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Black Iron assembling the pieces to restart their Shymanivske iron ore project in Ukraine

Snapshot

The project is situated in a developed iron ore mining region with well-established infrastructure

iron ore mine

Quick facts: Black Iron Inc.

Price: 0.08 CAD

TSX:BKI
Market: TSX
Market Cap: $14.9 m
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  • Top-ranked development-stage iron ore project in a strategic global location
  • Solid plan to finance Shymanivske project with an aim to begin construction in late 2020
  • Compelling project economics benefitting from rising iron ore prices and proximity to infrastructure

What Black Iron does:

Very few companies have dealt with the types of challenges seen by Toronto’s Black Iron Inc (TSE:BKI) (OTCMKTS:BKIRF) over the past five years.

The iron ore company was primed for construction at the Shymanivske iron ore project in Ukraine when, in 2014, Russia invaded Crimea and revolution fell upon the Eastern European country.

Five years later, as the situation has calmed down in Ukraine, the company is ready to put Shymanivske into production at a time when iron ore prices are rising

Shymanivske is strategically located in Ukraine between the markets of Europe, Russia, Asia and the Middle East. The surrounding area, Kryvyi Rih, is a developed iron ore mining region with well-established infrastructure, well away from the conflict zones.

The deposit, which has a resource defined from around 54,000 metres of drilling, lies less then 2 kilometres from two open-pit iron ore mines owned by ArcelorMittal and Metinvest/Evraz Steel.  There is potential to expand the resource via more drilling.

An NI-43 101 resource estimate has shown 646 million tons (Mt) of measured and Indicated mineral resources, consisting of 355 Mt in the measured category, grading 31.6% total iron and 18.8% magnetic iron. A further 188 Mt in the inferred at 30.1% iron, which will be concentrated to around 68% iron.

In December 2017 a re-scoped preliminary economic assessment estimated that Shymanivske will have an un-levered after-tax net present value of US$1.7 billion using a 10% discount rate and an internal rate of return of 36%.

The report envisages a two-phase build of the mine and production plant. The first phase, put at a capital investment of US$436 million, will see production of 4 million tons per annum (Mtpa) of ultra high-grade, low impurity, 68% iron concentrate (top 4% globally) with expansion to 8 Mtpa starting in the third year of production and operational by year five.

An additional US$312 million is required to double the production capacity to 8 million tons, which could potentially be fully funded from the free cash generated by the phase 1 production.

 

How is it doing:

In September, Black Iron announced a financing package of up to C$11 million by way of a convertible security funding agreement with Lind Global Macro Fund LP. The deal gives Black Iron initial access to a C$2.25 million investment, which it drew on in October.

Lind’s investment puts Black Iron in a strong financial position while the company is in the midst of discussions with other investors to finance Shymanivske’s construction, CEO Matt Simpson has told shareholders.

The CEO and his team have been busy meeting with potential investors, offtake partners and political stakeholders in an effort to secure the C$436 million to put Shymanivske into production. Senior management recently met with Ukraine’s newly elected Prime Minister and Minister of Economy to discuss the project’s importance to the country, both in terms of job creation and as a sign that Ukraine is once again open for investment.

A memorandum of understanding for offtake and construction investment was signed with Glencore and there is potential interest from Asian construction firms to consider investing equity-in-kind, whereby the investors would receive shares in Black Iron as a partial payment.

Recently the company struck a milestone agreement with Ukraine's government to acquire a key parcel of land being used by the country's Ministry of Defense for the location of Black Iron's future processing plant, tailings and waste rock stockpiles.

The Ministry of Defense has agreed to transfer a 1,263-hectare parcel of land adjacent to Shymanivske in exchange for a commitment from the company to provide compensation that will largely be used to fund the construction of apartments for servicemen and women.

Inflection points:

  • Secure offtake agreements with end-users
  • Raise remaining capital to finance construction
  • Commence construction on property

What the CEO says:

Reflecting on the company’s rocky journey over the last few years, CEO Matt Simpson remained optimistic in a recent interview with Proactive.

“This is a project that, in (mining company) Glencore’s words, should be built, and it was important for me to stick around and see it through for our shareholders,” he said.

“The economics are even better today given the major depreciation of Ukraine's exchange rate, despite iron ore prices being lower than 2014."

Contact Angela at [email protected]

Follow her on Twitter @AHarmantas

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Full interview: Black Iron Exploration sign deal to acquires land for...

Black Iron Exploration (TSE:BKI-OTC: BKIRF) CEO Matt Simpson joined Steve Darling from Proactive in Toronto to discuss the company signing a deal with the Ukrainian government to acquire 1263 hectares of land adjacent to their project. Simpson talks about, what he says, is a “Win-Win” for both...

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