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Corporate Presentation

  1. 1. A Compelling Iron Ore Investment Opportunity Corporate Presentation November 2012TSX: BKI
  2. 2. Disclaimer Forward Looking Statement TSX: BKIThis Presentation contains ‘‘forward-looking information’’ which may include, but is not limited to, statements with respect to the future financial or operating performance of theCompany and its subsidiaries (collectively, the ‘‘Company’’) and its mineral projects; the future prices of metals; the anticipated results of exploration activities; the estimation of mineralresources; the realization of mineral resource estimates; capital, development, operating and exploration expenditures; costs and timing of the development of the Company’s mineralproperties; timing of future exploration; requirements for additional capital; government regulation of mining operations; anticipated results of economic and technical studies;environmental matters; reclamation expenses; title disputes or claims; limitations of insurance coverage and the timing and possible outcome of pending litigation and regulatory matters.Often, but not always, forward-looking information can be identified by the use of words and phrases such as ‘‘plans’’, ‘‘expects’’, ‘‘is expected’’, ‘‘budget’’, ‘‘scheduled’’, ‘‘estimates’’,‘‘forecasts’’, ‘‘intends’’, ‘‘anticipates’’, or ‘‘believes’’ or variations (including negative 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.Forward-looking information is based on the opinions and estimates of management as of the date such statements are made and is based on information currently available to managementand upon what management believes to be reasonable assumptions, including, among others, that general business, economic, competitive, political and social uncertainties remainfavorable; that actual results of exploration activities justify further studies and development of the Company’s mineral projects; that the future prices of metals, and iron ore in particular,remain at levels that justify the exploration and future development and operation of the Company’s mineral projects; that ore body quality and characteristics remain as anticipated; thatthere is no failure of plant, equipment or processes to operate as anticipated; that accidents, labour disputes and other risks of the mining industry do not occur; that the jurisdictions inwhich the Company operates remain politically stable; that there are no unanticipated delays in obtaining governmental approvals or financing or in the completion of future studies,development or construction activities; that the actual costs of exploration, and studies remain within budgeted amounts; that regulatory and legal requirements required for exploration ordevelopment activities do not change in any adverse manner, as well as those factors discussed in the section entitled ‘‘Risk Factors’’ in this Final Prospectus of the Company dated March16, 2011 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 information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to bematerially different from any future results, performance or achievements expressed or implied by such forward-looking information. Although the Company has attempted to identifyimportant factors that could cause actual actions, events or results to differ materially from those described in the forward-looking information, there may be other factors that cause suchactions, events or results to differ from those anticipated, estimated or intended. Any inaccuracy in the assumptions identified above may also cause actual actions, events or results todiffer materially from those described in the forward-looking information.Forward-looking information contained herein is made as of the date of this Presentation and the Company disclaims any obligation to update any forward-looking information, whether as aresult of new information, future events or results, except as may be required by applicable securities laws. There can be no assurance that such forward-looking information will prove tobe accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, potential investors should not place unduereliance on forward-looking information.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 Press Release – 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 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.*Matt Simpson President & CEO, Black Iron is a Qualified Persons as defined by NI 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 Compelling High margins due to close proximity to multiple steel mills, relative Economics labour cost advantage and favourable corporate tax rate of 16% • Bankable Feasibility Study for 9.2Mt of high-grade 68% iron ore concentrate – NPV of US$3.5billion and 45.9% IRR Skilled Experienced management team with history of creating value for Management shareholders of Consolidated Thompson, RioTinto and Ferrexpo 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 Today 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 • Former Chairman of Consolidated Thompson Iron Iron Ore Company of Canada Mines• Worked for Hatch designing global metallurgical Jaroslav Kinach refineries • Former Advisor to Ukraine Prime Minister and formerGeorge Mover – COO Ukraine Country Head of EBRD• Former Project General Director of Ferrexpo Chris Westdal Yeristovo Mining, Ukraine • Canadian Ambassador to Ukraine (1996-98) and toPaul Bozoki – CFO Russia (2003-06)• Former CFO of CD Capital Partners, operating Pierre Pettigrew in Soviet Union & Ukraine • Distinguished career as a Canadian Federal CabinetIgor Buchatskiy – VP Strategy Minister• Former GM, International Business John Detmold Development, ArcelorMittal S.A. • Chairman & Founder of Invescture Group, S.A. de C.V.Aaron Wolfe – VP Corp Development Dave Porter• Former investment banker with Macquarie • Former VP for Rio Tinto’s Iron Ore Company of CanadaMike McAllister – Manager, Investor Relations Matt Simpson – President & CEO of Black Iron 6
  7. 7. Sound Capital StructureAttractive Valuation with substantial upside TSX: BKI Capital Structure Historical Share Price $0.90Shares Outstanding 141.0 million $0.80 (1) $0.70Warrants 1.7 million $0.60 (2) $0.50Stock Options 8.5 million $0.40 $0.30Fully Diluted Shares 151.2 million $0.20 $0.10Market Cap(4) ~US$31 million $0.00 Sep-12 Feb-12 Apr-12 Oct-11 May-12 Aug-12 Oct-12 Nov-11 Dec-11 Jan-12 Mar-12 Jun-12 Jul-12Current Cash Balance ~US$11.7 millionDebt Balance nil Analyst Coverage1. 1,653,312 warrants exercisable at $1.40 per share (IPO financing). Maxim Sytchev Daniel Greenspan2. 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 per share; 260,000 options exercisable at $0.30 per share .3. As at Nov 16, 2012, using a closing price of CAD 0.22 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 12,000 meters of twin hole drilling ― Total iron grade and band width align very well Shymanivske Tonnage Fe Tot Fe Mag with historical data Resource* (Mt) (%) (%) • Potential for total combined resourceMeasured 355.1 32.0 19.5 expansion of 1.1 to 1.8BTIndicated 290.7 31.1 17.9 − Additional drilling of Shymanivske at North end of deposit and to depthTotal Measured 645.8 31.6 18.8 − Exploration of the Zelenivske projectand IndicatedInferred 188.3 30.1 18.4Tonnage and grade rounded to first decimals. Cut-off grade of 10% Fe Mag * Please see note on page 2 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 ― Following Presidential elections in 2012, country is currently united with a President and Prime Minister from the same Political Party ― S&P Sovereign Risk of B+• Economy dominated by 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 − Growth driven by US$15.2B IMF stabilization program and strong commodity prices − GDP growth of 4.2% in 2010; 5.2% in 2011; • Mining friendly jurisdiction with strong local and 2012 forecast to be 6.5% growth national support• Ongoing negotiations to sign the drafted ― ArcelorMittal and Ferrexpo plc have operated “Association Agreement” with the European Union in-country for over 5 years• Potential key member of the Russia proposed • Legislated corporate tax rate reductions from 21% Eurasian Trade Union in 2012 to 16% in 2014• Large, highly skilled labour force (pop. 45.4 million) • Favourable mining royalties of $0.40 per tonne of − GDP per capita only $6700/yr ore mined (~1%) to the Government 15
  16. 16. Globally Significant Iron Ore District Ukraine: 6th largest iron ore producer & 4th largest reserve base TSX: BKI • Black Iron’s projects are located in the heart of Ukraine’s 2010E Iron Ore Production iron ore belt 1000 900 – 35km from city of 750,000 people 800 – 98% of Ukraine population has completed a secondary education or higher Only 3% of world production 600 • Iron ore district trends 300 km with sedimentary rock hostedIron Ore (mt) 420 400 370 banded iron formations (Dnenpovskog complex) 260 • Historically well explored resource base but substantially 200 100 72 55 49 under-exploited due to historic Soviet policy 35 25 0 • 15 iron ore mines in Ukraine produced 72 million tonnes in 2010 Sweden United States Russia Canada China India Ukraine Brazil South Africa Australia • Ukraine has 28.5 million tonnes or 18% of the world’s Iron Ore supply Global Distribution of Fe Reserves Tarnavatskoye Kirovograd United States Rest of World Liponevsky Poltavsky GOK Sweden 3% 20% 3% Novokonstantinovsky Yeristovskoye India Russia 16% Tsentralny Safonovskoye 5% Kryviy Rih Iron Ore Complex Shymanivske China Ordzhonikize Gok 8% Zelenivske Ingulestky GOK Kryviv Rih Yuzhny GOK Brazil Australia Kuksunurskoye 18% 17% Ukraine 10% Source: USGS 2011 Iron Ore report and Metal Economics Group 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 PEA BFS Annual Production: 7.3 Mt 9.2 Mt Iron Content: 67.0% 68.0% Estimated Capital Investment: US$896.0 million US$1,094 million Estimated Operating Expenses: (average FOB) US$52.40/t US$43.97/t (average at Mine Gate) US$41.78/t US$29.67/t Net Present Value (8%): US$3.0 billion US$3.5 billion IRR: 42.1% 45.9% Annual Average Cash Flow: US$383 million US$593 million Projected Payback (8%): 2.2 years 2.2 years Estimated Mine Life: 28 years 16 years Proj. Plant Start-Up Q4 2015 Q4 2015 Proj. Revenue Commencement Q4 2015 Q1 2016 Production, Iron Content, NPV, IRR and Cash Flow all increase** See Disclaimer on page 2 ** while Capital Intensity decreases 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 the globe: 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 at the rate of $5 per 1% of additional iron content (6 x $5 = $30). 19** See Disclaimer on page 2 **
  20. 20. Vale (Shimandou 1) African Minerals (phase2) Xstrata (Askaf) African Minerals (DSO) 84 87 90 92 ArcelorMittal (Western…** See Disclaimer on page 2 ** Fortescue (Expansion) Black Iron 109 109 119 Rio Tinto (IOC) Alderon 122 124 Sundance Kumba Ferrexpo (Yeristovo) Source: Company data; Renaissance Capital estimates IRC (Kuranakh) 134 135 141 142 London Mining IRC (K&S) Auila (Hardey) 157 159 160 Xstrata (Zanaga) 167 Atlas Iron (Ridley) CAPEX Forecast (US$/t of capacity) Rio Tinto (Pilbara) Average = 161 Gindalbie (Karara) Shymanivske Relative to Other Iron Ore Projects Anglo Merican (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) 211 217 CITIC Pacific (Sino) Baffinland 221 222 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 3.1 3.3 3.4 3.5 1.8 1.8 2.1 1.5 29% 1.0 0.3 0.5 1.1 0.1 0.3 0.6 26% 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% (%) 40.2 45.9 40.3 32.0 35.0 38.0 2% 25.0 22.7 27.1 16.9 18.9 20.5 5-8% Northland Northland Millenium Millenium Alderon Alderon Black Iron Black Iron Gindalbie Gindalbie Brockman Brockman n/a 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 21substantiated by a financial model. 1 Super-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 Future H1 H2 H1 H2 Drill metallurgical holes Scoping Study/PEA Definition Drilling Bankable Feasibility Study Land Acquisition Environmental Studies Permitting Detailed Engineering Construction Production 22** See Disclaimer on page 2 **
  23. 23. Black Iron Value Proposition TSX: BKI 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, 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 Skilled Experienced management team with history of creating value for Management shareholders of Consolidated Thompson, RioTinto and Ferrexpo 23 23* Please see note on Page 2
  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 London: +44 (0) 207 466 5000 Ukraine: +380 (67) 619-0454 info@blackiron.comTSX: BKI