bullish on karara and lodestone magnetite

Must have missed this one, with all the excitment of the merger. Now that's in the past, let's concentrate on Karara and Lodestone (which Dixon says: "won't be quite as big as Karara" -not quite but big enough I'd say). Some interesting comments from Dixon that I hadn't heard before. Maybe GBG are sitting on Lodestone?

From Mining News:

Karara remains top priority: Gindalbie
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Friday, September 28, 2007
Kate Haycock

THE 1.4 billion tonne Karara deposit is the premier magnetite project in Australia, according to Gindalbie Metals, which will soon become the second-largest pure iron ore play in the country after its merger with Sundance Resources.

Speaking at the 2007 Resources Rising Stars Conference in Queensland four days after the announcement of the company's planned merger with Cameroon-focused iron ore play Sundance, Gindalbie managing director Garrett Dixon hammered home the message that the Karara project was still the company's number one objective.

"The Mid-West region of Western Australia is certainly the next iron ore province," he said.

"[And] Karara is the biggest… and best magnetite resource in Australia."

Dixon said Karara had all the necessary ingredients for a successful iron ore play – including the necessary size to sustain development – as well as being a consistent magnetite deposit with low impurities that metallurgical testing has indicated will concentrate to a high grade.

"What do you need for a good magnetite project? You need size, and you need to put a whole lot of infrastructure in. So you need to make long-term plans and have a project that can carry it," he said.

While Dixon pointed out any iron play was as much about infrastructure – mining machinery, loaders and then overland and sea transplant – magnetite had an even greater infrastructure demand.

High grade hematite, which is classed a direct shipping ore (DSO), can be virtually dug out of the ground, loaded into trains and shipped directly to customers in China.

Conversely, magnetite needs to be concentrated in a plant, which requires additional capital expenditure at the development phase.

Gindalbie has estimated its capital expenditures for the Karara project at $1.7 billion, including contingency, the construction of a Chinese pellet plant, and all Australian minesite and infrastructure costs.

However, Dixon was quick to defend the expenditure associated with magnetite and said the additional capex should be compared with transport costs for projects with greater haulage expenditure.

"You put 20 million tonnes into the concentrator and you get about 8 million tonnes out. There's a cost to doing that – but my view of the world is that it doesn't matter where your costs are," he said.

"I challenge those mines that are a lot further away on their transport costs… If you're 400 kilometres from a port you'll have $12 a tonne transport fee.

"My view is that I'm not fussed about where you spend the money, it's the cost at the end, what you can produce it for."

In its bankable feasibility study into the Karara project Gindalbie has estimated its operating costs at $552 million per annum, or around $69 per tonne of concentrate.

Dixon was also bullish about the future of Karara beyond the already defined resource and reserves, plus further potential in the Mid-West.

"We've got mineralisation down to 600 metres and our resources are only down to about 300 metres, so there's a lot more potential obviously. Also, we haven't drilled out the extent of the project. Karara will undoubtedly expand."

Dixon also said the expansion options in the area had dicatated Gindalbie's rail plans in the Mid-West.

He said the company had looked at two options for getting the magnetite concentrate to port – slurry pipe or via rail, and the company's preferred option was rail due to its ability to accommodate more production.

"Slurry pipelines do work… but at our production levels, a railway line beats [a slurry pipeline] hands down," he said.

The rail line to Geraldton will be an upgrade to an existing rail line and could also provide Gindalbie access to the proposed new port development at Oakajee should it go ahead.

"Karara is a great starter project, and at the same time we're starting to look further afield … [such as] the Lodestone project.

"It won't be quite as big as Karara but it certainly is the second best magnetite project in the area," Dixon added.

Yesterday Dixon also said the merger with Sundance did not change the company's plans for getting Karara up and running, and the companies would have separate teams for its Karara and Mungada hematitie project in Australia as well as for the Sundance and Gindalbie projects.

Instead, he said, the merger was about "building blocks" and growth, as it will create the second largest pure iron ore play in Australia behind Fortescue Metals Group.

Shares in Gindalbie were last trading at $1.65 this morning, unchanged after gaining 9.5c or 5.7% yesterday.