consolidated Fire Lake North
The consolidated Fire Lake North project includes three deposits, the Fire Lake North, Bellechasse and Oil Can deposits. All deposits are located
north of ArcelorMittal’s Fire Lake mine.
Table 7: Fire Lake North Historical Mineral Resource Estimate at Cut-off 15% Fe6
Category
Measured
Indicated
Total measured and indicated resources
Inferred
Mt Tonnage (dmt)
26.6
666.9
693.5
521.6
Fe (%)
35.2
31.4
31.5
30.1
6 The historical Fire Lake North resource estimates are based on the NI 43-101 technical report entitled “Preliminary Feasibility Study of the West and East Pit Deposits of the Fire Lake North
Project” by BBA Inc., P&E Mining Consultants Inc. and Rail Cantech Inc. dated February 22, 2013 and having an effective date of January 25, 2013. The historical mineral resources mentioned
are strictly historical in nature, are non-compliant with NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied upon. A “qualified person”, as defined in NI 43-101, or a
“competent person”, as defined in JORC Code (2012 edition), has not done sufficient work to upgrade or classify the historical estimates as current mineral resources or mineral reserves and
Champion is not treating the historical estimates as current mineral resources or mineral reserves, and it is uncertain whether, following evaluation or further exploration work, the historical
estimates will be able to be reported as mineral resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition).
105 Page
Champion Iron Limited
Mineral Resources and Ore Reserves Statement
5. Consolidated Reserves and Resources (continued)
II. Consolidated Fire Lake North (continued)
Table 8: Fire Lake North Historical Mineral Reserve Estimate at Cut-off 15% Fe7
Category
Proven
Probable
Total proven and probable
Mt Tonnage (dmt)
23.7
440.8
464.5
Fe (%)
36.0
32.2
32.4
CaO (%)
0.5
2.8
1.3
Table 9: Historical Inferred Resources for Other Consolidated Fire Lake North Deposits at Cut-off 15% Fe8
Deposit
Bellechasse
Oil Can
Mt Tonnage (dmt)
215.1
967.0
Weight
Recovery (%)
45.0
39.6
39.9
Fe (%)
28.7
33.2
III. Moiré Lake
Moiré Lake is a stand-alone deposit located approximately 6 km west from the city of Fermont and 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.
Table 10: Moiré Lake Historical Resource Estimate at Cut-off 15% Fe9
Category
Measured
Indicated
Total measured and indicated resources
Inferred
Mt Tonnage (dmt)
—
163.9
163.9
416.9
Fe (%)
—
30.5
30.5
29.4
7 The historical Fire Lake North reserve estimates are based on the NI 43-101 technical report entitled “Preliminary Feasibility Study of the West and East Pit Deposits of the Fire Lake North
Project” by BBA Inc., P&E Mining Consultants Inc. and Rail Cantech Inc. dated February 22, 2013 and having an effective date of January 25, 2013. The historical mineral reserves mentioned are
strictly historical in nature, are non-compliant with NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied upon. A “qualified person”, as defined in NI 43-101, or a
“competent person”, as defined in JORC Code (2012 edition), has not done sufficient work to upgrade or classify the historical estimates as current mineral resources or mineral reserves and
Champion is not treating the historical estimates as current mineral resources or mineral reserves, and it is uncertain whether, following evaluation or further exploration work, the historical
estimates will be able to be reported as mineral resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition).
8 The historical Consolidated Fire Lake resource estimates are based on the NI 43-101 technical reports entitled “Technical Report and Resource Estimate on the Bellechasse and Fire Lake North
Properties, Fermont Project Area, Québec, Canada” prepared by P&E Mining Consultants Inc. dated December 23, 2009 and having an effective date of November 10, 2009 (as regards
Bellechasse) and “Technical Report and Mineral Resource Estimate on the Oil Can Deposit of the Consolidated Fire Lake North Property, Fermont Area, Quebec, Canada” by P&E Mining
Consultants Inc. dated August 17, 2012 and having an effective date of July 1, 2012 (as regards Oil Can). The historical mineral resources mentioned are strictly historical in nature, are non-
compliant with NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied upon. A “qualified person”, as defined in NI 43-101, or a “competent person”, as defined in JORC
Code (2012 edition), has not done sufficient work to upgrade or classify the historical estimates as current mineral resources or mineral reserves and Champion is not treating the historical
estimates as current mineral resources or mineral reserves, and it is uncertain whether, following evaluation or further exploration work, the historical estimates will be able to be reported as
mineral resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition).
9 The historical Moiré Lake resource estimates are based on the NI 43-101 technical report entitled “Technical Report and Mineral Resource Estimate on the Moire Lake Property” by P&E Mining
Consultants Inc. dated May 11, 2012 and having an effective date of March 28, 2012. The historical mineral resources mentioned are strictly historical in nature, are non-compliant with
NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied upon. A “qualified person”, as defined in NI 43-101, or a “competent person”, as defined in JORC Code (2012
edition), has not done sufficient work to upgrade or classify the historical estimates as current mineral resources or mineral reserves and Champion is not treating the historical estimates as
current mineral resources or mineral reserves, and it is uncertain whether, following evaluation or further exploration work, the historical estimates will be able to be reported as mineral
resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition).
106 Page
Champion Iron Limited
Mineral Resources and Ore Reserves Statement
5. Consolidated Reserves and Resources (continued)
IV. Quinto Claims
The Quinto holding is composed of 435 claims with several iron ore deposits and occurrences. The property is adjacent to the Consolidated Fire
Lake North project. All the deposits have more magnetite than hematite with small amounts of iron silicates. The Peppler Lake and Lamelée
projects are part of the Quinto Claims.
Table 11: Peppler Lake Historical Resource Estimate at Cut-off 18% Fe10
Category
Measured
Indicated
Total measured and indicated resources
Inferred
Table 12: Lamelée Historical Resource Estimate at Cut-off 18% Fe11
Category
Measured
Indicated
Total measured and indicated resources
Inferred
V. Harvey-Tuttle
Mt Tonnage (dmt)
—
327.0
327.0
216.0
Mt Tonnage (dmt)
—
272.0
272.0
653.0
Fe (%)
—
28.0
28.0
27.5
Fe (%)
—
29.4
29.4
30.5
The Harvey-Tuttle property is located northwest of the Quinto Claims. It holds several small deposits, although one of them, Turtleback
Mountain, holds significant historical resources. As a whole, the Harvey-Tuttle property has 947.0 Mt of inferred historical resources at 23.2%
Fe.12
VI. Cluster 3 (unconsolidated)
A series of 126 claims located near the closed Lac Jeannine Mine, identified as Cluster 3 was optioned to Cartier Iron Corporation. Champion
Iron Mines Limited still hold 45% of the property. The main asset in Cluster 3 is the Penguin Lake deposit. It has 534.8 Mt of inferred historical
resources at 33.1% Fe with a cut-off at 15% Fe.13 Cluster 3 also includes a series of small deposits near Round Lake (north-west of Penguin
Lake).
10 The historical Peppler Lake resource estimates are based on the NI 43-101 technical report entitled “Mineral Resource Technical Report, Peppler Project, Quebec” by G H Wahl & Associates
Consulting dated February 15, 2013 and having an effective date of December 31, 2012. The historical mineral resources mentioned are strictly historical in nature, are non-compliant with
NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied upon. A “qualified person”, as defined in NI 43-101, or a “competent person”, as defined in JORC Code (2012
edition), has not done sufficient work to upgrade or classify the historical estimates as current mineral resources or mineral reserves and Champion is not treating the historical estimates as
current mineral resources or mineral reserves, and it is uncertain whether, following evaluation or further exploration work, the historical estimates will be able to be reported as mineral
resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition).
11 The historical Lamelée resource estimates are based on the NI 43-101 technical report entitled “Mineral Resource Technical Report, Lamelée Project, Quebec” by G H Wahl & Associates
Consulting dated February 15, 2013 and having an effective date of December 31, 2012. The historical mineral resources mentioned are strictly historical in nature, are non-compliant with
NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied upon. A “qualified person”, as defined in NI 43-101, or a “competent person”, as defined in JORC Code (2012
edition), has not done sufficient work to upgrade or classify the historical estimates as current mineral resources or mineral reserves and Champion is not treating the historical estimates as
current mineral resources or mineral reserves, and it is uncertain whether, following evaluation or further exploration work, the historical estimates will be able to be reported as mineral
resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition).
12 The historical Harvey-Tuttle resource estimates are based on the NI 43-101 technical report entitled “Technical Report and Resource Estimate on the Harvey-Tuttle Property Québec, Canada” by
P&E Mining Consultants Inc. dated April 13, 2011 and having an effective date of February 25, 2011. The historical mineral resources mentioned are strictly historical in nature, are non-compliant
with NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied upon. A “qualified person”, as defined in NI 43-101, or a “competent person”, as defined in JORC Code (2012
edition), has not done sufficient work to upgrade or classify the historical estimates as current mineral resources or mineral reserves and Champion is not treating the historical estimates as
current mineral resources or mineral reserves, and it is uncertain whether, following evaluation or further exploration work, the historical estimates will be able to be reported as mineral
resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code (2012 edition).
13 The historical Penguin Lake resource resource estimates are based on the NI 43-101 technical report entitled “43-101 Technical Report and Mineral Resource Estimate on the Penguin Lake
Project (Round Lake Property), NTS 23C/01, Quebec” by Geochryst Geological Consulting and MRB & Associates Geological Consultants dated February 3, 2014 and having an effective date of
May 1, 2013. The historical mineral resources mentioned are strictly historical in nature, are non-compliant with NI 43-101 and the JORC Code (2012 edition) and should therefore not be relied
upon. A “qualified person”, as defined in NI 43-101, or a “competent person”, as defined in JORC Code (2012 edition), has not done sufficient work to upgrade or classify the historical estimates
as current mineral resources or mineral reserves and Champion is not treating the historical estimates as current mineral resources or mineral reserves, and it is uncertain whether, following
evaluation or further exploration work, the historical estimates will be able to be reported as mineral resources, mineral reserves or ore reserves in accordance with NI 43-101 or the JORC Code
(2012 edition).
107 Page
Champion Iron Limited
Mineral Resources and Ore Reserves Statement
6. Subsequent event — Acquisition of the Kamistiatusset iron ore project (the “Kami Project”)
On April 1, 2021, the Company acquired the mining properties of the Kami Project and is planning to revise the Kami Project's scope and update
its previously completed feasibility study. The historical mineral reserves and resources of the Kami Project are as follows:
Table 15: Kami Project Historical Mineral Resource Estimate (at 15% Fe Cut-off)
Category
Measured
Indicated
Total measured and indicated
Inferred
Mt Tonnage
(dmt)
536.9
737.6
1,274.5
522.6
Fe (%)
29.9
29.5
29.7
29.5
MagFe (%)
15.9
15.8
15.8
15.0
HmFe (%)
10.9
10.3
10.5
11.1
Mn (%)
1.2
1.1
1.1
1.0
Table 16: Kami Project Historical Mineral Reserve Estimate (at 15% Fe Cut-off)
Category
Proven
Probable
Total proven and probable
7. Material Changes
Mt Tonnage
(dmt)
392.7
124.5
517.2
Fe (%)
MagFe (%)
Mag (%)
29.0
28.2
28.8
15.0
11.1
14.1
1.2
1.1
1.2
Weight
Recovery (%)
34.7
32.0
34.1
There were no material changes in the year ended March 31, 2021 other than depletion by the Bloom Lake Mine.
8. Qualified Person and Data Verification
Mr. Vincent Blanchet, P. Eng., Engineer at Quebec Iron Ore (“QIO”), the Company’s subsidiary and operator of Bloom Lake, is a “qualified person”
as defined by NI 43-101 and has reviewed and approved, or has prepared, as applicable, the disclosure of the scientific and technical
information contained in this report, except Section 4 “Reserves and Resources — Bloom Lake Phase I as at March 31, 2021”. Mr. Blanchet’s
review and approval does not include statements as to the Company’s knowledge or awareness of new information or data or any material
changes to the material assumptions and technical parameters underpinning the Feasibility Study. Mr. Blanchet is a member of the Ordre des
ingénieurs du Québec.
Mr. Brandon Wilson, P. Eng., Engineer at QIO, the Company’s subsidiary and operator of Bloom Lake, is a “qualified person” as defined by NI
43-101 and has reviewed and approved, or has prepared, as applicable, the disclosure of the scientific and technical information contained in
Section 4 “Reserves and Resources - Bloom Lake Phase I as at March 31, 2021” of this report. Mr. Wilson’s review and approval does not include
statements as to the Company’s knowledge or awareness of new information or data or any material changes to the material assumptions and
technical parameters underpinning the Feasibility Study. Mr. Wilson is a member of the Ordre des ingénieurs du Québec.
108 Page
109 Page
1)
In the opinion of the Directors:
a.
The accompanying financial statements and notes are in accordance with the Corporations Act 2001, including:
•
•
giving a true and fair view of the Company's financial position as at March 31, 2021 and of its performance for the year ended on
that date; and
complying with Australian Accounting Standards and the Corporations Act 2001.
b.
c.
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
the audited remuneration disclosure set out in the Remuneration Report of the Directors' Report for the year ended March 31, 2021
complies with section 300A of the Corporations Act 2001.
2) The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 for the financial year ended
March 31, 2021.
3) The Company 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
/s/ Michael O’Keeffe
Michael O’Keeffe, Executive Chairman
/s/ Andrew Love
Andrew Love, Lead Director
110 Page
111 Page
Champion Iron Limited
(ACN: 119 770 142)
Consolidated Financial Statements
For the Years Ended March 31, 2021 and 2020
(Expressed in thousands of Canadian dollars - audited)
Champion Iron Limited
Management's Responsibility for Financial Reporting
Management is responsible for the preparation and presentation of the accompanying consolidated financial statements, which includes
making significant accounting judgments and estimates in accordance with International Financial Reporting Standards and ensuring that all
information in the annual report is consistent with the consolidated financial statements, selecting appropriate accounting principles and
methods, and making decisions that affect the measurement of transactions.
The Board of Directors and Audit Committee are composed primarily of Directors who are neither management nor employees of the Company.
The Board is responsible for overseeing management in the performance of its financial reporting responsibilities, and for approving the
financial information included in the annual report. The Board fulfills these responsibilities by reviewing the financial information prepared by
management and discussing relevant matters with management and external auditors. The Audit Committee has the responsibility of meeting
with management and external auditors to discuss the internal controls over the financial reporting process, auditing matters and financial
reporting issues. The Committee is also responsible for recommending the appointment of the Company's external auditors.
Ernst & Young LLP, the independent auditors, has been appointed by the shareholders to audit the consolidated financial statements as at
March 31, 2021 and 2020 and for the years then ended and report directly to them; their report follows. The external auditors have full and free
access to, and meet periodically and separately with, both the Audit Committee and management to discuss their audit findings.
/s/ David Cataford
David Cataford Chief Executive Officer
/s/ Natacha Garoute
Natacha Garoute Chief Financial Officer
113 Page
Champion Iron Limited
Independent Auditor's Report
114 Page
Champion Iron Limited
Independent Auditor's Report
115 Page
Champion Iron Limited
Independent Auditor's Report
116 Page
Champion Iron Limited
Independent Auditor's Report
117 Page
Champion Iron Limited
Independent Auditor's Report
118 Page
Champion Iron Limited
Report on the Audit of the Financial Report
119 Page
Champion Iron Limited
Report on the Audit of the Financial Report
120 Page
Champion Iron Limited
Report on the Audit of the Financial Report
121 Page
Champion Iron Limited
Report on the Audit of the Financial Report
122 Page
Champion Iron Limited
Report on the Audit of the Financial Report
123 Page
Champion Iron Limited
Report on the Audit of the Financial Report
124 Page
Champion Iron Limited
Consolidated Statements of Financial Position
(Expressed in thousands of Canadian dollars - audited)
Notes
As at March 31,
2021
As at March 31,
2020
Assets
Current
Cash and cash equivalents
Short-term investments
Receivables
Prepaid expenses and advances
Inventories
Non-current
Restricted cash
Non-current investments
Advance payments
Intangible assets
Property, plant and equipment
Exploration and evaluation assets
Total assets
Liabilities
Current
Accounts payable and other
Income and mining taxes payable
Non-current
Long-term debt
Lease liabilities
Rehabilitation obligation
Other long-term liabilities
Deferred tax liabilities
Total liabilities
Shareholders’ equity
Share capital
Contributed surplus
Warrants
Foreign currency translation reserve
Retained earnings (accumulated deficit)
Total equity
Total liabilities and equity
Commitments and contingencies
Subsequent events
609,316
27,200
98,755
5,454
66,814
807,539
44,012
8,761
49,246
6,257
504,985
76,106
1,496,906
102,225
191,542
293,767
214,951
1,401
45,074
4,163
84,533
643,889
515,970
22,309
29,973
530
284,235
853,017
1,496,906
3
4
5
6
13
7
8
9
10
11
12, 14
23
13
14
15
23
16
16
28
34
Should be read in conjunction with the notes to the consolidated financial statements
Approved on May 27, 2021 on behalf of the directors
/s/ Michael O'Keeffe
Director
/s/ Andrew Love
Lead Director
281,363
17,291
31,249
13,035
58,611
401,549
—
1,546
32,438
6,070
365,470
75,525
882,598
55,158
57,761
112,919
275,968
1,902
42,836
4,410
67,941
505,976
431,556
21,100
75,336
381
(151,751)
376,622
882,598
125 Page
Champion Iron Limited
Consolidated Statements of Income
(Expressed in thousands of Canadian dollars, except per share amounts - audited)
Revenues
Cost of sales
Cost of sales - incremental costs related to COVID-19
Depreciation
Gross profit
Other expenses
Share-based payments
General and administrative expenses
Product research and development expenses
Sustainability and other community expenses
Operating income
Net finance costs
Other income (expense)
Income before income and mining taxes
Current income and mining taxes
Deferred income and mining taxes
Net income
Attributable to:
Champion shareholders
Non-controlling interest
Earnings per share
Basic
Diluted
Notes
17
18
2
16
19
20
21
22
23
23
24
24
Year Ended March 31,
2021
1,281,815
(416,272)
(12,610)
(35,177)
817,756
(3,983)
(23,594)
(1,258)
(14,858)
774,063
(22,428)
10,237
761,872
(280,855)
(16,592)
464,425
464,425
—
0.97
0.92
2020
785,086
(399,368)
—
(22,001)
363,717
(2,551)
(21,087)
—
(13,540)
326,539
(84,244)
(1,107)
241,188
(89,657)
(30,481)
121,050
89,426
31,624
0.20
0.19
Weighted average number of common shares outstanding
Basic
Diluted
Should be read in conjunction with the notes to the consolidated financial statements
478,639,000
506,323,000
441,620,000
464,645,000
126 Page
Champion Iron Limited
Consolidated Statements of Comprehensive Income
(Expressed in thousands of Canadian dollars - audited)
Net income
Other comprehensive income (loss)
Item that may be reclassified subsequently to the consolidated statements of income:
Net movement in foreign currency translation reserve
Total other comprehensive income (loss)
Total comprehensive income
Attributable to:
Champion shareholders
Non-controlling interest
Should be read in conjunction with the notes to the consolidated financial statements
Year Ended March 31,
2021
464,425
149
149
464,574
464,574
—
2020
121,050
(39)
(39)
121,011
89,387
31,624
127 Page
Champion Iron Limited
Consolidated Statements of Equity
(Expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
Share Capital
Attributable to Champion Shareholders
Balance - March 31, 2020
Net income
Other comprehensive income
Total comprehensive income
Exercise of warrants
Exercise of stock options
Dividends on preferred shares
Share-based payments
Balance - March 31, 2021
Notes
16
16
16
16
Net income
Other comprehensive loss
Total comprehensive income (loss)
Exercise of warrants
Exercise of stock options
Exercise of compensation options
Purchase of non-controlling interest
Issuance of preferred shares
Fair value of warrants issued
Share-based payments
Balance - March 31, 2020
Ordinary Shares
Shares(1)
Preferred Shares
Contributed
Shares
467,689,000 272,049 185,000,000
$
$
159,507
Surplus Warrants
75,336
21,100
—
—
—
—
—
—
—
—
—
27,733,000
6,694,000
—
—
—
—
—
—
502,116,000 356,463 185,000,000
76,563
7,851
—
—
—
—
—
—
—
—
—
159,507
—
—
—
—
—
—
—
—
—
—
—
—
—
—
16
16
16
29
16
16
16
13,719,000
2,500,000
21,000,000
—
—
—
—
467,689,000
—
25,478
—
832
—
7,770
—
—
— 185,000,000
—
—
—
—
185,000,000
272,049
—
—
—
—
159,507
—
—
159,507
—
—
—
—
—
—
— (45,363)
—
—
—
29,973
(2,774)
—
3,983
22,309
21,404
17,730
—
—
—
—
—
—
— (10,044)
—
—
—
—
67,650
—
75,336
(335)
(2,520)
—
—
—
2,551
21,100
Balance - March 31, 2019
430,470,000
237,969
Should be read in conjunction with the notes to the consolidated financial statements
1 All issued ordinary shares are fully paid and have no par value.
Foreign
Currency
Translation
381
Retained
Earnings
(Accumulated
Deficit)
(151,751)
Non-
Controlling
Interest
Total
— 376,622
Total
376,622
—
149
149
—
—
—
—
530
420
—
(39)
(39)
—
—
—
—
—
—
—
381
464,425 464,425
149
464,425 464,574
—
—
—
(28,439)
—
284,235
31,200
5,077
(28,439)
3,983
853,017
— 464,425
149
—
— 464,574
31,200
—
—
5,077
— (28,439)
—
3,983
— 853,017
(127,177)
150,346
65,376
215,722
89,426
—
89,426
89,426
(39)
89,387
—
—
—
(114,000)
15,434
497
5,250
(114,000)
— 159,507
67,650
—
2,551
—
376,622
(151,751)
31,624
—
31,624
121,050
(39)
121,011
15,434
—
497
—
5,250
—
(211,000)
(97,000)
159,507
—
67,650
—
—
2,551
— 376,622
128 Page
Champion Iron Limited
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars - audited)
Cash provided by (used in)
Operating Activities
Net income
Adjustments for non-cash items
Depreciation
Share-based payments
Loss on debt refinancing and amortization of transaction costs
Change in fair value of non-current investments and related gain on disposal
Unrealized foreign exchange loss
Deferred income and mining taxes
Interest
Other
Changes in non-cash operating working capital
Net cash flow from operating activities
Investing Activities
(Increase) decrease in short-term investments
Increase in restricted cash
Proceeds on disposal of non-current investments
Purchase of intangible assets
Purchase of property, plant and equipment
Advance payments
Investment in exploration and evaluation assets
Net cash flow from investing activities
Financing Activities
Proceeds of long-term debt
Repayment of long-term debt and convertible debenture
Repurchase of common shares - Investissement Québec
Issuance of preferred shares, net of transaction costs
Transaction costs on credit facilities
Exercise of warrants
Exercise of stock options and compensation options
Payment of lease liabilities
Dividends paid on preferred shares
Net cash flow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents, end of the year
Interest paid
Income and mining taxes paid
Should be read in conjunction with the notes to the consolidated financial statements
Notes
Year Ended March 31,
2021
2020
10,32
16
21
22
23
32
4
13
7
9
10,32
8
11
13
13,21
29
16
13
16
16
14
16
464,425
35,177
3,983
3,895
(10,237)
5,190
16,592
—
72
519,097
104,379
623,476
(10,045)
(44,972)
3,022
(1,705)
(174,650)
(15,211)
(581)
(244,142)
—
(25,262)
—
—
(7,888)
31,200
5,077
(988)
(28,439)
(26,300)
353,034
281,363
(25,081)
609,316
10,052
147,074
121,050
22,001
2,551
60,485
1,107
2,487
30,481
(19,517)
(193)
220,452
89,115
309,567
616
—
—
(5,513)
(147,304)
—
(691)
(152,892)
267,522
(266,444)
(211,000)
181,795
(7,322)
15,434
5,747
(622)
—
(14,890)
141,785
135,424
4,154
281,363
41,405
65,955
129 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
1. Description of Business
Champion Iron Limited (“Champion” or the “Company”) was incorporated under the laws of Australia in 2006 and is listed on the Toronto Stock
Exchange (TSX: CIA) and Australian Securities Exchange (ASX: CIA) and the OTCQX Best Market (OTCQX: CIAFF). The Company is domiciled in
Australia and its principle administrative office is located on 1100 René-Lévesque Blvd. West. Suite 610, Montreal, QC, H3B 4N4, Canada.
Champion Iron Limited, through its subsidiary Quebec Iron Ore Inc. (“QIO”), owns and operates the Bloom Lake Mining Complex (“Bloom Lake” or
“Bloom Lake Mine”), located on the south end of the Labrador Trough, approximately 13 km north of Fermont, Québec, adjacent to established
iron ore producers. Bloom Lake is an open-pit truck and shovel operation with a concentrator, and it ships iron ore concentrate from the site by
rail, initially on the Bloom Lake railway, to a ship loading port in Sept-Îles, Québec. The Bloom Lake Phase I plant has a nameplate capacity of
7.4M tonnes per annum (“Mtpa”) and produces a high-grade 66.2% Fe iron ore concentrate with low contaminant levels, which has proven to
attract a premium to the Platts IODEX 62% Fe iron ore benchmark. In addition to the partially completed Bloom Lake Phase II project (“Phase
II”), Champion also owns a portfolio of exploration and development projects in the Labrador Trough, including the Kamistiatusset iron ore
project (the “Kami Project” - refer to note 34 - Subsequent Events) located a few kilometres south east of Bloom Lake, and the Fire Lake North
iron ore project, located approximately 40 km south of Bloom Lake.
The Company sells its iron ore concentrate globally, including customers in China, Japan, the Middle East, Europe, South Korea, India and
Canada.
2. Significant Accounting Policies and Future Accounting Changes
A. Basis of preparation
The Company’s consolidated financial statements are for the group consisting of Champion Iron Limited and its subsidiaries.
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.
These consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial assets
and financial liabilities which have been measured at fair value.
The nature of the operations and principal activities of the Company are described in the Directors’ Report for the year ended March 31, 2021.
B. Statement of compliance
These audited consolidated financial statements have been prepared in accordance with in accordance with Australian Accounting Standards
(“AAS”) and International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
The Company has consistently applied the accounting policies used in the preparation of its IFRS consolidated financial statements with the
exception of those arising from new accounting standards issued and adopted by the Company as described in this note. These consolidated
financial statements were approved and authorized for issue by the Board of Directors (the “Board”) on May 27, 2021.
130 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
2. Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies and future accounting changes
The accounting policies set out below have been applied consistently to all years presented in these consolidated financial statements.
Basis of consolidation and functional currency
The consolidated financial statements include the accounts of the Company and its significant subsidiaries listed below:
Champion Innovations Limited
Champion Iron Mines Limited
Québec Iron Ore Inc.
Lac Bloom Railcars Corporation Inc.
Ownership
Percentage
100.0%
100.0%
100.0%
100.0%
Country of
Incorporation
Canada
Canada
Canada
Canada
Functional
Currency
Canadian dollars
Canadian dollars
Canadian dollars
U.S. dollars
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.
Generally, there is a presumption that a majority of voting rights results in control. All intra-group assets and liabilities, revenues, expenses and
cash flows relating to intra-group transactions are eliminated.
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 consolidated statements of financial position and consolidated statements of income. Losses within a subsidiary are
attributable to the non-controlling interests even if that results in a deficit balance.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker, who is
responsible for allocating resources and assessing the performance of the operating segments, and which has been identified as the
management team that makes strategic decisions.
Cash and cash equivalents
Cash and cash equivalents consist of cash in bank, cash held in trust and short-term deposits with a maturity of less than three months.
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 capitalized as inventory 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. Production costs that are capitalized as inventory exclude incremental costs
related to COVID-19.
Supplies and spare parts are valued at the lower of cost or net realizable value. Any provision for obsolescence is determined by reference to
specific items of stock. A regular review is undertaken to determine the extent of any provision for obsolescence.
131 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
2. Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies and future accounting changes (continued)
Property, plant and equipment
Property, plant and equipment are carried at historical cost less any accumulated depreciation and impairment losses.
Depreciation is calculated on the following basis over the estimated useful lives of property, plant and equipment:
Mining and processing equipment
Straight-line over 2 to 12 years or units-of-production basis over the recoverable reserves
Locomotives, railcars and rails
Straight-line over 23 to 24 years or units-of-production basis over the recoverable reserves
Tailings dykes
Straight-line over 3 years or units-of-production basis over the recoverable reserves
Mining development and stripping asset
Straight-line over 5 years or units-of-production basis over the recoverable reserves
Asset rehabilitation obligation and other
Straight-line over 3 to 24 years or units-of-production basis over the recoverable reserves
Right-of-use assets
Straight-line over 2 to 8 years or units-of-production basis over the recoverable reserves
Intangible assets
Intangible assets acquired separately are carried at cost. Intangible assets acquired through an acquisition of a group of assets are recognized
initially at their fair value at the acquisition date. Subsequently, intangible assets are carried at cost less accumulated depreciation and
accumulated impairment losses.
Depreciation on finite-life intangible assets is recognized on a straight-line basis over their estimated economic useful lives and assessed for
impairment whenever there is an indication that the intangible assets may be impaired. The estimated useful life and depreciation method are
reviewed at least at each financial year-end, with the effect of any changes in estimate being accounted for on a prospective basis.
Depreciation is calculated on the following basis over the economic lives of the intangible assets with a finite useful life:
Software
Straight-line over 3 years
Research and development expenses
Research and development expenses are recognized in profit or loss as incurred, except if the expenditures are related to the development and
setup of new products, processes and systems and satisfy generally accepted conditions for capitalization, including reasonable assurance
that they will be recovered. Capitalized development expenditures are measured at cost less accumulated depreciation, using the straight-line
method, and accumulated impairment losses.
Stripping (waste removal) costs
Where the benefits are realized in the form of improved access to ore to be mined in the future, the costs are recognized as a non-current
asset, referred to as a stripping costs, if the following criteria are met:
a) Future economic benefits (being improved access to the ore body) are probable;
b) The component of the ore body for which access will be improved can be accurately identified; and
c) The costs associated with the improved access can be reliably measured.
If any of the criteria are not met, the production stripping costs are charged to profit or loss as operating costs in cost of sales as they are
incurred.
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 for Phase I
is estimated at 0.5 based on the 43-101 Technical report on the Bloom Lake mine re-start feasibility study (the "Feasibility Study"). All costs
related to a stripping ratio over the life of mine ratio are capitalized and all costs related to a stripping ratio lower than the life of mine ratio
results in amortization of the stripping activity asset. 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. The production start date has been determined by the
Company using various relevant criteria as level of capital expenditures incurred compared to original budget, completion of reasonable period
of testing, ability to produce concentrate in saleable form and ability to sustain ongoing production of concentrate.
132 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
2. Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies and future accounting changes (continued)
Assets under construction
i) Property, plant and equipment in the course of construction or use for its own purposes
The cost comprises their purchase price and any costs directly attributable to bringing them into working condition for their intended use.
Assets under construction are carried at cost less any recognized impairment loss and are not subject to depreciation. Assets under
construction are classified to the appropriate category of property, plant and equipment and the depreciation of these assets commences
when the assets are ready for their intended use.
ii) Mineral properties under development
Costs incurred subsequent to the establishment of the technical feasibility and commercial viability of the extraction of resources from a
particular mineral property. Capitalized costs, including mineral property acquisition costs and certain mine development and construction
costs, are not depreciated until the related mining property has reached a level of operating capacity pre-determined by management, often
referred to "as commercial production" or expected capacity. The date of transition from construction to commercial production or expected
capacity accounting is based on both qualitative and quantitative criteria such as substantial physical project completion, sustained level of
mining, sustained level of processing activity, and passage of a reasonable period of time. Upon completion of mine construction activities
(based on the determination of commercial production or expected capacity), costs are removed from assets under development and
incorporated into the appropriate categories of property, plant and equipment and supplies inventories.
Exploration and evaluation assets
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 Québec 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.
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 consolidate
statements of income to the extent of any impairment.
Impairment of non-financial assets
The Company's non-financial assets, such as property, plant and equipment and exploration and evaluation assets are reviewed for indicators
of impairment at each reporting date and upon the occurrence of events or changes in circumstances indicating that the carrying value of the
assets may not be recoverable. If indication of impairment exists, the asset’s recoverable amount is estimated.
An impairment loss is recognized in the consolidated statements of income when the carrying amount of an asset, or its cash-generating unit
("CGU"), exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use (being
the present value of the expected cash flows of the relevant assets or CGUs). A CGU is the smallest identifiable group of assets that generates
cash inflows that are largely independent of the cash inflows from other assets or groups of assets. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. An impairment loss is reversed if there is an indication that there has been a change in the
estimates used to determine the recoverable amount. However, the impairment loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been
recognized.
133 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
2. Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies and future accounting changes (continued)
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.
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.
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.
Share capital and issuance costs
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.
Proceeds from issuance of share capital are allocated between shares capital and ordinary share purchase warrants by calculating the fair
value of the warrants using the Black-Scholes option pricing model and recording the share capital portion using the residual method as the
difference between the fair value of the warrants and the proceeds received. Issuance costs are allocated pro rata between the share capital
and warrants and netted against each component.
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 consolidated statements of income. 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 other
comprehensive income or profit or loss are also recognized in other comprehensive income 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 reporting date, 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.
Exchange differences relating to the translation of the results and net assets of the Company’s 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 9 Financial Instruments and IFRS 9 Financial Instruments.
134 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
2. Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies and future accounting changes (continued)
Share-based payments
i) Stock option plan
The Company offers a stock option plan for its directors and employees. 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.
ii) Other equity settled awards
For other equity settled awards, share-based compensation costs are measured at fair value and the awards expected to vest are accrued on a
straight-line basis over the vesting period with a corresponding increase in contributed surplus. The grant date fair value of performance share
unit ("PSU") awards, restricted share unit ("RSU") awards and deferred share unit ("DSU") awards is determined using the stock price of the
Company on the Toronto Stock Exchange at the grant date.
iii) Share-based payment transactions
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.
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.
Income tax
Income tax expense comprises current and deferred taxes. Current tax and deferred tax are 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.
135 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
2. Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies and future accounting changes (continued)
Initial recognition
Financial assets
i)
Financial assets are either classified and measured at amortized cost, fair value through profit or loss or fair value through other
comprehensive income.
In order for financial assets to be classified and measured at amortized cost or fair value through other comprehensive income, it needs to give
rise to cash flows that represent solely payments of principal and interest on the principal amount outstanding.
ii) Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e.,
removed from the Company’s consolidated statements of financial position) when:
•
•
The rights to receive cash flows from the asset have expired, or
The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a ‘pass-through’ arrangementꓼ and either (a) the Company has transferred
substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the asset
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates
if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the
risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of
its continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability
are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount
of the asset and the maximum amount of consideration that the Company could be required to repay.
iii) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading, e.g., derivative instruments, financial assets
designated upon initial recognition at fair value through profit or loss, e.g., debt or equity instruments, or financial assets mandatorily required
to be measured at fair value, i.e., where they fail the solely payments of principal and interest test. Financial assets are classified as held for
trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives,
are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that do not
pass the solely payments of principal and interest test are required to be classified and measured at fair value through profit or loss,
irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortized cost or at fair value through
other comprehensive income, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition
if doing so eliminates, or significantly reduces, an accounting mismatch. Financial assets at fair value through profit or loss are carried in the
consolidated statements of financial position at fair value with net changes in fair value recognized in profit or loss.
A derivative embedded in a hybrid contract with a financial liability or non-financial host, is separated from the host and accounted for as a
separate derivative if: the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as
the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss.
Embedded derivatives are measured at fair value with changes in fair value recognized in profit or loss. Reassessment only occurs if there is
either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of
a financial asset out of the fair value through profit or loss category.
As per IFRS 9, Financial Instruments, the requirements relating to the separation of embedded derivatives is no longer needed for financial
assets. An embedded derivative will often make a financial asset fail the solely payments of principal and interest test thereby requiring the
instrument to be measured at fair value through profit or loss in its entirety. This is applicable to the Company’s trade receivables (subject to
provisional pricing). These receivables relate to sales contracts where the selling price is determined after delivery to the customer, based on
the market price at the relevant quotation period stipulated in the contract. This exposure to the commodity price causes such trade
receivables to fail the solely payments of principal and interest test. As a result, these receivables are measured at fair value through profit or
loss from the date of recognition of the corresponding sale, with subsequent movements being recognized in the consolidated statements of
income.
136 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
2. Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies and future accounting changes (continued)
Financial assets (continued)
iv) Financial assets at amortized cost
Financial assets at amortized cost are subsequently measured using the effective interest rate ("EIR") method and are subject to impairment.
Interest received is recognized as part of finance income in the statements of income. Gains and losses are recognized in profit or loss when
the asset is derecognized, modified or impaired.
Impairment of financial assets
v)
The Company recognizes an allowance for expected credit loss ("ECL") for all debt instruments not held at fair value through profit or loss. ECLs
are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company
expects to receive, discounted at an approximation of the original EIR. The expected cash flows will include cash flows from the sale of
collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognized in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial
recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL).
For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for
credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
For trade receivables (not subject to provisional pricing) and other receivables due in less than 12 months, the Company applies the simplified
approach in calculating ECL. Therefore, the Company does not track changes in credit risk, but instead, recognizes a loss allowance based on
the financial asset’s lifetime ECL at each reporting date. The Company has established a provision matrix that is based on its historical credit
loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. For any other financial assets
carried at amortized cost (which are due in more than 12 months), the ECL is based on the 12-month ECL. The 12-month ECL is the proportion
of lifetime ECLs that results from default events on a financial instrument that are possible within 12 months after the reporting date. However,
when there has been a significant increase in credit risk since origination, the allowance will be based on the lifetime ECL. When determining
whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Company
considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative
and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment including forward-
looking information.
The Company considers a financial asset in default when contractual payments are 180 days past due. However, in certain cases, the
Company may also consider a financial asset to be in default when internal or external information indicates that the Company is unlikely to
receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Company. A financial
asset is written off when there is no reasonable expectation of recovering the contractual cash flows and usually occurs when past due for
more than one year and not subject to enforcement activity.
At each reporting date, the Company assesses whether financial assets carried at amortized cost are credit-impaired. A financial asset is
credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have
occurred.
137 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
2. Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies and future accounting changes (continued)
Initial recognition and measurement
Financial liabilities
i)
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables,
or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognized initially at fair
value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
ii) Loans and borrowings and trade and other payables
After initial recognition, interest-bearing loans and borrowings and trade and other payables are subsequently measured at amortized cost
using the EIR method. Gains and losses are recognized in the consolidated statements of income when the liabilities are derecognized, as well
as through the EIR amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees
or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the consolidated statements of income.
iii) Derecognition
A financial liability is derecognized when the associated obligation is discharged or cancelled or expires. When an existing financial liability is
replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such
an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the
respective carrying amounts is recognized in the consolidated statements of income.
Leases
Leases are recognized as a right-of-use asset in property, plant and equipment and a corresponding liability in lease liabilities at the date at
which the leased asset is available for use by the Company.
The right-of-use assets are initially measured at cost, which comprises:
•
•
•
•
the amount of the initial measurement of the lease liability;
any lease payments made at or before the commencement date, less any lease incentives;
any initial direct costs incurred by the Company; and
restoration costs.
After the commencement date the right-of-use assets are measured at cost less any accumulated depreciation. The right-of use asset is
depreciated either over the shorter of the asset’s useful life and the lease term on a straight-line basis or the units-of-production basis over the
recoverable reserves. Right-of-use assets are subject to impairment.
The lease liability is initially measured at the present value of the lease payments that are not paid at that date. These include:
•
•
•
•
•
fixed payments, less any lease incentives receivable;
variable lease payments that depend on an index or a rate;
amounts expected to be payable by the Company under residual value guarantees;
the exercise price of a purchase option if the Company is reasonably certain to exercise that option; and
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.
The lease payments are discounted using the Company’s incremental borrowing rate unless the implicit rate in the lease contract is readily
determinable in which case the latter is used.
Each lease payment is allocated between the repayment of the principal portion of the lease liability and finance cost. The finance cost is
charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for
each period.
After the commencement date, the amount of lease liability is increased to reflect the accretion of interest and reduced for the lease payments
made. In addition, the carrying amount of lease liability is remeasured if there is a modification, a change in the lease term, a change in the
lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a
change in the assessment of an option to purchase the underlying asset.
Payments associated with short-term leases, leases of low value assets and certain variable lease payments are recognized on a straight-line
basis as an expense in profit or loss.
138 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
2. Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies and future accounting changes (continued)
Borrowing costs
Borrowing costs attributable to the acquisition, development or construction of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use, are capitalized to the cost of those assets, until such time as the assets are
substantially ready for their intended use. Interests on long-term debt are capitalized in assets under construction until substantially all the
activities necessary to prepare the asset for its intended use are complete. Otherwise, borrowing costs are expensed as incurred in profit or
loss.
D. 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.
Uncertainty due to COVID-19
In March 2020, the World Health Organization declared a global pandemic related to COVID-19. To date there has been significant volatility in
stock markets, commodity prices and foreign exchange rates, as well as restrictions on the conduct of business in many jurisdictions and the
global movement of people and some goods has become restricted. The duration and full financial effect of the COVID-19 pandemic is
unknown at this time, as are the measures taken by governments, the Company or others to attempt to reduce the spread of COVID-19.
On March 24, 2020, the Company announced the ramp down of operations at Bloom Lake, following a directive from the Government which
required mining activities within the province to be reduced to a minimum. In line with the Government’s directives, all discretionary work had
been suspended and operations were restricted to a single production line, tailings management, water treatment and overall maintenance.
On April 23, 2020, the Company announced it would gradually ramp up operations at Bloom Lake, following an announcement from the
Government that effective April 15, 2020, mining activities were considered a “priority service” and the Company was allowed to resume
normal operations, conditional on the implementation of guidelines aiming to contain the risks related to the COVID-19 pandemic. As the
Company continued to focus on the health and safety of its workers, partners and communities, operations at the Bloom Lake mine gradually
ramped up and reached nameplate capacity by June 2020. The Company will continue to monitor and adapt to the rapidly changing global
economy impacted by the pandemic.
In line with Government guidelines, Champion has deployed several measures in its efforts to mitigate risks related to the COVID-19 pandemic.
The Company incurred direct, incremental and non-recurring operating costs of $12,610,000 for the year ended March 31, 2021, resulting from
its COVID-19 safety measures, which are mainly comprised of premiums paid to employees from adjusted work schedules, incremental
transportation costs, on-site COVID-19 testing and laboratory cost and incremental costs for cleaning and disinfecting facilities. These costs
are presented on a distinct line in the consolidated statements of income named “Cost of sales - incremental costs related to COVID-19”.
COVID-19 specific costs could continue to be incurred in the foreseeable future.
In the current environment, the judgments, estimates and assumptions are subject to greater variability than normal, which could in the future
significantly affect judgments, estimates and assumptions made by management as they relate to potential impact of COVID-19 on various
financial accounts and note disclosures and could lead to a material adjustment to the carrying value of the assets or liabilities affected. The
impact of current uncertainty on judgments, estimates and assumptions extends but is not limited to the Company’s valuation of the long-
term assets (including the assessment for impairment), estimation of rehabilitation obligations and estimation of mineral reserves and mineral
resources. While the Company has considered the impact of COVID-19 on these financial accounts, actual results may differ materially from
these estimates.
139 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
2. Significant Accounting Policies and Future Accounting Changes (continued)
D. Significant accounting judgments, estimates and assumptions (continued)
Estimates of mineral reserves and resources
The amounts used in units of production depreciation, impairment indicators analysis and stripping costs are based on estimates of mineral
reserves and resources. Reserve and 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 reserve and 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. Refer to note 10 - Property, Plant and
Equipment.
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, and results of exploration. Management judgment is also applied in
determining whether an economically-viable operation can be established, significant negative industry or economic trends, 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. Refer to note 11 - Exploration and Evaluation Assets.
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. Refer to note 15 - Rehabilitation Obligation.
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. Refer to note 16 - Share Capital and Reserves.
Revenue recognition
The Company recognizes revenue from sales of concentrate when control of the concentrate passes to the customer, which occurs upon
shipment. Thus, the performance obligation is satisfied at a point in time. At that time, Company has transferred the significant risks and
rewards relating to the customer, the legal title and the Company has physically transferred the concentrate.
Revenue is recognized at an amount that reflects the consideration to which the Company received or expects to receive in exchange for the
goods transferred and are recorded net of sale taxes to the extent that the revenue can be reliably measured.
For all the sales contracts, the sales price is determined provisionally at the date of sale, with the final pricing determined at a mutually agreed
date (generally between 2 to 3 months from the date of the sale), at a quoted market price at that time. This provisional pricing arrangement
fails the solely payments of principal and interest and the receivable is recorded at fair value based on the forward iron concentrate prices for
the relevant contract period. All subsequent mark-to-market adjustments are recorded in sales revenue up to the date of final settlement.
Price changes for shipments awaiting final pricing at year-end could have a material effect on future revenues. As at March 31, 2021, there was
US$159,938,000 (March 31, 2020: US$62,099,000) in revenues that were awaiting final pricing.
Valuation of deferred income tax assets
To determine the extent to which deferred income tax assets can be recognized, management estimates the amount of probable future
taxable profits that will be available against which deductible temporary differences and unused tax losses can be utilized. Such estimates are
made as part of the budget on an undiscounted basis and are reviewed on a quarterly basis. Management exercises judgment to determine the
extent to which realization of future taxable benefits is probable, considering factors such as the number of years to include in the forecast
period. Refer to note 23 - Income and Mining Taxes.
140 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
2. Significant Accounting Policies and Future Accounting Changes (continued)
D. Significant accounting judgments, estimates and assumptions (continued)
Valuation of lease liabilities and right-of-use assets
The application of IFRS 16, Leases, requires the Company to make judgments that affect the valuation of the lease liabilities and the valuation
of right-of-use assets. These include determining contracts in scope of IFRS 16, determining the contract term, determining the interest rate
used for discounting future cash flows and separating components of a contract. The lease term determined by the Company generally
comprises a non-cancellable period of lease contracts, periods covered by an option to extend the lease if the Company is reasonably certain
to exercise that option and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option.
The same term is applied as economic useful life of right-of-use assets. The separation of components of a contract requires estimates and
judgments for allocating the consideration in the contract to each lease component and non-lease component. Refer to notes 10 - Property,
Plant and Equipment and 14 - Lease Liabilities.
E. New accounting standards issued and adopted by the Company
The Company adopted the following new standards on April 1, 2020:
Amendments to AASB 3 (IFRS 3), Business Combinations (''IFRS 3'')
Amendments to IFRS 3 clarify the definition of a business. The amendments help entities determine whether an acquisition made is of a
business or a group of assets. The amended definition emphasizes that the output of a business is to provide goods and services to customers,
whereas the previous definition focused on returns in the form of dividends, lower costs or other economic benefits to investors and other. The
amendments also introduce an optional "concentration test" that can lead to a conclusion that the acquisition is not a business combination.
Amendments to AASB 101 (IAS 1), Presentation of Financial Statements (''IAS 1''), and AASB 108 (IAS 8), Accounting Policies, Changes in
Accounting Estimates and Errors (''IAS 8'')
Definition of Material (Amendments to IAS 1 and to IAS 8) is intended to make the definition of material in IAS 1 easier to understand and is not
intended to alter the underlying concept of materiality in IFRS Standards. The concept of “obscuring” material information with immaterial
information has been included as part of the new definition. The threshold for materiality influencing users has been changed from “could
influence” to “could reasonably be expected to influence”. The definition of material in IAS 8 has been replaced by a reference to the definition
of material in IAS 1.
Amendments to AASB 9 (IFRS 9), Financial Instruments (''IFRS 9''), AASB 139 (IAS 39), Financial Instruments: Recognition and Measurement
(''IAS 39''), and AASB 7 (IFRS 7), Financial Instruments: Disclosures (''IFRS 7'')
Amendments to IFRS 9, IAS 39 and IFRS 7 are designed to support the provision of useful financial information by entities during the period of
uncertainty arising from the phasing out of interest-rate benchmarks such as interbank offered rates (“IBORs”). The amendments modify some
specific hedge accounting requirements to provide relief from potential effects of the uncertainty caused by the IBOR reform. In addition, the
amendments require entities to provide additional information to investors about their hedging relationships which are directly affected by
these uncertainties.
The amendments listed above did not have a significant impact on the Company's consolidated financial statements for the year ended
March 31, 2021.
F. New accounting standards issued but not yet in effect
The following amendments to a standard have been issued and are applicable to the Company for its annual periods beginning on April 1, 2021
and thereafter, with an earlier application permitted:
Interest Rate Benchmark Reform - Phase 2, which amends IFRS 9, IAS 39, IFRS 7 and AASB 16 (IFRS 16), Leases (''IFRS 16'')
The amendments relate to: i) changes to contractual cash flows - an entity will not have to derecognize or adjust the carrying amount of
financial instruments for changes required by the reform, but will instead update the effective interest rate to reflect the change to the
alternative benchmark rate; ii) hedge accounting - an entity will not have to discontinue its hedge accounting solely because it makes changes
required by the reform, if the hedge meets other hedge accounting criteria; and iii) disclosures - an entity will be required to disclose
information about new risks arising from the reform and how it manages the transition to alternative benchmark rates.
141 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
2. Significant Accounting Policies and Future Accounting Changes (continued)
F. New accounting standards issued but not yet in effect (continued)
The following amendments to a standard have been issued and are applicable to the Company for its annual periods beginning on April 1, 2022
and thereafter, with an earlier application permitted:
Amendments to IFRS 3
Amendments to IFRS 3 are designed to: i) update its reference to the 2018 Conceptual Framework instead of the 1989 Framework; ii) add a
requirement that, for obligations within the scope of AASB (IAS 37), Provisions, Contingent Liabilities and Contingent Assets, (“IAS 37”) an
acquirer applies IAS 37 to determine whether at the acquisition date a present obligation exists as a result of past events. For a levy that would
be within the scope of AASB Interpretation 21 (IFRIC 21), Levies, (“IFRIC 21”) the acquirer applies IFRIC 21 to determine whether the obligating
event that gives rise to a liability to pay the levy has occurred by the acquisition date; and iii) add an explicit statement that an acquirer does
not recognize contingent assets acquired in a business combination.
Amendments to AASB 116 (IAS 16), Property, Plant and Equipment (''IAS 16'')
Amendments to IAS 16 prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced
before that asset is available for use, i.e., proceeds while bringing the asset to the location and condition necessary for it to be capable of
operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the cost of
producing those items, in profit or loss.
Amendments to IAS 37
Amendments to IAS 37 specify that the “cost of fulfilling” a contract comprises the “costs that relate directly to the contract”. Costs that relate
directly to a contract consist of both the incremental costs of fulfilling that contract (examples would be direct labor or materials) and an
allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of
property, plant and equipment used in fulfilling the contract).
Amendments to IFRS 9
Amendments to IFRS 9 clarify which fees an entity includes when it applies the “10 per cent” test in assessing whether to derecognize a
financial liability. An entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received
by either the entity or the lender on the other’s behalf.
The following amendment to a standard has been issued and is applicable to the Company for its annual periods beginning on April 1, 2023 and
thereafter, with an earlier application permitted:
Amendments to IAS 1
Amendments to IAS 1 clarify how to classify debt and other liabilities as current or non-current. The amendments help to determine whether, in
the consolidated statements of financial position, debt and other liabilities with an uncertain settlement date should be classified as current
(due or potentially due to be settled within one year) or non-current. The amendments also include clarifying the classification requirements for
debt an entity might settle by converting it into equity.
Amendments to IAS 1 change the requirements in IAS 1 with regard to disclosure of accounting policies. Applying the amendments, an entity
discloses its material accounting policies, instead of its significant accounting policies. Further amendments to IAS 1 are made to explain how
an entity can identify a material accounting policy.
Amendments to IAS 8
Amendments to IAS 8 replace the definition of a change in accounting estimates with a definition of accounting estimates. Under the new
definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”.
The Company is currently evaluating the impacts of adopting these amendments on its financial statements.
142 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
3. Cash and Cash Equivalents
As at March 31, 2021, cash and cash equivalents totalling $609,316,000 (March 31, 2020: $281,363,000) consisted of cash in bank. As at
March 31, 2021, the Company’s cash balance is comprised of $223,583,000 U.S. dollars ($281,156,000), $350,000 Australian dollars
($335,000), and $327,825,000 Canadian dollars.
4. Short-Term Investments
As at March 31, 2021, short-term investments totalled $27,200,000 (March 31, 2020: $17,291,000). Short-term investments comprise of term
deposits pledged as security in accordance with third party agreements. Maturity dates of the term deposits as collateral are less than 12
months, with a renewal option at the Company's option.
5. Receivables
Trade receivables
Sales tax
Other receivables
As at March 31,
2021
As at March 31,
2020
73,341
24,359
1,055
98,755
15,944
12,958
2,347
31,249
As at March 31, 2021, the trade receivables, subject to provisional pricing, amounted to $550,000 (March 31, 2020: payable balance of
$10,879,000).
For information about the Company's exposure to credit risk, refer to note 25 - Financial Instruments.
6. Inventories
Stockpiled ore
Concentrate inventories
Supplies and spare parts
As at March 31,
2021
As at March 31,
2020
13,050
18,860
34,904
66,814
13,630
16,560
28,421
58,611
For the year ended March 31, 2021, the amount of inventories recognized as an expense totalled $464,059,000 (year ended March 31, 2020:
$421,369,000). For the year ended March 31, 2021, no specific provision was recorded on any of the Company's inventories (year ended
March 31, 2020: nil).
143 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
7. Non-current Investments
Opening balance
Change in fair value of non-current investments
Disposal of non-current investments
Ending balance
As at March 31,
2021
As at March 31,
2020
1,546
10,237
(3,022)
8,761
2,653
(1,107)
—
1,546
Non-current investments are comprised of equity investments in publicly listed entities classified as financial assets at fair value through
profit or loss.
For the year ended March 31, 2021, the net increase in the fair value of investments in common shares of $7,905,000 (year ended
March 31, 2020: net decrease of $1,107,000) has been recorded as an unrealized gain on investments in the other income (expense) of the
consolidated statements of income. During the year ended March 31, 2021, the Company sold shares of its other equity investments for a net
proceed of $3,022,000. Refer to note 22 - Other Income (Expense).
8. Advance Payments
Port
Railway and port facilities
Other long-term advance
As at March 31,
2021
As at March 31,
2020
17,920
23,724
7,602
49,246
19,825
6,600
6,013
32,438
Port
On July 13, 2012, the Company signed an agreement with the Sept-Îles Port Authority ("Port") to reserve annual loading capacity of 10 million
metric tonnes of iron ore for an initial term of 20 years with options to renew for 4 additional 5-year terms. Pursuant to the agreement, the
Company made an advance payment of $25,581,000 on its future shipping, wharfage and equipment fees. The short-term portion of the
advance payment amounts to $1,969,000 and is presented under prepaid expenses and advances in the consolidated statements of financial
position.
Railway and port facilities
On October 12, 2017, the Company entered into a railway and stockyard facilities access agreement with Société Ferroviaire et Portuaire de
Pointe-Noire ("SFPPN") for the transportation, unloading, stockpiling and loading of iron ore concentrate from Sept-Îles to Pointe-Noire,
Québec. In connection with the agreement, the Company makes annual advance payments of $3,750,000 to SFPPN to guarantee access to the
yard. During the year ended March 31, 2021, the Company made an additional advance of $15,211,000 to SFPPN to increase the transshipment
capacity and support the Company's plans to increase production with the Phase II project (year ended March 31, 2020: nil).
Other long-term advance
The other long-term advance relates mainly to amounts paid to SFPPN annually and are recoverable from under the guarantee access
agreement if certain conditions are met.
144 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
9. Intangible Assets
Cost
Opening balance
Additions
Ending balance
Accumulated depreciation
Opening balance
Depreciation
Ending balance
Net book value
As at March 31,
2021
As at March 31,
2020
7,705
1,705
9,410
1,635
1,518
3,153
6,257
2,192
5,513
7,705
720
915
1,635
6,070
The Company’s software was previously presented as property, plant and equipment in the consolidated statements of financial position.
Prior year comparatives as at March 31, 2020 have been restated by reclassifying $6,070,000 from property, plant and equipment to
intangible assets ($1,472,000 as at April 1, 2019) with no impact on the consolidated statements of income.
145 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
10. Property, Plant and Equipment
Mining and
Processing
Equipment
Locomotives,
Railcars and
Rails
Tailings
Dykes
Assets under
Construction(1)
Mining
Development
and Stripping
Asset(2)
Asset
Rehabilitation
Obligation and
Other(3)
Subtotal
Right-of-
use Assets
Total
Cost
March 31, 2020
Additions
Transfers and disposals
Foreign exchange and other
March 31, 2021
Accumulated depreciation
March 31, 2020
Depreciation
Transfers and disposals
Foreign exchange and other
March 31, 2021
150,455
14,828
6,945
232
172,460
30,087
25,931
—
—
56,018
43,421
5,500
—
(5,258)
43,663
73,196
—
8,353
—
81,549
61,817
129,560
(15,298)
—
176,079
41,105
26,726
—
—
67,831
29,020
3,203
—
—
32,223
399,014
179,817
—
(5,026)
573,805
10,335
—
—
—
10,335
409,349
179,817
—
(5,026)
584,140
5,767
1,934
—
(734)
6,967
3,983
4,229
—
—
8,212
—
—
—
—
—
871
928
—
—
1,799
1,919
1,600
—
—
3,519
42,627
34,622
—
(734)
76,515
1,252
1,388
—
—
2,640
43,879
36,010
—
(734)
79,155
Net book value -
March 31, 2021
Cost
March 31, 2019
Adoption of IFRS 16(4)
Additions
Transfers and disposals
Foreign exchange
March 31, 2020
Accumulated depreciation
March 31, 2019
Depreciation
Transfers and disposals
Foreign exchange
March 31, 2020
Net book value -
March 31, 2020
116,442
36,696
73,337
176,079
66,032
28,704
497,290
7,695
504,985
Mining and
Processing
Equipment
Locomotives,
Railcars and
Rails
Tailings
Dykes
Assets under
Construction(1)
Mining
Development
and Stripping
Asset(2)
Asset
Rehabilitation
Obligation and
Other(3)
Subtotal
Right-of-
use Assets
Total
116,573
—
1,352
32,530
—
150,455
47,766
—
—
(6,823)
2,478
43,421
18,005
—
—
55,191
—
73,196
24,700
—
124,879
(87,762)
—
61,817
19,864
—
21,241
—
—
41,105
14,448
—
14,580
241,356
—
162,052
(8)
—
29,020
(6,872)
2,478
399,014
—
1,291
2,221
6,823
—
10,335
241,356
1,291
164,273
(49)
2,478
409,349
12,912
17,192
(17)
—
30,087
3,818
1,772
(158)
335
5,767
498
3,485
—
—
3,983
—
—
—
—
—
447
424
—
—
871
1,030
889
—
—
1,919
18,705
23,762
(175)
335
42,627
—
1,094
158
—
1,252
18,705
24,856
(17)
335
43,879
120,368
37,654
69,213
61,817
40,234
27,101
356,387
9,083
365,470
1 During the development period of the Bloom Lake Phase II expansion project, the amount of borrowing costs capitalized for the year ended March 31, 2021 was $3,793,000 (year
ended March 31, 2020: $1,405,000). Borrowing costs consisted of interest expense on the long-term debt and the amortization of transaction costs (note 13). The capitalization
rate used to determine the amount of borrowing costs eligible for capitalization for the year ended March 31, 2021 was 4.2% (year ended March 31, 2020: 5.9%).
2 For the year ended March 31, 2021, the addition to the stripping asset includes: i) production expenses capitalized amounting to $14,142,000 (year ended March 31, 2020:
$10,700,000) and ii) allocated depreciation of property, plant and equipment amounting to $2,636,000 (year ended March 31, 2020: $1,431,000).
3 Software was reclassified from property, plant and equipment to intangible assets. Refer to note 9 - Intangible assets.
4 Represents the initial recognition of right-of-use assets as at April 1, 2019 following the adoption of IFRS 16, Leases.
146 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
10. Property, Plant and Equipment (continued)
Right-of-use assets consist of the following:
March 31, 2020
Depreciation
March 31, 2021
March 31, 2019
Right-of-use assets as per IFRS 16 as at April 1, 2019
Additions
Transfers
Depreciation
March 31, 2020
Refer to note 14 - Lease Liabilities.
11. Exploration and Evaluation Assets
March 31, 2020
Additions
March 31, 2021
March 31, 2019
Additions
Transfers to property, plant and equipment
March 31, 2020
Mining and
Processing
Equipment
1,114
(816)
298
Locomotives,
Railcars and
Rails
6,329
(351)
5,978
Mining and
Processing
Equipment
—
272
1,421
—
(579)
1,114
Locomotives,
Railcars and
Rails
—
—
—
6,665
(336)
6,329
Building
1,640
(221)
1,419
Building
—
1,019
800
—
(179)
1,640
Labrador Trough
73,087
336
73,423
Labrador Trough
79,293
468
(6,674)
73,087
Newfoundland
2,438
245
2,683
Newfoundland
2,215
223
—
2,438
Total
9,083
(1,388)
7,695
Total
—
1,291
2,221
6,665
(1,094)
9,083
Total
75,525
581
76,106
Total
81,508
691
(6,674)
75,525
Exploration and evaluation assets mainly comprise mining rights and exploration and evaluation expenditures which typically include costs
associated with prospecting, sampling, trenching, drilling and other work involved in searching for ore such as topographical, geological,
geochemical and geophysical studies.
147 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
12. Accounts Payable and Other
Trade payable and accrued liabilities
Wages and benefits
Current portion of lease liabilities
13. Long-Term Debt
Opening balance
Advances
Capital repayment
Payment of capitalized interest
Transaction costs
Amortization of transaction costs
Foreign exchange (gain) loss
Non-cash loss on debt refinancing
Ending balance
Term Facility
Revolving facility
Unamortized transaction costs
Long-term debt, net of transaction costs
Note
As at March 31,
2021
As at March 31,
2020
14
83,395
18,329
501
102,225
44,491
9,679
988
55,158
Term Facility
Revolving Facility
247,594
—
—
—
(7,888)
2,398
(29,016)
1,863
214,951
28,374
—
(25,262)
—
—
—
(3,112)
—
—
As at March 31,
2021
(twelve-month period)
275,968
—
(25,262)
—
(7,888)
2,398
(32,128)
1,863
214,951
As at March 31,
2020
(twelve-month period)
228,890
267,522
(231,456)
(19,517)
(8,985)
2,915
14,657
21,942
275,968
As at March 31,
2021
As at March 31,
2020
226,350
—
(11,399)
214,951
255,366
28,374
(7,772)
275,968
On August 16, 2019, QIO entered into a US$200,000,000 lending arrangement with various lenders. The lending arrangement comprised of a
US$180,000,000 single draw non-revolving credit facility (the “Term Facility”) and a US$20,000,000 revolving credit facility (the “Revolving
Facility”). The proceeds of the lending arrangement were primarily used to fully repay previously issued debt facilities held by QIO with Sprott
Private Resource Lending (Collector), LP (“Sprott”) and CDP Investissements Inc. (“CDPI”). For the year-ended March 31, 2020, the non-cash
loss on debt repayment represents a non-cash expense to eliminate the unamortized borrowing costs and debt discount. Refer to note 21 - Net
Finance Costs.
On December 23, 2020, QIO amended and increased its lending arrangement to fund the completion of Phase II. The Term Facility was
increased to US$350,000,000 and the Revolving Facility was increased to US$50,000,000 (collectively the “Credit Facilities”). Transaction
costs of $7,888,000 were incurred for this transaction for the year ended March 31, 2021. During the year ended March 31, 2021, a non-cash
loss of $1,863,000 was accounted for in net finance costs as a result of the unsubstantial modification of the terms of the Credit Facilities.
Refer to note 21 - Net Finance Costs. On March 30, 2021, the Company fully repaid the Revolving Facility of US$20,000,000.
The Credit Facilities required the Company to deposit US$35,000,000 of cash as contingent funds to cover potential cost overruns of Phase II.
As at March 31, 2021, this deposit of $44,012,000 was classified as a non-current restricted cash in the consolidated statements of financial
position.
148 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
13. Long-Term Debt (continued)
The original and the amended terms of the Credit Facilities are as follows:
Amount:
Original Terms
US$180,000,000 Term Facility
US$20,000,000 Revolving Facility
Maturity:
Term Facility: August 16, 2024
Interest:
Revolving Facility: August 16, 2022
The Credit Facilities are subject to interest based on LIBOR and
a financial margin that fluctuates from 2.85% to 3.75%
depending on whether the net debt to EBIDTA ratio is below 1.0
or greater than 2.5.
Repayment: Term Facility - commencing on June 30, 2021, and quarterly
thereafter, 1/12th of the principal balance outstanding.
Amended Terms
US$350,000,000 Term Facility (US$180,000,000 drawn as at
March 31, 2021)
US$50,000,000 Revolving Facility (full amount undrawn as at
March 31, 2021)
Term Facility: December 23, 2025
Revolving Facility: December 23, 2023
The Credit Facilities are subject to interest based on LIBOR plus
4.00% during the pre-completion of Phase II, after which the
interest will be based on LIBOR and a financial margin that
fluctuates from 2.85% to 3.75% depending on whether the net
debt to EBIDTA ratio is below 1.0 or greater than 2.5.
Term Facility - commencing on the earlier of June 30, 2022 or
the first quarter following the Phase II completion date, and
equal quarterly installments thereafter of the principal balance
outstanding.
Covenants: The Credit Facilities are subject to operational and financial covenants, all of which have been met as at March 31, 2021.
Collateral:
All of the present and future undertakings, properties and assets of QIO and Lac Bloom Railcars Corporation Inc. The Company
guaranteed all the obligations of QIO and Lac Bloom Railcars Corporation Inc. and pledged all of the shares it holds in QIO and
Lac Bloom Railcars Corporation Inc.
As at March 31, 2021, the Credit Facilities are subject to an interest rate of 4.1% (March 31, 2020: 4.8%), which represented the LIBOR rate +
4.00%. In addition, for the year ended March 31, 2021, the weighted average interest rate was 3.8% (year ended March 31, 2020: 6.9%). Under
the terms of the amended Credit Facilities, the undrawn portion of the Credit Facilities is subject to standby commitment fees of 1.38% during
the pre-completion of Phase II and thereafter between 0.86% and 1.13% until the end of the term. As at March 31, 2021, the undrawn portion of
the Credit Facilities amounted to US$220,000,000.
14. Lease Liabilities
Opening balance
Lease liabilities as per IFRS 16 as at April 1, 2019
New lease liabilities
Payments
Note
As at March 31,
2021
As at March 31,
2020
2,890
—
—
(988)
1,902
(501)
1,401
—
1,291
2,221
(622)
2,890
(988)
1,902
Less current portion classified in ''accounts payable and other''
12
Ending balance
For the year ended March 31, 2020, lease liabilities were measured at the present value of the remaining lease payments, discounted using
the Company's weighted average incremental borrowing rate of 4.8%.
The expense related to short-term leases, low-value leases and variable leases were $910,000, $566,000 and $2,400,000, respectively, for the
year ended March 31, 2021 (March 31, 2020: $1,302,000, $472,000 and $3,043,000, respectively). These expenses were included in cost of
sales. The total cash outflow for leases was $4,864,000 for the year ended March 31, 2021 (March 31, 2020: $5,439,000).
149 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
15. Rehabilitation Obligation
Opening balance
Increase due to reassessment of the rehabilitation obligation
Accretion expense
Effect of change in discount rate
Ending balance
As at March 31,
2021
(twelve-month period)
42,836
994
72
1,172
45,074
As at March 31,
2020
(twelve-month period)
36,565
6,643
171
(543)
42,836
The accretion of the 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 using a discount rate of
0.28% as at March 31, 2021 (March 31, 2020: 0.43%). The future rehabilitation obligation was reassessed during the year ended March 31, 2021
based on the reclamation plan approved by the Government in July 2019. The undiscounted amount related to the rehabilitation obligation is
estimated at $47,268,000 as at March 31, 2021 (March 31, 2020: $46,274,000).
16. Share Capital and Reserves
a) Authorized
The Company's share capital consists of authorized:
• Unlimited number of ordinary shares, without par value; and
• Unlimited number of preferred shares, without par value, issuable in series.
b) Ordinary share issuances
Shares
Opening balance
Shares issued for exercise of warrants
Shares issued for exercise of compensation options
Shares issued for exercise of options - incentive plan
Ending balance
c) Preferred share issuances
Shares
Opening balance
Issuance of preferred shares
Ending balance
Year Ended March 31,
2021
(in thousands)
2020
(in thousands)
467,689
27,733
—
6,694
502,116
430,470
13,719
21,000
2,500
467,689
Year Ended March 31,
2021
(in thousands)
2020
(in thousands)
185,000
—
185,000
—
185,000
185,000
150 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
16. Share Capital and Reserves (continued)
c) Preferred share issuances (continued)
On August 16, 2019, QIO issued preferred shares for consideration of $185,000,000 to CDPI. Transaction costs of $3,205,000 were incurred for
this transaction, resulting in net proceeds of $181,795,000. The preferred shares accumulate dividends, if and when declared by QIO. The
dividend rate associated with the preferred shares is based on the gross realized iron ore price and fluctuates from 9.25% when the gross
realized iron price for Bloom Lake 66.2% iron ore is greater than US$85/t to 13.25% should the gross realized iron ore price decrease below
US$65/t. During the 21-month construction period of Phase II, the applicable dividend rate is locked in at 9.25%. During the year ended
March 31, 2021, the Company declared and paid dividends on the preferred shares amounting to $28,439,000 or $0.15 per preferred shares,
which represented the accumulated dividends for the August 17, 2019 to March 31, 2021 period.
The preferred shares are redeemable at the option of CDPI upon i) liquidation, dissolution or windup of QIO or the Company, or certain events
being within the control of the Company being ii) change of control of QIO or the Company, iii) sale of substantially all of the assets of QIO or iv)
completion of an initial public offering by QIO. The preferred shares and accrued dividends can be repaid at parity after its second anniversary
with no penalty. Therefore, the Company has the ability to redeem all QIO preferred shares on August 16, 2021.
At any time after the tenth anniversary, and provided that the preferred shares are not redeemed in full, CDPI shall have the right to notify QIO
of its desire that QIO commence a sale transaction of QIO. As such a sale transaction would not result in the redemption in cash of the
preferred shares unless the Company determines that a liquidation of assets would generate the highest sale proceeds, such decision
remaining in the control of the Company. The preferred shares were accounted for as equity in the consolidated statements of equity.
d) Share-based payments
The Company has various share-based compensation plans for eligible employees and directors. The objective of the Omnibus Incentive Plan is
to enhance the Company's ability to attract and retain talented employees and to provide alignment of interests between such employees and
the shareholders of the Company. Under the Omnibus Incentive Plan, the Company grants stock option awards, deferred share units (''DSU'')
awards, restricted share units (''RSU'') awards and preferred share units (''PSU'') awards.
Stock option awards and RSU awards vest annually in three equal tranches from the date of grant. DSU awards vest at the date of the grant.
PSU awards vest at the end of three years from the date of grant and vesting is subject to key performance indicators established by the
Board.
A summary of the share-based payments expenses is detailed as follows:
Stock option costs
DSU costs
RSU costs
PSU costs
Year Ended March 31,
2021
1,994
309
727
953
3,983
2020
927
118
1,034
472
2,551
151 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
16. Share Capital and Reserves (continued)
e) Stock options
As at March 31, 2021, the Company is authorized to issue 50,212,000 stock options and share rights (March 31, 2020: 46,769,000) equal to 10%
(March 31, 2020: 10%) of the issued and outstanding ordinary shares for issuance under the Omnibus incentive plan. The stock options granted
will vest over a three-year period.
The following table details the stock options activities of the share incentive plan:
Opening balance
Granted
Exercised
Ending balance
Options exercisable - end of the year
Year Ended March 31,
Year Ended March 31,
2021
Weighted
Average
Exercise Price
0.83
5.00
0.80
4.85
5.00
Number of
Stock Options
(in thousands)
6,814
1,800
(6,694)
1,920
600
Number of
Stock Options
(in thousands)
8,780
534
(2,500)
6,814
5,551
2020
Weighted
Average
Exercise Price
0.56
2.43
0.22
0.83
0.60
During the year ended March 31, 2021, a total of 1,800,000 new stock options were granted to executive officers of the Company. The fair value
of the stock options granted during the year ended March 31, 2021 amounted to $3,869,000. During the year ended March 31, 2021, a total of
6,694,000 stock options were exercised and the weighted average share price at the exercise date was $2.50.
During the year ended March 31, 2020, a total of 534,000 new stock options were granted to new employees of the Company. The fair value of
the outstanding stock options granted during the year ended March 31, 2020 amounted to $753,000. During the year ended March 31, 2020, a
total of 2,500,000 stock options were exercised and the weighted average share price at the exercise date was $2.31.
The share-based payment cost was calculated according to the fair value of stock options issued based on the Black-Scholes stock option
pricing model using the following weighted average assumptions:
Risk-free interest rate
Expected volatility based on historical volatility
Expected life of stock options
Expected dividend yield
Forfeiture rate
Share price at the grant date
Exercise price at the grant date
Fair value per stock option issued
Year Ended March 31,
2021
0.4 %
55 %
4 years
0 %
0 %
$5.05
$5.00
$2.15
2020
1.8 %
86 %
3 years
0 %
0 %
$2.55
$2.43
$1.41
A summary of the Company’s outstanding and exercisable stock options as at March 31, 2021 is presented below:
Exercise Price
$2.53
$5.00
Weighted Average
Remaining Life (Years)
1.14
3.85
Number of Stock Options
Outstanding
(in thousands)
120
1,800
1,920
Exercisable
(in thousands)
—
600
600
152 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
16. Share Capital and Reserves (continued)
f) Restricted share units
The following table details the RSU activities of the share incentive plan:
Opening balance
Granted
Ending balance
Vested - end of the year
Year Ended March 31,
Year Ended March 31,
2021
Weighted
Average
Share Price
2.18
2.33
2.24
2.19
2020
Weighted
Average
Share Price
—
2.18
2.18
2.18
Number of
RSUs
(in thousands)
—
598
598
199
Number of
RSUs
(in thousands)
598
412
1,010
253
During the year ended March 31, 2021, 412,000 RSUs were granted to key management personnel (year ended March 31, 2020: 598,000). They
will vest annually in three equal tranches from the date of grant.
g) Performance share units
The following table details the PSU activities of the share incentive plan:
Opening balance
Granted
Ending balance
Vested - end of the year
Year Ended March 31,
Year Ended March 31,
2021
Weighted
Average
Share Price
2.17
2.33
2.25
—
2020
Weighted
Average
Share Price
—
2.17
2.17
—
Number of
PSUs
(in thousands)
—
653
653
—
Number of
PSUs
(in thousands)
653
619
1,272
—
During the year ended March 31, 2021, 619,000 PSUs were granted to key management personnel (year ended March 31, 2020: 653,000). The
PSU awards vest at the end of three years from the date of grant according to performance indicators established by the Board.
h) Compensation options
Opening balance
Exercised
Ending balance
Year Ended March 31,
Year Ended March 31,
Number of
Compensation
Options
(in thousands)
—
—
—
2021
Weighted
Average
Exercise Price
—
—
—
Number of
Compensation
Options
(in thousands)
21,000
(21,000)
—
2020
Weighted
Average
Exercise Price
0.25
0.25
—
During the year ended March 31, 2020, the Company issued 21,000,000 shares pursuant to the exercise of 21,000,000 compensation options
with an exercise price of $0.25 per share, for total net proceeds of $5,250,000. At the time the options were exercised, the shares were trading
at a price of $2.38.
153 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
16. Share Capital and Reserves (continued)
i) Warrants
Opening balance
Granted
Exercised
Ending balance
Year Ended March 31,
Year Ended March 31,
2021
Weighted
Average
Exercise Price
1.50
—
1.13
1.91
Number of
Warrants
(in thousands)
53,014
—
(27,733)
25,281
2020
Weighted
Average
Exercise Price
1.13
1.59
1.13
1.50
Number of
Warrants
(in thousands)
24,000
42,733
(13,719)
53,014
A summary of the Company’s outstanding and exercisable warrants as at March 31, 2021 and 2020 is presented below:
Exercise Price
Holder
Expiry Date
$1.125
$1.125
$1.125
$2.45
Sprott
CDPI
Glencore
CDPI
October 16, 2022
October 16, 2024
October 13, 2025
August 16, 2026
Outstanding and Exercisable
As at March 31,
2021
(in thousands)
281
10,000
—
15,000
25,281
As at March 31,
2020
(in thousands)
281
10,000
27,733
15,000
53,014
All ordinary share warrants were accounted for as warrants in the consolidated statements of equity.
Long-term debt with Sprott and CDPI
In connection with the previous debt with Sprott and CDPI, the Company issued on October 16, 2017: (a) 3,000,000 ordinary 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 ordinary share purchase warrants to CDPI, entitling the holder to purchase 21,000,000 ordinary shares of the Company for $1.125
after October 16, 2018 until October 16, 2024.
During the year ended March 31, 2021, no warrants were exercised related to the previous debt with Sprott and CDPI. During the year ended
March 31, 2020, Sprott and CDPI exercised their right to purchase 2,719,000 and 11,000,000 ordinary shares, respectively, at $1.125 per share
for total proceeds of $3,059,000 and $12,375,000, respectively.
Glencore Debenture
On August 16, 2019, as the Company elected to prepay the unsecured subordinated convertible debenture (“Debenture”) with Glencore
International AG. (''Glencore''), the Debenture was not converted into ordinary shares of the Company by Glencore prior to the repayment. As a
result, the Company granted 27,733,000 ordinary share purchase warrants to Glencore, entitling the holder to purchase 27,733,000 ordinary
shares of the Company for $1.125 until October 13, 2025.
During the year ended March 31, 2021, Glencore exercised its right to purchase 27,733,000 ordinary shares, at $1.125 per share for total
proceeds of $31,200,000.
Preferred share offering with CDPI
On August 16, 2019, in connection with the preferred share offering with CDPI, the Company issued 15,000,000 ordinary share purchase
warrants to CDPI, entitling the holder to purchase 15,000,000 ordinary shares of the Company for $2.45 until August 16, 2026.
During the year ended March 31, 2021, no warrants were exercised related to the preferred share offering with CDPI.
154 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
17. Revenues
Iron ore revenue
Provisional pricing adjustments
Year Ended March 31,
2021
1,193,875
87,940
1,281,815
2020
819,334
(34,248)
785,086
Provisional pricing adjustments represent any difference between the revenue recognized at the end of the previous period and the final
settlement price. As at March 31, 2021, 1.0 million tonnes of iron ore sales remained subject to provisional pricing, with the final price to be
determined in the subsequent reporting periods (March 31, 2020: 0.9 million tonnes).
18. Cost of Sales
Land transportation
Operating supplies and parts
Salaries, benefits and other employee expenses
Sub-contractors
Other production costs
Change in inventories
Production expenses capitalized as stripping asset
Year Ended March 31,
2021
156,455
98,193
89,536
71,395
16,841
(2,006)
(14,142)
416,272
2020
149,280
98,065
82,252
69,504
14,115
(3,148)
(10,700)
399,368
For the year ended March 31, 2021, the amount recognized as an expense for defined contribution plans was $4,829,000 (year ended
March 31, 2020: $4,397,000) and was included in salaries, benefits and other employee expenses.
19. General and Administrative Expenses
Salaries, benefits and other employee expenses
Public company related and administrative expenses
Professional fees
Travel expenses
Year Ended March 31,
2021
10,281
8,605
4,339
369
23,594
2020
7,780
6,979
5,338
990
21,087
155 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
20. Sustainability and Other Community Expenses
Property and school taxes
Impact and benefits agreement
Salaries, benefits and other employee expenses
Other expenses
21. Net Finance Costs
Loss on debt refinancing
Interest on long-term debt and Debenture
Realized and unrealized foreign exchange Loss
Amortization of transaction costs
Interest expense on lease liabilities
Other interest and finance costs
a) Debt refinancing details
Non-cash items
Loss on amendment of the Credit Facilities
Write-off - book value of Debenture
Write-off - book value of CDPI debt facility
Write-off - book value of Sprott debt facility
Write-off - Glencore derivative asset
Write-off - CDPI derivative asset
Write-off - Sprott derivative asset
Cash items
Debt prepayment penalty fees
Loss on debt refinancing
Year Ended March 31,
2021
6,028
5,232
1,712
1,886
14,858
Year Ended March 31,
2021
1,863
6,624
7,782
2,032
117
4,010
22,428
Year Ended March 31,
2021
1,863
—
—
—
—
—
—
1,863
—
—
1,863
2020
5,944
5,154
741
1,701
13,540
2020
57,274
16,920
3,199
3,211
119
3,521
84,244
2020
—
18,837
15,976
5,966
1,336
5,603
5,768
53,486
3,788
3,788
57,274
a)
i
ii
iii
iii
iv
iv
iv
ii,iii
i.
Amendment of the Credit Facilities
On December 23, 2020, the Company amended its Credit Facilities. The non-cash loss of $1,863,000 represents a non-cash expense as a
result of the unsubstantial modification of the terms of the original Credit Facilities. Refer to note 13 - Long-Term Debt.
156 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
21. Net Finance Costs (continued)
a) Debt repayment details (continued)
ii. Debenture
On August 16, 2019, the Company fully repaid the $31,200,000 Debenture with Glencore and the conversion option granting Glencore the
right to convert into the ordinary shares of the Company was extinguished. Prepayment penalty fees of $780,000 were also paid for the
repayment of the Debenture, resulting in a total repayment of $31,980,000.
The non-cash loss on repayment of the Debenture of $18,837,000 represents a non-cash expense to eliminate the unamortized borrowing
costs and debt discount.
iii. CDPI and Sprott debt facilities
On August 16, 2019, the Company fully repaid previously issued debt facilities held by QIO. Prepayment penalty fees of $3,008,000 were
also paid for the repayment of the Sprott facility, resulting in a total repayment of $234,464,000.
The non-cash loss on repayment of the CDPI and Sprott debt facilities represents a non-cash expense to eliminate the unamortized
borrowing costs and debt discount.
iv. Glencore, CDPI and Sprott derivative assets
These derivatives assets were extinguished due to the repayments of the previously issued debt facilities and the Debenture on August 16,
2019. As a result, a write-off of $12,707,000 has been recognized in the year ended March 31, 2020, following a change in the fair value of
the derivative assets by $1,907,000 for the same period.
22. Other Income (Expense)
Change in fair value of non-current investments
Gain on disposal of non-current investments
23. Income and Mining Taxes
a) Deferred tax assets and liabilities
Deferred tax assets
Deferred income tax liability
Deferred mining tax liability
Net deferred tax liabilities
Year Ended March 31,
2021
7,905
2,332
10,237
2020
(1,107)
—
(1,107)
As at March 31,
2021
As at March 31,
2020
32,117
(82,814)
(33,836)
(116,650)
(84,533)
28,201
(72,566)
(23,576)
(96,142)
(67,941)
157 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
23. Income and Mining Taxes (continued)
a) Deferred tax assets and liabilities (continued)
The movement in deferred income tax asset during the year, without taking into consideration the offsetting of balances within the same tax
jurisdiction, is as follows:
Deferred tax assets
Operating
losses carried
forward
Capital losses
carried
forward
Rehabilitation
obligation
Transaction
costs
Mining tax
deduction
and other
As at April 1, 2019
Credited (charged) to statements of income
As at March 31, 2020
Credited (charged) to statements of income
As at March 31, 2021
9,924
(1,164)
8,760
245
9,005
48
(48)
—
1,079
1,079
9,690
1,662
11,352
592
11,944
128
1,434
1,562
(892)
670
126
6,401
6,527
2,892
9,419
Total
19,916
8,285
28,201
3,916
32,117
The movement in deferred income tax liabilities during the year, without taking into consideration the offsetting of balances within the same
tax jurisdiction, is as follows:
Deferred tax liabilities
As at April 1, 2019
Charged (credited) to statements of income
As at March 31, 2020
Charged (credited) to statements of income
As at March 31, 2021
Property, plant
and equipment
Mining tax
Exploration
and evaluation
assets
38,415
26,902
65,317
8,155
73,472
12,785
10,791
23,576
10,260
33,836
5,705
1,073
6,778
397
7,175
Other
471
—
471
1,696
2,167
Total
57,376
38,766
96,142
20,508
116,650
As at March 31, 2021, the Company had $9,012,000 (March 31, 2020: $30,363,000) of net deductible temporary differences, other than
Canadian exploration expenses, cumulative Canadian development expenses and tax losses, for which no deferred tax assets have been
recognized.
As at March 31, 2021, the Company had $47,641,000 (March 31, 2020: $47,806,000) of operating loss that can be carried forward against
future taxable income and that will expire from 2027 to 2039. Out of those losses, $13,553,000 (March 31, 2020: $14,644,000) were not
recognized. As at March 31, 2021, the Company also had $17,180,000 (March 31, 2020: $14,327,000) of operating losses that can be carried
forward indefinitely against future taxable income, for which no deferred tax assets have been recognized.
As at March 31, 2021, the Company had $14,318,000 (March 31, 2020: $18,738,000) of net capital losses that can be carried forward
indefinitely against future capital gains. Out of those capital losses, $6,177,000 (March 31, 2020: $18,738,000) were not recognized. Net capital
losses can be carried forward indefinitely and can only be used against future taxable capital gains.
As at March 31, 2021, the Company had $1,778,000 (March 31, 2020: $1,778,000) of unrecognized investment tax credit that can be carried
forward against future income tax payable and that will expire from 2033 to 2035.
As at March 31, 2021, the Company had $486,948,000 (March 31, 2020: nil) of taxable temporary differences related to investments in
subsidiaries. Deferred tax liabilities were not recognized in respect of such taxable temporary differences as the Company controls the
decisions affecting the realization of such liabilities and does not expect these temporary differences to reverse in the foreseeable future.
Upon distribution of these earnings in the form of dividends or otherwise, the Company may be subject to income and withholding taxes.
158 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
23. Income and Mining Taxes (continued)
b) Tax expense
The tax expense is applicable as follows:
Current income and mining taxes
Current income tax on profits for the year
Current mining tax on profits for the year
Total current income and mining taxes
Deferred income and mining taxes
Deferred income tax for the year
Deferred mining tax for the year
Total deferred income and mining taxes
Income and mining taxes expense
Year Ended March 31,
2021
150,166
130,689
280,855
6,332
10,260
16,592
297,447
2020
45,158
44,499
89,657
19,690
10,791
30,481
120,138
The tax on the Company's income before income tax differs from the theoretical amount that would arise using the weighted average tax rate
applicable to profits of the consolidated entities as follows:
Income before income and mining taxes
Canadian combined tax rate for Champion
Expected tax calculated at Canadian combined tax rate
Increase (decrease) resulting from the tax effects of:
Mining tax, net of tax benefit
(Income) expenses not (taxable) deductible for tax purposes
Unrecorded tax benefits
Recognition of previously unrecognized tax benefits
Difference in tax rate
Other
Income and mining taxes expense at effective tax rate
c) Income and mining taxes payable
The reconciliation of income and mining taxes payable is presented as follows:
Year Ended March 31,
2021
%
26.50 %
Amount
761,872
201,896
103,603
(3,790)
(97)
(3,640)
(232)
(293)
297,447
13.60 %
(0.50) %
(0.01) %
(0.48) %
(0.03) %
(0.04) %
39.04 %
2020
%
26.58 %
Amount
241,188
64,096
40,159
11,575
6,073
—
(1,258)
(507)
16.65 %
4.80 %
2.52 %
— %
(0.52) %
(0.21) %
120,138 49.82 %
Income and mining taxes payable
As at April 1, 2019
Current tax on profit for the year
Tax paid during the year
As at March 31, 2020
Current tax on profit for the year
Tax paid during the year
As at March 31, 2021
Mining Tax
Income Tax
34,059
44,499
(65,932)
12,626
130,689
(56,708)
86,607
—
45,158
(23)
45,135
150,166
(90,366)
104,935
Total
34,059
89,657
(65,955)
57,761
280,855
(147,074)
191,542
159 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
24. Earnings per Share
Earnings per share amounts are calculated by dividing the net income attributable to Champion shareholders for the year ended
March 31, 2021 and 2020 by the weighted average number of shares outstanding during the year.
Net income attributable to Champion shareholders
Weighted average number of common shares outstanding - Basic
Dilutive share options, warrants and equity settled awards
Weighted average number of outstanding shares - Diluted
Basic earnings per share
Diluted earnings per share
25. Financial Instruments
Measurement categories
Year Ended March 31,
2021
464,425
478,639,000
27,684,000
506,323,000
0.97
0.92
2020
89,426
441,620,000
23,025,000
464,645,000
0.20
0.19
Financial assets and financial liabilities have been classified into categories that determine their basis of measurement and, for items
measured at fair value, whether changes in fair value are recognized in the profit or loss or in other comprehensive income. These categories
are financial assets at fair value through profit and loss ("FVPL"), financial assets at amortized cost, and financial liabilities at amortized cost.
The following tables show the carrying values and the fair value of assets and liabilities for each of these categories as at March 31, 2021 and
2020:
As at March 31, 2021
Assets
Current
Cash and cash equivalents
Short-term investments
Trade receivables
Other receivables (excluding sales tax)
Non-current
Restricted cash
Non-current investments
Liabilities
Current
Accounts payable and other (excluding current
portion of lease liabilities)
Non-current
Long-term debt
Level 1
Level 1
Level 2
Level 2
Level 1
Level 1
Level 2
Level 2
Fair Value
Through Profit
and Loss
Financial
Assets at
Amortized Cost
Financial
Liabilities at
Amortized Cost
Total Carrying
Amount and
Fair Value
—
—
73,341
—
—
8,761
82,102
—
—
—
—
609,316
27,200
—
1,055
44,012
—
681,583
—
—
—
—
—
—
—
—
—
—
—
101,724
101,724
214,951
316,675
609,316
27,200
73,341
1,055
44,012
8,761
763,685
101,724
101,724
214,951
316,675
160 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
25. Financial Instruments (continued)
Measurement categories (continued)
As at March 31, 2020
Assets
Current
Cash and cash equivalents
Short-term investments
Trade receivables
Other receivables (excluding sales tax)
Non-current
Non-current investments
Liabilities
Current
Accounts payable and other (excluding the current
portion of lease liabilities)
Non-current
Long-term debt
Financial risk factors
a) Market
i. Fair value
Fair Value
Through Profit
and Loss
Financial
Assets at
Amortized Cost
Financial
Liabilities at
Amortized Cost
Total Carrying
Amount and
Fair Value
Level 1
Level 1
Level 2
Level 2
Level 1
Level 2
Level 2
—
—
15,944
—
1,546
17,490
—
—
—
—
281,363
17,291
—
2,347
—
301,001
—
—
—
—
—
—
—
—
—
—
54,170
54,170
275,968
330,138
281,363
17,291
15,944
2,347
1,546
318,491
54,170
54,170
275,968
330,138
Current financial assets and financial liabilities are valued at their carrying amounts, which are reasonable estimates of their fair value due to
their near-term maturities; this includes cash and cash equivalents, short-term investments, other receivables and accounts payable and
other (excluding current portion of lease liabilities). The fair value of restricted cash approximates its carrying amount. Long-term debt was
accounted for at amortized cost using the effective interest method, and its fair value approximates its carrying value.
Fair value measurement hierarchy
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).
There are no transfers between Level 1, Level 2 and Level 3 during the year ended March 31, 2021 (year ended March 31, 2020: nil).
161 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
25. Financial Instruments (continued)
Financial instruments measured at fair value
Trade receivables
The trade receivables are classified as Level 2 in the fair value hierarchy. Their fair values are a recurring measurement. The measurement of
the trade receivables is impacted by the Company’s provisional pricing arrangements, where the final sales price is determined based on iron
ore prices subsequent to a shipment arriving at the port of discharge. The Company initially recognizes sales trade receivables at the
contracted provisional price on the shipment date and re-estimates the consideration to be received using forecast iron ore prices at the end of
each reporting period. The impact of iron ore price movements until final settlement is recorded as an adjustment to sales trade receivables.
Non-current investments
Equity instruments are classified as a Level 1 in the fair value hierarchy. Their fair values are a recurring measurement and are estimated using
the closing share price observed on the relevant stock exchange. The equity investments are classified as financial assets at FVPL.
a) Market
ii. Interest rate risk
Interest risk is the risk that the value of assets and liabilities will change when the related interest rates change. The Company is exposed to
interest rate risk primarily on its long-term debt and does not take any particular measures to protect itself against fluctuations in interest
rates. With the exception of its long-term debt, the Company’s current financial assets and financial liabilities are not significantly exposed to
interest rate risk because either they are of a short-term nature or because they are non-interest bearing.
The Credit Facilities are subject to interest based on LIBOR. Based on the Credit Facilities outstanding balances at the end of the reporting
period, the following table illustrates a LIBOR rate sensitivity analysis calculating the impact on net income and equity over a 12-month
horizon:
(in U.S. dollars)
Increase in net income and equity with a 1% depreciation in the LIBOR rate
Decrease in net income and equity with a 1% appreciation in the LIBOR rate
iii. Commodity price risk
Year Ended March 31,
2021
1,800
(1,800)
2020
2,000
(2,000)
Commodity price risk arises from fluctuations in market prices of iron ore. The Company is exposed to the commodity price risk, as its iron ore
sales are predominantly subject to prevailing market prices. The Company has limited ability to directly influence market prices of iron ore. The
Company has sought to establish strategies that mitigate its exposure to iron ore price volatility in the short-term. The strategy of utilizing
renowned brokers is aimed at providing some protection against decreases in the iron ore price while maintaining some exposure to pricing
upside.
However, the Company’s iron ore sales contracts are structured using the iron ore price indexes. These are provisionally priced sales volumes
for which price finalization is referenced to the relevant index at a future date or the valuation is prescribed in some of the contracts. The
estimated consideration in relation to the provisionally priced contracts is marked to market using the spot iron ore price at the end of each
reporting period with the impact of the iron ore price movements recorded as an adjustment to operating sales revenue.
The following table sets out the Company’s exposure, as at March 31, 2021, in relation to the impact of movements in the iron ore price for the
provisionally invoiced sales volumes:
(in U.S. dollars)
Tonnes (dmt) subject to provisional pricing adjustments
10% increase in iron ore prices
10% decrease in iron ore prices
Year Ended March 31,
2021
1,007,000
18,393
(18,393)
2020
931,000
6,370
(6,370)
162 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
25. Financial Instruments (continued)
a) Market (continued)
The sensitivities demonstrate the monetary impact on revenues, net income and equity resulting from a 10% increase and a 10% decrease in
the realized selling prices at each reporting date, while holding all other variables, including foreign exchange rates, constant. The relationship
between iron ore prices and exchange rates is complex, and movements in exchange rates can impact commodity prices. The above
sensitivities should therefore be used with caution.
iv. Foreign exchange risk
Foreign currency risk is the risk that the Company financial performance could be affected by fluctuations in the exchange rates between
currencies. The Company's sales, sea freight and credit facilities costs are denominated in U.S. dollars. As such, the Company benefits from a
natural hedge between its revenues and its sea freight and credit facilities costs. Still, the Company is exposed to foreign currency fluctuations
as its cost of sales and general and administrative expenses are mainly incurred in Canadian dollars. Currently, the Company has no hedging
contracts in place and therefore has exposure to the foreign exchange rate fluctuations. The strengthening of the U.S. dollar would positively
impact the Company’s net income and cash flows while the strengthening of the Canadian dollar would reduce its net income and cash flows.
The following table indicates the foreign currency exchange risk as at March 31, 2021 and 2020:
(in U.S. dollars)
Current assets
Cash and cash equivalents
Short-term investments
Receivables (excluding sales tax)
Non-current assets
Restricted cash
Non-current liabilities
Long-term debt
Total foreign currency net liabilities in USD
CAD dollar equivalents
As at March 31,
2021
As at March 31,
2020
281,156
7,666
58,323
35,000
129,644
—
11,239
—
(180,000)
202,145
(200,000)
(59,117)
254,197
(83,869)
The following table is a currency risk sensitivity analysis calculating the impact on net income and equity for the year ended March 31, 2021
and 2020, based on the Company’s net assets (liabilities) denominated in US dollars at the end of the reporting period:
(Decrease) increase in net income and equity with a 10% depreciation in the US dollar
Increase (decrease) in net income and equity with a 10% appreciation in the US dollar
As at March 31
2021
As at March 31
2020
(25,420)
25,420
8,387
(8,387)
The sensitivity analysis above assumes that all other variables remain constant. The Company’s exposure to other currencies is not significant.
163 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
25. Financial Instruments (continued)
a) Market (continued)
v. Equity price risk
The Company is exposed to equity price risk for equity investments at fair value through profit and loss. Equity price risk is the risk that the fair
value of a financial instrument varies due to equity market changes. The Company's equity investments are exposed to equity price risk since
their fair value is determined through the last closing share price on the relevant stock exchange. The Company has no specific strategy to
manage the equity price risk.
The following table is an equity risk sensitivity analysis calculating the impact on net income and equity based on variation of 10% of the
quoted equity investment value at the end of the reporting period:
Increase in net income and equity with a 10% appreciation in the equity investments
Decrease in net income and equity with a 10% depreciation in the equity investments
The sensitivity analysis above assumes that all other variables remain constant.
b) Credit risk
As at March 31
2021
As at March 31
2020
876
(876)
155
(155)
Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations. Credit
risk arises principally from the Company’s cash and cash equivalents, short-term investments, and trade receivables.
Cash and cash equivalents and short-term investments
With respect to credit risk arising from cash and cash equivalents and short-term investments, the Company’s exposure to credit risk arises
from default of the counterparty, with a maximum exposure corresponding to the carrying amount of these instruments. The Company limits
its counterparty credit risk on these assets by dealing only with financial institutions with credit ratings of at least A or equivalent.
Trade receivables
The Company’s credit risk on trade receivables relates to two customers having similar activities and economic characteristics, representing a
significant portion of sales with a maximum exposure corresponding to the carrying value. Trade receivable credit risk is mitigated through
established credit monitoring activities. These include conducting financial and other assessments to establish and monitor a customer’s
credit worthiness, setting customer limits, monitoring exposure against these limits. There is no assurance that customers will remain solvent
over time and in the event a significant customer is unable to accept contracted volumes, the volumes may then be sold on a spot basis to
traders, sold under renegotiated contractual volumes with existing customers, or sold under contracts with new customers.
Loss allowance on receivables is based on actual credit loss experience over the past years and current economic conditions. Receivables are
generally settled within six months and are historically collectable. The Company has no receivables past due as at March 31, 2021 (March 31,
2020: nil). For the year ended March 31, 2021, no provision was recorded on any of the Company's receivables (year ended March 31, 2020: nil).
The Company holds no collateral for any receivable amounts outstanding as at March 31, 2021 (March 31, 2020: nil).
c) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial liabilities and lease 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, through budgeting and cash
forecasting, that it will have sufficient liquidity to meet its liabilities as they come due. For the year-ended March 31, 2021, the COVID-19
pandemic did not have a negative impact on the Company's liquidity risk.
164 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
25. Financial Instruments (continued)
c) Liquidity risk (continued)
The following are the contractual maturities of financial liabilities and gross lease liabilities (non-financial liabilities) with estimated future
interest payments as at March 31, 2021:
Accounts payable and other
Long-term debt, including interest
Lease liabilities, including interest
26. Capital Risk Management
Less than a year
101,724
9,315
577
111,616
1 to 5 years
—
239,773
1,146
240,919
More than 5 years
—
—
454
454
Total
101,724
249,088
2,177
352,989
Capital of the Company consists the components of shareholders’ equity and borrowings. 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 Company is not subject to externally imposed capital requirements other than certain restrictions under the terms of
its lending agreements. In order to facilitate the management of its capital requirements, the Company prepares long-term cash flow
projections that consider various factors, including successful capital deployment, general industry conditions and economic factors.
Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the
Company, is reasonable.
Historically, borrowings and equity financing were the Company's principal source of capital. As a result, capital is defined as long-term debt,
lease liabilities and share capital of the Company:
Long-term debt
Lease liabilities
Share capital
27. Key Management Compensation
As at March 31,
2021
As at March 31,
2020
214,951
1,902
515,970
732,823
275,968
2,890
431,556
710,414
The Company considers its directors and officers to be key management personnel. Transactions with key management personnel are set out
as follows:
Short-term benefits
Salaries
Bonus
Share-based payments
All other remuneration
Year Ended March 31,
2021
3,044
2,588
5,632
4,530
351
10,513
2020
2,248
1,343
3,591
2,785
268
6,644
165 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
28. Commitments and Contingencies
The Company's future minimum payments of commitments as at March 31, 2021 are as follows:
(in thousands of dollars)
Impact and Benefits Agreement with the Innu community
Take-or-pay fees related to the Port agreement
Capital expenditure obligations
Service commitment
Spare parts purchase commitment
Committed leases not yet commenced
Other
Less than a year
5,245
4,599
122,203
9,985
9,130
3,152
754
155,068
1 to 5 years More than 5 years
90,606
76,992
—
—
—
33,887
454
201,939
22,604
19,573
—
11,369
—
9,037
1,146
63,729
Total
118,455
101,164
122,203
21,354
9,130
46,076
2,354
420,736
29. Subsidiary Entity Information
Set out below is the Company’s summarized financial information for its subsidiary, QIO, which had a material non-controlling interest until
August 16, 2019. Investissement Québec was the owner of a 36.8% interest in QIO until August 16, 2019 when the Company acquired
Investissement Québec's 36.8% equity interest in QIO for $211,000,000. Investissement Québec is a successor to Ressources Québec Inc.,
which held the equity interest in QIO at the time of the transaction.
As at March 31, 2021, the Company no longer has a non-controlling interest. For the year ended March 31, 2020, the interest that non-
controlling interest had in the group's activities and cash flows until August 16, 2019 is as follow:
i. Summarized statement of income for QIO before inter-company eliminations
Revenues
Net income and comprehensive income
Net income attributable to non-controlling interest
ii. Summarized cash flows for QIO before inter-company eliminations
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net cash flow
Period Ended August 16,
2019
331,487
85,936
31,624
Period Ended August 16,
2019
156,536
(46,747)
(9,704)
100,085
166 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
30. Parent Entity Information
The following table is an AAS requirement and presents the information relating to Champion Iron Limited:
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Net assets
Share capital
Warrants
Contributed surplus
Accumulated deficit
Total equity
Net loss of the parent entity
Comprehensive loss of the parent entity
31. Auditor's Remuneration
As at March 31,
2021
As at March 31,
2020
70,783
85,594
156,377
580
580
155,797
227,069
29,973
13,324
(114,569)
155,797
6,618
6,618
38,181
85,594
123,775
1,620
1,620
122,155
142,655
75,336
12,115
(107,951)
122,155
36,231
36,231
The following table is an AAS requirement and presents the total of all remuneration received or due and receivable by the auditors in
connection with:
E&Y Canada
Audit fees
Tax fees
All other fees
E&Y Australia
Audit fees
All other fees
Year Ended March 31,
2021
2020
497
194
27
718
59
1
60
778
511
52
160
723
57
10
67
790
167 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
32. Financial Information Included in the Consolidated Statements of Cash Flows
a) Changes in non-cash operating working capital
Receivables
Prepaid expenses and advances
Inventories
Advance payments
Accounts payable and other
Income and mining taxes payable
Property taxes payable
Other long-term liabilities
Year Ended March 31,
2021
(74,205)
7,581
(8,488)
(1,597)
47,554
133,781
—
(247)
104,379
2020
67,629
8,945
(12,118)
5,812
9,473
23,702
(13,940)
(388)
89,115
b)
Reconciliation of additions presented in the property, plant and equipment schedule to the net cash flow from investing activities
Additions of property, plant and equipment before right-of-use assets as per note 10
Depreciation of property, plant and equipment allocated to stripping activity asset
Non-cash increase of the asset rehabilitation obligation
Capitalized amortization of transaction costs
Asset transferred from exploration and evaluation assets to property, plant and equipment
Net cash flow from investing activities - purchase of property, plant and equipment
Year Ended March 31,
2021
179,817
(2,636)
(2,166)
(365)
—
174,650
c)
Reconciliation of depreciation presented in the property, plant and equipment schedule to the statements of income
Depreciation of property, plant and equipment as per note 10
Depreciation of property, plant and equipment allocated to stripping activity asset
Depreciation of intangible assets
Net effect of depreciation of property, plant and equipment allocated to inventory
Depreciation as per statements of income
Year Ended March 31,
2021
36,010
(2,636)
1,518
285
35,177
2020
162,052
(1,431)
(6,643)
—
(6,674)
147,304
2020
24,856
(1,431)
915
(2,339)
22,001
168 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
33. Segmented Information
The Company is conducting exploration and evaluation and mining operations activities in Canada. The business segments presented reflect
the management structure of the Company and the way in which the Company’s chief operating decision maker reviews business
performance. The Company evaluates the performance of its operating segments primarily based on segment operating income, as defined
below. Since the Company has started production at the mine site which represents all the mining operation, it was identified as a segment.
Exploration and evaluation and corporate were identified as separate segments due to their specific nature.
Year Ended March 31, 2021
Revenues
Cost of sales
Cost of sales - incremental costs related to COVID-19
Depreciation
Gross profit (loss)
Share-based payments
General and administrative expenses
Product research and development expenses
Sustainability and other community expenses
Operating income (loss)
Net finance costs, other income and taxes expenses
Net income
Segmented total assets
Segmented total liabilities
Segmented property, plant and equipment
Year Ended March 31, 2020
Revenues
Cost of sales
Depreciation
Gross profit (loss)
Share-based payments
General and administrative expenses
Sustainability and other community expenses
Operating income (loss)
Net finance costs, other income and taxes expenses
Net income
Segmented total assets
Segmented total liabilities
Segmented property, plant and equipment
Mine Site
1,281,815
(416,272)
(12,610)
(34,919)
818,014
—
—
—
(6,025)
811,989
Exploration
and Evaluation
Corporate
—
—
—
—
—
—
—
—
—
—
—
—
—
(258)
(258)
(3,983)
(23,594)
(1,258)
(8,833)
(37,926)
Total
1,281,815
(416,272)
(12,610)
(35,177)
817,756
(3,983)
(23,594)
(1,258)
(14,858)
774,063
(309,638)
464,425
1,347,588
(632,538)
503,239
76,106
—
—
73,212
(11,351)
1,746
1,496,906
(643,889)
504,985
Exploration
and Evaluation
Corporate
Mine Site
785,086
(399,368)
(21,785)
363,933
—
—
(5,943)
357,990
—
—
—
—
—
—
—
—
777,725
(494,832)
363,483
75,525
—
—
—
—
(216)
(216)
(2,551)
(21,087)
(7,597)
(31,451)
29,348
(11,144)
1,987
Total
785,086
(399,368)
(22,001)
363,717
(2,551)
(21,087)
(13,540)
326,539
(205,489)
121,050
882,598
(505,976)
365,470
169 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
34. Subsequent Events
Acquisition of Kami
On November 16, 2020, the Supreme Court of Newfoundland and Labrador approved the acquisition by the Company from Deloitte
Restructuring Inc. (the “Receiver”), as receiver for Alderon Iron Ore Corp. (“Alderon”), of the mining properties of the Kami Project located in the
Labrador Trough geological belt in southwestern Newfoundland, near the Québec border, and certain related contracts.
On April 1, 2021, Champion paid $15,000,000 in cash and issued 4,200,000 ordinary shares to Sprott and Altius Resources Inc. (“Altius”) and
the secured debt between Alderon and Sprott was extinguished. The consideration also includes an undertaking in favour of the Receiver to
make a finite production payment on a fixed amount of future iron ore concentrate production from the Kami Project.
The acquisition is comprised of i) an intangible asset for the Sept-Îles Port Authority agreement for the rights and entitlements to reserve
annual loading capacity to support the Company's plans to increase production with the Phase II project; ii) take-or-pay advance payments on
its future shipping, wharfage and equipment fees, previously made by Alderon in respect of the Port agreement; and iii) exploration and
evaluation assets for the Kami Project.
Other
On April 1, 2021, the Company signed a master lease agreement for an amount up to US$75,000,000 with Caterpillar Financial Services Limited
in connection with the financing of Phase II mining equipment. The financing is available until March 31, 2022 and bears interest at LIBOR rate
plus a margin of 3.25%. Under the agreement, the Company must maintain financial covenants. On May 21, 2021, Champion also signed a
financing agreement with Fonds de Solidarité des Travailleurs du Québec for an amount up to $75,000,000.
Starting on May 10, 2021, the Company entered into forward foreign exchange contracts to sell US$220,000,000 for $266,376,000 maturing
between June 2021 and April 2022 to reduce the risk of variability of future cash flows resulting from forecasted sales.
170 Page
The additional information set out below relates to the ordinary shares of the Company as at April 27, 2021. The Company does not hold other
class of equity securities, which excludes shares held by it subsidiaries.
1. Distribution of Shareholdings as at April 27, 2021
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 Holders Number of Ordinary Shares
571,176
1,734,735
1,329,221
8,580,630
494,100,402
506,316,164
1,324
705
171
251
120
2,571
% of issued Capital
0.11 %
0.34 %
0.26 %
1.69 %
97.59 %
100.00 %
2. Substantial Shareholders as at April 27, 2021
The Company has received substantial shareholder notifications from the shareholders below. The following table sets out the shareholding of
each substantial shareholder from these substantial shareholder notifications with the percentage of issued share capital updated for the
current issued share capital of the Company.
Name of Shareholder
WC Strategic Opportunity LP
Michael O'Keeffe (and associates)
Investissement Québec
Number of Ordinary Shares
66,944,444
45,023,830
43,500,000
% of issued Capital
13.22%
8.89%
8.59%
3. Marketable Parcels as at April 27, 2021
103 shareholders held less than a marketable parcel of ordinary shares as at April 27, 2021.
4. Voting Rights
All ordinary shares issued by the Company carry one vote per share without restriction.
172 Page
5. Twenty Largest Shareholders as at April 27, 2021
The following table lists the 20 largest registered holders of the Company's shares, together with the number of shares and the percentage of
the issued capital each holds, as of April 27, 2021, being the last practicable date.
Many of the 20 largest shareholders shown below hold shares as a nominee or custodian. In accordance with the reporting requirements, the
tables reflect the legal ownership of shares and not the details of the underlying beneficial holders.
Name of Shareholder
WC Strategic Opportunity LP
HSBC Custody Nominee Aust Ltd
JP Morgan Nom Aust PL
Investissement Québec
Prospect AG Trading PL
Citicorp Nom PL
Metech Super PL
Mr Michael O'Keeffe
National Nominees LTD
Fidelity Clearing Canada ULC ITF SPROTT
Eastbourne DP PL
BNP Paribas Nominees PTY LTD
BNP Paribas Nominees PTY LTD Custodial Serv LTD DRP
GAB Super Fund PL
Mr David Cataford
BNP Paribas Nominees PTY LTD Six Sis LTD DRP
BNP Paribas Noms PTY LTD DRP
BASS Family Foundation PTY LTD
Warbont Nominees PTY LTD
GAB Superannuation Fund PTY LTD
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
51,143,314
48,864,500
43,500,000
34,362,930
26,693,742
10,000,000
6,751,900
5,417,361
3,600,000
3,500,000
3,284,691
2,389,990
2,290,850
2,222,080
2,000,752
1,807,639
1,750,000
1,470,059
1,443,334
% of issued Capital
13.22%
10.10%
9.65%
8.59%
6.79%
5.27%
1.98%
1.33%
1.07%
0.71%
0.69%
0.65%
0.47%
0.45%
0.44%
0.40%
0.36%
0.35%
0.29%
0.29%
173 Page
An investment in securities of the Company is highly speculative and involves significant risks. If any of the events contemplated in the risk
factors described below actually occurs, the Company’s business may be harmed and its financial condition and results of operation may
suffer significantly. In that event, the trading price of the Ordinary Shares could decline and purchasers of Ordinary Shares may lose all or part
of their investment. The risks described herein are not the only risks facing the Company. Additional risks and uncertainties not currently
known to the Company, or that the Company currently deems immaterial, may also materially and adversely affect its business.
Financial Risks
Iron Ore Prices
The Company’s principal business is the exploration, development and production of iron ore. The Company’s future profitability is largely
dependent on movements in the price of iron ore. Iron ore prices have historically been volatile and are primarily affected by the demand for
and price of steel in addition to the supply/demand balance. Given the historical volatility of iron ore prices, there are no assurances that the
iron ore price will remain at economically attractive levels. An increase in iron ore supply without a corresponding increase in iron ore demand
would be expected to result in a decrease in the price of iron ore. Similarly, a decrease in iron ore demand without a corresponding decrease in
the supply of iron ore would be expected to result in a decrease in the price of iron ore. A continued decline in iron ore prices would adversely
impact the business of the Company and could affect the feasibility of the Company’s projects. As some of the Company’s long-term debt
and other financial instruments are subject to rate fluctuation based on the price of iron ore, a decrease in iron ore could have an adverse
impact on the Company’s financial instruments. A continued decline in iron ore prices would also be expected to adversely impact the
Company’s ability to attract financing. Iron ore prices are also affected by numerous other factors beyond the Company’s control, including
the exchange rate of the United States dollar with other major currencies, global and regional demand, political and economic conditions,
production levels and costs and transportation costs in major iron ore producing regions. If as a result of a decline in iron ore prices, revenues
from iron ore sales were to fall below cash operating costs, the feasibility of continuing development and operations would be evaluated and
if warranted, could be discontinued.
Fluctuating Mineral Prices
Factors beyond the control of the Company may affect the marketability of any other minerals discovered. Resource prices have fluctuated
widely and are affected by numerous factors beyond the Company’s control. These factors include market fluctuations, the proximity and
capacity of natural resource markets and processing equipment, and government regulations, including regulations relating to prices, taxes,
royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot
be accurately predicted, but the combination of these factors may result in the Company not receiving an adequate return on invested
capital, and a loss of all or part of an investment in securities of the Company may result.
Liquidity / Financing Risk
The Company may need to obtain additional equity or debt financing in the future through the sale of securities, by optioning or selling its
properties, or otherwise. No assurance can be given that additional financing will be available for further exploration and development of the
Company’s properties when required, upon terms acceptable to the Company or at all. Failure to obtain such additional financing could result
in the delay or indefinite postponement of further exploration and development of its properties.
As of March 31, 2021, Champion had cash and cash equivalents of approximately $609.3 million and total long-term debt of approximately
$215 million. Although Champion has been successful in repaying debt in the past and restructuring its capital structure with a lower cost of
capital, there can be no assurance that it can continue to do so. In addition, Champion may in the future assume additional debt or reduce its
holdings of cash and cash equivalents in connection with funding future growth initiatives, existing operations, capital expenditures or in
pursuing other business opportunities. Champion’s level of indebtedness could have important consequences for its operations. In particular,
Champion may need to use a large portion of its cash flows to repay principal and pay interest on its debt, which will reduce the amount of
funds available to finance its operations and other business activities. Champion’s debt level may also limit its ability to pursue other
business opportunities, borrow money for operations or capital expenditures or implement its business strategy.
174 Page
Financial Risks (continued)
Liquidity / Financing Risk (continued)
As of March 31, 2021, Champion had approximately $226.4 million in debt maturing by December 23, 2025. This amount excludes $1.9 million
in capital lease payments expected by August 1, 2027. Currently, US$220 million are undrawn under the Company’s Amended Credit Facility.
The Term Facility will mature five years from December 23, 2020 while the Revolving Facility will mature three years from December 23,
2020.
In addition to future cash flows from operations, potential divestments and the creation of new partnerships, Champion’s other potential
sources of liquidity for the payment of its expenses and principal and interest payable on its debt and other financial instruments include
issuing additional equity or unsecured debt and borrowing under the Company’s US$50 million Revolving Facility. The key financial covenant
in the Revolving Facility requires Champion to maintain a net debt to EBITDA ratio that does not exceed 4.25:1 (as of March 31, 2021, this ratio
was approximately 0.35:1). Champion’s ability to reduce its indebtedness and meet its payment obligations will depend on its future financial
performance, which will be impacted by financial, business, economic and other factors. Champion will not be able to control many of these
factors, including the economic conditions in the markets in which it operates. There is no certainty that Champion’s existing capital
resources and future cash flows from operations will be sufficient to allow it to pay principal and interest on its debt and other financial
instruments and meet its other obligations. If these amounts are insufficient or if Champion does not comply with financial covenants under
the Amended Credit Facility or its other financial instruments, Champion may be required to refinance all or part of its existing debt, sell
assets, borrow more money or issue additional equity. The ability of Champion to access the bank, public debt or equity capital markets on an
efficient basis may be constrained by a dislocation in the credit markets or capital or liquidity constraints in the banking, debt or equity
markets at the time of such refinancing.
Champion is also exposed to liquidity and various counterparty risks including, but not limited to: (i) Champion’s lenders and other banking
and financial counterparties; (ii) Champion’s insurance providers; (iii) financial institutions that hold Champion’s cash; (iv) companies that
have payables to Champion, including concentrate customers; and (v) companies that have received deposits from Champion for the future
delivery of equipment.
Global Financial Conditions and Capital Markets
As future capital expenditures of the Company will be financed out of funds generated from operations, borrowings and possible future equity
sales, the Company’s ability to do so is dependent on, among other factors, the overall state of capital markets and investor appetite for
investments in the Company’s securities.
Global financial markets experienced extreme and unprecedented volatility and disruption in 2008, 2009 and the first half of 2020. World
economies experienced a significant slowdown in 2008 and 2009 and only slowly began to recover late in 2009, through 2010 to 2019,
although the strength of recovery has varied by region and by country. In the latter half of 2011 and 2012-2013, debt crises in certain
European countries and other factors adversely affected the recovery. Similarly, as a result of the recent outbreak of the novel coronavirus
disease (COVID-19), there has been a slowdown in world economies since the first quarter of 2020.
The impact that the United Kingdom’s leaving the European Union on January 31, 2020 may continue to have on global financial markets’
challenges and the demand for commodities is uncertain. As a result, access to public financing has been negatively impacted. Following
January 31, 2020, the European Union and the United Kingdom negotiated the terms of their future relationship and on December 31, 2020,
entered into a Trade and Cooperation Agreement. These conditions have resulted and may continue to result in a reduction in demand for
various resources and raw materials.
These factors may impact the ability of the Company to obtain equity or debt financing in the future on favourable terms. Additionally, these
factors, as well as other related factors, may impair the Company’s ability to make capital investments and may cause decreases in asset
values that are deemed to be other than temporary, which may result in impairment losses. If such increased levels of volatility and market
fluctuations continue, the Company’s operations could be adversely impacted and the trading price of its Ordinary Shares may be adversely
affected.
175 Page
Financial Risks (continued)
Operating Costs
The Company’s financial performance is affected by its ability to achieve production volumes at certain cash operating costs. The Company’s
expectations with respect to cash operating costs of production are based on the mine plan that reflects the expected method by which the
Company will mine Mineral Reserves at the Bloom Lake Mine and the expected costs associated with the plan. Actual iron ore production and
cash operating costs may differ significantly from those the Company has anticipated for a number of reasons, including variations in the
volume of ore mined and ore grade, which could occur because of changing mining rates, ore dilution, varying metallurgical and other ore
characteristics and short-term mining conditions that require different sequential development of ore bodies or mining in different areas of
the mine. Mining rates are impacted by various risks and hazards inherent at the operation, including natural phenomena, such as inclement
weather conditions, and unexpected labour shortages or strikes or availability of mining fleet. Cash operating costs are also affected by ore
characteristics that impacts recovery rates, labour costs, the cost of mining supplies and services, foreign currency exchange rates and
stripping costs incurred during the production phase of the mine. In the normal course of operations, the Company manages each of these
risks to mitigate, where possible, the effect they have on operating results.
Foreign Exchange
Iron ore is sold in U.S. dollars. The Company is, therefore, subject to foreign exchange risks relating to the relative value of the Canadian dollar
as compared to the U.S. dollar. Revenue generated by the Company from production on its properties are received in U.S. dollars while
operating and capital costs are incurred primarily in Canadian dollars. A decline in the U.S. dollar would result in a decrease in the real value of
the Company’s revenues and adversely impact the Company’s financial performance. In addition, Champion’s functional and reporting
currency is Canadian dollars, while its Credit Facility and Equipment Financing Facility are denominated in U.S. dollars. Therefore, as the
exchange rate between the Canadian dollar and the U.S. dollar fluctuates, the Company will experience foreign exchange gains and losses,
which can have a significant impact on its consolidated operating results.
Interest Rates
A significant, prolonged increase in interest rates could have a material adverse impact on the interest payable under the Company’s long-
term debt, long-term leases and other financial instruments. The Company’s interest rate exposure mainly relates to the interest payments on
its variable-rate debt totaling US$180 million as of March 31, 2021.
Reduced Global Demand for Steel or Interruptions in Steel Production
The global steel manufacturing industry has historically been subject to fluctuations based on a variety of factors, including general
economic conditions and interest rates. Fluctuations in the demand for steel can lead to similar fluctuations in iron ore demand. A decrease in
economic growth rates could lead to a reduction in demand for iron ore. Any decrease in economic growth or steel consumption could have an
adverse effect on the demand for iron ore and consequently on the Company’s ability to obtain financing, to achieve production and on its
financial performance. See also “Global Financial Conditions and Capital Markets” above.
176 Page
Operational Risks
Mineral Exploration, Development and Operating Risks
Mineral exploration is highly speculative in nature, generally involves a high degree of risk and is frequently non-productive. Resource
acquisition, exploration, development and operation involve significant financial and other risks over an extended period of time, which even a
combination of careful evaluation, experience and knowledge may not eliminate. Significant expenses are required to locate and establish
economically viable mineral deposits, to acquire equipment and to fund construction, exploration and related operations, and few mining
properties that are explored are ultimately developed into producing mines.
Success in establishing an economically viable project is the result of a number of factors, including the quantity and quality of minerals
discovered, proximity to infrastructure, metal and mineral prices, which are highly cyclical, costs and efficiencies of the recovery methods
that can be employed, the quality of management, available technical expertise, taxes, royalties, environmental matters, government
regulation (including land tenure, land use and import/export regulations) and other factors. Even in the event that mineralization is
discovered on a given property, it may take several years in the initial phases of drilling until production is possible, during which time the
economic feasibility of production may change as a result of such factors. The effect of these factors cannot be accurately predicted, but the
combination of these factors may result in the Company’s not receiving an adequate return on its invested capital, and no assurance can be
given that any exploration program of the Company will result in the establishment or expansion of resources or reserves.
The Company’s operations are subject to all the hazards and risks normally encountered in the exploration, development and production of
iron ore and other minerals, including, but not limited to, environmental hazards (including hazards relating to the discharge of pollutants),
industrial accidents, labor force disruptions, health crises (including epidemics and pandemics), adjacent or adverse land or mineral
ownership rights or claims that may result in constraints on current or future mining operations, unavailability of materials and equipment,
equipment failures, changes in anticipated grade and tonnage of ore, unusual or unexpected adverse geological or geotechnical conditions or
formations, unanticipated ground and water conditions, unusual or unexpected adverse operating conditions, slope failures, rock bursts,
cave-ins, seismic activity, the failure of pit walls or tailings dams, pit flooding, fire, explosions and natural phenomena and “acts of God” such
as inclement weather conditions, floods, earthquakes or other conditions, any of which could result in, among other things, damage to, or
destruction of, mineral properties or production facilities, personal injury or death, damage to property, environmental damage, unexpected
delays in mining, limited mine site access, difficulty selling concentrate to customers, reputational loss, monetary payments and losses and
possible legal liability. As a result, production may fall below historic or estimated levels and Champion may incur significant costs or
experience significant delays that could have a material adverse effect on its financial performance, liquidity and results of operations. The
Company maintains insurance to cover some of these risks and hazards; however, such insurance may not provide sufficient coverage in
certain circumstances or may not be available or otherwise adequate for the Company’s needs. See also “Risk Factors – Insurance and
Uninsured Risks” below.
The Company’s processing facility is dependent on continuous mine feed to remain in operation. Insofar as the Bloom Lake Mine does not
maintain material stockpiles of ore or material in process, any significant disruption in either mine feed or processing throughput, whether
due to equipment failures, adverse weather conditions, supply interruptions, export or import restrictions, labour force disruptions or other
causes, may have an immediate adverse effect on the results of its operations. A significant reduction in mine feed or processing throughput
at the mine could cause the unit cost of production to increase to a point where the Company could determine that some or all of its reserves
are or could be uneconomic to exploit.
The Company periodically reviews mining schedules, production levels and asset lives in its LOM planning for all of its operating and
development properties. Significant changes in the LOM plans can occur as a result of mining experience, new ore discoveries, changes in
mining methods and rates, process changes, investment in new equipment and technology, iron ore price assumptions and other factors.
Based on this analysis, the Company reviews its accounting estimates and, in the event of impairment, may be required to write-down the
carrying value of one or more of its long-lived assets. This complex process continues for the LOM. See also “Risk Factors – Ability to Support
the Carrying Value of Non-Current Assets” below.
177 Page
Operational Risks (continued)
Mineral Exploration, Development and Operating Risks (continued)
In addition, any current and future mining operations are and will be subject to the risks inherent in mining, including adverse fluctuations in
commodity prices, fuel prices, exchange rates and metal prices, increases in the costs of constructing and operating mining and processing
facilities, availability of energy, access and transportation costs, delays and repair costs resulting from equipment failure, changes in the
regulatory environment, industrial accidents and labour actions or unrest. The occurrence of any of these events could materially and
adversely affect the development of a project or the operations of a facility, which could have a material adverse impact upon the Company.
As well, risks may arise with respect to the management of tailings and waste rock, mine closure, rehabilitation and management of closed
mine sites (regardless of whether the Company operated the mine site or acquired it after operations were conducted by others). Financial
assurances may also be required with respect to closure and rehabilitation costs, which may increase significantly over time and reserved
amounts may not be sufficient to address actual obligations at the time of decommissioning and rehabilitation.
As a result of the foregoing risks, and in particular, where a project is in a development stage, expenditures on any and all projects, actual
production quantities and rates, and cash costs may be materially and adversely affected and may differ materially from anticipated
expenditures, production quantities and rates, and costs. In addition, estimated production dates may be delayed materially, in each case
especially to the extent development projects are involved. Any such events can materially and adversely affect the Company’s business,
financial condition, results of operations and cash flows.
Uncertainty of Mineral Resource and Mineral Reserve Estimates
Although the Mineral Resource and Mineral Reserve estimates included herein have been carefully prepared by independent mining experts,
these amounts are estimates only and no assurance can be given that any particular level of recovery of iron ore or other minerals will in fact
be realized or that an identified mineral deposit will ever qualify as a commercially mineable (or viable) ore body which can be economically
exploited. Additionally, no assurance can be given that the anticipated tonnages and grades will be achieved or that the indicated level of
recovery will be realized. Estimates of Mineral Resources and Mineral Reserves can also be affected by such factors as environmental
permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological
formations and work interruptions. In addition, the grade of ore ultimately mined may differ dramatically from that indicated by results of
drilling, sampling and other similar examinations. Short-term factors relating to Mineral Resources and Mineral Reserves, such as the need for
orderly development of ore bodies or the processing of new or different grades, may also have an adverse effect on mining operations and on
the results of operations. Material changes in Mineral Resources and Mineral Reserves, grades, stripping ratios or recovery rates may affect
the economic viability of projects. Mineral Resources and Mineral Reserves are reported as general indicators of mine life. Mineral Resources
and Mineral Reserves should not be interpreted as assurances of potential mine life or of the profitability of current or future operations. There
is a degree of uncertainty attributable to the calculation and estimation of Mineral Resources and Mineral Reserves and corresponding grades.
Until ore is actually mined and processed, Mineral Resources and Mineral Reserves and grades must be considered as estimates only. In
addition, the quantity of Mineral Resources and Mineral Reserves may vary depending on mineral prices. Any material change in resources,
Mineral Resources or Mineral Reserves, or grades or stripping ratios will affect the economic viability of the Company’s projects.
178 Page
Operational Risks (continued)
Uncertainties and Risks Relating to Feasibility Studies
Feasibility studies are used to determine the economic viability of a deposit, as are pre-feasibility studies and preliminary assessments.
Feasibility studies are the most detailed and reflect a higher level of confidence in the reported capital and operating costs. Generally
accepted levels of confidence are plus or minus 15% for feasibility studies, plus or minus 25-30% for pre-feasibility studies and plus or minus
35-40% for preliminary economic assessments. There is no certainty that the Phase II Feasibility Study will be realized. While the Phase II
Feasibility Study is based on the best information available to the Company, it cannot be certain that actual costs will not significantly exceed
the estimated cost. While the Company incorporates what it believes is an appropriate contingency factor in cost estimates to account for
this uncertainty, there can be no assurance that the contingency factor is adequate. Many factors are involved in the determination of the
economic viability of a mineral deposit, including the achievement of satisfactory Mineral Reserve estimates, the level of estimated
metallurgical recoveries, capital and operating cost estimates and estimates of future mineral and metal prices.
In addition, ongoing mining operations at the Bloom Lake Mine are dependent on a number of factors including, but not limited to, the
acquisition and/or delineation of economically recoverable mineralization, favourable geological conditions, seasonal weather patterns,
unanticipated technical and operational difficulties encountered in extraction and production activities, mechanical failure of operating plant
and equipment, shortages or increases in the price of consumables, spare parts and plant and equipment, cost overruns, access to the
required level of funding and contracting risk from third parties providing essential services. Actual operating results may differ from those
anticipated in the Feasibility Study or the Phase II Feasibility Study. The Company’s operations may be disrupted by a variety of risks and
hazards which are beyond its control, including environmental hazards, industrial accidents, technical failures, labour disputes, unusual or
unexpected rock formations, flooding and extended interruptions due to inclement or hazardous weather conditions and fires, explosions or
accidents. There is no certainty that metallurgical recoveries obtained in bench scale or pilot plant scale tests will be achieved in ongoing or
future commercial operations. Capital and operating cost estimates are based upon many factors, including anticipated tonnage and grades
of ore to be mined and processed, the configuration of the ore body, ground and mining conditions, expected recovery rates of the metals
from the ore and anticipated environmental and regulatory compliance costs. Each of these factors involves uncertainties, and as a result,
the Company cannot give any assurance that the Phase II Feasibility Study results will not be subject to change and revisions.
179 Page
Operational Risks (continued)
Dependence on the Bloom Lake Mine
While the Company may invest in additional mining and exploration projects in the future, the Bloom Lake Mine is currently the Company’s
sole producing asset providing all of the Company’s operating revenue and cash flows. Consequently, a delay or any difficulty encountered in
the operations at the Bloom Lake Mine, including with respect to the realization or timing of the Phase II expansion project, would materially
and adversely affect the financial condition and financial sustainability of the Company. In addition, the results of operations of the Company
could be materially and adversely affected by any events which cause the Bloom Lake Mine to operate at less than optimal capacity,
including, among other things, equipment failure, adverse weather, serious environmental, public health and safety issues, any permitting or
licensing issues and any failure to produce expected amounts of iron ore. See also “Liquidity / Financing Risk” above and “Public Health
Crises” below.
Development and Expansion Projects Risks
The Company’s ability to meet development and production schedules and cost estimates for its development and expansion projects cannot
be assured. Without limiting the generality of the foregoing, the Company is in the process of implementing the Phase II expansion project of
the Bloom Lake Mine, which requires considerable capital expenditures and various environmental and other permits and governmental
authorizations. Construction and development of these projects are subject to numerous risks, including, without limitation, risks relating to:
significant cost overruns due to, among other things, delays, changes to inputs or changes to engineering; delays in construction and
technical and other problems, including adverse geotechnical conditions and other obstacles to construction; ability to obtain regulatory
approvals or permits, on a timely basis or at all; ability to comply with any conditions imposed by regulatory approvals or permits, maintain
such approvals and permits or obtain any required amendments to existing regulatory approvals or permits; accuracy of reserve and resource
estimates; accuracy of engineering and changes in scope; adverse regulatory developments, including the imposition of new regulations;
significant fluctuations in iron ore and other commodity prices, fuel and utilities prices, which may affect the profitability of the projects;
community action or other disruptive activities by stakeholders; adequacy and availability of a skilled workforce; strikes; difficulties in
procuring or a failure to procure required supplies and resources to construct and operate a mine; availability, supply and cost of water and
power; weather or severe climate impacts; litigation; dependence on third parties for services and utilities; development of required
infrastructure; a failure to develop or manage a project in accordance with the planning expectations or to properly manage the transition to
an operating mine; the reliance on contractors and other third-parties for management, engineering, construction and other services, and the
risk that they may not perform as anticipated and unanticipated disputes may arise between them and the Company; and the effects of the
COVID-19 pandemic or other potential pandemics, including regulatory measures intended to address the pandemic or operating restrictions
imposed to protect workers, supply chain impacts and other factors. These and other risks could lead to delays in developing certain
properties or delays in current mining operations, and such delays could have a material and adverse effect on the Company’s future cash
flows, earnings, results of operations and financial condition.
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Operational Risks (continued)
Replacement of Mineral Reserves
The Bloom Lake Mine is currently the Company’s only source of production. The Company’s ability to maintain, past the current life of mine at
the Bloom Lake Mine, or increase its annual production will depend on its ability to bring new mines into production and to expand Mineral
Reserves at the Bloom Lake Mine. Once a site with mineralization is discovered, it may take several years from the initial phases of drilling
until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to
establish Mineral Reserves and to construct mining and processing facilities. As a result of these uncertainties, there is no assurance that
current or future exploration programs may be successful. There is a risk that depletion of reserves will not be offset by discoveries. As a
result, the reserve base of the Company may decline if reserves are mined without adequate replacement and the Company may not be able
to sustain production beyond the current LOM, based on current production rates, which could have a material and adverse effect on the
Company’s future cash flows, earnings, results of operations and financial condition.
Environmental Risks and Hazards
The operations of the Company are subject to environmental laws and regulations relating to the protection of the environment (including
living things), occupational health and safety, hazardous or toxic substances, wastes, pollutants, contaminants or other regulated or
prohibited substances or dangerous goods (collectively, “Environmental Laws”), as adopted and amended from time to time. Environmental
Laws provide for, among other thing, restrictions and prohibitions on spills, releases and emissions of various substances produced in
association with, or resulting from, mining industry operations, such as seepage from tailings disposal areas that result in environmental
pollution. A breach of Environmental Laws may result in the imposition of fines, penalties, restrictive orders or other enforcement actions. In
addition, certain types of operations require the submission and approval of environmental impact assessments or other environmental
authorizations. Environmental Laws are evolving toward stricter standards, and enforcement, fines and penalties for non-compliance are
becoming more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and
their directors, officers and employees. The cost of compliance with such changes to Environmental Laws has a potential to adversely impact
the Company’s future cash flows, earnings, results of operations and financial condition.
The Company’s operation is subject to environmental regulations which are enforced primarily by the Department of Environment, Climate
Change and Municipalities (Newfoundland and Labrador), the Ministry of the Environment and the Fight against Climate Change (Quebec),
Fisheries and Oceans Canada, and Environment and Climate Change Canada.
Reclamation Costs and Related Liabilities
The Company is required to submit for government approval a reclamation plan in connection with certain mining sites, to submit financial
warranties covering the anticipated cost of completing the work required under such a plan, and to pay for the reclamation work upon the
completion or cessation of certain mining activities. Any significant increases over the Company’s current estimates of future cash outflows
for reclamation costs could have an adverse impact on the Company’s future cash flows, earnings, results of operations and financial
condition.
Government Regulation
Exploration, development and mining of minerals are subject to extensive federal, provincial and local laws and regulations governing
acquisition of mining interests, prospecting, development, mining, production, exports, taxes, labour standards, occupational health, waste
disposal, toxic substances, water use, land use, land claims of aboriginal peoples and local people, environmental protection and remediation,
endangered and protected species, mine safety and other matters.
181 Page
Operational Risks (continued)
Potential First Nations Land Claims
The Company conducts its operations in the Province of Quebec and in the Province of Newfoundland and Labrador, which areas are subject
to conflicting First Nations land claims. Aboriginal claims to lands, and the conflicting claims to traditional rights between Aboriginal groups,
may have an impact on the Company’s ability to develop its properties. The boundaries of traditional territorial claims by these groups, if
established, may impact the areas which constitute the Company’s properties. Mining licences and mineral claims and their renewals may be
affected by land and resource rights negotiated as part of new agreements that may be entered into by governments with First Nations.
Pursuant to section 35 of The Constitution Act of 1982, the Federal and Provincial Crowns (including those of the Provinces of Quebec and
Newfoundland and Labrador) have in some circumstances a duty to consult and a duty to accommodate Aboriginal peoples. When
development is proposed in an area to which an Aboriginal group asserts Aboriginal rights or Aboriginal title, and a credible claim to such
rights or title has been made, a developer may also be required by the Crown to conduct consultations with Aboriginal groups which may be
affected by the proposed project and, in some circumstances, accommodate them. The outcome of such consultations may significantly
delay or even prevent the development of the Company’s properties.
The development and the operation of the Company’s properties may require the entering into of impact and benefits agreements (“IBAs”) or
other agreements with the affected First Nations. As a result of such IBAs or other agreements, the Company may incur significant financial
or other obligations to affected First Nations.
On April 12, 2017, the Company, through QIO, entered into an IBA with the Uashaunnuat, Innu of Uashat and of Mani-Utenam, the Innu
Takuaikan Uashat Mak Mani-Utenam Band No. 80 and the Innu Takuaikan Uashat Mak Mani-Utenam Band Council with respect to future
operations at Bloom Lake (the “Bloom Lake IBA”).
The Bloom Lake IBA is a LOM 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 receive fair and equitable financial and socio-
economic benefits. The Bloom Lake 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.
The negotiation of any IBA required in the future for other projects may significantly delay the development of the properties. There can be no
assurance that the Company will be successful in reaching an IBA or other agreement with First Nation groups asserting Aboriginal rights or
Aboriginal title or who may have a claim which affects the Kami Project, the CFLN project, Quinto Claims or any of the Company’s other
projects.
No Assurance of Titles
The acquisition of title to mineral projects is a very detailed and time consuming process. Although the Company has taken precautions to
ensure that legal title to its property interests is properly recorded in the name of the Company or, where applicable, in the name of its joint
venture partners, there can be no assurance that such title will ultimately be secured. Furthermore, there is no assurance that the interests of
the Company in any of its properties may not be challenged or impugned.
182 Page
Operational Risks (continued)
Permits and Licenses
The operations of the Company require licenses and permits from various governmental authorities. The Company believes that it presently
holds all necessary licenses and permits required to carry out the activities which it is currently conducting under applicable laws and
regulations, and the Company believes it is presently complying in all material respects with the terms of such licenses and permits. However,
there can be no assurance that the Company will be able to obtain all necessary licenses and permits required in the future to carry out
exploration, development and mining operations at its projects on acceptable terms, in a timely manner or at all. The costs and delays
associated with obtaining necessary permits and complying with these permits and applicable laws and regulations could stop or materially
delay or restrict the Company from proceeding with the development of an exploration project or the operation or further development of a
mine, which could have a material and adverse effect on the Company’s future cash flows, earnings, results of operations and financial
condition. There can be no guarantee that the Company will be able to obtain or maintain all necessary licenses and permits that may be
required to explore and develop its properties, commence construction or operation of mining facilities or to maintain continued operations
that economically justify the cost.
Climate Change
Champion recognizes that climate change is a global challenge that will affect its business in a range of possible ways. Champion’s mining
and processing operations are energy intensive, resulting in a carbon footprint either directly or through the purchase of fossil-fuel based
energy. As a result, the Company is impacted by current and emerging policy and regulations relating to the greenhouse gas emission levels,
energy efficiency and reporting of climate change related risks. While some of the costs associated with reducing emissions may be offset by
increased energy efficiency and technological innovation, the current regulatory trend may result in additional transition costs at Champion’s
operations. In addition, the physical risks of climate change may also have an adverse effect on Champion’s business and operations. These
may include increased incidence of extreme weather events and conditions, resource shortages, changes in rainfall and storm patterns and
intensities and changing temperatures. Associated with these physical risks is an increasing risk of climate-related litigation (including class
actions) and the associated costs. Stakeholders are seeking enhanced disclosure of the material risks, opportunities, financial impacts and
governance processes related to climate change. Adverse publicity or climate-related litigation could have an adverse effect on Champion’s
reputation, financial condition or results of operations.
Public Health Crises
The Company’s business, operations and financial condition could be materially and adversely affected by outbreaks of epidemics or
pandemics or other health crises, including the recent outbreak of COVID-19. On January 30, 2020, the World Health Organization declared
the outbreak a public health event of international concern, and on March 11, 2020, the World Health Organization declared the COVID-19
outbreak a pandemic. On March 13, 2020, the Government of Quebec declared a public health emergency. On March 23, 2020, the
Government of Quebec mandated companies involved in the mining industry to reduce mining activities in the Province of Quebec to a
minimum. As a result, the Company announced on March 24, 2020 that it was ramping down operations. Although, as announced by the
Company on April 23, 2020 following the Quebec Government’s announcement that mining activities were to be considered a “priority
service” in the Province of Quebec effective April 15, 2020, the operations gradually ramped up and although early actions implemented by
management of the Company in response to the COVID-19 pandemic minimized its impacts on the Company and its operations, there is no
certainty that there will be no further reductions or disruptions to the Company’s mining and operating activities.
183 Page
Operational Risks (continued)
Public Health Crises (continued)
Since the beginning of the outbreak of COVID-19, there have been a large number of temporary business closures, quarantines and a general
reduction in consumer activity worldwide. The COVID-19 outbreak has caused companies and various international jurisdictions to impose
significant travel, gathering and other public health restrictions. The impact of COVID-19 on global supply chains, and in particular its impact
on the mining industry, is still evolving. The speed and extent of the spread of COVID-19 (which for purposes of this AIF, where applicable,
includes any variants thereof), and the duration and intensity of resulting business disruption, local and international, and related financial
and social impact, are uncertain. Further, the extent and manner to which COVID-19, and measures taken by governments, the Company or
others to attempt to reduce the spread of COVID-19, may affect the Company cannot be predicted with certainty. The Company cannot
estimate whether any additional restrictions will be imposed on its activities or whether any additional measures will be taken by
governments (including measures that result in the suspension or reduction of mining operations) and the potential financial and operational
impact thereof, including impact on employee health, workforce productivity and availability, travel restrictions, contractor availability, supply
availability, ability to sell or deliver iron ore and the availability of insurance and the cost thereof.
Such public health crises can result in volatility and disruptions in the supply and demand for metals and minerals, global supply chains and
financial markets, as well as declining trade and market sentiment and reduced mobility of people, all of which could affect commodity
prices, interest rates, credit ratings, credit risk and inflation. The risks to the Company of such public health crises also include risks to
employee health and safety, a slowdown or temporary suspension of operations, increased labour, shipping and fuel costs, regulatory
changes, political or economic instabilities or civil unrest. Similarly, the Company’s ability to obtain financing and the ability of the Company’s
vendors, suppliers, consultants and partners to meet their obligations to the Company may be impacted as a result of the COVID-19 outbreak
and efforts to contain the virus. Consequently, the COVID-19 outbreak or potential future public health crises may have a material adverse
effect on the Company’s business, results of operations and financial condition. The extent to which COVID-19 and any other pandemic or
public health crisis impacts the Company’s business, affairs, operations, financial condition, liquidity, availability of credit and results of
operations will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information which
may emerge concerning the severity of and the actions required to contain the COVID-19 pandemic or remedy its impact.
Infrastructure and Reliance on Third Parties for Transportation of the Company’s Iron Ore Concentrate
Some of the Company’s properties are located in relatively remote areas at some distance from existing infrastructure. Active mineral
exploitation at any such properties would require building, adding or extending infrastructure, which could add to time and cost required for
mine development.
Mining, processing, development and exploration activities depend, to one degree or another, on adequate infrastructure. In order to develop
mines on its properties, the Company has entered into various agreements for various infrastructure requirements, including for rail
transportation, power and port access with various industry participants, including external service and utility providers. These are important
determinants affecting capital and operating costs. The Company has concluded agreements with the relevant rail companies and port
authorities necessary for the transportation and handling of the Company’s production of Bloom Lake iron ore, and disruptions in their
services could affect the operation and profitability of the Company.
In addition, there is no certainty that the Company will be able to continue to access sources of power on economically feasible terms for all
of its projects and requirements and this could have a material adverse effect on the Company’s results of operations and financial condition.
Reliance on Small Number of Significant Customers
The Company currently relies on a small number of significant customers in connection with the sale of its iron ore. As a result of this reliance
on the limited number of customers, the Company could be subject to adverse consequences if any of these customers breaches their
purchase commitments.
184 Page
Operational Risks (continued)
Availability of Reasonably Priced Raw Materials and Mining Equipment
The Company requires and will continue to require a variety of raw materials in its business as well as a wide variety of mining equipment. To
the extent these materials or equipment are unavailable or available only at significantly increased prices, the Company’s production and
financial performance could be adversely affected. It is also expected that if the Company proceeds with the Phase II expansion project at
Bloom Lake, such project will require significant financing.
Dependence on Third Parties
The Company has relied upon consultants, engineers and others and intends to rely on these parties for development, construction and
operating expertise. Substantial expenditures are required to construct mines, to establish Mineral Resources and Mineral Reserves through
drilling, to carry out environmental and social impact assessments, to develop metallurgical processes to extract the metal from the ore and,
in the case of new properties, to develop the exploration and plant infrastructure at any particular site. If such parties’ work is deficient or
negligent or is not completed in a timely manner, it could have a material adverse effect on the Company.
Reliance on Information Technology Systems
The Company’s operations are dependent upon information technology systems. These systems are subject to disruption, damage or failure
from a variety of sources. Failures in the Company’s information technology systems could translate into production downtimes, operational
delays, compromising of confidential information or destruction or corruption of data. Accordingly, any failure in the Company’s information
technology systems could materially adversely affect its financial condition and results of operation. Information technology systems failures
could also materially adversely affect the effectiveness of the Company’s internal controls over financial reporting.
Cybersecurity Threats
The Company’s operations depend, in part, on how well it and its suppliers protect networks, technology systems and software against
damage from a number of threats, including viruses, security breaches and cyber-attacks. Cybersecurity threats include attempts to gain
unauthorized access to data or automated network systems and the manipulation or improper use of information technology systems. A
failure of any part of the Company’s information technology systems could, depending on the nature of such failure, materially adversely
impact the Company’s reputation, financial condition and results of operations. Although to date the Company has not experienced any
material losses relating to cyber-attacks or other information security breaches, there can be no assurance that it will not incur such losses in
the future. The risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these
threats. As cyber threats continue to evolve, the Company may be required to expend additional resources to continue to modify or enhance
protective measures or to investigate and remediate any system vulnerabilities.
Litigation
All industries, including the mining industry, are subject to legal claims, with and without merit. The Company has in the past been, and may in
the future be, involved in various legal proceedings. While the Company is not aware of any pending or contemplated legal proceedings the
outcome of which could have a material adverse effect on the Company’s financial condition and results of operations, the Company may
become subject to legal proceedings in the future, the outcome of which is uncertain, and may incur defense costs in connection therewith,
even with respect to claims that have no merit. Due to the inherent uncertainty of the litigation process, there can be no assurance that the
resolution of any particular or several combined legal proceedings will not have a material adverse effect on the Company’s financial
condition and results of operations.
185 Page
Other Risks
Volatility of Stock Price
In recent years, the securities markets in Australia and Canada have experienced a high level of price and volume volatility, and the market
prices of securities of many companies have experienced wide fluctuations in price which have not necessarily been related to the operating
performance, underlying asset values or prospects of such companies. There can be no assurance that continual fluctuations in price will not
occur. It may be anticipated that any quoted market for the Ordinary Shares will be subject to market trends generally, notwithstanding any
potential success of the Company in creating revenues, cash flows or earnings and that the value of the Ordinary Shares will be affected by
such volatility.
Reputational Risk
As a result of the increased usage and the speed and global reach of social media and other web-based tools used to generate, publish and
discuss user-generated content and to connect with other users, companies today are at much greater risk of losing control over how they
are perceived socially and in the marketplace. Damage to Champion’s reputation can result from the actual or perceived occurrence of any
number of events, including any negative publicity (for example with respect to Champion’s handling of environmental matters or its relations
with stakeholders), whether true or not. Champion places a great emphasis on protecting its image and reputation by managing its social
media and other web-based platforms, but it does not ultimately have direct control over how it is perceived by others. Reputation loss may
lead to increased challenges in developing and maintaining community relations, ability to secure labour and ability to finance, decreased
investor confidence and impediments to Champion’s overall ability to advance its projects, thereby having a material adverse impact on its
financial performance, cash flows, operations and growth prospects.
Internal Controls and Procedures
Management of the Company has established processes to provide them with sufficient knowledge to support representations that they have
exercised reasonable diligence to ensure that (i) the financial statements of the Company do not contain any untrue statement of material
fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the
circumstances under which it is made, as of the date of and for the periods presented thereby, and (ii) the financial statements of the
Company fairly present in all material respects the financial condition, results of operations and cash flow of the Company, as of the date of
and for the periods presented. The Company files certifications of annual and interim filings, signed by the Company’s Chief Executive Officer
and Chief Financial Officer, as required by National Instrument 52-109 – Issuers’ Annual and Interim Filings. In such certifications, the
Company’s Chief Executive Officer and Chief Financial Officer certify the appropriateness of the financial disclosure in the Company’s filings
with the securities regulators, the design and effectiveness of the Company’s disclosure controls and procedures and the design and
effectiveness of internal controls over financial reporting at the respective financial period end. The Company’s certifying officers are
responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making
in the certificate.
Internal controls over financial reporting are procedures designed to provide reasonable assurance that transactions are properly authorized,
assets are safeguarded against unauthorized or improper use and transactions are properly recorded and reported. They are not a guarantee
of perfection. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance with respect
to the reliability of financial reporting and financial statements preparation.
186 Page
Other Risks (continued)
Insurance and Uninsured Risks
The Company currently maintains insurance to protect it against certain risks related to its current operations (including, among others,
directors’ and officers’ liability insurance) in amounts that it believes are reasonable depending upon the circumstances surrounding each
identified risk. However, the Company is unable to maintain insurance to cover all risks at economically feasible premiums, and in certain
cases, insurance coverage may not be available or may not be adequate to cover any resulting liability (such as, for example, matters relating
to environmental losses and pollution). Consequently, the Company may elect not to insure against certain risks due to high premiums or for
various other reasons. Accordingly, insurance maintained by the Company does not cover all of the potential risks associated with its
operations. In addition, no assurance can be given that the current insurance maintained by the Company will continue to be available at
economically feasible premiums or at all, that the Company will obtain or maintain such insurance or that such insurance will provide
sufficient coverage for any future losses. As a result, the Company’s property, liability and other insurance may not provide sufficient
coverage for losses related to the risks identified in this AIF or other risks or hazards. Should liabilities arise as a result of insufficient or non-
existent insurance, any future profitability could be reduced or eliminated and delays, increases in costs and legal liability could result, each
of which could have a material adverse impact upon the Company’s cash flows, earnings, results of operations and financial condition.
Potential Conflicts of Interest
The directors and officers of the Company may serve as directors or officers of other companies involved in the mining industry or have
significant shareholdings in such companies. Situations may arise in connection with potential acquisitions and investments where the other
interests of these directors and officers may conflict with the interests of the Company. In the event that such a conflict of interest arises, a
director is required to disclose the conflict of interest and to abstain from voting on the matter.
Dependence on Management and Key Personnel
The Company is dependent on the services of key executives, including a small number of highly skilled and experienced executives and
personnel. The Company’s development to date has largely depended, and in the future will continue to depend, on the efforts of
management and other key personnel to develop its projects. Loss of any of these people, particularly to competitors, could have a material
adverse impact upon the Company. In addition, the Company may need to recruit and retain other qualified managerial and technical
employees to build and maintain its operations. If the Company requires such persons and is unable to successfully recruit and retain them,
its development and growth could be significantly curtailed.
Employee Relations
Champion’s ability to achieve its future goals and objectives is dependent, in part, on maintaining good relations with its employees,
minimizing employee turnover and attracting new skilled workforce. Work stoppages, prolonged labor disruptions or other industrial relations
events at Champion’s major capital projects, as well as inability to recruit and retain qualified employees, could lead to project delays or
increased costs and have a material adverse impact on Champion’s projects, the completion, including the timing thereof, of the Bloom Lake
Phase II expansion project, the Company’s cash flows, earnings, results of operations and financial condition.
Competitive Conditions
There is aggressive competition within the mineral exploration and mining industry for the discovery and acquisition of properties considered
to have commercial potential and for management and technical personnel. The Company’s ability to acquire projects in the future is highly
dependent on its ability to operate and develop its current assets and its ability to obtain or generate the necessary financial resources. The
Company will compete in each of these respects with other parties, many of which have greater financial resources than the Company.
Accordingly, there can be no assurance that any of the Company’s future acquisition efforts will be successful or that it will be able to attract
and retain required personnel. There is no assurance that the Company will continue to be able to compete successfully with its competitors
in acquiring such properties or prospects.
187 Page
Other Risks (continued)
Dilution and Future Sales
The Company may from time to time undertake offerings of its Ordinary Shares or of securities convertible into Ordinary Shares, and it may
also enter into acquisition agreements under which it may issue Ordinary Shares in satisfaction of certain required payments. An increase in
the number of Ordinary Shares issued and outstanding and the prospect of issuance of Ordinary Shares upon conversion of convertible
securities may have a depressive effect on the price of Ordinary Shares. In addition, as a result of such additional Ordinary Shares, the voting
power and equity interests of the Ordinary Shareholders will be diluted. Furthermore, sales of a large number of Ordinary Shares in the public
markets, or the potential for such sales, could decrease the trading price of the Ordinary Shares and could impair the Company’s ability to
raise capital through future sales of Ordinary Shares.
Joint Ventures and Option Agreements
From time to time, several companies may participate in the acquisition, exploration and development of natural resource properties through
options, joint ventures or other structures, thereby allowing for their participation in larger programs, permitting involvement in a greater
number of programs and reducing financial exposure in respect of any one program. It may also be the case that a particular company will
assign all or a portion of its interest in a particular program to another of these companies due to the financial position of the company
making the assignment. In determining whether or not the Company will participate in a particular program, the structure of its participation
and the interest therein to be acquired by it, the directors of the Company will primarily consider the degree of risk to which the Company may
be exposed and its financial position at that time. In some of those arrangements, a failure of a participant to fund its proportionate share of
the ongoing costs could result in its proportionate share being diluted and possibly eliminated.
From time to time, the Company may enter into option agreements and joint ventures as a means of gaining property interests and raising
funds. Any failure of any option or joint venture partner to meet its obligations to the Company or other third parties, or any disputes with
respect to third parties’ respective rights and obligations, could have a material adverse effect on such agreements. In addition, the Company
may be unable to exert direct influence over strategic decisions made in respect of properties that are subject to the terms of these
agreements.
Ability to Support the Carrying Value of Non-Current Assets
As of March 31, 2021, the carrying value of Champion’s non-current assets was approximately $689.4 million, or approximately 46.1% of
Champion’s total assets. Non-current assets are tested for impairment when events or changes in circumstances indicate that the carrying
value of these assets may not be recoverable. If indication of impairment exists, a non-current asset’s recoverable amount is estimated. Such
estimation is subjective and it involves making estimates and assumptions with respect to a number of factors, including, but not limited to,
mine design, estimates of production levels and timing, Mineral Reserves and Mineral Resources, ore characteristics, operating costs and
capital expenditures, as well as economic factors beyond management’s control, such as iron ore prices, discount rates and observable net
asset value multiples. If the recoverable amount is lower than the carrying value, Champion may be required to record an impairment loss on
the non-current asset, which will reduce the Company’s earnings. The timing and amount of such impairment charges are uncertain.
188 Page
This Annual Report contains certain information and statements, which may be deemed “forward-looking statements” within the meaning of
applicable securities laws (collectively referred to herein as “forward-looking statements”). All statements in this Annual Report, other than
statements of historical fact, that address future events, developments or performance that Champion expects to occur including
management’s expectations regarding (i) the Company's ability to advance the Phase II expansion project and its construction and completion
timeline, funding,
impact on nameplate capacity, expected capital expenditures, production volume and project economics; (ii)
decarbonization initiatives; (iii) laboratory testing and development of cold pelletizing technologies to reposition the Company's product
offering; (iv) the revision of the Kami Project feasibility study; (v) the mitigation of risks related to COVID-19 and the impact of COVID-19 on the
overall economy, the operations and cash flows of the Company; (vi) the impact of iron ore prices fluctuations; (vii) global macroeconomics
and iron ore industry conditions; (viii) the Company’s growth; (ix) the Company's operational improvement; (x) the LoM of the Bloom Lake Mine;
(xi) the R&D program which aims to develop new technologies and products; (xii) the Company’s ability to increase its customer base; (xiii) the
Company's cash requirements for the next twelve months; (xiv) the fluctuations of the ocean freight costs in connection with the fluctuations
of the iron ore prices; (xv) the impact of exchange rate fluctuations on the Company and its financial results; (xvi) the cold agglomeration
technology and its potential to reduce emissions; (xvii) job creation; (xviii) the recovery rates; (xix) the Company's or the SFPPN’s operational
improvement; (xx) the potential Phase II expansion of the Bloom Lake mine, including its funding, its expected capital expenditures, NPV, Iritis
LoM, construction timeline, its growth to the company’s shareholders and its positive impact on the region and its communities; (xxi) the
estimated future operation capacity of the Bloom Lake Mine and the potential doubling of production; (xxii) the completion of the construction
for a potential expansion of the Bloom Lake Mine; (xxiii) the potential job creation related to the Bloom Lake Mine; (xxiv) the possibility of
reconsidering domiciliation and related future savings; (xxv) the potential impacts on Champion’s business, financial condition and financial
results of the outbreak of the COVID-19 pandemic; (xxvi) new measures to reduce environmental impact and airborne emissions; and (xxvii) the
expected reduction in sustaining capital required for tailings management are forward-looking statements. Statements relating to"reserves" or
“resources” are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and
assumptions, that the reserves described exist in the quantities predicted or estimated and that the reserves can be profitably produced in the
future. Actual reserves may be greater than or less than the estimates provided herein. Forward-looking statements are statements that are
not historical facts and are generally, but not always, identified by the use of words such as “plans”, “expects”, “is expected”, “budget”,
“scheduled”, “estimates”, “continues”, “forecasts”, “projects”, “predicts”, “intends”, “anticipates”, “aims” “targets”, or “believes”, or variations
of, or the negatives of, such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “should”, “might” or
“will” be taken, occur or be achieved. including, without limitation, the results of the feasibility study with regards to the potential expansion of
the Bloom Lake Mine. Although Champion believes the expectations expected in such forward-looking statements are based on reasonable
assumptions, such forward-looking statements involve known and unknown risks, uncertainties and other factors, most of which are beyond
the control of the Company, which may cause the Company’s actual results, performance or achievements to differ materially from those
expressed or implied by such forward-looking statements. Factors that could cause the actual results to differ materially from those in
forward-looking statements include, without limitation: the results of feasibility studies; project delays; continued availability of capital and
financing and general economic, market or business conditions; general economic, competitive, political and social uncertainties; future prices
of iron ore; failure of plant, equipment or processes to operate as anticipated; delays in obtaining governmental approvals, necessary
permitting or in the completion of development or construction activities, impact of COVID-19 on the global economy, the iron ore market and
Champion Iron Limited’s operations as well as those factors discussed in the section entitled “Risk Factors” of the Company’s 2021 Annual
Information Form available on SEDAR at www.sedar.com. The forward-looking statements in this Annual Report are based on assumptions
management believes to be reasonable and speak only as of the date of this Annual Report or as of the date or dates specified in such
statements. Champion cautions that the foregoing list of risks and uncertainties is not exhaustive. Investors and others should carefully
consider the above factors as well as the uncertainties they represent and the risk they entail. Inherent in forward-looking statements are
risks, uncertainties and other factors beyond the Company’s ability to predict or control. The forward-looking statements contained herein are
made as of the date hereof, or such other date or dates specified in such statements. Champion Iron undertakes no obligation to update
publicly or otherwise revise any forward-looking statements contained herein whether as a result of new information or future events or
otherwise, except as may be required by law. If the Company does update one or more forward-looking statements, no inference should be
drawn that it will make additional updates with respect to those or other forward-looking statements.
190 Page
DIRECTORS
Michael O’Keeffe
(Executive Chairman) - Non-independent
COMPANY SECRETARY - AUSTRALIA
CORPORATE SECRETARY
REGISTERED OFFICE
PRINCIPLE
ADMINISTRATIVE OFFICE
AUDITORS
SHARE REGISTRIES
Gary Lawler
Andrew Love
(Non-Executive Director) - Independent
(Non-Executive Director) - Independent
Michelle Cormier
(Non-Executive Director) - Independent
Wayne Wouters
(Non-Executive Director) - Independent
Jyothish George
(Non-Executive Director) - Independent
Louise Grondin
David Cataford
Pradip Devalia
Steve Boucratie
(Non-Executive Director) - Independent
(Executive Director and Chief Executive Officer) - Non-independent
Level 1, 91 Evans Street
Rozelle NSW 2039, Australia
Telephone: +61 2 9810 7816
Facsimile: +61 2 8065 5017
Website: www.championiron.com
ACN 119 770 142
1100 René-Lévesque Blvd. West,
Suite 610
Montreal. QC, H3B 4N4, Canada
Telephone: +1 514 316 4858
Facsimile: +1 514 819 8100
Ernst & Young
200 George Street
Sydney 2000 NSW, Australia
Automic Pty Ltd (“Automic Group”)
Level 5, 126 Phillip Street
Sydney NSW 2000, Australia
Telephone: +61 2 9698 5414
Facsimile: +61 2 8583 3040
TSX Trust Company
301 - 100 Adelaide Street West
Toronto, ON, Canada, M5H 4H1
Telephone: (416) 361-0930
Facsimile: (416) 361-0470
STOCK EXCHANGES
ASX CODE & TSX SYMBOL
The Company’s shares are listed on the Australian Stock Exchange (ASX), Toronto Stock
Exchange (TSX) under the symbol CIA. The Company's shares are also available to trade on the
OTCQX Best Market under symbol CIAFF.
CIA (Fully Paid Ordinary Shares)
192 Page