IRON ore company Gindalbie Metals has announced a $62 million equity raising to strengthen its balance sheet so it can contribute to the commissioning of its flagship Karara project in WA if necessary.
The equity raising comprises a $40 million fully underwritten placement to institutional and sophisticated investors, and a proposed additional conditional placement of $22 million to major shareholder Ansteel that would allow Ansteel to maintain its 36 per cent interest in Gindalbie.
The offer price for the institutional placement, which was successfully completed in early December, was 25.5 cents per share – a 13.6 per cent discount to the last closing price of Gindalbie’s shares before the placement.
First magnetite concentrate has been produced at Karara and the project is undergoing a 6-month commissioning and ramp up with a view toward boosting its capacity to 8 million tonnes per annum.
According to Gindalbie, the production ramp up is scheduled for completion during the June quarter of 2013. Gindalbie stated that the proceeds from its equity raising would provide an additional cash buffer to address possible increases in working capital requirements during commissioning of the Karara magnetite concentrator.
“While Karara has been delivered broadly within the revised construction budget and very close to schedule – which is a major achievement in itself – we have seen that, in recent months, unexpected volatility in Australian dollar iron ore prices can put significant short-term pressure on Australian iron ore operations,” Gindalbie managing director Tim Netscher said.
“We want to make sure that the company and the project remain in the strongest possible position during the commissioning process, with sufficient liquidity to address any unexpected events and the ability to weather any adverse developments in global markets.”
Gindalbie also announced that, following a review, its stage 1 production cost forecast had increased from between $65 and $68 per tonne to between $72 and $76 per tonne.
The Karara iron ore project, 200km east of Geraldton in the Midwest region of WA, is being developed by Karara Mining, a 50-50 joint venture between Gindalbie Metals and Ansteel.