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20140603 bki corp_pres


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20140603 bki corp_pres

  1. 1. A Compelling Iron Ore Investment Opportunity Corporate Presentation June 2014 TSX: BKI
  2. 2. TSX: BKI 2 Disclaimer Forward Looking Statement This Presentation contains ‘‘forward-looking information’’ within the meaning of applicable Canadian securities legislation. Forward-looking information is based on what management believes 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 discussed in the section entitled ‘‘Risk Factors’’ in the Company’s annual information form for the year ended December 31, 2013 (and dated March 14, 2013) or as may be identified in the Company’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 on commercially reasonable terms; and the impact of concerns relating to permitting, regulation, governmental and local community relations, including the results of upcoming Presidential elections and Western and Russian responses to the results of said elections. 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 “completion of the transaction with Metinvest” or variations of such words and phrases 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 Study arise from engineering, geological and costing work of Lycopodium Minerals Canada Ltd. (“Lycopodium”), Soutex Inc. (“Soutex”), Watts, Griffis and McOuat Limited (“WGM”), Consulting Geologists and Engineers 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, assumptions and 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 or achievements 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 information form 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-looking information, 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, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward looking information. The Company 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 an offering 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, or shall be relied upon, as a promise or representation, whether as to the past or future. NI 43-101 Technical Report “Feasibility Study of the Shymanivske Iron Ore Deposit for Black Iron Inc”, dated January 24, 2014 Prepared by Lycopodium Minerals Canada Ltd. / Bankable Feasibility Study (the “Feasibility Study”) – For additional information, please see the Report filed on dated January 24, 2014. *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 on historical 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 during the 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 defined by 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 Lycopodium Minerals Canada Ltd.; Soutex Mineral & Metallurgical Consultants; 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.
  3. 3. TSX: BKI 3 What Sets Black Iron Apart? Access to Skilled Labour & Infrastructure – Two of the Most Challenging Iron Ore Project Development Risks Key Development Risks Taxes/Royalties Human Resources Access to Infrastructure Community Opposition Licensing/Permitting Access to Water Electricity Supply Canada Brazil Africa Australia Ukraine 3
  4. 4. TSX: BKI * Please see note on Page 2 4 Black Iron has ALL the Key Fundamentals for a Successful Low Cost Project in Place Exceptional Infrastructure • Significant infrastructure advantages (power, rail and port) with confirmed access and capacity • Skilled local workforce • Local partnerships Compelling Economics • Bankable Feasibility Study (Shymanivske Project): - 9.9Mtpa of 68% Fe Conc. - Pre-tax NPV8 of US$3.3B - Pre-tax IRR of 48% • Break even price of $54/t (after-tax) Sizeable Resource • Large NI 43-101 Compliant Resource* - Shymanivske 646Mt (M+I) @ 32% Fe 188Mt (Inf) @ 30% Fe - Zelenivske (upside) 1.1 - 1.8Bt potential Skilled Leadership • History of creating value for shareholders • Significant Ukrainian political and iron ore operations experience Close to Target Markets • Located in Kryvyi Rih, Ukraine a major iron ore district, close to Europe, Turkey, Russia, Asia and Middle East Metinvest Development Agreement • Ukraine’s largest company, 9th globally in iron ore, 16th in steel • Committed to half of project construction financing (est. $250-$500M)
  5. 5. TSX: BKI Board of DirectorsKey Management Matt Simpson – President & CEO • Former General Manager, Mining for Rio Tinto’s Iron Ore Company of Canada • Worked for Hatch designing global metallurgical refineries George Mover – COO • Former Project General Director of Ferrexpo Yeristovo Mining, Ukraine • Since 1994 worked on numerous mining projects in Former Soviet Union (Ukraine, Russia, Kazakhstan, Armenia) Paul Bozoki – CFO • Former CFO of CD Capital Partners, operating in Former Soviet Union & Ukraine Aaron Wolfe – VP Corp Development • Former investment banker with Macquarie Nikolay Bayrak – VP Gov’t & Community Relations • Former department head, Ukrainian Ministry of Emergencies and Public Protection; Former MP and President of MP’s Parliamentary Social Club Bruce Humphrey – Chairman • Former Chairman of Consolidated Thompson Iron Mines Jaroslav Kinach • Former Advisor to Ukraine Prime Minister and former Ukraine Country Head of EBRD Chris Westdal • Canadian Ambassador to Ukraine (1996-98) and to Russia (2003-06) Pierre Pettigrew • Former Canadian Minister for Foreign Affairs and international Trade John Detmold • Chairman & Founder of Invecture Group, S.A. de C.V. which owns Frontera Copper Corporation Dave Porter • Former VP for Rio Tinto’s Iron Ore Company of Canada and COO of Algoma Steel Matt Simpson – President & CEO 5 A Track Record of Iron Ore Success with Rio Tinto’s Iron Ore Company of Canada, and Ferrexpo
  6. 6. TSX: BKI 6 Project Backed by Forbes & Manhattan Success with Consolidated Thompson’s Bloom Lake Iron Mine • World class 8Mtpa iron ore concentrate mine in Quebec • Advanced from exploration stage through development to construction − 8 mtpa capacity (66% Fe concentrate) expanding to 16 mtpa − Completed scoping study, 3 feasibility studies, secured off-take with China’s third largest steel producer (WISCO) • Raised over Cdn$1 bn in capital • Attracted and put in place a qualified management team Recently acquired for $4.9 billion $1 mm market cap First F&M involvement Forbes&ManhattanInvolvement 2005 Q1-2011 Acquired for $4.9 billion
  7. 7. TSX: BKI 7 Major Local Development Partner: Metinvest Ukraine’s Largest Company and a Global Iron Ore & Steel Producer • Over 100,000 employees; Generated US$12.8 billion of revenues and a 18% EBITDA margin in 2013 • Metinvest is owned by System Capital Management (SCM) and Smart Holding • SCM has over US$28.4B in assets and operations across 13 different areas including ownership of: • Global Commodity Ranking: • DTEK >18GW of electricity production (~26%) • Leman Trans, ~21% of railway cars • Portinvest, ~13% of Ukraine’s port capacity • 9th in Iron Ore with 33.9 MT • 16th in Steel with 18.4 MT • 33rd in Coal with 2.6 MT
  8. 8. TSX: BKI Sound Capital Structure Attractive Valuation with Substantial Upside & Funding Support 8 Corporate StructureCapital Structure (TSX: BKI) Shares Outstanding 159.2 million Stock Options(1) 9.9 million Warrants(2) 17.7 million Fully Diluted Shares 186.8 million Market Cap(3) ~US$20.3 million Current Cash Balance(4) ~US$2.0 million Debt Balance nil 1. 9,913,750 options exercisable at a weighted average price of $0.32 per share. 2. 17,680,000 warrants expire Feb 20, 2017 with strike price of $0.25. 3. As at May 30, 2014, using a closing price of CAD $0.14 per share. 4. As at Mar 31, 2014 per Q1 Unaudited Financial Statements Metinvest Transaction Summary Analyst Coverage • Metinvest acquired 49% of Black Iron Cyprus for a total commitment up to US$535M – US$20M due at closing (payable in 4 installments) – Matching of any further equity financed capital • Metinvest option to increase ownership in Black Iron Cyprus to 51% − Option vests after 3 consecutive months of production at nameplate capacity − Option priced at a 30% premium to the fair market value as derived by an independent third party Black Iron Inc. (TSX: BKI) Metinvest B.V. (Ukraine private) Black Iron (Cyprus) Ltd. (Cyprus private) Shymanivske Steel (Ukraine private) Zelenivske Steel (Ukraine private) 51% 49% 100% 100%
  9. 9. TSX: BKI 9 Deposits In Mining Friendly Region Adjacent to existing Iron Ore Producers • Two mining and exploration permits covering 5.92 km2 − Mining permit at Shymanivske, which has been extensively explored, covering 2.56 km2 valid until 2024 − Exploration permit at Zelenivske covering 3.36 km2 valid until 2014 • Adjacent to ArcelorMittal’s Kryvyi Rih iron ore complex and Metinvest & Evraz’s YuGOK iron ore mine • Plan to acquire a plot of land from Ukraine Government adjacent to the Shymanivske deposit for project waste dumps, concentrator and tailings Black Iron’s Shymanivske Project M&I: 646Mt @ 31.6% Inferred: 188Mt @ 30.1% Black Iron’s Zelenivske Project ArcelorMittal’s Kryvyi Rih Iron Ore Complex Metinvest & Evraz’s YuGOK Iron Ore Mine Railway lines ** See Black Iron’s website at for a Corporate Video highlighting the project location and infrastructure **
  10. 10. TSX: BKI 10 Large Ore Deposit with Growth Potential • 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 with a strip ratio of 1.63:1, life of mine; 1.36:1 for first 8 years − Very clean ore body low in phosphorus, manganese and aluminum • Resource defined by ~54,000 metres of drilling ― Black Iron 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 ― Total iron grade and band width align very well with 37,000 metres of historical drilled data • Potential for total combined resource expansion of 1.1 to 1.8BT − Additional drilling of Shymanivske at North end of deposit and to depth − Exploration of the Zelenivske project Shymanivske Resource* Tonnage (Mt) Fe Tot (%) Fe Mag (%) Measured 355.1 32.0 19.5 Indicated 290.7 31.1 17.9 Total Measured and Indicated 645.8 31.6 18.8 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
  11. 11. TSX: BKI 11 Potential Resource Extension at Shymanivske Ground Gravity Shows Iron Ore Mineralization at North End • Ground gravity and magnetic surveys show potential extension of iron ore mineralization at North end of property as circled in red • This area has not been included in the NI 43-101 resource as it has not yet been sufficiently drilled • The identified area will be a target of a future drill program to allow for a second phase process plant expansion to increase production and project value Potential resource upside to be drilled Drill hole Property boundary Very likely Iron in ground Likely just dirt in ground
  12. 12. TSX: BKI Extensive Pit Shell Design and 3D Model Completed (Property Overview) 12 * Bankable Feasibility Study complete by Lycopodium Minerals Canada Ltd.
  13. 13. TSX: BKI Concentrator Footprint Compressed by Staggering HPGRs and Stacking LIMS 13 * Bankable Feasibility Study complete by Lycopodium Minerals Canada Ltd.
  14. 14. TSX: BKI 14 Conventional Flowsheet Producing High Quality Iron Ore Products Fe 68.0% SiO2 4.5% P 0.02% S 0.05% Al2O3 0.43% Mn 0.03% P80 32 µm B.F. Concentrate Fe 65.5% SiO2 4.5% S <0.01% CaO/SiO2 0.15% SiO2+Al2 O3 5.1% CaO+MgO 1.0% Compress. 318kg/pel B.F. Pellets Fe 69.5% SiO2 1.3% P 0.02% S 0.05% Al2O3 0.28% Mn 0.03% P80 32 µm D.R. Concentrate Fe 67.4% SiO2 2.0% S <0.01% CaO/SiO2 0.34% SiO2+Al2 O3 2.4% CaO+MgO 1.2% Compress. 283g/pel D.R. Pellets CoreProduct Value-Add Alternative Products
  15. 15. TSX: BKI 15 Secured Infrastructure Access (Rail, Port Power) Key to a Successful Iron Ore Project • Letters of Intent in place for Electricity (140MW) and Natural Gas (900m3/hr @85kPa) • Paved roads to site, located 35km away from the major city of Kryvyi Rih which has a highly skilled work force • Letter of Intent in place for up to 20 million tonnes per year of rail capacity from site to Port Yuchniy • Black Iron’s Shymanivske Project is ~2 km from main state-owned rail line • Letter of Intent in place with a private operator at Port Yuzniy for 9.5 million tonnes per year +/- 15% • Port Yuzniy is located ~430 km away and provides access to the Black Sea and global seaborne iron ore markets ** See Black Iron’s website at for a Corporate Video highlighting the project location and infrastructure **
  16. 16. TSX: BKI 16 Strategic Global Location Close Proximity to Target Markets with Abundant Port and Rail Access • 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 • Excellent Ukrainian logistical advantages • Densely populated roadway infrastructure • 468 million tonnes of cargo transported via rail • 155 million tonnes of cargo transported via ship
  17. 17. TSX: BKI 17 Ukraine: A Mining Friendly Country in Transition • S&P Sovereign Risk rating of B − Recently held successful presidential election (5 year term) − GDP growth of 4.2% in 2010; 5.2% in 2011; 0.2% in 2012 (impacted by slowdown in global economy and steel production) − Member of WTO − Strong desire by citizens and business for European integration (and further separation from Russia) but government has delayed signing “Trade Agreement” over concerns of increased cost for Russian gas and trade restrictions • Joining the “Trade Agreement” with Europe would benefit Black Iron due to lower construction costs via reduced duties. However not joining is neutral for Black Iron, as the Bankable Feasibility Study was completed without those cost savings assumptions • 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) • Large, highly skilled labour force (pop. 45.4 million) − GDP per capita only $7600/yr − Literacy rate >99% • Mining friendly jurisdiction with strong local and national support ― ArcelorMittal and Ferrexpo plc have operated in-country for over 7 years • Competitive Corporate tax rate of 18% (Approximately half compared to other major iron ore producing countries) $5Bn Investment in Integrated Iron Mine/Steel Mill $3.2Bn Market Cap Iron Ore and Steel Production in Ukraine $1.8Bn Investment in Shale Gas Development Major Foreign Corporate Investors $10Bn Planned Investment in unconventional gas exploration and development $10Bn Planned Investment in exploration and development of shale gas
  18. 18. TSX: BKI 0% 10% 20% 30% 40% 50% 60% %ofWorldProductionandReserves Production Reserves 18 Source: Based on know production and reserves as listed in the USGS 2013 Iron Ore report Globally Significant Iron Ore District 4th largest iron ore producer & 2nd largest reserve base Global Distribution of Fe Reserves & Fe Production • Black Iron’s projects are located in the heart of Ukraine’s iron ore belt – 35km from Kryvyi Rih, city of 750,000 people • Iron ore district trends 300 km with sedimentary rock hosted banded iron formations (Dnenpovskog complex) • Historically well explored resource base but substantially under-exploited due to historic Soviet policy • 15 iron ore mines in Ukraine produced 88 million tonnes in 2012 Kiev Yeristovskoye Poltavsky GOK TsentralnyKryviy Rih Iron Ore Complex Ingulestky GOK Yuzhny GOK Kryviv Rih Ordzhonikize Gok Shymanivske Zelenivske C Gok YuGok Production Reserves 7% 20%
  19. 19. TSX: BKI 19 Permit Process for Shymanivske Deposit Black Iron Remains on Track Exploration Permit Extraction Permit Land Allotment Construction Approval Operations Approval Deem deposit economical • Complete Ukraine version of scoping study including evaluation of various mining methods & high level environmental impact Pit shell reserves & environmental impact Gov approval • Complete field environmental (OVOS) & archeological studies for Gov approval • Submit pit shell design & mapped ground surface project for Gov. approval Obtain surface rights for mine, refinery & tailings • Land use analysis based on plot plan showing major buildings & agreed connections to utilities, rail and roads (Proekt) • Approval of the project location • Approval from all land owners & finalize lease Start mine overburden removal & plant construction • Detailed design approved (Expertisa) • Obtaining the construction permit • Commissioning of the facility • Registration of the ownership to the facility Explore resource potential • Conduct geophysical program • Drill ore body • State approval of explored deposit Operate mine & refinery • Ensure compliance with Ukraine Safety, Environment, Health and Employment laws as check by regular Gov inspections • Finalize environmental permits Mining Allotment Completed
  20. 20. TSX: BKI Annual Production: 9.9 Mt Iron Content: 68.0% Estimated Capital Investment: (capital intensity, includes 15% contingency) US$1,097 million US$111/t Estimated Operating Expenses: (average FOB) (average at Mine Gate) US$44.54/t US$29.64/t Long-Term CFR Benchmark Price(62%): US$95/t Net Present Value (8%): (pre-tax) (after-tax) US$3.3 billion US$2.6 billion Internal Rate of Return: (pre-tax) (after-tax) 48% 39% Annual Average Cash Flow: (pre-tax) (after-tax) US$630 million US$536 million Projected Payback (8%): (pre-tax) (after-tax) 2.0 years 2.5 years Estimated Mine Life: modelled reserve total defined resource 14 years ~19 years Projected Plant Start-Up Q4 2016 Projected Revenue Commencement Q1 2017 BFS Highlights – High Grade Concentrate High Value, Low Net Cost Iron Ore Development Project 20 ** See Disclaimer on page 2 *** Bankable Feasibility Study completed by Lycopodium
  21. 21. TSX: BKI Black Iron’s Operating Cost Competitiveness Shymanivske: First Quartile to Local Markets; Second Quartile to China 21** See Disclaimer on page 2 ** Source: Company data; Wood Mackenzie; BMO Capital Markets * Adjusted for iron content and shipping distance 2013E Iron Ore Cost Curve BKI delivered to Europe/Middle East Markets BKI delivered to China World Cumulative Production (%) Spot: $91/t TotalCashCost(US$/tCFRChina)
  22. 22. TSX: BKI ** See Disclaimer on page 2 ** Black Iron’s Capital Cost Advantage Shymanivske Relative to Other Iron Ore Projects 22 Vale(Shimandou1) AfricanMinerals(phase2) Xstrata(Askaf) AfricanMinerals(DSO) ArcelorMittal(Western… Fortescue(Expansion) BlackIron RioTinto(IOC) Sundance Kumba Ferrexpo(Yeristovo) IRC(Kuranakh) LondonMining IRC(K&S) Alderon Auila(Hardey) Xstrata(Zanaga) AtlasIron(Ridley) RioTinto(Pilbara) Gindalbie(Karara) AngloAmerican(MinasRio) BHP(RGP5&6) Aquila(WestPilbara) ArcelorMittal(Western… BHP(Samarco) AtlasIron(BallaBalla) CITICPacific(Sino) Baffinland Xstrata(GeulbelAouj) GrangeResources… 84 87 90 92 109 109 111 122 134 135 141 142 157 159 159 160 167 180 186 188 189 190 192 200 211 217 221 222 236 258 CAPEX Forecast (US$/t of capacity) Source: Company data; Renaissance Capital estimates Average = 162 0% 25% 50% 75% 100%
  23. 23. TSX: BKI Black Iron’s Target Capital Funding Strategy 49% of Equity Capital Solidified with Metinvest Transaction; 100% of Off-Take Still Available ** See Disclaimer on page 2 ** Estimated Capital Investment US$1.1 billion Equity Investment Debt Investment Black Iron Inc. (TSX: BKI) Metinvest 9.9Mtpa Off-take Export Credit Agencies Bank Debt / High-Yield Bonds Capital Markets 60%40% 49%51% (US$250-300 million) (US$0-50 million) (US$300-400 million) (US$250-350 million) Significant Off-take Opportunity with Equity Funding Support from Metinvest ** % and $ amounts are indicative only and subject to negotiation ** (US$250-300 million) 23
  24. 24. TSX: BKI Black Iron Continues to Deliver Shymanivske Project Development Timeline 2011-2012 2013 Scoping Study/PEA Bankable Feasibility Study Off-take Construction Drill metallurgical holes Definition Drilling Land Acquisition Detailed Engineering Production Future ** See Disclaimer on page 2 ** Pilot Plant Test Work 2014 Permitting Milestone Achieved 2014 Milestone 24       
  25. 25. TSX: BKI 25 Black Iron Value Proposition Close to Steel Mills in: W.Europe, Turkey, Russia, Asia and Middle East Close to Target Markets Large iron ore deposit with NI 43-101 compliant resource* • 646 Mt Measured & Indicated resource @ 31.6% iron; additional 188 Mt of Inferred resource @ 30.1% iron, which will be concentrated to ~68% iron • Potential for resource expansion to 1.1-1.8 Bt Sizable Resource Excellent access to skilled labour, power, rail & ports Exceptional Infrastructure Experienced management team and Board with history of creating value for shareholders of RioTinto and Ferrexpo Skilled Leadership High margins due to close proximity to multiple steel mills, skilled labour cost advantage and favourable corporate tax rate of 16% • Bankable Feasibility Study for 9.9Mt of high-grade 68% iron ore concentrate – NPV of US$3.3 billion and 48% IRR (US$2.6 billion and 39% after-tax) Compelling Economics * Please see note on Page 2 25 Strategic Partners Metinvest: Largest company in Ukraine; committed to half of project financing
  26. 26. TSX: BKITSX: BKI Shymanivske Project Site Paved Road High voltage power linesState-owned rail line
  27. 27. CONTACT INFORMATION 65 Queen Street West Suite 805, P.O. Box 71 Toronto, Ontario, Canada M5H 2M5 TSX: BKI Investor Relations Toronto: +1 (416) 309-2134 - Michael McAllister, IR Manager Ukraine: +380 (56) 409-2536 Follow us: