- Recent dam failure and closure of 11 mines by leading iron ore producer Vale lowered supplies worldwide, raising prices
- Black Iron is developing the Shymanivske iron ore deposit in Ukraine to produce cost-effective, high grade pellet feed containing 68 percent iron
- Black Iron’s iron pellet feed product is expected to sell for a significantly higher price than benchmark iron ore for at least the next two to three years
Recent supply-side shortages and the resulting tightness in the world’s iron ore market are seen as solid reasons for investors to keep a close eye on Canadian iron ore exploration and development company Black Iron Inc. (TSX: BKI) (OTC: BKIRF) (GR: BIN) as it brings its premium, high-grade iron ore Shymanivske Ukraine project to life. Black Iron’s Shymanivske project is situated in the southern part of the historic KrivBass iron ore mining district, a highly developed iron ore mining region with well-established infrastructure and nearby skilled labor forces. Surrounded by five producing iron ore mines, the Shymanivske project is expected to produce an ultra-high-grade, 68-percent iron ore concentrate with few impurities at very low cost (http://ibn.fm/6MXdh).
The January 25 disaster at the tailings dam at Vale SA’s Corrego do Feijao iron ore mine in Brazil’s mining heartland of Minas Gerais remains in the news as officials search for the missing and tally up the dead. Since the initial incident, involving Vale’s second-largest iron ore mine, Vale, the world’s top producer of iron ore, has announced supply cuts of up to 70 million tons, leading to a steep rise in benchmark spot prices, according to an article on Mining.com (http://ibn.fm/QpMuc). Many iron ore mining companies have also experienced a significant increase in share prices.
Brazil’s government on February 18 banned new upstream mining dams and ordered the decommissioning of all such dams by 2021, targeting the type of structure that burst last month, killing hundreds of people. Iron ore prices are expected to remain high for some time, with the market still focused on the impact of the loss of some supply from Brazil, as Reuters noted in a February 18 article (http://ibn.fm/ozFuE).
Black Iron recently reaffirmed economic projections for its Shymanivske project in a news release (http://ibn.fm/YDhyc), noting that the premium 68 percent iron pellet feed product that Black Iron plans to produce is expected to sell for a significantly higher price than benchmark iron ore for at least the next two to three years. The company intends to build its Shymanivske project in two phases, taking advantage of its proximity to rail, power, ports and skilled labor to reduce the upfront capital and time required to generate cash flow (http://ibn.fm/ItKdF).
A capital investment of $436 million is required for the first phase of the Shymanivske project, which is expected to produce four million tonnes per year. An additional $312 million is required to double the production capacity of the Shymanivske project to eight million tonnes per year, and this could potentially be fully funded from the free cash generated by phase 1 production. Iron ore concentrate is one of the key resources required by the steel industry. Black Iron’s concentrate can be used both in sinter and highly valued pellet production. Prior to the latest Brazilian development, there was already a shortage of pellet feed. The supply/demand gap is set at 133Mt against the current base of approximately 400Mt consumed by 2035. According to Zion Market Research, the global iron ore pellet market was valued at $25.22 billion in 2017 and is expected to reach $50.12 billion by 2024 (http://ibn.fm/zJN4o).
The technical and scientific contents of this article 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.
For more information, visit the company’s website at www.BlackIron.com
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