Black Iron signs royalty, offtake agreement with Anglo American

Black Iron announced the signing of a legally binding royalty agreement and offtake agreement with Anglo American (NGLOY) for a US$4 million royalty investment, offtake rights and future potential construction prepayments. Black Iron’s Shymanivske Iron Ore Project located in Kryvyi Rih, central Ukraine, will be developed in two phases – with Phase 1 producing approximately 4 million tonnes per annum and Phase 2 production increasing to approximately 8 million tonnes per annum. Certain key terms of the Transaction that have been agreed upon include: Anglo American will invest US$4 million in two tranches in exchange for a gross revenue royalty of 1.0% should the prevailing 65% iron CFR China iron ore price be less than US$120 per tonne and 1.5% should the price be equal to or higher than US$120 per tonne for Black Iron’s first 60 million tonnes of production at the Project. The first tranche consisting of US$2.6 million 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 pre-agreed internal rate of return to Anglo American; Anglo American’s investment in the Royalty secures it offtake rights to the higher of 60% or 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% 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% of the Phase 1 production for an expected 4 million tonnes per annum. Additionally, Anglo American also has first refusal rights to fund a further 15% of expansion construction cost for Phase 2 of the Project. Provision of such funding would secure Anglo American 100% of the life of mine offtake rights for Phase 2 of the Project, for an expected 8 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.