Location of the Shymanivske iron ore deposit. Image credit: Black Iron Inc.
Canadian-based exploration and development company Black Iron Inc. (Black Iron) has selected Cargill, Incorporated (Cargill) for offtake rights on the initial four million tonnes (Mt) per year of production from its Shymanivske iron ore project (the Project) and a US$75 million finance facility to be used for Project construction.
Located in Kryviy Rih, Ukraine, the Shymanivske Project contains a NI 43-101 compliant mineral resource estimated to be 646 Mt Measured and Indicated mineral resources, consisting of 355 Mt Measured mineral resources grading 32.0 per cent total iron and 19.5 per cent magnetic iron, and Indicated mineral resources of 290 Mt grading 31.1 per cent total iron and 17.9 per cent magnetic iron, using a cut-off grade of 10 per cent magnetic iron.
The Project also contains 188 Mt of Inferred mineral resources grading 30.1 per cent total iron and 18.4 per cent magnetic iron.
Subject to completion of due diligence and successful conclusion of negotiations, Cargill will offtake the production and extend financing of US$75 million for the construction of the Project through a finance facility.
Drawdown on this funding will be subject to certain conditions being met, as is customary for this type of transaction, mainly related to the Project being fully permitted and financed for construction.
Black Iron and Cargill will now start work on definitive binding offtake and financing agreements which reflect the Proposal.
Based on the proposal agreed between Black Iron and Cargill (the Proposal), the offtake agreement will be for an initial term of ten years and will include a profit-sharing component which will align the interests of both parties and thereby generate a strong interdependent relationship of benefit to both parties.
On the profit share, Black Iron will receive 100 per cent of the 65 per cent iron content fines benchmark price, currently approximately $230 per tonne, and share with Cargill a portion of the incremental sale price of its 3 per cent higher (68 per cent) iron content and low impurity magnetite product.
Cargill’s metals business (Cargill Metals) focuses on iron ore and steel trading. Connecting iron ore miners around the world with steel mills and steel end-users in key markets, Cargill Metals trades over roughly 50 Mt of iron ore per year and is also a strategic investor of a number of mining operations in North America and Northern Europe.
Black Iron and Cargill Metals agree that, as the world is becoming more environmentally conscious it will naturally turn to ores with a higher iron content and in forms such as pellets/pellet feed that reduce emissions in the production of steel.
Black Iron’s planned 68 per cent iron content magnetite pellet feed is in the top 4 per cent of global production by iron content and is anticipated to reduce emissions generated in the production of steel by an estimated 30 per cent as compared to the more commonly consumed 62 per cent iron content hematite fines.
It is envisaged that the high-quality product from the Shymanivske iron ore project will attract a premium price in a variety of markets.
Black Iron’s CEO, Matt Simpson, stated: “Black Iron received several offtake and investment proposals and chose Cargill based on its proposal striking the optimal balance of investment quantum, structure and shared vision on the increasing demand for high-grade ore as the global ferrous industry is shifting to become greener.”
“Cargill brings tremendous value not only in strengthening the project funding with a US$75 million financing facility but, more importantly, its global network and local footprints, unique industry insight and successful experience in the technical marketing of high-grade ore to customers around the world,” Mr Simpson said.
Managing Director of Cargill Metals, Lee Kirk, said that the company is pleased to help finance Black Iron’s Shymanivske Project.
“A relationship with Black Iron would be an excellent fit with Cargill Metals’ growth strategy to develop a high-grade and CO2 reducing iron ore portfolio, to help customers navigate the environmental and carbon challenges and opportunities ahead, and to support the sustainability efforts and low carbon ambitions of the ferrous industry,” he said.
Cargill has operated in Ukraine since 1991 with offices in several cities to support its more than 500 in-country employees.
Cargill’s main Ukraine businesses are in the agricultural sector and include a deep-sea vessel terminal at Port Yuzhny close to the terminal Black Iron plans to use to ship its iron ore.
The selection of Cargill as Black Iron’s preferred offtake purchaser has triggered the following activities to bring the Project to a fully financed state for construction:
- Update of the Project’s feasibility study will commence upon receipt and review of proposals already requested.
- Selection and negotiation of binding terms with the preferred engineering, procurement and construction contractor who proposes to invest approximately US$65 million in the Project.
- Commencement of third-party due diligence with a consortium of major international financial institutions on binding agreements for senior debt, US$100 million royalty investment and political risk insurance.
The above activities will be supported by the outputs from the environmental impact assessment and the Ukraine land transfer work which Black Iron is currently ongoing.