Champion Iron (CIA)

Hi Richard,

The path of least resistance for CIA remains on the downside with the stock already down over 16% year-to-date, especially disappointing with BHP and RIO basically unchanged while the more leveraged, higher Beta Fortescue (FMG) has retreated ~8%. The stock is forecast to yield around 4.7% over the next 12-months but this is highly correlated to the bulk commodity price. CIA had some issues of late:

• Operationally CIA faced a 14-day rail outage last December and a temporary shutdown due to forest fires in July.
• In the third quarter of FY2025, Champion Iron reported revenues of $363.2 million, a decrease from $506.9 million in the same period the previous year.
• Also, the company’s dividend payout ratio stands ~80%, which is on the high side, raising concerns about the long-term sustainability of its yield.
• On a positive note, CIA should be a beneficiary of the declining oil price, and it looks to have been oversold on tariff concerns.

In the last 3-months of 2024 CIA reported NPAT of $US88.2mn at a cost of US56.3mn per MT, not favourable compared to say BHP where its ~$US16; hence, a 10% drop in iron ore will have a significantly greater impact on CIA’s margins/profitability, conversely if iron ore rallies from the $US100 CIA could outperform.

• We still prefer BHP for iron ore and copper exposure and FMG as a leveraged high-yielding play on Iron Ore.

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Champion Iron (CIA)

LAST UPDATED 15/05/2025 17:00

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Champion Iron (CIA)

LAST UPDATED 15/05/2025 17:00