Black Iron updates on efforts to advance Shymanivske iron ore project to construction

Black Iron Inc (TSE:BKI) (OTCMKTS:BKIRF) (FRA:BIN) has updated on its quest to get its giant Shymanivske iron ore project in Ukraine financed and built, saying it had set a deadline of October 9 for expressions of interest on an offtake deal.

Steel mills and global traders can secure the right to purchase the group’s initial entire expected annual production of 4 million tonnes of pellet feed, in exchange for making a “substantial investment” towards the cost of construction, the group said in a statement.

READ: Black Iron calls for investor bids to secure an offtake agreement on its massive Shymanivske iron ore project in Ukraine 

Shymanivske has a resource estimate of 646 million tons (Mt) of measured and indicated resources, consisting of 355 Mt in the measured category, grading 31.6% total iron and 18.8% magnetic iron. A further 188 Mt of inferred at 30.1% iron, which will be concentrated to around 68% iron.

A preliminary economic assessment estimated that the project 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%.

Upon a review of the expressions received, those who submit the most compelling investment and offtake proposals will be invited to participate in a second round of due diligence, said Black Iron.

“Upon completion of the second round, targeted for mid-Q1 2021, binding submissions to invest and secure offtake rights will be sought,” it added.

Black Iron also confirmed it was “well advanced” in negotiations for a potential royalty investment valued at multiple times its current market cap, which, if secured on attractive terms, has the potential to displace the offtake investment as the main source of equity required for the project.

But the firm also clarified that it would seek to secure an offtake investment to round out the equity required for project construction and product purchase agreements often required by debt investors.

“It is possible, this royalty could be finalized prior to the end of this year,” it added.

Management is also “very close” to finalizing a heads of agreement with a second construction company that will include an investment package valued at around US$60 million, it told investors.

“Black Iron expects to conclude a binding construction/investment agreement after the offtake investment has been secured.”

The Shymanivske project in Kryviy Rih, Ukraine is surrounded by five other operating mines, including ArcelorMittal’s iron ore complex.

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