Black Iron Inc (TSE:BKI) (OTCPINK:KIRF) revealed Friday that it successfully closed its non-brokered private placement by offering 36,534,420 units at a price of $0.05 per unit to raise gross proceeds of C$1,826,721.
The Toronto-based company said it saw “extremely strong” interest from investors and its cornerstone investor was UK-based RAB Capital, who acquired a roughly 10% ownership stake. RAB Capital has a history of “successful investing in development mining projects” and will be a “long-term shareholder,” Black Iron said in a statement.
"Black Iron offers a unique investment opportunity in a world-class iron ore development,” said Philip Richards, founder and honorary president of RAB Capital.
“We believe its low impurity and high-grade magnetite will be in strong demand from many global smelters. Experienced management and good local infrastructure should make the build process a successful near-term reality," he added.
Black Iron will use the funds to advance its large Shymanivske iron ore project in Ukraine. The developer also said the funds would be used specifically for negotiations to secure land surface rights, construction financing, and general working capital.
Separately, the company said insiders subscribed for units, in a so-called "related party transaction," exempt from the minority shareholder approval requirements of MI 61-101 rules. Each unit consisted of a share and one-third of a share purchase warrant entitling the holder to a share at a price of $0.06 for a period of three years.
Black Iron paid a finder fee of $96,600 in cash in connection with the offering. The securities underlying the units will be subject to a four-month hold period that expires on September 8, 2020.
Lind exercises option
Meanwhile, Lind Global Macro Fund LP has invested an additional C$415,000 into Black Iron by exercising a portion of their C$1.25 million first convertible security option. This was a follow-up to the previously announced convertible security funding agreement with Lind announced in September 2019.
Following the agreement, Black Iron has issued Lind a convertible security with a principal amount of C$415,000. As part of the financing, Black Iron has issued Lind 3,384,991 warrants exercisable for a term of 48 months at an exercise price of $0.0797 per share. The number of warrants issued is equal to half the funded amount divided by the 20-day volume-weighted average price of Black Iron's shares traded on the Toronto Stock Exchange.
This investment builds on the C$2.7 million Lind previously invested in the developer. Black Iron has the option to buy-back outstanding convertible securities in cash at any time with no penalty. If Black Iron exercises the buy-back option, Lind will have the option to convert a maximum of 33% of the outstanding face value of the convertible securities into Black Iron shares.
"It is great to have the financial support from RAB Capital and Lind during this time of uncertainty as both are great firms to have as investors. They take a strong interest in the companies they invest into and are able to make follow on investments to support project development," said Black Iron CEO Matt Simpson.
Simpson also noted that as countries emerge from restrictive coronavirus (COVID-19) lockdowns, economic stimulus packages are likely to “focus on job creation,” largely through “greater spending” to upgrade infrastructure.
“Infrastructure upgrades will entail a large consumption of steel and therefore iron ore. Black Iron's project is well-positioned to become a new supplier of iron ore given its low-cost position and close proximity to growing market demand," added Simpson.
Update on land negotiations
Despite Ukraine's borders currently being sealed to contain the spread of the virus, Black Iron said its management team is having “positive discussions” with large investors to fund project construction. The developer previously said it is seeing “strong interest” from a number of steel mills and global trading companies to sign an offtake agreement for the entire initial 4 million tons of annual production in exchange for construction funding.
“Progress with Asia based investors is currently gaining traction, particularly on the construction financing front,” said the company.
On the other hand, for groups located outside of Asia, discussions are “progressing positively,” but are unlikely to conclude until Ukraine reopens its borders so that “due diligence and commercial negotiations” can be finalized, said Black Iron.
Black Iron also provided a detailed update on its land transfer negotiations with the government of Ukraine. On March 4, Ukrainian President Volodymyr Zelenskiy appointed a new prime minister, minister of economy and minister of defense to step up the pace of economic reforms in the mineral-rich Eastern European nation. Black Iron's file has since been transferred from the Ukraine prime minister’s desk directly to President Zelenskiy.
“Meetings are currently ongoing on the terms and compensation for land transfer,” said the company, while adding that it has very senior personnel located in Ukraine.
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