Gindalbie Metals says it will continue to purchase iron ore from third parties to make up for a shortfall of concentrator production at its Karara mine, as the company warned shareholders it will need additional capital investment before it can reach capacity at its main magnetite project.
Gindalbie said today it expected magnetite concentrate output to reach 75 per cent of nameplate capacity by the end of March next year as it worked to overcome bottlenecks in its tailings system.
The company previously forecast the project would be operating at its full 8 million tonnes per annum capacity by July this year but has been forced on several occasions to request further working capital from its joint venture partner, Ansteel, to help it address production delays.
The magnetite project is currently operating at just more than 60 per cent capacity on current guidance.
Ansteel agreed in September to provide a $US230 million injection of working capital into the Karara project through a concentrate pre-sale agreement and then through a loan facility to be provided by Bank of China and guaranteed by Ansteel, in a deal which could dilute Gindalbie's stake in the project to as little as 38 per cent.
"I recognise and acknowledge that it has been an extremely tough few years for Gindalbie shareholders as the delays and disappointments, particularly in the last year, have been reflected in our share price and market rating," Gindalbie managing director Dale Harris said today.
"However, equally I think it is important that we do not lose sight of the achievements of the past few years or of the fact that Gindalbie, as a junior company, has played a central role in establishing a project that is capable of delivering long-term value, with an infrastructure chain that will sustain this asset for many decades to come.
"(Karara Mining) is focused on developing a clear plan to resolve the major bottleneck issues, and is confident that the bottlenecks will be overcome, but this will require time."
Gindalbie has flagged that it will continue purchasing third-party ore to allow its rail and port system to run at design rates.
The company expects around a third of its forecast 2.4mt to 2.6mt direct shipping ore for the December half to come from a third party source.
Gindalbie disclosed in its September quarterly report that it had entered into an agreement with Mount Gibson Iron to purchase ore from its Extension Hill mine, with around 160,000 wet metric tonnes included in its total shipments for that period.
Gindalbie shares closed the day's trade 7.4 per cent lower at 12.5 cents.
