Eavex Capital starts coverage on Black Iron

Ukraine-focused Black Iron (TSE:BKI) said Tuesday that Eavex Capital has initiated research coverage of the iron ore explorer.

Black Iron is an iron ore exploration and development company advancing its 100 percent-owned Shymanivske project located in Kryviy Rih, Ukraine.

This project contains a NI 43-101 compliant resource with 373 million tonnes measured and indicated resources grading 31.3% iron and 480 million tonnes of inferred resources grading 30.2% iron.

The project is surrounded by five other operating mines including ArcelorMittal's (NYSE:MT) iron ore complex.

The company has two 100 percent-owned projects: the flagship Shymanivske iron ore property and the Zelenivske iron ore property, located a few kilometres south of Shymanivske.

Black Iron's president and CEO Matt Simpson said: "We are encouraged by the news that Eavex Capital has initiated coverage of Black Iron. With operations based in Kyiv, and with a core focus on Ukraine, Eavex Capital has an intimate knowledge of the local markets in which we operate and is well positioned to provide a unique perspective for current and prospective investors."

Eavex Capital is the eighth independent investment bank to initiate coverage on Black Iron. Research analyst coverage on the company is also provided by: AltaCorp Capital, Cormark, Desjardins, Macquarie (ASX:MQG), RBC (TSE:RY), TD (TSE:TD), and Union Securities.

In December 2011, Black Iron received an initial "outperform" rating and $1.50 price target from RBC Capital Markets.

In the research note, RBC Capital analyst, Robin Kozar, said: "Given the existing iron ore resource, the benefit of existing infrastructure, further resource growth potential, the strong management team and relative valuations, we believe Black Iron provides a compelling investment opportunity at current share price levels."

Ukraine contains roughly 10 percent of the world’s known iron ore reserves, making it the fourth largest iron ore reserve base in the world behind Brazil, Australia, and Russia, according to the US Geological Survey.

A recently completed Preliminary Economic Assessment at Shymanivske outlined, as a base case scenario, an operation producing 7.3 million tonnes of pellet plant feed per annum for 28 years at an average cash cost of $52 per tonne. This would yield a projected 42.1 percent internal rate of return (IRR), with a whopping US$3 billion net present value, at an 8 percent discount rate.

Development capital expenditure was estimated at $896 million in the study, with production start-up targeted for late 2015.

Black Iron is also contemplating the construction of a pelletizing facility, which would result in Black Iron selling 7.6 million tonnes of iron ore pellets per annum for 28 years at a cash cost of $64 per tonne.

Total capex for the pellet production alternative was estimated at $1.571 billion, or $675 million more than the pellet feed base case scenario.

In January, the company said it hired resource and engineering firm WorleyParsons Services Canada to complete a feasibility study for its Shymanivske project.

Established in 1994, Eavex Capital is a full service investment house offering corporate finance and investment banking, research, custody, consultancy and equity/fixed income sales and trading services.

Eavex is a partnership between management and minority shareholder, Swiss-based Accuro Group.