- Black Iron and Glencore signed a memorandum of understanding for the purpose of securing funds for construction of the Shymanivske Iron Ore Project
- The project’s favorable characteristics have helped generate interest from various other international investors
- The Shymanivske Iron Ore Project will produce premium iron ore concentrate, which is set to continue growing in price over the next years as demand for steel also increases
A partnership between Black Iron Inc. (TSX: BKI) (OTC: BKIRF) (GR: BIN) and a subsidiary of Glencore plc (OTC: GLCNF) (OTC: GLNCY) is anticipated to provide a material amount of the funding needed for the construction of Black Iron’s Shymanivske Iron Ore Project.
On February 20, the two entities signed a non-binding memorandum of understanding (“MOU”) for the purpose of engaging in formal negotiations for the financing of construction. The MOU calls for Glencore to make a material equity investment in exchange for securing the offtake of up to the full phase one planned annual production of four million tons (http://ibn.fm/qFPyO). The MOU also outlines cooperation between Black Iron and Glencore to leverage their relationships to source the balance of funds required to construct the Shymanivske Iron Ore Project.
Black Iron is in talks with steel mills that would invest alongside Glencore, due to the strong interest in securing ultra-high-grade iron ore supply. The Shymanivske Iron Ore Project is anticipated to deliver premium iron ore concentrate, and this supply could be exchanged for project construction financing.
Currently, the Black Iron management team is focusing on two primary goals – securing sufficient financing and getting the required surface rights for the project. The project is currently doing well in terms of the first goal. In addition to Glencore investing equity, international finance institutions and European banks are highly interested in investing debt due to the project’s robust economic projections and the low operating costs. Good progress is also being made on surface rights, with a site visit attended by representatives from Ukraine’s Ministry of Defense, Dnepropetrovsk Regional Council, Kryvyi Rih City and Black Iron to review options for land transfer occurring during the first week of March.
Black Iron’s Shymanivske Iron Ore Project is located in a highly developed iron ore region in Ukraine, where it takes advantage of well-established infrastructure (paved roads, power lines, a railway and port) and highly skilled, affordable labor.
The economic projections for the project are more than positive. In mid-February, Black Iron reaffirmed the forecast for the Shymanivske Iron Ore Project based on a week-long surge in iron ore prices. The upward market pressure is the result of the world’s largest iron ore producer, Brazil’s Vale (NYSE: VALE), discontinuing work in 11 mines. As a result, the world’s iron ore supply was majorly reduced (http://ibn.fm/HI7Ev).
Experts still cannot predict how long the iron content benchmark price will remain elevated because of the Vale mining accident and subsequent issues in Brazil. There’s a general consensus, however, that the price of iron ore pellets and pellet feed will continue rising in the coming few years.
The premium, 68 percent iron pellet feed product that is anticipated to be derived at Black Iron’s project is expected to sell for a significantly higher price than the benchmark iron ore.
The latest international developments have led analysts to conclude that the time may be right to invest in steel stocks (http://ibn.fm/mbS6I). According to analysts, large steel stocks currently trading at marginal discounts to long-term average EV/EBIDTA may be the best choice.
Black Iron is an advanced stage iron ore exploration and development company that’s currently focused on bringing its 100-percent-owned Shymanivske Iron Ore Project into production. The project features a NI 43-101-compliant preliminary economic assessment that replaces two historic feasibility studies, along with a resource estimate of 646 Mt measured and indicated mineral resource consisting of 355 Mt measured mineral resources grading 31.6 percent total iron and 18.8 percent magnetic iron, and indicated mineral resources of 290 Mt grading 31.1 percent total iron and 17.9 percent magnetic iron, using a cut-off grade of 10 percent magnetic iron.
For more information, visit the company’s website at www.BlackIron.com
The technical and scientific contents of this article have been reviewed and approved by Matt Simpson, P.Eng., CEO of Black Iron, who is a Qualified Person as defined by NI 43-101.
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