30/11/2012 - 09:51

Gindalbie launches $62m equity raising

30/11/2012 - 09:51

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Gindalbie launches $62m equity raising

Gindalbie Metals has announced it will tap investors for $62 million to insulate it against continuing iron ore market volatility, as it ramps up production at the Karara magnetite project in the Mid West.

Gindalbie said today that it would raise the funds through a $40 million fully underwritten placement to sophisticated and institutional investors, and a conditional $22 million placement to major shareholder, Chinese steelmaker Ansteel.

The offer price for the placements is 25.5 cents per share, while the institutional component is underwritten by UBS.

Following completion of the Ansteel placement, the steelmaker will maintain its 36 per cent stake in Gindalbie.

Managing director Tim Netscher said the proceeds would give the company extra balance sheet flexibility during the commissioning phase of the Karara project.

Gindalbie produced first magnetite at Karara earlier this month.

“While Karara has been delivered broadly within the revised construction budget and very close to schedule – which is a major achievement in itself – we have seen that, in recent months, unexpected volatility in Australian dollar iron ore prices can put significant short term pressure on Australian iron ore operations,” Mr Netscher said.

“We want to make sure that the company and the project remain in the strongest possible position during the commissioning process, with sufficient liquidity to address any unexpected events and the ability to weather any adverse developments in global markets.”

Mr Netscher said Gindalbie was pleased with Ansteel’s participation in the raising, which was a good sign of their continued support for the Karara project.

The company, however, said production cost forecasts had increased to between $72 and $75 a tonne, up from the previous prediction of $65 to $68 per tonne. 

Gindalbie said the cost increase reflected general inflation and the impact of the carbon tax.

Gindalbie shares went into a trading halt this morning, having last traded at 29.5 cents.

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