hi stylish ; i agree , that's why i posted this report by the...

hi stylish ; i agree , that's why i posted this report by the Australian newspaper today.

GINDALBIE Metals' Chinese partner Ansteel is finalising talks with its banks to secure funding, which will ensure the Karara joint venture does not breach debt covenants.

The Perth-based company flagged in its half-yearly results, released late on Monday, that delays in the ramp-up of production at its Karara iron ore project had affected the project's working capital requirements.

The project, 200km east of Geraldton in Western Australia, is effectively incurring all fixed operating costs, plus commissioning costs, while not yet generating full production revenue. The company's subsidiary, Karara Mining, has required significant levels of bridging finance to cover working capital requirements.

Karara, which is Gindalbie's only operating asset, is jointly owned with Ansteel, which is one of China's largest steelmakers and iron ore producers.

Gindalbie's new managing director, Dale Harris, said the miner had a good relationship with Ansteel, which had been very supportive over the past 12 months in terms of funding support for the project.

He said Ansteel was taking the lead to secure additional funding to support the project as it ramped up to nameplate capacity.

"Those negotiations that Ansteel are leading with the banking syndicate are at an advanced stage," he said.

"It's really a timing issue around working through the necessary approvals in China and we have confidence that funding solution will take place in due course.

"The message here is we have China Inc supporting us. Ansteel is a state-owned enterprise. They are working at the senior levels with CDB (China Development Bank), which is also a state-owned enterprise."

Ansteel has an option to convert a portion of its direct funding support into equity, which could eventually take its interest in the project to 62 per cent, reducing Gindalbie's stake to 38 per cent.

Mr Harris, who joined Gindalbie in November, said Ansteel had not formally advised the company yet that it intends to take up that option.

"That was quite a good arrangement that was put in place at the time that the funding was required," he said.

"It was a much better option than going for a rights issue that would've been highly dilutive to shareholders. The rate at which Ansteel would convert to equity is favourable compared to where the current share price sits."

Shares in Gindalbie were 6.59 per cent lower at 8.5c yesterday.

Mr Harris, the former chief operating officer of iron ore at Rio Tinto, added that he was not concerned by the recent slump in the iron ore price.

"Some of this volatility is based on thin volumes," he said. "Iron ore, based on recent history, is subject to short, sharp drops followed by quick recoveries.