new announcement .. funding proposal, page-71

AnSteel seeks to increase stake in Gindalbie Metals

November 04, 2008

CHINESE steel giant AnSteel is looking to boost its stake in Gindalbie Metals to help the iron ore miner fund its flagship project.

The Perth-based miner was placed in a trading halt yesterday while it considered an alternative funding proposal for its final equity contribution to the 1.4 billion-tonne Karara iron ore project from AnSteel, its joint-venture partner.

AnSteel, China's second-biggest steelmaker, has already contributed $228.38 million to the project and Gindalbie had paid $18.38 million from existing cash reserves. The final contributions from both, to be $143.68 million each, was due last month.

Gindalbie, headed by chief executive Garret Dixon, said yesterday it had previously exercised its right, under the terms of the Karara joint venture development agreement, to ask AnSteel to arrange debt finance for Gindalbie's final payment. AnSteel, which already has a 12.6 per cent stake in Gindalbie, instead offered to provide the miner with $162.06 million in return for the issuing of new shares at a substantial premium to the current share price.

CCZ Equities Research analyst John Chong said the alternative was a positive for Gindalbie and illustrated that the Chinese group had confidence in the project and the company.

"China is looking through the cycle and will take advantage of the turmoil by increasing stakes where they can," he said. With Chinese companies previously pushing to gain a foothold in Australian miners, Mr Chong said offers would now be "falling in their laps".

Gindalbie said it was now considering the offer and expected to make a further announcement in the next couple of days. The company said it was discussing with China Development Bank the provision of $1.4 billion project financing to the joint-venture company, Karara Mining.

Chairman George Jones said: "These equity funding discussions confirm AnSteel's commitment to the project and highlight the strength of the long-term relationship Gindalbie has with its joint-venture partner. In the current market this is a very positive alternative as it would leave Gindalbie itself debt-free."