Black Iron Releases Feasibility Study Showing 45.9% IRR, 2.2 Year Payback and U.S. $3.5 Billion NPV for Shymanivske Project
TORONTO, ONTARIO -- (Marketwire) -- 11/15/12 -- Black Iron Inc. ("Black Iron" or the "Company") (TSX: BKI)(FRANKFURT: BIN) is pleased to announce the results of the Bankable Feasibility Study ("BFS") completed on its Shymanivske Iron Ore Project located in Kryviy Rih, Ukraine (the "Project"). The BFS outlines an operation producing 9.2 million tonnes per year of high-grade 68% iron ore concentrate, projecting a 45.9% internal rate of return ("IRR") and a U.S. $3.5 billion net present value ("NPV") at an 8% discount rate.
The BFS was completed by WorleyParsons Canada Services Ltd. ("WorleyParsons"), Watts, Griffis and McOuat Limited ("WGM"), Consulting Geologists and Engineers of Toronto, and P&E Mining Consultants Inc. ("P&E"). Mr. Michael Kociumbas, P.Geo., and Mr. Rick Risto, P.Geo., both with independent firm WGM, are Qualified Persons as defined by NI 43-101. WGM has previously visited the site, collected independent core samples and reviewed the QA/QC data received to date. Mr. Risto has reviewed and approved the underlying sampling, analytical and test data used for the estimate and Mr. Kociumbas is responsible for auditing the in-house mineral resource estimate as supplied by Black Iron. The estimate is classified as Measured, Indicated and Inferred mineral resources, consistent with the CIM definitions referred to in National Instrument 43-101. The complete BFS report will be filed on SEDAR and Black Iron's website within 45 days of the publication of this news release.
The Table below summarizes the key elements of the BFS:
High-Grade 68% Concentrate (all currency is USD, pre-tax)
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NPV at 8% discount rate $ 3.5 billion
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IRR 45.9%
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Total Estimated Capital Costs (excluding sustaining capital) $ 1094 million
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Life of Mine FOB OPEX (Beneficiation, Mine & Transportation) $ 43.97 /t
Mine Gate OPEX (Beneficiation & Mine) $ 29.67 /t
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High-Grade 68% Concentrate Sales Price Forecast - based on
long term CFR benchmark price of $95/T @ 62% iron adjusted
for Black Iron's higher iron content and shorter shipping
distance to end users
(Year 1, 2016) $ 125
(Year 2) $ 117
(Year 3 onward; long-term) $ 115
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Average Annual Cash Flow $ 593 million
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Estimated Mine Life 16 years
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Final Product Iron Grade (Fine Iron Ore Concentrate) 68% Fe
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Measured and Indicated Resource (at 31.6% iron) 645.8 Mt
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Proven and Probable Reserves (at 31.1% iron) 448.2 Mt
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Annual Production Rate (average life of mine, post ramp-up
year) 9.2 Mt
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Projected Plant Start-up and Commissioning Q4, 2015
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Projected Commencement of Revenue Generation Q1, 2016
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Projected Years to Payback (at 8% Discount Rate) 2.2 years
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Matt Simpson, Black Iron's President and CEO, commented, "The operation outlined by this BFS for the Shymanivske Project clearly illustrates the potential for a high-value, low net cost iron ore development project. The projected high NPV, net cash flows, and relatively low unit cost for concentrate arise from Black Iron's advantages, which include an iron ore deposit with significant existing infrastructure (railway, power lines and port) in addition to access to low-cost skilled labour. We continue to deliver on our objective timetable and our results to date, coupled with this engineering study, make a compelling case for expediting the development of the Shymanivske Project."
Financial Sensitivities at Various Discount Rates
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IRR (pre-tax) 45.9%
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Pre-Tax
NPV USD Payback
Discount Rate (Millions) (Years)
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0% $ 8392 1.9
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6% $ 4328 2.1
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8% $ 3524 2.2
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10% $ 2887 2.3
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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. $1136 million in average annual revenue over the life of mine.
On the basis of the metallurgical test work completed for this BFS, it is estimated that the process weight recovery of 32.7% would yield a project life of 16 years at an average strip ratio of 1.63:1, according to the current estimated resource. The Company believes that additional exploration and definition drilling work have the potential to expand the existing resource and upgrade the 188.3 Mt of Inferred mineral resource to the Measured and Indicated classification, potentially adding up to 5 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, which would further increase the already favourable Project NPV.
George Mover, Black Iron's Chief Operating Officer, added, "We are pleased with the level of engineering expertise and rigour behind this BFS. Through the process, we implemented several improvements to the work completed last year for our Preliminary Economic Assessment. We have found and verified solutions to optimize the process flow sheet, to reduce the stripping ratio through mine phasing, and to increase our weight recoveries. As a result, we are now considering an initial operation with 26% higher annual production and 16% lower operating costs than in our previous study. The relatively low-unit operating cost of production, coupled with close proximity to Turkish, European, and Middle East customers, means that this operation has the potential to remain profitable despite fluctuations in the iron ore price."
Details and Assumptions
Total initial capital expenditures are estimated at U.S. $1094 million to produce a high-grade 68% iron ore concentrate. The capital cost estimate excludes the sustaining capital cost of U.S. $689 million. The initial assessment of the preferred port facility indicates that sufficient capacity currently exists for the planned production.
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Summary of Estimated Initial Capital Costs USD (millions)
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Mining Capitalized Pre-Stripping Costs 61
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Mine Fleet Lease Costs 62
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Concentrator and Site Infrastructure 654
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Environmental and Tailings Management 20
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Rail Spur 9
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Port Facilities nil
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Indirect Costs and Land Acquisition 189
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Contingency (10%) 99
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TOTAL 1094
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The total average operating costs over 16 years are estimated at U.S. $43.97 per tonne of high grade 68% iron ore concentrate.
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USD/tonne of
Concentrate
(Average
Summary of Estimated Operating Costs Mine Life)
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Mining $ 13.51
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Concentrator $ 14.30
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Site Infrastructure $ 0.75
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Sales and General Administration $ 0.75
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Environmental and Tailings Management $ 0.37
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Rail Transportation $ 7.39
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Port Facility $ 6.90
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TOTAL $ 43.97
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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 8.1 UAH per USD has been used for the CAPEX (up to Jan. 2016) and 9.0 UAH per USD for the OPEX and Sustaining Capital (2016 and beyond). Variations in the exchange rates from year 2016 and beyond impact the financial analysis as follows.
Impact of Ukraine Hryvna Exposure - BFS Currency Sensitivity
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(UAH/USD)
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Exchange Rate as of year 2016 onward 8:1 9:1 10:1 11:1
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NPV @ 8% discount U.S. $ (millions) 3334 3524 3677 3800
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Total Estimated Capital Cost 1094 1094 1094 1094
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Estimated Operating Cost ($/tonne) 46.73 43.97 41.75 39.96
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Average Annual Cash Flow U.S. $
(millions) 568 593 613 629
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Bankable Feasibility Study Report
The BFS has been prepared in accordance with the guidelines of National Instrument 43-101, by the independent firms of WorleyParsons Canada Services Ltd., Watts, Griffis and McOuat Limited and P&E Mining Consultants Inc. WorleyParsons is a leading full-service engineering firm and has experience in the sector that includes the design and construction supervision of many components of some of the world's leading iron ore assets. The final BFS technical report, which will also include the current mineral resource estimate, will be filed on SEDAR within 45 days of the publication of this news release.
Pellet Plant Alternative
Black Iron has investigated an alternative production scenario, which would include the production of high-grade iron ore pellets. The pellet production alternative is not included as part of the BFS.
Analyst and Shareholder Conference Call
Black Iron will host a conference call today at 8:00 a.m., EST (November 15, 2012) to discuss the BFS results. To participate in the call please dial the following:
International: +1 416 340 8527
Toll Free North America: 1 877 240 9772
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:
-- Rob Spiering, P.Eng., Project Manager, WorleyParsons QP for the Process
Plant and Infrastructure;
-- Michael Kociumbas, P.Geo. and Rick Risto, P.Geo., Watts, Griffis and
McOuat Limited, QPs for mineral resources and QA/QC and data
verification;
-- Eugene Puritch, P.Eng., P&E Mining Consultants Inc., QP for the mine
engineering aspects.
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. For further information, please see the technical report of the Company, which is available on SEDAR at www.sedar.com.
Additional information about the Project can be found in the technical report filed on SEDAR at www.sedar.com, entitled "Resource Estimate - Shymanivske Deposit in Ukraine," and dated January 31, 2011.
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 FS 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.
Contacts:
Black Iron Inc.
Michael McAllister
Manager, Investor Relations
+1 (416) 309-2950
Black Iron Inc.
Matt Simpson
President & Chief Executive Officer
+1 (416) 309-2138
info@blackiron.com
www.blackiron.com