Canadian junior Black Iron on Wednesday announced that it had signed a nonbinding memorandum of understanding with a subsidiary of Glencore, pursuant to which the parties agreed to engage in formal negotiations to finance the construction of the Shymanivske iron-ore project, in Ukraine.
The agreement contemplates Glencore making an investment to help fund construction of the project in exchange for securing the offtake of up to the full Phase 1 planned production of four-million tonnes a year.
Phase 1 of Shymanivske will require a capital investment of $436-million, the company previously said.
Black Iron said that the agreement allowed for allocation of offtake to other equity investors subject to the investment terms offered being equal or superior to those proposed by Glencore. It also noted that it was in discussion with other companies that had expressed strong interest in securing supply of the high-grade iron-ore concentrate expected to be produced from the project, in exchange for providing construction financing.
The project will produce pellet feed containing 68% iron. Prices for the premium grade iron-ore have rocketed since the January 25 dam wall burst in Vale, which has impacted on supply.
Black Iron plans to produce concentrate with low levels of trace elements that can be used to produce high-quality iron-ore blast furnace pellets or premium direct reduction grade pellets. It can also be used as a sweetener in the feed for sinter production which is then processed to iron in blast furnaces.
Black Iron’s TSX-listed stock rose nearly 12% on Wednesday, trading at C$0.095 a share.