Black Iron to receive $4M investment from Anglo $$$$$$$$$$$$ 2024-11-07 13:02 ET - News Release
Mr. Matt Simpson reports
BLACK IRON SIGNS BINDING DOCUMENTATION WITH ANGLO AMERICAN FOR A ROYALTY INVESTMENT WITH ASSOCIATED OFFTAKE AND RIGHT TO PARTICIPATE IN CONSTRUCTION FUNDING
Black Iron Inc. has signed a legally binding royalty agreement and offtake agreement with Anglo American for a $4-million (U.S.) royalty investment, offtake rights and future potential construction prepayments.
Background
Black Iron's Shymanivske iron ore project located in Kryvyi Rih, central Ukraine, will be developed in two phases -- with phase 1 producing approximately four million tonnes per annum and phase 2 production increasing to approximately eight million tonnes per annum.
Terms of the transaction
Certain key terms of the transaction that have been agreed upon include:
- Anglo American will invest $4-million (U.S.) in two tranches in exchange for a gross revenue royalty of 1.0 per cent should the prevailing 65-per-cent iron CFR China iron ore price be less than $120 (U.S.) per tonne and 1.5 per cent should the price be equal to or higher than $120 (U.S.) per tonne for Black Iron's first 60 million tonnes of production at the project. The first tranche consisting of $2.6-million (U.S.) will be invested now and the balance upon Black Iron renewing its permits.
- Black Iron reserves the right to buy back this royalty at any time at a buyback price that provides a preagreed internal rate of return to Anglo American.
- Anglo American's investment in the royalty secures it offtake rights to the higher of (a) 60 per cent or (b) 2.4 million tonnes per year of the phase 1 production for life of mine.
- The agreement also provides for a right of first offer for Anglo American to further invest at least 15 per cent of the phase 1 construction cost as part of a consortium after the conflict in Ukraine ends. Such additional investment by Anglo American would result in the increase of its offtake to 100 per cent of the phase 1 production for an expected four million tonnes per annum.
- Additionally, Anglo American also has first refusal rights to finance a further 15 per cent of expansion construction cost for phase 2 of the project. Provision of such financing would secure Anglo American 100 per cent of the life of mine offtake rights for phase 2 of the project, for an expected eight million tonnes per annum.
- The offtake includes a profit-sharing component which aligns the interests of both parties and thereby generates a strong interdependent relationship of mutual benefit. Black Iron and Anglo American will also mutually benefit from any realized shipping cost-savings by selling the product to steel mills located closer to Ukraine than China, such as those in the Middle East where there is strong demand for such high-purity direct reduction iron ore.
Black Iron's chief executive officer, Matt Simpson, stated: "Black Iron is excited to welcome Anglo American as an investor and offtake partner given their extensive global experience in the mining sector. Raising $4-million (U.S.) through a royalty structure relative to Black Iron's current market capitalization without issuing additional shares to strengthen our finances during the ongoing war in Ukraine is a great outcome for shareholders. The majority of the initial $2.6-million (U.S.) of funds from the transaction will be used to renew the permit for our project which will expire six months after the end of martial law in Ukraine. Further, the future potential funding for project construction from such a highly credible mining company as Anglo American is important to demonstrate a clear path forward to build the Shymanivske iron ore project into an operating mine after the war in Ukraine comes to an end."
Anglo American is a leading global mining company focused on the responsible production of copper, premium iron ore and crop nutrients -- future-enabling products that are essential for decarbonizing the global economy, improving living standards and food security. Its portfolio of world-class operations and outstanding resource endowments offers value-accretive growth potential across all three businesses, positioning the company to deliver into structurally attractive major demand growth trends.
Black Iron had previously selected Cargill as the offtake purchaser in May, 2021. However, a definitive agreement was fully negotiated but not executed and Cargill's May, 2021, non-binding memorandum of understanding has since expired, leading to a competitive investment and offtake process being retendered. In selecting Anglo American, Black Iron engaged Bacchus Capital Advisers to run a global competitive process resulting in several interested leading mining and trading companies signing confidentiality agreements. This confirms the strong interest in the project given its compelling projected economics and high-purity product despite the uncertainly associated with the war in Ukraine.
About Black Iron Inc.
Black Iron is an iron ore exploration and development company, advancing its 100-per-cent-owned Shymanivske iron ore project located in Kryviy Rih, Ukraine.