Canadian-based Black Iron with assets in Ukraine claims it faces complications in the implementation of a project to produce and enrich iron ore in Ukraine due to a decline in prices on global markets and an increase in local production royalties.
The company’s iron ore project suggests investing over $1 billion, Deputy CFO of Dnipropetrovsk Zelenovske Steel LLC Mykola Levchenko said at a roundtable meeting entitled “New Tax Reform – Chance for the Economic Development of Ukraine’s Mining and Metallurgical Complex in Kyiv on Sept. 23.
“Canadian company Black Iron has been implementing its project for four years already to build a new iron ore plant in Ukraine, and the project is estimated at over $1 billion. Over $60 million has already been invested in it,” he said.
Levchenko also pointed to the worsening of the investment climate in Ukraine for foreign investors.
“Unfortunately, Ukraine’s economy has seen a situation when it is very difficult to reach the planned indicators as prices of iron ore on the global market are on the decline and royalties and other taxes are on the rise. Therefore we’d like to point out that an increase in the royalties will make it impossible for the project to develop and will challenge its efficiency,” he said.
The company says it has repeatedly asked the finance and economy ministries in Ukraine to involve it in discussion of issues related to royalties and taxation of iron ore production. It also called on lawmakers and tax reform experts to cooperate with the company.
As was earlier reported, Black Iron planned to discuss with its Ukrainian partner, the Metinvest Group, the possibility of buying toxic, but promising assets in the industry. The company prepared a comprehensive business plan to raise shareholder value amid a considerable decline in iron ore prices and the ongoing war in eastern Ukraine. The plan is aimed at creating conditions for an increase in the value of shares in the near-term outlook until the company’s flagman project, Shymanisvke iron ore mine in Kryvy Rih in Dnipropetrovsk region, starts to reap the benefits. In particular, Black Iron decided to buy back and eliminate up to 10 percent of its own shares, as they were underestimated.
Late in June 2015, the company said that amid the crisis and availability of monetary reserves, the mining and metallurgical sector offered the company beneficial acquisitions of high-quality toxic assets at advantageous prices.
The company was already mulling several possible deals with prospects to general money flows in the next few years.
At the same time, Black Iron said that such plans needed to be coordinated with Metinvest B.V., as they jointly own iron ore assets in Ukraine via Black Iron (Cyprus) Ltd. In particular, Black Iron has 51% and Metinvest holds 49 percent.
The company also reported that “conceptual discussions had already been initiated.”
