Downer EDI wins $120m Karara contract

Gindalbie Metals has awarded a $120 million contract for the key power transmission line at its Karara Iron Ore Project to Downer EDI.

Downer EDI will construct a 180km, 330kV power transmission line from the project to Eneabba.

At Eneabba the transmission line will connect to the South West Interconnected Service, allowing Karara to draw power under its 15-year supply agreement with Verve Energy.

In a statement to the Australian Securities Exchange Gindalbie said construction of the bases for the transmission line has already begun.

Gindalbie managing director Garret Dixon said Downer EDI was well placed to deliver Karara's power transmission requirements with extensive experience in power line construction and a strong relationship with Western Power.

See company statement below:

Gindalbie Metals Limited (ASX: GBG) is pleased to advise that more substantial progress has been made in the development of the $1.975 billion Karara Iron Ore Project, with the award of a $120 million contract to Downer EDI for the construction of the key power transmission line.

Under the terms of the contract awarded by Karara Mining Limited, Downer EDI Engineering Power Pty Ltd will construct a 180km, 330kV power transmission line from the Karara Project to Eneabba. At Eneabba, the transmission line will connect to Western Power's South West Interconnected Service, allowing Karara to draw power under its 15-year supply agreement with Verve Energy.

Construction of the line has already commenced with Downer EDI completing the footings for more than 60 of the transmission line tower bases under an early works agreement.

Gindalbie Managing Director, Mr Garret Dixon, said Downer EDI was well placed to deliver Karara's power transmission requirements with extensive experience in power line construction and a strong relationship with Western Power.

The high voltage power line represents one of the key pieces of infrastructure investment - together with rail, water and port facilities - where additional capacity is being built into the Stage One project with a view to the potential future expansion of Karara's production level.

The original Karara Bankable Feasibility Study envisaged a 132kV transmission line, which would have provided sufficient capacity for the Stage One production of approximately 10Mtpa of magnetite concentrate and hematite ore. However the 330kV transmission line now being built, and budgeted for in the revised $1.975 billion construction cost estimate announced in May, will provide Karara with enough transmission capacity to underpin production of more than 36Mtpa.

The transmission line construction agreement is the latest in a rapidly growing list of major contracts and orders already in place for the Karara Project, including the recent award of an $86 million contract to Macmahon for earthworks and track laying for the 85km rail spur line.

Mr Dixon said the Downer EDI contract ensured Karara would have adequate transmission capacity to meet its production potential of more than 30Mtpa for more than 30 years.

"This contract is another example of how rapidly Karara is being transformed into a world-scale iron ore producer," Mr Dixon said. "With our funding arrangements in place and negotiation on a host of other key contracts well advanced, the Karara project is on track to achieve its target of first production next year."

"The project is also ideally placed for potential expansion, thanks to the decision to invest in much of the additional infrastructure upfront. The cost and time savings as a result of this strategy will be significant, ultimately reducing expenses and improving project returns."