viewBlack Iron Inc.

Black Iron has support from Ukraine’s president to advance massive Shymanivske iron ore project


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

Black Iron Inc. -

Quick facts: Black Iron Inc.

Price: 0.375 CAD

Market: TSX
Market Cap: $93.69 m
  • Top-ranked development-stage iron ore project in a strategic global location
  • Solid plan to finance Shymanivske project with 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.

Shymanivske has the potential to become a major economic driver for Ukraine, which is slowly rebuilding its domestic industry after a years-long conflict with neighbouring Russia. President Volodymyr Zelensky recently hailed the importance of the project to Ukraine’s economy, saying: "This is more than a billion dollars of investment in Ukraine, it is very important for Canada, for Black Iron, and it is important for us.”

How is it doing:

Black Iron continues to make good progress in its discussions with potential partners interested in financing construction of Shymanivske.

In July, the company said it is negotiating investment structure and terms with two construction companies who are interested in investing approximately US$60 million in exchange for the contract to build the mine.

Discussions are also ongoing with potential debt providers and some new and previously engaged European government-backed export credit agencies which can help lower borrowing costs by providing sovereign guarantees.

Additionally, the company has also said that steel mills and global trading houses interested in securing offtake rights to Black Iron's expected high grade 68% iron content concentrate are “closely watching” global travel restrictions in their home countries in anticipation of conducting their due diligence at Shymanivske after Ukraine announced its border reopening.

Black Iron, in particular, has been helped along by news that the ongoing conflict in Ukraine is winding down. Although Shymanivske is not located near the conflict zone, the boost to sentiment has been significant. Black Iron’s shares are up 150% since March.

Inflection points:

  • Progress discussions with Ukraine’s government
  • Secure financing for construction
  • Finalize construction contracts

What the boss says:

Commenting on the strength of the iron ore price trend, Black Iron CEO Matt Simpson told Proactive: "What we’re seeing globally as countries start to relax COVID-19 restrictions is that populations are starting to get back to work. Governments are shifting their stimulus towards major infrastructure projects, which not only gets people working again but solves a lot of infrastructure headaches caused by a lack of upgrades in decades. It’s something that we’re seeing globally – these projects take several years to complete so we’ll see higher iron ore prices for longer."

Contact Angela at angela@proactiveinvestors.com

Follow her on Twitter @AHarmantas

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