JOHANNESBURG (miningweekly.com) – Canadian explorer and developer Black Iron will develop a new preliminary economic assessment (PEA) for its Shymanivske iron-ore project, in Ukraine, to take into account the favourable exchange rate and a phased development plan.

Instead of a 9.9-million-ton-a-year operation, as considered in the 2014 feasibility study, the PEA will be based on a scaled down, yet expandable design, starting with a four-million-ton-a-year operation.

The company said in a media statement on Wednesday that subsequent phases to increase production could be largely self-funded, using the cash flows generated from the first four-million-ton-a-year operation.

“Given the current market and political environment, management feels that the smaller operation with far less capital expenditure requirements will be better received by investors,” Black Iron stated.

The 2014 feasibility study used an iron-ore price of $95/t and an exchange rate of eight Ukrainian hryvnia (UAH) to the US dollar. Today, the exchange rate is about 26UAH to the dollar and iron-ore with 62% iron content is selling for $64/t.

The current exchange rate should materially reduce the projected upfront capital cost, as a significant amount of the construction costs, including labour, concrete, steel and secondary equipment would be Ukraine based. The lower exchange rate also resulted in significantly lower operating costs as achieved by existing Ukraine iron-ore miners, including Ferrexpo, Metinvest and ArcelorMittal.

Black Iron pointed out that Shymanivske concentrate would be a superior 68% product with very low impurities, making it a premium-priced product ideal for blending with lower grade products. Currently, each additional 1% iron content is commanding a $4 per 1% premium, so at the current benchmark price of $65/t, Black Iron's product should sell for $89/t.

Further, Shymanivske has all the major infrastructure including rail, power, port and skilled local people in very close proximity to the deposit, allowing for the project to be economic at lower than typical production rates required for an iron-ore mine.

"I am very excited to reinvigorate the Shymanivske project as this is a mine that is technically derisked based on the favourable 2014 feasibility study and was very close to be constructed with funding largely from our former development partner Metinvest and a large international trading company that had visited site multiple times to discuss a prepaid offtake agreement. Based on the current favourable exchange rate largely offsetting lower iron prices, I am confident that the PEA results will demonstrate to both existing and new shareholders the robust and economic attractiveness of the Shymanivske project," Black Iron CEO Matt Simpson commented.

BBA led the preparation of the company's former PEA and will also complete the new PEA. The results of the PEA will be available before year-end.

The Shymanivske project contains a National Instrument 43-101-compliant resource estimated to be 645.8-million tons of measured and indicated mineral resources, consisting of 355.1-million tons measured mineral resources grading 32% total iron and 19.5% magnetic iron, and indicated mineral resources of 290.7-million tons grading 31.1% total iron and 17.9% magnetic iron, using a cutoff grade of 10% magnetic iron.

The Shymanivske project also contains 188.3-million tons inferred mineral resources grading 30.1% total iron and 18.4% magnetic iron.