Black Iron: Spike in Iron Ore Prices Supports Economics of Shymanivske Project
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, CANADA, February 14, 2019 – via NetworkWire – Black Iron Inc. (“Black Iron”)
(TSX: BKI; OTC: BKIRF; FRANKFURT: BIN) 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 co mbined 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 l east 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 inve stment 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 poten tially be fully funded from th e 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 benchm ark 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 projecte d project economic returns, assuming 60% debt
financing for the mine’s construction across a range of iron ore (“Fe”) pr ices, including current
much higher actual prices of US$87/T and ~US$6/1% Fe.
About Black Iron
Black Iron is an iron ore exploration and de velopment 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 resour ces grading 31.6% tota l 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% ma gnetic 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 co mpliant 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 Ma tt Simpson, P.Eng., CEO of Black Iron, who is a
Qualified Person as defined by NI 43-101.
Cautionary Statement
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 rese rves. There is no certainty that the PEA will be
realized.
For more information, please contact:
Black Iron Inc.
Matt Simpson
Chief Executive Officer
Tel: +1 (416) 309-2138
Corporate Communications:
NetworkWire (NW)
New York, New York
www.NetworkNewsWire.com
212.418.1217 Office
Forward-Looking Information
This press release contains forward-looking in formation. Forward-looking information is based
on what management believes to be reasonable a ssumptions, opinions and estimates of the date
such statements are made based on information available to them at th at 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 in clude, but is not li mited to, statements with respect to the
Shymanivske project, the mineraliz ation of the Shymanivske projec t, 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 pl ans for the Company’s
development. Generally, forward looking informati on 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, ec onomic, 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 t hat 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 s hould 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.