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Black Iron chief says firm is "great turnaround opportunity"

A preliminary economic assessment in November last year showed a 36.1% IRR (internal rate of return), the firm said
The firm was forced to pause development of its Ukraine project in 2014

Shares in Ukraine focused Black Iron Inc (TSE:BKI) advanced on Monday as its chief executive described the company as a "really great turnaround opportunity" for investors.

Matt Simpson told SECFilings there were three reasons making now a great time to relaunch the Shymanivske iron ore project.

Here they are:

  • The front-line in Ukraine hasn’t moved in four years and there’s no reason to think that it will move again anytime soon. With greatly reduced geopolitical risk, the company will have an easier time attracting new financiers for the project.
  • Iron-ore prices have experienced a sharp rebound from their lows reached in early-2015, which means that the economics of the project have dramatically improved from a top-line revenue standpoint.
  • The exchange rate in Ukraine has significantly lowered its operational costs. At first, it was 8-to-1 with the U.S. dollar, but it has since fallen to 28-to-1 today. This means that the project has significantly lower costs than originally planned.

“We have a solid management team that had brought this project to the brink of construction previously," added Simpson.

He suggested the only reason why the share price was so low was because, when Russia invaded Ukraine and the iron ore prices fell, the group's two largest shareholders, which controlled about 65% of the share count, just dumped their shares.

"So, we went from a pretty high market cap all the way down to a market cap of around $10 million and a $0.04 share price."

A preliminary economic assessment in November last year showed a 36.1% IRR (internal rate of return), 2.9 year payback period and US$1.66bn NPV (net present value).

Simpson estimates that the company could conservatively generate a 36% after tax internal rate of return with a long term iron ore price of $62.00 per ton.

Iron ore is today selling for around US$75 per ton resulting in even greater investment returns. 

"When reasonable leverage (debt financing) is applied and using today’s actual selling price, these returns could increase to around 65%, making the project extremely attractive," he said.

"The company has already floated the new economics to potential investors and several companies are under a non-disclosure agreement (NDA) considering investment."

Black Iron shares in Toronto added 5% to stand at C$0.10 on the day.

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