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Black Iron sees lower up-front CapEx with phased development of Ukranian project

An updated preliminary economic assessment for Black Iron Inc.'s Shymanivske iron ore project in Ukraine outlined a phased development plan to significantly reduce the up-front construction costs.

In the first phase, the project will produce 4 million tonnes per annum of 68% iron ore concentrate, which will expand to 8 mtpa in the fifth year of production.

Building the project in phases allows for a portion of the costs for the second phase of the expansion to 8 mtpa to be funded using internal cash generated from operations during the first phase, Black Iron CEO Matt Simpson said in a Nov. 21 statement.

Total CapEx to build the mine, concentrator, infrastructure and tie-ins in the initial phase will come in at US$435.8 million, while construction of the second phase will begin in the third year and will be completed in the fifth year of operations at an estimated cost of US$312.2 million.

The total CapEx excludes sustaining costs of US$348.3 million spread over the life of mine and closure costs of US$27.9 million.

The total average free-on-board operating costs over the 20 years of operation are estimated at US$31.46/t.

Using this phased build strategy coupled with Ukraine's exchange rate of 28 Ukrainian hryvnias to US$1, the study pegged posttax unleveraged internal rate of return of 36.1%, payback in 2.9 years and US$1.66 billion net present value, at a 10% discount rate.

The updated study incorporated measured and indicated resources of 645.8 million tonnes at 18.8% magnetite ore and inferred resources of 188.3 million tonnes at 18.4% magnetite ore.

In March, the Kryviy Rih city council in Ukraine granted Black Iron permission to push ahead with development plans for Shymanivske following a decision by the Dnepropetrvosk Ecology Department to lift a suspension on exploration in the area.