a compelling iron ore investment opportunity corporate presentation september 2012 tsx: bki
TRANSCRIPT
A Compelling Iron Ore Investment
OpportunityCorporate Presentation
September 2012TSX: BKI
TSX: BKI
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DisclaimerForward Looking Statement
This Presentation contains ‘‘forward-looking information’’ which may include, but is not limited to, statements with respect to the future financial or operating performance of the Company and its subsidiaries (collectively, the ‘‘Company’’) and its mineral projects; the future prices of metals; the anticipated results of exploration activities; the estimation of mineral resources; the realization of mineral resource estimates; capital, development, operating and exploration expenditures; costs and timing of the development of the Company’s mineral properties; 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 management and upon what management believes to be reasonable assumptions, including, among others, that general business, economic, competitive, political and social uncertainties remain favorable; 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; that there 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 in which 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 or development 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 March 16, 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 www.sedar.com.
Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Although the Company has attempted to identify important 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 such actions, 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 to differ 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 a result 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 to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, potential investors should not place undue reliance 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 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.
TSX: BKI
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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 InfrastructureCommunity Opposition
Licensing/Permitting
Access to Water
Electricity Supply
Canada
Brazil
Africa
Australia
Ukraine
3
TSX: BKI
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5 Fundamentals for Iron Ore Success A High-Quality Iron Ore Development Opportunity
Project located in Kryviy Rih, Ukraine; one of the world’s major iron ore districts• Close to target markets: W.Europe, Turkey, Russia, Asia and Middle
East• Surrounded by 7 other operating iron ore mines
Close to Target Markets
Close to Target Markets
Large iron ore deposit with NI 43-101 compliant resource*• Two properties held – Shymanivske & Zelenivske• Shymanivske - 373 Mt Measured & Indicated resource @ 31.4%
iron; additional 480 Mt of Inferred resource @ 30.2% iron, which will be concentrated to ~65% iron
• Potential for resource expansion by further drilling of both deposits
SizableResourceSizable
Resource
Good 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 &
five deep water ports accessible by rail (140-515km)
ExceptionalInfrastructureExceptional
Infrastructure
Experienced management team with history of creating value for shareholders of Consolidated Thompson, RioTinto and Ferrexpo
SkilledManagement
SkilledManagement
High margins due to close proximity to multiple steel mills, relative labour cost advantage and favourable corporate tax rate of 16%• PEA for 7.3Mt Pellet Plant Feed – NPV of US$3.0 billion and 42.1%
IRR• PEA for 7.6Mt Pellet – NPV of US$4.1 billion and IRR of 35.2%
Compelling EconomicsCompelling Economics
* Resource estimate compiled using historic Soviet data by Hugues de Corta, who is an independent qualified person as defined by NI 43-101
TSX: BKI
2005 Today
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Project Backed by Forbes & ManhattanSuccess 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 involvemen
t
Forb
es
& M
anhatt
an
Involv
em
ent
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
Paul Bozoki – CFO• Former CFO of CD Capital Partners,
operating in Soviet Union & Ukraine
Igor Buchatskiy – VP Strategy• Former GM, International Business
Development, ArcelorMittal S.A.
Aaron Wolfe – VP Corp Development• Former investment banker with Macquarie
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• Distinguished career as a Canadian Federal
Cabinet Minister
John Detmold• Chairman & Founder of Invescture Group, S.A.
de C.V.
Dave Porter• Former VP for Rio Tinto’s Iron Ore Company of
Canada
Matt Simpson – President & CEO of Black Iron
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A Track Record of Iron Ore Successwith Consolidated Thompson Iron Mines, Rio Tinto’s Iron Ore Companyof Canada, and Ferrexpo
TSX: BKI
Sound Capital StructureAttractive Valuation with substantial upside
7
• IPO’d on the TSX on March 29, 2011 ($1.40)
Historical Share PriceCapital Structure
Shares Outstanding 140.1 million
Warrants (1) 1.7 million
Stock Options (2) 8.2 million
Share Comp Plan (3) 1.5 million
Fully Diluted Shares 151.5 million
Market Cap(4) ~US$40 million
Current Cash Balance ~US$17.0 million
Debt Balance nil
1. 1,653,312 warrants exercisable at $1.40 per share (IPO financing). 2. 5,700,000 options exercisable at $1.40 per share and 2,530,000 options
exercisable at $0.54.3. 1,500,000 shares reserved for Directors, Executives, Employees and
Consultants.4. As at August 31, 2012, using a closing price of CAD 0.285 per share.
Analyst Coverage
Maxim Sytchev
Cliff Hale-Sanders
John Hughes
Daniel Greenspan
Robin Kozar
Craig Miller
Philip Ker
David Talbot
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Ivan Dzvinka
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Deposits In Mining Friendly RegionAdjacent 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 Kryviy Rih iron ore complex and Smart & 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
ProjectM&I: 373Mt @ 31.4%
Inferred: 480Mt @ 30.2%
Black Iron’s Zelenivske
Project
ArcelorMittal’s Kryviy Rih Iron Ore Complex
Smart & Evraz’s YuGOK Iron Ore Mine
Railway lines
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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
− 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 6,042
meters of twin hole drilling
― Total iron grade and band width align very well with historical 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 306.3 31.3 18.9
Indicated 66.4 31.9 20.3
Total Measured and Indicated
372.7 31.4 19.1
Inferred 480.3 30.2 17.4
1.9 km
0.4 km
* Resource estimate compiled using historic Soviet data by Hugues de Corta, who is an independent qualified person as defined by NI 43-101
Tonnage and grade rounded to first decimals. Cut-off grade of 15% Fe Tot
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Potential Resource Extension at ShymanivskeGround 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
Potential resource upside to be
drilled
Drill hole
Propertyboundary
Very likelyIron in ground
Likely just dirt in ground
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Extensive Pit Shell Design Work CompletedSignificant Portion of the Resource Falls within the Economic Pit Shell
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Conventional Flowsheet (simplified)Producing High Quality Iron Ore Products
Drill Blast Load & Haul Crush
HPGRBall Mill (x2)Vertical Mill Magnetic Separator
Sulphur Floatation Pellet PlantFe 67.0%SiO2 4.5%
P 0.05%S 0.05%Al2O
3
0.31%
Mn 0.15%P80 44 µm
Concentrate
Fe 65.0%SiO2 4.13%
P 0.025%
S 0.01%Mn 0.15%
Pellets(optional)
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Feasibility Study On Track for Q4 CompletionLayouts finalized as shown below
Beneficiation Plant
Rail Loop
Cobbing Building
Secondary Crushing Building
Primary Crusher
Secondary Crushing Building
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Excellent Infrastructure Key to a Successful Iron Ore Project
• 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 10 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
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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
Major Rail Line Major Rail Line Major Rail Line
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Ukraine: A Mining Friendly CountryStrong Local and National Support
• Politically stable Democratic republic
― Following Presidential elections in 2010, 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; expected to increase to 4.5% in 2011
• Ongoing negotiations to sign the drafted “Association Agreement” with the European Union
• Potential key member of the Russia proposed Eurasian Trade Union
• Large, highly skilled labour force (pop. 45.4 million)
− GDP per capita only $6700/yr
• Mining friendly jurisdiction with strong local and national support
― ArcelorMittal and Ferrexpo plc have operated in-country for over 5 years
• Legislated corporate tax rate reductions from 21% in 2012 to 16% in 2014
• Favourable mining royalties of $0.40 per tonne of ore mined (~2%) to the Government
TSX: BKI
Russia16%
Australia17%
Ukraine10%
Brazil18%
China8%
India5%
Sweden3%
United States3%
Rest of World20%
900
420370
260
100 72 55 49 35 25
0
200
400
600
800
1000
Chin
a
Aust
ralia
Braz
il
Indi
a
Rus
sia
Ukr
aine
Sout
h Af
rica
Uni
ted
Stat
es
Cana
da
Swed
en
Iron
Ore
(m
t)
17
2010E Iron Ore Production
Source: USGS 2011 Iron Ore report and Metal Economics Group
Globally Significant Iron Ore DistrictUkraine: 6th largest iron ore producer & 4th largest reserve base
Global Distribution of Fe Reserves Kirovograd
Tarnavatskoye
LiponevskyYeristovskoye Safonovsko
ye
NovokonstantinovskyPoltavsky GOK
TsentralnyKryviy Rih Iron Ore Complex
Kuksunurskoye
Ingulestky GOK
Yuzhny GOKKryviv Rih
Ordzhonikize GokShymanivske
Zelenivske
• Black Iron’s projects are located in the heart of Ukraine’s iron ore belt
– 35km from 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 72 million tonnes in 2010
Only 3% of world production
TSX: BKI
Shymanivske PEA HighlightsHigh Value, Low Net Cost Iron Ore Development Project
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Production Case: Pellet Plant Feed Pellet
Annual Production: 7.3 Mt 7.6 Mt
Iron Content: 67.0% 65.0%
Estimated Capital Investment: US$896.0 million US$1,571.3 million
Estimated Operating Expenses: (life of mine) (avg ex. leasing costs years 8-20)
US$51.21/t US$48.22/t
US$63.00/tUS$60.11/t
Net Present Value (8%): US$3.0 billion US$4.1 billion
IRR: 42.1% 35.2%
Annual Average Cash Flow: US$382.8 million US$540.7 million
Projected Payback (8%): 2.2 years 2.9 years
Estimated Mine Life: 28 years 28 years
Proj. Revenue Commencement Q4 2015 Q4 2015OPPORTUNITIES EXIST TO FURTHER IMPROVE ALREADY
FAVOURABLE ECONOMICS
TSX: BKI
Black Iron’s Capital Cost AdvantageShymanivske Relative to Other Iron Ore Projects
19
Vale
(Shim
andou 1
)
Xst
rata
(A
skaf)
Arc
elo
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l (W
est
ern
Range
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Rio
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to (
IOC
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Ald
ero
n
Kum
ba
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(Kura
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IRC
(K&
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Xst
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(Z
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Rio
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Pilb
ara
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Anglo
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can (
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as
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(W
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BH
P (
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arc
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aci
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(Sin
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(G
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84 87 90 92109109122123124134135141142157159160167180186188189190192200211217221222236
258
CAPEX Forecast(US$/t of capacity)
Source: Company data; Renaissance Capital estimates
Average = 161
TSX: BKI
Black Iron Compares FavourablyBlack Iron to Other Iron Ore Developers
20
Maca
rthur
Centa
uru
s
Iron R
oad
Nort
hla
nd
Bla
ck Iro
n
Ald
ero
n
Bro
ckm
an
Gin
dalb
ie
0.3 0.5 1.1 1.53.0 3.1 3.3 3.4
7.3
Pre-Tax & Royalty NPV8(US$ billions)
Maca
rthur
Centa
uru
s
Iron R
oad
Nort
hla
nd
Bro
ckm
an
Gin
dalb
ie
Ald
ero
n
Bla
ck Iro
n
0.1 0.3 0.6 1.01.8 1.8 2.1 2.5
4.9
Post-Tax & 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. 1 Super-Profits tax >A$75 million profit. 2 Includes Brazil mining tax of $4 / tonne of iron ore
Source: Company data; Press Release; Research Estimates
New
Mill
eniu
m
Nort
hla
nd
Gin
dalb
ie
Bro
ckm
an
Ald
ero
n
Bla
ck Iro
n
25.0 32.0 35.0 38.0 40.2 42.1
Pre-Tax & Royalty IRR(%)
New
Mill
eniu
m
Gin
dalb
ie
Bro
ckm
an
Nort
hla
nd
Ald
ero
n
Bla
ck Iro
n
16.9 18.9 20.5 22.7 27.135.4
Post-Tax & Royalty IRR(%)
Tax Regime
Royalties
30%+30%1
39%2
29%
26%
16%
5%
2%
5-8%
n/a
2%
New
Mill
eniu m
New
Mill
eniu m
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Black Iron Continues to DeliverShymanivske Project Development Timeline
H1 H2 H1 H22011 2012
Scoping Study/PEA
Definitive Feasibility Study
Permitting
Construction
Drill metallurgical holes
Definition Drilling
Environmental Studies
Detailed Engineering
Production
Future
Exploration Drilling
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Permit Process for Shymanivske DepositBlack Iron Remains on Track
ExplorationPermit
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
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5 Fundamentals for Iron Ore Success A High-Quality Iron Ore Development Opportunity
Project located in Kryviy Rih, Ukraine; one of the world’s major iron ore districts• Close to target markets: W.Europe, Turkey, Russia, Asia and Middle
East• Surrounded by 7 other operating iron ore mines
Close to Target Markets
Close to Target Markets
Large iron ore deposit with NI 43-101 compliant resource*• Two properties held – Shymanivske & Zelenivske• Shymanivske - 373 Mt Measured & Indicated resource @ 31.4%
iron; additional 480 Mt of Inferred resource @ 30.2% iron, which will be concentrated to ~65% iron
• Potential for resource expansion by further drilling of both deposits
SizableResourceSizable
Resource
Good 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 &
five deep water ports accessible by rail (140-515km)
ExceptionalInfrastructureExceptional
Infrastructure
Experienced management team with history of creating value for shareholders of Consolidated Thompson, RioTinto and Ferrexpo
SkilledManagement
SkilledManagement
High margins due to close proximity to multiple steel mills, relative labour cost advantage and favourable corporate tax rate of 16%• PEA for 7.3Mt Pellet Plant Feed – NPV of US$3.0 billion and 42.1%
IRR• PEA for 7.6Mt Pellet – NPV of US$4.1 billion and IRR of 35.2%
Compelling EconomicsCompelling Economics
* Resource estimate compiled using historic Soviet data by Hugues de Corta, who is an independent qualified person as defined by NI 43-101
CONTACT INFORMATION65 Queen Street WestSuite 805, P.O. Box 71Toronto, Ontario, CanadaM5H 2M5
www.blackiron.com
TSX: BKI
Investor Relations
Toronto: +1 (416) 309-2950London: +44 (0) 207 466 5000Ukraine: +380 (67) 619-0454