tain unloading at the geraldton port, page-15

Article from The West:

Gindalbie declares Karara project ?bulletproof?
Peter Kerr Geraldton, The West Australian
September 19, 2012, 7:12 am


George Jones has declared the first stage of Gindalbie Metal's Karara project virtually bulletproof, saying even sustained falls in iron ore prices to $85 a tonne would not affect its ability to repay interest on its $1.5 billion debt.

However, in an admission that the market shakeout was affecting the fledgling iron ore producer, the Gindalbie chairman said it would defer the Mid West expansion until conditions improved.

"Our costs are just below $70 a tonne (excluding debt)," Mr Jones said yesterday after opening its new iron ore berth and loading facilities in Geraldton.

"But the product that we make, magnetite, is processed and we get a big premium over benchmark prices of about 20 per cent. Those margins do give us comfort and we will be able to service (that debt)."

Mr Jones added that the interest rate on its Chinese-supplied debt was lower than most other miners.

Iron ore traded as high as $US180/t a year ago, but plummeted to a three-year low of $US86/t earlier this month as demand in China fell. Prices have since jumped back to about $US105/t.

Mr Jones said the volatility was likely to delay Gindalbie's plans to expand output from 10mtpa by the end of this year to an interim 16mtpa, but that the project was designed "to last 50 years".

"We do hope to expand this project, but in this market we obviously will have a good hard think about that," he said. "We anticipate that we will just push that back to a more appropriate time.

"We have already spent about $1 billion extra to get our infrastructure right so we can move to those higher tonnages. The expansion will happen, it's just timing."

He said even if delayed, preliminary work on the expansion could begin next year, which would be crucial for squeezing the most out of the $2.6 billion investment.

With finishing touches still being applied to the berth, and senior executives from Chinese-backer Ansteel at the opening, Treasurer Troy Buswell said the project laid the "fundamental building blocks" for a Mid West iron ore province.

However, doubts remain over the nearby Oakajee port project crucial in the long term for miners in the region. Mr Jones said he would travel to China next week where he hoped to get "clarity" on Oakajee investment plans.

Gindalbie's $200 million-plus Geraldton facility is capable of handling up to 16mtpa from its Karara mine. Production of magnetite concentrate is expected in October.