Peter Ker
November 28, 2011 - 12:00AM
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Staying flat: The sale of the troubled Oakajee project has had negligible impact on Gindalbie Metals' share price. Photo: Bloomberg
AS HE rode around his flagship mine site in a mini-bus on Thursday, Gindalbie Metals chief executive Tim Netscher stole a moment to check the company's share price.
It had been a big day for iron ore producers in the mid-west, after the first steps were taken to rescue a troubled port and rail development for the region.
That project — Oakajee Port and Rail — had produced a steady tide of bad news all year as the developer Murchison Metals gradually realised it was not capable of delivering the $10 billion hub.
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As a future customer of the port, Gindalbie's share price had been punished with each piece of bad news, but with Murchison selling control of the project into a safer pair of hands on Thursday, there was a rare feeling of optimism for those involved.
The sale lifted Murchison shares by more than 50 per cent, and Mr Netscher was curious to see if the optimism had spread to Gindalbie's share price.
"We finished flat, George," Netscher said to chairman George Jones, upon seeing no change to the stock. "Flat as a biscuit".
While the inconsistency of the market didn't escape the pair, the fact the Oakajee news didn't deliver a bounce to Gindalbie's share price was comforting for a company that has long fought perceptions its fate is completely tied to Oakajee.
Gindalbie already has port access at nearby Geraldton, and expects to be exporting to their Chinese partners Ansteel at a rate of 8 million tonnes a year by December 2012.
Geraldton will soon allow Gindalbie to lift those exports to 16 million tonnes a year, meaning the company can grow to become a significant exporter long before they need Oakajee.
While it remains an important part of Gindalbie's strategy, Oakajee represents the company's distant third phase of growth and is not expected to be part of Gindalbie's infrastructure mix until 2016 at the earliest.
Once Oakajee is built and operating, Gindalbie hopes to lift its production to 30 million tonnes each year, which, if delivered today, would make the company the fourth biggest iron ore exporter in Australia.
Thursday's transaction means Mitsubishi is now the sole owner of the Oakajee project, and is expected to seek partners to buy in and help with its delivery.
Mr Jones believes a partnership between the Japanese giant and the Chinese groups that dominate the mid-west iron ore scene will prove to be the best way forward.
"There are five other Chinese participants in the mid-west who all want access to Oakajee, so it's rational that Mitsubishi will now sit down and talk to China about the joint development of this mid-west infrastructure," he said.
"We were always going to be a foundation customer [at Oakajee].
"If we were offered it we would take a share."
Plenty more water will pass under the bridge before Oakajee is settled, but there is work to do. Gindalbie's Karara mine is rapidly advancing, and the company expects to put its first ore — a beneficiated magnetite product — on a ship in 10 months' time.
Mr Jones says the company's results will soon speak for themselves.
"Gindalbie has been oversold, but the best way to fix that is to get into production and start showing everyone the sheer amount of money the project will make," he said.
The reporter made a site visit at the Karara mine as a guest of the company.
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