Champion Iron : Financial Document

Management's Discussion and Analysis

For the Three and Six-Month Periods Ended September 30, 2023

TSX: CIA - ASX: CIA

As at October 26, 2023

Champion Iron Limited

Management's Discussion and Analysis

(Expressed in Canadian dollars, except where otherwise indicated)

The following Champion Iron Limited ("Champion" or the "Company") Management's Discussion and Analysis ("MD&A") has been prepared as of October 26, 2023. This MD&A is intended to supplement the condensed interim consolidated financial statements for the three and six-month periods ended September 30, 2023, and related notes thereto ("Financial Statements"), which have been prepared in accordance with AASB 134/IAS 34, Interim Financial Reporting, and should be read in conjunction with the Company's audited annual financial statements and MD&A for the financial year ended March 31, 2023. The Financial Statements and other information pertaining to the Company are available on SEDAR+ at www.sedarplus.ca, the ASX at www.asx.com.auand the Company's website at www.championiron.com.

Champion's management team ("Management") is responsible for the preparation and integrity of the Financial Statements, including the maintenance of appropriate information systems, procedures and internal controls. Management is also responsible for ensuring that information disclosed externally, including the Financial Statements and MD&A, is complete and reliable.

Unless otherwise specified, all dollar figures stated herein are expressed in millions of Canadian dollars, except for: (i) tabular amounts, which are in thousands of Canadian dollars; and (ii) per share or per tonne amounts. The following abbreviations and definitions are used throughout this MD&A: US$ or U.S. (United States dollar), C$ (Canadian dollar), Board (Board of Directors), t (tonnes), wmt (wet metric tonnes), dmt (dry metric tonnes), Fe (iron ore), Mtpa (million tonnes per annum), M (million), km (kilometres), m (metres), FOB (free on board), LoM (life of mine), Bloom Lake or Bloom Lake Mine (Bloom Lake Mining Complex), Phase II (Phase II expansion project), Kami Project (Kamistiatusset project), G&A (general and administrative), EBITDA (earnings before interest, tax, depreciation and amortization), AISC (all-in sustaining costs) and EPS (earnings per share). The terms "Champion" or the "Company" refer to Champion Iron Limited and/or one, or more, or all of its subsidiaries, as applicable. The term "QIO" refers to Quebec Iron Ore Inc., the Company's wholly-owned subsidiary and the operator of Bloom Lake. IFRS refers to the International Financial Reporting Standards.

This MD&A contains forward-looking statements. Particular attention should be given to the risk factors described in the "Risk Factors" sections of the Company's 2023 Annual Information Form and the MD&A for the financial year ended March 31, 2023, and to the "Cautionary Note Regarding Forward-Looking Statements" section of this MD&A.

Non-IFRS and Other Financial Measures

Certain financial measures used by the Company to analyze and evaluate its results are non-IFRS financial measures or ratios and supplementary financial measures. Each of these indicators is not a standardized financial measure under IFRS and might not be comparable to similar financial measures used by other issuers. These indicators are intended to provide additional information and should not be considered in isolation or as substitutes for measures of performance prepared in accordance with IFRS. The non-IFRS and other financial measures included in this MD&A are: EBITDA and EBITDA margin, adjusted net income, adjusted EPS, available liquidity, cost of sales per dmt sold, C1 cash cost or total cash cost per dmt sold, AISC per dmt sold, cash operating margin, cash profit margin, gross average realized selling price per dmt sold, net average realized selling price per dmt sold or net average realized FOB selling price per dmt sold, and operating cash flow per share. When applicable, a quantitative reconciliation to the most directly comparable IFRS measure is provided in section 21 - Non- IFRS and Other Financial Measures of this MD&A.

Cautionary Note Regarding Forward-Looking Statements

Forward-Looking Statements

This MD&A includes certain information and statements that may constitute "forward-looking information" under applicable Canadian securities legislation. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "continues", "forecasts", "projects", "predicts", "intends", "anticipates", "aims", "targets" or "believes", or variations of, or the negatives of, such words and phrases or state that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. Inherent in forward-looking statements are risks, uncertainties and other factors beyond the Company's ability to predict or control.

Specific Forward-Looking Statements

All statements, other than statements of historical facts, included in this MD&A that address future events, developments or performance that Champion expects to occur are forward-looking statements. Forward-looking statements include, among other things, Management's expectations regarding:

1. the Company's Phase II expansion project, its expected achievement of nameplate capacity, throughput, recovery rates, economic and other benefits, impact on nameplate capacity, milestones and associated costs;
2. Bloom Lake's life of mine, recovery rates, production, economic and other benefits;

2 Page

Champion Iron Limited

Management's Discussion and Analysis

(Expressed in Canadian dollars, except where otherwise indicated)

Cautionary Note Regarding Forward-Looking Statements (continued)

Specific Forward-Looking Statements (continued)

1. the project to upgrade the Bloom Lake iron ore concentrate to a higher grade with lower contaminants and to convert approximately half of Bloom Lake's increased nameplate capacity of 15 Mtpa to commercially produce a Direct Reduction quality pellet feed iron ore, expected project timeline, economics, capital expenditure, budget and financing, production metrics, technical parameters, permitting and approvals, efficiencies and economic and other benefits;
2. the study evaluating the re-commissioning of the Pointe-Noire Iron Ore Pelletizing Facility to produce Direct Reduction grade pellets, including its anticipated completion timeline, economics, capital expenditure and expected premium that high quality DRPF products will attract;
3. the Kami Project's feasibility study, its purpose, including evaluating the potential to produce a Direct Reduction grade product, and anticipated completion timeline;
4. the future declaration and payment of dividends and the timing thereof;
5. the shift in steel industry production methods towards reducing emissions and green steel production methods, including expected rising demand for higher-grade iron ore products and related market deficit and higher premiums, and the Company's participation therein, contribution thereto and positioning in connection therewith, including the transition of the Company's product offering (including producing high quality DRPF products) and expected benefits thereof;
6. the cold pelletizing technology and its potential to substantially reduce emissions linked to the agglomeration of iron ore;
7. greenhouse gas and CO2 emissions reduction initiatives, objectives, targets and expectations;
8. collaboration between First Nations and Champion;
9. increasing stripping ratio and recovering accumulated waste backlog;
10. optimization work programs, their objectives and expected results and impact on production;
11. benefits and expected impact of recently commissioned equipment on production and the Company's shipping capacity;
12. shipping and sales of accumulated concentrate inventories and related rehandling costs and their impact on cost of sales;
13. the Company's mining equipment rebuild program, fleet management program, tailings investment plan and related investments and benefits;
14. the impact of exchange rates on commodity prices and the Company's financial results;
15. the impact of interest rates on commodity prices and the Company's financial results;
16. the relationship between iron ore prices and ocean freight costs and their impact on the Company;
17. the impact of iron ore prices fluctuations on the Company and its financial results and the occurrence of certain events and their impact on iron ore prices and demand for high-grade iron ore products;
18. the Company's cash requirements for the next twelve months, the Company's positioning to fund such cash requirements and estimated future interest payments;
19. legal actions, including arbitration and class actions, their potential outcome and their effect on the consolidated financial position of the Company;
20. production and recovery rate targets and the Company's performance;
21. pricing of the Company's products;
22. the Company's tax position;
23. the Company's expected iron ore concentrate production and sales;
24. the Company's iron ore concentrate pricing trends compared the P65 index;
25. the closing of the refinancing of the Company's credit facility and its impact on liquidity and the Company's growth projects; and
26. the Company's growth and opportunities generally.

Deemed Forward-Looking Statements

Statements relating to "reserves" or "resources" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated and that the reserves can be profitably mined in the future. Actual reserves and resources may be greater or less than the estimates provided herein.

3 Page

Champion Iron Limited

Management's Discussion and Analysis

(Expressed in Canadian dollars, except where otherwise indicated)

Cautionary Note Regarding Forward-Looking Statements (continued)

Risks

Although Champion believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such forward-looking statements involve known and unknown risks, uncertainties and other factors, most of which are beyond the control of the Company, which may cause the Company's actual results, performance or achievements to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause the actual results to differ materially from those expressed in forward-looking statements include, without limitation:

• the results of feasibility studies;
• changes in the assumptions used to prepare feasibility studies;
• project delays;
• timing and uncertainty of industry shift to green steel and electric arc furnaces, impacting demand for high-grade feed;
• continued availability of capital and financing and general economic, market or business conditions;
• general economic, competitive, political and social uncertainties;
• future prices of iron ore;
• future transportation costs;
• failure of plant, equipment or processes to operate as anticipated;
• delays in obtaining governmental approvals, necessary permitting or in the completion of development or construction activities; and
• the effects of catastrophes and public health crises, including the impact of COVID-19, on the global economy, the iron ore market and Champion's operations,

as well as those factors discussed in the section entitled "Risk Factors" of the Company's 2023 Annual Report and Annual Information Form for the financial year ended March 31, 2023, all of which are available on SEDAR+ at www.sedarplus.ca, the ASX at www.asx.com.auand the Company's website at www.championiron.com.

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.

Additional Updates

All of Champion's forward-looking information contained in this MD&A is given as of the date hereof or such other date or dates specified in the forward-looking statements 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 of the forward-looking information, whether as a result of new information, future events or otherwise, except as required by law. If the Company does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements. Champion cautions that the foregoing list of risks and uncertainties is not exhaustive. Readers should carefully consider the above factors as well as the uncertainties they represent and the risks they entail.

1. Description of Business

Champion was incorporated under the laws of Australia in 2006 and is listed on the Toronto Stock Exchange (TSX: CIA) and the Australian

Securities Exchange (ASX: CIA), and trades on the OTCQX Best Market (OTCQX: CIAFF).

Champion, through its wholly-owned subsidiary Quebec Iron Ore Inc., owns and operates the Bloom Lake Mining Complex, located on the south end of the Labrador Trough, approximately 13 km north of Fermont, Québec. Bloom Lake is an open-pit operation with two concentrators that primarily source energy from renewable hydroelectric power. The two concentrators have a combined nameplate capacity of 15 Mtpa and produce low contaminant high-grade 66.2% Fe iron ore concentrate with a proven ability to produce a 67.5% Fe direct reduction quality iron ore concentrate. In January 2023, the Company announced the positive findings of a study evaluating the upgrade of half of the Bloom Lake mine's capacity to a direct reduction quality pellet feed iron ore and approved an initial budget to advance the project. Bloom Lake's high-grade and low contaminant iron ore products have attracted a premium to the Platts IODEX 62% Fe iron ore benchmark. The Company ships iron ore concentrate from Bloom Lake by rail, to a ship loading port in Sept-Îles, Québec, and has sold its iron ore concentrate to customers globally, including in China, Japan, the Middle East, Europe, South Korea, India and Canada. In addition to Bloom Lake, Champion owns a portfolio of exploration and development projects in the Labrador Trough, including the Kamistiatusset Project, located a few kilometres south-east of Bloom Lake, and the Consolidated Fire Lake North iron ore project, located approximately 40 km south of Bloom Lake.

4 Page

Champion Iron Limited

Management's Discussion and Analysis

(Expressed in Canadian dollars, except where otherwise indicated)

2. Financial and Operating Highlights

• This is a non-IFRS financial measure, ratio or other financial measure. The measure is not a standardized financial measure under the financial reporting framework used to prepare the Financial Statements and might not be comparable to similar financial measures used by other issuers. Refer to the section 21 - Non-IFRS and Other Financial Measures of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measure when applicable.

• See the "Currency" subsection of this MD&A included in section 7 - Key Drivers.

5 Page

Champion Iron Limited

Management's Discussion and Analysis

(Expressed in Canadian dollars, except where otherwise indicated)

3. Quarterly Highlights

Sustainability and Health & Safety

• No serious injuries and no major environmental incidents reported in the quarter;
• Appointed Ms. Jessica McDonald to the Board at the Company's Annual General Shareholders' Meeting held in August 2023. Ms. McDonald brings extensive leadership and directorship experience to the Company and this appointment enabled Champion to exceed the 30% female Board representation threshold that the Company committed to in its 2022 Sustainability Report;
• Recognized National Day for Truth and Reconciliation on September 30 for the second year in a row, by organizing full day workshops and commemoration activities aimed at familiarizing Champion's employees with the Innu culture;
• Concluded a 10-year financial partnership with the Innu Nikamu Festival, one of the most important events celebrating First Nations music and art in North America, to help promote and increase awareness of the Innu culture and language; and
• Participated in several community engagements, including fundraising events to support local residents fighting cancer and struggling local families, sponsorship of the annual First Nations and Québec Regional Economic Circle, contributions to local facilities to promote First Nations employment and several 2023 scholarships offered in sports, arts and recreation to encourage young people from the Innu community to pursue their studies.

Operations and Finance

• Achieved a record quarterly production of 3.45 million wmt of high-grade 66.1% Fe concentrate for the three-month period ended September 30, 2023, an increase of 21%, compared to the same period last year due to the continued solid performance of Phase II since achieving commercial production in December 2022. Record production was realized despite several days of unscheduled outage related to a major crusher ore belt failure in one of the Company's conveyor systems, affecting the availability of the Phase II concentrator;
• Realized a record quarterly material mined and hauled of nearly 17 million wmt for the three-month period ended September 30, 2023, up 14% from the previous quarter, enabled by the contribution of additional mining equipment commissioned during the financial year. Ore milled by both plants reached a new high at 10 million wmt for the three-month period ended September 30, 2023, up 4% from the previous quarter, enabled by ongoing infrastructure optimization. With the solid performance of the mine and the processing plants, the Company continues its progress towards reaching its expanded 15 Mtpa production nameplate capacity;
• Quarterly iron ore concentrate sales of 2.9 million dmt for the three-month period ended September 30, 2023, comparable to the same period in 2022, and up 12% from the previous quarter, as railway capacity gradually resumed after the June 2023 forest fires. Shipments during the period were also impacted by the railway service provider's annual planned maintenance lasting several days, together with a few days of outage caused by a train derailment in the northern switching yard, which fortunately caused no injuries or negative environmental impact. As a result, the Company had 1.6 million wmt of iron ore concentrate stockpiled at Bloom Lake as at September 30, 2023. With additional locomotives in service and rail operations resuming at full capacity after the scheduled maintenance in September 2023, the Company expects its tonnage sold to meet and possibly exceed tonnage produced as it clears iron ore concentrate inventories at the mine site in upcoming periods;
• Cost of sales was $73.7/dmt1 (US$55.0/dmt)2, a decrease of 9% for the three-month period ended September 30, 2023, compared to $81.3/dmt1 (US$60.5/dmt)2 in the previous quarter, positively impacted by semi-annual railway services trailing fuel price
  adjustments and by higher shipment volumes amortizing fixed handling costs at the port. The cost of sales per dmt sold slightly increased, compared to $71.5/dmt1 (US$54.8/dmt)2 for the same period in 2022, and continued to be negatively impacted by the utilization of contractors to fill vacant positions, higher maintenance costs driven by planned and unplanned maintenance activities and below normal run rate shipment levels to amortize mostly fixed costs at the port facilities in Sept-Îles;

1 This is a non-IFRS financial measure, ratio or other financial measure. The measure is not a standardized financial measure under the financial reporting framework used to prepare the Financial Statements and might not be comparable to similar financial measures used by other issuers. Refer to the section 21 - Non-IFRS and Other Financial Measures of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measure when applicable.

• See the "Currency" subsection of this MD&A included in section 7 - Key Drivers.

• Page

Champion Iron Limited

Management's Discussion and Analysis

(Expressed in Canadian dollars, except where otherwise indicated)

3. Quarterly Highlights (continued)

Operations and Finance (continued)

• Revenues of $387.6 million for the three-month period ended September 30, 2023 ($300.6 million for the same period in 2022), net cash flow from operating activities of $162.2 million ($87.1 million for the same period in 2022), EBITDA of $155.0 million1 ($84.3 million1 for the same period in 2022) and net income of $65.3 million with EPS of $0.13 ($19.5 million with EPS of $0.04 for the same period in 2022);
• Strong cash position and liquidity at quarter-end with $316.5 million in cash and cash equivalents and short-term investments as at
  September 30, 2023 ($277.4 million as at September 30, 2022), an increase of $66.2M since June 30, 2023, and available liquidity, including amounts available from the Company's credit facilities, totalling $645.9 million1 at quarter-end, compared to $579.2 million1 as at June 30, 2023; and
• Fifth consecutive semi-annual dividend of $0.10 per ordinary share declared on October 25, 2023 (Montréal time) / October 26, 2023 (Sydney time), in connection with the semi-annual results for the period ended September 30, 2023.

Direct Reduction Pellet Feed Project Update ("DRPF Project")

• Cumulative investments totalled $28.9 million, as at September 30, 2023, from previously approved initial budgets, including ongoing detailed engineering work and on-site activities, in preparation for upcoming civil work programs; and
• Work programs completed to date secured the project completion timeline, scheduled for the second half of calendar year 2025 pending a final investment decision ("FID"), which is expected in the near term.

Other Growth and Development

• The Company continues to pursue organic growth opportunities, with the Kami Project's feasibility study, evaluating the viability to produce a Direct Reduction ("DR") grade pellet feed product, and an additional study, in collaboration with a major international steelmaking partner, to re-commission the Pointe-Noire Iron Ore Pelletizing Facility (the "Pellet Plant") to produce DR grade pellets. Both studies are expected to be completed in the near term; and
• Issued a technical report in respect of Bloom Lake prepared pursuant to National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") and Chapter 5 of the ASX Listing Rules entitled "Mineral Resources and Mineral Reserves for the Bloom Lake Mine, Fermont, Québec, Canada", prepared by BBA Inc., SRK Consulting (U.S.), Inc., Soutex and Quebec Iron Ore Inc. and dated September 28, 2023 (the "2023 Technical Report"), confirming the 18-year LoM, based on the mineral reserves, with an opportunity to extend operations beyond the LoM plan, with a 40% increase to the measured and indicated resources and a 360% increase to inferred resources.

• This is a non-IFRS financial measure, ratio or other financial measure. The measure is not a standardized financial measure under the financial reporting framework used to prepare the Financial Statements and might not be comparable to similar financial measures used by other issuers. Refer to the section 21 - Non-IFRS and Other Financial Measures of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measure when applicable.

• Page

Champion Iron Limited

Management's Discussion and Analysis

(Expressed in Canadian dollars, except where otherwise indicated)

4. Dividend on Ordinary Shares

The Board declared a fifth consecutive semi-annual dividend of $0.10 per ordinary share on October 25, 2023 (Montréal time) / October 26, 2023 (Sydney time), in connection with the semi-annual financial results for the period ended September 30, 2023, payable on November 28, 2023 (Montréal and Sydney time), to the Company's shareholders on record as at the close of business on November 7, 2023 (Montréal and Sydney time).

The Board will evaluate future dividends concurrently with the release of the Company's semi-annual and annual results.

For shareholders holding ordinary shares on the Australian share register, the dividend will be paid in Australian dollars. The dividend amounts received will be calculated by converting the dividend determined to be paid using the exchange rates applicable to Australian dollars five business days prior to the dividend payment date, as published by the Bank of Canada.

Additional details on the dividends and related tax information can be found on the Company's website at www.championiron.comunder the section Investors - Dividend Information.

5. Direct Reduction Pellet Feed Project Update

In January 2023, the Company completed the DRPF Project's study, which evaluated the equipment and infrastructure required to upgrade the Bloom Lake Phase II plant to produce approximately 7.5 Mtpa of DRPF quality iron ore with up to 69% Fe with a combined silica and alumina content below 1.2%. The study proposed a 30-month construction period with estimated capital expenditures of $470.7 million, including additional power and port-related infrastructure, resulting in a Net Present Value ("NPV") of $738.2 million and an Internal Rate of Return ("IRR") of 24.0% after tax. An initial budget of $62 million was approved by the Board to advance the project and secure its estimated project construction timeline and potential completion by the second half of calendar year 2025, pending an FID expected in the near term.

The DRPF Project aims to capitalize on the steel industry's focus to reduce emissions and its associated impact on the raw material supply chain. Accordingly, production of a DRPF product would enhance the Company's ability to further contribute to the green steel supply chain by engaging with additional customers focused on the Direct Reduced Iron ("DRI") and Electric Arc Furnaces ("EAF") steelmaking route, which reduces emissions in the steelmaking process by approximately half, compared to the traditional steelmaking route using Blast Furnace ("BF") and Basic Oxygen Furnace ("BOF") methods. By producing the DRPF product required in the DRI-EAF steelmaking process, the Company would contribute to a reduction in the use of coal in the conventional BF-BOF steelmaking method, which would significantly reduce global emissions. Benefiting from a rare high-purity resource, the Company has a unique opportunity to produce one of the highest DRPF quality products available on the seaborne market, for which Champion expects to attract a substantial premium over the Company's current high-grade 66.2% Fe iron ore concentrate.

During the three-month period ended September 30, 2023, detailed engineering work and on-site activities in preparation for upcoming civil work programs continued. Refer to section 11 - Cash Flows for investments made during the quarter.

Additional details on the DRPF Project, including key assumptions and capital costs, can be found in the Company's press release dated January 26, 2023 (Montréal time), available under its profile on SEDAR+ at www.sedarplus.ca, the ASX at www.asx.com.auand on the Company's website at www.championiron.com.

The Company is not aware of any new information or data that materially affects the information included in the DRPF Project study and confirms that all material assumptions and technical parameters underpinning the estimates in the DRPF Project study continue to apply and have not materially changed.

Champion Iron Limited

Management's Discussion and Analysis

(Expressed in Canadian dollars, except where otherwise indicated)

6. Green Steel Initiatives

With an increased focus on reducing greenhouse gas ("GHG") emissions in the steelmaking processes, the steel industry is experiencing a structural shift in its production methods. This dynamic is expected to create additional demand for higher-purity iron ore products, as the industry transitions towards using reduction technologies to produce liquid iron, such as the use of DRI in EAF instead of traditional BF-BOF steelmaking. DR grade iron ore is generally pelletized to produce DR grade pellets. DR grade pellets are then processed in a DR reactor, removing oxygen from the iron oxide concentrate to produce metallic iron (DRI or HBI), which can be a substitute for or blended with scrap steel to produce steel in the EAF steelmaking method.

Accordingly, the Company advanced its research and development program aimed at developing technologies and products to support the steelmaking transition from the BF-BOF method to the DRI-EAF method, while supporting emissions reduction in the BF-BOF process.

The Company is an early investor and collaborator with Binding Solutions Limited, a private European-based company which holds a proprietary cold pelletizing technology. The objective of the cold pelletizing technology is to substantially reduce emissions linked to the agglomeration of iron ore. Laboratory results demonstrated that carbon emissions related to agglomeration could be reduced by more than 95% with this technology.

Emissions Reduction Initiatives

As part of its ongoing efforts to minimize the environmental impact of its operations, the Company continued with its strategy to achieve its 2030 commitment to reduce GHG emissions by 40%, based on combining its 2014 emissions intensity together with Bloom Lake's increased targeted nameplate capacity of 15 Mtpa, with a further goal to be carbon neutral by 2050. Towards this effort, a working group identified emissions reduction initiatives and evaluated resources required to deploy a program to reach the Company's GHG emissions reduction objectives. As the Company optimizes its Environmental, Social and Governance ("ESG") related disclosures and works to align with industry best practices, new objectives were detailed in its 2022 Sustainability Report, including disclosure on GHG reduction work programs designed to help the Company reach its 2030 and 2050 targets.

Acquisition of an Iron Ore Pelletizing Facility

On May 17, 2022, the Company entered into a definitive purchase agreement (the "Purchase Agreement") to acquire, via a wholly-owned subsidiary and upon satisfaction of certain conditions, the Pointe-Noire Iron Ore Pelletizing Facility located in Sept-Îles, adjacent to the port facilities. The Company also entered into a Memorandum of Understanding (the "MOU") with a major international steelmaker (the "Pellet Plant Partner") to complete a study to evaluate the re-commissioning of the Pellet Plant and produce DR grade pellets. The study will evaluate the investments required to re-commission the Pellet Plant while integrating up-to-date pelletizing and processing technologies. During the three and six-month periods ended September 30, 2023, the Company advanced this study.

The MOU sets out a framework for Champion and the Pellet Plant Partner to collaborate in order to complete the study, anticipated in the near term. Good progress is expected in the next quarter as work is entering its final stages of estimation and economic modelling. Subject to the study's positive findings and results, the MOU outlines a framework for a joint venture to produce DR grade iron ore pellets to sell to third parties and the Pellet Plant Partner. Pursuant to the Purchase Agreement, Champion is required to comply with various undertakings in connection with the Pellet Plant, including a commitment to design and operate the project using electricity, natural gas, biofuels or renewable energy as main power sources.

7. Key Drivers

A. Iron Ore Concentrate Price

The price of iron ore concentrate is the most significant factor affecting the Company's financial results. As such, net income and cash flow from operating activities and the Company's development may, in the future, be significantly and adversely affected by a decline in the price of iron ore. The iron ore concentrate price fluctuates daily and is affected by several industries and macroeconomic factors beyond the Company's control. Due to the high-quality properties of its greater than 66% Fe iron ore concentrate, the Company's iron ore product has proven to attract a premium over the IODEX 62% Fe CFR China Index ("P62"), widely used as the reference price in the industry. As such, the Company quotes its products based on the high-grade IODEX 65% Fe CFR China Index ("P65"). The premium captured by the P65 index is attributable to steel mills recognizing that higher iron ore grades offer the benefit of optimizing output while also significantly decreasing CO2 emissions in the steelmaking process.

Champion Iron Limited

Management's Discussion and Analysis

(Expressed in Canadian dollars, except where otherwise indicated)

7. Key Drivers (continued)

A. Iron Ore Concentrate Price (continued)

During the three-month period ended September 30, 2023, the index P62 average price was 10% higher than during the corresponding period in 2022. This increase can likely be attributed to support measures introduced to stimulate economic activity, including the property sector, in China. Additionally, the lack of steel output restrictions previously discussed by Chinese authorities further supported a positive undertone as blast furnace utilization rates and hot metal production remained robust in the country. While iron ore prices remained stable through the period, high-grade iron ore premiums declined compared to the same period in 2022; as European steel output declined, impacting a key consuming region for high-grade iron ore, steel mills profitability remained challenged globally, prompting steelmakers to focus on low price, low grade, raw material rather than optimizing production through the use of high-grade iron ore.

According to the World Steel Association1, global crude steel production during the three-month period ended September 30, 2023, witnessed a rise of 2.49% compared to the corresponding period in 2022, which totalled 460.8 million. Notably, China's crude steel production for the same period reached 259.3 million tonnes, increasing 2.85% compared to the previous year as output remained elevated with mills attempting to maximize production ahead of potential production curbs. The world ex-China also recorded a year-over-year increase in crude steel production of 2.03% from 2022, totalling 201.5 million tonnes. The growth was positively impacted by increased steel production originating from Russia, Ukraine and Africa, partially offset by a declining European output.

US$ Spot Price of Iron Ore Fines per dmt (As per Platts IODEX Index)

Average Monthly Iron Ore Price IODEX 65% Fe CFR China

Average Monthly Iron Ore Price IODEX 62% Fe CFR China

A significant portion of Champion's iron ore concentrate sales contracts are structured on a provisional pricing basis, where the final sale price is determined using the iron ore price indices on or after the vessel's arrival at the port of discharge. The Company recognizes revenues from iron ore sales contracts upon vessel departure. In order to estimate the final sales price as assigned by sales contracts, the Company assigns a provisional price upon vessel departure. The estimated gross consideration in relation to the provisionally priced contracts is accounted for using the P65 forward iron ore price at the expected settlement date. The impact of iron ore price fluctuations, compared to the estimated price at the last quarter-end, is accounted for as a provisional pricing adjustment to revenues. As the Company's sales are subject to freight routes that usually take up to 55 days before reaching customers, final price adjustments on tonnes in transit at each quarter-end, which are recorded using forward prices, are exposed to variations in iron ore index prices after the end of the quarter.

During the three-month period ended September 30, 2023, an average final price of US$122.4/dmt was established for the 1.4 million tonnes of iron ore that were in transit as at June 30, 2023, which were previously evaluated using an average expected price of US$121.2/dmt. Accordingly, during the three-month period ended September 30, 2023, positive pricing adjustments of $1.6 million were recorded for tonnes subject to provisional prices as at June 30, 2023. For the total volume of 2.9 million dmt sold during the second quarter, the positive adjustments represent US$0.5/dmt. As at September 30, 2023, 1.3 million tonnes of iron ore sales remained subject to provisional pricing adjustments, with the final price to be determined in the subsequent reporting periods (September 30, 2022: 1.3 million tonnes). A gross forward provisional price of US$125.9/dmt was used as at September 30, 2023, to estimate the sales that remain subject to final pricing.

• https://www.worldsteel.org/