By James Kwantes
Published first at Patreon
Mining entrepreneurs with chops capture my attention. Chops = serial and serious shareholder value creators.
Especially when they aren't household names in the mining sector.
Michael O'Keeffe fits the bill. The Aussie executive chairman of Champion Iron Mines (CIA-T) has created billions in shareholder value on both sides of the Pacific, yet remains unknown to many retail investors.
An iron ore stock is a deeply contrarian pick during these times of tariffs and economic uncertainty, with gold taking centre stage. O'Keeffe's track record suggests he's a jockey worth following, especially for investors with long-term outlooks.
Forward-looking: Execs Who Make a Statement
O'Keeffe is a metallurgist who spent 20 years at Mount Isa Mines before becoming a managing partner at Glencore Australia. A short summary of his greatest hits:
Secured met coal assets in Mozambique and took Riversdale Mining from a $7-million valuation to a $4-billion sale to Rio Tinto in 2011;
Sold followup company Riversdale Resources, which held Alberta coal resources, to Gina Rinehart's Hancock Prospecting for $806 million;
With Champion, O'Keeffe's master strokes have been two fire-sale purchases. In 2015 Champion bought the Bloom Lake iron ore mine and rail assets in the Labrador Trough out of bankruptcy, paying $10.5 million in cash and assuming $43M in liabilities. Bloom Lake generated $363M in revenue for Champion last quarter. In 2022, Champion bought the nearby Kami high-grade iron ore deposit out of bankruptcy, paying $15M cash and assuming $19.4M in secured debt.
"My DNA is to find brownfield assets and buy them at a time when the commodity is out of favour," he told The Sydney Morning Herald in 2023.
The Bloom Lake (producing) and Kami deposits host high-purity iron ore suitable for electric arc furnaces, a greener method of steel production that is much less carbon-intensive than blast furnaces. The global market for high-purity iron ore is growing rapidly, particularly in markets such as Europe and Japan. Champion benefits from cheap and plentiful hydroelectric power.
Iron ore is the world's largest metals market and the driver for mining behemoths including BHP and Rio Tinto. Both companies have "green iron" initiatives.
In hockey terms, O'Keeffe has good instincts for where the puck is headed next. Like-minded contrarian investors may want to take a page from his playbook.
There have been two meaningful developments recently: an innovative JV deal for the development of Kami that allows Champion to keep majority control, and insider buying by O'Keeffe.
1. On Dec. 19 Champion announced a deal that will see Japanese partners Nippon Steel and Sojitz contribute an initial $245 million for a 49% stake in Kami. Champion will retain 51% and could receive future payments based on Kami's financial performance once operating. A feasibility study is underway.
It's been a theme of my writing here -- companies that manage to retain meaningful stakes in valuable projects can generate outsized returns for shareholders. Maintaining majority control, as Champion has, in a high-quality but capital-intensive project is a master stroke.
2. O'Keeffe already owned an 8.3% stake in Champion stock, which is dual-listed in Australia and Canada. On Feb. 24 he purchased another $568,817 worth of $CIA, paying $5.69 AUD or about $5.11 Canadian. The stock closed today at $4.75 on the TSX.
Interesting side note: Brian Dalton's Altius Minerals (ALS-T) owns a 3% gross smelter royalty (GSR) on Kami, an asset that emerged out of Altius's project generator business.
Champion's deal with Nippon Steel and Sojitz greatly increases the chances of that Kami royalty becoming another of Altius's valuable cash-flowing royalties
Champion Iron Mines (CIA-T)
Price: $4.75
Shares out: 518.25 million
Market cap: $2.46 billion
Disclosure: I own shares of Champion Iron Mines and Altius Minerals in long-term accounts. No business relationship with any company mentioned. This article is not financial advice and all investors need to do their own due diligence.
