Delays prompt Gindalbie staff cuts

Delays in receiving environmental approval for the $1.8 billion Karara iron ore joint venture have prompted Gindalbie Metals to make redundant 24 employees.


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Re. Green Tape causes job losses at Gindalbie. The decision by Gindalbie to cut jobs predominately within its exploration group and operations team within the Karara Mining Limited JV had little to do with delays caused by green tape. Cost cutting and spending constraints imposed by Gindalbie's JV partner, Ansteel were the main reason for the announcement. The second reason was the lack of interest in the market for hematite from the Blue Hills deposits at Mungada. Last Friday the board met in China and considered the budget forecast for the first phase of construction and exploration for Hematite. Ansteel rejected the budget outright and demanded that all further spending be focused only on the delivery of the Karara Project. As a result KML was forced to fully suspend exploration and close the Karara Exploration camp site with the loss of 30 full-time and casual staff. All planning and operational staff employed on the Hematite phase in Perth were either transferred to Karara's Magnetite project or made redundant. The Operations GM for Gindalbie was also made redundant. Overnight Gindalbie became a listed company on paper only. All assets were transferred to KML and Gindalbie staff were either terminated and a few transferred to KML where positions were vacant. The Karara site was placed into care and maintenance. The EPA bulletin delivered for Karara in April was favorable and the project was given the green light. Access to site and vegetation clearance can only occur after delivery of a Ministerial Statement expected in October. Construction and planning activities can commence immediately on pastoral lease, however they have not for two main reasons. KML blew its budget on project management contractors in the first quarter and has ran out of money and no land access agreements have been set up with pastoral landowners. The first problem KML addressed with the cutting of 60 positions from the WorleyParsons team and rewriting scopes of services with the contractor in April. The second wave of redundancies also further cut costs. Land Access agreements on the other hand are a delicate exercise and take months to complete; this oversight will be costly and further delay start up of construction. In addition KML faces headaches with access to water at Mingenew, adequate power supply by 2011 and lack of port space for the initial shipments of ore. KML retains lease of office space in London House and QV1 on St Georges Terrace, overheads that are fast draining the budget before ground is even broken. The appeal against the EPA decision on Terapod is a side issue, not the length of green tape that has tied the project. KML has already agreed conditionally to relinquish its tenements on Mungada Ridge for an A Class Reserve and expects Sino-steel will be forced to do the same. The protracted appeal against EPA recommendations over Terapod and the Mungada Ridge has done little more than provide additional work for Environmental Consultants engaged by KML in the appeals strategy. If anything the appeal is an effective ploy or delaying tactic. The Hematite on Blue Hills and Terapod is non-economic at current prices and not wanted by China because of high silica content in the ore. While the issue remains unresolved, KML still has another chance at the greatest prize: At least $5B worth of Magnetite reserve hidden under the marginal cap of Hematite on Mungada Ridge, possibly richer than Karara. The ore, not the ridge is the true gem in the banded iron stone formations of the Mid West. Once proven the likelihood of an A Class Reserve on Mungada is unlikely. What stands in the way of KML is lack of experience in delivering world class projects on time and on budget and an unattractive and shabby but very unique plant.

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