This Appendix should be read in conjunction with the Company's Annual Report for the year ended March 31, 2022.
1. Name of Entity
Champion Iron Limited
ACN 119 770 142
2. Reporting Period
Reporting period: For the year ended March 31, 2022
Previous corresponding period: For the year ended March 31, 2021
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
2022
(in thousands of CA$)
1,460,806
522,585
522,585
2021
(in thousands of CA$)
1,281,815
464,425
464,425
(in thousands of CA$)
178,991 14%
58,160 13%
58,160 13%
Dividends
An unfranked interim dividend was declared and paid during the fiscal year ended March 31, 2022 at an amount of CA$0.10 per ordinary
share. The record date for determining the entitlement to the interim dividend was February 8, 2022. The interim dividend was paid on
March 1, 2022. An unfranked final dividend was declared on May 25, 2022 (Montréal time) / May 26, 2022 (Sydney time), payable on
June 28, 2022. Dividends paid by subsidiaries are not included. No interim or final dividend has been declared for the fiscal year ended
March 31, 2021.
4. Net Tangible Assets per Security
Net tangible assets per security
As at March 31,
2022
(CA$ per share)
2.25
2021
(CA$ per share)
1.70
5. Associates and Joint Venture Entities
Associates are not considered to be material to the Company. The Company does not have joint venture entities.
6. 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.
7. Status of Audit
This report is based on Financial Statements for the year ended March 31, 2022, which have been audited by Ernst & Young.
Champion, through its subsidiary Quebec Iron Ore Inc., owns and operates the Bloom Lake Mining Complex, located on
the south end of the Labrador Trough, approximately 13 km north of Fermont, Québec. Bloom Lake is an open-pit
operation with two concentrators that primarily source energy from renewable hydroelectric power. The Bloom Lake
Phase I and Phase II plants have a combined nameplate capacity of 15 Mtpa and produce a low contaminant high-grade
66.2% Fe iron ore concentrate with the proven ability to produce a 67.5% Fe direct reduction quality concentrate. Bloom
Lake’s high-grade and low contaminant iron ore products have attracted a premium to the Platts IODEX 62% Fe iron ore
benchmark. The Company ships iron ore concentrate from Bloom Lake by rail, to a ship loading port in Sept-Îles, Québec,
and sells its iron ore concentrate to customers globally, including in China, Japan, the Middle East, Europe, South Korea,
India and Canada. In addition to the Bloom Lake Mining Complex, Champion owns a portfolio of exploration and
development projects in the Labrador Trough, including the Kamistiatusset project located a few kilometres south-east
of Bloom Lake, and the Consolidated Fire Lake North iron ore project, located approximately 40 km south of Bloom Lake.
7,650,600 dmt
Concentrate Sold
US$181.1
Gross Realized Price1
$1,460.8M
Revenues
7,907,300 wmt
Record Concentrate
Produced
$925.8M
Record EBITDA1
$1.03
EPS
83.2%
Fe Recovery Rate
$352.7M
Cash on Hand1
$58.9 / dmt sold
Total Cash Cost1
$0.10 / per ordinary share
Inaugural Dividend
Payment
66.2%
Iron Ore Concentrate
2.98
Recordable Injury
Frequency Rate
1
This is a non-IFRS financial measure, ratio or other financial measure. The measure is not a standardized financial measure under the financial reporting framework used to prepare the
Financial Statements and might not be comparable to similar financial measures used by other issuers. Refer to the section 20 - Non-IFRS and Other Financial Measures of the Directors'
Report for definitions of these metrics and reconciliations to the most comparable IFRS measures when applicable.
8 Page
FINANCIAL
Declared
two dividend payments as per the Company's
capital returns strategy.
Redeemed
$185M of the Company's subsidiary preferred
shares, which eliminated preferred share
dividend payments.
Signed
a revolving facility for US$400M on
May 24, 2022, replacing the Company's previous
Phase II term loan.
PHASE II
Commissioned
the Phase II expansion project ahead of
schedule and completed the first rail shipments
from the project on May 3, 2022.
Anticipated
to gradually increase the mine and plant's
capacity towards commercial production by the
end of calendar year 2022.
GROWTH & DEVELOPMENTS
Acquired
the Kami Project acquisition and its related
mining properties, on April 1, 2021, and
advanced work related to revising the Kami
Project’s scope and feasibility study.
Completed
the acquisition of the Lac Lamêlée property and
the 1.5% net smelter return on the Company's
Moiré Lake property and Fermont Properties
portfolio.
Advanced
a feasibility study to evaluate the reprocessing
and infrastructure required for commercial
production of a 69% Fe direct reduction pellet
feed product.
Acquired
the Pointe-Noire iron ore pelletizing facility on
May 17, 2022, in line with the Company's vision
to contribute towards 'greening' the steelmaking
supply chain.
Progressed
laboratory testing and the development of cold
pelletizing technologies.
Commenced
a collaboration with Caterpillar Inc. and
Toromont Cat to develop, test and implement
advanced drilling technologies aimed at
optimizing Bloom Lake's operational
productivity and reducing energy consumption.
9 Page
Champion Iron concludes its 2022 fiscal year with sustained growth momentum.
Our people mitigated the impact of the pandemic and delivered another robust operational and financial
result. This year is to be transformational for our Company with the completion of our Phase II expansion
project, expected to double Bloom Lake’s nameplate capacity of high-purity iron ore to 15 million tonnes
per year, and position the business for additional growth opportunities.
In addition to the positive economic impact for local communities and the creation of 400 additional
permanent quality jobs, the Phase II project will significantly contribute to the reduction of emissions for
the steel industry. With our high-purity iron ore products, the annual impact of this expansion in emissions
reduction is anticipated to be the equivalent of eliminating nearly 500,000 cars.
Steel is a foundational product upon which society is built and it is one of the most important materials
used by different technologies as the world transitions to a carbon-efficient economy. With superior iron
ore products and access to renewable hydroelectric power, Champion has become part of a global green
solution within the steelmaking supply chain.
As steelmakers seek to reduce emissions, we are strategically positioned to meet the growing demand for
high-purity iron products and contribute in the fight against climate change.
Our vision of the rising demand for high-purity products is confirmed by the increasing focus to reduce
emissions by global leaders. As such, we continue to position the business for organic growth
opportunities with strategic acquisitions in the Labrador Trough and ongoing feasibility studies.
10 Page
A Word from the Executive Chairman (continued)
In the coming months, we expect to complete studies on the Kami project, our Direct Reduction (“DR”)
pellet feed project and the opportunity to produce DR pellets at our recently acquired pellet plant in
Pointe-Noire, in partnership with a global leader in the steel industry. These projects aim to further
contribute to the green steel supply chain and benefit the Québec Côte-Nord economy by creating
additional quality jobs in the region.
Furthermore, the completion of the Phase II project, together with our cumulative efforts to operate
sustainably, created the stability required to declare an inaugural dividend on January 26, 2022 (Montréal
time) / January 27, 2022 (Sydney time), and continue our capital return strategy with an additional
dividend declared on May 25, 2022 (Montréal time) / May 26, 2022 (Sydney time).
It is a privilege to share our vision with supportive stakeholders. Based on trust and respect, we continue
to enhance and benefit from our relationship with our Innu partners.
We proudly conclude the 2022 fiscal year with several significant accomplishments.
Despite the challenges imposed by the pandemic, our committed employees, together with our partners’
support, enabled our Company to deliver superior operational performance while maintaining a focus on
health and safety practices and minimizing our impact on the environment. The completion of the Phase II
project will create a positive regional impact for generations. Our local expertise, market leading high-
purity products, access to renewable power and stable operating jurisdiction are being recognized globally.
These strategic advantages present opportunities for the Québec Côte-Nord region as we pursue multiple
organic growth projects designed to unlock the region’s full potential.
In addition to our aspirations for growth, we continue to prioritize our local relationships and efforts to
provide opportunities to develop our team and workforce. In line with our values of respect and solidarity
with our Innu partners, we proudly became the first mining company in Québec to recognize the National
Day of Truth and Reconciliation as a day of remembrance for all our employees. Additionally, we initiated a
mentoring program aimed at integrating women into our workforce to maximize their opportunities for
success.
While we are proud of our local positive impact, our ability to significantly contribute to the fight against
climate change fuels our motivation. Only a small portion of the world’s iron ore production, including the
high-purity iron ore produced at Bloom Lake, provides the quality and purity required to qualify as DR feed
and contribute to the green steelmaking supply chain.
I am extremely grateful for the support received by our employees, partners and communities who share
our vision to produce a critical and strategic metal for the future.
Michael O’Keeffe, B AppSc (Metallurgy)
Executive Chairman and Former Chief Executive Officer
Mr. O’Keeffe was appointed Executive Chair of the Company on August 13, 2013 and CEO on October 3, 2014. On April 1, 2019,
Mr. O’Keeffe stepped down as CEO and remains Executive Chair 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 Mont Royal Resources.
David Cataford, Eng
Chief Executive Officer and Director
Mining engineer by training, Mr. Cataford joined Champion Iron in 2014 and was appointed to the position of Chief Executive Officer on
April 1, 2019. Prior to his appointment as Chief Executive Officer, he held the role of Chief Operating Officer at Champion Iron where he
played a key role in the management team. Mr. Cataford completed the acquisition and delivery of the successful restart of the Bloom
Lake Mine by managing its construction, its commissioning, and building a team composed of more than 900 top mining talents. In
addition to his successful performance history in executing acquisitions, Mr. Cataford held several management positions in the
Labrador Trough, including his tenure with Cliffs Natural Resources Inc. and ArcelorMittal. Mr. Cataford cofounded and held the role of
president for the North Shore and Labrador Mineral Processing Society. His career has been recognized by several accolades including
the Young Mining Professionals award and the Brendan Woods International Top Gun CEO award.
Alexandre Belleau, Eng
Chief Operating Officer
Mr. Belleau joined the team in 2016, following the Company's decision to acquire and recommission the sidelined Bloom Lake Mine. His
entrepreneurial and versatile background allowed him to successfully head the Bloom Lake mine restart in 2018. As Chief Operating
Officer, Mr. 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. Leading the charge where innovation and growth
intersect, Mr. Belleau’s most recent accomplishment is the completion of the Phase II expansion project. Prior to joining Champion Iron,
Mr. Belleau participated in the creation of two startups specializing in building and medical control technology and bioenergy. He also
worked in process and building energy efficiency and recreational products. Mr. Belleau holds a bachelor's degree in mechanical
engineering from the University of Sherbrooke and is an executive member of the Québec Mining Association.
Steve Boucratie
Senior 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
16 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.
14 Page
Michael Marcotte, CFA
Senior Vice-President, Corporate Development and Capital Markets
Michael initially 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.
Angela Kourouklis, CRIA, MBA
Senior Vice-President, Human Resources
Ms. Kourouklis has been in human resources management for nearly 20 years. She holds a Bachelor’s degree in Industrial Relations
from the Université de Montréal, an MBA from UQAM and an EMBA from the Université Paris Dauphine – PSL. Prior to joining Champion
Iron, Ms. Kourouklis worked in various sectors such as aerospace, hospitality, transportation, food industries and media. She was able to
implement, through her diverse experience and in various contexts, many management practices that position people at the heart of
the company. This approach has enabled her to foster culture, innovation and creativity.
Pradip Devalia, FCA
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.
15 Page
Sustainability is deeply anchored in Champion's culture as we aim to create a positive impact for all stakeholders. Champion’s business
strategy, annual objectives and company values guide our approach to sustainability. We strive to produce high-purity iron ore products
sustainably and with integrity by providing a safe and inclusive working environment, avoiding social inequities, respecting human
rights and protecting the environment and biodiversity. Champion is proud to be a market-leading, low-emission producer of one of the
highest quality iron ore products globally.
Champion recognizes the importance of optimizing the energy efficiency of its operations in order to minimize greenhouse gas
emissions and contribute to the global battle against climate change. As such, the Company is consistently investing in energy
consumption reduction initiatives to reduce its environmental footprint. In addition, the Company is investing in decarbonization
projects, including product research and development for higher-grade iron ore products.
Champion diligently overseas 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 Sustainability Report. The latest versions are available on the Company's website at www.championiron.com.
Sustainability Report
We measure 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 actively aims to obtain the best value from
the goods and services it procures, while stimulating the economy of local communities and Indigenous groups. In line with our
transparency values, we completed the Company's 2021 Sustainability Report, available on the Company's website at
www.championiron.com. As we seek to continuously improve our sustainability disclosure, the report onboarded Task Force on Climate-
Related Financial Disclosure.
Modern Slavery Statement
Champion recognizes that its activities can have an impact on human rights, either through its operations or through its relationships
with subcontractors and suppliers. As such, the Company is committed to implementing policies and practices that respect human
rights and ensure that its employees and business partners understand and live up to this commitment. Respect for human rights is
one of the fundamental elements of Champion's principles of sustainable development.
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 operations. The
Company's responsible procurement policy enables it 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 throughout its organization. This policy forms part of Champion's global perspective to fulfill its
responsibilities in connection with environmental, societal and ethical issues inherent to the Company's procurement processes. In the
course of its operations and activities, Champion diligently implements the policy's principles and commitments.
19 Page
Michael O’Keeffe, B AppSc (Metallurgy)
Executive Chairman and Former Chief Executive Officer (non-independent)
Mr. O’Keeffe was appointed Executive Chair of the Company on August 13, 2013 and CEO on October 3, 2014. On April 1, 2019, Mr.
O’Keeffe stepped down as CEO and remains Executive Chair 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 Mont Royal Resources.
David Cataford, Eng
Chief Executive Officer and Director (non-independent)
Mining engineer by training, Mr. Cataford joined Champion Iron in 2014 and was appointed to the position of Chief Executive Officer on
April 1, 2019. Prior to his appointment as Chief Executive Officer, he held the role of Chief Operating Officer at Champion Iron where he
played a key role in the management team. Mr. Cataford completed the acquisition and delivery of the successful restart of the
Bloom Lake Mine by managing its construction, its commissioning, and building a team composed of more than 900 top mining
talents. In addition to his successful performance history in executing acquisitions, Mr. Cataford held several management positions
in the Labrador Trough, including his tenure with Cliffs Natural Resources Inc. and ArcelorMittal. Mr. Cataford cofounded and held the
role of president for the North Shore and Labrador Mineral Processing Society. His career has been recognized by several accolades
including the Young Mining Professionals award and the Brendan Woods International Top Gun CEO award.
Andrew J. Love, B.Comm, MAICD
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 2008. 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.
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 an Australian corporate lawyer who has specialized in
mergers and acquisitions for over 40 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.
23 Page
Michelle Cormier, CPA
Non-Executive Director (independent)
Ms. 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. Ms. Cormier has been Operating Partner at Wynnchurch
Capital Canada, Ltd. since 2014. Ms. 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).
Ms. Cormier articled with Ernst & Young. She serves on the Board of Directors of Cascades Inc. and Uni-Select Inc.
Louise Grondin, P.Eng, MSc
Non-Executive Director (independent)
Ms. Grondin has been, since January 2021, working as an independent consultant after retiring from Agnico Eagle Mines Ltd. (“Agnico
Eagle”), 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. In 2013, she was named amongst the 100 Global Inspirational
Women in Mining, in 2015 she received the Rick W. Filotte Career Recognition Award and, in 2016, she was the recipient of the Women
in Mining Canada Trailblazer award. She also sits on the Board of the Canadian Mining Hall of Fame and is a member of the
Association of Professional Engineers of Ontario, the Ordre des ingénieurs du Québec and a fellow of the Canadian Academy of
Engineering.
Jyothish George, Ph.D
Non-Executive Director (independent)
Mr. George is currently Head of Marketing (copper & zinc metal) at Glencore. Immediately prior to his current role, Mr. George served as
head of marketing for iron ore at Glencore . Prior to that he was 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.
The Honourable Wayne G. Wouters, PC, OC
Non-Executive Director (independent)
The Honourable Wayne G. Wouters, PC, OC, has served as a director of the Company since 2016. Mr. Wouters has an honours bachelor
of commerce degree from the University of Saskatchewan and a master’s degree in economics from Queen’s University. He has been
a Strategic and Policy Advisor to McCarthy Tétrault LLP since April 2015 and is also a director of BlackBerry Limited, Canadian Utilities
Limited and Foran Mining Corporation. From 2009 to 2014, Mr. Wouters was the Clerk of the Privy Council of Canada and, in that
capacity, held the roles of Deputy Minister to the Prime Minister, Secretary to the Cabinet and Head of the Public Service. Prior to his
tenure as Clerk, Mr. Wouters was Secretary of the Treasury Board of Canada and served in deputy ministerial and other senior
positions in the Canadian public service. Mr. Wouters has received numerous awards, including Honorary Doctorates of Laws from the
Universities of Saskatchewan and Manitoba, the Queen’s Diamond Jubilee Medal and the André Mailhot Award for lifetime
achievement from the United Way Canada. He was inducted by the Prime Minister as a member of the Privy Council in 2014 and was
invested into the Order of Canada as an officer in 2017.
24 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 Principles and Recommendations and will continue to
adapt its governance practices to maintain this status or make changes as appropriate, in accordance with the nature and scale of
the Company's business.
A full copy of the 2022 fiscal year 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 on Champion’s
corporate governance policies, including its whistleblower policy.
Diversity Policy
The Company has adopted a Diversity Policy, a copy of which can be accessed at the Company’s website at www.championiron.com.
The Board aims to increase its gender diversity as Director and Senior Management positions become vacant and appropriately
qualified candidates become available. At the date of this report, 20% of the Company's Senior Executive team and 25% of its Board
positions are held by women. As at December 31, 2021, women represented 14% of the whole organization (11% as at
December 31, 2020).
25 Page
The following Champion Iron Limited (“Champion” or the “Company”) Directors' Report has been prepared as of May 26, 2022. This
Directors' Report is intended to supplement the audited consolidated financial statements for the year ended March 31, 2022 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 and definitions are used
throughout this Directors' Report: US$ (United States dollar), CA$ (Canadian dollar), t (tonnes), wmt (wet metric tonnes), dmt (dry metric
tonnes), Fe (iron ore), Mtpa (million tonnes per annum), M (million), km (kilometres), m (metres), FOB (free on board), LoM (life of mine),
Bloom Lake or Bloom Lake Mine (Bloom Lake Mining Complex), Phase II (Phase II expansion project), Kami Project (Kamistiatusset
project), EBITDA (earnings before interest, tax, depreciation and amortization), AISC (all-in sustaining costs) and EPS (earnings per
share). The terms “Champion” or the “Company” refer to Champion Iron Limited and/or one, or more, or all of its subsidiaries, as
applicable. The term “QIO” refers to the Company’s subsidiary and operator of Bloom Lake, Quebec Iron Ore Inc.
Non-IFRS and Other Financial Measures
Certain financial indicators used by the Company to analyze and evaluate its results are non-IFRS financial measures or ratios and
supplementary financial measures. Each of these indicators is not a standardized financial measure under the IFRS and might not be
comparable to similar financial measures used by other issuers. These indicators 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. The non-IFRS
and other financial measures included in this Directors' Report are: EBITDA, adjusted net income, cash on hand, EBITDA margin,
adjusted EPS, total cash cost or C1 cash cost, AISC per dmt sold, cash operating margin, cash profit margin, net average realized selling
price per dmt sold or net average realized FOB selling price per dmt sold, gross average realized selling price per dmt sold or gross
average realized FOB selling price per dmt sold and operating cash flow per share. When applicable, a quantitative reconciliation to the
most directly comparable IFRS measures is provided in section 20 - Non-IFRS and Other Financial Measures of this Directors' Report.
YEAR-ON-YEAR STRONG
FINANCIAL PERFORMANCE
“Our robust quarterly and annual operational results are
an ongoing testament to the commitment and
professionalism of our employees and team.”
David Cataford
28 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
1. Financial and Operating Highlights
Three Months Ended
March 31,
2021
2022
Variance
Year Ended
March 31,
2021
2022
Variance
Iron ore concentrate produced (wmt)
Iron ore concentrate sold (dmt)
1,869,000
1,889,900
2,011,400
1,971,100
(7%) 7,907,300 8,001,200
(4%) 7,650,600 7,684,500
Financial Data (in thousands of dollars, except per share amounts)
Revenues
Gross profit
EBITDA1
EBITDA margin1
Net income
Adjusted net income1
Basic EPS
Adjusted EPS1
Net cash flow from operating activities
Dividend per ordinary share declared and paid
Cash and cash equivalents
Total assets
Total non-current financial liabilities
Statistics (in dollars per dmt sold)
Gross average realized selling price1
Net average realized selling price1
Total cash cost (C1 cash cost)1
All-in sustaining cost1
Cash operating margin1
Statistics (in U.S. dollars per dmt sold)2
Gross average realized selling price1
Net average realized selling price1
Total cash cost (C1 cash cost)1
All-in sustaining cost1
Cash operating margin1
331,376
200,361
197,938
60 %
115,653
121,311
0.23
0.24
4,280
0.10
321,892
396,702
277,116
275,764
70 %
155,934
155,499
0.32
0.31
228,566
—
609,316
1,989,230 1,496,906
214,951
251,365
(16%) 1,460,806
958,199
(28%)
925,817
(28%)
(14%)
63 %
522,585
(26%)
537,768
(22%)
1.03
(28%)
(23%)
1.06
470,435
(98%)
0.10
—%
(47%)
321,892
33%
17%
1,281,815
817,756
819,477
64 %
464,425
470,681
0.97
0.98
624,419
—
609,316
1,989,230 1,496,906
214,951
251,365
207.1
175.3
60.0
70.5
104.8
164.1
139.1
47.4
55.7
83.4
220.0
201.3
54.4
65.1
136.2
173.9
159.3
43.0
51.4
107.9
(6%)
(13%)
10%
8%
(23%)
(6%)
(13%)
10%
8%
(23%)
225.9
190.9
58.9
73.1
117.8
181.1
153.3
47.0
58.3
95.0
182.3
166.8
54.2
62.8
104.0
139.1
127.3
41.0
47.5
79.8
(1%)
—%
14%
17%
13%
(2%)
13%
14%
6%
8%
(25%)
—%
(47%)
33%
17%
24%
14%
9%
16%
13%
30%
20%
15%
23%
19%
1 This is a non-IFRS financial measure, ratio or other financial measure. The measure is not a standardized financial measure under the financial reporting framework used to prepare the
Financial Statements and might not be comparable to similar financial measures used by other issuers. Refer to the section 20 - Non-IFRS and Other Financial Measures of this Directors'
Report for definitions of these metrics and reconciliations to the most comparable IFRS measures when applicable.
2 See the "Currency" section of this Directors' Report included in section 8 - Key Drivers.
29 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
2. Quarterly and Year-End Highlights
Health & Safety and Sustainability
•
•
•
•
•
No serious injuries or major environmental issues reported during the period;
An employee recordable injury frequency rate of 2.98 for the 2022 fiscal year, which is in line with Québec's open pit industry
performance;
COVID-19 testing laboratory and prevention measures maintained in line with the Government of Québec's (the “Government”)
directives to mitigate risks related to COVID-19 and limit the spread of variants;
Completed the Company's 2021 Sustainability Report, including Task Force on Climate-Related Financial Disclosure, available on the
Company's website at www.championiron.com; and
Committing to greenhouse gas (“GHG”) emissions reduction of 40% by 2030, based on 2014 emission intensity with additional
consideration for the targeted nameplate capacity of 15 Mtpa. The Company is also committed to be carbon neutral by 2050.
Financial
•
•
•
•
•
•
•
Inaugural dividend of $0.10 per ordinary share paid on March 1, 2022, in connection with the semi-annual results for the period ended
September 30, 2021, and an additional dividend of $0.10 per ordinary share declared by the Board of Directors (the “Board”) in
connection with the annual results for the period ended March 31, 2022;
Revenues of $331.4M and $1,460.8M for the three-month period and year ended March 31, 2022, respectively, compared to $396.7M
and $1,281.8M for the same periods in 2021;
EBITDA1 of $197.9M for the three-month period ended March 31, 2022, compared to $275.8M for the same period in 2021. EBITDA1 of
$925.8M for the year ended March 31, 2022, compared to $819.5M for the same period in 2021;
Net income of $115.7M for the three-month period ended March 31, 2022 (EPS of $0.23), compared to $155.9M for the same period in
2021 (EPS of $0.32). Net income of $522.6M for the year ended March 31, 2022 (EPS of $1.03), compared to $464.4M for the same
period in 2021 (EPS of $0.97);
Net cash flow from operating activities of $4.3M for the three-month period ended March 31, 2022, representing an operating cash
flow per share1 of $0.01, compared to $228.6M or $0.46 for the same period in 2021. Net cash flow from operating activities of
$470.4M for the year ended March 31, 2022, representing an operating cash flow per share1 of $0.93, compared to $624.4M or $1.30
for the same period in 2021;
Cash on hand1 and restricted cash of $396.4M as at March 31, 2022, compared to $543.4M as at December 31, 2021 and $680.5M as
at March 31, 2021, reflecting the ongoing construction of the Phase II expansion project, working capital changes and the semi-
annual dividend payment on March 1, 2022; and
US$400.0M general purpose revolving facility agreement signed on May 24, 2022 (the “Revolving Facility”), which refinanced the
previous Phase II credit facility (the “Credit Facility”), providing increased financial flexibility and enabling the Company to lift the
restricted cash covenant of $43.7M, and reduce its cost of capital.
1 This is a non-IFRS financial measure, ratio or other financial measure. The measure is not a standardized financial measure under the financial reporting framework used to prepare the
Financial Statements and might not be comparable to similar financial measures used by other issuers. Refer to the section 20 - Non-IFRS and Other Financial Measures of this Directors'
Report for definitions of these metrics and reconciliations to the most comparable IFRS measures when applicable.
30 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
2. Quarterly and Year-End Highlights (continued)
Operations
•
•
•
Production of 1,869,000 wmt of high-grade 66.2% Fe concentrate for the three-month period ended March 31, 2022, compared to
2,011,400 wmt of high-grade 66.5% Fe concentrate for the same period in 2021. Production of 7,907,300 wmt of high-grade 66.2% Fe
concentrate for the year ended March 31, 2022, compared to 8,001,200 wmt of high-grade 66.4% Fe for the same period in 2021;
Fe recovery rate of 82.7% and 83.2% for the three-month period and year ended March 31, 2022, respectively, compared to a
Fe recovery rate of 82.6% and 83.5%, respectively, for the same periods in 2021; and
Total cash cost1 of $60.0/dmt (US$47.42/dmt) (C1) and $58.9/dmt (US$47.02/dmt) for the three-month period and year ended
March 31, 2022, respectively, compared to $54.4/dmt (US$43.02/dmt) and $54.2/dmt (US$41.02/dmt), respectively, for the same
periods in 2021.
Growth and Development
•
•
•
Ongoing feasibility study evaluating the reprocessing and infrastructure required to commercially produce a 69% Fe Direct Reduction
(“DR”) pellet feed product. The study of this proposed project, scaled to convert approximately half of Bloom Lake’s increased
nameplate capacity, is expected to be completed in mid-2022;
Announcement of the entering into an acquisition agreement for the Pointe-Noire Iron Ore Pelletizing Facility located in Sept-Îles,
Québec (the “Pellet Plant”) on May 17, 2022, and announcement that the Company had entered into a memorandum of understanding
with a major international steelmaking partner to evaluate the recommissioning of the Pellet Plant to produce DR grade pellets; and
Advancing the Kami Project's feasibility study, expected to be completed in the second half of calendar 2022, whereby the project is
being evaluated for its capability to produce DR grade pellet feed product.
Phase II Milestones
•
•
•
Phase II commissioning achieved ahead of schedule in late April 2022, despite pandemic-related challenges, positioning the
Company to ramp up towards commercial production by the end of calendar 2022;
Completion of the first rail shipments containing 24,304 wmt of high-grade 66.2% Fe iron ore concentrate from the Phase II project
on May 3, 2022; and
Cumulative investments of $625.2M, including deposits, deployed on the project as at March 31, 2022.
1 This is a non-IFRS financial measure, ratio or other financial measure. The measure is not a standardized financial measure under the financial reporting framework used to prepare the
Financial Statements and might not be comparable to similar financial measures used by other issuers. Refer to the section 20 - Non-IFRS and Other Financial Measures of this Directors'
Report for definitions of these metrics and reconciliations to the most comparable IFRS measures when applicable.
2 See the "Currency" section of this Directors' Report included in note 8 - Key Drivers.
31 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
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 and related variants, in line with or exceeding Government guidelines.
On September 1, 2021, a COVID-19 vaccination passport became effective in the province of Québec for certain non-essential businesses,
which aimed to limit the spread of the pandemic. Despite this public health measure to protect people from COVID-19, the Omicron variant
rapidly increased cases of COVID-19 in late 2021 and early 2022, in the province and globally. As such, the Government introduced and
distributed rapid testing solutions to the general population and tightened its restrictions in advance of Christmas holiday gatherings. As there
was a consensus that one or more vaccine booster doses may be required to provide adequate protection, during the three-month period
ended March 31, 2022, the Québec vaccination campaign continued, providing eligible recipients with a third vaccine dose. Starting mid-
February, with public health care indicators starting to stabilize, the Government cautiously and gradually started easing health measures and
restrictions. Since March 12, 2022, the vaccination passport is no longer required in Québec.
The Company continuously reviews its COVID-19-related measures and protocols in order to safeguard the health and safety of its employees,
partners and local communities. The pandemic created and continues to create some operational inefficiencies. Early in the three-month
period ended March 31, 2022, the virus rapidly increased at the mine site and surrounding communities, forcing Management to allocate a
smaller workforce between operations and the Phase II project. The rapid spread of the Omicron variant also created additional logistical
complexities, due to increases in cases at the mine site and the implementation of preventive isolation measures. Accordingly, the Company
deployed additional measures in order to avoid a significant disruption in the Company's operations during this fiscal quarter, which
contributed to increasing operating expenses during the three-month period ended March 31, 2022.
Although the Company is managing its operations to mitigate risks related to COVID-19, significant uncertainties remain regarding the ultimate
impact that the pandemic may have on the overall economy and the demand for iron ore products. The pandemic's future impact on the
Company, including operations, supply chain and cash flows, remains uncertain and will depend on future developments, such as the duration
of the pandemic, the emergence of variants, the efficacy and regulatory actions to contain the virus.
The Company's full COVID-19 plan is available on its website at www.championiron.com.
4. Dividend on Ordinary Shares
The Board declared a dividend of $0.10 per ordinary share on May 25, 2022 (Montréal time) / May 26, 2022 (Sydney time), in connection with
the financial results for the fiscal year ended March 31, 2022, payable on June 28, 2022, to the Company's shareholders at the close of
business in Australia and Canada on June 7, 2022 (local time). The ordinary shares will begin trading on an ex-dividend basis at the open of
trading in Australia and Canada on June 6, 2022.
The Board will evaluate future dividends concurrently with the release of the Company’s semi-annual and final-annual results.
For shareholders holding ordinary shares on the Australian share register, the dividend will be paid in Australian dollars. The dividend amounts
received will be calculated by converting the dividend determined to be paid using the exchange rates applicable to Australian dollars five
business days prior to the dividend payment date, as published by the Bank of Canada.
Additional details on the dividends and related tax information can be found on the Company’s website at www.championiron.com under the
section Investors – Dividend Information.
32 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
5. Bloom Lake Phase II Commissioning
During the three-month period ended March 31, 2022, the Company advanced the work required to commission its Phase II project. As such,
the Company completed its first rail shipments containing 24,304 wmt of high-grade 66.2% Fe iron ore concentrate from the Phase II project
on May 3, 2022. The Company's first saleable Phase II high-grade iron ore concentrate is expected to be shipped from the port of Sept-Îles in
the first quarter of the 2023 fiscal year. This significant milestone represents a tangible step towards realizing Bloom Lake's potential to
become one of the largest global suppliers of high-purity iron ore.
As the Company anticipates reaching commercial production at Phase II by the end of calendar 20221, project milestones achieved and related
works undertaken during the three-month period ended March 31, 2022 included:
• Water-based commissioning of multiple process systems and all ancillary services at the plant;
• Obtained provincial government approval for future expansion of the tailings facilities to accommodate the full life of mine plan, while
awaiting final federal government authorization;
• Continuation of construction works; and
• Commissioning of the plant at the end of April 2022, with first rail shipments completed on May 3, 2022.
6. Decarbonization Initiatives
Product Research and Development
The steel industry is undergoing a structural shift in its production methods, including an increased focus on reducing greenhouse gas
emissions from the iron and steelmaking processes. This dynamic is expected to create a rising demand for higher-grade iron ore products and
a shift towards reduction technologies used to produce liquid iron, such as the use of direct reduced iron (“DRI”) in electric arc furnaces (“EAF”)
instead of blast furnaces-basic oxygen furnaces (“BF-BOF”).
Accordingly, the Company advanced its Research and Development (“R&D”) program which aims to develop technologies and products to
support the steelmaking transition from the BF-BOF method to the DRI-EAF method, while supporting emissions reduction in the BF-BOF
process.
During the three-month period and year ended March 31, 2022, the Company incurred product R&D expenses of $1,547,000 and $5,549,000,
respectively, compared to $336,000 and $1,258,000, respectively, for the same periods in 2021. The expenses incurred focused on two main
areas:
1.
2.
Development of an iron ore pellet feed consisting of more than 69% Fe; and
Development of a cold pelletizing technology.
Additionally, and as part of its commitment to participate in the iron and steel industry's decarbonization, the Company continued to invest and
actively collaborate with a European-based company which holds a proprietary cold pelletizing technology. During the year ended
March 31, 2022, the Company further increased its involvement with the European-based company with additional investments totalling
$4,476,000 (US$3,500,000), in the form of a convertible loan agreement and an equity investment. The objective of the cold pelletizing
technology is to substantially reduce emissions linked to the agglomeration of iron ore. 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 test the potential
of cold pelletizing technologies, towards industrial trials, jointly with this European-based company.
Emissions Reduction Initiatives
As part of its ongoing efforts to minimize the environmental impact of its operations, the Company committed to GHG emissions reduction of
40% by 2030, based on 2014 emissions intensity with additional consideration for the targeted nameplate capacity of 15 Mtpa. The Company
further committed to be carbon neutral by 2050. This GHG target is in line with the Paris Agreement 2 degrees Celsius scenarios, the Canadian
government GHG reduction and the Science Based Targets initiative (“SBTi”) frameworks. Towards this effort, the Company implemented a
working group mandated to identify emissions reduction initiatives and evaluate resources required to deploy a program to reach its GHG
emissions reduction objectives.
Recent initiatives include a partnership with Tugliq Energy Co. to initiate testing of electric pickup trucks designed for mining operations in
Northern climates, which are expected to reduce emissions.
1 See the "Cautionary Note Regarding Forward-Looking Statements" section of this Annual Report.
33 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
6. Decarbonization Initiatives (continued)
Direct Reduction Pellet Feed > 69% Fe
Since the fourth quarter of the 2021 fiscal year, the Company completed laboratory work and testing to produce a DR grade pellet feed iron ore
concentrate higher than 69% Fe with an average combined silica and alumina content below 1%. Preliminary results indicate that the Company
could upgrade the Bloom Lake iron ore concentrate to a higher grade with lower contaminants by using additional processes, including mild
regrinding and a silica flotation stage. This new DR pellet feed product is expected to be finer than the Company's existing products and rank
as one of the highest-quality DR pellet feed products available on the seaborne market.
As commercial production of DR pellet feed products would require additional reprocessing and infrastructure, the Company initiated a
feasibility study to evaluate the investments required to convert half of Bloom Lake's nameplate capacity of 15 Mtpa. Achieving DR pellet feed
commercial production would enable the Company to further engage with DRI-EAF based iron and steel producers, potentially benefit from
higher product pricing and enable the Company to participate further in reducing emissions in the steelmaking process.
During the three-month period ended March 31, 2022, the Company continued to advance the feasibility study, anticipated to be completed in
mid-2022.
Acquisition of an Iron Ore Pelletizing Facility
On May 17, 2022, the Company announced it has entered into a definitive purchase agreement (the “Purchase Agreement“) to acquire, via a
wholly-owned subsidiary, the Pointe-Noire iron ore pelletizing facility located in Sept-Îles, adjacent to the port facilities. The Company also
entered into a Memorandum of Understanding (the “MOU”) with a major international steelmaker (the “FS Partner”) to complete a feasibility
study to evaluate the re-commissioning of the Pellet Plant and produce DR grade pellets. The feasibility study will evaluate the investments
required to re-commission the Pellet Plant while integrating up-to-date pelletizing and processing technologies.
The MOU sets out a framework for Champion and the FS Partner to collaborate in order to complete the feasibility study, anticipated to occur in
2023. Subject to the feasibility study's positive findings and results, the MOU outlines a framework for a joint venture to produce DR grade iron
ore pellets to sell to third parties, including the FS Partner (the “Project”). Pursuant to the Purchase Agreement, Champion is required to comply
with various undertakings in connection with the Pellet Plant, including a commitment to design and operate the Project using exclusively
green energy sources, including electricity, natural gas, biofuels or renewable energy, as main power sources.
7. Key Drivers
A. Iron Ore Concentrate Price
The price of iron ore concentrate is one of the most significant factors affecting the Company’s financial results. As such, net cash flow from
operating activities 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% Fe iron ore concentrate, the Company’s iron ore product has proven to 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 based
on the high-grade CFR China Index (“P65”). 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, 2022, the average iron ore price increased substantially, compared to the previous quarter, as
a result of supply and demand factors. Accordingly, iron ore prices increased early in the period in tandem with China’s renewed focus on
infrastructure investment and announced measures to support the real estate sector. While the Chinese government pledged to support the
economy, including commitments for steel intensive infrastructure investments, Brazilian and Australian supplies were constrained with
weather and labour-related issues. Furthermore, the military conflict between Russia and Ukraine, initiated in late February, curtailed supply of
several commodities, including iron ore. Supply issues from high-grade iron ore export hubs in Ukraine and Brazil, in tandem with elevated
coking coal prices and robust steel prices, created positive support for the premium on high-grade iron ore products.
34 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)
The Chinese steel industry reported lower crude steel production for the three-month period ended March 31, 2022, compared to the same
prior-year period, attributable to restrictions imposed ahead of China’s February 2022 Olympics and a surge in COVID-19 cases. In fact, the
World Steel Association1 reported that China’s crude steel production totalled 246.26 million tonnes for the period, an 8.7% decrease from 2021.
The completion of the 2022 Beijing Winter Olympics, coupled with the positive seasonal demand, supported a resumption in output growth late
in the period. Offsetting the lower output in China, the World Steel Association1 reported that the world ex-China posted 213.25 million tonnes of
crude steel production for the three-month period ended March 31, 2022, a modest decrease compared to the same period in 2021.
During the three-month period ended March 31, 2022, the P65 index for high-grade iron ore fluctuated from a low of US$140.5/dmt to a high of
US$192.3/dmt. The P65 index average price for the period was US$169.7/dmt, an increase of 32% from the previous quarter, resulting in an
average premium of 19.8% over the P62 reference price of US$141.6/dmt.
During the three-month period ended March 31, 2022, the Company’s gross average realized selling price2 was US$164.1/dmt, before sea
freight and other costs and provisional pricing adjustments on tonnes in transit at the end of the previous quarter. The gross average realized
selling price2 of US$164.1/dmt was slightly lower than the P65 index average price for the period of US$169.7/dmt due to the negative impact
of sales based on fixed backward-looking iron ore prices, when prices were substantially lower compared to the P65 index average for the
current period. This negative impact was partially offset by sales in transit as at March 31, 2022, provisionally priced using an average forward
price of US$185.7/dmt, which is higher than the P65 index average price for the period. Taking into account sea freight and other costs and
sales adjustments, the Company's net realized FOB selling price2 was US$139.1/dmt compared to US$159.3/dmt for the same period in 2021.
During the year ended March 31, 2022, the P65 index for high-grade iron ore fluctuated from a low of US$101.8/dmt to a high of US$264.2/dmt.
The P65 index average price for the year was US$179.9/dmt, an increase of 25% from the same period in 2021, resulting in an average
premium of 17.4% over the P62 index reference price of US$153.3/dmt.
During the year ended March 31, 2022, the gross average realized selling price1 of US$181.1/dmt, before sea freight and other costs and
provisional pricing adjustments, is comparable to the P65 index average of US$179.9/dmt, demonstrating the Company's ability to track the
P65 high-grade index over the long term. Taking into account these latter, the net realized FOB selling price1 was US$153.3/dmt, compared to
US$127.3/dmt for the same period in 2021. The Company believes that it remains well positioned to benefit from iron ore prices which continue
to offer an attractive operating margin as it has no fixed price contracts in place, and the Bloom Lake Mine is not subject to royalties.
1 https://www.worldsteel.org/
2 This is a non-IFRS financial measure, ratio or other financial measure. The measure is not a standardized financial measure under the financial reporting framework used to prepare the
Financial Statements and might not be comparable to similar financial measures used by other issuers. Refer to the section 20 - Non-IFRS and Other Financial Measures of this Directors'
Report for definitions of these metrics and reconciliations to the most comparable IFRS measures when applicable.
35 Page
US$ 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'20Sep'20Dec'20Mar'21Jun'21Sep'21Dec'21Mar'22$90.00$120.00$150.00$180.00$210.00$240.00 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)
A significant portion 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 at the port of 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 P65 forward iron ore 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 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, 2022, a final price of US$169.3/dmt was established for the 856,200 tonnes of iron ore that
were in transit as at December 31, 2021 and which were previously evaluated using an average expected price of US$142.3/dmt. Accordingly,
during the three-month period ended March 31, 2022, positive pricing adjustments were recorded for tonnes subject to provisional prices as at
December 31, 2021, positively impacting revenues in the current quarter by US$27.0/dmt for the 856,200 tonnes of iron ore that were in transit
as at December 31, 2021. Over the total volume of 1,889,900 dmt sold during the current period, the positive adjustments represent US$12.2/
dmt. As at March 31, 2022, 691,100 tonnes of iron ore sales remained subject to provisional pricing adjustments, with the final price to be
determined in the subsequent reporting period (March 31, 2021: 1,007,000 tonnes). A gross forward provisional price of US$185.7/dmt has been
used as at March 31, 2022, to estimate the sales of the Company that remain subject to final price setting.
The following table details the Company’s exposure, as at March 31, 2022, to the movements in the iron ore price for the provisionally invoiced
sales volume:
(in thousands of 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,
2022
691,100
12,831
(12,831)
The sensitivities demonstrate the monetary impact on ore sales revenues resulting from a 10% increase and 10% decrease in realized selling
prices as at March 31, 2022, while holding all other variables constant, 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.
36 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
7. Key Drivers (continued)
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 several regions overseas
including historical sales to China, Japan, Europe, the Middle East and South Korea. 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.
During the three-month period ended March 31, 2022, the C3 index averaged US$22.9/t, a 26% decrease from the previous three-month period.
The lower freight rates are likely attributed to a combination of factors including Brazil’s rainy season hindering iron ore shipments, in addition
to a stabilization of port congestions globally experienced in the previous period. Later in the period, the C3 index experienced upward
momentum resulting from rising global fuel prices in tandem with sanctions imposed on Russia, which impacted energy prices. Furthermore,
China’s recent increase in COVID-19 cases caused transportation disruptions across the country, impacting vessel congestion at ports,
resulting in rising freight prices.
The industry has identified a historical 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 over time. As the freight cost for ocean transport between Sept-Îles and China is largely influenced by the C3 cost, a decrease in iron
ore prices typically results in lower ocean freight costs for the Company, resulting in a natural hedge for one of the Company's largest cost
components. With recent events impacting the seaborne iron ore supply and other freight rates, this historical relationship has experienced a
disconnect.
Due to its distance from main shipping hubs, Champion typically contracts vessels three to four weeks 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 uniformly throughout the year.
Despite these conditions influencing freight pricing, the Company benefits from a freight contract for one vessel per month until
December 2022, which is expected to reduce the Company’s freight premium volatility with a certain agreed-upon price premium above the
average C3 index plus a seasonal premium for winter conditions.
37 Page
US$ Sea Freight Cost per wmt – C3 Baltic Capesize Index (Brazil to China)Jun'20Sep'20Dec'20Mar'21Jun'21Sep'21Dec'21Mar'22$5.00$10.00$15.00$20.00$25.00$30.00$35.00$40.00$45.00
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
7. Key Drivers (continued)
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 the
majority of its long-term debt and lease liabilities are denominated in U.S. dollars. As such, the Company benefits from a natural hedge
between its revenues, sea freight costs, long-term debt and its lease liabilities. Despite this natural hedge, the Company is exposed to foreign
currency fluctuations as its mining operating expenses are mainly incurred in Canadian dollars. During the year ended March 31, 2022, the
Company entered into forward foreign exchange contracts to comply with its Senior Debt covenants.
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 majority of the Company's long-term debt and lease liabilities are 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$0.01 against the U.S. dollar will impact the debt revaluation by approximately 1%.
Exchange rates were as follows:
Q1
Q2
Q3
Q4
Year-end as at March 31
CA$ / US$
Average
Closing
FY2022
FY2021
Variance
FY2022
FY2021
Variance
1.2282
1.2600
1.2603
1.2662
1.2536
1.3853
1.3321
1.3030
1.2660
1.3219
(11) %
(5) %
(3) %
— %
(5) %
1.2394
1.2741
1.2678
1.2496
1.2496
1.3628
1.3339
1.2732
1.2575
1.2575
(9) %
(4) %
— %
(1) %
(1) %
Apart from these key drivers, the potential impact of the COVID-19 pandemic and the risk factors that are described in the “Risk Factors”
section of this Annual 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.
38 Page
Monthly Closing Exchange Rate – CA$/US$Jun'20Sep'20Dec'20Mar'21Jun'21Sep'21Dec'21Mar'22$1.20$1.24$1.28$1.32$1.36$1.40 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 (%)
Fe recovery (%)
Product Fe (%)
Iron ore concentrate produced (wmt)
Iron ore concentrate sold (dmt)
Financial Data (in thousands of dollars)
Revenues
Cost of sales
Other expenses
Net finance costs
Net income
EBITDA1
Statistics (in dollars per dmt sold)
Gross average realized selling price1
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,
2022
2021
Variance
2022
2021
Variance
5,071,700
5,388,200
10,459,900
3,796,300
5,636,100
9,432,400
34%
(4%)
11%
20,512,500
22,263,200
42,775,700
15,481,100
21,571,700
37,052,800
0.94
0.67
40%
0.92
0.72
4,904,100
30.3
82.7
66.2
1,869,000
1,889,900
5,237,800
30.7
82.6
66.5
2,011,400
1,971,100
(6%)
(1%)
—%
—%
(7%)
(4%)
20,972,100
29.9
83.2
66.2
7,907,300
7,650,600
20,598,700
30.7
83.5
66.4
8,001,200
7,684,500
331,376
116,658
26,648
2,269
115,653
197,938
207.1
175.3
60.0
70.5
104.8
396,702
110,299
14,591
5,430
155,934
275,764
220.0
201.3
54.4
65.1
136.2
(16%)
6%
83%
(58%)
(26%)
(28%)
1,460,806
458,678
84,871
11,045
522,585
925,817
1,281,815
428,882
43,693
22,428
464,425
819,477
(6%)
(13%)
10%
8%
(23%)
225.9
190.9
58.9
73.1
117.8
182.3
166.8
54.2
62.8
104.0
33%
3%
15%
28%
2%
(3%)
—%
—%
(1%)
—%
14%
7%
94%
(51%)
13%
13%
24%
14%
9%
16%
13%
Fourth Quarter of the 2022 Fiscal Year vs Fourth Quarter of the 2021 Fiscal Year
In the three-month period ended March 31, 2022, 10,459,900 tonnes of material were mined and hauled, compared to 9,432,400 tonnes during
the same period in 2021, an increase of 11%. The current strip ratio is in line with the revised mine plan, which includes preparation for Phase II
operations. The increase in material movement was enabled through the utilization of additional operational equipment compared to the same
prior-year period, offset by a longer haul cycle as material sourced from different pits, including those that deepened with mining activities
over time, contributed to a longer haul cycle year-over-year.
The iron ore head grade for the three-month period ended March 31, 2022 was 30.3%, compared to 30.7% for the same period in 2021. The
variation in head grade is attributable to the presence of some lower-grade ore being sourced and blended from different pits, which was
anticipated and is in line with the mining plan and the LoM head grade average.
Additionally, the Company's average Fe recovery rate remained stable quarter-over-quarter as a result of a constant recovery circuit.
Bloom Lake produced 1,869,000 wmt of 66.2% Fe high-grade iron ore concentrate during the three-month period ended March 31, 2022, a
decrease of 7%, compared to 2,011,400 wmt of 66.5% Fe during the same period in 2021. The slightly lower production is attributable to a lower
head grade and lower throughput. The plant processed 4,904,100 tonnes of ore during the three-month period ended March 31, 2022,
compared to 5,237,800 for the same prior-year period. The throughput for the period was negatively affected by the operational inefficiencies
caused by the COVID-19 Omicron variant, together with minor unplanned maintenances.
1
This is a non-IFRS financial measure, ratio or other financial measure. The measure is not a standardized financial measure under the financial reporting framework used to prepare the
Financial Statements and might not be comparable to similar financial measures used by other issuers. Refer to the section 20 - Non-IFRS and Other Financial Measures of this Directors'
Report for definitions of these metrics and reconciliations to the most comparable IFRS measures when applicable.
39 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)
2022 Fiscal Year vs 2021 Fiscal Year
On March 24, 2020, the Company announced the ramp-down of its operations following Government directives in response to the COVID-19
pandemic. Operations gradually ramped up following the Government's announcement in April 2020 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 its
impact on the Company and its operations. Once Government restrictions were lifted, the Company accelerated its mining activities and fully
resumed its production capacity.
The Company mined and hauled 42,775,700 tonnes of material during the year ended March 31, 2022, compared to 37,052,800 tonnes for the
same period in 2021. This increase in material mined and hauled is attributable to the utilization of additional operational equipment compared
to the same prior-year period and the negative impact of the COVID-19 pandemic on several of the Company's other activities early in the
comparative period. The strip ratio increased to 0.92 for the year ended March 31, 2022, compared to 0.72 for the same period in 2021. The
strip ratio is consistent with the revised mine plan which includes preparation for Phase II operations.
The iron ore head grade of 29.9% for the year ended March 31, 2022 was attributable to different sourcing pits, compared to 30.7% for the same
period in 2021 and is consistent with the LoM head grade average.
The plant processed 20,972,100 tonnes of ore during the year ended March 31, 2022, an increase of 2% over the same period in 2021. The iron
ore concentrate produced remained stable during the year ended March 31, 2022 despite a lower head grade, compared to the same period in
2021, as a result of continuous improvements and operational innovations allowing the Company to increase throughput stability and reach a
higher level of mill productivity.
9. Financial Performance
A. Revenues
(in U.S. dollars per dmt sold)
Index P62
Index P65
US$ Gross average realized selling price1
Freight and other costs
Provisional pricing adjustments
US$ Net average realized FOB selling price1
Foreign exchange rate conversion
CA$ Net average realized FOB selling price1
Three Months Ended
March 31,
Year Ended
March 31,
2022
2021 Variance
2022
2021 Variance
141.6
169.7
164.1
(37.2)
12.2
139.1
36.2
175.3
166.9
191.2
173.9
(23.0)
8.4
159.3
42.0
201.3
(15%)
(11%)
(6%)
62%
45%
(13%)
(14%)
(13%)
153.3
179.9
181.1
(35.3)
7.5
153.3
37.6
190.9
128.2
143.7
139.1
(20.5)
8.7
127.3
39.5
166.8
20%
25%
30%
72%
(14%)
20%
(5%)
14%
Fourth Quarter of the 2022 Fiscal Year vs Fourth Quarter of the 2021 Fiscal Year
During the three-month period ended March 31, 2022, 1,889,900 tonnes of high-grade iron ore concentrate were sold at the CFR China gross
average realized price1 of US$164.1/dmt, before freight and other costs and provisional pricing adjustments, compared to US$173.9/dmt for the
same prior-year period. The decrease in gross average realized selling price1 mainly reflects lower index prices during the three-month period
ended March 31, 2022, compared to the same prior-year period. Despite lower index prices, the gross average realized selling price1 of
US$164.1/dmt represents a premium of 15.9% over the benchmark P62 price for the period, compared to a premium of 4.2% for the same
period in 2021.
1 This is a non-IFRS financial measure, ratio or other financial measure. The measure is not a standardized financial measure under the financial reporting framework used to prepare the
Financial Statements and might not be comparable to similar financial measures used by other issuers. Refer to the section 20 - Non-IFRS and Other Financial Measures of this Directors'
Report for definitions of these metrics and reconciliations to the most comparable IFRS measures when applicable.
40 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)
Fourth Quarter of the 2022 Fiscal Year vs Fourth Quarter of the 2021 Fiscal Year (continued)
The gross average realized selling price1 of US$164.1/dmt was slightly lower than the P65 index average price of US$169.7/dmt for the period
due to the negative impact of sales based on backward-looking iron ore prices, when prices were substantially lower than the P65 index
average for the period. The gross average realized selling price1 also reflects the positive impact of sales at a determined price based on the
average forward price of US$185.7 at the expected settlement date for 691,100 tonnes which were in transit at the end of the period.
The average C3 index for the three-month period ended March 31, 2022 was US$22.9/t compared to US$18.0/t for the same period in 2021,
representing an increase of 27%, which contributed to higher freight costs in the three-month period ended March 31, 2022, compared to the
same prior-year period. The freight costs variation relative to the C3 index during the period was mainly due to the timing of the vessels'
booking. A dynamic also arose where the lower C3 index during the period, likely due to lower Brazilian shipments, had somewhat disconnected
with other bulk freight indices. As a result, vessel operators were not willing to book vessels using the C3 index when prices were low. The
Company expects to benefit from the quarter's low freight index in the upcoming period for sales contracts based on fixed backward-looking
indexes.
The net average realized selling price1 of US$139.1 for the three-month period ended March 31, 2022 was negatively impacted by a higher C3
index. Freight and other costs represented 23% of the gross average realized selling price for the period, compared to 13% for the same period
in 2021, which represents a variation of US$14.2/dmt. Provisional pricing adjustments on previous sales, which were directly correlated to the
increase in the P65 index early in the quarter contributed to increasing the net average realized selling price1. During the three-month period
ended March 31, 2022, the final price was established for the 856,200 tonnes of iron ore that were in transit as at December 31, 2021.
Accordingly, during the three-month period ended March 31, 2022, net positive provisional pricing adjustments were recorded as an increase in
revenues for the 856,200 tonnes, representing a positive impact of US$12.2/dmt for the period, compared to US$8.4/dmt for the same period
in 2021.
After taking into account sea freight and other costs of US$37.2/dmt and the positive provisional pricing adjustment of US$12.2/dmt, the
Company obtained a net average realized selling price1 of US$139.1/dmt (CA$175.3/dmt) for its high-grade iron ore delivered to the end
customer. Revenues totalled $331,376,000 for the three-month period ended March 31, 2022 compared to $396,702,000 for the same period
in 2021, reflecting the lower net average realized selling price1 as well as the negative volume impact attributable to the COVID-19 pandemic.
1 This is a non-IFRS financial measure, ratio or other financial measure. The measure is not a standardized financial measure under the financial reporting framework used to prepare the
Financial Statements and might not be comparable to similar financial measures used by other issuers. Refer to the section 20 - Non-IFRS and Other Financial Measures of this Directors'
Report for definitions of these metrics and reconciliations to the most comparable IFRS measures when applicable.
41 Page
$ per dmt soldQ4 FY2022 Net Realized Selling PriceUS$141.6US$169.7US$164.1US$(37.2)US$12.2US$139.1CA$36.2CA$175.3Index P62Index P65Gross Average RealizedSelling PriceFreight andOther CostsProvisional SalesAdjustmentNet Average RealizedSelling PriceFX ConversionCAD Net AverageRealized Selling Price$75.00$100.00$125.00$150.00$175.00 Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
9. Financial Performance (continued)
A. Revenues (continued)
2022 Fiscal Year vs 2021 Fiscal Year
For the year ended March 31, 2022, the Company sold 7,650,600 tonnes of iron ore concentrate, mainly to customers in China, Japan, South
Korea and Europe. While the high-grade iron ore P65 index price fluctuated between a low of US$101.8/dmt and a high of US$264.2/dmt during
the year ended March 31, 2022, the Company sold its product at a gross average realized selling price1 of US$181.1/dmt. The gross average
realized selling price is comparable to the average P65 high-grade index of US$179.9/dmt for the period. The Company expects its iron ore
concentrate pricing to continue tracking the P65 index in the long term.
Combining the gross average realized selling price1 with the positive provisional pricing adjustment of US$7.5/dmt, the Company sold its high-
grade iron ore at a price of US$188.6/dmt during the year ended March 31, 2022, compared to the P65 high-grade index average of US$179.9/
dmt. Deducting sea freight and other costs of US$35.3/dmt, the Company obtained a net average realized selling price1 of US$153.3/dmt
(CA$190.9/dmt) for its high-grade iron ore. The increase in freight and other costs in the year ended March 31, 2022, compared to the same
period in 2021, negatively impacted the net average realized selling price1 for the period by US$14.8/dmt. As such, revenues totalled
$1,460,806,000 for the year ended March 31, 2022, compared to $1,281,815,000 for the same period in 2021, mainly as a result of a higher
gross average realized selling price1, partially offset by higher freight and other costs and the negative impact of foreign exchange rates.
B. Cost of Sales
Cost of sales represents mining, processing, and mine site-related general and administrative (“G&A”) expenses as well as rail and port
operation costs. It also includes specific and incremental costs related to COVID-19.
For the three-month period ended March 31, 2022, the cost of sales totalled $116,658,000, compared to $110,299,000 for the same period in
2021. During the three-month period ended March 31, 2022, the total cash cost1 or C1 cash cost1 per tonne, excluding specific and incremental
costs related to COVID-19, totalled $60.0/dmt, compared to $54.4/dmt for the same period in 2021. The total cash cost1 for the three-month
period ended March 31, 2022 was negatively impacted by fuel price increases, longer haul cycle times associated with the current mine plan,
and the utilization of additional operational mining equipment in order to prepare for Phase II. Increased explosives costs also contributed to
higher cash costs1 for the period.
For the year ended March 31, 2022, the Company produced high-grade iron ore at a total cash cost1 amounting to $58.9/dmt, compared to
$54.2/dmt for the year ended March 31, 2021. The variation is attributable to the same factors that affected the total cash cost1 for the three-
month period ended March 31, 2022. In addition, minor unplanned maintenances contributed to the higher cash cost1 for the year ended
March 31, 2022.
C. Gross Profit
The gross profit for the three-month period ended March 31, 2022 totalled $200,361,000, compared to $277,116,000 for the same prior-year
period. The decrease in gross profit is mainly attributable to lower revenues, as a result of a lower net average realized selling price1 of $175.3/
dmt for the three-month period ended March 31, 2022, compared to $201.3/dmt for the same period in 2021 and lower volume of iron ore
concentrate sold. The lower net average realized selling price1, compared to the same prior-year period, is due to the negative impact of higher
freight and other costs and lower P65 index average price, partially offset by a favourable provisional price adjustment on previous sales.
The gross profit for the year ended March 31, 2022 totalled $958,199,000, compared to $817,756,000 for the same period in 2021. The increase
is largely driven by the higher net average realized selling price1 of $190.9/dmt for the year ended March 31, 2022, compared to $166.8/dmt for
the same period in 2021. The higher revenues were partially offset by higher production costs mainly attributable to increased fuel and
explosives costs.
1 This is a non-IFRS financial measure, ratio or other financial measure. The measure is not a standardized financial measure under the financial reporting framework used to prepare the
Financial Statements and might not be comparable to similar financial measures used by other issuers. Refer to the section 20 - Non-IFRS and Other Financial Measures of this Directors'
Report for definitions of these metrics and reconciliations to the most comparable IFRS measures when applicable.
42 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
9. Financial Performance (continued)
D. Other Expenses
(in thousands of dollars)
Share-based payments
G&A expenses
Sustainability and other community expenses
Product R&D expenses
Bloom Lake Phase II start-up costs
Three Months Ended
March 31,
Year Ended
March 31,
2022
2021 Variance
2022
2021 Variance
6,689
8,094
4,353
1,547
5,965
26,648
2,439
7,905
3,911
336
—
14,591
174 %
2 %
11 %
360 %
— %
83 %
12,818
31,769
16,983
5,549
17,752
84,871
3,983
23,594
14,858
1,258
—
43,693
222 %
35 %
14 %
341 %
— %
94 %
The higher share-based payments for the three-month period and year ended March 31, 2022, compared to the same prior-year periods is
attributable to the change in classification of share-based payment arrangements, initially classified as equity-settled instruments. As the
Company modified some of the RSUs, PSUs and DSUs during the year ended March 31, 2022 to allow the holders to elect the form of
settlement for vested share-based units granted, the Company reassessed for all prior awards granted its cash obligation at fair value using
the share price as at March 31, 2022. The increase in share-based payments for the year ended March 31, 2022 also reflects the costs
associated with an increase in the numbers of performance share units granted to key employees, as part of the Company's remuneration
policy to retain talented employees and provide alignment of interests between such key employees and the Company's shareholders. A part of
these performance share units are linked to the achievement of certain milestones relating to the Phase II project and do not have a significant
dilutive impact on the Company's current shareholders.
G&A expenses were stable for the three-month period ended March 31, 2022, compared to the same period in 2021. The variation in G&A
expenses in the year ended March 31, 2022, compared to the same prior-year period, represents costs associated with a higher headcount and
professional fees required to support the Company's growth initiatives, as well as increased insurance costs impacting the mining industry.
Higher sustainability and other community expenses in the three-month period and year ended March 31, 2022 reflected the Company's
increased focus on sustainability.
The variation in R&D expenses in the three-month period and year ended March 31, 2022, compared to the same periods in 2021, is due to the
advancement of the strategy to develop technologies and products supporting emissions reduction, as detailed in section 6 — Decarbonization
Initiatives. R&D expenses are mainly comprised of consultant fees and salaries and benefits.
During the three-month period and year ended March 31, 2022, the Company incurred pre-commercial start-up costs for the Phase II project,
mainly related to staff mobilization and training.
E. Net Finance Costs
Fourth Quarter of the 2022 Fiscal Year vs Fourth Quarter of the 2021 Fiscal Year
Net finance costs decreased to $2,269,000 for the three-month period ended March 31, 2022, compared to $5,430,000 for the same period in
2021, mainly as a result of a foreign exchange gain compared to a foreign exchange loss in 2021 and higher capitalization of borrowing costs
during the construction period of Phase II.
The Company benefits from a natural hedge between its revenues generated in U.S. dollars and its U.S. denominated debt and lease liabilities.
During the three-month period ended March 31, 2022, the foreign exchange gain amounted to $847,000, compared to a foreign exchange loss
of $2,108,000 in the same period in 2021. Realized and unrealized foreign exchange gain is 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, 2022, compared to
December 31, 2021. The appreciation of the Canadian dollar contributed to a foreign exchange gain on the Company's Senior Debt and on the
Phase II mining equipment and railcars financed through debt or lease liabilities, partially offset by a foreign exchange loss on its accounts
receivable and cash on hand1 denominated in U.S. dollars.
1 This is a non-IFRS financial measure, ratio or other financial measure. The measure is not a standardized financial measure under the financial reporting framework used to prepare the
Financial Statements and might not be comparable to similar financial measures used by other issuers. Refer to the section 20 - Non-IFRS and Other Financial Measures of this Directors'
Report for definitions of these metrics and reconciliations to the most comparable IFRS measures when applicable.
43 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
9. Financial Performance (continued)
E. Net Finance Costs (continued)
Fourth Quarter of the 2022 Fiscal Year vs Fourth Quarter of the 2021 Fiscal Year (continued)
Interest expenses on long-term debt decreased in the three-month period ended March 31, 2022, compared to the same prior-year period, due
to the progress on the Phase II project and the build-up of qualifying assets, resulting in a higher capitalization rate being used to determine
the amount of borrowing costs eligible for capitalization.
2022 Fiscal Year vs 2021 Fiscal Year
Net finance costs decreased to $11,045,000 for the year ended March 31, 2022, compared to $22,428,000 for the same period in 2021. Lower
net finance costs are mainly due to lower foreign exchange losses, lower interest costs on long-term debt, partially offset by higher standby
commitment fees on undrawn available long-term debt balances.
Lower interest expenses on long-term debt are attributable to the progress on the Phase II project and the build-up of qualifying assets,
resulting in a higher capitalization rate being used to determine the amount of borrowing costs eligible for capitalization. Standby commitment
fees which are not eligible for capitalization totalled $5,031,000 for the year ended March 31, 2022, compared to $975,000 for the same prior-
year period.
F. Other Income
During the three-month period and year ended March 31, 2022, other income totalled $9,868,000 and $8,560,000, respectively, and mainly
represents the realized and unrealized change in the fair value on non-current investments. For the same periods in 2021, other income of
$3,952,000 and $10,237,000, respectively, represented the change in the fair value of non-current investments attributable to share price
increases in the Company's equity investments during the periods and to a gain on the disposal of equity investments.
G. Income Taxes
The Company and its subsidiaries are subject to tax in Australia and Canada. 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.
During the year ended March 31, 2022, Champion, incorporated under the laws of Australia, incurred a current tax expense related to the
dividend received from its Canadian subsidiary and had partially recognized a deferred tax liability on its investments in the subsidiary. 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 mining profit, as defined by the Mining Tax Act
(Québec), divided by revenues. Progressive tax rates are based on 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, 2022 (2021: 26.50%).
During the year ended March 31, 2022, current income and mining tax expenses totalled $47,864,000 and $306,480,000, respectively,
compared to $100,638,000 and $280,855,000, respectively, for the same periods in 2021. The variation is mainly due to the change of taxable
profit associated with the volatility of iron ore prices and the Company being subject to a 5% withholding tax in connection with the payment of
dividends. During the year ended March 31, 2022, deferred income and mining tax expenses totalled $17,795,000 and $41,778,000,
respectively, compared to $4,475,000 and $16,592,000, respectively, for the same periods in 2021. The variation in deferred tax expenses is
mainly due to temporary differences between the carrying amounts of property, plant and equipment and the tax basis.
The combined provincial and federal statutory tax and mining taxes was 38% while the Company’s effective tax rates (“ETRs”) were 36% and
40%, respectively, for the three-month period and year ended March 31, 2022, compared to 40% and 39%, respectively, for the same periods in
2021. The lower ETR for the three-month period ended March 31, 2022 was due to a lower mining profit margin, which resulted in a lower tax
rate, as per the progressive mining tax rates schedule detailed previously, partially offset by the impact of a capital loss not recognized,
combined with the 5% withholding tax paid by Champion on the dividend received from QIO and the recognition of a deferred tax liability on its
investments in QIO.
44 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
9. Financial Performance (continued)
G. Income Taxes (continued)
During the year ended March 31, 2022, the Company paid $475,278,000 in income and mining taxes, of which $191,542,000 was for mining
and income taxes for the period of April 1, 2020 to March 31, 2021, and $283,736,000 was for tax installments. Since monthly tax installments
are based on the previous 2021 fiscal year's taxable income, which was lower due to the iron ore concentrate price volatility during the year
ended March 31, 2022, current income and mining taxes of $306,480,000 exceed the $283,736,000 paid in tax installments, resulting in
income and mining taxes payable of $22,744,000 as at March 31, 2022.
H. Net Income & EBITDA1
Fourth Quarter of the 2022 Fiscal Year vs Fourth Quarter of the 2021 Fiscal Year
For the three-month period ended March 31, 2022, the Company generated net income of $115,653,000 (EPS of $0.23), compared to
$155,934,000 (EPS of $0.32) for the same period in 2021. The net income was mainly affected by lower gross profits associated with a lower
P65 index average price and higher sea freight and other costs during the period, as well as by lower volumes of iron ore concentrate sold,
compared to the same prior-year period. The decrease in net income is partially offset by lower current income and mining taxes as a result of
lower operating earnings.
For the three-month period ended March 31, 2022, the Company generated an EBITDA1 of $197,938,000, including non-cash share-based
compensation and pre-commercial start-up costs for Phase II totalling $12,654,000, representing an EBITDA margin1 of 60%, compared to
$275,764,000, representing an EBITDA margin1 of 70% for the same period in 2021. The decrease in EBITDA1 period-over-period is primarily due
to lower revenue from lower net average realized selling prices1.
2022 Fiscal Year vs 2021 Fiscal Year
For the year ended March 31, 2022, the Company generated net income of $522,585,000 (EPS of $1.03), compared to $464,425,000 (EPS of
$0.97) for the same period in 2021. The increase in net income is mainly due to higher gross profits and lower net finance costs mainly
attributable to a lower foreign exchange loss for the period. The increase is partially offset by Bloom Lake Phase II start-up costs, higher G&A
expenses and higher current income and mining taxes as a result of higher operating earnings.
For the year ended March 31, 2022, the Company generated an EBITDA1 of $925,817,000, representing an EBITDA margin1 of 63%, compared to
$819,477,000, representing an EBITDA margin1 of 64% for the same period in 2021. This increase in EBITDA1 is mainly attributable to the
increase in the net average realized selling price1, partially offset by higher production costs and pre-commercial start-up costs for Phase II.
I. AISC1 and Cash Operating Margin1
During the three-month period ended March 31, 2022, the Company realized an AISC1 of $70.5/dmt, compared to $65.1/dmt for the same
period in 2021. The variation relates to higher total cash costs1 and the negative impact of lower volumes of iron ore concentrate sold.
Deducting the AISC1 of $70.5/dmt from the net average realized selling price1 of $175.3/dmt, the Company generated a cash operating margin1
of $104.8/dmt for each tonne of high-grade iron ore concentrate sold during the three-month period ended March 31, 2022, compared to
$136.2/dmt for the same prior-year period. The variation is mainly due to a lower net average realized selling price1 for the period.
During the year ended March 31, 2022, the Company recorded an AISC1 of $73.1/dmt, compared to $62.8/dmt for the same period in 2021. The
variation is due to higher total cash costs1, higher sustaining capital expenditures related to higher stripping and mining activities and higher
investments made in tailings lifts associated with preventive and corrective interventions on two specific dikes. The cash operating margin1
totalled $117.8/dmt for the year ended March 31, 2022, compared to $104.0/dmt for the same period in 2021. The variation is mainly due to a
higher net average realized selling price1.
1 This is a non-IFRS financial measure, ratio or other financial measure. The measure is not a standardized financial measure under the financial reporting framework used to prepare the
Financial Statements and might not be comparable to similar financial measures used by other issuers. Refer to the section 20 - Non-IFRS and Other Financial Measures of this Directors'
Report for definitions of these metrics and reconciliations to the most comparable IFRS measures when applicable.
45 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
10. Exploration Activities and Regional Growth
Exploration and Evaluation Activities
During the three-month period and year ended March 31, 2022, the Company maintained all of its properties in good standing and did not enter
into any farm-in/farm-out arrangements. During the year ended March 31, 2022, $400,000 and $3,711,000 in exploration and evaluation
expenditures were incurred, respectively, compared to $226,000 and $581,000 for the same periods in 2021.
During the year ended March 31, 2022, exploration and evaluation expenditures mainly consisted of $1,300,000 in acquisition costs for the
Lac Lamêlée South property. Exploration expenditures also included costs associated with work related to updating the Kami Project feasibility
study, minor exploration work and claim renewal fees.
In the comparative periods, exploration and evaluation expenditures mainly consisted of fees required to maintain the Company's exploration
properties, exploration expenses related to drilling and geophysical work at the Company’s Gullbridge-Powderhorn property, located in Northern
Central Newfoundland, and the staking costs for additional exploration claims.
Acquisition of Exploration Property from Fancamp Exploration Ltd. (“Fancamp”)
On July 12, 2021, the Company completed the acquisition of the Lac Lamêlée South property and a 1.5% net smelter royalty interest on the
Company's Moiré Lake property and the Company's Fermont property portfolio, including the O’Keefe-Purdy, Harvey-Tuttle, and Consolidated
Fire Lake North properties from Fancamp.
The Lac Lamêlée South property adds an additional 74.7 Mt1 of historical indicated resources and 229.3 Mt1 of historical inferred resources, with
the project located adjacent to the Company's existing development properties south of Bloom Lake. 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.
Consideration paid to Fancamp included $1,300,000 in cash, an undertaking in favour of Fancamp to make future finite production payments
on a fixed amount of future iron ore production payable once certain production thresholds have been reached with respect to the Lac Lamêlée
South, Moiré Lake and Fermont property portfolio properties.
Concurrently with the transaction, the Company also staked 11 additional claims directly adjacent to the Lac Lamêlée South property, in order
to supplement its holdings in this area.
1 The historical Lac Lamêlée resource estimates are based on the NI 43-101 technical report entitled “NI 43-101 Technical Report and Mineral Resource Estimate on the Lac Lamêlée
South Resources Quebec - Canada” by Met-Chem, a division of DRA Americas Inc. dated July 28, 2017 and having an effective date of January 26, 2017. 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 mineralizations have not been prepared in accordance with the JORC Code (2012 edition)
and the ASX Listing Rules.
46 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
10. Exploration Activities and Regional Growth (continued)
Notes
1.
The historical Lac Lamêlée South resource estimates are based on the NI 43-101 technical report entitled “NI 43-101 Technical Report and Mineral Resource Estimate on the
Lac Lamêlée South Resources Quebec - Canada” by Met-Chem, a division of DRA Americas Inc. dated July 28, 2017 and having an effective date of January 26, 2017. 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 mineralization have not been prepared in accordance with the
JORC Code (2012 edition) and the ASX Listing Rules.
The historical Consolidated Fire Lake 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 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
Iron Limited 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 Champion Iron Limited’s existing mining tenements and therefore the reports on these mineralization have not been
prepared in accordance with the JORC Code (2012 edition) and the ASX Listing Rules.
The historical Quinto Claims resource estimates are based on the NI 43-101 technical reports entitled “Mineral Resource Technical Report, Peppler Project, Quebec” (as regards
Peppler Lake), “Mineral Resource Technical Report, Lamelee Project, Quebec” (as regards Lamêlée) and “Mineral Resource Technical Report, Hobdad Project, Quebec” (as
regards Hobdad), each prepared 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 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 Iron
Limited 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 Champion Iron Limited’s existing mining tenements and therefore the reports on these mineralization have not been prepared in
accordance with the JORC Code (2012 edition) and the ASX Listing Rules.
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 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 Iron Limited 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 Champion Iron Limited’s existing mining tenements and therefore the reports on these mineralization have not been prepared in accordance with the JORC
Code (2012 edition) and the ASX Listing Rules.
Certain resources mentioned are foreign estimates from an Australian perspective.
2.
3.
4.
5.
47 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
10. Exploration Activities and Regional Growth (continued)
Acquisition of the Kami Project
On April 1, 2021, the Company completed the acquisition of the Kami Project and certain related contracts. The Kami Project and related mining
properties are located in the Labrador Trough geological belt in southwestern Newfoundland, near the Québec border. Refer to
note 8 — Acquisition of the Kami Project in the Financial Statements.
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 Iron Ore Corp. ("Alderon"), the Kami Project's former owner, 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", "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 reserves1.
Alderon completed an updated feasibility study on the Kami Project in September 2018. The Company is currently revising the Kami Project's
scope with the aim of maximizing the project's value by incorporating the most recent mining technologies. Over the upcoming months, the
Company will evaluate the amenability of the deposit's feasibility study to produce a DR grade product. The updated feasibility study is
expected to be completed in the second half of calendar 2022, as part of the Company's strategy to evaluate its growth alternatives within its
property portfolio.
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 mineralizations 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.
48 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
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 used in investing activities
Net cash flow used in financing activities
Net increase (decrease) in cash and cash equivalents
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Operating cash flow per share1
Operating
Three Months Ended
March 31,
Year Ended
March 31,
2022
2021
2022
2021
144,336
(140,056)
4,280
(134,297)
(14,793)
(144,810)
(1,380)
468,082
321,892
0.01
168,693
59,873
228,566
(91,439)
(15,314)
121,813
(2,137)
489,640
609,316
0.46
614,677
(144,242)
470,435
(635,465)
(118,141)
(283,171)
(4,253)
609,316
321,892
0.93
519,097
105,322
624,419
(245,085)
(26,300)
353,034
(25,081)
281,363
609,316
1.30
During the three-month period ended March 31, 2022, the Company generated operating cash flows of $144,336,000 before working capital
items, compared to $168,693,000 for the same period in 2021. The decrease is largely driven by a lower net average realized selling price1 and
lower volumes of concentrate sold. Changes in working capital items for the period were mainly affected by the timing of supplier payments,
related to Phase II construction and customer receipts. Based on the foregoing, the operating cash flow per share1 for the three-month period
ended March 31, 2022 was $0.01, compared to an operating cash flow per share1 of $0.46 for the same period in 2021.
During the year ended March 31, 2022, the Company's operating cash flows before working capital items totalled $614,677,000, compared to
$519,097,000 for the same period in 2021. The variation is driven by a higher net average realized selling price1. In addition to the payment of
$191,542,000 for mining and income taxes for the April 1, 2020 to March 31, 2021 period, changes in working capital items during the year
ended March 31, 2022 were mainly affected by the timing of supplier payments and customer receipts. After working capital items, the
operating cash flow per share1 for the period totalled $0.93, compared to $1.30 for the same period in 2021.
Investing
i. Purchase of Property, Plant and Equipment
During the three-month period and year ended March 31, 2022, the Company invested $117,779,000 and $519,322,000, respectively, in
addition to property, plant and equipment, compared to $74,500,000 and $174,650,000, respectively, for the same periods in 2021. The
following table details these investments:
(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,
Year Ended
March 31,
2022
2021
2022
2021
—
7,581
4,162
11,743
83,669
22,367
117,779
839
7,346
5,008
13,193
45,971
15,336
74,500
27,512
35,747
13,697
76,956
354,035
88,331
519,322
8,165
22,831
11,762
42,758
97,087
34,805
174,650
1 This is a non-IFRS financial measure, ratio or other financial measure. The measure is not a standardized financial measure under the financial reporting framework used to prepare the
Financial Statements and might not be comparable to similar financial measures used by other issuers. Refer to the section 20 - Non-IFRS and Other Financial Measures of this Directors'
Report for definitions of these metrics and reconciliations to the most comparable IFRS measures when applicable.
49 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
11. Cash Flows (continued)
Investing (continued)
i. Purchase of Property, Plant and Equipment (continued)
Sustaining Capital Expenditures
Early in the 2021 fiscal year, the Company ramped down its operations following Government directives in response to the COVID-19 pandemic
and implemented several measures in its efforts to mitigate the risks related to the spread of the virus. As a result, the overall sustaining
capital expenditures were lower and delayed in the 2021 fiscal year, compared to the 2022 fiscal year.
The increase in tailings-related investments for the year ended March 31, 2022, compared to the same period in 2021, is due to preventive
works performed on the dikes. As part of the Company's ongoing and thorough tailings infrastructure monitoring and inspections, the Company
continues to invest in its safe tailings strategy. Preventive and corrective interventions on two specific dikes were scheduled for the 2022
fiscal year, with $27,512,000 spent to correct identified discrepancies on specific dikes from their original designs, compared to works
completed by the asset’s previous owner.
The increase in stripping and mining activities during the year ended March 31, 2022, compared to the same period in 2021, was anticipated
with the preparation for Phase II project operations and was also attributable to the ramp-down of operations in the first quarter of the 2021
fiscal year, mandated by the Government's COVID-19 containment directives, whereby operations were negatively affected in the comparable
period.
The Company's mining equipment maintenance program reflects the work planned and undertaken during the year ended March 31, 2022.
Phase II
For the year ended March 31, 2022, $354,035,000 was spent in capital expenditures. Cumulative investments of $625,200,000, including
deposits, were deployed on the project as at March 31, 2022.
Other Capital Development Expenditures at Bloom Lake
During the three-month period ended March 31, 2022, other capital development expenditures at Bloom Lake totalled $22,367,000. The
expenditures mainly consisted of $13,750,000 in deposits for production equipment to be commissioned and financed in the future through the
finance agreement with Caterpillar Financial Services Limited, $4,365,000 in borrowing costs capitalized during the development period of the
Phase II project and an investment of $1,948,000 to improve mill and other infrastructure capacity.
During the year ended March 31, 2022, other capital development expenditures at Bloom Lake totalled $88,331,000. During the year ended
March 31, 2022, cash outflows include $37,501,000 in deposits for production equipment to be commissioned, an investment of $26,558,000
to increase mill capacity and other infrastructure improvements, capitalized borrowing costs of $15,040,000, related to the Phase II project
and a remaining investment of $3,851,000 in lodging infrastructure at the mine site, in order to accommodate a larger workforce. During the
year ended March 31, 2022, other capital development expenditures were offset by the receipt of a government grant totalling $6,234,000,
related to the Company’s greenhouse gas emissions and energy consumption reduction initiatives. The Company qualified for a grant of up to
$21,817,000.
During the three-month period and year ended March 31, 2021, other capital development expenditures at Bloom Lake totalled $15,336,000
and $34,805,000, respectively. The investment for the three-month period ended March 31, 2021 mainly consisted of lodging infrastructure
investments at the mine site to accommodate an increasing workforce and prepayments for production equipment. The investment for the
year ended March 31, 2021 also included other infrastructure upgrades at the mine, the commissioning of new service equipment and the
acquisition of additional used railcars.
ii. Acquisition of the Kami Project
During the year ended March 31, 2022, the Company completed the acquisition of the Kami Project and certain related contracts (refer to
note 8 — Acquisition of the Kami Project in the Financial Statements). The consideration included a cash payment of $15,000,000, in addition
to $444,000 in transaction costs.
50 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
11. Cash Flows (continued)
Investing (continued)
iii. Advance Payments
During the three-month period and year ended March 31, 2022, the Company made advance payments totalling $15,267,000 and $97,067,000,
respectively, for infrastructure upgrades required to accommodate the anticipated increase in Phase II production volumes and for Phase II rail
access, compared to $9,200,000 and $15,211,000, respectively, for the same prior-year periods. These advance payments are part of the
$633.8M construction budget and the increase, compared to the same prior-year periods, is attributable to the project's advancement.
iv. Other Investing Activities
During the year ended March 31, 2022, the Company executed a US$2,500,000 convertible loan to a private entity in connection with its cold
pelletizing R&D activities. The Company also acquired common shares of this private entity and fully disposed some of its other marketable
securities investments, resulting in net proceeds from non-current investments of $5,034,000, compared to $2,079,000 for the same period in
2021.
During the year ended March 31, 2021, the Company transferred $44,972,000 (US$35,000,000) into a restricted account for potential Phase II
project cost overruns, pursuant to a Senior Debt covenant. The cash in the restricted account is expected to be released once Phase II
operations satisfy the Senior Debt covenants and conditions.
Financing
During the three-month period ended March 31, 2022, the Company drew down $27,516,000, of which $20,000,000 is related to the IQ Loan to
finance the increase in transshipment capacity by SFPPN and the remaining cash inflow is related to the CAT Financing in connection with the
funding of Phase II mining equipment. Drawdowns made for the year ended March 31, 2022 were comprised of $60,000,000, $30,000,000 and
$30,874,000 related to the IQ Loan, FTQ loan and CAT Financing, respectively.
During the three-month period and year ended March 31, 2022, the Company commenced repayment of the CAT Financing in the amount of
$2,116,000. During the same prior-year periods, the Company fully repaid a revolving facility of $25,262,000 (US$20,000,000) that was
initially drawn in the 2021 fiscal year to face the uncertainty related to the COVID-19 pandemic. During the year ended March 31, 2022, the
Company incurred and paid $4,373,000 for new financing transaction costs, compared to $7,888,000 for the same period in 2021, related to
the amendment of the Senior Debt, which was increased to fund the completion of the Phase II project.
During the three-month period ended March 31, 2022, 10,000,000 warrants and 120,000 stock options were exercised for proceeds totalling
$11,553,000, compared to 12,733,000 warrants and 110,000 stock options for proceeds totalling $14,485,000 during the same period in 2021.
During the year ended March 31, 2022, 10,000,000 warrants and 220,000 stock options were exercised for proceeds totalling $12,053,000,
compared to 27,733,000 warrants and 6,694,000 stock options for proceeds totalling $36,277,000 during the same period in 2021.
During the year ended March 31, 2022, the Company’s subsidiary, QIO, redeemed 185,000,000 of its preferred shares held by Caisse de dépôt
et placement du Québec, at par value, for consideration of $185,000,000. The redemption of the QIO preferred shares terminated the preferred
shares dividend payments and reduced the overall cost of capital for the Company. During the year ended March 31, 2022, QIO declared and
paid the accumulated dividends on its preferred shares for a total disbursement of $6,470,000, pursuant to the 9.25% dividend rate, compared
to $4,219,000 and $28,439,000, respectively, during the three-month period and year ended March 31, 2021. During the three-month period
and year ended March 31, 2022, the Company paid an inaugural dividend on ordinary shares totalling $50,623,000 in connection with the
semi-annual financial results for the six-month period ended September 30, 2021.
51 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
12. Financial Position
As at March 31, 2022, the Company held $396,405,000 in cash on hand1 and restricted cash. The Company is well positioned to fund all of its
cash requirements for the next 12 months with its existing cash balance, forecasted cash flows from operating activities and the following
undrawn available financings:
(in thousands of dollars)
Senior Debt
Caterpillar Financial Services Limited
FTQ loan
IQ Loan
Total available and undrawn loans
As at March 31,
2022
274,912
63,391
45,000
10,000
393,303
Following the announcement of Phase II commissioning, on May 24, 2022, QIO completed the refinancing of the US$400.0M Credit Facility with
a US$400.0M general purpose Revolving Facility. The Company drew US$180M on the Revolving Facility, equivalent to the Credit Facility
balance as at March 31, 2022. The Revolving Facility is provided by Societe Generale (Coordinating Bank, Mandated Lead Arranger and Joint
Bookrunners), The Bank of Nova Scotia (Administrative Agent, Mandated Lead Arranger and Joint Bookrunner), with The Toronto-Dominion
Bank, The Royal Bank of Canada (acting as Mandated Lead Arrangers and Joint Bookrunners), with the inclusion of the Bank of China Toronto
Branch, Fédération des caisses Desjardins du Québec, Bank of Montreal, National Bank, Bank of America and EDC.
The US$400M Revolving Facility will mature four years from May 24, 2022, and will bear interest based on leverage ratios ranging between the
Secured Overnight Financing Rate (“SOFR”), plus a credit spread adjustment plus 2.00% if the net debt to EBITDA ratio is lower or equal to 0.50x
to SOFR, plus a credit spread adjustment plus 3.00% if the net debt to EBITDA ratio is greater than 2.50x. The Revolving Facility includes
standard and customary finance terms and conditions, including with respect to fees, representations, warranties, covenants and conditions
precedent to disbursements. This new facility will enable the Company to lift the restricted cash covenant from the previous Credit Facility and
reduce the cost of capital.
The Company's cash requirements for the next 12 months relate primarily to the following activities:
– Remaining expenditures in relation to the Phase II expansion project;
– Payment of mining and income taxes; and
– Semi and final annual dividends payment to shareholders, if declared.
52 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
12. Financial Position (continued)
The following table details the changes to the statements of financial position as at March 31, 2022, compared to March 31, 2021:
(in thousands of dollars)
Cash and cash equivalents
Short-term investments
Cash on hand1
Receivables
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
As at March 31,
2022
As at March 31,
2021
Variance
321,892
30,777
352,669
124,137
119,133
595,939
43,736
1,070,030
107,810
171,715
1,989,230
286,890
251,365
86,021
203,256
827,532
1,161,698
1,161,698
1,989,230
609,316
27,200
636,516
98,755
72,268
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
(47%)
13%
(45%)
26%
65%
(26%)
(1%)
112%
42%
167%
33%
(2%)
17%
91%
126%
29%
36%
36%
33%
The Company’s cash and cash equivalents balance on March 31, 2022 decreased from the amount held on March 31, 2021 and is mainly
attributable to the payment of $191,542,000 in mining and income taxes for the April 1, 2020 to March 31, 2021 period, investments related to
Phase II project capital expenditures, the redemption of the QIO preferred shares for $185,000,000 and the inaugural dividend payment of
$50,623,000. The decrease in cash and cash equivalents balance is partially offset by cash flow from operating activities and drawdowns on
financing agreements during the year ended March 31, 2022.
Higher receivables were impacted by the sale of concentrate on two vessels which were not yet collected by March 31, 2022, compared to only
one vessel in the prior-year period. Higher other current assets are attributable to higher inventories and higher prepaid expenses, mainly
related to Phase II.
The increase in property, plant and equipment is mainly attributable to the significant progress made on the Phase II expansion project, the
receipt of most of the railcars required for projected Phase II increases in volume and the increase in the asset rehabilitation obligation of
$44,605,000, as detailed in an updated rehabilitation study (refer to note 16 — Rehabilitation Obligation in the Financial Statements). The
increase in exploration and evaluation assets relates mainly to the acquisition of assets related to the Kami Project. Other non-current assets
increased, reflecting the deposits and advance payments made in connection with Phase II.
Higher total current liabilities are mainly due to increased accounts payable balances related to the Phase II project, as several final payments
became due following the completion of most of the construction work. In addition, higher total current liabilities are due to the reclassification
of the Senior Debt's first four quarterly principal payments totalling $59,981,000 (US$48,000,000) as a current liability, together with the
current portion of the IQ loan and CAT Financing. The increase in total current liabilities is partially offset by lower income and mining taxes
payable of $22,744,000 as at March 31, 2022, as income and mining taxes payable for the 2021 fiscal year were paid in May 2021.
1 This is a non-IFRS financial measure, ratio or other financial measure. The measure is not a standardized financial measure under the financial reporting framework used to prepare the
Financial Statements and might not be comparable to similar financial measures used by other issuers. Refer to the section 20 - Non-IFRS and Other Financial Measures of this Directors'
Report for definitions of these metrics and reconciliations to the most comparable IFRS measures when applicable.
53 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
12. Financial Position (continued)
The increase in long-term debt during the year ended March 31, 2022 is mainly due to the $60,000,000 drawdown of the IQ Loan, the
$30,000,000 drawdown in relation to the loan agreement with FTQ and the $30,874,000 drawdown of the CAT Financing. This increase is
partially offset by the reclassification of the principal payments listed above to current liabilities.
Following the completion of a new rehabilitation obligation study during the year ended March 31, 2022, which was required for additional
consideration related to the Phase II project, the rehabilitation obligation significantly increased.
The increase in other non-current liabilities is mainly due to additional lease liabilities in the year ended March 31, 2022, following the receipt of
most of the railcars and equipment required to support the projected increase in Phase II volumes.
The increase in total equity is mainly attributable to an increase in retained earnings through net income during the year ended March 31, 2022
and the issuance of shares related to the acquisition of the Kami Project, partially offset by the redemption of 185,000,000 QIO preferred
shares and the inaugural dividend payment on ordinary shares.
13. Financial Instruments
The nature and extent of risks arising from the Company’s financial instruments are summarized in note 26 of the Financial Statements for the
year ended March 31, 2022.
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.
15. Contractual Obligations, Commitments and Off-Balance Sheet Arrangements
Contractual Obligations and Commitments
The following are the contractual maturities of the Company's liabilities, with estimated future interest payments, segmented by period, and
the future minimum payments of the commitments, as at March 31, 2022:
(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 29 of the Financial Statements
Less than a
Year
182,548
84,509
4,936
154,938
426,931
1 to 5 Years
—
233,649
16,494
106,119
356,262
More than 5
Years
—
68,310
67,213
210,596
346,119
Total
182,548
386,468
88,643
471,653
1,129,312
The Company has obligation services related to fixed charges for the use of infrastructure over a defined contractual period of time. The
service commitment is excluded in the above figure as the service is expected to be used by the Company. To the extent that this changes, the
amount of commitment may change.
54 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 (continued)
Contractual Obligations and Commitments (continued)
In relation to the acquisition of the Kami Project and contingent upon it advancing to commercial production, the Company is subject to:
•
•
•
•
A gross sales royalty to Altius Resources Inc. on iron ore concentrate, refined copper, fine gold bullion, silver bullion, and other refined
products;
Finite production payments on future production;
Education and training fund for the local communities; and
Special tax payment to the Minister of Finance of Newfoundland and Labrador.
The Company is also subject to a limited production payment on its Consolidated Fire Lake North, Lac Lamêlée, Moiré Lake, O’Keefe-Purdy and
Harvey-Tuttle properties.
Other Off-Balance Sheet Arrangements
The undrawn portion of the Senior Debt totalled US$220,000,000, which was composed of a term facility of US$170,000,000 that was only
available during the pre-completion period of Phase II, and a revolving credit facility of US$50,000,000; both of which were subject to standby
commitment fees.
The undrawn portion of the FTQ loan amounted to $45,000,000, as at March 31, 2022, and is subject to standby commitment fees.
The undrawn portion of the finance agreement with Caterpillar Financial Services amounted to US$50,729,000, as at March 31, 2022. The
original amount of US$75,000,000 may be increased at Caterpillar Financial Services' discretion up to an amount no greater than
US$125,000,000. The finance agreement is also subject to standby commitment fees.
The undrawn portion of the IQ Loan amounted to $10,000,000 as at March 31, 2022.
Based on the foregoing, as at March 31, 2022, the Company is benefiting from available and undrawn loans totalling $393,303,000, which will
allow the Company to fund all its cash requirements for the next 12 months.
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, 2022.
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, 2022.
18. New Accounting Standards Issued but not 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, 2022.
55 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
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 28 of the Financial
Statements for the year ended March 31, 2022.
20. Non-IFRS and Other Financial Measures
The Company has included certain non-IFRS financial measures, ratios and supplementary financial measures in this Directors' Report, as
listed in the table below, to provide investors additional information to help them evaluate the underlying performance of the Company. These
measures are mainly derived from the Financial Statements but do not have any standardized meaning prescribed by IFRS and, therefore, may
not be comparable to similar measures presented by other companies. Management believes that these measures, in addition to conventional
measures prepared in accordance with IFRS, provide investors with an improved ability to understand the results of the Company's operations.
Non-IFRS and other financial measures should not be considered in isolation or as a substitute for measures of performance prepared in
accordance with IFRS. The exclusion of certain items from non-IFRS financial measures does not imply that these items are necessarily non-
recurring.
Non-IFRS and Other Financial Measures
Non-IFRS Financial Measures
EBITDA
Adjusted net income
Cash on hand
Non-IFRS Ratios
EBITDA margin
Adjusted EPS
Total cash cost or C1 cash cost per dmt sold
AISC per dmt sold
Cash operating margin
Gross average realized selling price or gross
average realized FOB selling price per dmt sold
Cash profit margin
Other Financial Measures
Net average realized selling price or net average
realized FOB selling price per dmt sold
Operating cash flow per share
Earnings before income and mining taxes, net finance costs and depreciation
Net income plus incremental costs related to COVID-19 and Phase II start-up costs, less
gain on disposal of non-current investments, and the related tax effect of these items
Cash and cash equivalents plus short-term investments
EBITDA as a percentage of revenues
Adjusted net income per basic weighted average number of ordinary shares outstanding
Cost of sales before incremental costs related to COVID-19 divided by iron ore concentrate
sold in dmt
Cost of sales before incremental costs related to COVID-19 plus sustaining capital
expenditures and G&A expenses divided by iron ore concentrate sold in dmt
Net average realized selling price less AISC
Revenues before provisional pricing adjustments and freight and other costs divided by
iron ore concentrate sold in dmt
Cash operating margin as a percentage of net average realized selling price
Revenues divided by iron ore concentrate sold in dmt
Net cash flow from (used in) operating activities per basic weighted average number of
ordinary shares outstanding
56 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
20. Non-IFRS and Other Financial Measures (continued)
EBITDA and EBITDA Margin
EBITDA is a non-IFRS financial measure that allows comparability of operating results from one period to another by excluding the effects of
items that are usually associated with investing and financing activities. EBITDA is not necessarily indicative of operating profit or cash flows
from operating activities as determined under IFRS. For simplicity and comparative purposes, the Company did not exclude non-cash share-
based payments, Phase II pre-commercial start-up costs, COVID-19-related expenditures and other income.
EBITDA margin is used for the purpose of evaluating business performance. Management believes this financial ratio is relevant to investors to
assess the Company’s ability to generate liquidity by producing operating cash flows to fund working capital needs and capital expenditures,
as well as service debt obligation.
EBITDA and EBITDA margin do not have any standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar
measures presented by other companies.
June 30,
2021
September 30,
2021
December 31,
2021
Three Months Ended
March 31,
2022
391,393
4,387
9,959
405,739
545,408
74 %
189,564
1,012
9,437
200,013
331,006
60 %
108,574
3,377
10,176
122,127
253,016
48 %
181,312
2,269
14,357
197,938
331,376
60 %
June 30,
2020
September 30,
2020
December 31,
2020
Three Months Ended
March 31,
2021
120,077
1,145
8,940
130,162
244,574
53 %
186,096
4,530
8,346
198,972
310,994
64 %
194,652
11,323
8,604
214,579
329,545
65 %
261,047
5,430
9,287
275,764
396,702
70 %
Year Ended
March 31,
2022
870,843
11,045
43,929
925,817
1,460,806
63 %
Year Ended
March 31,
2021
761,872
22,428
35,177
819,477
1,281,815
64 %
(in thousands of dollars)
Income before income and mining taxes
Net finance costs
Depreciation
EBITDA
Revenues
EBITDA margin
(in thousands of dollars)
Income before income and mining taxes
Net finance costs
Depreciation
EBITDA
Revenues
EBITDA margin
Adjusted Net Income 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. Management believes that these financial measures provide users with enhanced understanding of the Company's
results by excluding certain items that do not reflect the core performance of the Company. By excluding these items, Management believes it
provides a better comparability of the Company's results from one period to another and with other mining entities. These financial measures
do not have any standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures and ratios presented by
other companies.
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. Incremental costs related to COVID-19 are mainly comprised of on-site COVID-19 testing and laboratory costs, incremental costs for
cleaning and disinfecting facilities, premium payroll costs from adjusted work schedules and additional transportation costs. These costs do
not include the inefficiency costs associated with the COVID-19 pandemic across all areas of the Company’s operations. Pre-commercial start-
up costs for the Phase II project mainly related to staff mobilization and training costs and are part of the construction budget of $633.8M.
Management believes these items have a disproportionate impact on the results for a period.
57 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
20. Non-IFRS and Other Financial Measures (continued)
Adjusted Net Income and Adjusted EPS (continued)
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 and ratios used by mining industry analysts.
June 30,
2021
September 30,
2021
December 31,
2021
Three Months Ended
March 31,
2022
Year Ended
March 31,
2022
Net
Income
Net
Income
EPS
Net
Income
EPS
Net
Income
EPS
Net
Income
EPS
EPS
224,339
0.44 114,596
0.23 67,997
0.13 115,653
0.23
522,585
1.03
(408)
2,068
—
1,660
(889)
—
—
—
—
232
1,099
4,613
5,944
—
—
0.01
0.01
—
1,366
7,174
8,540
—
—
—
3,310
0.01 5,965
9,275
0.01
—
0.01
0.01
0.02
(176)
7,843
17,752
25,419
—
0.02
0.03
0.05
—
(2,228)
(0.01)
(3,501)
—
(3,617)
(0.01) (10,236)
(0.02)
(in thousands of dollars except per share)
Unadjusted
Cash items
Gain on disposal of non-current
investments
Incremental costs related to COVID-19
Bloom Lake Phase II start-up costs
Tax effect of adjustments listed above1
Adjusted
225,110
0.44
118,312
0.23
73,036
0.14
121,311
0.24
537,768
1.06
(in thousands of dollars except per share)
Unadjusted
Non-cash item
Loss on debt refinancing
Cash items
Gain on disposal of non-current
investments
Incremental costs related to COVID-19
June 30,
2020
September 30,
2020
December 31,
2020
Three Months Ended
March 31,
2021
Year Ended
March 31,
2021
Net
Income
Net
Income
EPS
Net
Income
EPS
Net
Income
EPS
Net
Income
EPS
EPS
75,556
0.16 112,164
0.24 120,771
0.25 155,934
0.32
464,425
0.97
—
—
—
—
—
—
—
—
1,863
1,863
—
—
—
—
—
—
1,863
1,863
—
—
—
4,562
4,562
—
0.01
0.01
—
2,671
2,671
—
—
—
—
2,215
2,215
—
0.01
0.01
(2,332)
3,162
830
(0.01)
0.01
—
(2,332)
12,610
10,278
(0.01)
0.03
0.02
Tax effect of adjustments listed above1
(2,114)
—
(1,076)
—
(1,430)
—
(1,265)
(0.01)
(5,885)
(0.01)
Adjusted
78,004
0.17
113,759
0.24
123,419
0.26
155,499
0.31
470,681
0.98
1 The tax effect of adjustments is calculated using the applicable tax rate.
58 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
20. Non-IFRS and Other Financial Measures (continued)
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. This measure does not have any standardized meaning prescribed by IFRS and, therefore, may not be
comparable to similar measures presented by other companies.
Cash and cash equivalents
Short-term investments
Cash on hand
Total Cash Cost
As at March 31,
2022
As at March 31,
2021
321,892
30,777
352,669
609,316
27,200
636,516
Total cash cost, or C1 cash cost, is a common financial performance measure in the iron ore mining industry. 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. This measure does not have any standardized meaning prescribed by IFRS and, therefore, may not be comparable
to similar measures presented by other companies.
The cost of sales includes production costs such as mining, processing and mine site-related G&A expenses as well as rail and port operation
costs, and is adjusted to exclude incremental costs related to COVID-19. Depreciation expense is not a component of total cash cost. Phase II
start-up costs are not included in total cash cost as these are pre-commercial expenses related to the Phase II.
Per tonne sold
Iron ore concentrate sold (dmt)
(in thousands of dollars except per tonne)
Cost of sales
Less: Incremental costs related to COVID-19
Total cash cost (per dmt sold)
Per tonne sold
Iron ore concentrate sold (dmt)
(in thousands of dollars except per tonne)
Cost of sales
Less: Incremental costs related to COVID-19
June 30,
2021
September 30,
2021
December 31,
2021
Three Months Ended
March 31,
2022
Year Ended
March 31,
2022
1,974,700
1,953,900
1,832,100
1,889,900
7,650,600
120,846
(2,068)
118,778
60.1
110,884
(1,099)
109,785
56.2
110,290
(1,366)
108,924
59.5
116,658
(3,310)
113,348
60.0
458,678
(7,843)
450,835
58.9
June 30,
2020
September 30,
2020
December 31,
2020
Three Months Ended
March 31,
2021
Year Ended
March 31,
2021
1,758,800
2,063,400
1,891,200
1,971,100
7,684,500
107,338
(4,562)
102,776
102,739
(2,671)
100,068
108,506
(2,215)
106,291
110,299
(3,162)
107,137
428,882
(12,610)
416,272
Total cash cost (per dmt sold)
58.4
48.5
56.2
54.4
54.2
59 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
20. Non-IFRS and Other Financial Measures (continued)
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. 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 does not include
product R&D expenses, start-up costs and exploration expenses that are not sustainable in nature, income and mining tax expenses, working
capital, defined as current assets less current liabilities, interest costs, or other income (expense). This measure does not have any
standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies.
The Company calculates AISC as the sum of total cash cost, sustaining capital, including deferred stripping cost and G&A expenses divided by
the iron ore concentrate sold to arrive at a per dmt figure. The AISC excludes the incremental costs related to COVID-19. 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.
Per tonne sold
Iron ore concentrate sold (dmt)
(in thousands of dollars except per tonne)
Cost of sales
Less: Incremental costs related to COVID-19
Sustaining capital expenditures1
G&A expenses
AISC (per dmt sold)
Per tonne sold
Iron ore concentrate sold (dmt)
(in thousands of dollars except per tonne)
Cost of sales
Less: Incremental costs related to COVID-19
Sustaining capital expenditures1
G&A expenses
AISC (per dmt sold)
June 30,
2021
September 30,
2021
December 31,
2021
Three Months Ended
March 31,
2022
Year Ended
March 31,
2022
1,974,700
1,953,900
1,832,100
1,889,900
7,650,600
120,846
(2,068)
16,767
7,804
143,349
72.6
110,884
(1,099)
26,461
7,548
143,794
73.6
110,290
(1,366)
21,985
8,323
139,232
76.0
116,658
(3,310)
11,743
8,094
133,185
70.5
458,678
(7,843)
76,956
31,769
559,560
73.1
June 30,
2020
September 30,
2020
December 31,
2020
Three Months Ended
March 31,
2021
Year Ended
March 31,
2021
1,758,800
2,063,400
1,891,200
1,971,100
7,684,500
107,338
(4,562)
5,946
5,184
113,906
64.8
102,739
(2,671)
12,177
5,695
117,940
57.2
108,506
(2,215)
11,442
4,810
122,543
64.8
110,299
(3,162)
13,193
7,905
128,235
65.1
428,882
(12,610)
42,758
23,594
482,624
62.8
1 Purchase of property, plant and equipment as per the consolidated statements of cash flows are classified into sustaining capital expenditures, Phase II capital expenditures and other capital
development expenditures at Bloom Lake. Sustaining capital expenditures are defined as capital expenditures to sustain or maintain the existing assets to achieve operations as per the mine
plan, from which future economic benefits will be derived. Refer to section 13 — Cash flows of this Directors' Report.
60 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
20. Non-IFRS and Other Financial Measures (continued)
Cash Operating Margin and Cash Profit Margin
Cash operating margin per dmt sold is used by Management to better understand the iron ore concentrate margin realized throughout a period.
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. These measures do not have any
standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies.
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
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
June 30,
2021
September 30,
2021
December 31,
2021
Three Months Ended
March 31,
2022
Year Ended
March 31,
2022
1,974,700
1,953,900
1,832,100
1,889,900
7,650,600
545,408
276.2
72.6
203.6
74 %
331,006
169.4
73.6
95.8
57 %
253,016
138.1
76.0
62.1
45 %
331,376
175.3
70.5
104.8
60 %
1,460,806
190.9
73.1
117.8
62 %
June 30,
2020
September 30,
2020
December 31,
2020
Three Months Ended
March 31,
2021
Year Ended
March 31,
2021
1,758,800
2,063,400
1,891,200
1,971,100
7,684,500
244,574
139.1
64.8
74.3
53 %
310,994
150.7
57.2
93.5
62 %
329,545
174.2
64.8
109.4
63 %
396,702
201.3
65.1
136.2
68 %
1,281,815
166.8
62.8
104.0
62 %
61 Page
Champion Iron Limited
Directors' Report - Operating and Financial Review
(Expressed in Canadian dollars, except where otherwise indicated)
20. Non-IFRS and Other Financial Measures (continued)
Gross Average Realized Selling Price per dmt Sold
Gross average realized selling price is used by Management to better understand the iron ore concentrate price throughout a period. The
measure excludes the provisional pricing adjustments on sales contracts structured on a provisional pricing basis and freight and other costs,
enabling Management to track the level of its iron ore concentrate price compared to the average P65 index used in the market.
Provisional pricing adjustments represent any difference between the revenue recognized at the end of the previous period and the final
settlement price. Excluding this element allows a better understanding of the iron ore price realized on vessels sold during the period. This
measure does not have any standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by
other companies.
Per tonne sold
Iron ore concentrate sold (dmt)
(in thousands of dollars except per tonne)
Revenues
Provisional pricing adjustments
Freight and other costs
Gross revenues
June 30,
2021
September 30,
2021
December 31,
2021
Three Months Ended
March 31,
2022
Year Ended
March 31,
2022
1,974,700
1,953,900
1,832,100
1,889,900
7,650,600
545,408
(60,895)
67,807
552,320
331,006
11,229
85,219
427,454
253,016
7,466
96,849
357,331
331,376
(28,769)
88,757
391,364
1,460,806
(70,969)
338,632
1,728,469
Gross average realized selling price (per dmt
sold)
279.7
218.8
195.0
207.1
225.9
Per tonne sold
Iron ore concentrate sold (dmt)
(in thousands of dollars except per tonne)
Revenues
Provisional pricing adjustments
Freight and other costs
Gross revenues
June 30,
2020
September 30,
2020
December 31,
2020
Three Months Ended
March 31,
2021
Year Ended
March 31,
2021
1,758,800
2,063,400
1,891,200
1,971,100
7,684,500
244,574
(23,135)
41,027
262,466
310,994
(28,980)
54,002
336,016
329,545
(15,376)
54,331
368,500
396,702
(20,449)
57,456
433,709
1,281,815
(87,940)
206,816
1,400,691
Gross average realized selling price (per dmt
sold)
149.2
162.8
194.8
220.0
182.3
21. Share Capital Information
The Company’s share capital consists of ordinary shares without par value. As of May 25, 2022, there are 516,611,876 ordinary shares issued
and outstanding. In addition, there are 5,765,399 ordinary shares issuable pursuant to options, restricted share units, deferred share units and
performance share units, and 15,281,250 ordinary shares issuable pursuant to warrants.
62 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, 2022
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, 2021.
The Company’s fiscal year ends on March 31. All financial data is stated in millions of dollars except for earnings per share and adjusted EPS1.
Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021
Q3 2021 Q2 2021
Q1 2021
Financial Data ($ millions)
Revenues
Operating income
EBITDA1
Net income
Adjusted net income1
EPS - basic
EPS - diluted
Adjusted EPS - basic1
Net cash flow (used in) from operations
331.4
173.7
197.9
115.7
121.3
0.23
0.22
0.24
4.3
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 (%)
Fe recovery (%)
Product Fe (%)
Iron ore concentrate produced (thousands of wmt)
Iron ore concentrate sold (thousands of dmt)
5,072
5,388
0.94
4,904
30.3
82.7
66.2
1,869
1,890
253.0
109.2
122.1
68.0
73.0
0.13
0.13
0.14
104.6
5,442
5,517
0.99
5,161
30.6
83.9
66.2
2,013
1,832
331.0
190.4
200.0
114.6
118.3
0.23
0.22
0.23
374.1
5,300
5,714
0.93
5,680
29.1
83.3
66.3
2,089
1,954
545.4
400.0
405.7
224.3
225.1
0.44
0.43
0.44
(12.6)
396.7
262.5
275.8
155.9
155.5
0.32
0.30
0.31
228.6
4,700
5,644
0.83
5,227
29.6
82.9
66.3
1,936
1,975
3,796
5,636
0.67
5,238
30.7
82.6
66.5
2,011
1,971
329.5
203.3
214.6
120.8
123.4
0.25
0.24
0.26
189.1
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
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
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
Statistics (in dollars per dmt sold)
Gross average realized selling price1
Net average realized selling price1
Total cash cost (C1 cash cost)1
All-in sustaining cost1
Cash operating margin1
Statistics (in U.S. dollars per dmt sold)2
Gross average realized selling price1
Net average realized selling price1
Total cash cost (C1 cash cost)1
All-in sustaining cost1
Cash operating margin1
207.1
175.3
60.0
70.5
104.8
164.1
139.1
47.4
55.7
83.4
195.0
138.1
59.5
76.0
62.1
154.8
109.5
47.2
60.3
49.2
218.8
169.4
56.2
73.6
95.8
279.7
276.2
60.1
72.6
203.6
220.0
201.3
54.4
65.1
136.2
174.6
134.7
44.6
58.4
76.3
228.3
225.5
48.9
59.1
166.4
173.9
159.3
43.0
51.4
107.9
194.8
174.2
56.2
64.8
109.4
150.3
134.5
43.1
49.7
84.6
162.8
150.7
48.5
57.2
93.5
122.2
113.2
36.4
42.9
70.1
149.2
139.1
58.4
64.8
74.3
107.8
100.3
42.2
46.8
53.5
1 This is a non-IFRS financial measure, ratio or other financial measure. The measure is not a standardized financial measure under the financial reporting framework used to prepare the
Financial Statements and might not be comparable to similar financial measures used by other issuers. Refer to the section 20 - Non-IFRS and Other Financial Measures of this Directors'
Report for definitions of these metrics and reconciliations to the most comparable IFRS measures when applicable.
2 See the Currency section of this Directors' Report included in section 8 - Key Drivers.
63 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 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 Directors' Report and has confirmed that the relevant information is an accurate representation of the available data and studies for the
relevant projects. 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 Phase II Feasibility Study.
Mr. Blanchet is a member of the Ordre des ingénieurs du Québec.
64 Page
Unless otherwise noted, the following information is for the Company’s last completed financial year which ended March 31, 2022 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.
Certain figures included in this Remuneration Report have been rounded for ease of presentation. Percentage and other figures included in this
Remuneration Report have not in all cases been calculated on the basis of such rounded figures but on the basis of such figures prior to
rounding. For this reason, percentage and other figures in this Remuneration Report may not sum due to rounding.
Key Management Personnel and Named Executive Officers
In compliance with Section 300A of the Corporations Act and 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 financial year (March 31, 2022).
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)
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
d)
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.
65 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
Key Management Personnel and Named Executive Officers (continued)
The following persons were the KMPs, and NEOs of the Company during the financial year ended March 31, 2022.
Name
David Cataford (NEO and KMP)(1)
Natacha Garoute (NEO and KMP)
Alexandre Belleau (NEO and KMP)
Steve Boucratie (NEO and KMP)(2)
Michael Marcotte (NEO and KMP)(3)
Michael O’Keeffe (KMP)(4)
Andrew J. Love (KMP)
Gary Lawler (KMP)
Michelle Cormier (KMP)(5)
Jyothish George (KMP)
Louise Grondin (KMP)
Wayne Wouters (KMP)
Notes:
Position
CEO
CFO
Chief Operating Officer
Appointment Date
April 1, 2019
August 13, 2018
July 22, 2020
Senior Vice-President, General Counsel and Corporate Secretary
September 9, 2021
Senior Vice-President, Corporate Development and Capital Markets
September 9, 2021
Executive Chairman
Non-Executive Director and Lead Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
April 1, 2019
April 9, 2014
April 9, 2014
April 11, 2016
October 16, 2017
August 27, 2020
November 1, 2016
(1) Mr. Cataford was appointed Chief Executive Officer on April 1, 2019 and appointed to the Board of Directors on May 21, 2019. Prior to that, he had been Chief Operating Officer of
the Company and an NEO since March 20, 2017.
(2) Mr. Boucratie was promoted to Senior Vice-President, General Counsel and Corporate Secretary on September 9, 2021. Prior to that, he had been Vice-President, General Counsel
and Corporate Secretary of the Company and an NEO since May 20, 2019.
(3) Mr. Marcotte was promoted to Senior Vice-President, Corporate Development and Capital Markets of the Company on September 9, 2021. Prior to that, he had been Vice-
President, Investor Relations of the Company since 2018.
(4) 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.
(5) Ms. Cormier was appointed to the Board in 2016 as a nominee of WC Strategic Opportunity, L.P. (“Wynnchurch”) pursuant to certain board nomination rights granted by the
Company in favour of Wynnchurch in connection with a private placement of ordinary shares completed on April 11, 2016. Following the disposition of ordinary shares by
Wynnchurch that was publicly announced by Wynnchurch on August 2, 2021, Wynnchurch is no longer entitled to nominate a candidate for election or appointment to the Board
such that Ms. Cormier is no longer considered to be a director nominee of Wynnchurch.
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, 2022, the Remuneration and Nomination Committee was comprised of Gary Lawler (Chairman), Andrew J. 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 40 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 has 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 listed companies over a 30-year period in the resources, financial services and property
industries.
Michelle Cormier - Ms. Cormier is a CPA with over 30 years of experience in senior-level executive positions in management, including financial
management, corporate finance, turnaround and strategic advisory situations and human resources. Ms. Cormier has a strong capital markets
background, with significant experience in public companies listed in the United States and Canada.
66 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
A. Role of Remuneration and Nomination Committee (continued)
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.
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 and length of service to the Company and to set
overall target remuneration to ensure it remains competitive and reflective of generally accepted market practices of the Company’s
peers and the markets in which it employs people. Although the Company is incorporated under the Corporations Act, almost all of the
Company’s employees are located in the Province of Québec, Canada, such that the Company’s executive remuneration program and
strategy is intended to remain competitive within that market;
• 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 with Shareholder interests – 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.
Consistent with our commitment to sustainable development, 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 in the North American mining industry 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 five years have received strong support from Shareholders at
the 2017-2021 Annual General Meetings, with a five-year average of almost 90% of votes cast in favour of the respective Remuneration
Reports.
The Board recognizes the importance of engaging in constructive communications with the Company’s Shareholders and values their input
and insights. During the financial year ended March 31, 2022, enhancing shareholder engagement was a key priority of the Company. Towards
this end, the Board reviewed the reports of proxy advisors and coordinated engagement with major Shareholders in relation to the affairs of the
Company. The Company engaged with certain of its investors, which involved meetings and exchanges with Shareholders to ensure feedback
was solicited and received on compensation, governance, and other matters.
67 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
B. Remuneration Philosophy & Approach (continued)
In determining the level of annual performance bonus awards, the Remuneration and Nomination Committee takes into account overall
corporate performance against predetermined performance objectives and metrics. In setting equity-based incentive awards, the
Remuneration and Nomination Committee establishes time-based and performance-based vesting criteria in line with retention and reward
objectives. If it is deemed appropriate, the Remuneration and Nomination Committee has 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 makes
its recommendations 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 national
and international levels, industry norms for such awards and other elements of executive compensation.
The Remuneration and Nomination Committee and the Board as a whole have 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 incentivizing the right
behaviour and Champion does not want to cap the incentive to outperform.
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, (iii) the achievement of performance criteria over a period of three years or the achievement of key
milestones to successful completion of Phase II (as defined below), as applicable, for performance share units (“PSUs”) under the Company’s
LTIP (as defined below).
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, among other things, strategic and operational risks; compliance risk; reputational risk; and financial and economic risks.
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 or margin
lending or other secured financing arrangements in respect of the Company's securities without the prior approval of the Senior Vice-President,
General Counsel and Corporate Secretary and the Executive Chairman. KMPs are 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 in the North American mining industry 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
Until December 2021, the Board had hired Mercer Canada Limited (“Mercer”) to provide independent, third-party analysis and advice on the
remuneration levels and practices for the Company’s executive team as well as the remuneration for the Board of Directors. After having
completed a comprehensive search, the Committee retained Meridian Compensation Partners LLC (“Meridian”) to assist in such matters,
effective as of December 2021. Mercer provided advice and recommendations on the remuneration program for KMPs during each of the
financial years ended March 31, 2022 and 2021, and Meridian started providing advice and recommendations on the remuneration program for
KMPs during the financial year ended March 31, 2022. In addition, since the 2021 financial year, Compensation Governance Partners Inc.
(“CGP”) has been providing compensation advice to the Company, including by assisting the Board in establishing vesting criteria tied to the
achievement of milestones to the successful completion of Phase II for a portion of the PSUs granted under the LTIP. 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 the KMPs to whom they relate.
68 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
C. External Advice (continued)
The table below provides an overview of the total fees paid to Mercer, Meridian and CGP for services rendered during the financial years ended
March 31, 2022 and 2021.
(in Canadian dollars)
Mercer
Fees for services related to executive team and Board of Directors compensation
All other fees(1)
Total
Meridian
Fees for services related to executive team and Board of Directors compensation
All other fees
Total
CGP
Fees for services related to executive team and Board of Directors compensation
All other fees
Total
$
$
$
$
$
$
$
$
$
2022
2021
48,500
39,518
88,018
115,918
—
115,918
47,196
—
47,196
$
$
$
$
$
$
$
$
$
39,000
19,036
58,036
—
—
—
—
—
—
Note:
(1) Mercer received advisory fees for other services of $39,518 during the year ended March 31, 2022 (including providing advice as to salaries of employees other than the
executive team) and $19,036 during the year ended March 31, 2021 (including providing advice as to salaries of employees other than the executive team).
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 operations in consultation with
Mercer. The Remuneration and Nomination Committee has approved the following compensation peer group for the financial year ended
March 31, 2022 that includes 13 similarly-sized publicly-traded mining peers that are generally within 0.5x to 2x of Champion’s market
capitalization and/or total revenues:
Alamos Gold - Centerra Gold - Pretium Resources - SSR Mining - Wesdome Gold Mines - New Gold - Capstone Mining Corp. - Yamana Gold Inc. -
IAMGOLD Corp. - HudBay Minerals Inc. - Eldorado Gold Corp. - Equinox Gold Corp - Torex Gold Resources Inc.
In order to benchmark relative total shareholder return for purposes of performance share units grants, 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 - 2022 RSU and PSU Grant”.
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(Expressed in Canadian dollars, except where otherwise indicated - audited)
E. Key Achievements of the Named Executive Officers in the Financial Year Ended March 31, 2022
Champion became a producing company in the 2018 calendar year and, further to achieving this milestone, delivered significant increases in
market capitalization and cash flow production for Shareholders, while ensuring integration of the Company’s sustainability principles in its
day-to-day operations and decision-making and continuing to manage its environmental, social and governance responsibilities. During the
financial year ended March 31, 2022, management of the Company continued to coordinate the determination and implementation of the
Company’s long-term strategy, including the ongoing construction to complete the Bloom Lake Phase II expansion project (“Phase II”). In late
April 2022, Phase II commissioning was achieved ahead of schedule, despite pandemic-related challenges, positioning the Company to ramp
up towards commercial production by the end of calendar 2022. In addition, on May 3, 2022, the Company announced the completion of the
first rail shipments containing 24,304 wmt of high-grade 66.2% Fe iron ore concentrate from the Phase II project.
Key achievements of the management team during the year ended March 31, 2022 include:
• Annual production of 7,907,300 wet metric tonnes (wmt) of high-grade 66.2% Fe concentrate;
• Achieved revenues of $1,460.8 million, and increased annual Earnings before income and mining taxes, net finance costs and
depreciation (“EBITDA”)1 by 13% compared to the prior year, achieving a record EBITDA1 of $925.8 million for the year;
• Ongoing feasibility study evaluating the reprocessing and infrastructure required to commercially produce a 69% Fe Direct Reduction
pellet feed product;
•
Several project milestones for Phase II were achieved and related works undertaken during the financial year ended March 31, 2022,
which resulted in Phase II commissioning being achieved ahead of schedule in late April 2022, despite pandemic-related challenges;
• Annual employee recordable injury frequency rate of 2.98, which is in line with Québec’s open-pit industry performance;
•
Successful operation of COVID-19 testing laboratory and maintenance of preventive measures in line with the Government of Québec
directives to mitigate risks related to COVID-19 and limit the spread of variants;
• Completion of the acquisition of the Kamistiatusset project (the “Kami Project”) located a few kilometres south-east of Bloom Lake, and
commencement of the Kami Project's updated feasibility study;
• Completion of the acquisition of the Lac Lamêlée South Property and a 1.5% net smelter royalty interest on the Corporation's Moiré Lake
property and the Corporation's Fermont property portfolio;
• Collaboration with Caterpillar Inc. and Toromont Cat to develop, test and implement advanced drilling technologies aimed at optimizing
Bloom Lake's operational productivity and reducing energy consumption;
•
•
•
Inaugural dividend of $0.10 per ordinary share paid on March 1, 2022, in connection with the semi-annual results for the period ended
September 30, 2021, and an additional dividend of $0.10 per ordinary share declared by the Board of Directors in connection with the
annual results for the period ended March 31, 2022;
Full redemption of the $185 million balance of preferred shares in the capital of the Company’s subsidiary which were held by Caisse de
dépôt et placement du Québec. The redemption terminated preferred share dividend payments and reduced the overall cost of capital;
Execution of an agreement for a freight contract signed for one vessel per month, from August 2021 to December 2022, which helped
reduce the Company’s freight premium volatility;
• New 3-year collective agreement reached on June 23, 2021, maintaining the Company's strong partnership with its workers;
• Advancement of the Company’s Research and Development program which aims to develop technologies and products to support the
steelmaking transition from the BF-BOF method to the DRI-EAF method, while supporting emissions reduction in the BF-BOF process;
and
• Organization of workshops aimed at familiarizing the Company’s employees with the Innu culture; contribution to the commemoration
activities that took place in the Uashat mak Mani-utenam community for the inaugural National Day for Truth and Reconciliation on
September 30, 2021; launch of a women's mentoring program dedicated to improve the integration and recruitment of more women
into the Company’s workforce.
1 Non-IFRS financial measure or ratio with no standard meaning under the financial reporting framework used to prepare the financial statements. Refer to section P - Non-IFRS Financial
Measures and Ratios at the end of this Remuneration Report.
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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 of August 13, 2013 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 financial year ended March 31, 2022. Mr. O'Keeffe is paid an annual base salary in the
amount of $550,000 but is not eligible to receive annual short and long-term incentives in the form of annual bonus or equity-based
compensation. In addition, for the financial year ended March 31, 2022, Mr. O’Keeffe received non-monetary compensation in the amount of
$54,313 paid to a superannuation on behalf of the KMP.
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 2022 fiscal
year.
H. 2022 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 and the continuing integration of the Company’s sustainability principles in its day-to-
day operations and decision-making; and
• pursue the Company’s organic growth, including by continuing 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.
• 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 and/or the achievement of key milestones to
successful completion of Phase II.
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 Company's executive officers against the base salaries of executive officers in
comparable positions at public companies in our peer group of mining companies.
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(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 Executive Performance Metrics and Incentives (continued)
i) Base Salary (continued)
2022 Base Salary
The NEO’s base salaries are intended to be competitive with those paid in the North American 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. In the
context of achieving initial production in the 2018 calendar year, commissioning of the Phase II expansion project in late April 2022, and
delivering shareholder value throughout since the beginning of commercial production, it is 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 2022. The compensation is generally aligned with the median of the comparator group.
The 2022 salary for each NEO is set out in a table under the heading “2022 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 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 organizational 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.
2022 Bonus Awards
For 2022, the Board set a target bonus for each NEO as follows, based on Mercer’s recommendation:
NEO
David Cataford
Natacha Garoute
Alexandre Belleau
Steve Boucratie
Michael Marcotte
Target Bonus
(% Salary)
125%
90%
90%
80%
70%
Directors who are not NEOs have not received any bonus awards.
For the financial year ended March 31, 2022, the following financial and operating KPIs were established and evaluated:
•
45% of total bonus - Financial performance objectives set against the financial year ended March 31, 2022 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”)1: 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 financial year ending March 31, 2022 of 7,547,000 dmt at a total
cash cost1 per tonne sold of no more than $58.00/dmt. 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.
1 Non-IFRS financial measure or ratio with no standard meaning under the financial reporting framework used to prepare the financial statements. Refer to section P - Non-IFRS Financial
Measures and Ratios at the end of this Remuneration Report.
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(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 Executive Performance Metrics and Incentives (continued)
ii) Short-Term Incentives (Annual Bonus) (continued)
2022 Bonus Awards (continued)
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 187.5% of
base salary for the CEO, 135% of base salary for the CFO and Chief Operating Officer and 120% of base salary for each of the Senior Vice-
President, General Counsel and Corporate Secretary, and Senior Vice-President, Corporate Development and Capital Markets.
The Budget for 2022 was approved in March 2021 as part of the regular Board approval timetable. At such time, 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 2022 budget process was
against a backdrop of significant uncertainty in the global economy due to the ongoing impacts of the COVID-19 pandemic. The 2022 targets
for the STI program were approved by the Remuneration and Nomination Committee in April 2021.
As outlined below, the Company achieved EBITDA1 of $925.8 million in the financial year ended March 31, 2022. The combination of focused
production management to achieve increased throughput and overall production uplift, prudent cost control and demand driven iron ore prices,
all contributed to EBITDA1 and FCF1 outperformance against rigorously set targets.
The following 2022 bonus score card table outlines the weighting, performance objectives, actual results and payout factor for the bonus
awards for the year ended March 31, 2022.
KPIs
Weighting
Minimum
Threshold (50%
Performance
Level)
Target
(100%
Performance
Level)
Stretch
(150%
Performance
Level)
Actual Results
Payout Factor
EBITDA1
FCF1
Production
(dry metric tonnes)
Total Cash Cost1
($ per tonne)
Meet Sustainable
Development Objectives2
Incident Frequency (QIO)
Incident Frequency
(Contractor)
25 %
20 %
15 %
15 %
10 %
7.5%
7.5%
$
$
455,000,000 $
568,000,000 $
134,000,000 $
7,317,000
143,000,000 $
7,547,000
665,000,000 $ 925,817,000 1
149,000,000 $ 303,824,000 1
7,663,000
7,675,614
61.00
58.00
55.00
58.93 1
2 objectives
3 objectives
5 objectives
5 objectives
3.25
4.00
2.50
3.00
2.13
2.50
2.98
6.27
150%
150%
150%
84.5 %
150 %
68 %
— %
Total 2022 Bonus Payout Factor
122.8 %
1 Non-IFRS financial measure or ratio with no standard meaning under the financial reporting framework used to prepare the financial statements. Refer to section P - Non-IFRS Financial
Measures and Ratios at the end of this Remuneration Report.
2 Sustainable development objectives include a total of five objectives which relate to (i) the implementation of a grievance mechanism specific to host communities; (ii) the development of a
method to assess the openness to diversity of candidates in order to promote the inclusion and integration of diversity within the organization; (iii) the implementation of a special employee
wellness program in the context of the COVID-19 pandemic; (iv) the implementation of a program aiming at including actions and process controls related to energy use and greenhouse gas
emissions in management systems for material sources; and (v) the implementation of a project to help a species of special concern in Canada in collaboration with First Nations and the
government.
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(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 Executive Performance Metrics and Incentives (continued)
ii) Short-Term Incentives (Annual Bonus) (continued)
2022 Bonus Awards (continued)
The following table sets out the tabulations for 2022 NEO bonus awards:
NEO
David Cataford
Natacha Garoute
Alexandre Belleau
Steve Boucratie
Michael Marcotte
Target Bonus
(% Salary)
Weighted
Score
Actual Bonus
(% Salary)
Annual Bonus
($)
125 %
90 %
90 %
80 %
70 %
122.8 %
122.8 %
122.8 %
122.8 %
122.8 %
153 %
110 %
110 %
98 %
86 %
1,381,219
552,488
552,488
471,456
326,582
Non-Executive Directors are not eligible to receive any bonus awards, and directors who are not NEOs have not received any bonus awards.
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 tables under the section "2022 RSU and PSU (“2022 LTI”) Grant" sets out the tabulation for the 2022 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 initial 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 LTIP was re-approved by the Shareholders at the 2021 annual meeting.
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.
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.
No stock options were granted to NEOs during the year ended March 31, 2022.
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(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 Executive Performance Metrics and Incentives (continued)
iii) Long-Term Incentive - Equity-Based Incentives (continued)
2018 Omnibus Plan (continued)
Stock Options (continued)
The following table provides the annual burn rate associated with the LTIP for each of the Company’s three most recent financial years (2022,
2021 and 2020):
Equity Compensation Plan
LTIP(4)
Notes:
Fiscal Year
Ended March 31,
2022
Ended March 31,
2021
2020
Number of
Securities Granted
under the Plan(1)
2,038,744
2,906,499
1,833,455
Weighted Average
Number of
Securities
Outstanding(2)
507,591,000
478,639,000
441,620,000
Annual
Burn Rate(3)
0.40 %
0.61 %
0.42 %
(1) Corresponds to the number of dilutive securities granted under the LTIP in the applicable financial 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 divided by the weighted average number of securities outstanding.
(4) The LTIP came into effect on August 17, 2018.
Types of Awards under the Omnibus Incentive Plan
The following types of awards may be made under the Omnibus Incentive Plan: 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 Omnibus Incentive Plan, and
will be evidenced by an award agreement. In addition, subject to the limitations provided in the Omnibus Incentive Plan 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 trading
price of the Shares on the 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 subject to the options. No Shares will be issued upon the
exercise of stock options in accordance with the terms of the grant until full payment for the shares has been received by the Company.
No stock options were granted during the year ended March 31, 2022.
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(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 Executive Performance Metrics and Incentives (continued)
iii) Long-Term Incentive - Equity-Based Incentives (continued)
Types of Awards under the Omnibus Incentive Plan (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 Omnibus Incentive Plan, as the Board shall determine; provided that no RSU granted shall vest and be payable after
December 31 of the third calendar year following the year of service for which the RSU was granted. When cash dividends are paid by the
Company on outstanding Shares, the Company credits additional dividend equivalent RSUs to the participant’s account. Dividend equivalent
RSUs are subject to the same terms and conditions as the RSUs and vest and are settled at the same time and in the same form as the RSUs to
which such dividend equivalent RSUs relate. As is the case for RSUs granted under incentive plans of many TSX-listed issuers, including
issuers in the North American mining industry, vesting of the RSUs is based on time-based vesting conditions rather than performance-based
vesting conditions. The Company believes that the grant of time-based RSUs vesting equally over a three-year period is an effective means of
retaining executives by providing compensation packages that remain competitive and reflective of generally accepted market practices of its
peers and which rewards past performance against pre-established targets that contributes to the Company’s annual profitability and growth,
and tying executive remuneration to the 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 or with respect to certain project-related specific milestones.
The Board has 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 31 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 Omnibus Incentive Plan 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. When cash dividends are paid by the
Company on outstanding Shares, the Company credits additional dividend equivalent PSUs to the participant’s account. Dividend equivalent
PSUs are subject to the same terms and conditions as the PSUs and vest and are settled at the same time and in the same form as the PSUs to
which such dividend equivalent PSUs relate.
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.
The Company began granting PSUs under the Omnibus Incentive Plan during the year ended March 31, 2020. As of the end of the financial year
ended March 31, 2022, the 3-year vesting period for PSUs granted under the Omnibus Incentive Plan had not been completed such that no
payout had been made as of such date pursuant to PSUs granted under the Omnibus Incentive Plan. The PSUs granted during the year ended
March 31, 2020 will vest, subject to the achievement of the applicable performance-based vesting conditions, during the financial year ending
on March 31, 2023, and the payout thereunder will be disclosed in the Company’s remuneration report for such year.
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 Omnibus Incentive Plan
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. When cash dividends are paid by the Company on outstanding
Shares, the Company credits additional dividend equivalent DSUs to the participant’s account. Dividend equivalent DSUs are subject to the
same terms and conditions as the DSUs and vest and are settled at the same time and in the same form as the DSUs to which such dividend
equivalent DSUs relate.
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(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 Executive Performance Metrics and Incentives (continued)
iii) Long-Term Incentive - Equity-Based Incentives (continued)
Type of Awards under the Omnibus Incentive Plan (continued)
Other Share-Based Awards
The Board may grant to an Eligible Person, subject to the terms of the Omnibus Incentive Plan, 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. 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.
2022 RSU and PSU (”2022 LTI”) Grant
This year, in light of the importance of the Phase II expansion, which aims to double the nameplate capacity of Bloom Lake and which will have
a direct impact on shareholder returns for a number of subsequent years, the Board determined that vesting of a portion of the awards granted
under the LTIP would be aligned with the achievement of key milestones to successful completion of the Phase II project, while the vesting of
the other awards granted under the LTIP would be over a period of three years and take into consideration annual performance for the financial
year ended March 31, 2022 consistent with awards granted for prior years.
The Board believes that these performance criteria provide the most suitable link to long-term shareholder value creation. Specifically, the
criteria encourage executives to focus on the key performance drivers which underpin the Company’s strategy as well as on completion of
Phase II on time and on budget, in each case with a view 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 incentive
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”.
RSUs and PSUs which Take into Consideration Annual Performance for the Financial Year Ended March 31, 2022
The grants of RSU and PSU awards which take into consideration annual performance for the financial year ended March 31, 2022, will be
made in the 2023 financial year, following the publication of the annual financial results. For 2022, the Board set a target for the long-term
incentive for each NEO as follows, based on Mercer’s recommendation. The number of PSUs or RSUs that is granted is determined according to
the volume weighted average price (“VWAP”) per Share on the TSX during the period of five trading days immediately prior to the date of grant.
77 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 Executive Performance Metrics and Incentives (continued)
iii) Long-Term Incentive - Equity-Based Incentives (continued)
Types of Awards under the Omnibus Incentive Plan (continued)
2022 RSU and PSU (”2022 LTI”) Grant (continued)
RSUs and PSUs which Take into Consideration Annual Performance for the Financial Year Ended March 31, 2022 (continued)
NEO
David Cataford
Natacha Garoute
Alexandre Belleau
Steve Boucratie
Michael Marcotte
LTIP Target
(% salary)
Value of Annual
Equity Awards
($)
RSU
($)
PSU
($)
225 %
130 %
130 %
120 %
120 %
2,025,000
650,000
650,000
576,000
456,000
810,000
260,000
260,000
230,400
182,400
1,215,000
390,000
390,000
345,600
273,600
None of the directors who are not NEOs received any grants of RSUs or PSUs in the financial year ended March 31, 2022.
The 2022 LTI grant with respect to RSUs and PSUs which take into consideration annual performance for the financial year ended
March 31, 2022 consisted of the following components:
•
•
RSU Grant (40% of LTI): vesting equally over a three-year period and subject to no performance hurdles; and
PSU Grant (60% of LTI): measured against certain performance conditions over the three years following the date of grant and which
vest at the end of that three-year period subject to the key performance measures having been met.
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 31, 2025. 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 and is taken into account by the Board when determining the overall compensation of NEOs, and the Board believes
this approach is appropriate to ensure executive compensation remains competitive and reflective of generally accepted market
practices of the Company’s peers.
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
financial year ended March 31, 2022, 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 the steelmaking 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)
78 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 Executive Performance Metrics and Incentives (continued)
iii) Long-Term Incentive - Equity-Based Incentives (continued)
Types of Awards under the Omnibus Incentive Plan (continued)
2022 RSU and PSU (”2022 LTI”) Grant (continued)
RSUs and PSUs which Take into Consideration Annual Performance for the Financial Year Ended March 31, 2022 (continued)
•
60% of the grant based on an actual ratio of cash flow return on capital employed (“ROCE”)1 compared to a target ratio set by the
Company. The actual ratio is measured over a three-year period by dividing (i) average EBITDA1 for each year in the three-year period
by (ii) average capital employed (long-term debt plus Champion’s consolidated total equity, including options and warrants) for each
year in the three-year period. While the disclosure in the Company’s remuneration report has been enhanced and supplemented over
recent years to provide additional information on the computation and target ratio, the method of calculation of the actual 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 0.46 for the financial year ended March 31, 2022), 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. The Board believes that the use of ROCE as a performance measure allows to link executive pay to capital allocation discipline
and therefore further aligns executives’ interests with shareholder interests.
The following table outlines the payout percentages associated to the specific ranges of actual ratio of ROCE1, for the financial year
ended March 31, 2022:
2022 Objectives - ROCE
Vesting of 60% Portion of PSU Grants
0.55 and above
0.46
0.32
Less than 0.27
175%
100%
75%
Nil
The Board believes that the performance criteria for PSU grants which vest over the three years under the LTI and the milestones used to
determine vesting of the PSUs, provide the most suitable link to long-term shareholder value creation. Specifically, the performance criteria for
PSU grants which vest over the three years encourages executives to focus on the key performance drivers which underpin the Company’s
strategy to deliver long-term growth in shareholder value. Generally, 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 incentive 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”.
1 Non-IFRS financial measure or ratio with no standard meaning under the financial reporting framework used to prepare the financial statements. Refer to section P - Non-IFRS Financial
Measures and Ratios at the end of this Remuneration Report.
79 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 Executive Performance Metrics and Incentives (continued)
iii) Long-Term Incentive - Equity-Based Incentives (continued)
Type of Awards under the Omnibus Incentive Plan (continued)
2022 RSU and PSU (”2022 LTI”) Grant (continued)
PSUs with Vesting Aligned with the Achievement of Key Milestones Related to Successful Completion of Phase II
The PSU grants, for which vesting is aligned with the achievement of key milestones related to the successful completion of the Phase II
project, will vest on certain dates based on the achievement of each milestone and be payable within ten (10) business days following vesting.
Vested PSUs will be settled as to two thirds in Shares and as to one third in cash. Performance in between the minimum (50%), target (100%)
and maximum (160%) thresholds will be determined on a pro rata (linear) basis. The Board set these targets based on the CGP’s
recommendation. The number of PSUs granted was determined by dividing their aggregate value by the VWAP per Share on the TSX during the
period of five trading days immediately prior to the date of grant.
NEO
David Cataford
Natacha Garoute
Alexandre Belleau
Steve Boucratie
Michael Marcotte
Maximum Payout
Number of PSU Granted
Value of Equity Awards
($)
160 %
160 %
160 %
160 %
160 %
487,013
162,338
162,338
162,338
81,169
3,000,000
1,000,000
1,000,000
1,000,000
500,000
The Board has established the following key performance measures for the PSUs:
•
•
•
•
28% of the grant is based on criteria related to the completion of construction of Phase Il and the final costs of construction
(“Construction”) based on the construction budget (the “Budget”). These PSUs will vest at target if Construction is completed on or
before the applicable target date (the “Construction Target Date”) and on Budget, with the possibility of a 160% payout multiplier if
Construction is completed on or before the date that is three months before the Construction Target Date. Only 50% of the PSUs will
vest if Construction is completed on the date that is three months after the Construction Target Date and on Budget. If Construction is
completed at a cost above Budget by no more than a predetermined threshold, the number of PSUs that will vest will be reduced by
20%. No vesting of these PSUs will occur if Construction is not completed by the date that is three months after the Construction
Target Date or if Construction is completed for a cost above Budget by more than the predetermined threshold.
12% of the grant is based on criteria related to the number of incidents of “Lost Time lnjury” occurring per 200,000 hours during
Construction, with no PSUs vesting if an incident of death or mutilation or if more than 7 incidents of “Lost Time lnjury” per 200,000
hours occur during Construction.
40% of the grant is based on criteria related to achievement of commercial production of Phase Il. These PSUs will vest at target if
commercial production is achieved on the applicable target date (the “Commercial Production Target Date”), with the possibility of a
160% payout multiplier if commercial production is achieved on or before the date that is three months before the Commercial
Production Target Date. Only 50% of the PSUs will vest if commercial production is achieved on the date that is three months after
the Commercial Production Target Date. No vesting of these PSUs will occur if commercial production is not achieved by the date that
is three months after the Commercial Production Target Date.
20% of the grant is based on criteria related to achievement of nameplate capacity of Phase Il. These PSUs will vest at target if
nameplate capacity is achieved on or before the applicable target date (the “Nameplate Capacity Target Date”), with the possibility of
a 160% payout multiplier if nameplate capacity is achieved on or before the date that is three months before the Nameplate Capacity
Target Date. Only 50% of the PSUs will vest if nameplate capacity is achieved on the date that is three months after the Nameplate
Capacity Target Date. No vesting of these PSUs will occur if nameplate capacity is not achieved by the date that is three months after
the Nameplate Capacity Target Date.
80 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 Executive Performance Metrics and Incentives (continued)
iii) Long-Term Incentive - Equity-Based Incentives (continued)
Types of Awards under the Omnibus Incentive Plan (continued)
2022 RSU and PSU (”2022 LTI”) Grant (continued)
PSUs with Vesting Aligned with the Achievement of Key Milestones Related to Successful Completion of Phase II (continued)
The Board believes those vesting criteria properly incentivize management to ensure that Phase II be completed on or ahead of schedule and
on Budget, which would result in additional revenue to the Company such that NEOs’ interests are aligned with those of the Company’s
shareholders. In particular, the Board believes that the construction, commercial production and nameplate capacity milestones represent the
key milestones to successful completion of Phase II, and that having a portion of the PSUs vesting based on the incident frequency during
construction is consistent with the Company’s commitment to ensuring health and safety of employees, partners and local communities.
As of March 31, 2022, none of the foregoing milestones had been achieved and none of those PSUs were therefore vested.
NEO
Construction Milestone(1)
Incident Frequency during
Construction (per 200,000 hours)
Commercial Production Milestone
Nameplate Capacity Milestone
Notes:
Weighting
28 %
12 %
40 %
20 %
Minimum Threshold
(50% Performance
Level)
Target
(100% Performance
Level)
3 months delayed
On target
Stretch
(160% Performance
Level)
3 months early
7 incidents(2)
5 incidents
3 incidents
3 months delayed
3 months delayed
On target
On target
3 months early
3 months early
(1) Completion of construction is achieved if the concentrator successfully demonstrates that 66% Fe concentrate can be produced. In addition to the payout targets set out in the
table, vesting of such PSUs will vary based on the final costs of Construction compared to the construction Budget. If Construction is completed on Budget, the payout
multipliers set out above will remain the same. If Construction is completed or for a cost above Budget by not more than 15%, 80% of the PSUs will vest upon completion of
Construction, and if Construction is completed for a cost above Budget by more than 15%, none of such PSUs will vest.
(2)
If an incident of death or mutilation occurs during Construction, none of such PSUs will vest.
81 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 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 $27,830 for the calendar year 2021 within the pension fund or
retirement and saving plan, excessed in non-registered savings plan
Vesting
Transfers from Other Plans
Immediate
Permitted
The following table lays out, for each NEO, the accumulated value at the start of the financial year, the compensatory value and the
accumulated value at the end of the financial year ended March 31, 2022.
Name
David Cataford
Natacha Garoute
Alexandre Belleau
Steve Boucratie
Michael Marcotte
Accumulated Value
at Start of Year
Employer’s
Contribution
Employee’s
Contribution
Accumulated Value
at Year-End
369,298
179,985
196,656
105,329
89,647
96,228
54,389
53,344
51,238
34,990
54,988
31,080
30,482
29,280
23,326
520,514
265,454
280,482
185,847
147,963
Directors who are not NEOs are not eligible for, and have not received, any of the retirement plan contributions and personal benefits set out
above during the financial year ended March 31, 2022.
82 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 Executive Performance Metrics and Incentives (continued)
2022 Remuneration Awards for the Named Executive Officers
Annual base salary, bonus, PSU grants and RSU grants in relation to the 2022 financial 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 financial year ended March 31, 2022 will be
granted in the 2023 financial year, after the publication of the annual financial results. In the 2022 financial year, in light of the importance of
the Phase II expansion, which aims to double the nameplate capacity of Bloom Lake and which will have a direct impact on shareholder returns
for a number of subsequent years, vesting of a portion of the PSUs granted under the LTIP is aligned with the achievement of key milestones to
successful completion of the Phase II project. Those PSUs were granted in June 2021.
Name
David Cataford
CEO
Natacha Garoute
CFO
Alexandre Belleau
Chief Operating Officer
Steve Boucratie
Senior Vice-President, General Counsel and Corporate
Secretary
Michael Marcotte
Senior Vice-President, Corporate Development and
Capital Markets
Annual Base Salary
($)
Bonus
($)
Total RSU Grant
($)
Total PSU Grant
($)
900,000
1,381,219
810,000
4,215,000
500,000
552,488
260,000
1,390,000
500,000
552,488
260,000
1,390,000
480,000
471,456
230,400
1,345,600
380,000
326,582
182,400
773,600
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 - Non-Statutory”, below.
Tabular Remuneration Disclosure for the Named Executive Officers - Summary Remuneration Table - Non-Statutory
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, 2022, 2021 and 2020. As described in the footnotes to the summary remuneration table, amounts presented
under the columns entitled Share-based Awards and Option-based Awards reflect the full fair values of the awards as measured at their
respective grant dates. Accordingly, the amounts presented thereunder are not reflective of the related accounting expense for the period.
Refer to Section K “Details of Total Statutory Remuneration for KMP (NEOs and Directors)” on page 97 of this Remuneration Report for the
statutory remuneration table as calculated with reference to the Corporations Act.
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 awards which are granted taking into consideration the annual
performance for the financial year ended March 31, 2022 will be granted in the financial year ending March 31, 2023, after the publication of
the annual financial results for the year ended March 31, 2022. 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 2022 financial year is presented in the
section, “2022 Remuneration Awards for the Named Executive Officers”, above.
83 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 Executive Performance Metrics and Incentives (continued)
Tabular Remuneration Disclosure for the Named Executive Officers - Summary Remuneration Table - Non-Statutory (continued)
Salary
($)
Year
2022 900,000
2021
750,000
2020 600,000
2022 500,000
2021
430,000
2020 400,000
2022 500,000
2021
430,000
2020 319,730
Share-
Based
Awards(1)
($)
4,500,000
900,000
500,000
1,516,000
400,000
733,295
1,516,000
236,250
182,001
Option-Based
Awards(2)
($)
—
645,000
—
—
645,000
192,092
—
645,000
124,000
(4)
Non-Equity incentive
Plan Compensation
Annual
Incentive
Plans
($)
1,381,219
1,262,573
753,399
552,488
452,422
375,000
552,488
452,422
328,381
Long-
Term
Incentive
Plans
($)
—
—
—
—
—
—
—
—
Pension
Value
($)
96,228
80,850
65,098
54,389
47,250
44,317
53,344
45,237
31,553
All
Other
Compensation
($)
42,400
40,380
43,528
29,840
28,045
32,032
17,585
7,454
6,647
Total
($)
6,919,847
3,678,803
1,962,025
2,652,717
2,002,717
1,776,736
2,639,417
1,816,363
992,312
At
Risk
(%)
85 %
76 %
64 %
78 %
75 %
73 %
78 %
73 %
64 %
2022 480,000
1,480,000
—
471,456
—
51,238
21,999
2,504,693
78 %
2021
400,000
228,000
645,000
420,858
2020 238,365
(5)
—
560,988
2022 380,000
746,500
—
(5)
(6)
214,719
—
42,000
—
25,028
8,152
6,316
1,744,010
74 %
1,045,416
74 %
326,582
—
34,990
21,630
1,509,702
71 %
2021
290,000
164,500
645,000
203,435
—
26,100
2020 239,113
164,500
—
151,967
—
21,519
8,047
6,973
1,337,082
76 %
584,072
54 %
Name and
Principal Position
David Cataford
CEO
Natacha Garoute(3)
CFO
Alexandre Belleau
Chief Operating
Officer
Steve Boucratie
Senior Vice-President,
General Counsel and
Corporate Secretary
Michael Marcotte
Senior Vice-President,
Corporate
Development and
Capital Markets
Notes:
(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, 2022, the fair market value of the stock at the time of grant was at $6.16, and the amounts included in this
column represent the value of the RSUs and PSUs granted in the year taking into consideration the annual performance for the year ended March 31, 2021 (which amounted to
$1,500,000, $516,000, $516,000, $480,000 and $246,500 in the case of Mr. Cataford, Ms. Garoute, Mr. Belleau, Mr. Boucratie and Mr. Marcotte, respectively), and the value of the
PSUs granted in the year, for which the vesting is aligned with the achievement of key milestones to successful completion of the Phase II project (which amounted to
$3,000,000 in the case of Mr. Cataford, $1,000,000 in the case of each of Ms. Garoute, Mr. Belleau and Mr. Boucratie and $500,000 in the case of Mr. Marcotte). 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 RSUs granted to Ms. 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 ($375,000) relates to the 2019 grant.
The RSUs and PSUs to be granted taking into consideration the annual performance for the financial year ended March 31, 2022 will be granted in the 2023 financial year, after
the publication of the annual financial results, according to the VWAP per Share on the TSX during the period of five trading days immediately prior to grant.
(2) No stock options were granted to NEOs during the year ended March 31, 2022. Option-based awards represent the fair value of stock options granted or recognized in the year
under the Company’s LTIP. Grant date fair value calculations for option grants are based on the Black-Scholes Option Price Model which used the following assumptions
determined on the date of grant:
Fiscal Year-End
Grant Date
Risk Free
Interest Rate
Expected
Average Life
Expected
Volatility
Exercise Price
($)
Fair Value
($)
2021
2020
2020
February 5, 2021
April 15, 2019
May 20, 2019
0.39 %
1.79 %
1.79 %
4 years
3 years
3 years
55 %
86 %
86 %
5.00
2.21
2.53
2.15
1.10
1.56
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) On April 11, 2022, the Company announced that Ms. Garoute will be departing the Company following the 2022 fiscal year-end results. The Company is actively engaged in a
search for her successor.
(4) Ms. Garoute was appointed CFO of Champion on August 13, 2018 and did not earn any remuneration from Champion prior to such date. Upon joining the Company, Ms. Garoute
was awarded 200,932 stock options on September 14, 2018 for a fair value of $114,531 and 174,502 stock options on April 15, 2019 for a fair value of $192,092.
(5) Mr. Boucratie was promoted to Senior Vice-President, General Counsel and Corporate Secretary of the Company on September 9, 2021. Prior to that, Mr. Boucratie had been Vice-
President, General Counsel and Corporate Secretary of the Company and an NEO since May 20, 2019. Mr. Boucratie did not earn any remuneration from the Company prior to
May 20, 2019. Upon joining the Company, Mr. Boucratie was granted 360,000 stock options with a value of $560,988.
(6) Mr. Marcotte was promoted to Senior Vice-President, Corporate Development and Capital Markets of the Company on September 9, 2021. Prior to that, Mr. Marcotte was Vice-
President, Investor Relations of the Company and earned remuneration from the Company in such role.
84 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 Executive Performance Metrics and Incentives (continued)
Tabular Remuneration Disclosure for the Named Executive Officers (continued)
Outstanding Share-Based Awards and Option-Based Awards
The following table sets out the outstanding option-based and share-based awards for NEOs as at March 31, 2022, the end of the Company’s
most recently completed financial year.
Option-Based Awards
Share-Based Awards(2)
Number of
Securities
Underlying
Unexercised
Options
(#)
Option
Exercise
Price
($)
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
($)
300,000
5.00
February 5, 2025
648,000
1,256,796
8,998,657
828,153
300,000
5.00
February 5, 2025
648,000
531,931
3,808,627
506,606
300,000
5.00
February 5, 2025
648,000
400,255
2,865,827
256,750
300,000
5.00
February 5, 2025
648,000
330,370
2,365,449
94,943
300,000
5.00
February 5, 2025
648,000
240,325
1,720,730
211,643
Name
David Cataford
CEO
Natacha Garoute
CFO
Alexandre Belleau(3)
Chief Operating Officer
Steve Boucratie(4)
Senior Vice-President,
General Counsel and
Corporate Secretary
Michael Marcotte(5)
Senior Vice-President,
Corporate Development
and Capital Markets
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 $7.16 on
March 31, 2022, 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, and include RSUs and PSUs issued
as dividend equivalents. RSUs vest over a specific period of time while PSUs vest over a predetermined period of time upon meeting predetermined performance criteria. For
more information regarding RSU and PSU vesting, please see Omnibus Incentive Plan Awards. The market or payout value is based on the TSX market closing price of the Shares
on March 31, 2022 being $7.16.
(3) Mr. Belleau joined the Company in 2016 and was appointed Chief Operating Officer of the Company on July 22, 2020.
(4) Mr. Boucratie was promoted to Senior Vice-President, General Counsel and Corporate Secretary on September 9, 2021. Prior to that, Mr. Boucratie had been Vice-President,
General Counsel and Corporate Secretary of the Company since May 20, 2019.
(5) Mr. Marcotte was promoted to Vice-President, Corporate Development and Capital Markets of the Company on September 9, 2021. Prior to that, Mr. Marcotte was Vice-President,
Investor Relations of the Company.
Omnibus Incentive Plan Awards - Value Vested or Earned During the Year
The following table discloses incentive plan awards, including annual incentive bonuses and contracted milestone bonuses, vested or awarded
during the financial year ended March 31, 2022 (all dollar amounts in Canadian dollars):
Name
David Cataford
Natacha Garoute
Alexandre Belleau
Steve Boucratie
Michael Marcotte
Value Vested
During the Year ($)
Option-Based Awards
Share-Based Awards
Value Earned
During the Year ($)
Non-Equity Incentive Plan
Compensation
115,000
115,000
115,000
586,600
115,000
524,920
572,816
156,294
80,893
123,868
1,381,219
552,488
552,488
471,456
326,582
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, and include RSUs and PSUs issued as dividend equivalents.
85 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 Executive Performance Metrics and Incentives (continued)
Agreements with Named Executive Officers (NEOs)
The Company has written employment agreements with its NEOs. These contracts, which are governed by the laws of the Province of Québec,
provide for the payment and provision of other benefits triggered by a termination without cause as described below. Employment laws
applicable in the province of Québec require the Company to provide employees, in the case of termination other than for cause, reasonable
notice or pay in lieu thereof, and such reasonable notice period which, in the case of the NEOs, would reasonably be expected to exceed
12 months in each case. The Board believes that providing such severance entitlements upon termination without cause is advisable in order to
provide NEOs with severance entitlements that are reflective of generally accepted market practices of the Company’s peers and that would
not reasonably be expected to be below the minimum applicable notice period required under employment laws applicable in the province of
Québec in light of the applicable case law. In addition, the employment agreement of each NEO provides for the acceleration of vesting (as if
vesting occurred at 100%) of incentive awards in the event a change of control occurs during the term of their employment, as further
described below.
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. In 2021, Mr. Cataford and Champion entered into an amended and restated employment agreement under which
Mr. Cataford is entitled to participate in all elements of 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. In such scenario, the Company would pay to Mr. Cataford a
lump sum severance payment equal to (i) an indemnity in lieu of reasonable notice equal to 24 months of Mr. Cataford then current annual
base salary, (ii) an indemnity for loss of STIP bonus calculated by taking an average of the annual STIP bonuses paid to Mr. Cataford in the
three years immediately preceding the date of termination, dividing by 12 and multiplying by 24, (iii) an indemnity for loss of pension plan
contributions of Mr. Cataford's then current annual base salary divided by 12 and multiplied 24, and (iv) an indemnity for the loss of the annual
car allowance and financial advice allowance on a 24-month period. In addition, the Company will be required to maintain Mr. Cataford’s
participation to the same group insurance and/or health benefit plans as those he was entitled or participating immediately prior to
termination (except for disability insurance) for a period of 24 months, and all unvested stock options, RSUs or PSUs held by Mr. Cataford that
would have otherwise vested during the 24 months following termination had Mr. Cataford remained employed will immediately vest (as if
vesting occurred at 100%), become exercisable and payable. 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
Ms. Garoute was appointed Chief Financial Officer of the Company on August 13, 2018. In 2021, Ms. Garoute and Champion entered into an
amended and restated employment agreement under which Ms. Garoute is entitled to participate in all elements of the executive remuneration
program as well as any group insurance or health benefit plans the Company establishes.
Ms. Garoute’s employment agreement includes termination remuneration and benefit scenarios. Under the terms of Ms. Garoute’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.
86 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 Executive Performance Metrics and Incentives (continued)
Agreements with Named Executive Officers (NEOs) (continued)
Natacha Garoute – Chief Financial Officer (continued)
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. In such scenario, the Company would pay to Ms. Garoute a
lump sum severance payment equal to (i) an indemnity in lieu of reasonable notice equal to 18 months of Ms. Garoute’s then current annual
base salary, (ii) an indemnity for loss of STIP bonus calculated by taking an average of the annual STIP bonuses paid to Ms. Garoute in the three
years immediately preceding the date of termination, dividing by 12 and multiplying by 18, (iii) an indemnity for loss of pension plan
contributions of Ms. Garoute's then current annual base salary divided by 12 and multiplied 18, and (iv) an indemnity for the loss of the annual
car allowance and financial advice allowance on an 18-month period. In addition, the Company will be required to maintain Ms. Garoute’s
participation to the same group insurance and/or health benefit plans as those she was entitled or participating immediately prior to
termination (except for disability insurance) for a period of 18 months, and all unvested stock options, RSUs or PSUs held by Ms. Garoute that
would have otherwise vested during the 18 months following termination had Ms. Garoute remained employed will immediately vest (as if
vesting occurred at 100%), become exercisable and payable. If Ms. Garoute resigns due to an event that constitutes constructive dismissal
under common law and constructive dismissal did in fact exist at the time of Ms. Garoute’s resignation, the Company will be required to pay
severance equal to that which would have been payable had Ms. Garoute been terminated without cause.
Alexandre Belleau – Chief Operating Officer
Mr. Belleau was appointed Chief Operating Officer of the Company on July 22, 2020. In 2021, Mr. Belleau and Champion entered into an
amended and restated employment agreement under which Mr. Belleau is entitled to participate in all elements of 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. In such scenario, the Company would pay to Mr. Belleau a
lump sum severance payment equal to (i) an indemnity in lieu of reasonable notice equal to 18 months of Mr. Belleau’s then current annual
base salary, (ii) an indemnity for loss of STIP bonus calculated by taking an average of the annual STIP bonuses paid to Mr. Belleau in the three
years immediately preceding the date of termination, dividing by 12 and multiplying by 18 (if at the date of termination, Mr. Belleau had not
completed three years of employment with the Company, the indemnity for loss of STIP bonus shall be based on the STIP bonus paid to
Mr. Belleau in the year prior to the date of termination, divided by 12 and multiplied by 18), (iii) an indemnity for loss of pension plan
contributions of Mr. Belleau's then current annual base salary divided by 12 and multiplied 18, and (iv) an indemnity for the loss of the annual
car allowance and financial advice allowance on an 18-month period. In addition, the Company will be required to maintain Mr. Belleau’s
participation to the same group insurance and/or health benefit plans as those he was entitled or participating immediately prior to
termination (except for disability insurance) for a period of 18 months, and all unvested stock options, RSUs or PSUs held by Mr. Belleau that
would have otherwise vested during the 18 months following termination had Mr. Belleau remained employed will immediately vest (as if
vesting occurred at 100%), become exercisable and payable. 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 – Senior 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. On September 9, 2021,
Mr. Boucratie was promoted to Senior Vice-President, General Counsel and Corporate Secretary. Mr. Boucratie and Champion entered into an
employment agreement under which Mr. Boucratie is entitled to participate in all elements of 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.
87 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 Executive Performance Metrics and Incentives (continued)
Agreements with Named Executive Officers (NEOs) (continued)
Steve Boucratie – Senior Vice-President, General Counsel and Corporate Secretary (continued)
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. In such scenario, the Company would pay to Mr. Boucratie
a lump sum severance payment equal to (i) an indemnity in lieu of reasonable notice equal to 18 months of Mr. Boucratie’s then current annual
base salary, (ii) an indemnity for loss of STIP bonus calculated by taking an average of the annual STIP bonuses paid to Mr. Boucratie in the
three years immediately preceding the date of termination, dividing by 12 and multiplying by 18 (if at the date of termination, Mr. Boucratie had
not completed three years of employment with the Company, the indemnity for loss of STIP bonus shall be based on the STIP bonus paid to
Mr. Boucratie in the year prior to the date of termination, divided by 12 and multiplied by 18), (iii) an indemnity for loss of pension plan
contributions of Mr. Boucratie's then current annual base salary divided by 12 and multiplied 18, and (iv) an indemnity for the loss of the annual
car allowance and financial advice allowance on an 18-month period. In addition, the Company will be required to maintain Mr. Boucratie’s
participation to the same group insurance and/or health benefit plans as those he was entitled or participating immediately prior to
termination (except for disability insurance) for a period of 18 months, and all unvested stock options, RSUs or PSUs held by Mr. Boucratie that
would have otherwise vested during the 18 months following termination had Mr. Boucratie remained employed will immediately vest (as if
vesting occurred at 100%), become exercisable and payable. 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.
Michael Marcotte – Senior Vice-President, Corporate Development and Capital Markets
Mr. Marcotte was appointed Vice-President, Investor Relations of the Company on January 10, 2019. On September 9, 2021, Mr. Marcotte was
promoted to Senior Vice-President, Corporate Development and Capital Markets. Mr. Marcotte and Champion entered into an employment
agreement under which Mr. Marcotte is entitled to participate in all elements of the executive remuneration program as well as any group
insurance or health benefit plans the Company establishes.
Mr. Marcotte’s employment agreement includes termination remuneration and benefit scenarios. Under the terms of Mr. Marcotte’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. In such scenario, the Company would pay to Mr. Marcotte a
lump sum severance payment equal to (i) an indemnity in lieu of reasonable notice equal to 18 months of Mr. Marcotte’s then current annual
base salary, (ii) an indemnity for loss of STIP bonus calculated by taking an average of the annual STIP bonuses paid to Mr. Marcotte in the
three years immediately preceding the date of termination, dividing by 12 and multiplying by 18, (iii) an indemnity for loss of pension plan
contributions of Mr. Marcotte’s then current annual base salary divided by 12 and multiplied 18, and (iv) an indemnity for the loss of the annual
car allowance and financial advice allowance on an 18-month period. In addition, the Company will be required to maintain Mr. Marcotte’s
participation to the same group insurance and/or health benefit plans as those he was entitled or participating immediately prior to
termination (except for disability insurance) for a period of 18 months, and all unvested stock options, RSUs or PSUs held by Mr. Marcotte that
would have otherwise vested during the 18 months following termination had Mr. Marcotte remained employed will immediately vest (as if
vesting occurred at 100%), become exercisable and payable. If Mr. Marcotte resigns due to an event that constitutes constructive dismissal
under common law and constructive dismissal did in fact exist at the time of Mr. Marcotte’s resignation, the Company will be required to pay
severance equal to that which would have been payable had Mr. Marcotte been terminated without cause.
Executive Employment Agreements – Change of Control
The amended and restated employment agreement entered into between the Company and each of the NEOs further provides that in the event
a change of control (as such term is defined in the agreement) occurs during their respective term of employment (that does not involve a
transfer of the whole or any part of the undertaking or property of the Company), all of their respective unvested stock options, RSUs and PSUs
will immediately vest (as if vesting occurred at 100%) and become exercisable.
88 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
H. 2022 Executive Performance Metrics and Incentives (continued)
Agreements with Named Executive Officers (NEOs) (continued)
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, the employment agreements entered into between
Champion and its NEOs include customary non-competition and non-solicitation covenants applicable during the term of the agreements and
for a period of twelve months following the end of employment, together with customary confidentiality clauses.
The following table sets forth the estimated incremental value that would become payable to each NEO in the event of employment
termination by the Company without cause (including following a change of control) or in the event of a change of control of the Company, in
each case as if the triggering event (change of control or termination without cause) had occurred on March 31, 2022.
David Cataford
CEO
Natacha Garoute
CFO
Alexandre Belleau
Chief Operating Officer
Steve Boucratie
Senior Vice-President, General Counsel and Corporate Secretary
Michael Marcotte
Senior Vice-President, Corporate Development and Capital Markets
Notes:
Termination Without
Cause(1)
($)
Termination Without
Cause Following
Change of Control(2)
($)
Change of Control(3)
($)
12,959,026
13,508,450
5,569,666
5,573,333
4,561,800
4,592,223
3,918,748
3,945,567
2,914,022
2,914,022
9,214,656
4,024,628
3,081,828
2,581,450
1,936,730
(1) Amounts represent the value of the severance entitlements described under “Agreements with Named Executive Officers (NEOs)” above, and include the incremental value of
the unvested stock options, RSUs or PSUs held by the NEO that would have otherwise vested during the severance period had the NEO remained employed that will immediately
vest (as if vesting occurred at 100%) and become exercisable upon termination without cause (based on the TSX market closing price of the Shares on March 31, 2022 of $7.16).
Amounts do not include the value of vested in-the-money options and vested and undelivered RSUs.
(2) Amounts represent the aggregate of (i) the incremental value of unvested stock options, RSUs and PSUs which will immediately vest (as if vesting occurred at 100%) and
become exercisable upon a change of control of the Company (based on the TSX market closing price of the Shares on March 31, 2022 of $7.16), and (ii) the value of the
severance entitlements described under “Agreements with Named Executive Officers (NEOs)” above (without duplication with respect to unvested stock options, RSU and PSUs
which would have immediately vested and become exercisable upon the change of control). Amounts do not include the value of vested in-the-money options and vested and
undelivered RSUs.
(3) Amounts represent the incremental value of unvested stock options, RSUs and PSUs which will immediately vest (as if vesting occurred at 100%) and become exercisable upon
a change of control of the Company (based on the TSX market closing price of the Shares on March 31, 2022 of $7.16).
89 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
I. Performance
i. Performance Graph
The following graph and table is a reporting requirement under Canadian securities laws, and compares the Company’s five-year cumulative
total shareholder return had $100 been invested in the Company on the first day of the five-year period at the closing price of the Ordinary
Shares on that date (April 1, 2017), with the cumulative total return of the S&P/TSX Composite Index and the S&P/TSX Global Mining Index over
the five most recently completed financial years ended on March 31.
90 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
I. Performance (continued)
ii. Performance Metrics
The following table discloses key production, revenue, net income (loss), EBITDA1 and share price metrics for each of the financial years during
the period from April 1, 2017 to March 31, 2022:
Production (wet metric tonnes)
Revenue
EBITDA1
Net income (loss)
Share price at March 31
Share price at March 31 (A$)
Year Ended
March 31, 2022
Year Ended
March 31, 2021
Year Ended
March 31, 2020
Year Ended
March 31, 2019
Year Ended
March 31, 2018
7,907,300
1,460,806,000
925,817,000
522,585,000
7.16
7.81
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
From April 1, 2017 to March 31, 2022, the share price of the Company increased by 595% compared to an increase of 41% and 105% 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 493%, from a base of $2,838,145 in 2017 to $16,830,687 in 2022.
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. Additionally, the Company is now focused on executing several complex growth projects,
including its Phase II expansion and ongoing studies regarding organic growth opportunities such as the DR pellet feed plant and the Kami
project. As such, the Company recently announced the commissioning of its Phase II expansion ahead of schedule. The compensation of NEOs
also reflects the tightening of the employment market for mining executives over that period.
Accordingly, the Company’s share price has significantly outperformed its peers since April 1, 2017, 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 several stages, including acquisition, evaluation, financing, restart of
operation and production ramp-up of the Phase I project, then planning and construction of the Phase II expansion throughout
volatile macroeconomic environments and within budgeted constraints;
the operational and financial performance generated by the Bloom Lake iron ore mine since it went into production in 2018;
achieving record production to capture elevated Fe prices and generate record EBITDA1 during the COVID-19 pandemic while
progressing the construction of the Phase II expansion aiming at doubling the Bloom Lake iron mine's production;
the acquisition of properties in the Labrador Trough, including the Kami project and the Lac Lamêlée project; and
the advancement of studies to consider organic growth projects, including the DR pellet feed plant to upgrade its iron ore concentrate
to 69% Fe and the Kami project feasibility study.
•
•
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, achievement of milestones relating to Phase II and relative and/or absolute shareholder
returns (including performance of the Company’s Share price relative to a peer group, with a view to ensure that executives are motivated to
deliver returns that are superior to what a shareholder could achieve in the broader market). As a consequence, actual NEO remuneration will
increase with the outperformance of the Company’s share price compared to industry peers, 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.
1 Non-IFRS financial measure or ratio with no standard meaning under the financial reporting framework used to prepare the financial statements. Refer to section P - Non-IFRS Financial
Measures and Ratios at the end of this Remuneration Report.
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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 Non-Executive Directors
In conjunction with the review of executive compensation conducted for the year ended March 31, 2021, the Remuneration and Nomination
Committee of the Board hired 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 2021 Mercer report, the Board set the following non-executive director
remuneration framework starting August 2021, paid in Canadian dollars for Canadian-based directors and in Australian dollars for Australian-
based directors:
•
•
•
•
•
•
•
annual cash retainer of $200,000 for non-executive directors;
cash retainer of $60,000 for lead director;
cash retainer of $40,000 for Chair of Audit Committee and Chairman of Remuneration and Nomination Committee;
cash retainer of $20,000 for Chair of Environmental, Social and Governance Committee;
no retainer 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.
At the 2021 annual meeting of shareholders of the Company, shareholders approved, for the purpose of ASX Listing Rule 10.17, Clause 10.2 of
the Company's constitution and for all other purposes, that the aggregate maximum sum available for the remuneration of non-executive
directors be increased by C$750,000 from C$1.0 million per year to C$1.75 million per year.
In conjunction with the review of executive compensation conducted for the year ended March 31, 2019, the Remuneration and Nomination
Committee of the Board hired 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 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 the annual shareholder meeting held on August 17, 2018 and re-approved at the 2021 annual meeting.
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. DSUs are priced at the greater of the five-day volume
weighted average price of the Shares over the last five 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 financial year ended March 31, 2022, and consequently did not receive
compensation for their service as directors.
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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 held by Compensated Directors is referred to as the “Relevant Threshold”. Neither
Mr. O'Keeffe nor Mr. Cataford were compensated in the financial year ended March 31, 2022 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 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.
Director Remuneration Table - Non-Statutory
The following table discloses all compensation provided to directors, other than any director who is an NEO of the Company, for the Company’s
most recently completed financial year ending March 31, 2022. Amounts presented under the column entitled Fees Earned in DSUs reflect the
full fair values of the awards as measured at their respective grant dates. Accordingly, the amounts presented thereunder are not reflective of
the related accounting expense for the period. Refer to Section K “Details of Total Statutory Remuneration for KMP (NEOs and Directors)” on
page 97 of this Remuneration Report for the statutory remuneration table as calculated with reference to the Corporations Act. Fees are paid
on a monthly basis. All DSUs were fully vested on March 31, 2022.
Fees Earned
in Cash
($)
Fees Earned
in DSU
($)
Other Share-
Based Awards
($)
Option-Based
Awards
($)
All Other
Compensation
($)
Total
($)
—
146,644
237,170
Nil
144,000
119,750
110,000
—
93,356
22,830
Nil
96,000
80,250
110,000
—
Nil
Nil
Nil
Nil
Nil
Nil
—
Nil
Nil
Nil
Nil
Nil
Nil
—
Nil
Nil
Nil
Nil
Nil
Nil
—
240,000
260,000
Nil
240,000
200,000
220,000
Name
Michael O'Keeffe(1)
Gary Lawler
Andrew Love
Jyothish George
Michelle Cormier(2)
Wayne Wouters
Louise Grondin
Notes:
(1) Mr. O'Keeffe was not compensated in the financial year ended March 31, 2022 for acting as a director by virtue of his employment with the Company. See the section
“Remuneration of Executive Chairman”.
(2) Ms. Cormier was appointed to the Board in 2016 as a nominee of Wynnchurch pursuant to certain board nomination rights granted by the Company in favour of Wynnchurch in
connection with a private placement of ordinary shares completed on April 11, 2016. Following the disposition of ordinary shares by Wynnchurch that was publicly announced by
Wynnchurch on August 2, 2021, Wynnchurch is no longer entitled to nominate a candidate for election or appointment to the Board such that Ms. Cormier is no longer considered
to be a director nominee of Wynnchurch.
93 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
J. DIRECTOR REMUNERATION (continued)
iii. Share Ownership Policy (continued)
Fees Paid
The following table discloses a detailed breakdown of the fees paid to directors, other than any director who is an NEO of the Company, for the
Company's most recently completed financial year ending March 31, 2022. Fees are paid quarterly on a monthly basis. All DSUs were fully
vested on March 31, 2022.
Name
Michael O'Keeffe(3)
Gary Lawler
Andrew Love
Jyothish George
Michelle Cormier
Wayne Wouters
Louise Grondin
Notes:
Board
Retainer Fee
($)
Committee
Retainers
($)
Meeting
Fees
($)
Nil
200,000
200,000
Nil
200,000
200,000
200,000
Nil
40,000
60,000
Nil
40,000
Nil
20,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Total
($)
Nil
240,000
260,000
Nil
240,000
200,000
220,000
Fees Paid
in Cash(1)
($)
Fees Earned
in DSUs(2)
($)
Total
Fees
($)
Nil
146,644
237,170
Nil
144,000
119,750
110,000
Nil
93,356
22,830
Nil
96,000
80,250
110,000
Nil
240,000
260,000
Nil
240,000
200,000
220,000
(1) Portion of total fees paid to the non-executive directors in cash.
(2) Portion of the total fees paid to the non-executive directors in DSUs.
(3) Mr. O'Keeffe was not compensated in the financial year ended March 31, 2022 for acting as a director by virtue of his employment with the Company. See the section
“Remuneration of Executive Chairman”.
94 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)
Outstanding Share-Based Awards and Option-Based Awards
As at March 31, 2022, the end of the Company’s most recently completed financial year, outstanding option-and share-based awards for all
directors, other than any director who is an NEO of the Company, are set out in the following table:
Option-Based Awards
Share-Based Awards(1)
Number of
Securities
Underlying
Unexercised
Options
(#)
Option
Exercise
Price
($)
Option
Expiration Date
(M/D/Y)
Value of
Unexercised
In-the-Money
Options
($)(2)
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
Number of
Shares or
Units of
Shares that
Have not
Vested
(#)
239,435
Nil
Nil
Nil
Nil
Nil
Nil
Market or
Payout Value
of
Share-Based
Awards that
Have not
Vested
($)
1,714,356
Nil
Nil
Nil
Nil
Nil
Nil
Market or
Payout Value of
Vested
Share-Based
Awards not
Paid Out or
Distributed
($)
623,404
512,182
160,926
Nil
530,126
512,711
326,918
Name
Michael O'Keeffe
Gary Lawler
Andrew Love
Jyothish George
Michelle Cormier
Wayne Wouters
Louise Grondin
Notes:
(1)
In the case of Mr. O’Keeffe, share-based awards consist of RSUs and PSUs and are settled in Shares or cash in accordance with the Company’s Omnibus Incentive Plan, and
include RSUs and PSUs issued as dividend equivalents. 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 Omnibus Incentive Plan Awards. The value of share-based awards noted above is based on the TSX market closing price
of the Shares on March 31, 2022, being $7.16.
(2) 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 $7.16 on
March 31, 2022, and the exercise price of the option.
95 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
J. DIRECTOR REMUNERATION (continued)
iv. Tabular Remuneration Disclosure for the Directors (continued)
Incentive Plan Awards - Value Vested or Earned During the Year
The following table discloses incentive plan awards to directors, other than any director who is an NEO of the Company, for the year ended
March 31, 2022. Except for Mr. O’Keeffe, all of the share-based awards vested during the year which are referred to in the following table
represent DSUs which directors elected to receive in lieu of annual fees paid in cash.
Name
Michael O'Keeffe
Gary Lawler
Andrew Love
Jyothish George
Michelle Cormier
Wayne Wouters
Louise Grondin
Notes:
Option-Based Awards
Value Vested
During the Year (1)
($)
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
Nil
282,711
121,320
23,334
Nil
91,342
131,342
98,451
Nil
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, 2022 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) With respect to Gary Lawler, Michelle Cormier, Wayne Wouters and Louise Grondin, share-based awards value vested during the year includes DSUs related to the 2023 fiscal
year and issued in March 2022 of $65,700, $30,000, $70,000 and $55,000, respectively, and includes DSUs issued as dividend equivalents. With respect to Michael O’Keeffe,
share-based awards value vested during the year includes PSUs and RSUs held by Mr. O’Keeffe, and includes PSUs and RSUs issued as dividend equivalents.
96 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
K. Details of Total Statutory Remuneration for KMP (NEOs and Directors)
The elements of statutory remuneration presented below have been recognised and measured in accordance with the applicable accounting
standards under IFRS.
Short-Term
($)
Year Ended
March 31, 2022
Salary
Michael O’Keeffe
550,000
Gary Lawler
Andrew Love
Michelle Cormier(2)
Wayne Wouters
Louise Grondin
Jyothish George
146,644
237,170
144,000
119,750
110,000
—
Con-
sulting
Fees
—
—
—
—
—
—
—
Bonus
Non-
Monetary
—
54,313
—
—
—
—
—
—
—
—
—
—
—
—
Termi-
nation
Payments
($)
—
—
—
—
—
—
—
Pension
($)
Options
($)
DSUs(1)
($)
Total
($)
—
559,916
—
1,164,229
—
—
—
—
—
—
—
178,637
325,281
—
42,855
280,025
—
148,037
292,037
—
187,732
307,482
—
136,766
246,766
—
—
—
Perfor-
mance
Related
— %
— %
— %
— %
— %
— %
— %
Consisting
of Options
48.09 %
— %
— %
— %
— %
— %
— %
David Cataford
900,000
—
1,381,219
42,400
—
96,228
4,160,495
—
6,580,342
20.99 %
63.23 %
500,000
Natacha Garoute
Alexandre Belleau 500,000
480,000
Steve Boucratie
—
552,488
29,840
—
54,389
1,905,269
—
3,041,986
18.16 %
62.63 %
—
552,488
17,585
—
53,344
1,499,588
—
2,623,005
21.06 %
57.17 %
—
471,456
21,999
—
51,238
1,316,991
—
2,341,684
20.13 %
56.24 %
Michael Marcotte
380,000
—
326,582
21,630
34,990
999,470
—
1,762,672
18.53 %
56.70 %
Total
Note:
4,067,564
—
3,284,233
187,767
—
290,189
10,441,729 694,027
18,965,509
(1) Represents DSUs which directors elected to receive in lieu of annual fees paid in cash.
(2) Ms. Cormier was appointed to the Board in 2016 as a nominee of Wynnchurch pursuant to certain board nomination rights granted by the Company in favour of Wynnchurch in
connection with a private placement of ordinary shares completed on April 11, 2016. Following the disposition of ordinary shares by Wynnchurch that was publicly announced by
Wynnchurch on August 2, 2021, Wynnchurch is no longer entitled to nominate a candidate for election or appointment to the Board such that Ms. Cormier is no longer considered
to be a director nominee of Wynnchurch.
Short-Term
($)
Con-
sulting
Fees
—
—
—
—
—
—
—
—
—
—
—
—
—
Bonus
—
—
—
—
—
—
—
1,262,573
452,422
452,422
420,858
203,435
2,791,710
Non-
Monetary
52,250
—
—
—
—
—
—
40,380
28,045
7,454
8,152
8,047
144,328
Termi-
nation
Payments
($)
—
—
—
—
—
—
—
—
—
—
—
—
—
Pension
($)
—
—
—
—
—
—
—
80,850
47,250
45,237
42,000
26,100
241,437
Options
($)
152,778
—
—
—
—
—
—
869,930
754,828
441,070
490,457
425,430
3,134,493
DSUs(1)
($)
—
48,704
—
70,997
54,002
135,001
—
—
—
—
—
—
308,704
Total
($)
755,028
188,914
151,760
163,091
137,346
151,142
—
3,003,733
1,712,545
1,376,183
1,361,467
953,012
9,954,221
Perfor-
mance
Related
— %
— %
— %
— %
— %
— %
— %
42.03 %
26.42 %
32.88 %
30.91 %
21.35 %
Consisting
of Options
20.23 %
— %
— %
— %
— %
— %
— %
28.96 %
44.08 %
32.05 %
36.02 %
44.64 %
Year Ended
Salary
March 31, 2021
Michael O’Keeffe
550,000
Gary Lawler
140,210
Andrew Love
151,760
Michelle Cormier
92,094
Wayne Wouters
83,344
Jyothish George
16,141
Louise Grondin
—
David Cataford
750,000
Natacha Garoute
430,000
Alexandre Belleau 430,000
Steve Boucratie
400,000
Michael Marcotte
290,000
Total
3,333,549
Note:
(1) Represents DSUs which directors elected to receive in lieu of annual fees paid in cash.
97 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
L. Movement of Equity Held by Key Management Personnel (Named Executive Officers and Directors)
Stock Options as at March 31, 2022
Balance
April 1, 2021
Grant
Exercised
Cancelled
Held and Vested
March 31, 2022
Unvested
March 31, 2022
Name
Michael O'Keeffe
David Cataford
Natacha Garoute
Alexandre Belleau
Steve Boucratie
Michael Marcotte
Gary Lawler
Andrew Love
Jyothish George
Michelle Cormier
Wayne Wouters
Louise Grondin
Name
Michael O'Keeffe
Gary Lawler
Andrew Love
Michelle Cormier
Wayne Wouters
Jyothish George
Louise Grondin
David Cataford
Natacha Garoute
Alexandre Belleau
Steve Boucratie
Michael Marcotte
—
300,000
300,000
300,000
420,000
300,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
120,000
—
—
—
—
—
—
—
45,023,830
1,700,000
1,660,813
456,500
440,000
—
—
2,436,365
101,934
260,200
61,000
123,796
—
19,725
—
—
—
—
—
—
—
—
9,000
5,000
—
—
—
—
—
—
—
—
75,712
—
120,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
200,000
200,000
200,000
200,000
200,000
—
—
—
—
—
—
—
100,000
100,000
100,000
100,000
100,000
—
—
—
—
—
—
Balance
March 31, 2022
Value of Shares
Issued During the
Year(1)
45,023,830
1,719,725
1,660,813
456,500
440,000
—
—
2,436,365
177,646
260,200
105,000
128,796
—
—
—
—
—
—
—
—
387,645
—
678,000
—
(85,000)
—
Ordinary Shares as at March 31, 2022
Balance
April 1, 2021
Purchased
Acquired Upon
Exercise of Equity
Award
Sold
Note:
(1) Represents value of Shares issued during the year upon exercise of option-base awards and share based-awards, calculated as at the applicable exercise date(s) based on the
TSX market closing price of the Shares on the exercise date(s) multiplied by the number of options or rights exercised.
98 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
Grant Date
Performance
Period
Number of
PSUs Granted
Value per
PSU Granted
at Grant Date
($)
Value of
PSUs Granted
at Grant Date
($)
Number of
Additional PSUs
Granted as
Dividend
Equivalent(1)
% of Performance
Achieved, and Vested
vs Forfeited PSUs
April 30, 2019
May 28, 2020
June 7, 2021
April 1, 2019 to
March 31, 2022
April 1, 2020 to
March 31, 2023
April 1, 2021 to
March 31, 2024
June 7, 2021
June 7, 2021 to
January 30, 2023
April 30, 2019
May 28, 2020
June 7, 2021
April 1, 2019 to
March 31, 2022
April 1, 2020 to
March 31, 2023
April 1, 2021 to
March 31, 2024
June 7, 2021
June 7, 2021 to
January 30, 2023
May 14, 2019
May 28, 2020
June 7, 2021
April 1, 2019 to
March 31, 2022
April 1, 2020 to
March 31, 2023
April 1, 2021 to
March 31, 2024
June 7, 2021
June 7, 2021 to
January 30, 2023
May 28, 2020
June 7, 2021
April 1, 2020 to
March 31, 2023
April 1, 2021 to
March 31, 2024
June 7, 2021
June 7, 2021 to
January 30, 2023
May 14, 2019
May 28, 2020
June 7, 2021
April 1, 2019 to
March 31, 2022
April 1, 2020 to
March 31, 2023
April 1, 2021 to
March 31, 2024
June 7, 2021
June 7, 2021 to
January 30, 2023
140,187
2.14
300,000
231,760
2.33
540,000
146,103
6.16
899,994
487,013
6.16
3,000,000
105,140
2.14
225,000
103,004
2.33
240,000
50,259
6.16
309,595
2,286
3,780
2.383
7,944
1,715
1,680
Will be determined in
May 2022
Will be determined in
May 2023
Will be determined in
May 2024
Will be determined in
January 2023
Will be determined in
May 2022
Will be determined in
May 2023
Will be determined in
May 2024
819
162,338
6.16
1,000,000
2,648
48,969
2.23
109,200
60,837
2.33
141,750
50,259
6.16
309,595
798
992
819
162,338
6.16
1,000,000
2,648
58,712
2.33
136,800
46,753
6.16
287,998
957
762
162,338
6.16
1,000,000
2,648
44,260
42,361
2.23
2.33
98,700
98,700
24,009
6.16
147,895
722
691
391
Will be determined in
January 2023
Will be determined in
May 2022
Will be determined in
May 2023
Will be determined in
May 2024
Will be determined in
January 2023
Will be determined in
May 2023
Will be determined in
May 2024
Will be determined in
January 2023
Will be determined in
May 2022
Will be determined in
May 2023
Will be determined in
May 2024
81,169
6.16
500,000
1,324
Will be determined in
January 2023
Name
David Cataford
CEO
Natacha Garoute
CFO
Alexandre Belleau
Chief Operating
Officer
Steve Boucratie
Senior Vice-
President, General
Counsel and
Corporate Secretary
Michael Marcotte
Senior Vice-
President, Corporate
Development and
Capital Markets
Note:
(1) Represents PSUs granted as dividend equivalent. Dividend equivalent PSUs are subject to the same terms and conditions as the PSUs and vest and are settled at the same time
and in the same form as the PSUs to which such dividend equivalent PSUs relate.
99 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
N. Securities Authorized for Issuance under Equity Compensation Plans
The following table sets out, as at March 31, 2022, 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. As at March 31, 2022, the number of issued and
outstanding Shares of the Company was 516,611,876.
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)
1,500,000 (Options)
285,316 (DSUs)
1,142,416 (RSUs)
2,842,239 (PSUs)
(b)
(c)
$5.00 (Options)
45,891,217
Equity Compensation plans not approved by
security holders
Total
Nil
N/A
N/A
5,769,970
$5.00 (Options)
45,891,217
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 five-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.
100 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
O. Other Information (continued)
Director's Attendance for the Financial Year Ended March 31, 2022
Name
Michael O'Keeffe
David Cataford
Gary Lawler
Andrew Love
Jyothish George
Michelle Cormier
Wayne Wouters
Louise Grondin
Board of Directors
Meetings
Audit Committee
Meetings
Remuneration
Committee Meetings
ESG Meetings
9 of 9
9 of 9
9 of 9
9 of 9
9 of 9
9 of 9
9 of 9
9 of 9
N/A
N/A
5 of 5
5 of 5
N/A
5 of 5
N/A
N/A
N/A
N/A
6 of 6
6 of 6
N/A
6 of 6
N/A
N/A
N/A
N/A
N/A
N/A
N/A
5 of 5
5 of 5
5 of 5
P. Non-IFRS Financial Measures and Ratios
This Remuneration Report contains non-IFRS financial measures and ratios such as EBITDA, FCF, cash cost and ROCE. These measures are
mainly derived from the financial statements but do not have any standardized meaning prescribed by International Financial Reporting
Standards (“IFRS”) and therefore, may not be comparable to similar measures presented by other companies. These non-IFRS financial
measures and ratios, which are representative of the Company's performance, are used to determine the executive compensation.
Additional details on EBITDA and cash cost, including reconciliations to the most directly comparable IFRS measures, have been incorporated
by reference and can be found in section 20 - Non-IFRS and Other Financial Measures in the Company's Management's Discussion and
Analysis (“MD&A”) for the three-month period and year ended March 31, 2022, available on SEDAR at www.sedar.com, the ASX at
www.asx.com.au and on the Company's website under the Investors section at www.championiron.com.
EBITDA
EBITDA is a non-IFRS financial measure which represents income (loss) before income and mining taxes, net finance costs and depreciation.
For simplicity and comparative purposes, the Company did not exclude non-cash share-based payments, Phase II pre-commercial start-up
costs, COVID-19-related expenditures and other income. EBITDA does not have any standardized meaning prescribed by IFRS and therefore,
may not be comparable to similar measures presented by other companies.
(in thousands of dollars)
Income (loss) before income and mining taxes
Net finance costs
Depreciation
EBITDA
Year Ended
March 31,
2022
2021
2020
2019
2018
870,843
11,045
43,929
925,817
761,872
22,428
35,177
819,477
241,188
84,244
22,001
347,433
213,611
48,413
14,551
276,575
(107,331)
23,081
4,244
(80,006)
101 Page
Champion Iron Limited
Directors' Report - Remuneration Report
(Expressed in Canadian dollars, except where otherwise indicated - audited)
P. Non-IFRS Financial Measures and Ratios (continued)
Free Cash Flow
FCF is a non-IFRS measure defined as net increase in cash and cash equivalents plus investments in the Bloom Lake Phase II expansion
project and cash flows used in financing activities. Phase II start-up costs are composed of property, plant and equipment expenditures, long-
term advance payments and deposits related to existing port, rail and transboarding infrastructure and Phase II start-up costs mainly related
to staff mobilization and training, which were part of the Phase II construction budget.
FCF includes all tax payments including true-up payments made in relation to prior income tax expenses. As such, FCF generated by Champion
for the 2022 fiscal year included payments of $191.5M related to the 2021 income tax expenses. FCF reflects cost and capital management
and production efficiencies. FCF does not have any standardized meaning prescribed by IFRS and therefore, may not be comparable to similar
measures presented by other companies.
(in thousands of dollars)
Net increase (decrease) in cash and cash equivalent
Plus: Cash flows used in financing activities
Plus: Phase II capital expenditures1
Plus: Phase II advance payments
Plus: Bloom Lake Phase II start-up costs
Free Cash Flow
Year Ended March 31,
2022
Year Ended March 31,
2021
(283,171)
118,141
354,035
97,067
17,752
303,824
353,034
26,300
97,087
15,211
—
491,632
1 Phase II capital expenditures are included in purchase of property, plant and equipment as per the statements of cash flows as described in section 13 - Cash Flows of the MD&A for the three-
month period and year ended March 31, 2022, available on SEDAR at www.sedar.com, the ASX at www.asx.com.au and on the Company's website under the Investors section at
www.championiron.com.
Return on Capital Employed
ROCE is a non-IFRS ratio defined as EBITDA divided by capital employed consisting of the current portion of the long-term debt, the long-term
debt, and total equity as per statement of financial position. This measure is largely used in a capital-intensive industry such as mining. ROCE
does not have any standardized meaning prescribed by IFRS and therefore, may not be comparable to similar measures presented by other
companies.
102 Page
Principal Activities
Champion’s principal activities include the production of high-grade 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 May 24, 2022, the Company signed a four-year general purpose revolving facility of $US400,000,000 and refinanced the previous Phase II
Credit Facility.
On May 25, 2022 (Montréal time) / May 26, 2022 (Sydney time), the Board declared a dividend of $0.10 per ordinary share in connection with
the financial results for the period ended March 31, 2022, payable on June 28, 2022, to the Company's shareholders at the close of business in
Australia and Canada on June 7, 2022 (local time).
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, 2022.
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.
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.
103 Page
Champion Iron Limited
Directors' Report - Specific and General Information
Dividends
An unfranked interim dividend was declared and paid during the fiscal year ended March 31, 2022 at an amount of CA$0.10 per ordinary share.
The record date for determining the entitlement to the interim dividend was February 8, 2022. The interim dividend was paid on March 1, 2022.
An unfranked final dividend was declared on May 25, 2022 (Montréal time) / May 26, 2022 (Sydney time), payable on June 28, 2022. Dividends
paid by subsidiaries are not included. No interim or final dividend has been declared for the fiscal year ended March 31, 2021. Dividends paid by
subsidiaries were not included.
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, 2022.
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, 2022 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
104 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
Mineral reserves and resources are subject to a systematic internal peer review. Process and validations are documented and sent to the
Resource and Reserve committee for approval. As a control, external technical audits are conducted when required. The 2021 technical audit
did not identify any major risk or flaws in the estimation. In general, any estimation update would be based on new information, including but
not limited to drilling information, calibration to production and changes to assumptions. Information used for update is validated by a
“qualified person” as defined by National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”). Tonnages and grades
included in the following statement have been reviewed by the Resource and Reserve committee.
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 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 the 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 "Phase II 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 the 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 Phase II Feasibility Study. The Company is not aware of any new information or data that materially
affects the information included in the Phase II Feasibility Study and confirms that all material assumptions and technical parameters
underpinning the estimates in the Phase II Feasibility Study continue to apply and have not materially changed. The Phase II Feasibility Study is
available under the Company's filings at www.sedar.com and on the ASX at www.asx.com.au.
106 Page
Champion Iron Limited
Mineral Resources and Ore Reserves Statement
4. Reserves and Resources — Bloom Lake as at March 31, 2022
During the 2022 fiscal year, stripping activities commenced as detailed in the NI 43-101 and JORC Code (2012 edition) compliant technical
report titled “Bloom Lake Mine – Feasibility Study Phase II”, authored by BBA, Soutex and WSP Canada Inc., and dated June 20, 2019. As such, it
is no longer relevant to report reserves and resources separately as Phase I and Phase II.
The Bloom Lake reserves and resources were subject to adjustments for new drilling, operational experience and depletion, due to iron ore
being mined as of March 31, 2022. The Phase II Feasibility Study is available under the Company's filings at www.sedar.com and on the ASX at
www.asx.com.au.
• Total Bloom Lake measured and indicated resources totalled 846 Mt as at March 31, 2022, compared to 843 Mt as at March 31, 2021 for
Phase I (894 Mt as at March 31, 2021 for Phase II, inclusive of Phase I);
• Bloom Lake inferred resources totalled 129 Mt as at March 31, 2022, compared to 79 Mt as at March 31, 2021 for Phase I (54 Mt as at
March 31, 2021 for Phase II, inclusive of Phase I); and
• Total Bloom Lake proven and probable reserves totalled 745 Mt at 28.8% Fe as at March 31, 2022, compared to 345 Mt at 30.0% Fe as at
March 31, 2021 for Phase I (807 Mt at 29.0% as at March 31, 2021 for Phase II, inclusive of Phase I).
All Bloom Lake mineral resources reported are inclusive of the Bloom Lake mineral reserves. The Bloom Lake mineral reserves and resources
reported were estimated using an iron ore reference price of US$61.50/dmt (based on CFR China Index P62). Bloom Lake proven reserves and
measured resources as of March 31, 2022 include 1.2 Mt of pre-concentration stockpiles.
The changes in resources and reserves between March 31, 2021 and March 31, 2022 are mostly due to the following:
• Change in the pit design in relation to the Phase II expansion detailed in the Phase II Feasibility Study;
• Adjustment of the geological domains due to the addition of new drill holes to the database;
• Adjustment of the estimation parameters used in modelling through calibration with results from operations; and
• Yearly depletion.
Table 1: Bloom Lake Mineral Resource Estimate (at 15% Fe Cut-Off)
Category
Measured
Indicated
Total measured and indicated resources
Inferred
Mt Tonnage
(dmt)
219
626
846
129
As at March 31, 2022
(Phases I and II)
As at March 31, 2021
(Phase I)
Fe (%)
30.4
28.6
29.0
27.2
CaO (%)
1.3
2.1
1.9
1.3
MgO (%)
1.2
1.9
AI2O3 (%)
0.3
0.5
Mt Tonnage (dmt)
379
464
1.7
1.2
0.4
0.5
843
79
Table 2: Bloom Lake Phase Mineral Reserve Estimate (at 15% Fe Cut-Off)
Category
Proven*
Probable
Total proven and probable
* Proven tonnage of 214 Mt includes 1 Mt of stockpiles.
Mt Tonnage
(dmt)
214
531
745
As at March 31, 2022
(Phases I and II)
As at March 31, 2021
(Phase I)
Fe (%)
30.1
28.3
28.8
CaO (%)
1.3
2.3
2.0
MgO (%)
1.2
2.1
1.8
AI2O3 (%)
0.3
0.5
0.4
Mt Tonnage (dmt)
202
143
345
107 Page
Champion Iron Limited
Mineral Resources and Ore Reserves Statement
5. Consolidated Reserves and Resources as at March 31, 2022
Bloom Lake mineral resources and reserves, as stated by the Phase II Feasibility Study, include Bloom Lake Phase I resources and reserves
and do not take into account the depletion. Bloom Lake mineral resources and reserves have been adjusted for depletion and calibrated with
production.
The reserves and resources mentioned below (except the Bloom Lake 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 the 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).
Table 3: Consolidated Mineral Resources (million dmt)
Property
Bloom Lake
Consolidated Fire Lake North1
Moiré Lake2
Quinto Claims3
Lamêlée South4
Kamistiatusset5
Harvey-Tuttle6
Penguin Lake7
Total as at March 31, 2022
Total as at March 31, 2021
Group
Bloom Lake
Fire Lake North1
Bellechasse
Oil Can
Total
Moiré Lake
Peppler Lake
Lamêlée North
Hobdad
Total
Lamêlée South
Rose North
Rose Central
Mills Lake
Total
Harvey-Tuttle
Penguin Lake
(45% Champion Iron Limited interest)
Table 4: Consolidated Mineral Reserves (million dmt)
Measured
219
27
—
—
27
—
—
—
—
—
—
236
250
51
537
—
—
783
406
Indicated
626
667
—
—
667
164
327
272
—
599
75
313
295
131
739
—
—
2,868
1,944
Property / Group
Bloom Lake*
Fire Lake North8
Kamistiatusset5
Total as at March 31, 2022
Total as at March 31, 2021
* Proven tonnage of 214 Mt includes 1 Mt of stockpiles.
Proven
214
24
393
631
370
Fe (%)
30.1
36.0
29.0
29.6
30.3
Probable
531
441
125
1,096
902
Fe (%)
28.3
32.2
28.2
29.8
30.1
Total Measured
& Indicated
846
694
—
—
694
164
327
272
—
599
75
549
545
182
1,276
—
—
3,651
2,350
Reserves
Proven &
Probable
745
465
517
1,727
1,272
Inferred
129
522
215
967
1,704
417
216
653
508
1,377
229
287
161
75
523
947
239
5,565
3,990
Fe (%)
28.8
32.4
28.8
29.8
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
108 Page
Champion Iron Limited
Mineral Resources and Ore Reserves Statement
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, Lamêlée Project, Quebec” (as regards Lamêlée), 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 Lac Lamêlée resource estimates are based on the NI 43-101 technical report entitled “NI 43-101 Technical Report and Mineral Resource Estimate on the Lac Lamêlée South
Resources Quebec - Canada” by Met-Chem, a division of DRA Americas Inc. dated July 28, 2017 and having an effective date of January 26, 2017. 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 Iron Limited 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 Champion Iron Limited’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.
5 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.
6 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).
7 The historical Penguin Lake resource estimates are based on the National Instrument 43-101 technical report entitled “43-101 Technical Report and Mineral Resource Estimate on the Penguin
Lake Project” by MRB & Associates 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 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 Iron Limited 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 Champion Iron Limited’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.
8 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).
109 Page
Champion Iron Limited
Mineral Resources and Ore Reserves Statement
5. Consolidated Reserves and Resources (continued)
I. Bloom Lake (Inclusive of Phase I)
Bloom Lake mineral resources and reserves as stated by the Phase II Feasibility Study, include Bloom Lake Phase I resources and reserves and
do not take into account the depletion. Bloom Lake mineral resources and reserves have been adjusted for depletion and calibrated with
production.
Table 5: March 31, 2022 Bloom Lake Mineral Resource Estimate (at 15% Fe Cut-Off)
Category
Measured
Indicated
Total measured and indicated
Inferred
Mt Tonnage (dmt)
219
626
846
129
Fe (%)
30.4
28.6
29.0
27.2
Table 6: March 31, 2022 Bloom Lake Mineral Reserve Estimate (at 15% Fe Cut-Off)
Category
Proven*
Probable
Total proven and probable
* Proven tonnage of 214 Mt includes 1 Mt of stockpiles.
Mt Tonnage (dmt)
214
531
745
Fe (%)
30.1
28.3
28.8
CaO (%)
1.3
2.1
1.9
1.3
CaO (%)
1.3
2.3
2.0
MgO (%)
1.2
1.9
1.7
1.2
MgO (%)
1.2
2.1
1.8
AI2O3 (%)
0.3
0.5
0.4
0.5
AI2O3 (%)
0.3
0.5
0.4
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% Fe9
Category
Measured
Indicated
Total measured and indicated resources
Inferred
Mt Tonnage (dmt)
27
667
694
522
Fe (%)
35.2
31.4
31.5
30.1
Table 8: Fire Lake North Historical Mineral Reserve Estimate at Cut-Off 15% Fe9
Category
Proven
Probable
Total proven and probable
Mt Tonnage (dmt)
24
441
465
Fe (%)
36.0
32.2
32.4
CaO (%)
0.5
2.8
1.3
Weight
Recovery (%)
45.0
39.6
39.9
9 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).
110 Page
Champion Iron Limited
Mineral Resources and Ore Reserves Statement
5. Consolidated Reserves and Resources (continued)
II. Consolidated Fire Lake North (continued)
Table 9: Historical Inferred Resources for Other Consolidated Fire Lake North Deposits at Cut-Off 15% Fe10
Deposit
Bellechasse
Oil Can
Mt Tonnage (dmt)
215
967
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% Fe11
Category
Measured
Indicated
Total measured and indicated resources
Inferred
IV. Quinto Claims
Mt Tonnage (dmt)
—
164
164
417
Fe (%)
—
30.5
30.5
29.4
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 Lamêlée
projects are part of the Quinto Claims.
Table 11: Peppler Lake Historical Resource Estimate at Cut-Off 18% Fe12
Category
Measured
Indicated
Total measured and indicated resources
Inferred
Mt Tonnage (dmt)
—
327
327
216
Fe (%)
—
28.0
28.0
27.5
10 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).
11 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).
12 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).
111 Page
Champion Iron Limited
Mineral Resources and Ore Reserves Statement
5. Consolidated Reserves and Resources (continued)
IV. Quinto Claims (continued)
Table 12: Lamêlée Historical Resource Estimate at Cut-Off 18% Fe13
Category
Measured
Indicated
Total measured and indicated resources
Inferred
Table 13: Hobdad Historical Resource Estimate at Cut-Off 18% Fe14
Category
Measured
Indicated
Total measured and indicated resources
Inferred
V. Lamêlée South
Table 14: Lamêlée South Historical Resource Estimate at Cut-Off 18% Fe15
Category
Measured
Indicated
Total measured and indicated resources
Inferred
Mt Tonnage (dmt)
—
272
272
653
Mt Tonnage (dmt)
—
—
—
508
Mt Tonnage (dmt)
—
75
75
229
Fe (%)
—
29.4
29.4
30.5
Fe (%)
—
—
—
27.4
Fe (%)
—
31.6
31.6
30.5
13 The historical Lamêlée resource estimates are based on the NI 43-101 technical report entitled “Mineral Resource Technical Report, Lamêlée 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).
14 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, Lamêlée Project, Quebec” (as regards Lamêlée), 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).
15 The historical Lac Lamêlée South resource estimates are based on the NI 43-101 technical report entitled “NI 43-10 Technical Report and Mineral Resource Estimate on the Lac Lamêlée South
Resources Quebec - Canada” by Met-Chem, a division of DRA Americas Inc. dated July 28, 2017 and having an effective date of January 26, 2017. 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 Iron Limited 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 Champion Iron Limited’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.
112 Page
Champion Iron Limited
Mineral Resources and Ore Reserves Statement
5. Consolidated Reserves and Resources (continued)
VI. Kami
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)16
Category
Measured
Indicated
Total measured and indicated
Inferred
Mt Tonnage
(dmt)
537
739
1,276
523
Fe (%)
29.9
29.5
29.7
29.5
MagFe (%)
15.9
15.8
15.8
HmFe (%)
10.9
10.3
10.5
15.0
11.1
Mn (%)
1.2
1.1
1.1
1.0
Table 16: Kami Project Historical Mineral Reserve Estimate (at 15% Fe Cut-Off)16
Category
Proven
Probable
Total proven and probable
VII. Harvey-Tuttle
Mt Tonnage
(dmt)
393
125
517
Fe (%)
29.0
28.2
28.8
MagFe (%)
15.0
11.1
14.1
Mag (%)
1.2
1.1
1.2
Weight
Recovery (%)
34.7
32.0
34.1
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 Mt of inferred historical resources at 23.2%
Fe.17
VIII. Cluster 3
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 a total of 535 Mt of inferred
historical resources (239 Mt attributable to the Company) at 33.1% Fe with a cut-off at 15% Fe.18 Cluster 3 also includes a series of small
deposits near Round Lake (north-west of Penguin Lake).
16 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.
17 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).
18 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).
113 Page
Champion Iron Limited
Mineral Resources and Ore Reserves Statement
6. Material Changes
There were no material changes in the year ended March 31, 2022 other than depletion by the Bloom Lake Mine. Only changes applied on the
current estimation are due to depletion and new drilling and production information used to calibrate the model.
7. 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 and has confirmed that the relevant information is an accurate representation of the available data and
studies for the relevant projects, except Section 4 “Reserves and Resources — Bloom Lake as at March 31, 2022”. 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 Phase II 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 as at March 31, 2022” 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 Phase II Feasibility Study. Mr. Wilson is a member of the Ordre des ingénieurs du Québec.
114 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, 2022 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, 2022
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, 2022.
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
116 Page
117 Page
Champion Iron Limited
(ACN: 119 770 142)
Consolidated Financial Statements
For the Years Ended March 31, 2022 and 2021
(Expressed in thousands of Canadian dollars)
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, the independent auditors, has been appointed by the shareholders to audit the consolidated financial statements as at
March 31, 2022 and 2021 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/ Vicky Munger
Vicky Munger Vice-President Financial Performance
119 Page
Champion Iron Limited
Independent Auditor's Report
120 Page
Champion Iron Limited
Independent Auditor's Report
121 Page
Champion Iron Limited
Independent Auditor's Report
122 Page
Champion Iron Limited
Independent Auditor's Report
123 Page
Champion Iron Limited
Independent Auditor's Report
124 Page
Champion Iron Limited
Independent Auditor's Report
125 Page
Champion Iron Limited
Report on the Audit of the Financial Report
126 Page
Champion Iron Limited
Report on the Audit of the Financial Report
127 Page
Champion Iron Limited
Report on the Audit of the Financial Report
128 Page
Champion Iron Limited
Report on the Audit of the Financial Report
129 Page
Champion Iron Limited
Report on the Audit of the Financial Report
130 Page
Champion Iron Limited
Report on the Audit of the Financial Report
131 Page
Champion Iron Limited
Consolidated Statements of Financial Position
(Expressed in thousands of Canadian dollars - audited)
Notes
As at March 31,
2022
As at March 31,
2021
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
Current portion of long-term debt
Non-current
Long-term debt
Deferred grant
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
Total equity
Total liabilities and equity
Commitments and contingencies
Subsequent events
321,892
30,777
124,137
20,272
98,861
595,939
43,736
14,158
149,012
8,545
1,070,030
107,810
1,989,230
192,151
22,744
71,995
286,890
251,365
8,727
51,689
86,021
17,848
124,992
827,532
398,635
21,339
22,473
539
718,712
1,161,698
1,989,230
3
4
5
6
14
7
9
10
11
12
13, 15
24
14
14
14
15
16
17
24
17
17
29
34
Should be read in conjunction with the notes to the consolidated financial statements
Approved on May 26, 2022 on behalf of the directors
/s/ Michael O'Keeffe
Executive Chairman
/s/ Andrew Love
Lead Director
609,316
27,200
98,755
5,454
66,814
807,539
44,012
9,704
48,303
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
132 Page
Champion Iron Limited
Consolidated Statements of Income
(Expressed in thousands of Canadian dollars, except per share amounts - audited)
Revenues
Cost of sales
Depreciation
Gross profit
Other expenses
Share-based payments
General and administrative expenses
Sustainability and other community expenses
Product research and development expenses
Bloom Lake Phase II start-up costs
Operating income
Net finance costs
Other income
Income before income and mining taxes
Current income and mining taxes
Deferred income and mining taxes
Net income
Earnings per share
Basic
Diluted
Year Ended March 31,
Notes
18
19
17
20
21
22
23
24
24
25
25
2022
1,460,806
(458,678)
(43,929)
958,199
(12,818)
(31,769)
(16,983)
(5,549)
(17,752)
873,328
(11,045)
8,560
870,843
(306,480)
(41,778)
522,585
1.03
1.00
2021
1,281,815
(428,882)
(35,177)
817,756
(3,983)
(23,594)
(14,858)
(1,258)
—
774,063
(22,428)
10,237
761,872
(280,855)
(16,592)
464,425
0.97
0.92
Weighted average number of ordinary shares outstanding
Basic
Diluted
Should be read in conjunction with the notes to the consolidated financial statements
507,591,000
524,108,000
478,639,000
506,323,000
133 Page
Champion Iron Limited
Consolidated Statements of Comprehensive Income
(Expressed in thousands of Canadian dollars - audited)
Net income
Other comprehensive income
Item that may be reclassified subsequently to the consolidated statements of income:
Net movement in foreign currency translation reserve
Total other comprehensive income
Total comprehensive income
Should be read in conjunction with the notes to the consolidated financial statements
Year Ended March 31,
2022
522,585
2021
464,425
9
9
149
149
522,594
464,574
134 Page
Champion Iron Limited
Consolidated Statements of Equity
(Expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
Attributable to Champion Shareholders
Share Capital
Notes
Ordinary Shares
Shares(1)
502,116,000
$
356,463
Preferred Shares
Shares
185,000,000
$
159,507
Contributed
Surplus
22,309
—
—
—
17
17
17
10,000,000
220,000
76,000
8, 17
17
17
17
4,200,000
—
—
—
—
—
—
18,750
1,205
167
—
—
—
—
—
—
—
—
—
—
22,050
—
— (185,000,000)
—
—
—
—
—
(159,507)
—
—
—
—
—
—
(402)
(358)
—
—
—
77
Warrants
29,973
—
—
—
(7,500)
—
—
—
—
—
—
17
—
516,612,000
—
398,635
—
—
—
—
(287)
21,339
—
22,473
467,689,000
272,049
185,000,000
159,507
21,100
75,336
—
—
—
—
—
—
—
—
—
17
17
17
17
27,733,000
6,694,000
—
—
502,116,000
76,563
7,851
—
—
356,463
—
—
—
—
185,000,000
—
—
—
—
—
—
—
159,507
—
—
—
—
(2,774)
—
3,983
22,309
—
—
—
(45,363)
—
—
—
29,973
Balance - March 31, 2021
Net income
Other comprehensive income
Total comprehensive income
Exercise of warrants
Exercise of stock options
Release of restricted share units
Issuance of common shares for the
acquisition of the Kami Project(2)
Redemption of preferred shares
Dividends
Dividend equivalents
Share-based payments, net of tax
of $1,319
Balance - March 31, 2022
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
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.
2 Kamistiatusset iron ore project (the “Kami Project”).
Foreign
Currency
Translation
530
Retained
Earnings
(Accumulated
Deficit)
284,235
—
9
9
—
—
—
—
—
—
—
—
539
381
—
149
149
—
—
—
—
530
Total
853,017
522,585
9
522,594
11,250
803
(443)
22,050
(185,000)
(57,093)
—
522,585
—
522,585
—
—
(252)
—
(25,493)
(57,093)
(77)
(5,193)
718,712
(5,480)
1,161,698
(151,751)
464,425
—
464,425
—
—
(28,439)
—
284,235
376,622
464,425
149
464,574
31,200
5,077
(28,439)
3,983
853,017
135 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
Unrealized loss on derivative liabilities
Change in fair value of non-current investments and related gain on disposal
Unrealized foreign exchange loss
Deferred income and mining taxes
Other
Changes in non-cash operating working capital
Net cash flow from operating activities
Investing Activities
Net acquisition of short-term investments
Increase in restricted cash
Acquisition of non-current investments
Disposal of non-current investments
Acquisition of the Kami Project
Increase in non-current advance payments
Purchase of intangible assets
Purchase of property, plant and equipment
Investment in exploration and evaluation assets
Net cash flow used in investing activities
Financing Activities
Issuance of long-term debt
Repayment of long-term debt
Transaction costs on long-term debt
Exercise of warrants
Exercise of stock options
Withholding taxes paid pursuant to the settlement of RSUs
Redemption of preferred shares
Dividends paid on preferred and ordinary shares
Payment of lease liabilities
Net cash flow used in financing activities
Net increase (decrease) 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
2022
2021
Year Ended March 31,
522,585
464,425
32
17
23, 26
23
24
32
4
14
7
7
8
9
10
11, 32
12
14
14, 22
14
17
17
17
17
17
15
43,929
12,818
176
(9,554)
524
41,778
2,421
614,677
(144,242)
470,435
(3,598)
—
(4,434)
9,468
(15,444)
(97,067)
(1,357)
(519,322)
(3,711)
(635,465)
120,874
(2,116)
(4,373)
11,250
803
(443)
(185,000)
(57,093)
(2,043)
(118,141)
(283,171)
609,316
(4,253)
321,892
12,248
475,278
35,177
3,983
—
(10,237)
5,190
16,592
3,967
519,097
105,322
624,419
(10,045)
(44,972)
(943)
3,022
—
(15,211)
(1,705)
(174,650)
(581)
(245,085)
—
(25,262)
(7,888)
31,200
5,077
—
—
(28,439)
(988)
(26,300)
353,034
281,363
(25,081)
609,316
10,052
147,074
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)
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 the Australian Securities Exchange (ASX: CIA) and trades on 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. Bloom Lake is an open-
pit operation with two concentrators that primarily source energy from renewable hydroelectric power. The Bloom Lake Phase I and Phase II
plants have a combined nameplate capacity of 15 million tonnes per annum (“Mtpa”) and produce a low contaminant high-grade 66.2% Fe iron
ore concentrate with the proven ability to produce a 67.5% Fe direct reduction quality concentrate. Bloom Lake’s high-grade and low
contaminant iron ore products have attracted a premium to the Platts IODEX 62% Fe iron ore benchmark. The Company ships iron ore
concentrate from Bloom Lake by rail, to a ship loading port in Sept-Îles, Québec, and sells its iron ore concentrate to customers globally,
including in China, Japan, the Middle East, Europe, South Korea, India and Canada. In addition to the Bloom Lake Mining Complex, Champion
owns a portfolio of exploration and development projects in the Labrador Trough, including the Kamistiatusset Project (refer to note 8 -
Acquisition of the Kami Project) located a few kilometres south-east of Bloom Lake, and the Consolidated Fire Lake North iron ore project,
located approximately 40 km south of Bloom Lake.
2. Summary of 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 (“AAS”) and other authoritative pronouncements of the Australian
Accounting Standards Board (“AASB”).
These consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial assets
and liabilities as well as derivatives 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, 2022.
B. Statement of compliance
These audited consolidated financial statements have been prepared in accordance with 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 26, 2022.
C. Significant accounting policies
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.
12364042 Canada Inc.
Lac Bloom Railcars Corporation Inc.
Ownership
Percentage
100.0%
100.0%
100.0%
100.0%
100.0%
Country of
Incorporation
Canada
Canada
Canada
Canada
Canada
Functional
Currency
Canadian dollars
Canadian dollars
Canadian dollars
Canadian dollars
United States (“U.S.”) dollars
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. Summary of Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies (continued)
Consolidation
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.
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.
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.
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 15 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 23 years or units-of-production basis over the recoverable reserves
Acquisition of a group of assets
The Company determines whether it has acquired a business when the acquired set of activities and assets include an input and a substantive
process that together significantly contribute to the ability to create outputs. If the set of activities do not constitute a business, the Company
accounts for the acquisition of a group of assets including intangible assets and liabilities assumed based on their relative fair values at the
date of acquisition. The cost of acquisition, including directly attributable acquisition-related costs, is measured as the aggregate of the
consideration transferred measured at the acquisition date fair value.
If the acquisition of a group of assets comprises a variable contingent consideration that varies according to future activities such as future
production, then the contingent consideration is expensed when incurred. Contingent considerations related to the initial value of the assets
are capitalized when the contingency is crystallized.
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. Summary of Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies (continued)
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:
Port access
Software
Straight-line over 20 years
Straight-line over 3 years
Product research and development expenses
Product 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.
Bloom Lake Phase II start-up costs
Start-up costs are pre-commercial expenses related to Bloom Lake Phase II expansion project (“Phase II”) and include mainly costs related to
staff mobilization and training. Start-up costs are expensed as incurred.
Production 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 production stripping asset, 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 on the stage of the mine life. 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 life of mine stripping ratio for Bloom Lake Phase I was initially estimated at 0.5 based on the National Instrument 43-101
Technical report on the Bloom Lake mine re-start feasibility study (the "Feasibility Study"). As part of the mineral reserves review of Phase II, on
December 15, 2021, the Company revised the stripping ratio at a weighted average of 0.99 for two separate open-pits concurrent with the
commencement of Phase II operations. Refer to the Significant accounting judgements, estimates and assumptions section below.
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.
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. Summary of Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies (continued)
Assets under construction (continued)
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 are capitalized. 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.
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.
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
consolidated 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, intangible assets 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.
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. Summary of Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies (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 debt are initially measured at fair value, net of transaction 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,
using a discount rate that reflects current market assessments of the time value and risks at the reporting period. The unwinding of the
discount is recognized as finance cost.
Share capital and issuance costs
Share capital is classified as equity. Incremental costs directly attributable to the issue of ordinary 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.
Dividend
The Company recognizes a liability to pay a dividend when the distribution is authorized by the Board, and the distribution is no longer at the
discretion of the Company. A corresponding amount is recognized directly in equity.
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 (IFRS 9) Financial Instruments.
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. Summary of Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies (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 payments 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 payments associated with the unvested portion of the stock options forfeited is reversed.
ii) Other awards
As part of the remuneration plan, the Company offers performance share unit (“PSU”) awards, restricted share unit (“RSU”) awards and
deferred share unit (“DSU”) awards. Recipient of these share-based awards are entitled to receive a dividend equivalent.
For equity-settled share-based awards, share-based payments 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 equity-settled
share-based awards is determined using the share price of the Company on the TSX at the grant date. At a dividend record date, if any, the
dividend equivalent is recognized directly as an increase in contributed surplus with a corresponding amount in retained earnings based on the
vesting period, measured at the grant date fair value of the dividend equivalent.
Cash-settled share-based payments are measured at fair value at the grant date with a corresponding liability. Until the liability is settled, the
fair value of the liability is remeasured at the end of each reporting period and at the date of settlement, with any changes in fair value
recognized in net income. The grant date fair value of the compensation is measured based on the closing share price of the Company on the
TSX adjusted to take into account the terms and conditions upon which the shares were granted, if any, and the awards that are expected to
vest. At a dividend record date, if any, the dividend equivalent is recognized as a liability for cash-settled awards with a corresponding amount
as share-based payments in profit or loss.
When terms of an equity-settled share-based award are modified to be being cash-settled award, at the date of modification, a liability is
recognized based on the fair value of the cash–settled award as at that date and the extent to which the vesting period has expired with a
corresponding decrease in contributed surplus. Subsequently, the fair value of the liability is remeasured at the end of each reporting period
with any changes in fair value recognized in net income.
iii) Share-based payment transactions
The fair value of share-based payment transactions to non-employees and other share-based payments 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
Government grants are recognized at fair value when there is reasonable assurance that the grant will be received and all attached conditions
will be complied with. When the grant relates to an expense item, it is recorded as a deferred credit and recognized as income or recorded
against the expenditure, as the related costs for which it is intended to compensate are expensed. When the grant relates to an asset, it is
deducted from the cost of the related asset. The Company presents grants received related to an expense item within operating activities
whereas grants received related to an asset within the investing activities against the purchase of property, plant and equipment in the
consolidated statements of cash flows.
Interest-bearing loans from government at a below-market interest rate are treated as government grants and are recognized at fair value
measured at the present value of all future cash flows discounted using the prevailing market rate of interest for similar instruments. The
difference between the fair value of the loan and the consideration received is recognized as a government grant. After initial recognition, the
interest-bearing loan is subsequently measured at amortized cost using the effective interest rate method. The government grant is amortized
over the estimated useful life of the assets financed by the interest-bearing loan.
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)
2. Summary of Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies (continued)
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.
Derivative financial instruments
Derivative financial instruments are classified as fair value through profit and loss (“FVTPL”), unless they are designated as hedging
instruments for which hedge accounting is applied. The Company has no hedging instrument. Changes in the fair value of derivative financial
instruments not designated in a hedging relationship are recognized in other income (expense), based on the nature of the exposure.
Derivative financial instruments include forward foreign exchange contracts used to manage the Company’s exposure to foreign exchange.
Derivative financial instruments also include derivatives that are embedded in financial or non-financial contracts that are not closely related
to the host contracts. Embedded derivatives of the Corporation include prepayment options and subscription right to purchase equity
instruments. Prepayment options that are not closely related to the host contract are measured at fair value, with the initial value recognized
as an increase of the related long-term debt and amortized to income using the effective interest method. Subscription right to purchase
equity instruments are recorded as a derivative asset when the market value of the underlying equity instrument becomes higher than the
Company's subscription price. Subsequent changes in fair value of embedded derivatives are recorded either in net finance costs or other
income (expense), depending on the nature of the derivative.
Embedded derivatives for which economic characteristics and risks are closely related to the host contracts are not accounted as a separate
derivative. 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.
Financial assets
i)
Financial assets are either classified and measured at amortized cost, FVTPL or fair value through other comprehensive income (“FVOCI”).
Initial recognition
In order for financial assets to be classified and measured at amortized cost or FVOCI, it needs to give rise to cash flows that represent solely
payments of principal and interest on the principal amount outstanding.
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)
2. Summary of Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies (continued)
Financial assets (continued)
ii) Financial assets at FVTPL
Financial assets at FVTPL include financial assets held for trading, e.g., derivative instruments, financial assets designated upon initial
recognition at FVTPL, 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 at FVTPL include the Company's trade receivables, convertible loans and
equity investments.
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 FVTPL, irrespective of the business model. Financial assets at FVTPL are carried in the consolidated statements of financial position at fair
value with net changes in fair value recognized in profit or loss.
The Company’s trade receivables subject to provisional pricing 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. The embedded derivative related to 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 FVTPL in its entirety from the date of recognition of the corresponding sale, with subsequent movements being
recognized as provisional pricing adjustments within revenues in the consolidated statements of income.
The Company's convertible loans and equity investments are also measured at FVTPL based on the underlying entity’s fair value with
subsequent movements being recognized in the consolidated statements of income .
iii) Financial assets at amortized cost
Financial assets at amortized cost include the Company's cash and cash equivalents, short-term investments, other receivables and restricted
cash which are subsequently measured using the effective interest rate (“EIR”) method and are subject to impairment. Interest received is
recognized within net finance cost in the statements of income. Gains and losses are recognized in profit or loss when the asset is
derecognized, modified or impaired.
iv) Impairment of financial assets
The Company recognizes an allowance for expected credit loss (“ECL”) for all debt instruments not held at FVTPL. 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.
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)
2. Summary of Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies (continued)
Financial assets (continued)
iv) Impairment of financial assets (continued)
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.
Initial recognition and measurement
Financial liabilities
i)
Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL or as amortized cost. All financial liabilities are
recognized initially at fair value and, in the case of loans and payables, net of directly attributable transaction costs.
ii) Loans and accounts payable and other at amortized cost
After initial recognition, interest-bearing loans and borrowings as well as accounts payable and other 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) Cash-settled share-based payment liability at FVTPL
After grant date, changes in fair value of cash-settled share-based payment arrangements are recognized in the consolidated statements of
income based on the Company's share price at each reporting date.
iv) 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 on a straight-line basis over the lease term, taking into account any extensions that are likely to be exercised (or longer if a
purchase option is reasonably certain to be exercised) 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.
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)
2. Summary of Significant Accounting Policies and Future Accounting Changes (continued)
C. Significant accounting policies (continued)
Leases (continued)
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.
At a full lease termination, the Company derecognizes the right-of-asset and lease liability. A gain or loss for any difference between the
carrying amounts of the right-of-use asset and lease liability as of the date of termination is recognized under other income (expense) in the
consolidated statements of income.
D. Significant accounting judgements, 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 assumptions are continually evaluated and are based on management’s experience
and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these
assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected
in future periods.
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. Since then, several COVID-19 variants were
reported and rapidly increased the proportion of COVID-19 cases globally. The duration and full financial effect of the COVID-19 pandemic is
unknown at this time, as are the measures required in the future to attempt to reduce the spread of COVID-19.
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 through the assessment for impairment. While the Company has considered the impact of COVID-19 on these financial accounts,
actual results may differ materially from these estimates.
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)
2. Summary of Significant Accounting Policies and Future Accounting Changes (continued)
D. Significant accounting judgements, estimates and assumptions (continued)
Estimates of mineral reserves and resources
Ore reserves and mineral resource estimates are estimates of the amount of ore that can be economically and legally extracted from the
Company’s mining properties. The Company estimates its ore reserves and mineral resources based on information compiled by qualified
persons relating to geological and technical data, on the size, depth, shape and grade of the ore body and suitable production techniques and
recovery rates. Recovery of reserves is based on factors such as estimated future prices, expected future production and production costs and
the timing of future capital expenditures, all of which are subject to many uncertainties and interpretations. Such an analysis requires complex
geological judgements and estimates. Estimates of mineral reserves and resources have an impact on the following items:
– Capitalized stripping costs recognized as inventory or charged to profit or loss. On December 15, 2021, the Company revised its stripping
ratio. Refer to note 11 - Property, Plant and Equipment;
– Depreciation charge as changes in estimates of mineral reserves and resources may affect the useful life or units-of-production method
calculation for depreciation;
– Rehabilitation obligation as changes in estimates may affect the expected date to settle the obligation; and
– Carrying value of non-financial assets as changes in estimates may affected estimated future cash flows and therefore impact
impairment analysis.
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.
Judgement on what defines separate open-pits
Where a mine operates several open pits that are regarded as separate operations for the purpose of mine planning, initial stripping costs are
accounted for separately by reference to the ore from each separate pit. If, however, the pits are highly integrated for the purpose of mine
planning, the second and subsequent pits are regarded as extensions of the first pit in accounting for stripping costs. In such cases, the initial
stripping of the second and subsequent pits is considered to be production phase stripping. There is judgment as to whether multiple pit mines
are considered separate or integrated operations depends on each mine’s specific circumstances.
The following factors would point towards the initial stripping costs for the individual pits being accounted for separately:
– If mining of the second and subsequent pits is conducted consecutively following that of the first pit, rather than concurrently;
– If separate investment decisions are made to develop each pit, rather than a single investment decision being made at the outset;
– If the pits are operated as separate units in terms of mine planning and the sequencing of overburden removal and ore mining, rather than as
an integrated unit; and
– If the pits extract ore from separate and distinct ore bodies, rather than from a single ore body.
If the designs of the second and subsequent pits are significantly influenced by opportunities to optimize output from several pits combined,
including the co-treatment or blending of the output from the pits, then this would point to treatment as an integrated operation for the
purposes of accounting for initial stripping costs. The relative importance of each of the above factors is considered in each case. The
Company operates three open-pits at the Bloom Lake Mine. The Company assessed that two open-pits are integrated. As such, the Company
uses two stripping ratios.
Depreciation of non-current assets
Property, plant and equipment is depreciated over its useful life, or over the remaining life of the mine if that is shorter and there is no
reasonable alternative use for the asset by the Company. The useful lives of the major assets of a CGU are often dependent on the life of the
mine to which they relate. Where this is the case, the lives of mining properties, plant, concentrators and other long-lived processing
equipment are generally limited to the expected life of mine, which is estimated on the basis of the mining plan. Where the major assets of a
CGU are not dependent on the life of mine, management applies judgment in estimating the remaining service potential of long-lived assets.
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)
2. Summary of Significant Accounting Policies and Future Accounting Changes (continued)
D. Significant accounting judgements, estimates and assumptions (continued)
Judgements and estimates on recovery 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 or whether activities have not reached a stage that permits a
reasonable assessment of the existence of reserves, significant negative industry or economic trends, CGUs, 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 12 - 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, including but not limited to dismantling and removing infrastructure and operating facilities as well as restoring water pond
and vegetating affected areas. The 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 best 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 at each reporting
period to take into account any material changes to the assumptions, including regulatory changes and cost increases associated with site
areas used for tailings and waste. 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. A
rehabilitation obligations study was completed in the year ended March 31, 2022. Refer to note 16 - Rehabilitation Obligation.
Estimates on revenue recognition
The Company recognizes revenue from sales of concentrate when control of the concentrate passes to the customer, which occurs upon
loading. Incoterm used by the Company is Free On Board, where the Company has no responsibility for freight or insurance once control of the
concentrate has passed at the loading port. Thus, the performance obligation is satisfied at a point in time. At the time the concentrate is
loaded, the 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 sales contracts structured on a provisional pricing basis, 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 test 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 and identified as provisional pricing adjustments.
Price changes for shipments awaiting final pricing at year-end could have a material effect on future revenues. As at March 31, 2022, there
was US$106,708,000 (March 31, 2021: US$159,938,000) in revenues that were awaiting final pricing.
Estimates 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, assessing purchase option 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. Lease payments include the exercise price of a
purchase option if the Company is reasonably certain to exercise that option. 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 11 -
Property, Plant and Equipment and 15 - Lease Liabilities.
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)
2. Summary of Significant Accounting Policies and Future Accounting Changes (continued)
E. New accounting standards issued and adopted by the Company
The Company adopted the following new standard on April 1, 2021:
Interest Rate Benchmark Reform - Phase 2, which amends AASB 9 (IFRS 9), Financial Instruments (''IFRS 9''), AASB 139 (IAS 39), Financial
Instruments: Recognition and Measurement (''IAS 39''), AASB 7 (IFRS 7), Financial Instruments: Disclosures (''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.
The adoption of the amendment did not have a significant impact on the Company's consolidated financial statements for the year ended
March 31, 2022.
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, 2022,
with an earlier application permitted:
Amendments to AASB 101 (IAS 1), Presentation of Financial Statements (''IAS 1'')
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 AASB 108 (IAS 8), Accounting Policies, Changes in Accounting Estimates and Errors (''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”.
Amendments to AASB 3 (IFRS 3), Business Combinations (''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 137 (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 AASB 137 (IAS 37), Provisions, Contingent Liabilities and Contingent Assets (''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 AASB 9 (IFRS 9), Financial Instruments (''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.
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)
2. Summary of Significant Accounting Policies and Future Accounting Changes (continued)
F. New accounting standards issued but not yet in effect (continued)
Amendments to AASB 16 (IFRS 16), Leases (''IFRS 16'')
Amendments to IFRS 16 remove the illustration of the reimbursement of leasehold improvements included in the Illustrative Example 13 of
IFRS 16 since it does not explain clearly enough the conclusion as to whether the reimbursement would meet the definition of a lease incentive
in IFRS 16.
The following amendments to a standard have been issued and are applicable to the Company for its annual periods beginning on April 1, 2023
and thereafter, with an earlier application permitted:
Amendments to AASB 101 (IAS 1), Presentation of Financial Statements (''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 AASB 112 (IAS 12), Income Taxes (''IAS 12'')
The amendments specify how entities should account for deferred income taxes on transactions such as leases and decommissioning
obligations. In specified circumstances, entities are exempt from recognizing deferred income taxes when they recognize assets or liabilities
for the first time. The amendments clarify that the exemption does not apply to transactions such as leases and decommissioning obligations
and that entities are required to recognize deferred income taxes on such transactions.
The Company is currently evaluating the impacts of adopting these amendments on its financial statements.
3. Cash and Cash Equivalents
As at March 31, 2022, cash and cash equivalents totalling $321,892,000 (March 31, 2021: $609,316,000) consisted of cash in bank and short-
term deposits. As at March 31, 2022, the Company’s cash balance is comprised of $129,840,000 U.S. dollars ($162,248,000), $159,426,000
Canadian dollars and $233,000 Australian dollars ($218,000).
4. Short-Term Investments
As at March 31, 2022, short-term investments totalled $30,777,000 (March 31, 2021: $27,200,000). 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
Grant receivable
Other receivables
Note
As at March 31,
2022
As at March 31,
2021
11
93,527
23,981
3,298
3,331
124,137
73,341
24,359
—
1,055
98,755
As at March 31, 2022, the trade receivables, subject to provisional pricing, amounted to a total balance of $26,504,000 (March 31, 2021:
$550,000).
For information about the Company's exposure to credit risk, refer to note 26 - Financial Instruments.
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)
6. Inventories
Stockpiled ore
Concentrate inventories
Supplies and spare parts
As at March 31,
2022
As at March 31,
2021
28,523
26,386
43,952
98,861
13,050
18,860
34,904
66,814
For the year ended March 31, 2022, the amount of inventories recognized as an expense totalled $502,607,000 (year ended March 31, 2021:
$464,059,000). For the year ended March 31, 2022, no provision was recorded on any of the Company's inventories (year ended
March 31, 2021: nil).
7. Non-Current Investments
Convertible loans - at FVTPL
Equity investments in private entity - at FVTPL
Derivative asset - at FVTPL
Equity investments in publicly listed entities - at FVTPL
Opening balance
Change in fair value during the period
Acquisition
Disposal
Foreign exchange loss
Ending balance
As at March 31,
2022
As at March 31,
2021
7,960
3,445
2,744
9
14,158
943
—
—
8,761
9,704
As at March 31,
2022
(twelve-month period)
9,704
9,554
4,434
(9,468)
(66)
14,158
As at March 31,
2021
(twelve-month period)
1,546
10,237
943
(3,022)
—
9,704
During the year ended March 31, 2022, the Company invested in a convertible loan and an equity investment in an European-based entity for
an amount totalling $4,434,000 (US$3,500,000) (year ended March 31, 2021: $943,000 in a convertible loan).
An unrealized and realized gain in fair value on non-current investments of $5,071,000 and $4,483,000, respectively, have been recorded for
the year ended March 31, 2022 (year ended March 31, 2021: $7,905,000 and $2,332,000, respectively).
During the year ended March 31, 2022, the Company sold the majority of its remaining shares of its publicly listed equity investments for net
proceeds of $9,468,000 (year ended March 31, 2021: $3,022,000).
Refer to notes 26 - Financial Instruments and 23 - Other Income.
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)
8. Acquisition of the Kami Project
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.
At the acquisition date, on April 1, 2021, Champion paid $15,000,000 in cash and purchased and extinguished the secured debt between
Alderon and Sprott Private Resource Lending (Collector), LP (“Sprott”) through the issuance of 4,200,000 ordinary shares to Sprott and Altius
Resources Inc. (“Altius”). 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. Refer to note 29 - Commitments and Contingencies.
The transaction has been determined and recorded as an acquisition of a group of assets. The total purchase price was allocated to the assets
acquired based on their relative fair values at the acquisition date.
The purchase price and the allocation to the assets were calculated as follows:
Purchase price
Cash consideration
4,200,000 ordinary shares issued
Transaction costs
Assets acquired
Advance payment (Port agreement)
Intangible asset (access to Port)
Exploration and evaluation assets (mining property rights)
Reconciliation of the acquisition of the Kami Project to the net cash flow used in investing activities
Cash consideration
Transaction costs paid
Notes
As at April 1,
2021
17
9
10
12
15,000
22,050
444
37,494
5,988
3,513
27,993
37,494
15,000
444
15,444
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)
9. Advance Payments
Railway and port facilities
Port and other port-related advance payments
Other long-term advance
As at March 31,
2022
As at March 31,
2021
111,102
21,365
16,545
149,012
23,724
17,920
6,659
48,303
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. As at March 31, 2022, the related advance payments amounted to $9,359,000 (March 31, 2021: $8,513,000).
In addition, the Company entered into a construction agreement with SFPPN and made advances to increase the transshipment capacity and
support the Company's plans to increase production with the Phase II project, which totalled $62,278,000 as at March 31, 2022
(March 31, 2021: $15,211,000). These advance payments will be reclassified to property, plant and equipment as a right-of-use asset once the
work is completed and the related additional transshipment capacity is available.
On April 16, 2021, the Company entered into an agreement to expand an existing long-term rail contract to accommodate the anticipated
increased Phase II production volumes. In connection with this agreement, the Company advance payments during the year ended
March 31, 2022, which totalled $39,465,000 as at March 31, 2022.
The current portion of the railway and port facilities advances totalled $10,331,000 and is included under Prepaid expenses and advances in
the consolidated statements of financial position.
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. Pursuant to the agreement, the Company made an advance payment on its future shipping, wharfage and equipment
fees. As at March 31, 2022, the remaining advance payment amounted to $14,712,000 (March 31, 2021: $17,920,000).
On April 1, 2021, the Company acquired the Kami Project, along with related contracts, which included an advance payment and take-or-pay
advance payments as an advance on its future shipping, wharfage and equipment fees, previously made by Alderon in respect of the Port
agreement totalling $5,988,000. Refer to note 8 - Acquisition of the Kami Project.
Both agreements with the Port have an initial term of 20 years maturing in 2032 with options to renew for 4 additional 5-year terms. The
current portion of the port advances totalled and $3,206,000 is included in under Prepaid expenses and advances in the consolidated
statements of financial position.
Other long-term advance
The other long-term advance relates mainly to amounts paid to SFPPN annually and are recoverable from SFPPN under the guarantee access
agreement if certain conditions are met as well as amounts prepaid for capital maintenance expenditures on SFPPN's assets.
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)
10. Intangible Assets
Cost
March 31, 2021
Additions
March 31, 2022
Accumulated depreciation
March 31, 2021
Depreciation
March 31, 2022
Net book value - March 31, 2022
Cost
March 31, 2020
Additions
March 31, 2021
Accumulated depreciation
March 31, 2020
Depreciation
March 31, 2021
Net book value - March 31, 2021
Port Access
Software
—
3,513
3,513
—
—
—
3,513
9,410
1,357
10,767
3,153
2,582
5,735
5,032
Port Access
Software
—
—
—
—
—
—
—
7,705
1,705
9,410
1,635
1,518
3,153
6,257
Total
9,410
4,870
14,280
3,153
2,582
5,735
8,545
Total
7,705
1,705
9,410
1,635
1,518
3,153
6,257
On April 1, 2021, in connection with the acquisition of the Kami Project, the Company acquired a Port agreement for the rights and
entitlements to reserve annual loading capacity of 8 million metric tonnes of iron ore for an initial term of 20 years maturing in 2032 with
options to renew for 4 additional 5-year terms. The related port access is amortized straight-line over the life of mine starting at the
commercial production of Phase II. Refer to note 8 - Acquisition of the Kami Project.
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)
11. Property, Plant and Equipment
Mining and
Processing
Equipment
Locomotives,
Railcars and
Rails
Tailings
Dykes
Assets under
Construction
(i)(ii)
Mining
Development
and Stripping
Asset (iii)
Asset
Rehabilitation
Obligation and
Other
Subtotal
Right-of-
use Assets
Total
Cost
March 31, 2021
Additions
Transfers and disposals
Foreign exchange and other
March 31, 2022
172,460
24,658
25,797
—
222,915
43,663
6,959
4,123
(269)
54,476
81,549
—
62,383
—
143,932
176,079
449,228
(93,522)
—
531,785
67,831
44,134
—
—
111,965
32,223
40,916
—
—
73,139
573,805
565,895
(1,219)
(269)
1,138,212
10,335
57,138
—
(1,105)
66,368
584,140
623,033
(1,219)
(1,374)
1,204,580
Accumulated depreciation
March 31, 2021
Depreciation
Transfers and disposals
Foreign exchange and other
March 31, 2022
56,018
34,482
(740)
—
89,760
6,967
1,972
—
(48)
8,891
8,212
5,425
—
—
13,637
—
—
—
—
—
1,799
8,981
—
—
10,780
3,519
2,917
—
—
6,436
76,515
53,777
(740)
(48)
129,504
2,640
2,406
—
—
5,046
79,155
56,183
(740)
(48)
134,550
Net book value -
March 31, 2022
133,155
45,585
130,295
531,785
101,185
66,703
1,008,708
61,322
1,070,030
Mining and
Processing
Equipment
Locomotives,
Railcars and
Rails
Tailings
Dykes
Assets under
Construction
(i)
Mining
Development
and Stripping
Asset (iii)
Asset
Rehabilitation
Obligation and
Other
Subtotal
Right-of-
use Assets
Total
Cost
March 31, 2020
Additions
Transfers and disposals
Foreign exchange and other
March 31, 2021
150,455
14,828
6,945
232
172,460
Accumulated depreciation
March 31, 2020
Depreciation
Foreign exchange and other
March 31, 2021
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
5,767
1,934
(734)
6,967
3,983
4,229
—
8,212
—
—
—
—
41,105
26,726
—
—
67,831
871
928
—
1,799
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
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
116,442
36,696
73,337
176,079
66,032
28,704
497,290
7,695
504,985
(i) During the development period of the Bloom Lake Phase II expansion project, the amount of borrowing costs capitalized for the year ended
March 31, 2022 was $15,040,000 (year ended March 31, 2021: $3,793,000). Borrowing costs consisted of interest expense on the long-term debt
and the amortization of transaction costs. Refer to note 14 - Long-Term Debt. The capitalization rate used to determine the amount of borrowing
costs eligible for capitalization for the year ended March 31, 2022 was 5.4% (year ended March 31, 2021: 4.2%).
(ii) The Company qualified for a government grant up to $21,817,000, payable in multiple advances, in relation to energy consumption reduction
initiatives under certain conditions. The Company must reach gas emissions reduction targets over a period of 10 years and must complete the
construction before August 5, 2025. The additions of property, plant and equipment for the year ended March 31, 2022 are net of government
grants of $9,532,000, of which $3,298,000 was receivable as at March 31, 2022. Refer to note 5 - Receivables.
(iii) The Company revised its mineral reserves as per the Phase II mine plan execution resulting in a change in the stripping ratio for cost capitalization
and the depreciation calculation for the stripping activity asset. The change in the stripping ratio is accounted prospectively. For the year ended
March 31, 2022, the addition to the stripping asset includes: i) production expenses capitalized amounting to $29,353,000 (year ended
March 31, 2021: $14,142,000) and ii) allocated depreciation of property, plant and equipment amounting to $5,845,000 (year ended March 31, 2021:
$2,636,000).
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)
11. Property, Plant and Equipment (continued)
Right-of-use assets consist of the following:
March 31, 2021
Additions
Lease termination
Depreciation
March 31, 2022
March 31, 2020
Depreciation
March 31, 2021
Mining and
Processing
Equipment
298
3,557
—
(1,349)
2,506
Locomotives,
Railcars and
Rails
5,978
53,581
—
(836)
58,723
Mining and
Processing
Equipment
1,114
(816)
298
Locomotives,
Railcars and
Rails
6,329
(351)
5,978
Building
1,419
—
(1,105)
(221)
93
Building
1,640
(221)
1,419
Total
7,695
57,138
(1,105)
(2,406)
61,322
Total
9,083
(1,388)
7,695
On January 22, 2021, QIO entered into a master lease agreement for 450 railcars for a term of 20 years to support the Phase II production
volume. Additions to the right-of-use assets were mainly comprised of these assets as the Company received most of the railcars during the
year ended March 31, 2022. Refer to note 15 - Lease Liabilities.
12. Exploration and Evaluation Assets
March 31, 2021
Additions
March 31, 2022
March 31, 2020
Additions
March 31, 2021
Labrador Trough
73,423
31,213
104,636
Labrador Trough
73,087
336
73,423
Newfoundland
2,683
491
3,174
Newfoundland
2,438
245
2,683
Total
76,106
31,704
107,810
Total
75,525
581
76,106
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.
On April 1, 2021, in connection with the acquisition of the Kami Project, the Company acquired mining property rights of $27,993,000. Refer to
note 8 - Acquisition of the Kami Project.
13. Accounts Payable and Other
Trade payable and accrued liabilities
Wages and benefits
Cash-settled share-based payment liability
Derivatives liabilities
Current portion of lease liabilities
Notes
As at March 31,
2022
As at March 31,
2021
17
26
15
160,097
22,275
7,313
176
2,290
192,151
83,395
18,329
—
—
—
501
102,225
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)
14. Long-Term Debt
Opening balance
Advances
Market value adjustment
Principal repayment
Transaction costs
Amortization of transaction costs
Foreign exchange gain
Non-cash loss on debt refinancing
Less current portion
Ending balance
Face value of long-term debt
Unamortized transaction costs and other
Long-term debt, net of transaction costs
As at March 31,
2022
(twelve-month period)
214,951
120,874
(8,727)
(2,116)
(4,373)
4,681
(1,930)
—
323,360
(71,995)
251,365
As at March 31,
2021
(twelve-month period)
275,968
—
—
(25,262)
(7,888)
2,398
(32,128)
1,863
214,951
—
214,951
As at March 31,
2022
As at March 31,
2021
343,178
(19,818)
323,360
226,350
(11,399)
214,951
Senior Debt
In December 2020, QIO entered into a lending arrangement with various lenders to fund the completion of Phase II, which is comprised of a
US$350,000,000 non-revolving credit facility (the “Term Facility”) and a US$50,000,000 revolving credit facility (the “Revolving Facility”)
(collectively the “Senior Debt”), maturing on December 23, 2025 and December 23, 2023, respectively.
As at March 31, 2022, the undrawn portion of the Senior Debt totalled US$220,000,000. The repayment of the Term Facility commences 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. Subsequently, the Company completed the refinancing of the Senior Debt. Refer to note 34 - Subsequent Events.
Collaterals are comprised of 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.
The Senior Debt 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, 2022, this deposit of $43,736,000 was classified as a non-current restricted cash in the consolidated statements of financial
position (March 31, 2021: $44,012,000).
IQ Loan
On July 21, 2021, QIO entered into an unsecured loan agreement with Investissement Québec (“IQ Loan”) to finance the Company's share of the
increase in transshipment capacity by SFPPN for an amount up to $70,000,000 maturing on April 1, 2032. Refer to note 9 - Advance
Payments. The repayment commences on April 1, 2022 in ten equal annual installments of the principal balance outstanding. The agreement
comprises an option to prepay the loan at any time without penalty. During the year ended March 31, 2022, the Company drew on $60,000,000.
The loan bearing interest at 3.70% was determined to be at below-market rate. The fair value of the total advances was estimated at
$51,273,000 and was determined based on the prevailing market interest rate for a similar instrument. The residual amount of $8,727,000 was
recognized as a government grant and presented as a deferred grant in the consolidated statements of financial position.
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)
14. Long-Term Debt (continued)
FTQ Loan
On May 21, 2021, QIO entered into an unsecured loan agreement with Fonds de Solidarité des Travailleurs du Québec (“FTQ Loan”) to fund the
completion of Phase II for an amount up to $75,000,000, maturing on May 21, 2028. During the year ended March 31, 2022, the Company drew
on $30,000,000. The FTQ Loan includes an option to prepay in whole or in part at any time, but not prior to the second anniversary by paying a
premium that varies from 2% to 6% based the prepayment date.
CAT Financing
On April 1, 2021, the Company signed an agreement with Caterpillar Financial Services Limited (“CAT Financing”) to finance Phase II mining
equipment for a facility of up to US$75,000,000 and available until March 31, 2023 (initially March 31, 2022 but extended during the period).
Transaction costs of $2,075,000 were incurred for this transaction. During the year ended March 31, 2022, the Company drew on
US$24,271,000 and started capital repayments for a balance of US$22,607,000 as at March 31, 2022. The CAT Financing matures between 3
to 6 years depending on the equipment and is collateralized by all of the financed equipment. The CAT Financing includes an option to prepay
the loan without penalty at any time.
The Senior Debt, FTQ Loan and the CAT Financing are subject to operational and financial covenants, all of which have been met as at
March 31, 2022. The undrawn portion of the Senior Debt, FTQ Loan and the CAT Financing is subject to standby commitment fees varying from
0.35% to 1.38% during the pre-completion of Phase II.
During the year ended March 31, 2022, the weighted average interest rate was 4.5% (year ended March 31, 2021: 3.8%).
15. Lease Liabilities
Opening balance
New lease liabilities
Payments
Lease termination
Impact of foreign exchange
Note
As at March 31,
2022
As at March 31,
2021
1,902
56,159
(2,043)
(1,285)
(754)
53,979
(2,290)
51,689
2,890
—
(988)
—
—
1,902
(501)
1,401
Less current portion classified in ''Accounts payable and other''
13
Ending balance
New lease liabilities for the year ended March 31, 2022 are mainly comprised of a lease liability for railcars. The lease liability is guaranteed by
Champion and QIO is not subject to any financial covenants under the master lease agreement and cannot assign or sublease any railcars.
Refer to note 11 - Property, Plant and Equipment.
For the year ended March 31, 2022, new lease liabilities were discounted using an average incremental borrowing rate of 5.0% (year ended
March 31, 2021: no new lease liabilities).
The expenses related to short-term leases, low-value leases and variable leases were $2,514,000, $571,000 and $2,128,000, respectively, for
the year ended March 31, 2022 (March 31, 2021: $910,000, $566,000 and $2,400,000, respectively). These expenses were included in cost of
sales. The total cash outflow for leases was $7,256,000 for the year ended March 31, 2022 (March 31, 2021: $4,864,000).
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)
16. 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,
2022
(twelve-month period)
45,074
44,605
100
(3,758)
86,021
As at March 31,
2021
(twelve-month period)
42,836
994
72
1,172
45,074
During the year ended March 31, 2022, a new rehabilitation obligation study was completed due to the Phase II expansion project. The
estimated rehabilitation obligation increased by $44,605,000 during the year ended March 31, 2022.
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
0.54% as at March 31, 2022 (March 31, 2021: 0.28%). The undiscounted amount related to the rehabilitation obligation is estimated at
$93,706,000 as at March 31, 2022 (March 31, 2021: $47,268,000).
17. 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
Opening balance
Shares issued for exercise of warrants
Shares issued for exercise of options - incentive plan
Shares issued for release of restricted share units - incentive plan
Shares issued for the acquisition of the Kami Project
Ending balance
Year Ended March 31,
2022
(in thousands)
502,116
10,000
220
76
4,200
516,612
2021
(in thousands)
467,689
27,733
6,694
—
—
502,116
On April 1, 2021, the Company issued 4,200,000 ordinary shares to Sprott and Altius as partial consideration for the acquisition of the Kami
Project. Refer to note 8 - Acquisition of the Kami Project.
During the year ended March 31, 2022, the Company declared and paid a dividend of $0.10 per ordinary share of the Company in respect to the
semi-annual results for the period ended September 30, 2021 to registered shareholders for a total amount of $50,623,000.
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)
17. Share Capital and Reserves (continued)
c) Preferred share issuances
Opening balance
Redemption of preferred shares
Ending balance
Year Ended March 31,
2022
(in thousands)
185,000
(185,000)
—
2021
(in thousands)
185,000
—
185,000
On August 16, 2019, QIO issued preferred shares for consideration of $185,000,000 to CDP Investissements Inc. (“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, 2022, the Company declared and paid dividends on the preferred shares amounting to $6,470,000 or $0.03
per preferred share which represented the accumulated dividends for the April 1, 2021 to August 16, 2021 period, inclusively. During the year
ended March 31, 2022, QIO redeemed 185,000,000 of its preferred shares. The redemption was settled for $185,000,000 and the excess of the
repurchase price over the book value of $25,493,000 was recorded in retained earnings for the year ended March 31, 2022.
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, RSU awards, PSU awards and
DSU awards. If and when cash dividends are paid, the holders of RSUs, PSUs and DSUs are entitled to receive a dividend equivalent.
Stock option awards and RSU awards vest annually in three equal tranches from the date of grant. PSU awards vest i) at the end of three years
from the date of grant or ii) over a 32-month period for Phase II construction. Vesting is subject to key performance indicators established by
the Board. A portion of the PSUs granted with performance criteria based on Phase II milestones is settled in cash. DSU awards vest at the date
of the grant.
A summary of the share-based payments expense is detailed as follows:
Stock option costs
RSU costs
PSU costs
DSU costs
Year Ended March 31,
2022
1,263
2,988
7,873
694
12,818
2021
1,994
727
953
309
3,983
Equity-settled awards
For the year ended March 31, 2022, the amount recognized as share-based payment expense related to equity-settled awards was $4,008,000
(year ended March 31, 2021: $3,983,000).
Cash-settled awards
On July 28, 2021, the Company modified some of the RSUs, PSUs and DSUs to allow the holders to elect the form of settlement for vested
share-based units granted under the Omnibus incentive plan. Therefore, given that theses were considered cash-settled awards at that date, a
liability of $10,807,000 was recognized based on the fair value of the cash–settled award as at the modification date and the extent to which
the vesting period had expired with a corresponding decrease in contributed surplus of $4,295,000 and retained earnings of $6,512,000
($5,193,000 net of tax of $1,319,000). The fair value of the liability was remeasured at year-end and an additional share-based payment
expense of $8,810,000 was recorded in the consolidated statements of income. The current portion of the cash-settled liability of $7,313,000
is presented under Accounts payable and other in the consolidated statements of financial position. The non-current portion of the liability of
$12,304,000 is included in Other long-term liabilities.
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)
17. Share Capital and Reserves (continued)
e) Stock options
As at March 31, 2022, the Company is authorized to issue 51,661,000 stock options and share rights (March 31, 2021: 50,212,000) equal to 10%
(March 31, 2021: 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
Forfeited
Exercised
Ending balance
Options exercisable - end of the year
Year Ended March 31,
Year Ended March 31,
2022
Weighted
Average
Exercise Price
4.85
—
5.00
3.65
5.00
5.00
Number of
Stock Options
(in thousands)
1,920
—
(200)
(220)
1,500
1,000
Number of
Stock Options
(in thousands)
6,814
1,800
—
(6,694)
1,920
600
2021
Weighted
Average
Exercise Price
0.83
5.00
—
0.80
4.85
5.00
During the year ended March 31, 2022, no new stock options were granted to executive officers of the Company (year ended March 31, 2021:
1,800,000). During the year ended March 31, 2022, a total of 220,000 stock options were exercised and the weighted average share price at
the exercise date was $5.81. 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.
The Company uses the Black-Scholes option pricing model in determining share-based payments, which requires a number of assumptions to
be made. The stock option fair value was calculated according to this 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
A summary of the Company’s outstanding and exercisable stock options as at March 31, 2022 is presented below:
Exercise Price
$5.00
Weighted Average
Remaining Life (Years)
2.85
Number of Stock Options
Outstanding
(in thousands)
1,500
1,500
Exercisable
(in thousands)
1,000
1,000
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)
17. Share Capital and Reserves (continued)
f) Restricted share units
The following table details the RSU activities of the share incentive plan:
Opening balance
Granted
Dividend equivalent
Forfeited
Released through the issuance of ordinary shares
Withheld as payment of withholding taxes
Ending balance
Vested - end of the year
Year Ended March 31,
Year Ended March 31,
2022
Weighted
Average
Share Price
2.24
6.16
6.13
2.87
2.21
2.21
3.37
2.28
Number of
RSUs
(in thousands)
1,010
316
18
(40)
(76)
(86)
1,142
435
2021
Weighted
Average
Share Price
2.18
2.33
—
—
—
—
2.24
2.19
Number of
RSUs
(in thousands)
598
412
—
—
—
—
1,010
253
During the year ended March 31, 2022, 316,000 RSUs were granted to key management personnel (year ended March 31, 2021: 412,000). They
will vest annually in three equal tranches from the date of grant.
During the year ended March 31, 2022, the Company issued 76,000 ordinary shares to an executive at a weighted average share price of
$2.21. Withholding taxes of $443,000 were paid pursuant to the issuance of these aforementioned ordinary shares resulting in the Company
not issuing an additional 86,000 RSUs.
g) Performance share units
The Company assesses each reporting period if performance criteria on share-based units will be achieved in measuring the share-based
payments. The actual share-based payment and the period over which the expense is being recognized may vary from the estimate.
The following table details the PSU activities of the share incentive plan:
Opening balance
Granted
Dividend equivalent
Forfeited
Ending balance
Vested - end of the year
Year Ended March 31,
Year Ended March 31,
2022
Weighted
Average
Share Price
2.25
6.16
6.13
2.60
4.55
—
Number of
PSUs
(in thousands)
1,272
1,635
45
(110)
2,842
—
2021
Weighted
Average
Share Price
2.17
2.33
—
—
2.25
—
Number of
PSUs
(in thousands)
653
619
—
—
1,272
—
During the year ended March 31, 2022, 1,635,000 PSUs were granted to key management personnel (year ended March 31, 2021: 619,000). Out
of the PSUs granted during the period, a portion is payable in cash representing a fair value of $1,086,000 for the year ended March 31, 2022
and presented under Other long-term liabilities in the consolidated statements of financial position.
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)
17. Share Capital and Reserves (continued)
h) Warrants
Opening balance
Exercised
Ending balance
Year Ended March 31,
Year Ended March 31,
2022
Weighted
Average
Exercise Price
1.91
1.13
1.91
Number of
Warrants
(in thousands)
25,281
(10,000)
15,281
2021
Weighted
Average
Exercise Price
1.50
1.13
1.91
Number of
Warrants
(in thousands)
53,014
(27,733)
25,281
A summary of the Company’s outstanding and exercisable warrants as at March 31, 2022 and 2021 is presented below:
Exercise Price
Holder
Expiry Date
$1.125
$1.125
$2.45
Sprott
CDPI
CDPI
October 16, 2022
October 16, 2024
August 16, 2026
Outstanding and Exercisable
As at March 31,
2022
(in thousands)
281
—
15,000
15,281
As at March 31,
2021
(in thousands)
281
10,000
15,000
25,281
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 a 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, of which 281,000 warrants remained outstanding as at March 31, 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 between October 16, 2018 and October 16, 2024. During the year ended March 31, 2022, the remaining 10,000,000 warrants were
exercised.
Preferred share offering with CDPI
On August 16, 2019, in connection with a 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. All warrants were
outstanding as at March 31, 2022. Refer to note 17 c).
18. Revenues
Iron ore revenue
Provisional pricing adjustments
Year Ended March 31,
2022
1,389,837
70,969
1,460,806
2021
1,193,875
87,940
1,281,815
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, 2022, 0.7 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, 2021: 1.0 million tonnes).
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)
19. 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
Incremental costs related to COVID-19
Year Ended March 31,
2022
159,301
123,727
102,196
83,668
25,303
(14,007)
(29,353)
7,843
458,678
2021
156,455
98,193
89,536
71,395
16,841
(2,006)
(14,142)
12,610
428,882
Incremental operating costs related to COVID-19 results from the Company's safety measures, which are mainly comprised of on-site
COVID-19 testing and laboratory costs, incremental costs for cleaning and disinfecting facilities, premiums paid to employees from adjusted
work schedules and incremental transportation costs.
For the year ended March 31, 2022, the amount recognized as an expense for defined contribution plans was $6,928,000 (year ended
March 31, 2021: $4,829,000) and is included in salaries, benefits and other employee expenses.
20. General and Administrative Expenses
Salaries, benefits and other employee expenses
Public company related and administrative expenses
Professional fees
Travel expenses
21. Sustainability and Other Community Expenses
Property and school taxes
Impact and benefits agreement
Salaries, benefits and other employee expenses
Other expenses
Year Ended March 31,
2022
13,880
10,975
5,576
1,338
31,769
Year Ended March 31,
2022
5,842
5,241
2,348
3,552
16,983
2021
10,281
8,605
4,339
369
23,594
2021
6,028
5,232
1,712
1,886
14,858
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)
22. Net Finance Costs
Standby commitment fees on long-term debt
Interest on long-term debt
Amortization of transaction costs
Loss on debt refinancing
Realized and unrealized foreign exchange loss
Interest expense on lease liabilities
Other
Year Ended March 31,
2022
5,031
623
1,503
—
359
912
2,617
11,045
2021
975
6,624
2,032
1,863
7,782
117
3,035
22,428
During the development period of the Bloom Lake Phase II expansion project, the amount of borrowing costs capitalized for the year ended
March 31, 2022 was $15,040,000 (year ended March 31, 2021: $3,793,000). Borrowing costs consisted of interest expense and transaction
costs on the long-term debt.
23. Other Income
Unrealized gain on non-current investments
Realized gain of non-current investments
Unrealized loss on derivative liabilities
Net loss on non-financial assets
24. 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
Note
26
26
26
Year Ended March 31,
2022
5,071
4,483
(176)
(818)
8,560
2021
7,905
2,332
—
—
10,237
As at March 31,
2022
As at March 31,
2021
49,376
32,117
(126,011)
(48,357)
(174,368)
(124,992)
(82,814)
(33,836)
(116,650)
(84,533)
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)
24. Income and Mining Taxes
a) Deferred tax assets and liabilities (continued)
The movement in deferred tax asset during the year, without taking into consideration the offsetting of balances within the same tax
jurisdiction, is as follows:
Deferred tax assets
As at April 1, 2020
Credited (charged) to statements of income
As at March 31, 2021
Credited to statements of equity
Credited (charged) to statements of income
As at March 31, 2022
Operating
losses carried
forward
Capital losses
carried
forward
Rehabilitation
obligation
Transaction
costs
Mining tax
deduction
and other
8,760
245
9,005
—
(430)
8,575
—
1,079
1,079
—
873
1,952
11,352
592
11,944
—
10,851
22,795
1,562
(892)
670
—
(527)
143
6,527
2,892
9,419
1,319
5,173
15,911
Total
28,201
3,916
32,117
1,319
15,940
49,376
The movement in deferred 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, 2020
Charged to statements of income
As at March 31, 2021
Charged to statements of income
As at March 31, 2022
Property, plant
and equipment
Mining tax
Exploration
and evaluation
assets
65,317
8,155
73,472
38,370
111,842
23,576
10,260
33,836
14,519
48,355
6,778
397
7,175
559
7,734
Other
471
1,696
2,167
4,270
6,437
Total
96,142
20,508
116,650
57,718
174,368
As at March 31, 2022, the Company had $9,013,000 (March 31, 2021: $9,012,000) 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, 2022, the Company had $13,008,000 (March 31, 2021: $17,180,000) of operating losses carried forward that were not
recognized and that can be carried forward indefinitely against future taxable income. As at March 31, 2022, the Company also had
$44,607,000 (March 31, 2021: $47,641,000) of operating losses that can be carried forward against future taxable income and that will expire
from 2030 to 2042. Out of those losses, $27,815,000 (March 31, 2021: $31,022,000) were not recognized.
As at March 31, 2022, the Company had $17,957,000 (March 31, 2021: $14,318,000) of net capital losses that can be carried forward
indefinitely against future capital gains. Out of those capital losses, $3,229,000 (March 31, 2021: $6,177,000) 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, 2022, the Company had cumulative Canadian exploration expenses of $35,225,000 (March 31, 2021: $35,225,000) and
cumulative Canadian development expenses of $14,175,000 (March 31, 2021: $13,333,000) which may be carried forward indefinitely to reduce
taxable income in future years.
As at March 31, 2022, the Company had $1,778,000 (March 31, 2021: $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, 2022, the Company had $957,003,000 (March 31, 2021: $486,948,000) of taxable temporary differences related to
investments in subsidiaries for which a deferred tax liabilities were partially recorded for an amount of $2,800,000 (nil as at March 31, 2021).
The deferred tax liabilities related to the remaining balance were not recognized as the Company controls the decisions affecting the
realization of such liabilities and does not expect this temporary differences to be reverse in the foreseeable future. Upon distribution of these
earnings in the form of dividends or otherwise, the Corporation may be subject to income taxes and/or withholding taxes.
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)
24. 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,
2022
2021
170,873
135,607
306,480
27,256
14,522
41,778
348,258
150,166
130,689
280,855
6,332
10,260
16,592
297,447
The tax on the Company's income before income and mining taxes 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
Other taxes included in income tax expense, net of tax benefits
(Income) expenses not (taxable) deductible for tax purposes
Recognition of previously unrecognized tax benefits
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,
2022
%
26.50 %
Amount
870,843
230,773
2021
%
26.50 %
Amount
761,872
201,896
110,330
5,947
689
—
519
12.67 %
0.68 %
0.08 %
— %
0.06 %
348,258 39.99 %
103,603
—
(3,790)
(3,640)
(622)
297,447
13.60 %
— %
(0.50) %
(0.48) %
(0.08) %
39.04 %
Income and mining taxes payable
As at April 1, 2020
Current tax on profit for the year
Tax paid during the year
As at March 31, 2021
Current tax on profit for the year
Tax paid during the year
As at March 31, 2022
Mining Tax
Income Tax
12,626
130,689
(56,708)
86,607
135,607
(217,256)
4,958
45,135
150,166
(90,366)
104,935
170,873
(258,022)
17,786
Total
57,761
280,855
(147,074)
191,542
306,480
(475,278)
22,744
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)
25. Earnings per Share
Earnings per share amounts are calculated by dividing the net income attributable to Champion shareholders for the years ended
March 31, 2022 and 2021 by the weighted average number of shares outstanding during the year.
Net income
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
26. Financial Instruments
Year Ended March 31,
2022
522,585
507,591,000
16,517,000
524,108,000
1.03
1.00
2021
464,425
478,639,000
27,684,000
506,323,000
0.97
0.92
Measurement Categories
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 and financial liabilities at FVTPL, 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, 2022 and
2021:
As at March 31, 2022
Assets
Current
Cash and cash equivalents
Short-term investments
Trade receivables
Other receivables (excluding sales tax and grant)
Non-current
Restricted cash
Non-current investments (equity investment in
publicly listed entity)
Level 1
Level 1
Level 2
Level 2
Level 1
Level 1
Non-current investments (convertible loans,
derivative and equity investment in private entity)
Level 3
Liabilities
Current
Accounts payable and other (excluding
current portion of lease liabilities and cash-settled
share-based payment liability)
Accounts payable and other (cash-settled
share-based payment liability)
Current portion of long-term debt
Level 2
Level 1
Level 2
Non-current
Long-term debt
Other long-term liabilities (cash-settled share-based
payment liability)
Level 2
Level 1
Financial
instruments at
FVTPL
Financial
Assets at
Amortized Cost
Financial
Liabilities at
Amortized Cost
Total Carrying
Amount and
Fair Value
—
—
93,527
—
—
9
14,149
107,685
176
7,313
—
7,489
—
12,304
19,793
321,892
30,777
—
3,331
43,736
—
—
399,736
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
321,892
30,777
93,527
3,331
43,736
9
14,149
507,421
182,372
182,548
—
71,995
254,367
7,313
71,995
261,856
251,365
251,365
—
505,732
12,304
525,525
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)
26. Financial Instruments (continued)
Measurement Categories (continued)
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 (equity investment in
publicly listed entities)
Non-current investments (convertible loans)
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
Financial
instruments at
FVTPL
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 1
Level 3
Level 2
Level 2
—
—
73,341
—
609,316
27,200
—
1,055
—
44,012
8,761
943
83,045
—
—
681,583
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
101,724
101,724
214,951
316,675
609,316
27,200
73,341
1,055
44,012
8,761
943
764,628
101,724
101,724
214,951
316,675
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 Hierarchy
Subsequent to initial recognition, the Company uses a fair value hierarchy to categorize the inputs used to measure the financial instruments
at fair value grouped into the following levels based on the degree to which the fair value is observable.
•
•
•
Level 1: Inputs derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Inputs derived from 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: Inputs that are not based on observable market data (unobservable inputs).
There were no transfers between Level 1, Level 2 and Level 3 during the year ended March 31, 2022 (year ended March 31, 2021: nil).
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)
26. Financial Instruments (continued)
a) Market (continued)
i. Fair Value (continued)
Financial Instruments Measured at FVTPL
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 publicly listed 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. During the year ended March 31, 2022, the Company sold the
majority of its remaining shares of its publicly listed equity investments for net proceeds of $9,468,000 (year ended March 31, 2021:
$3,022,000) and a net gain of $176,000 (year ended March 31, 2021: $2,332,000).
During the year ended March 31, 2022, the Company invested in a convertible loan of US$2,500,000 (year ended March 31, 2021: US$750,000)
in an European-based private entity which collaborates with the Company in industrial trials related to cold pelletizing technologies, convertible
after March 31, 2022 at the discretion of the Company and automatically convertible after sixty months from the contractual date of
December 16, 2021. The loan is convertible into a variable number of ordinary shares which varies according to the certain level of financing
that the entity will seek. During the year ended March 31, 2022, the Company also purchased equity instruments in this European-based
private entity. The fair value of the convertible loans and equity instruments is a recurring measurement and it is classified as Level 3. The
determination of fair value is conducted on a quarterly basis and it is based on the entity's financial performance from latest financial
statements as well as enterprise values used in financing, if any. Following the investments made by the Company, the private entity raised
new financings with a higher enterprise value than the cost of the Company's prior investments, which resulted in an increase in the fair value
on the convertibles loans and the equity investment based on a market approach.
The Company also has the right to subscribe equity instruments of this European-based private entity at any time prior to June 2023 at a
subscription price below the current market value. As such, as at March 31, 2022, the Company recorded a derivative asset of $2,744,000
based on the same enterprise value.
The following table shows a breakdown of the changes in fair value recognized on non-current investments per fair value hierarchy.
Change in fair value included in Other Income
Unrealized (loss) gain on public equity investments
Unrealized gain on private equity investments
Unrealized gain on convertible loans
Unrealized gain on derivative asset
Total change in fair value
Realized gain on disposal of public equity investments
Year Ended March 31,
2022
(3,767)
2,196
3,898
2,744
5,071
4,483
2021
7,905
—
—
—
7,905
2,332
Level 1
Level 3
Level 3
Level 3
Level 1
Derivative Liabilities
The Company entered into forward foreign exchange contracts to sell U.S. dollars to reduce the risk of variability of future cash flows resulting
from forecasted sales. The amount of contracts signed was determined based on the planned Phase II construction expenditures. As at
March 31, 2022, remaining forward exchange contracts totalled US$5,000,000, maturing in April 2022. The forward foreign exchange rates
used to estimate the fair value of these contracts was $1.25 as at March 31, 2022 and resulted in a derivative liability of $176,000 as at
March 31, 2022, presented under Accounts payable and other in the consolidated statements of financial position. The fair value of forward
exchange contracts was categorized as Level 2 in the fair value hierarchy.
170 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
26. Financial Instruments (continued)
a) Market (continued)
i. Fair Value (continued)
Financial Instruments Measured at FVTPL (continued)
Derivative Liabilities (continued)
Fair value of derivative financial instruments generally reflects the estimated amounts that the Corporation would receive or pay taking into
consideration the counterparty credit risk or the Corporation’s credit risk, at the reporting dates. The Corporation uses market data such as
credit spreads and foreign exchange spot rates to estimate the fair value of forward agreements. The Company did not apply hedge accounting
on these contracts. The change in fair value of these contracts amounted to a realized loss of $9,815,000 for the year ended March 31, 2022 in
the net finance costs of the consolidated statements of income.
Cash-Settled Share-Based Payment Liability
Cash-settled share-based liability is classified as a Level 1 in the fair value hierarchy. The fair value of the cash-settled share-based payment
liability is measured based on the closing share price of the Company on the TSX at each reporting date until the liability is settled with any
changes in the fair value measurement of the liability recognized under share-based payments in the consolidated statements of income.
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 bearing interest at variable rates 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 long-term debt bearing interest at variable rates is subject to interest based on London Interbank Offered Rate (“LIBOR”). The following
table illustrates a LIBOR rate sensitivity analysis calculating the impact on net income and equity over a 12-month horizon:
(in thousands of U.S. dollars)
Increase in net income and equity with a 1% decrease in the LIBOR rate
Decrease in net income and equity with a 1% increase in the LIBOR rate
Year Ended March 31,
2022
2,026
(2,026)
2021
1,800
(1,800)
Regulators announced that the USD LIBOR rate will cease on June 30, 2023. This will impact the Senior Debt and CAT Financing which are USD
LIBOR based contracts plus a financial margin. The Company is in the process of agreeing alternative rates with the relevant lenders. The
interest rate benchmark reform did not have any financial impact for the year ended March 31, 2022.
iii. Commodity Price Risk
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 revenue.
171 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
26. Financial Instruments (continued)
a) Market (continued)
iii. Commodity Price Risk (continued)
The following table sets out the Company’s exposure, as at March 31, 2022, in relation to the impact of movements in the iron ore price for the
provisionally invoiced sales volume:
(in thousands of U.S. dollars)
Dry metric tonnes subject to provisional pricing adjustments
10% increase in iron ore prices
10% decrease in iron ore prices
Year Ended March 31,
2022
691,100
12,831
(12,831)
2021
1,007,000
18,393
(18,393)
The sensitivities demonstrate the monetary impact on ore sales revenues, net income and equity resulting from a 10% increase and 10%
decrease in realized selling prices at each reporting date, while holding all other variables constant, 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.
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 costs, Senior Debt and CAT Financing are denominated in U.S. dollars. The Company also has
lease liabilities financed in U.S. dollars. As such, the Company benefits from a natural hedge between its revenues and its sea freight, long-
term debt and some of its lease liabilities. Despite this natural hedge, the Company is exposed to foreign currency fluctuations as its mining
operating expenses and other expenses are mainly incurred in Canadian dollars.
During the year ended March 31, 2022, the Company entered into forward foreign exchange contracts to comply with its Senior Debt
covenants. As at March 31, 2022, remaining forward exchange contracts totalled US$5,000,000, maturing in April 2022. 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, 2022 and 2021:
(in thousands of U.S. dollars)
Current assets
Cash and cash equivalents
Short-term investments
Receivables (excluding sales tax)
Non-current assets
Restricted cash
Current liabilities
Accounts payable and other
Current portion of long-term debt
Non-current liabilities
Lease liabilities
Long-term debt
Total foreign currency net liabilities in USD
CAD dollar equivalents
As at March 31,
2022
As at March 31,
2021
129,840
9,856
74,846
223,584
7,666
58,323
35,000
35,000
(4,593)
(52,813)
(40,624)
(149,794)
1,718
—
—
—
(180,000)
144,573
2,147
181,801
172 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
26. Financial Instruments (continued)
a) Market (continued)
iv. Foreign Exchange Risk (continued)
The following table is a currency risk sensitivity analysis calculating the impact on net income and equity for the years ended March 31, 2022
and 2021, based on the Company’s net assets denominated in U.S. dollars at the end of the reporting period:
Decrease in net income and equity with a 10% depreciation in the U.S. dollar
Increase in net income and equity with a 10% appreciation in the U.S. dollar
As at March 31
2022
As at March 31
2021
(215)
215
(18,180)
18,180
The sensitivity analysis above assumes that all other variables remain constant. The Company’s exposure to other currencies is not significant.
b) Credit Risk
Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations. Credit
risk arises principally from the Company’s cash and cash equivalents, short-term investments, trade receivables and restricted cash.
Cash and cash equivalents, short-term investments and restricted cash
With respect to credit risk arising from cash and cash equivalents, short-term investments and restricted cash, 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, 2022 (March 31,
2021: nil). For the year ended March 31, 2022, no provision was recorded on any of the Company's receivables (year ended March 31, 2021: nil).
The Company holds no collateral for any receivable amounts outstanding as at March 31, 2022 (March 31, 2021: 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. The COVID-19 pandemic did not have a negative impact
on the Company's liquidity risk for the years ended March 31, 2022 and 2021.
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, 2022:
Less than a year
1 to 5 years
More than 5 years
Total
Accounts payable and other (excluding current
portion of lease liabilities and cash-settled
share-based payment liability)
Long-term debt, including interest
Cash-settled share-based payment liability
Lease liabilities, including interest
182,548
84,509
7,313
4,936
279,306
—
233,649
12,304
16,494
262,447
—
68,310
—
67,213
135,523
182,548
386,468
19,617
88,643
677,276
173 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
27. Capital Risk Management
The Company’s main objective when managing its capital is to maintain an adequate balance between having sufficient capital to invest in
growth opportunities including exploring and developing mineral resource properties and investing in new product development as well as
maintaining a satisfactory return on equity to ordinary shareholders.
The Company defines its capital as long-term debt, lease liabilities and share capital. The Company manages its capital structure and makes
adjustments based on the funds available to the Company in light of changes in economic conditions. Dividend payments are discretionary and
depends on financial circumstances. The Company is not subject to externally imposed capital requirements other than certain restrictions
under the terms of its lending agreements for which the Company complied as at March 31, 2022. 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.
The Company's capital for the years ended March 31, 2022 and 2021 was as follows:
Long-term debt
Lease liabilities
Share capital
As at March 31,
2022
As at March 31,
2021
323,360
53,979
398,635
775,974
214,951
1,902
515,970
732,823
28. Key Management Compensation
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,
2022
4,068
3,284
7,352
11,136
478
18,966
2021
3,044
2,588
5,632
3,443
351
9,426
The Company has employment agreements with five executive officers, which include termination remuneration and benefits varying
according to different scenarios. Had all these officers been terminated on March 31, 2022, the Company would have paid an amount of
approximately $17,788,000, in addition to amounts in the table above.
174 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
29. Commitments and Contingencies
Commitments
The Company's future minimum payments of commitments as at March 31, 2022 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
Less than a year
5,270
6,933
116,378
10,227
15,045
1,085
154,938
1 to 5 years More than 5 years
84,553
105,592
—
3,294
—
17,157
210,596
22,712
29,509
—
48,228
—
5,670
106,119
Total
112,535
142,034
116,378
61,749
15,045
23,912
471,653
The Company has obligation services related to fixed charges for the use of infrastructure over a defined contractual period of time. The
service commitment is excluded in the above figure as the service is expected to be used by the Company. To the extent that this changes,
the amount of commitment may change.
In relation to the acquisition of the Kami Project and contingent upon it advancing to commercial production, the Company is subject to:
• A gross sales royalty to Altius on iron ore concentrate, refined copper, fine gold bullion, silver bullion, and other refined products;
• Finite production payments to the Receiver on future production;
• Education and training fund for the local communities; and
• Special tax payment to the Minister of Finance of Newfoundland and Labrador.
The Company is also subject to a limited production payment on its Consolidated Fire Lake North, Lac Lamêlée, Moiré Lake, O’Keefe-Purdy and
Harvey-Tuttle properties.
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
Non-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
As at March 31,
2022
As at March 31,
2021
42,119
143,063
185,182
8,045
11,455
19,500
165,682
269,242
22,473
12,354
(138,387)
165,682
20,827
20,827
70,783
85,594
156,377
580
—
580
155,797
227,069
29,973
13,324
(114,569)
155,797
6,618
6,618
175 Page
Champion Iron Limited
Notes to the Consolidated Financial Statements
(Tabular figures are expressed in thousands of Canadian dollars, except where otherwise indicated - audited)
31. Auditor's Remuneration
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 non-audit fees
E&Y Australia
Audit fees
All other non-audit fees
Other non-audit fees are mainly comprised of consulting services.
Year Ended March 31,
2022
2021
688
86
2
776
73
—
73
849
497
194
27
718
59
1
60
778
176 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
Other long-term liabilities
Year Ended March 31,
2022
(18,773)
(14,818)
(23,056)
1,352
78,470
(168,798)
1,381
(144,242)
2021
(74,205)
7,581
(8,488)
(654)
47,554
133,781
(247)
105,322
b)
Reconciliation of additions presented in the property, plant and equipment schedule to the net cash flow used in investing activities
Additions of property, plant and equipment as per note 11
Right-of-use assets
Depreciation of property, plant and equipment allocated to stripping activity asset
Non-cash increase of the asset rehabilitation obligation
Government grant receivable
Capitalized amortization of transaction costs
Net cash flow used in investing activities - purchase of property, plant and equipment
Year Ended March 31,
2022
623,033
(57,138)
(5,845)
(40,847)
3,298
(3,179)
519,322
2021
179,817
—
(2,636)
(2,166)
—
(365)
174,650
The additions of property, plant and equipment for the year ended March 31, 2022 are net of government grants of $9,532,000, of which
$3,298,000 was receivable as at March 31, 2022. The net cash flow from purchase of property, plant and equipment as presented in the
statements of cash flows is net of government grants totalling $6,234,000 for the year ended March 31, 2022.
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 11
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,
2022
56,183
(5,845)
2,582
(8,991)
43,929
2021
36,010
(2,636)
1,518
285
35,177
177 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.
Exploration
and Evaluation
Corporate
Total
Year Ended March 31, 2022
Revenues
Cost of sales
Depreciation
Gross profit (loss)
Share-based payments
General and administrative expenses
Sustainability and other community expenses
Product research and development expenses
Bloom Lake Phase II start-up costs
Operating income (loss)
Net finance costs, other expense and taxes expenses
Net income
Mine Site
1,460,806
(458,678)
(43,671)
958,457
—
—
(5,840)
—
(17,752)
934,865
—
—
—
—
—
—
—
—
—
—
—
—
(258)
(258)
(12,818)
(31,769)
(11,143)
(5,549)
—
(61,537)
Segmented total assets
Segmented total liabilities
Segmented property, plant and equipment
1,827,085
(800,206)
1,069,580
107,810
—
—
54,335
(27,326)
450
1,460,806
(458,678)
(43,929)
958,199
(12,818)
(31,769)
(16,983)
(5,549)
(17,752)
873,328
(350,743)
522,585
1,989,230
(827,532)
1,070,030
Total
1,281,815
(428,882)
(35,177)
817,756
(3,983)
(23,594)
(14,858)
(1,258)
774,063
(309,638)
464,425
Mine Site
1,281,815
(428,882)
(34,919)
818,014
—
—
(6,025)
—
811,989
Exploration
and Evaluation
Corporate
—
—
—
—
—
—
—
—
—
—
—
(258)
(258)
(3,983)
(23,594)
(8,833)
(1,258)
(37,926)
1,347,588
(632,538)
503,239
76,106
—
—
73,212
(11,351)
1,746
1,496,906
(643,889)
504,985
178 Page
Year Ended March 31, 2021
Revenues
Cost of sales
Depreciation
Gross profit (loss)
Share-based payments
General and administrative expenses
Sustainability and other community expenses
Product research and development 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
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
On May 24, 2022, QIO completed the refinancing of the US$400.0M Senior Debt with a US$400.0M general purpose revolving facility
(“US$400M Revolving Facility”). The Company drew US$180M on the Revolving Facility, equivalent to the Credit Facility balance as at
March 31, 2022. The US$400M Revolving Facility is provided by Societe Generale (Coordinating Bank, Mandated Lead Arranger and Joint
Bookrunners), The Bank of Nova Scotia (Administrative Agent, Mandated Lead Arranger and Joint Bookrunner), with The Toronto-Dominion
Bank, The Royal Bank of Canada (acting as Mandated Lead Arrangers and Joint Bookrunners), with the inclusion of the Bank of China Toronto
Branch, Fédération des caisses Desjardins du Québec, Bank of Montreal, National Bank, Bank of America and EDC.
The US$400M Revolving Facility will mature four years from May 24, 2022, and will bear interest based on leverage ratios ranging between the
Secured Overnight Financing Rate (“SOFR”), plus a credit spread adjustment, plus 2.00% if the net debt to EBITDA ratio is lower or equal to
0.50x to SOFR, plus a credit spread adjustment plus 3.00% if the net debt to EBITDA ratio is greater than 2.50x. The US$400M Revolving Facility
includes standard and customary finance terms and conditions, including with respect to fees, representations, warranties, covenants and
conditions precedent to disbursements.
On May 25, 2022 (Montreal time) / May 26, 2022 (Sydney time), the Board declared a dividend of $0.10 per ordinary share of the Company in
connection with the annual results for the period ended March 31, 2022, payable on June 28, 2022, to registered shareholders at the close of
business in Australia and Canada on June 7, 2022 (local time).
179 Page
The additional information set out below relates to the ordinary shares of the Company as at April 23, 2022. The Company does not hold other
class of equity securities, which excludes shares held by it subsidiaries.
1. Distribution of Shareholdings as at April 23, 2022
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
785,120
2,539,449
1,892,227
9,759,682
501,635,398
516,611.876
2,002
1,040
241
301
123
3,707
% of issued Capital
0.15 %
0.49 %
0.37 %
1.89 %
97.10 %
100.00 %
2. Substantial Shareholders as at April 23, 2022
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
Michael O'Keeffe (and associates)
Investissement Québec
WC Strategic Opportunity LP
Number of Ordinary Shares
45,023,830
43,500,000
41,944,444
% of issued Capital
8.72 %
8.42 %
8.12 %
3. Marketable Parcels as at April 23, 2022
149 shareholders held less than a marketable parcel of ordinary shares as at April 23, 2022.
4. Voting Rights
All ordinary shares issued by the Company carry one vote per share without restriction.
181 Page
5. Twenty Largest Shareholders as at April 23, 2022
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 23, 2022, 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
HSBC Custody Nominee Aust Ltd
JP Morgan Nom Aust PL
Investissement Québec
WC Strategic Opportunity LP
Prospect AG Trading PL
Citicorp Nom PL
Metech Super PL
National Nominees LTD
Mr Michael O'Keeffe
BNP Paribas Nominees PTY LTD
Eastbourne DP PL
BNP Paribas Nominees PTY LTD Custodial Serv LTD DRP
HSBC Custody Nominee Aust Ltd (Commonwealth Super Corp)
CS Third Party Nominees PTY LTD
BNP Paribas Nominees PTY LTD Agency Lending Collateral
Mr David Cataford
BNP Paribas Nominees PTY LTD Agency Six Sis LTD
BNP Paribas Nominees PTY LTD Agency Lending DRP
BNP Paribas Nominees PTY LTD ACF Clearstream
GAB Super Fund PL
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Number of Ordinary Shares
72,790,080
45,474,377
43,500,000
41,944,444
34,362,930
30,871,209
9,950,000
8,125,073
6,751,900
4,532,930
3,500,000
3,490,060
3,416,885
3,163,729
2,800,000
2,222,080
2,127,922
1,827,562
1,531,729
1,443,334
% of issued Capital
14.09 %
8.80 %
8.42 %
8.12 %
6.65 %
5.98 %
1.93 %
1.57 %
1.31 %
0.88 %
0.68 %
0.68 %
0.66 %
0.61 %
0.54 %
0.43 %
0.41 %
0.35 %
0.30 %
0.28 %
182 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 materially and adversely affected 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, over which the Company has no control. 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 and the recent increase in volatility thereof, 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. 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, the overall state of the economy and expectations for economic
growth (including as a result of the COVID-19 pandemic), global and regional demand, political and economic conditions, including trade
protection measures such as tariffs and import and export restrictions, production levels and costs and transportation costs in major iron ore
producing regions. During the financial year ended March 31, 2022, iron ore prices and high-grade iron ore premiums experienced increased
volatility, and the price for iron ore was subject to important volatility. The Company cannot predict the future impact of those factors on iron
ore prices, nor whether those factors will continue or if other factors that may negatively affect iron ore prices and high-grade iron ore
premiums will emerge. 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.
Freight Costs and Inflation
The Company uses external sea freight to ship most of its iron ore concentrate. Global sea freight capacity issues, which have been
exacerbated by the COVID-19 pandemic and port congestions globally, in addition to rising fuel prices and recent inflationary pressure,
continue to persist worldwide. Such dynamics in tandem with limited capacity and equipment, has resulted in longer shipping times and price
increases. Although the Company is seeking to manage and reduce its freight premium volatility, including through freight contracts, the
Company remains exposed to fluctuations in freight costs. Adverse fluctuations in freight costs, including as a result of general economic
conditions, rising fuel prices, decreased vessel availability or otherwise, could have a material affect the Company’s business, results of
operations and profitability.
184 Page
Risk Factors (continued)
Financial Risks (continued)
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, 2022, Champion had cash and cash equivalents of approximately $321.9 million and total long-term debt of approximately
$323.4 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 as well as payment under lease
liabilities, 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.
As of March 31, 2022, the Company had a total undrawn Amended Credit Facility of US$220 million. The 2020 Term Facility was scheduled to
mature five years from December 23, 2020 while the 2020 Revolving Facility was scheduled to mature three years from December 23, 2020.
Following the announcement of Phase II commissioning, QIO completed on May 24, 2022, the refinancing of the Amended Credit Facility with
the Revolving Facility, which is scheduled to mature four years from May 24, 2022. See “Current Financial Period – 2022 Refinancing” above.
As of March 31, 2022, the Company also had the Equipment Financing Facility with Caterpillar Financial Services Limited for an undrawn
amount of US$50.7 million, and a seven-year FTQ Loan Agreement for an undrawn amount of $45 million, maturing on May 21, 2028.
Additionally, the Company had an undrawn IQ Loan of $10.0 million to partially finance a total investment of $85 million related to upgrades at
SFPPN. Accordingly, as of March 31, 2022, the Company had a total $393.3 million of undrawn available financing.
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, its lease liabilities and other financial
instruments include issuing additional equity or unsecured debt and borrowing under the Company’s Revolving Facility. 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, lease liabilities 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 Revolving 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 disruption 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. In the event that such counterparties were affected by a business disruption, insolvency or similar event, Champion’s
liquidity or access to funds could be adversely affected, which could limit its ability to pursue other business opportunities or implement its
business strategy.
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.
185 Page
Risk Factors (continued)
Financial Risks (continued)
Global Financial Conditions and Capital Markets (continued)
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 outbreak of the coronavirus disease
(COVID-19), there has been a slowdown in world economies since the first quarter of 2020.
The conflict between Russia and Ukraine that commenced in February 2022 may result in increased volatility on global financial markets and
the demand and price for commodities although the scale and impact is uncertain.
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.
Increasing Global Instability as a Result of the Russia-Ukraine Conflict
Although the Company does not conduct business directly with or within Russia and Ukraine, increasing global instability could impact its
operations with worsening supply chain disruptions coupled with macro-economic forces increasing market, commodity prices and foreign
exchange volatility, driving up fuel prices and increasing inflationary pressures limiting consumer spending capacity and rising operating
expenses. In addition, governments have warned of potential coordinated cyberattacks on critical infrastructures. Additionally, the conflict
triggered global sanctions across many jurisdictions, which may impact the global trade flows of iron ore products and steel, which could
impact the Company’s historical business relationships. While the Company has risk mitigation measures in place such as advance
placement of orders to secure materials and supplier diversification (alternate sourcing), a prolonged conflict could continue to result in
additional inflationary pressure, and supply chain and transportation disruption, which could materially adversely affect the Company’s
business, results of operations and profitability.
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. 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. 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. The U.S. dollar/Canadian dollar exchange rate has fluctuated
significantly over the last several years. However, historical fluctuations in the U.S. dollar/Canadian dollar exchange rate are not necessarily
indicative of future exchange rate fluctuations. 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 Revolving 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.
186 Page
Risk Factors (continued)
Financial Risks (continued)
Interest Rates
The Company is exposed to interest rate risk, mainly as a result of certain of its borrowings being at variable rates of interest. As of
March 31, 2022, US$202.6 million of the Company’s borrowings was at variable rates. In order to manage inflation risks in accordance with
their mandates, the central banks of several jurisdictions including Canada have recently announced increases to their benchmark rates and
are expected to continue to increase their benchmark rates in the short to medium term. 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, which could reduce the profitability of the Company and affect the trading prices of its Ordinary Shares.
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. The Chinese
market is a significant source of global demand for commodities, including steel and iron ore. Chinese demand has been a major driver in
global commodities markets for a number of years. A slowing in China’s economic growth or the establishment by China of trade protection
measures such as tariffs and import and export restrictions could result in lower prices and demand for iron ore. 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.
Global carbon tax and carbon import duties
There continues to be an increasing focus on carbon (also referred to as “greenhouse gas” or GHG) emissions produced by the mining and
other industries. Legislation and regulations in various jurisdictions aimed at reducing domestic greenhouse gas emissions and implementing
systems to prevent the import of goods with embedded emissions continue to be considered or adopted. While we expect that carbon taxes
will increase over time, it is not yet possible to reasonably estimate the nature, extent, timing and cost or other impacts of any future taxes or
other programs that may be enacted, including the impact on demand for iron ore products from traditional steel producers and other
customers, and the impact on the Company’s ability to sell its products to customers. Additionally, as countries attempt to implement
systems to prevent the import of goods with embedded emissions, carbon import duties may impact the Company’s historical trade partners,
sales and financial performance. See “Climate Change and ESG Matters” below.
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), social acceptance by the local communities 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.
187 Page
Risk Factors (continued)
Operational Risks (continued)
Mineral Exploration, Development and Operating Risks (continued)
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 entire duration of the LOM. See also “Risk
Factors – Ability to Support the Carrying Value of Non-Current Assets” below.
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, supply chain cost increases and distruption, 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, including the completion
of the Phase II expansion of the Bloom Lake Mine, which could have a material adverse impact on 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.
188 Page
Risk Factors (continued)
Operational Risks (continued)
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, in particular those of the Bloom Lake Mine, will affect the economic
viability of the Company’s projects.
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. 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, pandemics, government-
imposed restrictions on operations, 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.
189 Page
Risk Factors (continued)
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 remaining milestones 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 working towards commercial production for the Phase II
expansion project of the Bloom Lake Mine, which will require 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.
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.
190 Page
Risk Factors (continued)
Operational Risks (continued)
Environmental Risks and Hazards (continued)
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 (Québec),
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. Reclamation costs are uncertain and planned expenditures may differ from the actual
expenditures required. Any significant increases over the Company’s current estimates of future cash outflows for reclamation costs, as a
result of the Company being required to carry out unanticipated reclamation work or otherwise, could have an adverse impact on the
Company’s future cash flows, earnings, results of operations and financial condition.
Applicable Laws and Regulations
Exploration, development and mining of minerals are subject to extensive and complex federal, provincial and local laws and regulations,
including 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. The costs of compliance and
any changes to the Company's operations mandated by new or amended laws or regulations, may be significant. Such costs and delays may
materially adversely impact the Company's business, results of operations or financial condition. Furthermore, any violations of these laws or
regulations may result in substantial fines and penalties, remediation costs, third party damages, or a suspension or cessation of the
Company's operations, which could materially adversely affect the Company's business, results of operations or financial condition.
Potential First Nations Land Claims
The Company conducts its operations in the Province of Québec 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.
Pursuant to section 35 of The Constitution Act of 1982, the Federal and Provincial Crowns (including those of the Provinces of Québec 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.
There is an increasing level of public concern relating to the perceived effect of mining activities on indigenous communities. The evolving
expectations related to human rights, indigenous rights and environmental protection may adversely impact the Company’s current or future
activities. Such opposition may be directed through legal or administrative proceedings, against the government and/or the Company, or
expressed in manifestations such as protests, delayed or protracted consultations, blockades or other forms of public expression against the
Company’s activities or against the government’s position. There can be no assurance that these relationships can be successfully managed.
Intervention by the aforementioned groups may have a material adverse effect on the Company’s reputation, results of operations and
financial performance.
191 Page
Risk Factors (continued)
Operational Risks (continued)
Potential First Nations Land Claims (continued)
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 Consolidated Fire Lake North 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. Title to, and the area of, mineral concessions may be
disputed, and there is no assurance that the interests of the Company in any of its properties may not be challenged or impugned. Third
parties may have valid claims on underlying portions of the Company’s interests, including prior unregistered liens, agreements, transfers or
claims, including land claims by indigenous groups, and title may be affected by, among other things, undetected defects. In addition, the
Company may be unable to conduct its operations on one or more of its properties as currently anticipated or permitted or to enforce its rights
in respect of its properties.
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.
192 Page
Risk Factors (continued)
Operational Risks (continued)
Climate Change and ESG Matters
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. In addition, global efforts to transition to a lower-carbon economy may entail extensive policy, legal,
technology, and market changes to address mitigation and adaptation requirements related to climate change. Depending on the nature,
speed, focus and jurisdiction of these changes, transition risks may pose varying levels of financial and reputational risk to the business.
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.
In addition, there is increased investor attention on environmental, social and governance (“ESG”) issues more generally. Notwithstanding our
commitment to conducting our business in a socially responsible manner, to the extent mining companies fall out of favour with some
investors due to the industry’s real or perceived impacts on climate change and its perceived role in a transition to a low carbon economy, this
could negatively affect our shareholder base and access to capital.
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 COVID-19 pandemic, including as a result of the emergence of other variants of the virus in the
future. 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. During the financial year ended March 31, 2021,
the Government of Québec imposed restrictive measures pursuant to which companies involved in the mining industry were required to
reduce mining activities in the Province of Québec to a minimum, which resulted in the Company ramping down operations for a portion of
March and April 2020. Although, as announced by the Company on April 23, 2020 following the Québec Government’s announcement that
mining activities were to be considered a “priority service” in the Province of Québec 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. The recent resurgence of the COVID-19 virus and the recent spread of new variants thereof and the possibility that a
resurgence of the COVID-19 virus or the spread of such new or other variants or mutations thereof may occur in other areas, has resulted in
the re-imposition of certain of the foregoing restrictions, and may result in further restrictions, by governmental authorities in certain
jurisdictions, including certain jurisdictions in which we operate. This further increases the risk and uncertainty as to the extent and duration
of the COVID-19 pandemic and its ultimate impact on the global economy.
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 Annual Report, where
applicable, includes any variants thereof), the actions that may be taken by governmental authorities in response thereto and in each case,
the related financial and social impact, are uncertain. Further, the extent and manner to which COVID-19, and measures taken by
governmental authorities, 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.
193 Page
Risk Factors (continued)
Operational Risks (continued)
Public Health Crises (continued)
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 full extent to which COVID-19 (including as a result of the
effect of other variants of the virus in the future) 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 the duration, severity and geographic spread of the COVID-19 virus and variants and
mutations thereof; further actions that may be taken by governmental authorities, including in respect of travel restrictions and business
disruptions, the effectiveness and timing of actions taken to contain and treat the COVID-19 virus and variants and mutations thereof,
including the vaccines developed in response thereto and the rates of vaccination among population, and how quickly and to what extent
normal economic and operating conditions can resume.
Depending on the extent and duration of the COVID-19 pandemic, it may also have the effect of heightening many of the other risks described
in this Annual Report including the risks relating to the iron ore and other mineral prices, the Company’s exposure to commodity prices; the
successful completion of the Phase II expansion, including the expected return on investment thereof; restricted access to capital and
increased borrowing costs; the Company’s ability to service obligations under its debt obligations and otherwise complying with the
covenants contained in the agreements that govern the Company’s indebtedness.
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, loading and
port authorities necessary for the transportation and handling of production of Bloom Lake iron ore, including from the Phase II expansion,
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.
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. In
2021 and 2022, supply chains were affected by a number of factors, including inflation affecting the price of raw materials and
transportation, and supply chain disruptions resulting from the COVID-19 pandemic and other factors. 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.
194 Page
Risk Factors (continued)
Operational Risks (continued)
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. The Company’s operations depend on the timely
maintenance, upgrade and replacement of these systems, as well as pre-emptive efforts to mitigate cybersecurity risks and other technology
system disruptions. In addition, measures taken as a result of the COVID-19 pandemic have resulted in certain of the Company’s workforce
working remotely, which has increased the Company’s reliance on its IT systems and associated risks. These systems are subject to
disruption, damage or failure from a variety of sources, including an increasing threat of continually evolving cybersecurity risks. Failures in
the Company’s information technology systems could translate into production downtimes, operational delays, compromising of confidential
information, destruction or corruption of data, loss of production or accidental discharge; expensive remediation efforts; distraction of
management; damage to the Company’s reputation; or events of noncompliance which could lead to regulatory fines or penalties or ransom
payments. 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. The Company is subject to cybersecurity attacks and related
threats from time to time. 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. In addition, the Company’s insurance coverage for cyber-attacks may not be sufficient to cover all the
losses it may experience as a result of a cyber incident.
The Company and its third party service provides also collects, uses, discloses, stores, transmits and otherwise processes customer, supplier
and employee and others’ data as part of its business and operations, which may include personal data or confidential or proprietary
information. There can be no assurance that any security measures that the Company or its third-party service providers have implemented
will be effective against current or future security threats. If a compromise of such data were to occur, the Company may become liable under
its contracts with other parties and under applicable law for damages and incur penalties and other costs to respond to, investigate and
remedy such an incident. Depending on the facts and circumstances of such an incident, these damages, penalties, fines and costs could be
significant. Any such event could harm the Company’s reputation and result in litigation against it.
Litigation
All industries, including the mining industry, are subject to legal claims, with and without merit. The causes of potential future litigation
cannot be known and may arise from, among other things, business activities, agreements with customers and third parties, environmental
laws, volatility in stock price or failure or alleged failure to comply with disclosure obligations. 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.
195 Page
Risk Factors (continued)
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.
Certain institutional investors may base their investment decisions on consideration of the Company’s environmental, governance and social
practices and performance against such institutions’ respective investment guidelines and criteria, and failure to satisfy such criteria may
result in limited or no investment in the Ordinary Shares by those institutions, which could materially adversely affect the trading price of the
Ordinary Shares.
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, ability to
secure permits and governmental approvals, 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. Any failure of the Company's internal controls and procedures
could result in improper disclosure to the financial markets, which could adversely affect the Company’s reputation, business, results of
operations and ability to finance.
196 Page
Risk Factors (continued)
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 Annual Report 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 on 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 on the Company. In addition, the Company’ success also depends, in part, on its continuing ability to identify, recruit, train,
develop and retain other qualified managerial and technical employees with specialized market knowledge and technical skills 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.
Although the Company and its mine site workers agreed on the terms of a new 3-year collective agreement on June 23, 2021, the Company
cannot predict the outcome of any future negotiations relating to labour disputes, union representation or the renewal of any collective
agreement relating to its employees, nor can the Company assure that it will not experience work stoppages, strikes, property damage or
other forms of labour protests pending the outcome of any future negotiations. If its unionized workers engage in a strike or any other form of
work stoppage, it could experience a significant disruption to its operations, damage to its property and/or interruption to its services, which
could have a material adverse effect on the Company’s business, results of operations or 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.
197 Page
Risk Factors (continued)
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, the Company may participate in the acquisition, exploration and development of natural resource properties through
options, joint ventures or other structures, thereby allowing for its participation in larger programs, permitting involvement in a greater
number of programs and reducing financial exposure in respect of any one program. From time to time, the Company may enter into option
agreements and joint ventures as a means of gaining property interests and raising funds. 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 the Company to fund its proportionate share of the ongoing costs could result in its proportionate share being
diluted and possibly eliminated.
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.
Anti-Corruption and Anti-Bribery Laws
The Company may be impacted by anti-bribery, anti-corruption, and related business conduct laws. The Canadian Corruption of Foreign
Public Officials Act and anti-bribery and anticorruption laws in other jurisdictions where we do business, prohibit companies and their
intermediaries from making improper payments for the purposes of obtaining or retaining business or other commercial advantages. The
Company’s policies mandate compliance with these laws, the failure of which often carry substantial penalties. There can be no assurances
that the Company’s internal control policies and procedures will always protect it from inappropriate acts committed by the Company’s
affiliates, employees, or agents. Violations of these laws, or allegations of such violations, could have a material adverse effect on the
Company’s reputation, business, financial position, and results of operations.
Ability to Support the Carrying Value of Non-Current Assets
As of March 31, 2022, the carrying value of Champion’s non-current assets was approximately $1,393.3 million, or approximately 70% 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.
198 Page
FORWARD-LOOKING STATEMENTS
This Annual Report contains certain information and statements, which may be deemed “forward-looking information” within the meaning of
applicable securities laws (collectively referred to herein as “forward-looking statements”). 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. Inherent in forward-looking statements are risks, uncertainties and other factors beyond the Company’s
ability to predict or control.
SPECIFIC 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 Phase II expansion project and its milestones, commissioning and impact on mine and plant capacity, commercial
production, nameplate capacity, job creation and reduction of emissions;
the revision of the Kami Project scope and feasibility study;
(ii)
(iii) the feasibility study to evaluate the reprocessing and infrastructure required for the commercial production of a 69% Fe direct reduction
pellet feed product;
(iv) the development of green steelmaking solutions and of cold pelletizing technologies and decarbonization initiatives;
(v)
the collaboration with Caterpillar Inc. and Toromont Cat to develop, test and implement advanced drilling technologies aimed at optimizing
Bloom Lake’s operational productivity and reducing energy consumption;
(vi) growth opportunities;
(vii) demand for high-purity iron products;
(viii) the production of DR pellets at the new acquired pellet plant in Pointe-Noire;
(ix) the adaptation of governance practices to maintain compliance with the ASX Governance Principles and Recommendations;
(x)
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;
(xi) the impact of iron ore prices fluctuations;
(xii) global macroeconomics and iron ore industry conditions; and
(xiii) the impact of exchange rate fluctuations on the Company and its financial results are forward-looking statements.
DEEMED 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.
200 Page
Cautionary Note Regarding Forward-Looking Statements (continued)
RISKS
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;
changes in the assumptions used to prepare 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 2022 Annual Information Form and the MD&A for the
fiscal year ended March 31, 2022, all of which are available on SEDAR at www.sedar.com, the ASX at www.asx.com.au and the Company's
website at www.championiron.com.
There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from
those anticipated in such forward-looking information. Accordingly, readers should not place undue reliance on forward-looking information.
ADDITIONAL UPDATES
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. 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. 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.
201 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
STOCK EXCHANGES
ASX CODE & TSX SYMBOL
Telephone: 416-342-1091
Toll-Free: +1-866-600-5869
Facsimile: 416-361-0470
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)
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