Using a 50/50 combination of 4.5x FY27E EV/EBITDA (March year-end, post Phase II expansion) and dividend-adjusted DCF, we generate a rounded price target of A$6.20. We assume a WACC of 7.50%, a long-term P62 iron ore price of US$85/dmt, a long-term P65 premium of 18% and a P69 premium of 39% over the P62 benchmark, implying a long-term P65 and P69 iron ore price of US$100/dmt and US$118/dmt, proceeds from the conversion of warrants of $80m, and some optionality value for Kami project.

This stock is High Risk based upon our quantitative model, but we do not believe assigning a High Risk rating is  supported by other qualitative factors – CIA is already a producer and exporter of iron concentrate from its Bloom Lake operation in Canada, and its Phase II expansion capex will be largely self-funded from free cash flow, which is elevated in the near term due to high C$ iron ore prices. As such, a High Risk rating has not been applied.


We see the following as upside risks to achieving our forecasts and target price for CIA: 1) Canadian dollar P62 iron ore price upside; 2) a higher premium for the P65 Canadian dollar iron ore price; 3) lower-than-expected capex requirements for Phase II expansion; 4) faster Phase II production ramp-up than expected; and 5) mine life extensions beyond the current ~20-year mine life.


We see the following as downside risks to achieving our forecasts and target price for CIA: 1) Canadian dollar P62 iron ore price downside; 2) a smaller premium for the P65 Canadian dollar iron ore price; 3) higher-than-expected capex requirements for Phase II expansion; 4) slower Phase II production ramp-up than expected; and 5) a shorter-than-expected mine life due to the inability to convert resources which are not already also into reserves.