China’s Ansteel is still bleeding cash at $4.7bn Karara magnetite mine

From the Australian 14th July 2020:

Link:

https://www.theaustralian.com.au/business/mining-energy/chinas-ansteel-is-still-bleeding-cash-at-47bn-karara-magnetite-mine/news-story/b72e58439e63330b91a84ad369b7b952

By NICK EVANS, RESOURCE WRITER

Chinese steel giant Ansteel is still losing money hand over fist at its $4.7bn WA magnetite minedespite the surging iron ore price, with the operation facing the prospect of refinancing $1bnworth of loans in 2020 while still losing money.

Despite selling its high-grade concentrate for an average of about $146 a tonne landed in Chinain 2019, Karara Mining still booked a net loss of $264.2m for the year – and said it had net cashoutflow from operating activities of $146.1m after paying $259m in interest on its massive debts.

Karara is now wholly owned by Ansteel, after the Chinese steel giant took out ASX-listed partnerGindalbie Metals last year. The Australian-registered company that owns and operates the minerecently filed its annual financial accounts for 2019, showing the project is still deeply mired indebt and is still bleeding cash, despite the surging iron ore price over the last 18 months.

Karara spent about $4.7bn building the magnetite mine, 200km southeast of Geraldton in WA’smid-west region. When planned it was supposed to produce 8 million tonnes a year of highgradeiron ore concentrate, destined for Ansteel’s Chinese steel mills.

But its latest accounts show it is yet to consistently hit its nameplate capacity, producing 7.5mt ofconcentrate in 2019, seven years after it loaded its first ship’s worth of product in Geraldton.

But it is primarily Karara’s crippling debt that weighs down its operations. According to its latestset of accounts the company has about $1.2bn worth of debt to repay or refinance in 2020, andanother $3.7bn worth of borrowings to repay in future years. The last tranche of its long-termdebt falls due in 2030.

Its interest bill in 2019 alone was $259m, and the company’s financial records show it is utterlyreliant on its Chinese parent company if it is to continue operating.

So far in 2020 Ansteel has helped Karara win a 12 month extension on a $US160m loan from theShanghai Pudong Development Bank, due for repayment in February, along with a $US300mloan from the China Merchants Bank and a $US130m working capital loan from the Bank ofChina due in June.

Ansteel itself also extended Karara a new line of credit worth about $374m in March.Karara booked $939.4m in revenue from the sale of iron ore in 2019, with operating costsincluding depreciation and amortisation of $862.9m.

But while its accounts are still in a parlous situation, the iron ore price helped Karara to a farbetter performance in 2019 than the previous year, when it booked a $668m net less.