Even as peace between Russia and Ukraine remains out of reach, with a ceasefire still uncertain, Canada-based Black Iron is positioning its Shymanivske iron ore project as a cornerstone of Ukraine’s eventual post-war reconstruction.
Backed by the US-Ukraine Minerals Development Act and buoyed by strong iron ore prices, the company remains optimistic, despite the likelihood of rising capital and labour costs.
Black Iron acquired rights to the Shymanivske project in 2010 through a privatization process.
The company was listed on the Toronto Stock Exchange (TSX) in the same year under the symbol BKI, with the goal of bringing the Shymanivske project into production as a high-grade iron ore mine with a phased annual production of 8 million tonnes, with 68% iron concentrate.
However, the full-scale invasion of Ukraine by Russia in February 2022 halted most activities on the project.
Significance of the Shymanivske iron ore project and current status
“Black Iron, to my knowledge, is the most advanced greenfield development mining project in Ukraine,” Matt Simpson, CEO of Black Iron, told Invezz in an interaction.
“It’s easily several years ahead of any new company that would want to come in and develop a project under the US-Ukraine Minerals Development Act,” he said.
Providing an update on the status of the project, Simpson said 90% of the feasibility study of the phased build is now complete, and no metallurgical test work or drilling remains, barring updated pricing- details of which will be accessible only when the war ends.
The company had also well-advanced its environmental and social impact assessment, which needs to be concluded, along with some permit work from Ukraine.
“So it will take us realistically about nine to twelve months once there’s peace to complete that documentation. But then we can be in a fully ready-to-construct stage,” Simpson said.
According to the company, the Shymanivske Iron Ore Project is expected to inject $1.2 billion in development capital over the life of the project and is estimated to contribute $2.2 billion to the Ukrainian economy.
Project cost expected to rise, but outlook for iron ore price fuels optimism
Simpson acknowledges there is bound to be a change in capex and other costs due to the disruption brought on by the war and other geopolitical disturbances.
“I think there’s going to be a lot of question marks on what the exchange rate is going to be in Ukraine? Because when we last did that study, it was 28 to 1. And today it’s like 42 to 1. So, the exchange has changed dramatically. We don’t know what it’s going to look like after the war,” he says.
The bigger challenge, however, may be labour.
Skilled workers such as electricians, welders, and mechanics are expected to be in high demand during Ukraine’s recovery, potentially putting upward pressure on wages, he says.
Yet the outlook for iron ore prices provides a counterbalance.
“When we last did that estimate, we used a long-term iron ore price of $62 a ton. And I don’t think iron ore has dropped much below $90 over the past five years. Mostly it’s above $100 actually,” he says.
UBS has forecast that iron ore prices will average around $100 per ton in 2025, with a slight decrease to $95 per ton in 2026 and $90 per ton in 2027.
Financing interest post Anglo-American deal and US-Ukraine minerals law
Black Iron’s financing prospects received a substantial boost when mining giant Anglo American agreed to fund 15.5% of the Shymanivske project’s construction costs.
“Anglo American is committed to fund 15.5% of the project’s construction costs. And they’re one of the biggest mining companies in the world. So to have them as an anchor investor just shows how good quality this project is as an investment opportunity,” Simpson says.
He added that the US-Ukraine Minerals Development Act will spur increased interest from export credit agencies and international finance institutions in rebuilding Ukraine, which likely means that the project will have access to many low-cost sources of funding for the construction.
“There’ll be a lot of people watching this project because it’s going to be kind of a roadmap for all the other developers,” he said.
While Simpson did not elaborate much on whether there has been any outreach from US entities towards the project, post the signing of the deal, he said the company is having conversations in that regard.
Last month, Simpson also participated in a panel discussion seeking to mobilise private capital for the recovery and reconstruction of Ukraine at the annual conference of the Export-Import Bank of the USA.
Tariffs depressing steel prices but Ukraine reconstruction will push iron ore, steel prices up
Simpson also weighed in on broader geopolitical issues, particularly trade tensions that have been triggered by the imposition of tariffs by the US.
Canada, in particular, has been hard hit, and the country’s leaders have lashed out multiple times at the move.
Last week, US President Donald Trump signed an order doubling tariffs on steel and aluminium imports from 25% to 50%.
The new order has already come into effect.
“The biggest impact on iron ore are really the direct tariffs that have been placed on steel. And that has actually caused a decrease in global steel prices,” Simpson said.
Simpson said that while the iron ore outlook would be majorly driven by the government policy in China, because it is the largest consumer of steel in the world, it is also going to be driven by when the war in Ukraine ends.
“Because once that war in Ukraine ends, concrete is probably the number one rebuilding material, but steel will be number two as it is going to be used for so many different applications, whether you’re rebuilding a school or a hospital or high-rise building, a bridge…So, I think when there’s peace in Ukraine, steel and iron ore prices in particular are going to rise quite a bit.”
Over the next six to twelve months, key milestones include securing the renewal of permits, which are set to expire six months after martial law ends.
Simpson said the company is also in talks with several government agencies in Ukraine to ensure Black Iron can access low-cost funding streams once rebuilding begins.
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