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Corporate Presentation - May 2013


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Corporate Presentation - May 2013

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Corporate Presentation - May 2013

  1. 1. A Compelling Iron Ore Investment OpportunityCorporate PresentationMay 2013TSX: BKI
  2. 2. TSX: BKI2DisclaimerForward Looking StatementThis 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.
  3. 3. TSX: BKI3What Sets Black Iron Apart?Access to Skilled Labour & Infrastructure –Two of the Most Challenging Iron Ore Project Development RisksKey Development RisksTaxes/RoyaltiesHuman ResourcesAccess to InfrastructureCommunity OppositionLicensing/PermittingAccess to WaterElectricity SupplyCanadaBrazilAfricaAustraliaUkraine3
  4. 4. TSX: BKI4Project located in Kryviy Rih, Ukraine; one of the world’s major ironore districts• Close to target markets: W.Europe, Turkey, Russia, Asia and Middle East• Surrounded by 7 other operating iron ore minesClose toTarget MarketsLarge iron ore deposit with NI 43-101 compliant resource*• Two properties held – Shymanivske & Zelenivske• Shymanivske – 646 Mt Measured & Indicated resource @ 31.6% iron;additional 188 Mt of Inferred resource @ 30.1% iron, which will beconcentrated to ~68% iron• Potential for resource expansion by further drilling of both depositsSizableResourceGood access to skilled labour, power, rail & ports• 35km from city of Kryviy Rih (pop. 750k); paved road to site• 2 km from state-owned rail and power lines with surplus capacity & fivedeep water ports accessible by rail (140-515km)ExceptionalInfrastructureExperienced management team with history of creating value forshareholders of Consolidated Thompson, RioTinto and Ferrexpo.Board of Directors with significant Ukrainian political and businessoperation experience.SkilledLeadershipHigh margins due to close proximity to multiple steel mills, relativelabour cost advantage and favourable corporate tax rate of 16%• Bankable Feasibility Study for 9.2Mt of high-grade 68% iron oreconcentrate – NPV of US$3.5billion and 45.9% IRRCompellingEconomics* Please see note on Page 2 4What Makes Black Iron’s Project Compelling?ALL Key Fundamentals for a Successful Low Cost Project in Place
  5. 5. TSX: BKI5Project Backed by Forbes & ManhattanSuccess with Consolidated Thompson’s Bloom Lake Iron Mine• World class 8Mtpa iron ore concentratemine in Quebec• Advanced from exploration stagethrough development to construction− 8 mtpa capacity (66% Fe concentrate)expanding to 16 mtpa− Completed scoping study, 3 feasibilitystudies, secured off-take with China’sthird largest steel producer (WISCO)• Raised over Cdn$1 bn in capital• Attracted and put in place a qualifiedmanagement teamRecentlyacquiredfor $4.9billion$1 mmmarketcapFirst F&MinvolvementForbes&ManhattanInvolvement2005 Q1-2011Recentlyacquiredfor $4.9billion
  6. 6. TSX: BKIBoard of DirectorsKey ManagementMatt Simpson – President & CEO• Former General Manager, Mining for Rio Tinto’s IronOre Company of Canada• Worked for Hatch designing global metallurgicalrefineriesGeorge Mover – COO• Former Project General Director of Ferrexpo YeristovoMining, UkrainePaul Bozoki – CFO• Former CFO of CD Capital Partners, operating in SovietUnion & UkraineAaron Wolfe – VP Corp Development• Former investment banker with MacquarieNikolay Bayrak – VP Gov’t & Community Relations• Former department head, Ukrainian Ministry &Currently President of MP’s Parliament ClubMike McAllister – Manager Investor Relations• Former IR Manager at Avion Gold Corporation,previously with BMO CM Metals & Mining GroupBruce Humphrey – Chairman• Former Chairman of Consolidated Thompson IronMinesJaroslav Kinach• Former Advisor to Ukraine Prime Minister andformer Ukraine Country Head of EBRDChris Westdal• Canadian Ambassador to Ukraine (1996-98) and toRussia (2003-06)Pierre Pettigrew• Distinguished career as a Canadian FederalCabinet MinisterJohn Detmold• Chairman & Founder of Invescture Group, S.A. deC.V.Dave Porter• Former VP for Rio Tinto’s Iron Ore Company ofCanadaMatt Simpson – President & CEO 6A Track Record of Iron Ore Successwith Consolidated Thompson Iron Mines, Rio Tinto’s Iron Ore Companyof Canada, and Ferrexpo
  7. 7. TSX: BKISound Capital StructureAttractive Valuation with substantial upside7Historical Share PriceCapital StructureShares Outstanding 141.0 millionStock Options (1)10.7 millionFully Diluted Shares 151.7millionMarket Cap(2)~US$26.6 millionCurrent Cash Balance(3)~US$7.9 millionDebt Balance nil1. 8,155,000 options exercisable at a weighted average price of $1.14 pershare; 2,840,000 options exercisable at an average weighted price of$0.31 per share .2. As at April 30, 2013, using a closing price of CAD $0.19 per share.3. As at Dec 31, 2012 per Q4 Audited Financial StatementsAnalyst CoverageCliff Hale-SandersJohn HughesDaniel GreenspanRobin KozarCraig MillerDavid TalbotIvan DzvinkaAsa Bridle$0.00$0.10$0.20$0.30$0.40$0.50$0.6030-Apr-1231-May-1230-Jun-1231-Jul-1231-Aug-1230-Sep-1231-Oct-1230-Nov-1231-Dec-1231-Jan-1328-Feb-1331-Mar-13
  8. 8. TSX: BKI8Deposits In Mining Friendly RegionAdjacent to existing Iron Ore Producers• Two mining and exploration permitscovering 5.92 km2− Mining permit at Shymanivske, whichhas been extensively explored, covering2.56 km2 valid until 2024− Exploration permit at Zelenivskecovering 3.36 km2 valid until 2014• Adjacent to ArcelorMittal’s Kryviy Rihiron ore complex and Smart & Evraz’sYuGOK iron ore mine• Plan to acquire a plot of land fromUkraine Government adjacent to theShymanivske deposit for projectwaste dumps, concentrator andtailingsBlack Iron’sShymanivske ProjectM&I: 646Mt @ 31.6%Inferred: 188Mt @ 30.1%Black Iron’sZelenivskeProjectArcelorMittal’s Kryviy RihIron Ore ComplexSmart & Evraz’sYuGOK Iron Ore MineRailway lines
  9. 9. TSX: BKI9Large Ore Deposit with Growth Potential• Banded iron formation consisting primarily ofmagnetite 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 metresof historical drilling― Black Iron recently completed a Twin Hole DrillProgram consisting of 6,042 metres and aPhase II Drill Program consisting of 11,435metres of infill drilling― Total iron grade and band width align very wellwith historical data• Potential for total combined resourceexpansion of 1.1 to 1.8BT− Additional drilling of Shymanivske at North endof deposit and to depth− Exploration of the Zelenivske projectShymanivskeResource*Tonnage(Mt)Fe Tot(%)Fe Mag(%)Measured 355.1 32.0 19.5Indicated 290.7 31.1 17.9Total Measuredand Indicated645.8 31.6 18.8Inferred 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
  10. 10. TSX: BKI10Potential Resource Extension at ShymanivskeGround Gravity Shows Iron Ore Mineralization at North End• Ground gravity and magnetic surveysshow potential extension of iron oremineralization at North end of property ascircled in red• This area has not been included in the NI43-101 resource as it has not yet beensufficiently drilled• The identified area will be a target of afuture drill programPotential resourceupside to be drilledDrill holePropertyboundaryVery likelyIron in groundLikely justdirt in ground
  11. 11. TSX: BKI11Extensive Pit Shell Design and 3D ModelCompletedProperty Overview Concentrator Layout
  12. 12. TSX: BKI12Conventional Flowsheet (simplified)Producing High Quality Iron Ore ProductsDrill Blast Load & Haul CrushHPGRBall Mill (x2)Vertical Mill Magnetic SeparatorSulphur Floatation Pellet PlantFe 68.0%SiO2 4.5%P 0.02%S 0.05%Al2O3 0.43%Mn 0.03%P80 32 µmConcentrateFe 65.0%SiO2 4.13%P 0.025%S 0.01%Mn 0.15%Pellets(optional)
  13. 13. TSX: BKI13Excellent InfrastructureKey to a Successful Iron Ore Project• Paved roads to site, located 35km away from themajor city of Kryviy Rih which has a skilled work force• Surplus electricity readily accessible from high voltagepower lines that run beside property• ~2 km from main state-owned rail line• Confirmation in July 2010 from Ukrainian Governmentthat there is sufficient capacity to haul at least anadditional 20 million tonnes of iron ore per annum• 5 deep water ports accessible by rail with iron orefacilities available• Preferred port option is Yuzhny located ~390 km awayand providing access to the Black Sea and globalseaborne iron ore markets
  14. 14. TSX: BKI14Strategic Global LocationClose Proximity to Target Markets with Abundant Port and Rail Access• Project is surrounded by steel mills in Europe, Turkeyand the Middle East• River barge & rail access to Western Europe.• Five dry bulk tonnage ports accessible using railwayrunning beside properties• Approx 20% to 25% shorter transport distance togrowth markets of India and China compared toNorth and South American producers• Excellent Ukrainian logisticaladvantages• Densely populatedroadway infrastructure• 468 million tonnes ofcargo transported via rail• 155 million tonnes ofcargo transported via ship
  15. 15. TSX: BKI15Ukraine: A Mining Friendly CountryStrong Local and National Support• Politically stable Democratic republic― Parliament reelected in October 2012 for afurther 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 “AssociationAgreement” with European Union− Potential key member of the Russia proposedEurasian Trade Union• Large, highly skilled labour force (pop. 45.4 million)− GDP per capita only $6700/yr− Literacy rate >99%• Mining friendly jurisdiction with strong local andnational support― ArcelorMittal and Ferrexpo plc have operatedin-country for over 7 years• Legislated corporate tax rate reductions from 21%in 2012 to 16% in 2014• Favourable mining royalties of $0.40 per tonne ofore mined (~1%) to the Government
  16. 16. TSX: BKI16Source: Based on know production and reserves as listed in the USGS2012 Iron Ore reportGlobally Significant Iron Ore District4th largest iron ore producer & 2nd largest reserve baseGlobal Distribution of Fe Reserves &Fe Production• Black Iron’s projects are located in the heart ofUkraine’s iron ore belt– 35km from city of 750,000 people• Iron ore district trends 300 km with sedimentary rockhosted banded iron formations (Dnenpovskog complex)• Historically well explored resource base butsubstantially under-exploited due to historic Sovietpolicy• 15 iron ore mines in Ukraine produced 88 milliontonnes in 2012KievYeristovskoyePoltavsky GOKTsentralnyKryviy Rih Iron Ore ComplexIngulestky GOKYuzhny GOKKryviv Rih Ordzhonikize GokShymanivskeZelenivskeC GokYuGok0%10%20%30%40%50%60%AsiaAustraliaS.AmericaFSUN.AmericaOtherAfrica%ofWorldProductionandReservesProduction ReservesProduction Reserves7%21%
  17. 17. TSX: BKI17Permit Process for Shymanivske DepositBlack Iron Remains on TrackExplorationPermitExtractionPermitLandAllotmentConstructionApprovalOperationsApprovalDeem depositeconomical• CompleteUkraine versionof scoping studyincludingevaluation ofvarious miningmethods & highlevelenvironmentalimpactPit shell reserves& environmentalimpact Govapproval• Complete fieldenvironmental(OVOS) &archeologicalstudies for Govapproval• Submit pit shelldesign &mapped groundsurface projectfor Gov. approvalObtain surfacerights for mine,refinery &tailings• Land use analysisbased on plotplan showingmajor buildings &agreedconnections toutilities, rail androads (Proekt)• Approval of theproject location• Approval from allland owners &finalize leaseStart mineoverburdenremoval & plantconstruction• Detailed designapproved(Expertisa)• Obtaining theconstructionpermit• Commissioningof the facility• Registration ofthe ownership tothe facilityExploreresourcepotential• Conductgeophysicalprogram• Drill ore body• State approvalof exploreddepositOperate mine &refinery• Ensurecompliance withUkraine Safety,Environment,Health andEmploymentlaws as check byregular Govinspections• FinalizeenvironmentalpermitsMiningAllotmentCompleted
  18. 18. TSX: BKIBFS Highlights – High Grade ConcentrateHigh Value, Low Net Cost Iron Ore Development Project18BFSAnnual Production: 9.2 MtIron Content: 68.0%Estimated Capital Investment: US$1,094 millionEstimated Operating Expenses:(average FOB)(average at Mine Gate)US$43.97/tUS$29.67/tNet Present Value (8%): US$3.5 billionIRR: 45.9%Annual Average Cash Flow: US$593 millionProjected Payback (8%): 2.2 yearsEstimated Mine Life: 16 yearsProjected Plant Start-Up Q4 2015Projected Revenue Commencement Q1 2016Production, Iron Content, NPV, IRR and Cash Flow have all increasedwhile Capital Intensity decreased from prefeasibility** See Disclaimer on page 2 **
  19. 19. TSX: BKIBFS Long-Term Concentrate PriceBased on Mean Forecast of 20 Banks with Important Adjustments forFavourable Iron Content & Shipping Distance19$95-$10+$30$115$0$20$40$60$80$100$120Analyst BenchmarkPriceShipping Adjustment Aggregate IronPremiumBKI LT ConcentratePrice* 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 = $30).** See Disclaimer on page 2 **
  20. 20. TSX: BKIBlack Iron’s Capital Cost AdvantageShymanivske Relative to Other Iron Ore Projects20Vale(Shimandou1)AfricanMinerals(phase2)Xstrata(Askaf)AfricanMinerals(DSO)ArcelorMittal(Western…Fortescue(Expansion)BlackIronRioTinto(IOC)SundanceKumbaFerrexpo(Yeristovo)IRC(Kuranakh)LondonMiningIRC(K&S)AlderonAuila(Hardey)Xstrata(Zanaga)AtlasIron(Ridley)RioTinto(Pilbara)Gindalbie(Karara)AngloAmerican(MinasRio)BHP(RGP5&6)Aquila(WestPilbara)ArcelorMittal(Western…BHP(Samarco)AtlasIron(BallaBalla)CITICPacific(Sino)BaffinlandXstrata(GeulbelAouj)GrangeResources…84 87 90 92109 109 119 122134 135 141 142157 159 159 160 167180 186 188 189 190 192 200211 217 221 222236258CAPEX Forecast(US$/t of capacity)Source: Company data; Renaissance Capital estimates** See Disclaimer on page 2 **Average = 162
  21. 21. TSX: BKIFavourable Tax and Royalties in UkraineBlack Iron to Other Iron Ore Developers21MacarthurCentaurusIronRoadNorthlandAlderonBrockmanGindalbieBlackIron0.3 0.5 1.1 1.53.2 3.3 3.4 3.57.3Pre-Tax & Royalty NPV8(US$ billions)MacarthurCentaurusIronRoadNorthlandBrockmanGindalbieAlderonBlackIron0.1 0.3 0.6 1.01.8 1.8 & Royalty NPV8(US$ billions)Disclaimer: 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. 1Super-Profits tax >A$75 million profit. 2 Includes Brazil mining tax of $4 / tonne of iron oreSource: Company data; Press Release; Research EstimatesNewMilleniumAlderonNorthlandGindalbieBrockmanBlackIron25.0 29.3 32.0 35.0 38.045.9Pre-Tax & Royalty IRR(%)NewMilleniumGindalbieBrockmanNorthlandAlderonBlackIron16.9 18.9 20.5 22.7 23.140.3Post-Tax & Royalty IRR(%)Tax RegimeRoyalties30%+30%139%229%16%5%2%5-8%1%NewMilleniumNewMillenium
  22. 22. TSX: BKI22Black Iron Continues to DeliverShymanivske Project Development TimelineH1 H2 H1 H22011 2012Scoping Study/PEABankable Feasibility StudyOfftakeConstructionDrill metallurgical holesDefinition DrillingEnvironmental StudiesDetailed EngineeringProductionFuture** See Disclaimer on page 2 **Land AcquisitionH1 H22013Permitting
  23. 23. TSX: BKI23Black Iron Value PropositionClose to Steel Mills in: W.Europe, Turkey, Russia, Asia and Middle EastClose toTarget MarketsLarge iron ore deposit with NI 43-101 compliant resource*• 646 Mt Measured & Indicated resource @ 31.6% iron; additional 188 Mt ofInferred resource @ 30.1% iron, which will be concentrated to ~68% iron• Potential for resource expansion to 1.1-1.8 BtSizableResourceExcellent access to skilled labour, power, rail & portsExceptionalInfrastructureExperienced management team with history of creating value forshareholders of Consolidated Thompson, RioTinto and Ferrexpo.Board of Directors with significant Ukrainian political and businessoperation experience.SkilledLeadershipHigh margins due to close proximity to multiple steel mills, skilledlabour cost advantage and favourable corporate tax rate of 16%• Bankable Feasibility Study for 9.2Mt of high-grade 68% iron oreconcentrate – NPV of US$3.5billion and 45.9% IRRCompellingEconomics* Please see note on Page 2 23
  24. 24. CONTACT INFORMATION65 Queen Street WestSuite 805, P.O. Box 71Toronto, Ontario, CanadaM5H 2M5www.blackiron.comTSX: BKIInvestor RelationsToronto: +1 (416) 309-2950 - Michael McAllister, IR ManagerLondon: +44 (0) 207 466 5000Ukraine: +380 (67) Follow us: