Gindalbie flags possible equity raising

Gindalbie Metals says it is considering an equity raising to fund a 30 per cent blowout in construction costs for its Karara magnetite iron ore project in the Mid West.

Gindalbie confirmed today that costs at Karara had risen to $2.57 billion, a figure it previously announced to the market on March 16.

The extra costs are due to the changed scope of the project, higher costs of materials, labour and fuel and greater quantities of materials for a plant to process magnetite iron ore.

Gindalbie said to cover its share of the increased construction costs it was considering "equity alternatives that would give shareholders the opportunity to participate on an equitable basis."

The company said it would announce its funding strategy in a few weeks time.

Gindalbie also today estimated its average cash operating costs for Karara would be in the range of $65 per tonne to $68/t for production of 10 million tonnes per annum.

Gindalbie managing director Tim Netscher said delays and cost escalations were common for major resources projects, but the guidance was nonetheless disappointing.

""However, Karara has a very large reserve and resource base, which will easily support a major long life project and it is important to take a medium to long term view," he said.

"We have an infrastructure solution for the first two phases of the enlarged project including capacity for 16Mtpa through Geraldton Port, which removes our reliance on Oakajee Port for Stages One and Two of Karara.

"We now have a clear framework for the final seven months of construction and for the commissioning phase next year."

Mr Netscher said he believed Karara was a world-class project which would deliver a premium priced, high quality product and generate strong margins.

"Keeping cash costs as low as possible is important, but the real driver of profitability and shareholder value is the margin that you generate," he said.

"In this, our first phase of development, we are investing large amounts in expanded infrastructure capacity and setting Karara up for very cost effective expansions."

At close of trade today Gindalbie's stock was steady at 85.5 cents.