TORONTO, ONTARIO--(Marketwire - Nov. 15, 2012) - 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)
| NPV at 8% discount rate || $ || 3.5 billion || |
| IRR || || 45.9 || % |
| Total Estimated Capital Costs (excluding sustaining capital) || $ || 1094 million || |
| Life of Mine FOB OPEX (Beneficiation, Mine & Transportation) || $ || 43.97 /t || |
| Mine Gate OPEX (Beneficiation & Mine) || $ || 29.67 /t || |
| 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 || |
| Average Annual Cash Flow || $ || 593 million || |
| Estimated Mine Life || || 16 years || |
| Final Product Iron Grade (Fine Iron Ore Concentrate) || || 68% Fe || |
| Measured and Indicated Resource (at 31.6% iron) || || 645.8 Mt || |
| Proven and Probable Reserves (at 31.1% iron) || || 448.2 Mt || |
| Annual Production Rate (average life of mine, post ramp-up year) || || 9.2 Mt || |
| Projected Plant Start-up and Commissioning || || Q4, 2015 || |
| Projected Commencement of Revenue Generation || || Q1, 2016 || |
| Projected Years to Payback (at 8% Discount Rate) || || 2.2 years || |
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
| IRR (pre-tax) || 45.9% |
| Discount Rate || Pre-Tax |
| Payback |
| 0% || $ || 8392 || 1.9 |
| 6% || $ || 4328 || 2.1 |
| 8% || $ || 3524 || 2.2 |
| 10% || $ || 2887 || 2.3 |
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.
| Summary of Estimated Initial Capital Costs || USD (millions) |
| Mining Capitalized Pre-Stripping Costs || 61 |
| Mine Fleet Lease Costs || 62 |
| Concentrator and Site Infrastructure || 654 |
| Environmental and Tailings Management || 20 |
| Rail Spur || 9 |
| Port Facilities || nil |
| Indirect Costs and Land Acquisition || 189 |
| Contingency (10%) || 99 |
| TOTAL || 1094 |
The total average operating costs over 16 years are estimated at U.S. $43.97 per tonne of high grade 68% iron ore concentrate.
| Summary of Estimated Operating Costs || USD/tonne of |
| Mining || $ || 13.51 |
| Concentrator || $ || 14.30 |
| Site Infrastructure || $ || 0.75 |
| Sales and General Administration || $ || 0.75 |
| Environmental and Tailings Management || $ || 0.37 |
| Rail Transportation || $ || 7.39 |
| Port Facility || $ || 6.90 |
| TOTAL || $ || 43.97 |
Consistent with practice in the industry, this BFS has been prepared with an engineering accuracy of +/-15%.
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
| || (UAH/USD) |
| Exchange Rate as of year 2016 onward || 8:1 || 9:1 || 10:1 || 11:1 |
| NPV @ 8% discount U.S. $ (millions) || 3334 || 3524 || 3677 || 3800 |
| Total Estimated Capital Cost || 1094 || 1094 || 1094 || 1094 |
| Estimated Operating Cost ($/tonne) || 46.73 || 43.97 || 41.75 || 39.96 |
| Average Annual Cash Flow U.S. $ (millions) || 568 || 593 || 613 || 629 |
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.