well if ansteel are funding GBG what do you think RockCheck and Hebei will end up doing, also look at the price GBG sold the equity at.
when AXO sells some equity to Hebei it will probably be close to $1.
CHINA'S second-biggest steelmaker has taken a majority stake in junior iron ore explorer Gindalbie Metals for $162.1 million.
Gindalbie was placed in a trading halt earlier this week to consider an alternative funding proposal from Anshan Iron & Steel Group Corporation (AnSteel), its joint venture partner in the $1.8 billion Karara iron ore project in Western Australia's mid-west region.
The Perth-based mining hopeful 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 project payment of $143.68 million, which was scheduled to be made last month.
AnSteel, which already has a 12.6 per cent stake in Gindalbie, instead offered to provide the miner with $162.1 million in return for the issuing of new shares to increase its stake to 36.28 per cent.
The iron ore sector is suffering from the financial downturn. Many miners have halted expansion and curbed spending, leading analysts to predict that Chinese companies will take advantage of the situation to increase interests in Australia's resources sector.
Gindalbie said that as a result of the significant decline in global equity and credit markets in recent months, its board had unanimously decided it was in the best interests of shareholders to de-risk the company's balance sheet and accept the offer.
"While we acknowledge that the issue of new equity represents a movement from our original strategy, it is being undertaken at a time of uncertainty in the world's credit markets where even large blue chip organisations are struggling with refinancing," chairman George Jones said. "This arrangement means Gindalbie will remain debt free at a corporate level and with cash reserves of approximately $40 million."
The offer, which is subject to regulatory approvals, will result in AnSteel increasing its stake to 36.28 per cent through the purchase of 190,658,824 shares at 85c per share.
The company said the issue price represented a premium of 105 per cent to the closing price of Gindalbie shares on October 31, and a 74 per cent premium to the volume weighted average price of Gindalbie shares for the 30 days to October 31. Its shares last traded at 41c.
Following completion of the share placement and the final equity contribution to the joint venture company Karara Mining Ltd, AnSteel will have invested a total of $573.1 million by way of Gindalbie placements and Karara Project equity contributions.
AXO Price at posting:
25.5¢ Sentiment: Buy Disclosure: Held
