Black Iron reports interest from Asian construction companies

Black Iron (BKI CN), a Canadian iron ore exploration
and development company with a project in Ukraine, received expressions of
interest from two multi-billion-dollar Asian engineering, procurement and
construction companies for participation in the construction of Black Iron’s
Shymanivske project, according to Yahoo! Finance, which cited a company report.

The Asian companies might make a USD 45 mln equity
investment (10% of the total project construction cost) in exchange for being
awarded the construction contract. The equity investment will be made over the
construction period, and is therefore likely to be made at a price much higher
than now (CAD 0.095/share, or USD 0.073/share, with market capitalization of
USD 13.5 mln), Black Iron said.

Dmytro Khoroshun: The total
cost inferable from this report, USD 450 mln, corresponds to Phase I (4 mmt per
year of concentrate, three years of construction) of the entire Shymanivske
project (8 mmt per year, to be reached in seven years).

We note that the currently-high iron ore prices,
which Black Iron mentioned in its release as a factor that is attracting
potential investors to its project, should also incentivize iron ore
development projects worldwide, potentially resulting in overinvestment and
supply surplus in a few years.