Black Iron presents updated case for Shymanivske iron ore project

Black Iron (BKI CN), a Canadian iron ore exploration and
development company, presented on Nov. 21 a Preliminary Economic Assessment
(PEA) for its Shymanivske iron ore project in Ukraine, which is an update of a
feasibility study performed in 2014. Assuming a CFR China 62% concentrate price
of 61.9 USD/t and an Fe content premium of 7.2 USD/dmtu, the PEA yields an NPV
of USD 1.7 bln and an IRR of 36%, calculated post tax with a 10% discount rate.
During the first few years, the company plans to produce 4 mmt p.a. of the
premium-quality 68% concentrate, later expanding capacity to 8 mmt p.a.

Black Iron mentioned several potential catalysts for
the next 12 months, among them being obtaining regulatory permits, completing a
revised feasibility study, arranging a prepaid offtake agreement, and
initiating discussions on debt financing.

Dmytro Khoroshun: Black Iron’s assumptions on the iron ore prices indeed reflect recent
developments at the spot market. But if the 62% concentrate price drops to 45
USD/t, and the Fe content premium drops to 2.5 USD/dmtu, which are also not
unreasonable assumptions, the NPV of the Shymanivske project would drop to
zero, we estimate. The upcoming updated feasibility study should offer insight
into the sensitivity of the project’s financial metrics to product prices. More
details should also emerge on Black Iron’s assumptions on
costs, particularly labor, which might grow substantially during the next 20
years from the very depressed current levels.