Black Iron has entered into a binding royalty and offtake agreement with Anglo American, marking a significant step forward for its Shymanivske iron ore project in central Ukraine.
The Shymanivske iron ore project will be developed in two phases, with phase one set to produce approximately 4 million tonnes per annum (mtpa) and phase two doubling the output.
The deal includes a $4m royalty investment and provisions for future potential construction prepayments, aligning the interests of both companies in the project's success.
Under the agreement, Anglo American will invest $4m in two tranches to secure a gross revenue royalty on Black Iron's first 60mt of production.
The royalty rate is set at 1% if the 65% iron CFR China iron ore price is below $120 per tonne (t), increasing to 1.5% if the price equals or surpasses this threshold.
The first tranche of $2.6m is due immediately, with the remainder payable upon the renewal of Black Iron's permits.
Black Iron retains the option to repurchase the royalty, providing a pre-agreed internal rate of return to Anglo American.
This investment grants Anglo American offtake rights to the greater of 60% or 2.4mtpa of phase one production for the life of the mine.
Additionally, the agreement includes a right of first offer for Anglo American to invest at least 15% of phase one construction costs post-conflict in Ukraine, potentially increasing its offtake to 100% for an expected 4mtpa.
Anglo American also holds first refusal rights to fund 15% of phase two expansion costs, which would entitle it to 100% of the life of mine offtake rights for an expected 8mtpa.
The offtake agreement features a profit-sharing component, fostering a mutually beneficial relationship between the two parties.
Black Iron's CEO Matt Simpson said: "Black Iron is excited to welcome Anglo American as an investor and offtake partner given their extensive global experience in the mining sector.
“Raising $4m through a royalty structure relative to Black Iron's current market capitalisation 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 $2.6m 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.”
