Black Iron CEO Matt Simpson discusses the company’s progress funding and developing the Shymanivske iron ore project in Ukraine
Black Iron (TSX:BKI,OTC Pink:BKIRF,FWB:BIN) CEO Matt Simpson recently joined the Investing News Network to discuss the company’s progress funding and developing the Shymanivske iron ore project in Ukraine, which is strategically located between the markets of Europe, Russia, Asia and the Middle East.
The high-grade Shymanivske iron ore project has received support from Ukraine’s Prime Minister and all levels of government, which agreed to transfer a key parcel of land to Black Iron according to an MOU in November 2019. The land is expected to be used for Black Iron’s future processing plant, tailings and waste rock stockpiles.
According to Simpson, the high-grade nature of the pellet feed to be produced by Black Iron can be converted into steel much more efficiently, cutting the environmental impact of the production process. “Globally, the world is becoming a lot more concerned about the environment,” said Simpson. “With iron ore, the higher the iron content, the fewer emissions generated per ton of steel. With the higher iron content, instead of putting energy into burning silica or some sort of waste product, you’re putting it into just making the steel itself.”
Simpson believes Black Iron is making significant progress in offtake discussions as it seeks partners for the Shymanivske project. “Our conversations are going extremely well with large steel mills at global trading houses,” said Simpson. “We plan to agree with a large steel mill to sell the first four million tons of production over the initial seventeen years of mine life at a discount to the market prices in exchange for them making a large investment towards project construction.” While Black Iron has been in discussion with companies from around the world, Simpson has recognized restrictions to contain the coronavirus could delay these talks. “We have some groups that are located outside of Asia that are not impacted by the spread of the coronavirus, those groups are progressing at a very good rate. However, we also do have some groups within Asia that are impacted and will take a little bit more time to complete their due diligence because they do want to come to the site. At this point in time, that’s not possible. Overall things are progressing really well, but it may take an extra month or two.”
Simpson feels strongly that Black Iron’s high-grade pellet feed can compete with similar offerings within the iron market. “Black Iron is making a 68 percent pellet feed as our product, which is in the top 4 percent of all iron ore globally. This is very positive in terms of making steel in a more environmentally friendly and sustainable manner. Being a pellet fee, it also further reduces emissions.” he said. “Our location in Ukraine is also quite good because we know the new growing demand for pellet feed is coming from the Middle East and Ukraine is just around the corner from there.”
Moving forward, Simpson is optimistic Black Iron is close to achieving a number of major milestones. “Black Iron has several major milestones it’s going to deliver that could be game-changing for the company and our shareholders this year. The first one is going to be the off-take agreement. We’re just a couple months away from having that done. When we bring in a multi-billion-dollar company, we feel it can’t help but change the share price,” said Simpson. “Right on the back of that, we’re going to secure land that is required for the construction of our tailings and our waste rock. Just prior to the holiday season, I signed a memorandum of understanding with Ukraine’s Minister of Defense, and now we’re looking to sign a binding contract. Once that’s done, the next big milestone towards the end of this year will be our debt financing for construction, followed by the start of construction in early 2021.”
Despite a number of macroeconomic factors holding back the markets, Simpson believes the investment case for Black Iron is compelling relative to its peers. “The biggest differentiator with Black Iron is that our net present value after tax with a 10 percent discount rate is USD$1.4 billion using a very conservative long term iron ore price of $62. Iron ore today trades at around $90,” he told INN. “With iron ore, to be successful, it’s all about proximity to major infrastructure. How far are you away from railways, power lines, ports, and skilled labor? In our case, the company’s mine site is located only two kilometers away from the government railway where we’ve secured capacity. High voltage power lines run right beside that rail which takes you to five different ports. So we’re not building any big infrastructure. What we are building is all done from a city of around 700,000 people only eight kilometers away, where skilled workers make a fraction of what they do in other places around the world.”
For a more comprehensive update from Black Iron CEO Matt Simpson, watch the full video above.
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