Black Iron: Spike in Iron Ore Prices Supports Economics of Shymanivske Project
Iron ore prices up ~25% YTD with 65% iron content product currently selling for US$106/tonne as of February 12, 2019; Black Iron plans to produce a 68% iron content product
License revocation and production cuts at the world's largest iron ore producer contributed to upward price trends in the iron ore market
Pellets and pellet feed, as planned to be produced by Black Iron, are expected to receive the most sustainable positive price impact
These market developments further bolster Black Iron's strong project economics
Toronto, Ontario--(Newsfile Corp. - February 14, 2019) - Black Iron Inc. (TSX: BKI) (OTC: BKIRF) (FSE: BIN) ("Black Iron") reaffirms the economic projections for its Shymanivske project, citing a weeks-long surge in iron ore prices after one of the world's largest iron ore producers took 11 mines offline, significantly crimping supply.
On January 25, 2019, one of Vale's mines in Brazil experienced a disastrous tailings dam failure, causing the producer to voluntarily shut ten of its iron ore mines (~40Mtpa production) to minimize the risk of additional upstream tailings dam failure. On February 4, 2019, as reported by several news outlets, regulatory authorities in Brazil ordered Vale to shut its second-largest iron ore mine, taking an additional 30Mtpa of production offline and causing Vale to claim force majeure on its ability to supply iron ore to some of its customers.
The shut-down of Vale's mines resulted in a combined production loss of 70Mtpa, representing ~6% of global consumption. In response, iron ore prices spiked to the current US$87/T for benchmark 62% iron content fines and US$106/T for 65% iron content fines.
While analysts have mixed projections on how long the iron content benchmark price will stay at elevated levels, there is consensus that prices of iron content products - more specifically iron ore pellets - will increase for at least the next few years as the industry responds to lower supply. As a result, premium 68% iron pellet feed product, as planned to be produced by Black Iron, is expected to sell for a significantly higher price than benchmark iron ore for at least the next two to three years.
Shymanivske Project Economics
Producing high grade iron ore (i.e. >65% iron) and pellets requires substantial investment and time to permit and construct suitable production facilities.
Black Iron, however, plans to produce pellet feed containing 68% iron, which is in the top 4% iron content globally. The Company's Shymanivske project is expected to be built in two phases, taking advantage of its proximity to rail, power, ports and skilled labor to reduce upfront capital and time required to generate cashflows. A capital investment of US$436 million is required for the first phase of the Shymanivske project, expected to produce 4 million tonnes a year. An additional US$312 million is required to double the production capacity of Shymanivske project to 8 million tonnes a year and this could potentially be fully funded from the free cash generated by phase 1 production.
On November 21, 2017, Black Iron released its rescoped preliminary economic assessment (the "PEA") based on a long-term price for benchmark 62% iron ore selling for US$62/T and its expected high grade 68% iron content pellet feed at a price of US$97/T delivered to China. Using these sale prices and the estimated US$31/T cost to mine, process, rail and load ocean going vessels with iron ore plus US$11.50/T for shipping to China, the PEA estimated that the Shymanivske project will have an unlevered after-tax net present value of US$1.66 billion using a 10% discount rate and an internal rate of return of 36%.
The following chart shows the after-tax projected project economic returns, assuming 60% debt financing for the mine's construction across a range of iron ore ("Fe") prices, including current much higher actual prices of US$87/T and ~US$6/1% Fe.
To view an enhanced version of Figure 1, please visit:
About Black Iron
Black Iron is an iron ore exploration and development company advancing its 100%-owned Shymanivske project located in Kryvyi Rih, Ukraine. The Shymanivske project contains a NI 43-101 compliant resource estimated to be 646 Mt Measured and Indicated mineral resources, consisting of 355 Mt Measured mineral resources grading 31.6% total iron and 18.8% magnetic iron, and Indicated mineral resources of 290 Mt grading 31.1% total iron and 17.9% magnetic iron, using a cut-off grade of 10% magnetic iron. Additionally, the Shymanivske project contains 188 Mt of Inferred mineral resources grading 30.1% total iron and 18.4% magnetic iron. Full mineral resource details can be found in the NI 43-101 compliant technical report entitled "Preliminary Economic Assessment of the Re-scoped Shymanivske Iron Ore Deposit" effective November 21, 2017, under the Company's profile on SEDAR at www.sedar.com. The Shymanivske project is surrounded by five other operating mines, including ArcelorMittal's iron ore complex. Please visit the Company's website at www.BlackIron.com for more information.
The technical and scientific contents of this press release have been prepared under the supervision of and 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.
The PEA is preliminary in nature, and it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the PEA will be realized.
For more information, please contact:
Black Iron Inc.
Chief Executive Officer
Tel: +1 (416) 309-2138
This press release contains forward-looking information. Forward-looking information is based on what management believes to be reasonable assumptions, opinions and estimates of the date such statements are made based on information available to them at that time, including those factors discussed in the section entitled ''Risk Factors'' in the Company's annual information form for the year ended December 31, 2017 or as may be identified in the Company's public disclosure from time to time, as filed under the Company's profile on SEDAR at www.sedar.com. Forward-looking information may include, but is not limited to, statements with respect to the Shymanivske project, the mineralization of the Shymanivske project, the results of the PEA, the realization of the PEA, the price of iron ore, the impact of Vale shutting down its mines, the Company's ability to construct the Shymanivske project and future plans for the Company's development. Generally, forward looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to: general business, economic, competitive, geopolitical and social uncertainties; the actual results of current exploration activities; other risks of the mining industry and the risks described in the annual information form of the Company. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.
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