Black Iron updates on Shymanivske project progress

Black Iron (BKI CN), a Canadian iron ore exploration and
development company with assets in Ukraine, expects to receive by the end of
August the proposals from several European export credit agencies and banks for
the debt financing of its Shymanivske iron ore project in Ukraine, the company
said in an Aug. 12 press release. Black Iron plans to host at its site in
September a multibillion-dollar Asian construction company that contemplates investing approximately USD 50 mlnin Black Iron’s equity in exchange for the project’s construction contract, the
release said. The results of the July 21 parliamentary elections in Ukraine are
positive because they will allow Zelensky and his party to make legislative
changes to attract and protect foreign investors, the release said.

The company also revealed that after President
Zelensky expressed his support for Shymanivske projectin Canada in early July, Black Iron got concrete help. Particularly, the President’s
office requested that the Ministry of Defense and the Economy Ministry, jointly
with Black Iron’s management, develop a transfer plan for the land parcel that
the company needs.

The recent BKI share price drop might be attributable
to a combination of the decline in global iron ore prices and the shares placed in April becoming
freely tradable, the company commented. Black Iron’s share price dropped 48% to
CAD 0.08 on Aug. 12 from its high of CAD 0.155 on July 17. The latest market
capitalization standing at USD 11.2 mln, which is only a fraction of its future
potential, as the company estimates the NPV of its Shymanivske project in a
range of USD 0.3-2.8 bln, depending on iron ore price and quality premium,
according to the chart in the press release. The levered (60% debt financing) IRRof the project is in the range of 20-83%, according to the release. Black Iron
emphasized that even after the recent plunge in global iron ore prices its
estimates for its project’s NPV and IRR are close to the top end of the ranges it provided.

Dmytro Khoroshun: Black Iron’s plans to start plant construction by the end of 2019 continue to look realistic. We
agree with the company that the Shymanivske project has a significant margin of
safety regarding the iron ore markets. Therefore, Black Iron’s progress will be
one of the litmus tests of Ukraine’s attractiveness for foreign investors.