- Production Volume 3.5 million tonnes produced, impacted by ore hardness and 2-day Hydro-Quebec shutdown resulting in 300,000 tonnes loss
- Rail Operation Capacity 4 million tonnes run rate, with 3.8 million tonnes railed and hauled during the quarter
- Iron Ore Pricing $14 per tonne spread between high-grade and low-grade material, with realized price around CAD 102 per tonne
- Cash Costs CAD 82 per tonne delivered, with $8 per tonne increase due to stockpiled material and ore hardness
- Financial Highlights $390 million revenue, $60 million EBITDA, and $0.05 EPS, with $176 million cash position after $500 million bond issue
Production and Cost Performance
The company's production was around 3.5 million tonnes, impacted by the ore hardness and the Hydro-Quebec shutdown. The rail operation had a run rate of roughly 4 million tonnes, but this will be impacted by the usual September rail shutdown. The company moved 440,000 tonnes from the stockpile, bringing it down to 2.1 million tonnes. The iron ore price decline and the spread between high-grade and low-grade material increasing to $14 per tonne also affected the company's realized price, which was around CAD 102 per tonne, with cash costs of CAD 82 per tonne delivered. The use of stockpiled material and ore hardness increased costs by approximately $8 per tonne, with about $4 per tonne associated with higher inventory costs.
Future Outlook and Growth Prospects
Despite the challenges, the company is advancing negotiations with clients and expects to sign its first contract by the end of the year or early 2026. A definitive framework agreement was signed with Nippon Steel and Sojitz to advance the Kami project, with a feasibility study and permit application in progress. The company aims to produce high-grade material to counter the decline in quality from Australian majors. With analysts estimating next year's revenues growth at 4.2%, the company's future outlook seems promising, but the current valuation metrics, such as the P/S Ratio of 1.24 and EV/EBITDA of 5.89, may indicate that some of this growth is already priced in.
Valuation and Investment Implications
Considering the company's valuation metrics, such as the P/B Ratio of 1.37 and ROE of 9.96%, the stock seems reasonably valued. However, the significant miss on EPS estimates and the challenges on the production and cost side may raise concerns. The company's Net Debt / EBITDA of 1.44 and Free Cash Flow Yield of -15.17% also indicate that the company's financial health and cash flow generation may be under pressure. As such, investors should carefully consider these factors before making any investment decisions, and may want to monitor the company's progress in addressing its production and cost challenges.