Friday, 30 March 2012

Black Iron makes major advances at its Shymanivske project

Black Iron (TSE:BKI) said since its public offering one year ago, the company has made major technical and corporate advancements toward the development of its Shymanivske property, in Ukraine.

The iron ore explorer started a 20,000 metre diamond drill program, of which 13,224 metres have been completed. 

The drill program is designed to target the northern part of the Shymanivske property, with the aim of boosting the resource size, the company said. 

Exploration, however, has been put on hold as the company obtains additional permissions required to drill and address a notice from Ukraine's Dnepropetrovsk Region Ecological Inspectorate that suspends work on the Shymanivske and Zelenivske land plots, temporarily.

"Management is currently working to obtain the required permissions and to resolve this issue with the Ecological Inspectorate;
however, it is unclear as to how long this process may take," the company said in a statement. 

The company believes the timing for the re-start of the drill program should not affect the project's current development path, but it does limit the company's ability to upgrade its mineral resources estimate in support of a future potential increase in annual production.

In December, the mineral explorer hired WorleyParsons to finish a feasibility study for its Shymanivske iron ore project, which is
slated to be released in fourth quarter 2012.

WorleyParsons has found a number of ways to improve the project economics with the view to simplify process flow sheet to allow higher annual tonnage and minimize capital and operating costs. 

Additionally, Black Iron said it is focused on finishing the required work to apply for a mining allotment which is the next major
step in Ukraine’s mine permitting process.

The feasibility study will build on the preliminary economic assessment of the project, which showed a low cost pellet plant feed operation with a projected high value and net cash flows.

In October, the company released a preliminary economic assessment on the property. The report had indicated a low cost pellet plant feed operation, with a project high value and net cash flows.

The preliminary report, completed by BBA of Montreal, considered two production scenarios over a 28 year mine life.

The first scenario is a 7.3 million tonne per year iron ore pellet plant feed, while the second scenario is a production alternative
for producing 7.6 million tonnes per year of iron ore pellets.

The first option projected 42.1 percent internal rate of return, with a whopping US$3 billion net present value, at an eight percent discount rate.

Total capital costs came in just shy of $900 million, with a payback period of 2.2 years, and an estimated operating cost for an
initial 20 years of $52.40 per tonne.

The second scenario for Shymanivske outlined the option to produce a higher margin pellet product of 65 percent iron grade, for a higher net present value of US$4.1 billion at the same discounted rate, but with a reduced 35.2 percent internal rate of return, due to raised construction costs.

Black Iron, which is advancing its Shymanivske project in Krivoy Rog, Ukraine, has both a measured and indicated resource of 345 million tonnes with a grade of about 32 percent iron, and 469 million tonnes of inferred resources grading 31 percent iron.

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

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