Black Iron Inc. (TSX: BKI; US-OTC: BKIRF) and Glencore (LON: GLEN) are in talks to finance construction of the junior's Shymanivske iron ore project in the Ukraine and have signed a non-binding memorandum of understanding to begin formal negotiations on the financing-offtake package.
The companies envision an investment from Glencore that will help fund construction in exchange for offtake of production of four million tonnes a year under Black Iron's phase one production plan. The terms and amount require further negotiations.
A PEA released in November 2017 envisioned building in two phases, starting at 4 million tonnes of dry concentrate per year, and ramping up to 8 million tonnes per year. Construction of phase two would start in the third year of production - funded by internal cash flow - and it would be in operation by year five. The debt would be paid down in the first couple years of production and then the third year would generate enough free cash flow to start building phase two.
Including a 17% contingency, the PEA estimated capital investment would be US$436 million for phase one and another US$312 million for phase two, for a minimum 20-year mine life from open pits, which are open for resource expansion, particularly to the north.
Under the terms of the MOU, Glencore has also agreed to work with Black Iron to leverage their relationships to source the balance of funds required. Black Iron can also allocate offtake to other equity investors if the investment terms are equal or superior to these proposed by Glencore. Separately, Black Iron continues its debt financing discussions with international financial institutions and banks in Europe.
Glencore's involvement strengthens Black Iron's capability and draws on the commodity giant's extensive international network, experience and market knowledge, Black Iron says.
Black Iron plans to produce a 68% iron content pellet feed concentrate with very low levels of trace elements that can be used to produce high-quality iron ore blast furnace pellets or premium direct reduction grade pellets. It can also be used as a sweetener in the feed for sinter production, which is then processed to iron in blast furnaces.
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 million inferred tonnes grading 30.1% total iron and 18.4% magnetic iron.
The project in Kryvyi Rih, a highly developed iron ore mining region in Ukraine, benefits from well-established infrastructure well away from conflict zones.
At presstime in Toronto, Black Iron was trading at $0.09 per share within a 52-week range of $0.045 and $0.12 per share. The company has about 160 million shares common shares outstanding for a market cap of $14.4 million.