Champion Announces Preliminary Feasibility Study Results Indicating $3.3 Billion NPV and 30.9% IRR for West and East Deposits of

Champion Announces Preliminary Feasibility Study Results Indicating $3.3 
Billion NPV and 30.9% IRR for West and East Deposits of the
Consolidated Fire Lake North Project 
TORONTO, ONTARIO -- (Marketwire) -- 02/07/13 -- Champion Iron Mines
Limited (TSX:CHM)(OTCQX:CPMNF)(FRANKFURT:P02) ("Champion", or the
"Company") is pleased to announce the results from its Preliminary
Feasibility Study ("PFS") for the West and East deposits of the
Consolidated Fire Lake North ("CFLN") Project that was performed by
BBA Inc. ("BBA") of Montreal, Quebec. The study is based on an
initial 20 year mine life and produced a Net Present Value ("NPV") of
$3.295 billion using an 8% discount rate. The financial model shows
an Internal Rate of Return ("IRR") of 30.9% and a capital payback
period of 3.4 years. The financial results included in this press
release are expressed in Ca
nadian dollars and pre-tax (unless
otherwise noted). 
Summary of Preliminary Feasibility Study Results 


 
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NPV at 8% discount rate (Pre-tax)                      $      3,295 million 
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IRR (Pre-tax)                                                          30.9%
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Payback Period at 8% discount rate                                3.4 years 
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Pre-production Capital Cost (excluding rail cost)      $      1,394 million 
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    - Rail capital contribution                        $        213 million 
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Average Operating Cost (loaded at Port of Sept-Iles         44.05 per tonne 
 including rail capital and debt service costs)        $     of concentrate 
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FOB Concentrate Selling Price based on CFR China                            
 benchmark price at 62 % FeT adjusted for higher                            
 CFLN Fe grade @ $5.00 per percent and $20.00/t                             
 freight cost                                                               
    Year 1-5                                           $   115.00 per tonne 
    Year 6-20                                          $   110.00 per tonne 
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Mine Life                                                        19.6 years 
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Concentrate Grade (percent contained Fe)                                 66%
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Process Recovery (Iron)                                                  82%
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Weight Recovery                                                        39.9%
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Average Annual Concentrate Production                          9.3 M Tonnes 
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In-pit Optimized Measured and Indicated Resources                           
West and East Deposits, CFLN Project                                        
(COG of 15 %, 31.5% Total Iron)                              691.3 M Tonnes 
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Engineered Optimized In-Pit Mineable Reserves                               
West and East Deposits, CFLN Project                                        
(COG of 15 %, 32.4% Total Iron)                              464.6 M Tonnes 
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Projected Concentrator Plant Start-up and                                   
 Commissioning                                                      Q1 2016 
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Projected Start of Nominal Production                               Q2 2016 
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Champion's President and CEO, Tom Larsen commented, "Completion of
this Preliminary Feasibility Study is the result of our team's
dedicated efforts over the past couple of years and we believe the
results confirm the excellent project at our Consolidated Fire Lake
North property. The delivery of the Preliminary Feasibility Study is
another major milestone for Champion. Our progress in securing port
access and material handling capacity at Sept-Iles, advanced
negotiations for electric power to the project and permits to start
the mine construction camp has resulted in material de-risking of the
Fire Lake North Project." Mr. Larsen added, "The recent increase in
the estimated mineral resources at Consolidated Fire Lake North to
over 2.6 billion tonnes including the Oil Can deposits creates strong
support for a potential increase in annual concentrate production to
20 million tonnes with a mine life greater than 20 years. The release
of this study on CFLN and what we believe to be a potential
world-class mine will accelerate our discussions with potential
strategic partners." 
Consolidated Fire Lake North Project Mineral Reserves  
The iron process recovery of 82% yields an average production of 9.3
million tonnes per year ("Mtpa") of iron concentrate grading 66%
total Iron ("FeT") during a 19.6 years mine life. The current
optimized engineered pits yield reserves of 464.6 M tonnes grading
32.37% FeT at a 15% FeT cut-off grade with a weight recovery of
39.9%. The first five years of production will average 9.8 Mtpa of
concentrate. 
Table 1 underneath summarizes the reserves and stripping estimates
for both the West and East pit. 


 
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                                   West Pit                 East Pit        
                          --------------------------------------------------
Consolidated                           Fe        %              Fe        % 
Fire Lake North             Tonnage  Total   Weight  Tonnage  Total   Weight
Table of Reserves              (Mt)      % Recovery     (Mt)      % Recovery
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Proven Reserves                20.7   36.2     45.7      3.0   34.2     40.2
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Probable Reserves             268.1   33.4     42.2    172.8   30.2     35.6
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Total                         288.8   33.6     42.4    175.8   30.3     35.6
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Overburden                    100.8                     19.4                
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Waste Rock                    616.8                    490.7                
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Inferred Resources (waste)     29.9                     15.9                
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Total of Waste Stripping      747.6                    526.0                
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Stripping Ratio (Waste                                                      
 Striping/Ore)                  2.6                      3.0                
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Life of Mine                      12.6 years               7.1 years        
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                                          Both Pits Combined                
                          --------------------------------------------------
Consolidated                                            Fe                % 
Fire Lake North                     Tonnage           Total           Weight
Table of Reserves                      (Mt)               %         Recovery
----------------------------------------------------------------------------
Proven Reserves                        23.7            36.0             45.0
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Probable Reserves                     440.9            32.2             39.6
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Total                                 464.6        
    32.4             39.9
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Overburden                            120.2                                 
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Waste Rock                          1,107.6                                 
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Inferred Resources (waste)             45.8                                 
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Total of Waste Stripping            1,273.5                                 
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Stripping Ratio (Waste                                                      
 Striping/Ore)                          2.7                                 
-------------------------------------------------------------------
---------
Life of Mine                                  19.6 years                    
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The engineered pits recover 67% of the current In-pit Optimized
Measured and Indicated Resources totalling 691.3 Mt grading 31.5%
FeT. The engineered pits limit the inclusion of In-pit Inferred
resources to 45.8 Mt which are categorized as waste.  
Additional drilling of the 480 Mt grading 30.4% FeT current Inferred
Resources within the limits and proximal to the Optimized Pit Shells
could provide additional Measured and Indicated resources required to
double production capacity and support a second concentrator line
that would produce an estimated 20 Mt of concentrate annually for a
mine life of 20 years. 
Financial Analysis 
Compared to the result of the Preliminary Economic Assessment (see
press release dated November 21st, 2011) the following main
differences in the capital costs of the project are as follows:  


 
--  Rail costs increased from $275.4 million to $1.334 billion, reflecting
    the estimate for a rail system from the CFLN Project to Point Noire at
    the Port of Sept-Iles as contained in the 2012 Feasibility Study
    prepared for Champion by Rail Cantech. However, $200 million of upfront
    costs in this rail scenario are attributed to Champion and $1.134
    billion is financed via construction financing and repaid from project
    cash flows over a 12 year period. 
--  Concentrator and site infrastructure cost was increased by $145.9
    million to support an increased concentrate production capacity to 10
    Mtpa and a dual voltage substation. 
--  Pointe Noire port facilities cost was increased by $109.8 million after
    consideration to a more suitable storage location which could be
    expanded at minimal cost. 
--  Environmental cost increased by $83.4 million due to a cost
    underestimation in the PEA. 
--  All mining equipment is capitalized ($55.4 million) compared to the PEA
    where the mining equipment was leased.

 
The addition of these significant cost components clarify the project
scope with regards to the project schedule and estimated budget. The
financial model illustrates the robust economics of the West and East
iron ore deposits on their own merit. With the adjacent resources
within the CFLN project boundaries, the mid and long term growth
profile of this project are exceptional (refer to Press Release dated
January 9th, 2013).  
The $US exchange rate is assumed to be at par value with the Canadian
dollar. Table 1 provides the Net Present Values calculated at various
discounted cash flow rates for the Base Case production scenario of
10 Mtpa of iron concentrate. The financial analysis in the PFS study
used a sale price of $115 per tonne of iron concentrate ($/tonne is
FOB Sept-Iles) for the first 5 years, and $110 per tonne for years 6
to 20. A sale price of $115 per tonne was used for the Updated PEA. 


 
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Table 1: CFLN West and East Deposits Preliminary Feasibility Results (Pre-  
 Tax)                                                                       
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     Internal Rate of Return (IRR) (8% Discount Rate)                  30.9%
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                               Undiscounted Cash Flow         $  9.0 billion
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          Net Present Value @ 5% Discounted Cash Flow         $  4.7 billion
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          Net Present Value @ 8% Discounted Cash Flow         $  3.3 billion
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         Net Present Value @ 10% Discounted Cash Flow         $  2.6 billion
-------------------------------------
---------------------------------------
                    Payback Period (8% Discount Rate)              3.4 years
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Receipt of the general Certificate of Authorization from the Quebec
Government is expected in Q1 2014 which will be followed by the
construction and start-up. Pre-construction activities are scheduled
to take place in 2013. The commissioning period is planned for Q1
2016 and feasibility study production levels are planned for mid-2016
in line with rail transportation availability. The Environmental and
Social Impact Assessment study is planned to be submitted to the
MDDEFP and CEAA within Q1 2013.  
The PFS study has an accuracy of +15/-10%, which is considered
industry standard for capital and operating cost estimates in a
feasibility study. The only component that is not at a feasibility
study precision level is the multi-user rail infrastructure
component. Champion has signed a contract with CN Railway Company
("CN") whereby CN would present a feasibility study on this
multi-user concept by May 31st, 2013.  
In order to complete the PFS in a timely manner, the Company included
the metrics from its Rail Cantech feasibility study completed in
August 2012. This study is based on a 310 km railway designed for an
initial capacity of 20 Mtpa that is located on the east side of the
Ste. Marguerite River, starting at the CFLN project loading station
and ending in the Pointe Noire area of the Sept-Iles port.  
Therefore, the PFS includes an estimated cost of $9.47/tonne of
concentrate for rail debt service in addition to 4.80 $/tonne for
operations, totalling $14.27/tonne based on 9.3 Mtpa mine-life
average production of iron concentrate. This is a higher cost than
the initial rates proposed by the CN multi-user rail transportation
solution. Nonetheless, it shows that the project economics are strong
enough to support the construction of a new 310 km railway on its
own.  
Excluding the rail transportation capital cost component, the total
capital expenditures during the pre-production period were estimated
at $1.39 billion of which $227.3 million is allocated to the Pointe
Noire concentrate stockyard facilities, as itemized in Table 2. The
cost to develop the CFLN concentrator and site facilities near
Fermont totals $1.167 billion, which equates to a capital intensity
of $125/tonne for the 9.3 million tonnes of annualized production of
iron ore concentrate.  
This PFS study takes into consideration the usage of the Sept-Iles
multi-user Port facility project that is currently in construction
and planned for completion by Q1 of 2014. The Port Authority has
communicated in December 2012 that the project is on schedule and on
budget.  


 
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Table 2: Pre-production Capital Costs                                       
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                                                                  C$ million
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Mine equipment and pre-stripping                                       133.8
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Site infrastructure                                                    192.0
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Concentrator including load out facilities                             410.7
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Environmental and Tailings Management                                   85.0
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Other Pre-production Costs (rail rolling stock lease)                   13
.4
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Port Facilities: Car dumper, stacker/reclaimer, stockyard              158.3
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Railway (Owner's cost for 310 km distance including                         
 turnaround loop and sidings)                                          200.0
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                                                    Sub Total        1,193.2
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Indirect Costs (including Owner's Costs)                               300.2
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                                            Contingency (10%)          114.6
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                            Grand Total (100% of the project)        1,607.8
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Operating costs are outlined in Table 3: 


 
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Table 3: Operating Costs                            ($/Tonne of Concentrate)
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                                                       Average       Average
Cost Parameters                                       20 years  years 1 to 5
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Mining                                                   18.89         12.76
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Concentrator crushing and processing                      4.38          3.89
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Site Infrastructure Maintenance, & General                                  
 Administration                                           4.05          3.66
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Environmental Tailings and Management                     0.13          0.12
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Rail Transport including lease for rolling stock          4.80          5.42
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Port facilities                                           2.34          2.14
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                     Total Direct Operating Cost         34.58         27.99
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Railway capital repayment ($1,133.6 million)              6.22          7.40
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Railway interest payment ($592.6 million)                 3.25          7.29
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                            Total operating cost         44.05         42.68
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Optimization of the mine-life production schedule resulted in a strip
ratio of 1.56:1 (waste/ore) for the first three years of production,
2.02:1 for the first five years of operation; and a 2.74:1 strip
ratio for the current 20 year mine-life.  
As in the 2012 updated PEA study, the mill flowsheet of this PFS is
based on a standard three stage spiral iron beneficiation process.
The run-of-mine iron ore is crushed in a 60" by 89" gyratory crusher
and then ground in a 38' by 21.5' autogenous grinding mill ("AG
Mill"). The AG mill diameter and associated horsepower was increased
for the PFS in order to optimize the production rate throughput and
enhance the economic metrics in comparison to the 2012 PEA study. The
AG mill will have two AC variable drive motors totalling 21,450 HP.
Larger mills of up to 42' are currently in operation in the mining
industry.  
The PFS operating costs were reduced by 16% in comparison to the 2012
PEA despite a significant cost increase related to the construction
of a new railway and associated debt service of $1,133.6 million.
Mining costs were reduced by $5.34/tonne of concentrate primarily
associated with a reduction in strip ratio ($4.19/tonne) combined
with the removal of the mine equipment lease cost ($1.15/tonne).
Costs at the Pointe Noire Port facilities were reduced by $1.38/tonne
of concentrate following the signing of an agreement with the Port of
Sept-Iles Authority. The concentrator, environmental, and general and
administration costs were slightly reduced by $0.14/tonne,
$0.16/tonne and $0.35/tonne respectively, following a detailed
analysis of each cost component by BBA.  
Manpower levels are expected to be 508 employees in Year 1 and peak
at 688 in Year 15 when the mine reaches maximum production.  
There is potential for the CFLN Project to become a significant low
cost iron ore producer with a new concentrator equipped with today's
advanced mineral processing technologies. The Company continues to
analyze lower cost opportunities.  
Results from the PFS indicate that the CFLN project is a very
technically feasible and economically robust project with a Base Case
scenario including one production line yielding 9-10 Mtpa of
concentrate from 464.6 M tonnes of in-pit reserves processed over a
20 year mine-life. The PFS study is based on a stand-alone operation
at CFLN and does not consider the current Mineral Resources
identified at other iron deposits located on the CFLN Property (see
Press Release dated Jan. 9th, 2013). The outstanding mid and long
term growth profiles for the Company are evident from mineral
resources identified within the CFLN Property and surrounding Fermont
Holdings.  
Investor and Analyst Conference Call 
Champion will host a conference call today at 8:30 am EST (February
7th, 2013) to discuss the Preliminary Feasibility Study r
esults and
address any questions from analysts and shareholders.  
The dial-in numbers for the conference call are as follows: 


 
Local / International:                (647) 426-1845                        
North American Toll Free:             1-866-782-8903                        

 
The technical information in this news release was prepared by Mr.
Jean-Luc Chouinard, ing., M.Sc., VP Project Development for Champion
Iron Mines Limited and approved by Dr. Andre Allaire, ing., M.Eng.,
Ph.D. and Mr. Patrice Live, ing., from BBA Inc., and all individuals
are Qualified Persons under NI 43-101 standards. Mr. Allaire and Mr.
Live are both independent of the issuer. 
About Champion Iron Mines Limited 
Champion is an iron exploration and development company with offices
in Montreal and Toronto, and is focused on developing its significant
iron resources in the provinces of Quebec and Newfoundland &
Labrador. Champion holds a 100% interest in the Fermont Iron Holdings
and a 44% interest in the Attikamagen Iron Project located in both
Quebec and Labrador. The Attikamagen Project is under option to Labec
Century Iron Ore Inc. ("Labec"), a subsidiary of Century Iron Mines
Corporation, under which Labec can earn up to a 60% interest. 
Champion's Fermont Iron Holdings, including its flagship Consolidated
Fire Lake North Project, are located in Canada's major iron ore
producing district, in close proximity to five producing iron mines,
existing transportation and power infrastructure. Consolidated Fire
Lake North is located immediately north of ArcelorMittal's operating
Fire Lake Mine and 60 km south of Cliffs Natural Resources Inc.'s
Bloom Lake Mine in northeastern Quebec. Champion's management and
advisory board includes mining and exploration professionals with the
mine development and operations experience to build, commission, and
operate the future Consolidated Fire Lake North mine. 
For additional information on Champion, please visit our website at
www.championironmines.com.  
This news release includes certain information that may constitute
"forward-looking information" under applicable Canadian securities
legislation. Forward-looking information includes, but is not limited
to, statements about planned operations at the Company's projects,
including its Consolidated Fire Lake North Project. Forward-looking
information is necessarily based upon a number of estimates and
assumptions that, while considered reasonable, are subject to known
and unknown risks, uncertainties, and other factors which may cause
the actual results and future events to differ materially from those
expressed or implied by such forward-looking information, including
the risks identified in Champion's annual information forms,
management discussion and analysis and other securities regulatory
filings by Champion on SEDAR (including under the heading "Risk
Factors" therein). 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. All forward-looking information
contained in this press release is given as of the date hereof and is
based upon the opinions and estimates of Champion's management and
information available to management as at the date hereof. Champion
disclaims any intention or obligation to update or revise any
forward-looking information, whether as a result of new information,
future events or otherwise, except as required by law. This press
release has been prepared by Champion Iron Mines Limited and no
regulatory authority has approved or disapproved the information
contained herein.
Contacts:
Champion Iron Mines Limited
Thomas G. Larsen
President and CEO
(416) 866-2200 
Champion Iron Mines Limited
Jorge Estepa
Vice President
(416) 866-2200
www.championironmines.com
 
 
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