Not sure if this article has been posted yet. Written by Sarah...

Not sure if this article has been posted yet. Written by Sarah Jane Tasker for the Australian 26th Sept.

GINDALBIE Metals could be forced to further dilute its stake in the Karara iron ore project after it was forced to tap its Chinese partner for $230 million to fund working capital. The Perth-based miner secured a new funding package with its joint-venture partner Ansteel that could see the Chinese state-owned entity increase its interest in the project to 62 per cent, leaving Gindalbie with 38 per cent.Gindalbie managing director Tim Netscher said if the miner were to decrease its interest in the project, 38 per cent would still be a substantial stake from which dividends would eventually flow."Gindalbie would then have money in the bank ($30m from a previous Ansteel funding deal), plus existing cash, plus anything we can raise from the sale of other assets and be in a position to turn that cash into another opportunity," Mr Netscher said. Gindalbie already has a separate funding deal with Ansteel, announced in June, which saw the Chinese provide a loan that enabled it to increase its stake in the project from 50 per cent to 52.16 per cent.Shares in Gindalbie initially increased on the announcement of the new funding package, but later fell, closing the day 3.57 per cent lower at 13c.The company had flagged earlier this month the possibility of a further dilution in its project interest after it revealed that an issue with its dry tailings damde-watering system had put the brakes on its production ramp-up.The slowdown in output meant it was not earning the revenue it had hoped it would to pay its share of working capital, forcing it to lean on its Chinese partner.The company had already ruled out raising equity on the market given the price of its stock. Based on the $230m Ansteel will pay for a potential extra 10 per cent stake, it values the project at $2.3 billion, which would value Gindalbie's 38 per cent stake at $814m, equating to about 56c a share.The iron ore miner also released its full-year accounts yesterday, which recorded a $143.2m loss, of which $133.5m was from its 50 per cent share in the Karara project, which had suffered a $267.1m loss for the year.Direct shipping ore operations at the project came close to break-even for the year, but the magnetite operations, the main output from the project, reported a loss of $22.8m. That was attributed to take-or-pay obligations because the project is yet to reach commercial production.