Canadian mining company Black Iron Inc. with assets in Ukraine intends to submit an updated proposal to the Cabinet of Ministers of Ukraine as part of an investment agreement on the Shymanivske iron ore project.
According to the company’s press release on Thursday, it has received a response from the Ministry of Economy under its investment support agreement, explaining that the legislation is now expiring and Black Iron will be required to update and resubmit the application.
“Black Iron understands that the Ukrainian government’s main focus is on the war. Unfortunately, those not directly involved in the war effort are not working in a more constructive and timely manner with investors, as Black Iron understands that to date no investment has been made with the signing of the agreement,” the statement reads.
The signing of investment agreements with Black Iron and other significant investors is important for improving the living standards of ordinary Ukrainians by supporting foreign direct investment needed to rebuild Ukraine and revitalize its war-torn economy.
In addition, it is emphasized that the constantly changing composition of ministers, coupled with the fact that it took more than two years to finalize the law on investment agreements, makes it difficult for companies to invest in Ukraine’s recovery. As such, it is imperative that Ukrainian government officials not directly involved in the fighting focus on actively working with engaged large investors, such as Black Iron, to develop practical solutions to rebuild the country.
“Black Iron’s management has been informed that the updated legislation on investment support agreements is under final review and should be published within the next few weeks. Upon publication of this law, Black Iron intends to update its Investment Agreement application and supporting documentation for resubmission, hoping to be more directly and timely involved in finalizing the Investment Agreement for submission to the Cabinet of Ministers of Ukraine for approval,” the company concludes.
As reported earlier, Black Iron Inc. continues to promote the Shymanivske iron ore project, having prioritized the conclusion of an investment agreement with the government of the country. The main issue is obtaining a land plot under the jurisdiction of the Ministry of Defense. Discussions with the ministry have led to an agreement on the preliminary amount of money that Black Iron will have to pay as compensation for obtaining this land plot for its use.
The company also announced that it is considering new potential projects.
In October 2010, Black Iron acquired a Cypriot subsidiary from the EastOne investment group of Ukrainian businessman Victor Pinchuk Geo-Alliance Ore East Limited along with its licenses for $13 million, then renamed it BKI Cyprus. The main assets are 99% in Shymanovske Steel and Zelenivske Steel (both in Dnipro).
In July 2013, after a number of problems with the project, Black Iron Inc. announced an agreement with the largest Ukrainian mining and metallurgical group Metinvest to develop its iron ore assets. Metinvest B.V. paid $20 million to Black Iron Inc. and acquired a 49% stake in BKI Cyprus. However, Metinvest later withdrew from the project.
The Shymanivske iron ore deposit is surrounded by five other operating mining companies, including ArcelorMittal’s iron ore complex. According to Black Iron, the existing infrastructure, including access to electricity, railways, and port facilities, will allow the project to be implemented quickly to the production stage.
According to a presentation from May 2021, the expected capital investment in the launch of the first stage is estimated at $452 million, and the second – $364 million. The project envisaged the construction of a factory for the production of premium iron ore with an iron content of more than 68% with a capacity of 4 million tons per year in the first stage and 8 million tons per year in the second.
Canadian mining company Black Iron Inc. with assets in Ukraine, despite the ongoing war, continues to promote the Shimanovsky iron ore project through negotiations with the Ministry of Defense regarding the transfer of land, the execution of an investment support agreement with the government of the country and obtaining permits for the extraction of minerals and their processing.
According to the company’s press release, the land adjacent to the Shimanovsky ore body, necessary for the location of the future processing plant, waste rock warehouses and tailings, belongs to the government of Ukraine and is used by the Ministry of Defense for training purposes. Discussions with the Department of Defense led to an agreement on a preliminary amount of funds that Black Iron would have to pay as compensation for obtaining this piece of land for its use.
“Efforts are now focused on drawing up a binding agreement on the transfer of this land (to the use of Black Iron – IF) after peace is established in Ukraine,” the press release states.
In addition, Black Iron is also negotiating with the government of Ukraine on an investment support agreement that will include several benefits, such as the permanence of legislation (company operating conditions – IF) and exemption from import duties on equipment needed for the project.
In turn, Black Iron management prepared an extensive report covering several aspects of the project, such as the proposed new jobs, tax payments and social benefits. Before submitting this document, it will be necessary to make some changes to the legislation of Ukraine in order for Black Iron to comply with the requirements, and work in this direction is currently in full swing, the press release emphasizes.
“In order to keep our permits valid, work is currently underway in Ukraine to update the geological and mining plans. Finally, while Black Iron stakeholders wait for peace in Ukraine to bring the Shimanovsky project to the construction stage, management is considering new potential projects to increase shareholder value “, – summed up in a press release.
As reported, in October 2010, Black Iron acquired the Cypriot subsidiary of Geo-Alliance Ore East Limited from EastOne investment group of Ukrainian businessman Viktor Pinchuk, together with licenses, for $13 million, then renaming it BKI Cyprus. The main assets are 99% in LLC “Shymanovskoe Steel” and “Zelenovskoe Steel” (both – Dnipro).
In July 2013, after a series of problems with the implementation of the Black Iron project, it announced an agreement with Metinvest, the largest Ukrainian mining and metallurgical group, to develop its iron ore assets. Metinvest B.V. paid to Black Iron Inc. $20 million and acquired 49% in BKI Cyprus. Later, however, Metinvest withdrew from the project.
The Shimanovskoye iron ore deposit is surrounded by five other operating mining enterprises, including the ArcelorMittal iron ore complex. The existing infrastructure, including access to electricity, railway and port facilities, according to Black Iron, will allow the project to be quickly implemented to the production stage.
According to a presentation dated May 2021, the expected capital investment in the launch of the first stage is estimated at $452 million, the second – $364 million. the first stage and 8 million tons per year – at the second.
Canada’s Black Iron, implementing the investment project to create a new iron ore production facility in Kryvy Rih (Dnipropetrovsk region, Shymanivske iron ore project), has welcomed a new law on state support of investment projects with large investments in Ukraine aimed at attracting investments, lower taxes and provision of priority rights to lease state and communal land plots needed to realize an investment project.
The company said in a Thursday press release that upon a company entering into an investment agreement with Ukraine’s Cabinet of Ministers, support can be provided in the following areas that are relevant for Black Iron to construct its Shymanivske project: lower taxes – exemption from corporate taxes for a period of time and value added tax for all new equipment imported for the project; duty exemption – no import duties need to be paid on new equipment; priority land rights – priority rights to lease state and communal land plots needed to realize the investment project; and stabilization of law – the rights and duties of the investor shall be governed by the Ukrainian laws in effect at the date the investment agreement is executed unless a new law improves the investor’s position.
For Black Iron, this could be a savings of up to nearly $170 million through a combination of reduced upfront tax/duty payments to construct the project and initial corporate tax payments.
Black Iron CEO Matt Simpson said that this is a very positive concrete measure initiated by Ukrainian President Volodymyr Zelensky to attract additional investment to Ukraine that is greatly welcomed by international investors, including Black Iron, and should prove to be very effective.
Canadian company Black Iron, which is implementing the investment project to create a new iron ore production facility in Kryvy Rih (Dnipropetrovsk region), has announced its decision to accelerate the expiry date of the common share purchase warrants dated March 29, 2019 and April 5, 2019.
The company said in its press release on July 30 that the warrants were issued in connection with a private placement of units, with each share purchase warrant being exercisable into one additional common share of the company at a price of $0.09 per share until March 29, 2022 and April 5, 2022, as applicable.
“The Warrants are subject to the right of the Company to accelerate the expiry date of the Warrants if the Company’s common shares close at or above $0.15 per share for more than 10 consecutive trading days on the Toronto Stock Exchange (the “Acceleration Event”). The Company is entitled to accelerate the expiry of the Warrants to that date that is 30 business days from the date of issuance of a news release announcing the exercise of the acceleration right,” it said.
Black Iron also noted that the press release constitutes notice to the holders of warrants that the Acceleration Event has occurred and the company has elected to accelerate the expiry date of the Warrants. This notice only affects the warrants dated March 29, 2019 and April 5, 2019 and not any other warrants the company has issued.
In addition, it is reported that Black Iron’s management have recently initiated discussions with institutional investors on a royalty that could contribute materially to the funding required for project construction and are receiving strong interest.
“Negotiation of a Heads of Agreement on the commercial terms to be included in a binding contract for a high potential $60 million investment in exchange for being awarded the construction contract for the Shymanivske project have concluded positively with one company and are well advanced with a second. Further details on this will be disclosed in due course noting that a binding contract would only be entered into with only one of these two companies, should the parties reach an agreement, who will then lead the future planned construction of the project,” the company said.
Canada’s Black Iron with assets in Ukraine has pointed out the increase in the attractiveness of the Shymanivske Iron Ore Project. The company said in a press release that since publishing the re-scoped Preliminary Economic Assessment, benchmark iron ore prices have rallied from $62 per tonne to $70 per tonne as of March 9, 2018.
The company said that based on prevailing iron ore prices and adjustments for product quality mainly related to iron content, Black Iron’s construction capital is estimated to have an estimated $1.4 billion Net Present Value (NPV), assuming 60% debt financing, 10% discount rate and an initial capital cost of $436 million. “Even under highly pessimistic long-term iron ore prices of $50 per tonne, the project generates Internal Rate of Return (IRR) in excess of 20%,” the press service said.
The company said that since releasing the revised project economics, the company has accelerated its efforts to secure the necessary land surface rights for the mine and plant. The leases related to three parcels of land that are required to begin construction are currently held within two Ukrainian government groups. The first parcel of land is held by the Kryvy Rih City Council who have been very supportive. Black Iron’s team and specialist consultants have completed more than 50% of the land allotment study to date.
The final parcel of land is held by Ukraine’s State Forestry, who have submitted the required documents for this land to be re-zoned and transferred to the Kryvy Rih City Council, who will in turn, lease the property to the company. The acquisition of these land packages will represent a significant milestone in beginning construction of the project and the company expects this process to be completed prior to year end. The company continues to pursue various financing options for construction of the project and has received significant interest from multiple groups which are currently conducting due diligence. The potential financiers include several multi billion-dollar steel mills, global trading houses and other mining companies.
