Gindalbie Metals (GBG.AX - A$1.18) Buy Target: A$1.70Finalises...

Gindalbie Metals (GBG.AX - A$1.18) Buy Target: A$1.70
Finalises iron ore offtake agreement
GBG finalises offtake agreement with Ansteel
GBG announced they have finalised their iron ore offtake agreement with Ansteel covering the life-of-mine magnetite
production from the Karara Iron Ore Project (GBG 50%). GBG confirmed that they will receive a premium price to
reflect the higher Fe content (68.2% Fe) as well as the low impurities of the concentrate which improves the value in
use. While not disclosed by GBG, we estimate this to be 10%. As a result, the realised price GBG will receive will be a
~20%/t premium to the Pilbara hematite producers (assuming 63% Fe).
Finalisation of the US$1.2bn senior debt facilities next key catalyst
GBG has previously announced they are targeting April 9 for completion. We understand that these negotiations have
been progressing with a term sheet agreed and are nearing finalisation but that this may occur after April 9. Given the
equity in the project, drawdown of the loan will not be required until May/June 2010.
ACTION: Buy; 31% discount to NPV, leverage to long-term iron ore price
We maintain a Buy rating on GBG with the stock trading at a ~31% discount to our NPV of $1.72ps. GBG has a high
degree of leverage to medium term iron ore prices as the Karara project becomes operational in 2011.
VALUATION: $1.72 (10% d.r.)
Our price target of $1.70 is based on our NPV estimate.
Bell Potter Securities Research Email [email protected]
Website www.AFS Licence No. 243480 ABN 25 006 390 772 bellpotter.com.au
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