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Friday, 27 September 2013
Black Iron enlists shareholder rights plan to protect against opportunistic buyers
Black Iron (TSE:BKI) has adopted a shareholder rights plan to protect the rights of its investors in the case of any takeover bid, citing a "large discrepancy" between its traded market value and the potential of its iron ore project in the Ukraine.
The plan ensures the company's board of directors has adequate time to evaluate such a takeover bid, and if appropriate, seek alternatives to maximize value for shareholders.
"The Rights Plan has not been adopted in response to any specific take-over bid or other proposal to acquire control ofBlack Iron and Black Iron is not aware of any such pending or contemplated proposals," said Black Iron's chairman, Bruce Humphrey, in a statement late Thursday.
"In light of our recent announcement with regards to securing a strong, respected, local development partner, and solidifying infrastructure access for the project, the Board decided we could no longer ignore the large discrepancy that currently exists between the traded market value for the company and the project potential as outlined in our economic studies, including the Bankable Feasibility Study," he continued.
Indeed, the company recently announced an agreement securing access to a deep water port facility in Ukraine for the handling of 9.5 million metric tonnes of iron ore per year from its Shymanivske project, taking another crucial step in de-risking the asset. The Protocol of Intent Agreement was signed between a subsidiary of Black Iron and the Sea Terminal at Port Yuzhny, for guaranteed access to the port's rail car dumper, stockyard, and port loading facilities.
The preliminary deal took effect immediately, Black Iron said last week, and remains in place until a full commercial contract is signed, expected sometime in the middle of 2015 - closer to the sart of production at Shymanivske given that the contract would be on a "take or pay" basis.
The company announced a completed NI 43-101 compliant bankable feasibility study on the Shymanivske project late in 2012, which outlined an operation producing 9.2 million tonnes per year of high-grade 68 per cent iron ore concentrate, projecting a 45.9 per cent internal rate of return, $3.5 billion net present value at an 8 per cent discount rate and 2.2 year payback for a capital investment of $1.1 billion.
Black Iron says it continues to progress on its timeline to production, reaping the benefits of its recently-announced definitive development agreement with Metinvest B.V. as it works to complete similar protocal of intent agreements in support of other core infrastructure needs, such as rail, power, water, gas and land.
"Today's adoption of the Rights Plan provides shareholders with some added protection from an opportunistic acquirer and ensures that a full value maximization review can be completed before any take-over is completed," said Humphrey.