- Black Iron is working to secure financing and land to start construction of its low-cost Ukraine iron ore project
- The mine site is surrounded by other producing iron ore mines and located in close proximity to a railway, powerlines, five ports and skilled labor, allowing for a phased build
- Unexpected incidents in Brazil and Australia have caused significant market players to cut their yearly outlooks for iron ore production, leading to higher price forecasts
The rise in commodity benchmark prices in the iron ore market on the heels of devastating industry setbacks in Brazil and Australia is indicating a corresponding opportunity for mine developer Black Iron Inc. (TSX: BKI) (OTC: BKIRF) (GR: BIN) as the Canadian firm pushes toward funding construction and securing essential land for its Shymanivske iron ore project in the historically rich Kryvyi Rih region of Ukraine.
Bloomberg reported, on April 3, that shortages in supply and questions about when the disruptions will be moderated had driven the benchmark price to $91 after a three-day, 7.3 percent advance (http://ibn.fm/EVIWh), capping a much larger climb from just over $67, where prices stood a year earlier (http://ibn.fm/H1FP6). Importantly, some ore is still in transit, meaning that the real effect of shortages on the iron ore price is yet to be fully felt.
Most of the price change has come as a result of curtailed output by Vale SA (NYSE: VALE), which declared force majeure on fulfillment of its contracts and cut its iron ore plan for the year by about 75 million metric tons after a Brazilian tailings dam failed in January (http://ibn.fm/zt2iq), killing hundreds of people and driving a regulatory crackdown on 56 other dams whose stability is compromised or in question, 20 of which are owned by Vale, according to Bloomberg.
The 2019 shipping-to-market outlet was further quieted when a cyclone hammered Australia’s shipping operations for Rio Tinto Group and BHP Group, leading Rio Tinto to also declare force majeure on parts of its global operations. The global miner reported that the cyclone and a screening plant fire in January would cost it about 14 million metric tons in lost shipping output this year (http://ibn.fm/Nf0WB).
While some of the shortages should be moderated during the coming months, especially those resulting from the Australia cyclone, Bloomberg noted that futures were above $90 a ton and the contract for high-grade ore had continued its rise above $100 a ton, with UBS Group AG analysts forecasting an average price of $83 a ton this year.
Black Iron has been pushing to begin construction at its Shymanivske project by the end of the year and is focused on raising capital to fund construction and securing essential land surface rights for the central Ukraine site. The company recently signed a memorandum of understanding (MOU) with Glencore, one of the world’s largest commodity traders, to make an investment toward funding construction of the project in exchange for securing the offtake of up to the full phase one planned annual production of four million tons. Additionally, the MOU outlines cooperation between Black Iron and Glencore to leverage their relationships to source the balance of funds required to construct the project. Debt finance discussions are ongoing with international financial institutions and Europe-based banks, which have shown interest in the projected robust economics of Black Iron’s project due to its low operating cost and construction capital intensity.
Solid progress is also being made to secure land that’s essential for construction of the processing plant, tailings and waste rock stockpiles. On March 14, Black Iron announced that Ukraine’s Ministry of Defense has developed a plan to transfer the land being sought.
The company closed a non-brokered private placement financing on April 5 that was upsized and fully subscribed. Black Iron noted, on March 29, that a new strategic investor participated in this financing and has expressed an interest in potentially participating in future construction financing and may also be able to assist in negotiations with other parties that could make an investment toward construction of Black Iron’s Shymanivske project (http://ibn.fm/4auLm).
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.
For more information, visit the company’s website at www.BlackIron.com
NOTE TO INVESTORS: The latest news and updates relating to BKIRF are available in the company’s newsroom at http://ibn.fm/BKIRF