Issue link: http://resourceworld.uberflip.com/i/855838
A U G U S T / S E P T E M B E R 2 0 1 7 www.resourceworld.com 27 Rate of Return, two-year payback and a $3.3 billion Net Present Value at an 8% dis- count rate (pre-tax) using a long term CFR benchmark iron ore concentrate price esti- mate (62% Fe) of $95/tonne and exchange rate of 8UAH:US $1. Ukraine's currency 'Hryvnia' has sub- stantially depreciated since completion of the Bankable Feasibility Study, positively impacting project economics. Currently, the exchange rate is 26UAH:US $1 and is expected to fluctuate between 26 and 30UAH:$1 over the next five years accord- ing to Trading Economics. FUNDAMENTALS OF THE PROJECT Being in Ukraine, the Shymanivske iron ore deposit is strategically located between markets in Europe, Russia, Asia, and the Middle East. It is located 330 km southeast of Kyiv in central Ukraine in the well- known KrivBass iron ore mining district. The mine site is 8 km from the city of Kryvyi Rih. The ArcelorMittal operations purchased in 2005 are located immediately to the north of the property and Southern Iron Ore Processing (YuGOK)'s property is located immediately to the southeast. The Shymanivske property has rail access to Western Europe and port access via Black Sea to global seaborne iron ore markets. Target markets may include Asia, Western Europe, Turkey, Middle East and Russia. There are several dry bulk tonnage ports, the closest being 140 km from mine site, which is a 20% to 25% shorter trans- port distance to China compared to North and South American producers. Power, port and rail access, combined with the local skilled workforce, provide potential to accelerate development and manage the amount of capital investment. A surplus of low-cost electricity is readily accessible from high voltage power lines that run beside the property 2 km from main state- owned rail line. With the rebound in iron ore prices coupled with greater clarity on the war being constrained to Eastern Ukraine, Black Iron is refocusing efforts on put- ting Shymanivske into production. From November 2016 to the end of March 2017, iron ore prices were above US $80/tonne, hitting a high of $95/tonne in February. Morgan Stanley expects iron ore to average $63 in 2017 and decrease to $58 next year and $54 in 2019. Further, Ukraine's exchange rate has depreciated from 8 UAH:US $1, as used in the Bankable Feasibility Study, to approxi- mately 26 UAH:US $1. Assuming all other factors in the BFS remain the same, Black Iron expects that the current exchange rate will result in lower operating and capital costs to construct the project and largely offset current lower iron ore prices. BBA will prepare a new PEA. The company has a market cap of $13.6 million, $2.7 million in cash and $3.7 million in investments. n