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20130201 bki corp_pres


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20130201 bki corp_pres

  1. 1. A Compelling Iron Ore Investment Opportunity Corporate Presentation February 2013TSX: BKI
  2. 2. Disclaimer Forward Looking Statement TSX: BKIThis Presentation contains ‘‘forward-looking information’’ within the meaning of applicable Canadian securities legislation. Forward-looking information is based on what managementbelieves to be reasonable assumptions, opinions and estimates of the date such statements are made based on information available to them at that time, including those factors discussedin the section entitled ‘‘Risk Factors’’ in the Company’s annual information form for the year ended December 31, 2011 (and dated March 26, 2012) or as may be identified in theCompany’s public disclosure from time to time, as filed under the Company’s profile on SEDAR at Forward-looking information may include, but is not limited to,statements with respect to results of the Feasibility Study (as defined below) and the mineral reserve and resource estimate, the future financial or operating performance of the Company,its subsidiaries and its projects, the development of and the anticipated timing with respect to the Shymanivske project, the ability to obtain financing; and the impact of concerns relatingto permitting, regulation, governmental and local community relations. Generally, forward looking information can be identified by the use of forward-looking terminology such as "plans","expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words andphrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Estimates underlying the results of the Feasibility Studyarise from engineering, geological and costing work of WorleyParsons Canada Services Ltd. (“WorleyParsons”), Watts, Griffis and McOuat Limited (“WGM”), Consulting Geologists andEngineers of Toronto, P&E Mining Consultants Inc. (“P&E”) and the Company. See the technical report relating to the feasibility study for a description of all relevant estimates, assumptionsand parameters. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance orachievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to: general business, economic,competitive, geopolitical and social uncertainties; the actual results of current exploration activities; other risks of the mining industry and the risks described in the annual informationform of the Company. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-lookinginformation, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, asactual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward looking information. TheCompany does not undertake to update any forward-looking information, except in accordance with applicable securities laws.This Presentation does not constitute an offer to sell, or solicitation of an offer to buy, any securities by any person in any jurisdiction in which it is unlawful for such person to make such anoffering or solicitation. No representation or warranty, express or implied, is made as to the accuracy or completeness of the information set out herein, and nothing contained herein is, orshall be relied upon, as a promise or representation, whether as to the past or future.Bankable Feasibility Study (the “Feasibility Study”) – For additional information, please see the Company’s press release dated November 15, 2012.*Resource estimate compiled using historic Soviet data by Hugues de Corta, who is an independent qualified person as defined by NI 43-101. Readers should not place undue reliance onhistorical estimates.*The mineral resource estimate for the Shymanivske Project is based on results from 185 historical drill holes totaling 37,316 meters and 60 Black Iron drill holes, which were drilled duringthe Company’s Twin Hole drill program and the Definition Drill program, totaling 16,518 meters and is effective as of September 2012. Watts, Griffis and McOuat Limted (“WGM”),Consulting Geologists and Engineers of Toronto, Canada, was retained to audit an in-house mineral resource estimate completed by Black Iron. Mr. Michael Kociumbas, P.Geo, Vice-President of WGM and Mr. Richard Risto, P.Geo, Senior Geological Associate of WGM, were retained by Black Iron as independent technical consultants and are Qualified Persons as definedby NI 43-101 and are responsible for reviewing and approving this mineral resource estimate. The Feasibility Study was prepared in accordance with the guidelines of National Instrument 43-101 by the independent firms of WorleyParsons Canada Services Ltd., Watts, Griffis and McOuat Limited and P&E Mining Consultants Inc.*Matt Simpson President & CEO of Black Iron, a Qualified Person as defined by NI-43-101, has reviewed and approved the scientific and technical information in this presentation. 2
  3. 3. What Sets Black Iron Apart?Access to Skilled Labour & Infrastructure –Two of the Most Challenging Iron Ore Project Development Risks TSX: BKI Key Development Risks Taxes/Royalties Human Resources Canada Ukraine Access to Infrastructure Community Opposition Licensing/Permitting Access to Water Africa Electricity Supply Brazil Australia 3 3
  4. 4. 5 Fundamentals for Iron Ore Success A High-Quality Iron Ore Development Opportunity TSX: BKI Good access to skilled labour, power, rail & ports Exceptional • 35km from city of Kryviy Rih (pop. 750k); paved road to site Infrastructure • 2 km from state-owned rail and power lines with surplus capacity & five deep water ports accessible by rail (140-515km) Large iron ore deposit with NI 43-101 compliant resource* • Two properties held – Shymanivske & Zelenivske Sizable • Shymanivske – 646 Mt Measured & Indicated resource @ 31.6% iron; Resource additional 188 Mt of Inferred resource @ 30.1% iron, which will be concentrated to ~68% iron • Potential for resource expansion by further drilling of both deposits Project located in Kryviy Rih, Ukraine; one of the world’s major iron Close to ore districts Target Markets • Close to target markets: W.Europe, Turkey, Russia, Asia and Middle East • Surrounded by 7 other operating iron ore mines High margins due to close proximity to multiple steel mills, relative Compelling labour cost advantage and favourable corporate tax rate of 16% Economics • Bankable Feasibility Study for 9.2Mt of high-grade 68% iron ore concentrate – NPV of US$3.5billion and 45.9% IRR Experienced management team with history of creating value for Skilled shareholders of Consolidated Thompson, RioTinto and Ferrexpo. Leadership Board of Directors with significant Ukrainian political and business operation experience. 4 4* Please see note on Page 2
  5. 5. Project Backed by Forbes & Manhattan Success with Consolidated Thompson’s Bloom Lake Iron Mine TSX: BKI • World class 8Mtpa iron ore concentrateForbes & Manhattan Involvement mine in Quebec • Advanced from exploration stage through development to construction Recently acquired − 8 mtpa capacity (66% Fe concentrate) for $4.9 expanding to 16 mtpa billion − Completed scoping study, 3 feasibility First F&M studies, secured off-take with China’s involvement third largest steel producer (WISCO) $1 mm • Raised over Cdn$1 bn in capital market cap • Attracted and put in place a qualified management team 2005 Q1-2011 5
  6. 6. A Track Record of Iron Ore Success with Consolidated Thompson Iron Mines, Rio Tinto’s Iron Ore Company of Canada, and Ferrexpo TSX: BKI Key Management Board of DirectorsMatt Simpson – President & CEO Bruce Humphrey – Chairman• Former General Manager, Mining for Rio Tinto’s Iron • Former Chairman of Consolidated Thompson Iron Ore Company of Canada Mines• Worked for Hatch designing global metallurgical Jaroslav Kinach refineries • Former Advisor to Ukraine Prime Minister andGeorge Mover – COO former Ukraine Country Head of EBRD• Former Project General Director of Ferrexpo Yeristovo Chris Westdal Mining, Ukraine • Canadian Ambassador to Ukraine (1996-98) and toPaul Bozoki – CFO Russia (2003-06)• Former CFO of CD Capital Partners, operating in Soviet Pierre Pettigrew Union & Ukraine • Distinguished career as a Canadian FederalIgor Buchatskiy – VP Strategy Cabinet Minister• Former GM, International Business Development, John Detmold ArcelorMittal S.A. • Chairman & Founder of Invescture Group, S.A. deAaron Wolfe – VP Corp Development C.V.• Former investment banker with Macquarie Dave PorterNikolay Bayrak – VP Gov’t & Community Relations • Former VP for Rio Tinto’s Iron Ore Company of• Former department head, Ukrainian Ministry & Canada Currently President of MP’s Parliament Club Matt Simpson – President & CEO 6Mike McAllister – Manager Investor Relations
  7. 7. Sound Capital StructureAttractive Valuation with substantial upside TSX: BKI Capital Structure Historical Share Price $0.80Shares Outstanding 141.0 million $0.70 (1) $0.60Warrants 1.7 million $0.50 (2)Stock Options 8.5 million $0.40 $0.30Fully Diluted Shares 151.2 million $0.20 $0.10Market Cap(4) ~US$63.4 million $0.00 31-May-12 31-Jan-12 30-Jun-12 31-Jul-12 31-Aug-12 31-Oct-12 30-Nov-12 29-Feb-12 31-Mar-12 30-Apr-12 30-Sep-12 31-Dec-12Current Cash Balance ~US$11.7 millionDebt Balance nil Analyst Coverage1. 1,653,312 warrants exercisable at $1.40 per share (IPO financing).2. 5,481,250 options exercisable at $1.40 per share; 2,342,500 options exercisable at $0.54 per share; 400,000 options exercisable at $0.49 Maxim Sytchev Daniel Greenspan per share; 260,000 options exercisable at $0.30 per share .3. As at Jan 31, 2013, using a closing price of CAD $0.45 per share. Cliff Hale-Sanders Robin Kozar John Hughes Matthew McDonald David Talbot Craig Miller Ivan Dzvinka 7
  8. 8. Deposits In Mining Friendly Region Adjacent to existing Iron Ore Producers TSX: BKI ArcelorMittal’s Kryviy Rih Iron Ore Complex • Two mining and exploration permits Black Iron’s covering 5.92 km2 Shymanivske Project − Mining permit at Shymanivske, which M&I: 646Mt @ 31.6% has been extensively explored, covering Inferred: 188Mt @ 30.1% 2.56 km2 valid until 2024 − Exploration permit at Zelenivske covering 3.36 km2 valid until 2014Railway lines • Adjacent to ArcelorMittal’s Kryviy Rih iron ore complex and Smart & Evraz’s Black Iron’s YuGOK iron ore mine Zelenivske • Plan to acquire a plot of land from Smart & Evraz’s Project Ukraine Government adjacent to the YuGOK Iron Ore Mine Shymanivske deposit for project waste dumps, concentrator and tailings 8
  9. 9. Large Ore Deposit with Growth Potential TSX: BKI • Banded iron formation consisting primarily of magnetite with some hematite − Iron band thickness ranges from 40-80 m − Only 9.7-21.2 m of overburden − Very clean ore body low in phosphorus, manganese and aluminum • The resource is defined by ~37,000 metres of historical drilling ― Black Iron recently completed a Twin Hole Drill Program consisting of 6,042 metres and a Phase II Drill Program consisting of 11,435 metres of infill drilling Shymanivske Tonnage Fe Tot Fe Mag ― Total iron grade and band width align very well Resource* (Mt) (%) (%) with historical data Measured 355.1 32.0 19.5 • Potential for total combined resource Indicated 290.7 31.1 17.9 expansion of 1.1 to 1.8BT Total Measured − Additional drilling of Shymanivske at North end 645.8 31.6 18.8 of deposit and to depth and Indicated − Exploration of the Zelenivske project Inferred 188.3 30.1 18.4 * Please see note on page 2Tonnage and grade rounded to first decimals. Cut-off grade of 10% Fe Mag 9
  10. 10. Potential Resource Extension at ShymanivskeGround Gravity Shows Iron Ore Mineralization at North End TSX: BKI Potential resource • Ground gravity and magnetic surveys upside to be drilled show potential extension of iron ore mineralization at North end of property as circled in red Property • This area has not been included in the NI boundary 43-101 resource as it has not yet been Very likely sufficiently drilled Iron in ground • The identified area will be a target of a future drill program Likely just dirt in ground Drill hole 10
  11. 11. Extensive Pit Shell Design and 3D ModelCompleted TSX: BKI Property Overview Concentrator Layout 11
  12. 12. Conventional Flowsheet (simplified) Producing High Quality Iron Ore Products TSX: BKI Drill Blast Load & Haul Crush Vertical Mill Ball Mill (x2) HPGR Magnetic SeparatorSulphur Floatation Concentrate Pellet Plant (optional) Fe 68.0% Pellets SiO2 4.5% Fe 65.0% P 0.02% SiO2 4.13% S 0.05% P 0.025% Al2O3 0.43% S 0.01% Mn 0.03% Mn 0.15% P80 32 µm 12
  13. 13. Excellent InfrastructureKey to a Successful Iron Ore Project TSX: BKI • Paved roads to site, located 35km away from the major city of Kryviy Rih which has a skilled work force • Surplus electricity readily accessible from high voltage power lines that run beside property • ~2 km from main state-owned rail line • Confirmation in July 2010 from Ukrainian Government that there is sufficient capacity to haul at least an additional 20 million tonnes of iron ore per annum • 5 deep water ports accessible by rail with iron ore facilities available • Preferred port option is Yuzhny located ~390 km away and providing access to the Black Sea and global seaborne iron ore markets 13
  14. 14. Strategic Global Location Close Proximity to Target Markets with Abundant Port and Rail Access TSX: BKI• Project is surrounded by steel mills in Europe, Turkey and the Middle East• River barge & rail access to Western Europe.• Five dry bulk tonnage ports accessible using railway running beside properties• Approx 20% to 25% shorter transport distance to growth markets of India and China compared to North and South American producers Major Rail Line • Excellent Ukrainian logistical advantages • Densely populated roadway infrastructure • 468 million tonnes of cargo transported via rail • 155 million tonnes of cargo transported via ship 14
  15. 15. Ukraine: A Mining Friendly Country Strong Local and National Support TSX: BKI• Politically stable Democratic republic ― Parliament reelected in October 2012 for a further five year term ― S&P Sovereign Risk rating of B• Economy dominated by agriculture & commodities ― Steel production is Ukraine’s largest industry ― 60% of Ukraine’s total exports are commodity- related (the majority of which is steel)• Strong economic growth − GDP growth of 4.2% in 2010; 5.2% in 2011; 2012 forecast to be 6.5% growth − Member of WTO − Ongoing negotiations to sign “Association • Mining friendly jurisdiction with strong local and Agreement” with European Union national support − Potential key member of the Russia proposed ― ArcelorMittal and Ferrexpo plc have operated Eurasian Trade Union in-country for over 7 years• Large, highly skilled labour force (pop. 45.4 million) • Legislated corporate tax rate reductions from 21% − GDP per capita only $6700/yr in 2012 to 16% in 2014 − Literacy rate >99% • Favourable mining royalties of $0.40 per tonne of ore mined (~1%) to the Government 15
  16. 16. Globally Significant Iron Ore District 4th largest iron ore producer & 2nd largest reserve base TSX: BKI • Black Iron’s projects are located in the heart of Global Distribution of Fe Reserves & Ukraine’s iron ore belt Fe Production – 35km from city of 750,000 people • Iron ore district trends 300 km with sedimentary rock 60% hosted banded iron formations (Dnenpovskog complex) % of World Production and Reserves 50% • Historically well explored resource base but substantially under-exploited due to historic Soviet 40% policy Production Reserves 30% • 15 iron ore mines in Ukraine produced 88 million 21% tonnes in 2012 20% 10% 7% Tarnavatskoye Kirovograd 0% Liponevsky Poltavsky GOK Novokonstantinovsky Yeristovskoye FSU Asia Other Africa N. America Australia S. America Tsentralny Safonovskoye Kryviy Rih Iron Ore Complex Shymanivske Ordzhonikize Gok Zelenivske Ingulestky GOK Kryviv Rih Yuzhny GOK Production Reserves KuksunurskoyeSource: Based on know production and reserves as listed in the USGS 2012 Iron Ore report 16
  17. 17. Permit Process for Shymanivske Deposit Black Iron Remains on Track TSX: BKI Exploration Extraction Mining Land Construction Operations Permit Permit Allotment Allotment Approval Approval Explore Deem deposit Pit shell reserves Obtain surface Start mine Operate mine & resource economical & environmental rights for mine, overburden refinery potential impact Gov refinery & removal & plant approval tailings construction• Conduct • Complete • Complete field • Detailed design • Ensure geophysical Ukraine version environmental • Land use analysis approved compliance with program of scoping study (OVOS) & based on plot (Expertisa) Ukraine Safety, including archeological plan showing Environment,• Drill ore body evaluation of studies for Gov major buildings & • Obtaining the Health and various mining approval agreed construction Employment• State approval methods & high connections to permit laws as check by of explored level • Submit pit shell utilities, rail and regular Gov deposit environmental design & roads (Proekt) • Commissioning inspections impact mapped ground of the facility surface project • Approval of the • Finalize for Gov. approval project location • Registration of environmental the ownership to permits • Approval from all the facility land owners & finalize lease Completed 17
  18. 18. BFS Highlights – High Grade Concentrate High Value, Low Net Cost Iron Ore Development Project TSX: BKI BFS Annual Production: 9.2 Mt Iron Content: 68.0% Estimated Capital Investment: US$1,094 million Estimated Operating Expenses: (average FOB) US$43.97/t (average at Mine Gate) US$29.67/t Net Present Value (8%): US$3.5 billion IRR: 45.9% Annual Average Cash Flow: US$593 million Projected Payback (8%): 2.2 years Estimated Mine Life: 16 years Projected Plant Start-Up Q4 2015 Projected Revenue Commencement Q1 2016 Production, Iron Content, NPV, IRR and Cash Flow have all increased** See Disclaimer on page 2 ** while Capital Intensity decreased from prefeasibility 18
  19. 19. BFS Long-Term Concentrate Price Based on Mean Forecast of 20 Banks with Important Adjustments for Favourable Iron Content & Shipping Distance TSX: BKI $120 $100 +$30 -$10 $80 $60 $115 $95 $40 $20 $0 Analyst Benchmark Shipping Adjustment Aggregate Iron BKI LT Concentrate Price Premium Price* BFS model prices for iron ore concentrate are based on the mean forecasted benchmark price for 62% iron concentrate, shipped from Brazil to China, of 20 investment banks across theglobe: 2016 = $105; 2017 = $97; Long-term = $95. The mean forecasted benchmark price is then adjusted to reflect shorter shipping to target market, and adjusted for iron content atthe rate of $5 per 1% of additional iron content (6 x $5 = $30).** See Disclaimer on page 2 ** 19
  20. 20. Vale (Shimandou 1) African Minerals (phase2) Xstrata (Askaf)** See Disclaimer on page 2 ** African Minerals (DSO) 84 87 90 92 ArcelorMittal (Western… Fortescue (Expansion) Black Iron 109 109 119 Rio Tinto (IOC) 122 Sundance Source: Company data; Renaissance Capital estimates Kumba Ferrexpo (Yeristovo) IRC (Kuranakh) 134 135 141 142 London Mining IRC (K&S) Alderon Auila (Hardey) Xstrata (Zanaga) 157 159 159 160 167 Atlas Iron (Ridley) CAPEX Forecast (US$/t of capacity) Rio Tinto (Pilbara) Average = 162 Gindalbie (Karara) Shymanivske Relative to Other Iron Ore Projects Anglo American (Minas Rio) BHP (RGP5&6) 180 186 188 189 190 Black Iron’s Capital Cost Advantage Aquila (West Pilbara) ArcelorMittal (Western… 192 200 BHP (Samarco) Atlas Iron (Balla Balla) CITIC Pacific (Sino) 211 217 221 Baffinland 222 Xstrata (Geulb el Aouj) 236 Grange Resources… 258 TSX: BKI 20
  21. 21. Favourable Tax and Royalties in Ukraine Black Iron to Other Iron Ore Developers TSX: BKI Pre-Tax & Royalty NPV8 Tax Regime Post-Tax & Royalty NPV8 30% (US$ billions) (US$ billions) +30%1 7.3 39%2 4.9 2.9 3.2 3.3 3.4 3.5 1.8 1.8 1.9 1.5 29% 1.0 0.3 0.5 1.1 0.1 0.3 0.6 Macarthur Macarthur Northland Black Iron Alderon Northland Black Iron Alderon Iron Road Iron Road Brockman Gindalbie Brockman Gindalbie Centaurus Centaurus Millenium Millenium New New 16% Pre-Tax & Royalty IRR Royalties Post-Tax & Royalty IRR (%) 5% (%) 45.9 40.3 32.0 35.0 38.0 2% 25.0 29.3 23.1 16.9 18.9 20.5 22.7 5-8% Northland Northland Millenium Millenium Alderon Alderon Black Iron Black Iron Gindalbie Gindalbie Brockman Brockman New New 1%Source: Company data; Press Release; Research EstimatesDisclaimer: Post-tax and royalty graphs are for illustrative purposes only using simple math. These numbers have not been reported, nor are they substantiated by a financial model. 1 21Super-Profits tax >A$75 million profit. 2 Includes Brazil mining tax of $4 / tonne of iron ore
  22. 22. Black Iron Continues to Deliver Shymanivske Project Development Timeline TSX: BKI 2011 2012 2013 Future H1 H2 H1 H2 H1 H2 Drill metallurgical holes Scoping Study/PEA Definition Drilling Bankable Feasibility Study Land Acquisition Environmental Studies Offtake Permitting Detailed Engineering Construction Production** See Disclaimer on page 2 ** 22
  23. 23. Black Iron Value Proposition TSX: BKI Experienced management team with history of creating value for Skilled shareholders of Consolidated Thompson, RioTinto and Ferrexpo. Leadership Board of Directors with significant Ukrainian political and business operation experience. Exceptional Excellent access to skilled labour, power, rail & ports Infrastructure Large iron ore deposit with NI 43-101 compliant resource* Sizable • 646 Mt Measured & Indicated resource @ 31.6% iron; additional 188 Mt of Resource Inferred resource @ 30.1% iron, which will be concentrated to ~68% iron • Potential for resource expansion to 1.1-1.8 Bt Close to Close to Steel Mills in: W.Europe, Turkey, Russia, Asia and Middle East Target Markets High margins due to close proximity to multiple steel mills, skilled Compelling labour cost advantage and favourable corporate tax rate of 16% Economics • Bankable Feasibility Study for 9.2Mt of high-grade 68% iron ore concentrate – NPV of US$3.5billion and 45.9% IRR* Please see note on Page 2 23 23
  24. 24. CONTACT INFORMATION 65 Queen Street West Suite 805, P.O. Box 71 Toronto, Ontario, Canada M5H 2M5 Investor Relations Toronto: +1 (416) 309-2950 - Michael McAllister, IR Manager London: +44 (0) 207 466 5000 Ukraine: +380 (67) 619-0454 Follow us:TSX: BKI