Black Iron Updates Bankable Feasibility Study Showing 48% IRR, 2 Year Payback and US$3.3 Billion NPV for Shymanivske Project
January 22 2014 - 11:05PM
Marketwired Canada
Black Iron Inc. ("Black Iron" or the "Company") (TSX:BKI) (FRANKFURT:BIN) has
updated its current Bankable Feasibility Study ("BFS"), incorporating pilot
plant test work, completed on its Shymanivske Iron Ore Project located in Krivoy
Rog, Ukraine (the "Project"). The updated BFS outlines an operation producing
9.9 million tonnes per year of high-grade 68% iron ore concentrate, projecting a
48% internal rate of return ("IRR"), two year payback and a US$3.3 billion net
present value ("NPV") at an 8% discount rate.
The primary reason for updating the previous report filed in December 2012 is to
include results from pilot plant test work conducted throughout 2013, which
resulted in an optimized process design and layout, along with revised
infrastructure usage rates confirmed through several recently signed protocols
of intent. The most significant changes implemented are: changing from dry
cobbing to more efficient wet cobbing at a finer particle size resulting in an
increase from 10% to 40% rejection of waste rock prior to grinding; elimination
of the second grinding stage resulting in a 14% reduction in total operational
running active power; reducing the plant footprint through a more optimal
layout; and an 8% increase in iron ore concentrate production from 9.2 to 9.9
million tonnes per year with essentially no change in capital cost.
Financial metrics contained in the BFS report are shown on a pre and after tax
basis and in both cases are inclusive of royalties. Ukraine has a corporate tax
rate of 16% effective January 1, 2014 and a mining royalty rate of $0.09 per
tonne of ore mined (less than 1%) payable to the State.
The Table below summarizes the key elements of the BFS:
High-Grade 68% Concentrate (all currency is US$)
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Measured and Indicated Resources (at 31.6% Total Fe)(i) 646 Mt
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Proven and Probable Reserves (at 31.1% Total Fe)(i) 449 Mt
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Annual Production Rate (average life of mine, post ramp- 9.9 Mt
up year)
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Estimated Mine Life (based on Proven and Probable 14 years
Reserves only)
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Final Product Iron Grade (Fine Iron Ore Concentrate) 68% Fe
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Projected Plant Start-up and Commissioning Q4 2016
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Projected Commencement of Revenue Generation Q1 2017
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Long Term CFR Benchmark Iron Ore Concentrate Price $95 /t
Estimate (62% Fe)
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Total Estimated Capital Costs (excluding sustaining $1,097 million
capital)
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Life of Mine FOB OPEX (Beneficiation, Mine, $44.54 /t
Transportation & Loading) $29.64 /t
Mine Gate OPEX (Beneficiation & Mine)
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Average Annual Cash Flow (pre-tax) $630 million
Average Annual Cash Flow (after-tax) $536 million
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NPV at 8% discount (pre-tax) $3.3 billion
NPV at 8% discount (after-tax) $2.6 billion
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IRR (pre-tax) 48.0%
IRR (after-tax) 39.1%
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Projected Years to Payback (at 8% Discount Rate, pre- 2.0 years
tax) 2.5 years
Projected Years to Payback (at 8% Discount Rate, after-
tax)
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(i) See "About Black Iron" section at end of this press release
Matt Simpson, Black Iron's President and CEO, commented, "The operation outlined
by this BFS for the Shymanivske Project continues to clearly illustrate the
potential for a high-value, low net cost iron ore development project. The
optimized process design and layout developed for this new study, based on
significant pilot scale test work, results in increased annual iron ore
concentrate production of approximately 8%, while holding initial capital costs
virtually unchanged. As a result of these improvements, the Project's access to
significant existing infrastructure (railway, power lines and port), and the
availability of competitively-priced skilled labour, the BFS continues to show
extremely attractive and robust economics."
Financial Sensitivities at Various Discount Rates
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(pre-tax) (after-tax)
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IRR (pre-tax) 48.0% 39.1%
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NPV Payback NPV Payback
Discount Rate US$ (Millions) (Years) US$ (Millions) (Years)
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0% $ 7,165 1.8 $ 5,877 2.1
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6% $ 3,997 1.9 $ 3,177 2.4
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8% $ 3,304 2.0 $ 2,609 2.5
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10% $ 2,756 2.1 $ 2,148 2.6
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The Project has favourable economic potential across a range of discount rates.
The operations outlined in this BFS are projected to generate over U.S. $1,216
million in average annual revenue over the life of mine.
The life of mine strip ratio is estimated at 1.64:1, which is essentially
unchanged from the December 2012 reported value of 1.63:1. On the basis of the
metallurgical test and beneficiation plant design work completed for this BFS,
it is estimated that the 449 million tonnes of reserves will result in a project
life of 14 years based on the average 9.9 million tonnes per year iron ore
concentrate production rate. The Company believes that additional exploration
and definition drilling work have the potential to expand the existing resource
and upgrade the 188 Mt of Inferred mineral resources to the Measured and
Indicated classification, potentially adding up to five years to the Project
life. With successful exploration in the North end of Shymanivske and the
addition of resources from the nearly adjacent Zelenivske Project, Black Iron
expects to be able to support an even higher annual production rate through a
potential second phase expansion, which would be expected to further increase
the Project NPV.
George Mover, Black Iron's Chief Operating Officer, added, "We are pleased with
the level of detailed engineering proficiency and precision that went into this
BFS. Through this process, we confirmed and implemented several improvements to
the work completed in the previous BFS study. As a result, we are now
considering an initial operation with 8% higher annual production, relatively
unchanged initial capital requirements, and only a modest 1.3% increase in
operating costs relative to our previous study. The updated operating costs are
inclusive of firm letters of intent signed with several infrastructure and
utility service providers and were benchmarked against our development partner's
actual operating experience. The Project's capital intensity is improving,
positioning it even lower into the first quartile of worldwide development
projects that should bode well to source project financing; particularly when
coupled with our relatively low operating cost, and proximity to end-user
markets of Turkey, Middle East and Europe."
Details and Assumptions
The total capital expenditure to develop the mine, concentrator and
infrastructure tie-ins is estimated at U.S. $1,097 million to produce 9.9
million tonnes per year of high-grade 68% iron ore concentrate. The capital cost
estimate excludes the sustaining capital cost of U.S. $483 million spread over
the life of mine. Assessment of the preferred port facility, backed up by a
formal protocol (letter) of intent, confirms that sufficient capacity exists for
the planned production.
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Summary of Estimated Initial Capital Costs (US$ in Millions)
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Mine 162
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Beneficiation Plant 475
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Tailings and Waste 21
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Project Infrastructure 113
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Project In-directs (mainly EPCM) 102
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Owner's Costs (includes land acquisition) 81
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Contingencies (15%) 143
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TOTAL 1,097
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The 15% contingency estimate includes a 5% design allowance. The total average
Freight On Board operating costs over 14 years are estimated at U.S. $44.54 per
tonne of high grade 68% iron ore concentrate broken out as follows:
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Summary of Estimated Operating Costs US$/tonne of Concentrate
(Average Mine Life )
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Mine $ 15.46
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Beneficiation Plant $ 12.50
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Tailings & Waste $ 0.08
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Environmental $ 0.26
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Infrastructure (primarily rail & port) $ 15.65
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General & Administration $ 0.59
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TOTAL $ 44.54
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Consistent with practice in the industry, this BFS has been prepared with an
engineering accuracy of +/-15%.
Currency Sensitivity
For the purpose of the BFS an exchange rate of 8.2 UAH per US$ has been used for
the CAPEX (up to January 2016) and 9.5 UAH per US$ for the OPEX and Sustaining
Capital (2017 and beyond) based on review of several economic forecasts.
Variations in the exchange rates from year 2016 onward impact the financial
analysis as follows:
Impact of Ukraine Hryvna Exposure - BFS Currency Sensitivity (US$)
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Exchange Rate as of year 2016 onward (UAH/US$)
----------------------------------------
8:1 9:1 9.5:1 10:1 11:1
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NPV @ 8% discount
pre-tax (billion) $ 3.2 $ 3.3 $ 3.3 $ 3.3 $ 3.4
after-tax (billion) $ 2.5 $ 2.6 $ 2.6 $ 2.6 $ 2.7
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Total Estimated Capital Cost
(million) $ 1097 $ 1097 $ 1097 $ 1097 $ 1097
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Estimated Operating Cost (per tonne) $47.71 $45.48 $44.54 $43.70 $42.24
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Average Annual Cash Flow
pre-tax (million) $ 575 $ 586 $ 590 $ 594 $ 601
after-tax (million) $ 494 $ 502 $ 506 $ 509 $ 515
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Updated Bankable Feasibility Study Report
The updated BFS has been prepared in accordance with the guidelines of National
Instrument 43-101 by the independent firms of Lycopodium Minerals Canada Ltd.;
Soutex Mineral & Metallurgical Consultants; Watts, Griffis and McOuat Limited;
and P&E Mining Consultants Inc. The final BFS technical report, which will also
include the current mineral resource and reserve estimate, will be filed on
SEDAR within 45 days of the publication of this news release.
Analyst and Shareholder Conference Call
Black Iron will host a conference call today, January 23, 2014, at 8:30 a.m.,
EST (1:30 p.m., GMT and 3:30 p.m., EET) to discuss the updated BFS results. To
participate in the call please dial the following:
International: +1 647 788 4901
Toll Free (North America): 1 877 201 0168
To register and listen to the webcast of the call, please go to Black Iron's
website at www.blackiron.com.
Qualified Persons
The contents of this press release have been prepared under the supervision of
and reviewed and approved by Qualified Persons, as follows:
-- Balaji Thangavel, P.Eng., Mauro Batista, P.Eng. and Enayat Shahrokni,
P.Eng., Lycopodium Minerals Canada Ltd., QP for the Plant
Infrastructure, CAPEX, and OPEX;
-- Daniel Roy, P.Eng, Soutex Inc., QP for Metallurgical testing and Process
design;
-- Michael Kociumbas, P.Geo. and Rick Risto, P.Geo., Watts, Griffis and
McOuat Limited, QPs for mineral resources estimate and QA/QC and data
verification;
-- Eugene Puritch, P.Eng., P&E Mining Consultants Inc., QP for the mine
engineering aspects and the mineral reserves estimate.
These persons are Qualified Persons as defined by NI 43-101, are independent of
Black Iron, and have reviewed the content of this press release.
About Black Iron
Black Iron is an iron ore exploration and development company, advancing its 100
percent-owned Shymanivske project located in Kryviy Rih, Ukraine. This project
contains an NI 43-101 compliant resource, with 645.8 Mt Measured and Indicated
mineral resources, consisting of 355.1 Mt Measured mineral resources grading
32.0% Total iron and 19.5% Magnetic iron, and Indicated mineral resources of
290.7 Mt grading 31.1% Total iron and 17.9% Magnetic iron, using a cut-off grade
of 10% Magnetic iron. Additionally, the project contains 188.3 Mt of Inferred
mineral resources grading 30.1% Total iron and 18.4% Magnetic iron. The project
is surrounded by five other operating mines, including ArcelorMittal's iron ore
complex. The Company believes that existing infrastructure, including access to
power, rail and port facilities, will allow for a quick development timeline to
production. Further, the Company holds an exploration permit for the adjacent
Zelenivske project, which it intends to further explore to determine its
potential. Please visit the Company's website at www.blackiron.com or write us
at info@blackiron.com for more information.
Forward-Looking Information
This press release contains forward-looking information which may include, but
is not limited to, statements about the results of the BFS and the development
potential of the Company and its project; the timing and amount of future
exploration and development of the project; and the future financial or
operating performance of the Company and its projects. Often, but not always,
forward-looking information can be identified by the use of words such as
"plans," "expects," "is expected," "budget," "scheduled," "estimates,"
"forecasts," "intends," "anticipates" or "believes" or variations (including
negative variations) of such words and phrases, or by the use of words or
phrases that state that certain actions, events or results "may," "could,"
"would," "might" or "will" be taken, occur or be achieved.
Forward-looking information is based on certain assumptions and analyses made by
the Company and based on known facts at the time. Forward-looking information
involves known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Company and/or its
subsidiaries to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking information contained
in this press release, including, without limitation, those described in the
Company's public disclosure documents which may be found under the Company's
profile on SEDAR. Although the Company has attempted to identify important
factors that could cause actual actions, events or results to differ materially
from those described in such forward-looking information, there may be other
factors that may cause actions, events or results to differ from those
anticipated, estimated or intended. Should one or more of these risks or
uncertainties materialize, or should assumptions underlying such forward-looking
information prove incorrect, actual results, performance or achievements may
vary materially from those expressed or implied by the forward-looking
information contained in this press release. The forward-looking information
contained herein is made as of the date of this press release and the Company
disclaims any obligation to update or review such information or statements,
whether as a result of new information, future events or results or otherwise,
except as required by law.
FOR FURTHER INFORMATION PLEASE CONTACT:
Black Iron Inc.
Michael McAllister
Manager, Investor Relations
+1 (416) 309-2950
info@blackiron.com
Black Iron Inc.
Matt Simpson
President & Chief Executive Officer
+1 (416) 309-2138
info@blackiron.com
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