miners pushed too deep

A change of tune from Tim it appears.

Miners pushed too deep
By Tim Treadgold
October 22, 2008

Gindalbie Metals. Sold down heavily in the mass exit from the over-hyped iron ore sector Gindalbie is a unique player in that sector because of its intimate connection to the Chinese steel industry, and a pile of cash in its treasury.

The key to Gindalbie is a deal with China’s second biggest steel maker, Ansteel, which has already paid $228 million for a stake in the Karara iron ore project with another $143 million due soon.

But, the cash is only one side of the story. The other side is Ansteel’s banking connections, which last week saw a visit of a delegation from the China Development Bank, arguably the most important bank in China, which has traditionally only funded major projects in China, including the Three Gorges Dam, railways, roads and Beijing’s new airport.

The 15-member bank delegation came to Australia as part of a final due diligence exercise before providing Ansteel with a $1.4 billion loan for the Karara mine, which will, in turn, feed product directly into a new steel mill built near Beijing in what is a unique example of a mine in Australia being directly linked to a mill in China.

The benefit to Gindalbie is that it will not have to arrange any debt because it has chosen to borrow its share of the project cost from Ansteel (which is, in turn, plugged into the Chinese Government via the China Development Bank).

At its latest share price of 37¢, Gindalbie is valued on the market at $190 million, which is less than the cash in the Karara joint venture.