Metals and Mining
February 10, 2012
Black Iron represents a potentially powerful addition to the stable of Ukrainian iron ore thoroughbreds. The company, currently in the exploration stage, intends to launch production by 2015 with annual output of 7mn tonnes, assuming it can obtain funding for its required CapEx of USD 900mn. The most likely route to such funding is via an M&A deal or a joint venture with a steelmaker. A historical analysis indicates that news about either of these arrangements should be a sharp trigger for Black Iron’s share price. Using a peer valuation and a deal-based valuation, we initiate coverage of the BKI stock with a target price of USD 1.51 (CAD 1.51) and a BUY rating.
