Gindalbie Metals bows to market pressure

Gindalbie Metals has hit a roadblock with the withdrawal of funding by joint venture parent Ansteel.

The WA miner announced last week it would voluntarily halt trading after it was informed by Ansteel, owner of the controlling share (52.16 per cent), that it would be “unable to continue providing funding support to Karara due to the impact of economic and industry downturn”.

Gindalbie is a JV owner of the Karara Project, located 200 kilometres east of Geraldton, which employs a workforce of around 1000, jobs that have been thrown into jeopardy by funding withdrawal.

The company is expected to make an announcement prior to commencement of trading on Tuesday 12 January.

The West Australian reported that the subsidiary operator Karara Mining has lobbied the WA government for royalty and tax concessions, in the effort to cut $200 million from operating costs to break even at current iron ore prices.

Last month Karara CEO Zhang Zhao Yuan met with mine and finance minister Bill Marmion and Department of State Development director-general Stephen Wood.

In early December Gindalbie chairman Keith Jones said it would be more costly to close the mine than to operate, which it would continue to do as long as Ansteel was prepared to subsidise losses.

It is understood Karara Mining is locked into high haulage costs due to take-or-pay agreements made with Brookfield rail during the mining boom.

Karara has already benefited from $9.3 million in temporary royalty concessions in the form of a 50 per cent rebate over 12 months to last September.

Last May Karara consolidated $US1.48 worth of loans into a single facility, with the maturity date moved to 2030.

Ansteel’s involvement with Karara originally began as a means to directly source material for its steel making operation at Bayuquan near the port of Yingkou.

Iron ore is trading around $US41.40 per tonne, compared to $US120 in 2011 when the Karara mine began operations.

In FY2014 the Karara mine produced nearly 2.4 million tonnes of concentrate from 5.853 million tonnes of magnetite ore.

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