Gindalbie Metals looks set to start construction of WA's first magnetite mine and pellet plant east of Geraldton in the State's Mid-West region sometime next year after finalising a $1 billion joint venture and funding deal with Chinese steel giant Anshan Iron and Steel for its Karara iron ore project.
The deal underlines the desperation of China's steel industry to lock in new sources of supply and cut their dependence on Pilbara giants BHP Billiton and Rio Tinto.
AnSteel is China's second biggest steel maker and already operates magnetite mines and pellet plants in China.
At a ceremony in Canberra yesterday, Anshan agreed to take a 50 per cent stake in the planned 10 million tonnes a year magnetite pellet venture by providing up to $925 million in debt and equity funding. Gindalbie is targeting a 70:30 debt-to-equity funding split for the $1 billion venture, with AnSteel committing to provide 75 per cent of the equity and arrange all debt funding.
It has also struck an offtake agreement for the project's entire estimated output of 10 million tonnes of magnetite pellets a year.
Chairman George Jones said the agreement was "binding" subject to the successful completion of final feasibility studies, which will start almost immediately, ahead of a likely development decision by March next year.
"The agreements we signed today are actually binding contracts, not expressions of interest," he said. "We've been through the letter of intent stage . . . and have now gone to a further stage, they've completed their due diligence on the project and have committed themselves to the feasibility study." Subject to a successful study outcome, AnSteel will then provide its share of equity funding and all debt funding unless better terms can be secured elsewhere.
The project also depends on the construction of a deepwater port at Oakagee, 20km north of Geraldton, a development crucial for virtually all the proposed iron ore and magnetite ventures proposed in the Mid-West region.
Gindalbie has already defined an inferred resource of 737 million tonnes of magnetite grading 31.7 per cent iron at Karara, 260km east of Geraldton, but has so far drilled out only half the known strike length.
The company proposes to build a slurry pipeline to Oakagee, where the pellet plant will be built close to the proposed port.
Gindalbie shares closed at 54¢ on Friday ahead of a trading halt yesterday
GBG Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
