In a letter to shareholders last night, Black Iron (TSE:BKI) CEO Matt Simpson told investors that positive strides continue to be made in advancing its Shymanivske iron ore project in the Ukraine, with discussions for an off-take agreement picking up.
"Despite challenging times in the global capital markets, we have remained busy since releasing the results of our Bankable Feasibility Study (NYSE:BFS) in Q4 2012," wrote Simpson in the letter.
"Much has changed since we successfully completed our initial public offering on the Toronto Stock Exchange. We have strategically deployed the monies raised and have significantly advanced test work and engineering at Shymanivske. Now, more than ever, we believe the project has the potential to become a world class iron ore producer."
Last December, the company filed a feasibility study that showed a 45.9 per cent internal rate of return, a 2.2 year payback period and a US$3.5 billion net present value, on a pre-tax basis, for a 9.2 million tonne per year operation, producing high grade, 68% iron concentrate. Capital costs were projected at $1.09 billion, or $119 per tonne of installed capacity, ranking it in the first quartile of development projects, according to Black Iron's statement.
The iron ore developer said that the release of the report has brought "significantly more" attention to its project, and the potential role of the site as a supplier of high grade iron ore products.
"We have had a number of positive discussions with prospective off-takers with a number of groups actively reviewing our data and testing our ore," Simpson's letter read. "Finding an off-take group, or groups, is a high priority at this stage as we see the off-taker as playing a vital role in our financing plan for the project's development.
Indeed, the company is currently conducting pilot plant test work, with an emphasis on firming up the process flow sheet, equipment sizing and product specifications. It says it may have found ways to get even better magnetic separation stage rates, which could lead to improved project economics.
Black Iron is also looking into the potential to produce a pellet product, and is still awaiting final results, while also confirming the possibility to sell direct reduction concentrate products, opening up more end markets for the company.
It is continuing with this work, and is expected to report final results over the remainder of the year, with other highlights such as securing infrastructure contracts on the horizon.
Black Iron is also strengthening its local presence to draw in more interest. "We have been working diligently to augment our already strong presence in Ukraine, but have come across a unique opportunity to potentially work with a major local company. We hope to execute on this opportunity in the near term, which could further differentiate us from other developers," said Simpson.
The chief executive concluded: "We admit that we are disappointed with recent trading prices but we are working hard to develop the company and to unlock value for shareholders. With the work we have completed since the BFS, the news flow that will follow our recent initiatives, and support from new and existing shareholders, we remain highly motivated to grow the company and execute our strategic plan."
Shares of Black Iron are currently trading at around 12 cents in Toronto.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.