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Black Iron pushes on with Shymanivske project plans; targeting PEA for fourth quarter

Last updated: 15:13 30 Oct 2017 EDT, First published: 07:53 30 Oct 2017 EDT

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The firm will start talks with debt finance sources including the EBRD, it said

Iron ore project developer Black Iron Inc (TSE:BKI) updated investors on progress at its Shymanivske project in Ukraine, saying the PEA (preliminary economic assessment) is expected to be completed in the middle of the fourth quarter this year.

The mining group said it expects the study to show "extremely favourable" economics.

It also revealed it will be engaging firms to seek prepaid offtake and/or a joint development partner to significantly reduce the amount of equity that needs to be raised to build the mine.

Debt finance sources..

It will also start discussions with debt finance sources including the European Bank for Reconstruction and Development (EBRD) who have already committed to invest US$350mln into ArcelorMittal's iron ore mine and steel mill, which is beside the Shymanivske pit.

In 2014, the firm had completed a bankable feasibility study (BFS) showing great economics and also reached an agreement with Metinvest to finance a sizable portion of the project's construction costs.

But in the same year, Russia invaded Ukraine and iron ore prices fell dramatically. Black Iron divested Metinvest's position in January last year and currently owns 100% of the project.

Better timing..

The project has been on hold, but now the timing looks right to move the project towards production, it said.

That's due partly, because since 2016, the benchmark 62% iron content prices markedly increased from a low of US$37 per tonne to hit a high of US$95 per tonne in February, 2017, and averaged about US$74 per tonne over the year to date in large part due to the increased global demand for steel.

Notably, the front line of conflict in Ukraine is 450km away from the project site and has not geographically advanced since the invasion occurred over three years ago.

The unpegging of the Ukrainian currency to the US dollar has also meant a lower exchange rate, which is also expected to significantly reduce Black Iron's construction cost and operating costs for the project.

A new PEA..

"In July of this year Black Iron announced that it had commissioned a new preliminary economic assessment (PEA) for the project that will be based on a much more favourable exchange rate and phased development plan starting with four million tonnes per year of production ramping up to eight million tonnes per year using self-generated cash to finance the expansion."

Shares in Toronto fell 13% on the day to C$0.10.

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