25/06/2009 - 00:00

China funds lift Mid West iron ore hopes

25/06/2009 - 00:00

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THE Chinese government's approval of a critical $162 million cash injection into Gindalbie Metals by the company's Chinese partner, AnSteel, has delivered a major boost to the emerging Mid West iron ore industry.

THE Chinese government's approval of a critical $162 million cash injection into Gindalbie Metals by the company's Chinese partner, AnSteel, has delivered a major boost to the emerging Mid West iron ore industry.

Gindalbie managing director Garret Dixon said the latest approval meant it was "all systems go" for the proposed $1.8 billion Karara magnetite project east of Geraldton, and kept the project on track to begin construction by the end of the year.

The approval represents a much-needed fillip for the Mid West's emerging regional iron ore industry.

Last week, Gindalbie axed 20 per cent of its Mid West workforce following the Environmental Protection Authority's April recommendation to block mining at the small but high-grade Terapod hematite deposit near Karara. At the same time, the EPA approved the main Karara magnetite project, which is unaffected by the Terapod ruling.

Gindalbie is appealing the EPA's ruling because Terapod is crucial to its plans for a 2 million tonnes per annum hematite starter operation to generate early cash flow ahead of the main Karara magnetite development.

The 24 jobs axed were primarily associated with the hematite project and Gindalbie's regional exploration program. Gindalbie also confirmed that about 50 contractors employed by engineering group Worley Parsons on related "operational readiness" activities had been laid-off in April.

Gindalbie investor relations manager Michael Weir said the cuts were the result of the uncertainty caused by the EPA ruling, and that the joint venturers' focus was now on getting Karara up and running.

The EPA ruling made it increasingly unlikely that the hematite operation, originally expected to start generating cash flow 12 months ahead of the magnetite project, could deliver any major timing advantage, he said.

Fellow Mid West miner, Sinosteel Midwest, is also challenging an adverse EPA recommendation last month that has effectively derailed plans for its own starter hematite operation at Koolanooka-Blue Hills.

Meanwhile, Mount Gibson Iron's 3mtpa Extension Hill hematite project remains in limbo due to a dispute with the Geraldton Port Authority over the installation of a new rail unloader at the dedicated Berth 5 iron ore berth.

Mt Gibson's Extension Hill project is fully permitted but the company has deferred development until at least mid 2010 because of the dispute over the rail unloader. The GPA maintains it cannot commit to the facility until Mt Gibson proceeds with Extension Hill.

Mt Gibson managing director Luke Tonkin said the GPA essentially expected Mt Gibson to fully fund the facility even though it would need the unloader for only five years and that other miners were expected to use the facility in future years.

He also argued that the authority was using "Rolls Royce, rather than Holden" cost estimates for the unloader. The end result was that the new $45 million 12mtpa Berth 5 shiploader was only partially utilised because the capacity of the existing rail unloader is only 4.5mtpa, Mr Tonkin said.

GPA chief executive Peter Klein said he was surprised by Mr Tonkin's comments, as the GPA had not yet put any proposal to Mt Gibson. However, the GPA continued to actively engage with Mt Gibson and was confident that agreement could eventually be reached.

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