Canada’s Black Iron, implementing the investment project to create a new iron ore production facility in Kryvy Rih (Dnipropetrovsk region), has said that it received expressions of interest from European banks and export credit agencies to provide $250 to $300 million of debt.
The company said in a press release that Black Iron management continue to make sound progress arranging the financing for Shymanivske project construction.
Construction of phase one to produce four million tonnes per year of 68% iron content pellet feed is estimated to cost $436 million, as further detailed in Black Iron’s most recent Preliminary Economic Assessment. As is typical for financing the development of mining projects, based on discussions with potential investors and financiers, the company estimates that some $175 million (40%) will be equity and the balance around $261 million (60%) financed as debt, not including financing charges and working capital.
Black Iron CEO Matt Simpson said that strong interest from well known, highly regarded, providers of debt financing for project construction is seen.
“The indicative interest rates, grace period prior to starting repayment and loan duration in the expressions of interest received by the Company are very competitive. The recent announcement of the MOU between the Company and Ukraine’s government to transfer a critical parcel of land to the Company is an important milestone that both anchor offtake and debt investors have been waiting to see. The Company is currently negotiating binding terms for the land transfer, including the compensation amount, and expect this to conclude following a binding product sale (i.e. offtake) agreement as a portion of the funds invested by the offtake company will be used to cover the land transfer costs. Now that an MOU on land transfer has been reached, we look forward to commercial negotiations for project construction financing being accelerated,” he said.
Majority of the required equity for project construction is anticipated to come from offtake by a large trading company and/or steel mill that is interested to purchase Black Iron’s pellet feed on a long-term contract at a slight discount to market price in exchange for making both a prepayment and acquiring ownership in the Shymanivske project. Several multi-billion companies, including Glencore, as previously announced, are currently conducting due diligence to consider such an investment.
Additionally, there are two Asia based construction companies that have conducted site visits and expressed serious interest to invest up to $50 million of equity in kind in exchange for being awarded the construction contract.
From a sequence standpoint, discussions are being held simultaneously with equity and debt investors as both are ultimately required to fund project construction. It is likely the anchor equity and offtake investor will be announced first followed by completion of an updated feasibility study and environmental impact assessment upon which the debt financing can be secured to allow for construction start around the end of next year, the company said.
Iron ore mines run by Ukraine’s Metinvest raised output in January-September 2019. An industry source told Interfax that Northern Mining (Pivnichny GOK) produced 6.542 million tonnes of merchant iron ore pellets in the 9M, up 1% year-on-year, including 422,000 tonnes in September; and 9.147 million tonnes of iron or concentrate, up 13.4%, including 923,000 tonnes in September.
Central Mining (Central GOK) raised merchant pellet output 0.1% in 9M 2019 to 1.779 million tonnes and concentrate 1.8% to 3.259 million tonnes, including respectively 209,000 tonnes and 390,000 tonnes in September.
Inhulets Mining (INGOK) reduced concentrate output 0.9% in 9M to 8.351 million tonnes, including 918,000 tonnes in September.
The vertically integrated Metinvest’s main shareholders are System Capital Management (SCM, 71.24%) and Smart Holding (23.76%).
Ukrainian businessman Ihor Kolomoisky has proposed to increase the iron ore production royalty from 8.8% to 75%. “… If you export raw materials [from the country], then give back at least 75% from $80 per tonne – this is $60, and keep $20,” Kolomoisky said in an interview with the Censor.net ezine.
According to the businessman, these current royalty rates stimulate the export of raw materials.
“However, there is a second option – don’t sell ore right away!.. Produce steel – you have capacities, and instead of loading enterprises you reduce capacities, because now it is easier for you to sell ore, and not engage in production,” Kolomoisky said.
In addition, he stated the need for nationalization of the largest enterprises and the development of mineral resources.
“For the salvation of Ukraine, the universal nationalization of large state-forming enterprises plus the nationalization of the deposit development, that is, in several sectors, we need state capitalism,” the businessman said.
Ukrainian metallurgical enterprises are expected to increase steel production by 4% by the end of the year compared to 2018, up to 21.895 million tonnes.
According to background documents of Economic Development and Trade Ministry available for Interfax-Ukraine, a total rolled steel output will see 3% rise by the end of 2019, up to 18.937 million tonnes, when pig iron will see 0.4% down, to 20.748 million tonnes.
Such forecast was made following the performance indicator of January-July 2019, the ministry said.
The agency’s source in the ministry also said that under ongoing trends scrap metals supplies to the enterprises would decrease by 3%, to 3.238 million tonnes.
Besides, pipe output in 2019 may grow by 19%, to 1.144 million tonnes, coke output will drop by 5%, to 10.305 million tonnes, metalware output will drop by 1%, to 186,000 tonnes.
Meanwhile, the metal and mining enterprise can increase iron ore extraction by 4%, to 76.095 million tonnes, iron ore concentrate output by 5%, to 63.568 million tonnes, ready iron ore raw materials may increase by 1%, to 53.696 million tonnes. Sinter cake output will remain on the level of previous year with 31.706 million tonnes, steel pellets output will increase by 3% reaching 21.989 million tonnes.
Ukraine’s ore mining enterprises increased exports of iron ore and raw materials (IORM) in physical terms by 8.5% in January-July 2019 year-on-year, to 23.311 million tonnes. Export of IORM for the mentioned period in monetary terms grew by 28.9%, up to $2.92 billion, according to a customs statistics report posted by State Fiscal Service of Ukraine.
The bulk of iron ore was exported to China (27.07% of total imports in monetary terms), Poland (13.69%), and Czech Republic (10.52%).
In January-July 2019, Ukraine imported 108 tonnes of IORM worth $56,000 from the Netherlands(51.79% in monetary terms), Great Britain (39.29%) and Czech Republic (3.57%).
Ukraine’s ore mining enterprises increased imports of iron ore and raw materials (IORM) in physical terms by 33.6% in January-July 2019 year-on-year, to 775,935 tonnes.
Import of IORM for the mentioned period in monetary terms grew by 26.4%, up to $143.995 million, according to a State Fiscal Service of Ukraine customs statistics report.
The bulk of iron ore was imported from Ghana (74.74% of total imports in monetary terms), Russia (20.74%), and Georgia (3.95%).
In January-July 2018, Ukraine exported 18,983 tonnes of IORM worth $1.693 million to Czech Republic (30.38%), Hungary (28.43%) and Slovak Republic (23.29%), while through seven months of 2018 the country exported 29,491 tonnes for $2.144 million.