Research Report

Black Iron – High-quality iron ore from Ukraine to drive Green Steel revolution – initiating with C$1.56/sh target.

We initiate coverage of TSX-listed Black Iron Inc (“BKI”), 100% owner of the Shymanivske iron ore project in central Ukraine. We derive a DCF-based target of C$1.56 per share (Dec’21E), implying 179% upside from the current price. A stand-out project with industry leading costs & capital intensity Having been on the brink of construction in 2014, political instability and low iron ore prices led to the shelving of the project until 2018.

However, in Mar’20 BKI released an updated PEA showing a post-tax NPV10% of US$1.4bn and IRR of 34% based on a US$62/t iron ore benchmark (roughly one third of today’s price).

Shymanivske’s strong economics stem mainly from its proximity to existing infrastructure, with rail access 2km from site allowing a choice of five Black Sea export terminals within 230-430km. This drives capital intensity per tonne of annual output of US$95/t. The project will also benefit from a low strip ratio of 1:1 and relatively simple beneficiation to produce a high-grade 68% Fe pellet-feed concentrate, implying a cash cost of US$33/t (normalised to 62% Fe), the lowest among global iron ore developments, according to CRU.