- Black Iron’s plan is to produce high-grade pellet feed in Ukraine
- High-grade pellet feed is forecast to substantially increase in price
- Close proximity to major infrastructure allows for the project to be built in low-cost phases
- Recently ranked by CRU in the lowest cost position globally for undeveloped iron ore pellet feed projects
Canadian-headquartered iron ore exploration and development company Black Iron Inc. (TSX: BKI) (OTC: BKIRF) (GR: BIN) is developing the Shymanivske iron ore deposit located in Kryvyi Rih, Ukraine. The company’s intention is to produce high grade pellet feed for sale to steel mills located in Europe, China and the Middle East. Its experienced management team is leveraging major infrastructure including railway, powerlines and ports that are already in place to advance its 100-percent-owned Shymanivske Project to production.
The global iron ore pellets market was valued at approximately $25.22 billion in 2017. The expectation is that it will reach $50.12 billion by 2024 (http://nnw.fm/T5bWJ). In addition, iron ore prices are rising significantly. BMO Capital Markets, a Canada-based investment bank, has increased its 2019 forecast for benchmark prices by 24 percent to $78 per tonne (from $63 per tonne) and its 2020-2021 price to $70 per tonne. Regarding the worldwide pellet market, BMO is increasing its average Atlantic Basin pellet premium to $75 a tonne in 2019 (from $59 a tonne) and $55 tonne in 2020 (http://nnw.fm/jwQ2J).
At present, Black Iron’s iron ore product sells for approximately $40 per tonne premium (http://nnw.fm/rM2Z4). Iron ore concentrates are one of the vital raw materials used by the steel industry to make sinter or highly valued pellets. Black Iron’s concentrate can be used in either application (http://nnw.fm/KV9p6). The price premium is increasing because of environmental consciousness, mainly in China. A benefit of Black Iron’s ultra-premium product (68 percent iron ore concentrate), upon the Shymanivske Project achieving production, is that less coal is burnt and therefore fewer emissions will be generated per ton of steel produced, as compared to benchmark iron ore containing 62 percent iron.
Moreover, its Shymanivske Project is strategically positioned between markets in Europe, Russia, Asia and the Middle East. This bodes well for the company as the demand for high-grade pellet feed increases across all of these markets. Shymanivske (surrounded by seven producing iron ore mines) lies 330km southeast of Kiev in central Ukraine, in the heart of the KrivBass iron ore mining district (http://nnw.fm/8TrjX).
The Shymanivske Project features a large iron ore deposit with an NI 43-101-compliant resource containing 646Mt Measure & Indicated at 31.6 percent iron. It also has an additional 188Mt Inferred resource at 30.1 percent iron that will be concentrated to the above-mentioned final product containing 68 percent iron. Forecast annual production for phase one of the project is 4.0 dmt (Dry Metric Tonnes), and it is expected to generate sufficient free cash flow to fully self-fund a second phase expansion to produce a total of 8.0 dmt (http://nnw.fm/c12HK). The company can systematically and efficiently phase build because of its close proximity to rail (2 km), power (20 km), ports (five ranging from 230 km to 430 km) and a skilled workforce.
The Shymanivske project has been ranked by the CRU Group in the lowest position of the business cost curve for pellet feed projects currently under development and as the second-lowest in capital intensity (construction capital divided by annual production) within CRU Group’s extensive database (http://nnw.fm/3MXsT). This low-cost position makes the project economics very robust to any shocks in iron ore price while providing a very high return at current and forecast prices.
The foundation for Black Iron’s positivity regarding the Shymanivske Project moving toward production is strong interest from a number of steel mills and international traders looking to secure a long-term contract to purchase product in exchange for making a substantial equity investment for project construction. Additionally, strong interest is being shown by several European banks and international finance agencies to provide debt financing for project construction. Therefore, the company is moving ahead with this compelling pellet feed project to meet forecast global demand while simultaneously offering a dynamic iron ore opportunity to investors.
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
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