Black Iron signs MOU with Glencore on mine financing

Black Iron (BKI CN), a Canadian iron ore exploration
and development company, reported on Feb. 20 the signing of a non-binding
memorandum of understanding (MOU) with a subsidiary of Glencore (GLEN LN) in
its attempts to arrange financing for its Shymanivske iron ore project in
Ukraine. As a result, the parties agreed to formally negotiate the financing
terms, Black Iron said in a press release.

The MOU contemplates Glencore making an investment to
help fund the construction of the Shymanivske project in exchange for securing
the offtake of up to the full volume of the planned annual production of the
first phase of the project (four million tons), Black Iron reported. The MOU
outlines cooperation between Black Iron and Glencore to leverage their
relationships to source the balance of funds required to construct the
Shymanivske project, the company said.

The MOU also allows for allocation of offtake to other
equity investors – subject to the investment terms offered – being equal or
superior to those proposed by Glencore, the press release said.

Dmytro Khoroshun: If the
Shymanivske project is realized, even after many years of uncertainties, it
would be positive for Ukraine’s investment image, especially if one of the
equity partners is Glencore. Nevertheless, we are cautious because one of the
main reasons for the long uncertainty with Shymanivske was the situation on the
iron ore market, and the iron ore price volatility is unlikely to go away.

Phase one of Black Iron’s Shymanivske iron ore
project foresees the construction of a mining and enrichment operation with an
annual capacity of 4 mmt of ultra-high-grade concentrate with 68% iron content.
The construction time is approximately two years, and therefore the effects of
the recent Vale mine disaster in Brazil, which lifted iron ore prices, will
likely largely disappear by the time phase one of Shymanivske is operational.