Here's why the Champion Iron (ASX:CIA) share price is sliding 6% today

Weak iron ore prices and shipping costs might be dragging on Champion Iron shares

| More on:
A group of disappointed board members.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Champion Iron Ltd (ASX: CIA) share price is falling on Thursday after the company released its second-quarter results for FY22.

At the time of writing, the Champion Iron share price is down 6.32% to $4.22.

Second-quarter highlights

Champion Iron achieved revenues of $331.0 million and $876.4 million for the three and six-month periods ended 30 September. By comparison, it achieved $311.0 million and $555.6 million for the same periods in 2020.

The company achieved a marginally higher earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $200 million for the three-month period compared to $199 million a year ago.

Similarly, net income came in at $114.6 million compared to $112.2 million in 2Q21.

During the quarter, the company produced 2.089 million wet metric tonnes (wmt) of high-grade 66.3% iron ore concentrate compared to 2.269 million wmt for the same period in 2020.

Champion Iron achieved an average gross realised price of US$174.6 per tonne, up 42.8% year-on-year.

Growth projects making significant progress

Champion Iron completed several critical construction items during the quarter, enabling the company to evaluate a potential accelerated completion schedule for its Bloom Lake Phase II expansion project, currently expected by mid-2022.

The Phase II project aims to double Bloom Lake's nameplate capacity to 15 million tonnes per annum of 66.2% Fe iron ore concentrate.

Why is the Champion Iron share price plunging?

At its peak year-to-date return, the Champion Iron share price was up almost 65% to $7.86 thanks to surging iron ore prices.

The opposite is now taking place with iron ore prices tanking from May's all-time highs of approximately US$230 a tonne to US$120 a tonne.

The quarterly update flagged the weak pricing environment, saying its realised selling price was "impacted by sales provisionally priced using forward prices at quarter end, which were at a significant discount compared to the P65 index average for the period".

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Resources Shares

a miner holds his thumb up as he holds a device in his other hand.
Resources Shares

3 reasons why the BHP share price could still be a buy

There are a few reasons why this mining giant could be appealing.

Read more »

Miner standing in front of trucks and smiling, symbolising a rising share price.
Resources Shares

The pros and cons of buying Fortescue shares in June

Let’s dig into whether it’s a good time to invest in this mining giant.

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Resources Shares

Why did the Mineral Resources share price rip 15% higher today?

The iron ore and lithium giant was the fastest riser of the ASX 200 on Thursday.

Read more »

A man wearing a hard hat and high visibility vest looks out over a vast plain where heavy mining equipment can be seen in the background.
Resources Shares

2030 forecast: As Australia's iron ore export earnings decline, copper will rise. What does this mean for BHP shares?

BHP is expanding its iron ore and copper production.

Read more »

An engineer takes a break on a staircase and looks out over a huge open pit coal mine as the sun rises in the background.
Resources Shares

4 reasons to buy BHP shares today

A leading expert outlines four key reasons BHP shares are a buy.

Read more »

Businessman walks through exit door signalling resignation
Resources Shares

Pilbara Minerals share price drops as CFO announces resignation

It’s been a challenging few years for outgoing Pilbara Minerals CFO Luke Bortoli.

Read more »

Miner looking at a tablet.
Resources Shares

What happened with the BHP share price in May?

Did you buy BHP shares in May? Here’s how much the ASX 200 miner returned.

Read more »

Two men in hard hats and high visibility jackets look together at a laptop screen at a mine site.
Resources Shares

Should I buy Fortescue shares today?

A leading investing expert offers his verdict on the outlook for Fortescue shares.

Read more »