Kiev. Ukraine. Ukraine Gate – January 2, 2021 – Economy
The Canadian mining company Black Iron, which is implementing a project to create a new iron ore production in Krivoy Rog (Dnipropetrovsk region), estimated the costs of the project at $ 505 million, of which the feasibility study was $ 452 million.
According to the company’s press release, financial and tax expenses were also added to the feasibility study costs by Black Iron’s financial advisor, excluding the cost overrun mechanism or a guarantee that may be required by creditors with predominant debt – in the amount of an additional 5-15%.
The company sees the following sources of covering these costs: royalty financing – $ 100 million, construction companies – $ 65 million, direct bank financing – $ 260-300 million and an agreement on the purchase of future iron ore products with a steel plant or an international trading house.
According to the release, a two-stage selection process for potential investors is currently underway. The first phase of this process ended on October 9, 2020, and select groups were invited to the second phase, which is likely to include either virtual or in-person site visits.
Prior to the selection, the company noted that interest in the project from iron ore mining groups had increased significantly, given the sharp increase in iron ore prices and China’s plans to diversify its dependence on Australian raw materials. In particular, parties that have already successfully passed due diligence, such as Glencore, are interested in the project in Ukraine.
After signing the purchase agreement, the company expects to enter into a binding agreement with the construction company to secure its investment. Banks, export credit agencies and the royalty investor are then expected to conduct due diligence in parallel with Black Iron’s completion of an updated feasibility study and environmental impact assessment to balance the financing of the project.
It is also reported that in addition to the December 22, 2020 announcement of Black Iron signing the terms of a $ 100 million royalty contract for the mine’s life at a 6.75% royalty on the original 4 million tonnes per year, the Toronto Stock Exchange (TSX) considered this transaction and conditionally approved the provision of 30 million warrants to Perpetual Iron LLC for facilitating and supporting negotiations with an investor. If Black Iron does not enter into a binding definitive agreement with this investor by December 22, 2022, all warrants issued by Perpetual will expire. The issuance of warrants is subject to final approval on the Toronto Stock Exchange.
The payback period of the project is estimated at 2.9 years, stocks of raw materials – 411 million tons, the service life of the project – 17 years. The cost price of 1 ton of iron ore production is $ 32.63.
In October 2010, Black Iron acquired the Cypriot subsidiary of Geo-Alliance Ore East Limited from Geo Alliance Group Limited of the EastOne investment group of Ukrainian businessman Viktor Pinchuk together with licenses for $ 13 million, then renaming it BKI Cyprus. Fixed assets – 99% – in Shimanovskoe Steel LLC and Zelenovskoe Steel (both – Dnipro).
Expansion of the enterprise to 8 million tons per year is estimated at $ 364 million.
In July 2013, after a number of problems with the implementation of the project, Black Iron announced an agreement with the largest Ukrainian mining and metallurgical group Metinvest to develop its iron ore assets. Metinvest BV paid Black Iron Inc. $ 20 million and acquired 49% in BKI Cyprus. However, later Metinvest left the project.
In early 2019, Black Iron announced the signing of a non-binding memorandum of understanding (MOU) with a subsidiary of Glencore plc to negotiate the construction of a concentrate production facility at the Shimanovskoye field, according to which Glencore could provide $ 180 million, or 40%, through equity entry. the necessary funds for the first stage of construction.
The Shimanovskoye iron ore deposit is surrounded by five other active mining operations, including the ArcelorMittal iron ore complex. The existing infrastructure, including access to electricity, rail and port facilities, according to Black Iron, will allow the project to be quickly implemented before the production stage
