• Champion Iron delivered its strongest quarterly performance in two years with approximately $175 million EBITDA and record sales of 4 million tonnes, whilst successfully reducing a 3-million-tonne high-grade stockpile that will generate significant cash as it converts to sales over coming quarters.
• The company's $500 million DR Pellet Feed project is over 80% complete and on track for December 2025 delivery, transitioning half of production to up to 69% iron ore concentrate – amongst the world's highest grades – with first commercial shipments expected in early 2026.
• Management owns over 10% of Champion Iron and has delivered three consecutive projects on time and on budget, investing over $2 billion since 2017 whilst maintaining a conservative balance sheet and four-year track record of semi-annual dividend payments.
• The DR Pellet Feed product enables geographic reorientation from China to North Africa, Middle East, and European markets, reducing freight costs by $23-25 per tonne whilst capturing premium pricing for material essential to steel industry decarbonisation through direct reduction iron processes.
• Champion Iron trades at a market capitalisation under $2 billion against over $6 billion in replacement costs, with the seven-year capital expenditure cycle ending December 2025 enabling material free cash flow generation and management evaluating enhanced dividends or share buybacks for shareholder returns.

Champion Iron stands at an inflection point. After seven years of sustained capital investment totalling over $2 billion, the Canadian iron ore producer is weeks away from completing its transition into one of the world's premier suppliers of ultra-high-grade iron ore concentrate. For investors seeking exposure to the steel industry's inevitable decarbonisation, Champion Iron's strategic positioning offers compelling value at current market levels.

David Cataford, CEO of Champion Iron, outlined the company's trajectory during an interview that highlighted both operational achievements and the significant cash generation potential ahead. With management owning over 10% of the business, alignment between executive interests and shareholder returns remains unusually strong for a mid-tier producer.

Record Quarter Signals Operational Inflection

Champion Iron's second quarter performance marked a decisive turning point. The company generated approximately $175 million in EBITDA – its strongest quarterly result in two years – whilst achieving record sales of roughly 4 million tonnes. This performance came despite the company working through operational challenges that had constrained production efficiency in previous periods.

Cataford confirmed, noting that the company had successfully navigated logistics bottlenecks that previously limited its ability to convert mine production into sales:

"This has been our best quarter in the last two years. We hit a pretty big stockpile at site roughly about 3 million tons of hybrid iron ore. Now we started destocking that material so we had about 4 million tons of sales during the quarter, and we should be able to continue destocking that which will generate significant cash for the company in the next quarters."

This inventory reduction strategy carries direct implications for near-term cash generation. Unlike many mining operations where stockpiled material represents lower-grade or marginal ore, Champion's inventory consists of its premium 66.2% iron ore concentrate – material commanding full market pricing. The conversion of this stockpile into cash over coming quarters provides visibility on substantial working capital release.

Cost Structure Improvement Trajectory

Champion Iron's cost performance showed meaningful improvement during the quarter, driven by operational optimisation and the resolution of inefficiencies created by the stockpiling necessity. The company's cost structure carries significant fixed components, meaning throughput optimisation directly translates to per-tonne cost reductions.

"If you look at our site we're pretty heavy in terms of fixed cost. So obviously if you look at the past quarters because we were not necessarily hitting all of our numbers that definitely affected our cost per ton," Cataford noted.

Additional cost pressures arose from creative stockpiling solutions necessitated by limited designed storage capacity.

"We had to creatively find some new areas to stockpile material. But that meant loading small trucks and hauling material back and forth at our few kilometres away from where we typically load our material. So that also increased our costs," Cataford explained.

The elimination of these inefficiencies as inventory normalises provides clear line of sight to further cost improvement. The company has now deployed all necessary mining equipment to sustain nameplate capacity production, whilst stripping ratios have normalised after catching up on waste movement deferred during COVID-related operational constraints. These factors collectively position Champion for sustained cost performance improvement through 2026 and beyond.

Interview with David Cataford, CEO of Champion Iron

The DRPF Project

Champion Iron's most significant near-term catalyst arrives with the December 2025 completion of its $500 million DR Pellet Feed project. This upgrade will transition half of the company's production – approximately 7-12 million tonnes annually of up to 69% iron ore concentrate, positioning Champion Iron amongst the world's highest-grade producers.

The strategic rationale extends beyond grade premiums. Current production sees approximately 9 million tonnes shipped annually to China, incurring freight costs of $23-25 per tonne and competing against proximate Australian and Brazilian suppliers. The DR Pellet Feed material targets customers in North Africa, the Middle East, and Europe – markets where Champion's Canadian location becomes an advantage rather than a disadvantage.

"By producing 7-12 million tons of material that's higher grade, we want to sell more into North Africa, Middle East, and in Europe. That's going to reduce significantly our shipping costs while at the same time increasing our premiums for our material," Cataford detailed.

This geographic reorientation fundamentally alters Champion's competitive positioning, converting freight disadvantage into proximity advantage.

The project timeline provides confidence, with over 80% of capital already spent and remaining work focused on piping and electrical completion. As Cataford confirmed, referencing Champion's unblemished track record of timely, on-budget project delivery:

"We're basically finished. We're a few weeks away from delivering the plant. So we're very comfortable we'll deliver that project on time and on budget as we've done with the other ones before."

First commercial shipments will commence in early 2026, with contracts already secured with major steel manufacturers requiring this ultra-high-grade material for direct reduction processes central to steel industry decarbonisation.

Steel Decarbonisation Drives Structural Demand

Champion Iron's strategic positioning directly addresses the steel industry's decarbonisation imperative. Traditional blast furnace steelmaking requires coking coal, generates substantial emissions, and increasingly faces regulatory and social pressure. Direct reduction iron (DRI) production using natural gas or hydrogen eliminates coking coal requirements and dramatically reduces carbon intensity.

However, DRI processes demand extremely high-grade iron ore feed – precisely the material Champion is uniquely positioned to supply. Whilst premiums for high-grade material currently sit at historical lows, the structural transition toward greener steel production should support premium expansion as supply constraints become apparent.

Highlighting that Champion has witnessed premiums reaching $45 per tonne during previous periods of tight high-grade supply, Cataford noted:

"As we go into the next years and we get into a bigger transition into decarbonising the steel industry, we definitely think those premiums can increase. We have seen those sort of shifts. Is it predictable to a sense that we can put a date on it? No. But we know the trends make quite a lot of sense for us to position our material."

The company's ore stability provides additional competitive advantage.

"We've got an extremely stable ore body. So, we don't have fluctuations in our grade, which allows us to get very good clients because they know that each time they're going to buy a vessel from Bloom Lake, it's on spec. So, we've never had any vessels that were not on spec and subject to major penalties," the CEO explained.

This consistency enables Champion to secure long-term contracts with sophisticated buyers who cannot afford specification risk in their DRI feedstock.

Capital Allocation and Shareholder Returns

With major capital expenditure concluding in December 2025, Champion Iron transitions from investment phase to cash generation mode. This shift carries profound implications for shareholder returns, particularly given the company's current valuation relative to asset replacement cost.

Cataford observed, highlighting the significant discount at which Champion trades relative to the capital required to replicate its operating platform.

"If you look at our company, we've got over $6 billion of replacement cost for our site, and we've got a market cap under $2 billion. So definitely there is a view that to buy back our own stock could be a liquid strategy for our shareholders."

The company has maintained a semi-annual dividend of 10 cents per share for four years, demonstrating commitment to shareholder returns even during the heavy investment period. Management is now evaluating whether enhanced dividends or share buyback programmes offer superior returns, with decisions forthcoming as free cash flow materially increases.

The Kami Project: Optionality Without Capital Requirement

Beyond current operations, Champion Iron has secured an attractive growth option through its Kami project – a potential 9-million-tonne-per-year high-grade iron ore development located proximate to existing Bloom Lake operations. The company recently sold 49% of Kami to Nippon Steel and Sojitz, structuring the transaction such that partner equity contributions fund several years of permitting and feasibility work.

"The equity portion that they're buying in is going to allow us to pay for the next steps for the next few years for that project. So there will not be any shareholder money from Champion that will be invested in that project over the next few years," Cataford confirmed.

The Kami economics could improve substantially through government infrastructure support. Approximately $800 million of the project's capital requirement relates to power and port infrastructure that would unlock broader regional development.

"We have been in discussion with the federal governments and provincial governments and there has been quite a lot of interest on the Cami project to be able to deliver new power and port infrastructure," the CEO added.

A construction decision could arrive in 2027, providing Champion with valuable expansion optionality at minimal near-term capital cost whilst the company focuses on optimising existing operations and returning capital to shareholders.

Valuation Disconnect and Market Scepticism

Despite Champion Iron's operational progress, improved financial performance, and strategic positioning, the company's share price has not reflected these achievements. This disconnect stems partly from persistent analyst scepticism regarding iron ore pricing sustainability.

"What happens is that a lot of the market turns to analysts that all forecast iron ore to be lower in the future. We've lived through that since 2015." Cataford observed. "If iron price stays where it is now, we'll be generating loads of cash in the next years."

The CEO attributes this resilience to Chinese domestic production economics,  highlighting the natural price support provided by high-cost marginal production.

"China produces over 450 million tons of iron ore at a pretty high cost. So what analysts forecast as a next year's price doesn't seem to account for the fact that if the iron ore price goes down, China's going to curtail some production and iron or price is going to go back up." Cataford explained.

The company's market capitalisation substantially below asset replacement cost may suggest the market either disbelieves management's execution capability – contradicted by Champion's perfect project delivery record – or maintains excessively pessimistic assumptions about iron ore pricing and premium sustainability.

The Investment Thesis for Champion Iron

Why Investors Should Consider Champion Iron:

• Valuation Dislocation: Market capitalisation under $2 billion against over $6 billion replacement cost presents substantial value for investors believing in management execution and iron ore price stability at or above current levels.
• Cash Generation Inflection: Seven-year capital expenditure cycle concludes December 2025, transitioning Champion to material free cash flow generation from 2026 onwards with minimal reinvestment requirements.
• Premium Product Positioning: Transition to 69% iron ore concentrate positions Champion in the highest-grade segment serving steel decarbonisation demand, with existing premiums at historical lows suggesting significant upside potential.
• Management Alignment: Over 10% management ownership ensures strong alignment with shareholder interests, supported by unblemished track record of on-time, on-budget project delivery across three major developments.
• Geographic Arbitrage Opportunity: DR pellet feed product enables sales into North Africa, Middle East, and European markets where Canadian location becomes proximity advantage, reducing freight costs by $23-25 per tonne whilst capturing higher premiums.
• Working Capital Release: Approximately 3 million tonnes of high-grade concentrate stockpile provides near-term cash generation visibility as inventory converts to sales over coming quarters.
• Capital Return Optionality: Management evaluating enhanced dividends versus share buybacks as free cash flow increases, with both options attractive given current valuation and improving financial position.
• Structural Demand Drivers: Steel industry decarbonisation creates sustained demand growth for ultra-high-grade iron ore essential to direct reduction processes, supporting both volume and premium expansion.
• Cost Improvement Trajectory: Operating cost reductions continuing as production optimises, stockpiling inefficiencies eliminate, and recovery rates improve through enhanced blending strategies.
• Growth Optionality Without Capital: Kami project provides 9-million-tonne-per-year expansion option funded by partners' equity contributions, preserving Champion's capital for optimisation and shareholder returns.

Macro Thematic Analysis: Steel Decarbonisation, High-Grade Iron Ore

The global steel industry faces an existential transformation. Traditional blast furnace production, dependent on coking coal and generating substantial carbon emissions, confronts increasingly stringent environmental regulation and social pressure. Direct reduction iron (DRI) technology offers a pathway to dramatically lower-carbon steel production using natural gas or hydrogen, but the process demands ultra-high-grade iron ore feedstock – material in structurally limited supply.

This supply-demand dynamic creates a favourable backdrop for premium iron ore producers. Whilst iron ore pricing overall remains subject to Chinese economic growth concerns and cyclical demand fluctuations, the premium for high-grade material should expand as steel producers invest in DRI capacity. Current premiums sit at historical lows, suggesting significant upside potential as this transition accelerates.

Champion Iron's positioning directly captures this thematic. The company's transition to 69% iron ore concentrate places it amongst a handful of global producers capable of supplying DRI-grade material at scale. Geographic proximity to European and Middle Eastern markets – regions leading steel decarbonisation efforts – further enhances competitive positioning whilst reducing emissions from maritime transport.

Iron ore bears consistently forecast price weakness, yet Chinese marginal production costs provide natural price support around current levels. Champion's premium product strategy offers leverage to both sustained pricing and potential premium expansion as high-grade supply constraints become apparent. This positions the company favourably across multiple scenarios whilst the steel industry navigates its decarbonisation journey.

TL;DR

Champion Iron operates a 15-million-tonne-per-year iron ore mine in northern Canada, producing premium-grade concentrate with management owning over 10% of the business. The company just delivered its best quarterly performance in two years with $175 million EBITDA and record 4-million-tonne sales, whilst working through a 3-million-tonne high-grade stockpile that provides near-term cash generation visibility. Champion's $500 million DR Pellet Feed project completes December 2025, transitioning half of production to up to 69% iron ore concentrate – amongst the world's highest grades – with first shipments in early 2026. This product enables sales into North Africa, Middle East, and European markets, reducing freight costs by $23-25 per tonne whilst commanding premiums for material essential to steel decarbonisation. With a seven-year, $2+ billion capital expenditure cycle ending December 2025, Champion transitions to substantial free cash flow generation from 2026 onwards. The company trades at under $2 billion market capitalisation versus over $6 billion replacement cost, with management evaluating enhanced dividends or share buybacks. Champion has delivered three consecutive projects on time and on budget, maintains a four-year semi-annual dividend track record, and secured a 9-million-tonne-per-year Kami growth option funded by Japanese partners without requiring Champion shareholder capital. Iron ore pricing resilience stems from Chinese marginal production costs around current levels, whilst premiums for ultra-high-grade material sit at historical lows with significant upside potential as steel industry decarbonisation accelerates.

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