Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Champion Iron Ltd (CIAFF, Financial) achieved record sales of over 3.4 million tons and produced approximately 3.9 million tons in Q1 FY2025.
- The company generated about $180 million of EBITDA during the quarter.
- No significant workplace incidents or major environmental issues were reported.
- Champion Iron Ltd (CIAFF) secured additional mining equipment and railcars to support future production increases.
- The company received recognition from the Canadian government, adding high-grade iron ore to the list of critical minerals, which could benefit future growth initiatives.
Negative Points
- Cash costs remained relatively flat at just shy of $77 per ton, indicating no significant cost improvements.
- The company faced a setback due to forest fires, which caused a temporary evacuation and impacted roughly one week's production.
- Iron recovery rates were below targets, with challenges in tuning the recovery circuit during significant shifts in tonnage.
- The P65 index decreased by about 7% during the quarter, impacting the realized selling price.
- Lower-than-expected cash levels were reported, mainly due to a $100 million change in working capital, affecting market expectations.
Q & A Highlights
Champion Iron Ltd (CIAFF) Q1 2025 Earnings Call Highlights
Q: Can you provide a timeline for when the additional railcars will be online and the expected cadence for destocking?
A: The railcars are currently being built and will be delivered before the end of this calendar year, with the bulk arriving in January and February 2025. This will help with destocking and increasing capacity beyond the 15 million tonnes per year. (David Cataford, CEO)
Q: How will the addition of high-purity iron ore to the critical minerals list benefit the Cammy project?
A: Being on the critical minerals list allows access to federal programs and infrastructure funds, potentially benefiting the Cammy project, which has significant infrastructure-related CapEx. (David Cataford, CEO)
Q: Are your sales now matching production, and what impact will the new railcars have?
A: Sales are close to matching production, but forest fires caused some setbacks. The new railcars and locomotives ordered by IOC will help align sales with production and assist in destocking. (David Cataford, CEO)
Q: What are the long-term cost expectations considering recent labor contracts and recovery targets?
A: Without non-cash items, costs are trending towards sub-$70 per ton. The goal is to achieve this by improving recoveries and managing labor costs. (David Cataford, CEO)
Q: What are the next steps for the Cammy project, the pellet plant, and upgrading capacity to DRPF product?
A: The Cammy project is in the permitting process, expected to complete by 2026. The focus is on delivering the DRPF project on time and budget, with less emphasis on the pellet plant in the short term. (David Cataford, CEO)
Q: How will the new power access impact your growth initiatives?
A: The additional hydroelectric power will support various growth initiatives, including decarbonization efforts and potential upgrades to plant operations. (David Cataford, CEO)
Q: What is the strategy for pricing the DRPF product?
A: The goal is to move towards a pricing formula based on DR pellet pricing, reducing exposure to P62 and P65 markets. (David Cataford, CEO)
Q: How will the rail operator allocate capacity during disruptions, and what is the stockpile capacity?
A: The rail operator aims to deliver on contracts, and capacity is typically split among clients during disruptions. Stockpile capacity is flexible but increases costs as it grows. (David Cataford, CEO)
Q: What are the expected improvements in sales volumes and stockpile levels?
A: Sales volumes are expected to improve with new railcars and locomotives. The goal is to reduce stockpiles, but no specific timeline is provided. (David Cataford, CEO)
Q: What are the implications of the recent forest fires on operations?
A: The forest fires caused a temporary evacuation and downtime, but operations have returned to pre-fire levels. The company’s contingency plans were effective in minimizing impact. (David Cataford, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
