Good afternoon, ladies and gentlemen, welcome to the Champion Iron to Launch Cash Tender Offer to Acquire Rana Gruber conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. This call is being recorded on Sunday, December 25, 2025. I would now like to turn the conference over to Michael Marcotte. Thank you. Please go ahead.
Thank you, operator, and thank you, everybody, to join this call, especially such last minute. We're quite excited to discuss the opportunity that we're here to present. Before we do, I'd like to highlight that the presentation that we're gonna be using throughout this webcast is available on our website at championiron.com, under the Events and Presentation tab. We're also gonna be making forward-looking statements throughout this call. You can look at the disclaimer page in the presentation and also a more recent MD&A, to, to read more about forward-looking statements, risks, and assumptions. Two people are joining me here on this call, including several executives, and Michael O'Keeffe, our Executive Chairman, our CEO, David Cataford, Alexandre Belleau, our COO. We also welcome Gunnar Moe, the CEO of Rana Gruber.
Before we jump to the formal portion of the presentation, I'd like to turn a few of our executives to provide introductory remarks to the call. With that, I'll turn it over to Michael O'Keeffe for introductory remarks.
Thank you, Mr. Marcotte. I appreciate everyone taking the time. I know how close it is to Christmas and family obligations, but it is Christmas, and I believe that the management of Champion and also Rana Gruber are about to deliver a nice Christmas present for shareholders. It is timely, but also very exciting. As you know, Champion's been moving into the high-grade more and more, and, you know, with that said, in the first quarter of 2026 calendar year, we'll be commissioning our high-grade plant to produce in the order of 7.5 million tons of 69% FE.
That's going to be a huge landmark, as we've consistently said to shareholders along the way, you know, before we start looking at other opportunities, we want to make sure that our own house is in order, and we've come a long way to doing that. By first of all, phase one, phase two, and now the high-grade plant, due to be commissioned. Most of our capital has been extended on that, and our balance sheet's quite strong, so it gives us good opportunity to look for other opportunities. Where we stand also is that we've always said that we'd be focused on our area, but by our area in, in Quebec and Canada, you know, is in the high-grade market, and there are limited opportunities in that region for us, hence our, our venture into Europe.
What that gives us is access to a lot of the market throughout Europe, through existing customers of Rana Gruber, and it's that, that's exciting for us. You know, there's also opportunities to be able to grow that business. You have to ask, you know, why would the shareholders of Rana Gruber want to do that? Well, they're looking at access to a bigger company that has a bigger balance sheet combined, and it makes a good opportunity. What David has been telling me over the many visits over the last few months to the site and meeting with the people, you know, a lot of this business has been built out of trust, integrity, and, and, and mutual respect for each management team.
That, that is very, very important when it comes to looking at these deals, because we have no interest in doing hostile deals. We want to make sure that the people on both sides can contribute to what we want to do is, in growth in a bigger company. You know, that's been highlighted to me with Gunnar and his team, and we're very excited to be working with them on this opportunity. You know, it's, it's a good time in our business, I believe, to be looking at these opportunities. We have to make sure they're sound, they have to deliver what we want, and there is good resources in the ground and good people.
We've ticked all the boxes on that, and, you know, I'm, I'm personally very excited about the opportunity for us, especially when it's into the high grade, and we're seeing more and more of high-grade iron ore demand and less and less of it available. That, for us, is, is very good. I also trust in David's continued leadership with this group. He's been, he's been prominent in this business, and let me tell you, he scrutinized this in a lot of detail. You know, and I've been able to trust David in the past, and I've got no doubt this will be delivered just as successfully. I'll leave it for everyone else to tell you about this deal, but I look forward to your support.
Thanks, Michael. This is David, as CEO at Champion Iron. Just a few extra remarks before we get into the formal part of the presentation. I think it's rare that we find teams in iron ore that have been able to deliver continuously on expectations. This is what we found when we, when we looked in detail, as Michael mentioned, at the Rana Gruber opportunity. We, we've been monitoring the asset for quite some time, and now recently, over the past months, in collaboration with the Rana Gruber team, we found that we really share similar values and a similar culture. It's clear that we're both on a mission to be able to work and to generate revenues by the decarbonization of the steel industry by producing high-grade iron ore. There's a lot of similarities between our companies as well.
We both operate in similar climates. We both have access to renewable power at very interesting prices. We also do think that by combining the two companies, we'll be able not only to optimize our current operations, but also look at other opportunities in the future. Saying all of this information before we get to the formal part of the presentation, I'll turn it over to Gunnar to be able to give opening remarks.
Thank you, David. My name is Gunnar Moe, and I'm the CEO of Rana Gruber. This is an important moment for us, and I want to share briefly who we are and why this partnership makes sense. Rana Gruber is more than a mining company. We have been a cornerstone of Norwegian industry for over 60 years, supplying high-quality iron ore to the European steel industry. Since our listing in 2021, we have delivered strong results, both financially and operationally. This year, we reached a major milestone, producing iron ore concentrate with 65% iron content. We are Norway's only iron ore producer, with a large, high-quality resource base and a skilled team. Our optimal location and proximity to the major European hubs gives us a significant competitive advantage.
Our people are the foundation of everything we do, and the culture of competence and safety is what sets us apart. Over the past months, I've seen how closely Champion Iron shares our vision, with a focus on high-grade iron ore and decarbonizing steel. We also share important values like transparency and long-term thinking, as well as a commitment to social responsibility. Together, we can achieve great things. Our team is ready to play a key role in Champion's expansion strategy while continuing to deliver the strong operations that have defined Rana Gruber for decades. Thank you for your trust. I look forward to hearing your perspectives on this exciting opportunity. Thank you. Back to you, David.
Thank you very much, Gunnar. If we look at the transaction summary, high level, what we are proposing to do is to acquire 100% of Rana Gruber shares at 79 NOK per share. That gives a total equity value of roughly about 2.9 billion NOK or $290 million. The offer is supported by Rana Gruber's management, the board of directors, and also major shareholders. We've already received over 51% support by key shareholders that were wall crossed on the transaction. To be able to fund the acquisition, we're looking to use cash on hand, a private placement with Caisse de dépôt, Quebec's largest pension fund, of $100 million, and also a term loan by Scotiabank of $150 million.
Pending remaining elements and related conditions, we anticipate a potential close in Q2 of 2026. When we look at the two, the two assets potentially combined, as we mentioned, we both have a focus on high-grade iron ore. Rana Gruber has delivered recently 65% Fe and has potential in the future to be able to deliver on even higher grades. Similar to what we're doing at Bloom Lake, with our current 66.2% Fe material going towards half of our tons to 69%. Both of our companies have proven technical expertise, and we do aspire to leverage and collaborate mutually to seek and optimize our operations. We both operate in Tier One jurisdictions, Canada and Norway. Norway has historically been very supportive of natural resource development and has been very pro-business in the past.
Together, we feel we'll be able to leverage a larger platform to grow the business, supported by our stable operations and also a larger cash flow base. In terms of the actual asset, Rana Gruber is located in Mo i Rana, near the Arctic Circle in Norway. The asset history dating back about 100 years, it's produced through economic cycles for over 50 years. Today, they hire around 370 people, all from the local community. They produce roughly about 1.8 million tons from open pit and underground operations. They produce two blends of material, one hematite iron ore and one magnetite product. Just like Bloom Lake, they've got significant resources that should support operations for decades. When we look at the logistics, Rana Gruber is a little bit simpler than what we have at Bloom Lake.
The mines are roughly around 35 km from the port, operated by a very good rail operator. We saw no stockpiles at the site, and the processing facilities are right beside the port facilities. Hence, the logistics is very streamlined and very efficient. Overall, they've got a proven and robust asset that's operated for several decades. Now, when we look at the geography, they're very well positioned to be able to service the European market. They're just 3-4 days of sailing time to their major clients. This means very good strategies and makes Rana Gruber a supplier of choice for a lot of potential and current steel manufacturing in Europe.
I know we've talked in the past about Europe being a little bit challenged with the steel industry in the past years, but we do see some light at the end of the tunnel. When we look at the, what's coming next year, CBAM will be implemented, and we'll start ramping up. Not only Bloom Lake, but Rana Gruber are two operations that have significantly lower CO2 emissions per ton of iron ore produced, which should benefit from CBAM once it comes along. Also, recently, Europe has announced measures to protect their steel industry, including rising tariffs for imported steel, which could be beneficial for Rana Gruber's main customer hub today. In terms of CO2 emissions per ton of iron ore, or sustainability in general, Rana Gruber is very well positioned, again, continuing the same values as we have at Bloom Lake.
Rana Gruber is one of the rare iron ore producers in the world that actually has lower CO2 intensity per ton of iron ore than Bloom Lake. They are one of the lowest emitters of CO2 intensity per ton of iron ore. They've also done a great job on their various scores with the Towards Sustainable Mining, achieving a top-tier score of single A to triple A on various metrics. In terms of financials, historically, Rana Gruber has produced roughly about 1.8 million tons per year for the past 5 years, which has allowed them to generate significant revenues due to the fact that their cash costs are lower than what we have currently at Bloom Lake, and they've hovered between $45-$55 per ton cash cost.
In terms of profitability, while they've made EBITDA ranging from CAD 50 million to CAD 110 million, historically, per year, and this is prior to their recent upgrade to 65% Fe. We do believe that in the future, this could be accretive for the company as they transition towards this new product. In terms of funding, as we mentioned on the highlights a little bit earlier, Champion Iron today, well, as at the 30th of September of 2025, had roughly about CAD 325 million cash or cash equivalents. We expect to fund roughly about $39 million from our cash. We have Scotiabank that have, well, we've received commitment letter from Scotiabank for a fully underwritten term loan of $150 million.
We also have La Caisse, which is Quebec's pension fund, largest pension fund, that want to participate with a private placement of $100 million, to be able to complete the financing for this transaction. La Caisse has been supporting us since the beginning, essentially, since 2017, when they facilitated our restart of the Bloom Lake operations, and they've supported us since, today being a current shareholder, but with this private placement, would become our largest shareholder, just shy of 8.5% of the total shares of the company. With that being said, I'll turn it over to Michael Marcotte, that's worked very hard in the past months to be able to get to where we're at today, to go through various elements of the transaction and of the combined assets.
Thank you, David. Like many things were said on the call, over and above the stability that adding this asset to our portfolio brings to the combined company, the funding structure actually brings many benefits to our pro forma business. Namely, obviously, our business size will grow, we're gonna maintain quite adequate liquidities with the new funding structure. When we look at the combined entity, the contribution of Rana Gruber brings about 20% or nearly 20% of EBITDA, when you look on trailing basis, but then we're only diluting shareholders by about 5% through a long-term and supporting shareholder. In addition to this, with the funding structure that we're providing with the acquisition, the financial ratios on leverage are not gonna change substantially.
We're gonna maintain quite adequate funding as well, post-transaction, with our revolver also remaining 100% undrawn. Obviously, post-transaction, one of the focus that we will have, will be to leverage the stability of both of these assets to make sure that we can deleverage the business even further and maintain adequate liquidities in the future. When we look at the overall business and what the combined company will look like, obviously, we'll now benefit from two proven, stable assets that have long life of mine, that will both produce exclusively high grade. That's quite a unique platform in the financial market, and that doesn't that isn't available with other publicly listed corporations.
Obviously, our company has a very healthy pipeline of growth opportunities, the combined cash flow that Rana Gruber and Champion will have together may enable us to further identify opportunities and unlock some of these projects in the future. With that, the overall corporate strategy has not changed. We maintain focus on high-grade iron ore. We maintain a very diligent approach to growth through our larger portfolio, all exclusively focused on high grade. Also, this doesn't change our views to, to continue our capital return strategy, something that we continue to look to potentially optimizing in the future.
Obviously, one of the key elements that we've always had as a core in our company was to make sure that we create a positive impact where we operate, and we'll be looking forward to work with Rana Gruber to continue on that same focus that they've had with their communities. With that, I'll pass it over to the operator for the Q&A portion.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised, and should you wish to cancel your request, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Once again, that is star and one to ask a question.
Thank you. Your first question comes from the line of Glenn Lockuck from Barrenjoey. Please go ahead.
Good evening, thanks for the opportunity. Just a couple of questions. Just firstly, just wondering why the choice of equity and just one shareholder. Was there any thought given to allowing other shareholders to participate? Then secondly, just your thoughts on any synergies. I know obviously geographically separate, but is there any synergies at all you think you can pull apart from the acquisition? Thanks.
Yeah, thanks for the question. When we look at the financing structure, obviously, Caisse de dépôt, being here located in Quebec, that have supported us since day one, that have been a very good partner of ours, and them mentioning many different times that they've wanted to support us in the future, it was a natural fit for us to be able to reach out and be able to do this deal with them. We do feel that they're good partners long term, and that, that was mainly the, the, the reason that made us knock on their door first to be able to do this to do this transaction. In terms of potential synergies, when we look at the type of products that we make, we both produce very high-grade material.
When we look at Rana Gruber's transition now, they're currently transitioning towards 65% material. We do feel that by this combination, we'll be able to support them in that transition, and then potentially beyond that, towards DR-grade material. We do feel that there's synergies on that front. We also feel with the client base, definitely implementing ourselves more into Europe has been a strategy of ours. When we look at the transition of our company, we did have quite a lot of tons sold into Asia that we wanna transition towards European market, North Africa, Middle East, and being able to work alongside with Rana Gruber to be able to increase our market share within Europe, was definitely one of the main elements that triggered this.
Again, aligning with very competent people to be able to look at the next steps of growth of our company, that was also one of the main main elements that we saw.
Sorry, just wanted to clarify. Is there a dollar figure you think you can generate? It sounds like it's more on the revenue side than the cost side. I guess, just looking at the acquisition, it's just over 5 times this, this 12-month EBITDA, so it's probably in line with where most companies are trading. I just wondering, is there a dollar figure you think you can add to the bottom line?
Well, right now we do believe we'll be able to generate more on the revenues, like you said, in the future, more than actually, reducing on the cost, let's say, of, of Rana Gruber's operations. They've got a great team in place, and we'll be able to support them in the future, but, it is a very competent team in place right now.
Okay, no dollar figure, you think, from a revenue perspective, too early?
Exactly.
All right. Thanks very much.
Thank you.
Thank you. Your next question comes from the line of Chen Diang from Bank of America. Please go ahead.
Hi, good evening, David. Thank you for the opportunity, taking my question. Just to follow up on the, on the, on the synergies. After this deal finish, complete, you will operate one, your, you know, Bloom Lake primary from Canada, and, this entity, you will continue to operate from Norway. Energy-wise, you, you, sorry, synergy-wise, you will operate in two separate countries. How should I think about your product strategy going forward? Is there any synergy from high-grade perspective? How... I understand you mentioned from marketing perspective, you will have probably penetrate some, some of your customers into, into Europe, but how should I think about product? Thank you.
Yeah, thanks for your question. We, we definitely see potentials on the product side to be able to optimize together. That'll be announced going forward, once the transaction is closed, to be able to explain maybe a little bit more what Rana Gruber has, that we don't have now, is a specialized magnetite product that will potentially increase in the future, and we do feel that that has potential to be able to increase on the revenue side. In the way that the material is distributed to various clients, there is some potential synergies by having larger volume from Bloom Lake and then combined with material from Rana Gruber. There's a few different key elements we think we can generate more on that front.
Again, the main goal from Bloom Lake has been to reduce the amount of tons going into China, and we do feel that there will be synergies to be able to place more of those tons into Europe, following this transaction.
Sure. Thanks, David. At this point in time, the synergy is more like from marketing side?
Correct.
Okay, thank you. I'll pass down.
Thank you once again. Should you have a question, please press star followed by the one on your telephone keypad. There are no further questions at this time. I will now hand the call back to Mr. David Cataford for any closing remarks.
Thanks, everyone, for being on the call. It's very interesting to see where the next steps of our company are going to go. I think, as you've seen in the past, we've set ourselves a target to be able to, one, move our product mix closer to home, be able to integrate markets that are closer to home, and always in the high-grade space. I think by this acquisition, we're able to continue on that journey, and also aligning ourselves with very competent teams that have delivered many times and over decades, uninterrupted over various economic cycles.
I do think that by combining these assets, we're gonna be able to benefit, not only by those synergies that we talked about a little earlier, but also I think there will be some cross-help between our sites and theirs to be able, one, to improve Bloom Lake, but also to be able to potentially work together to improve certain elements at Rana Gruber. We do see this as a very collaborative next step, and looking forward to be able to update the market once we potentially close the transaction. Again, thanks everyone for being on the call. I hope you'll have a great Christmas time. Sorry for disturbing you on this late Sunday here in Canada or early morning pre-Christmas in Australia.
Again, wishing you great holidays, and we'll speak at the next call at the end of January. Thanks, everyone. Have a good day.
This concludes today's call. Thank you for participating, and you may all disconnect.