27/01/2015 - 15:32

Gindalbie starts strategy review

27/01/2015 - 15:32

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Gindalbie Metals has commenced a review of its strategy and investment options, after reporting that the Karara iron ore project is still not cash flow positive despite achieving a solid lift in production volumes.

Gindalbie's Karara iron ore project.

Gindalbie Metals has commenced a review of its strategy and investment options, after reporting that the Karara iron ore project is still not cash flow positive despite achieving a solid lift in production volumes.

The $2.6 billion Karara project lifted production of magnetite concentrate by 12 per cent to 1.4 million tonnes in the December quarter, but is still a long way short of reaching its nameplate capacity of 8mt per year.

Karara, located 200 kilometres inland from Geraldton, also produced 412,000 ounces of hematite ore in the December quarter.

In addition, it bought 650,000oz of hematite ore from third parties in order to maximise the use of its installed rail and port capacity.

Gindalbie said that, given the ongoing work to improve the performance of the Karara operation, it was not in a position to provide accurate production guidance or forecast when the project would achieve positive cash flow.

In light of the fall in iron ore prices, project operator Karara Mining is focused on low-cost options to debottleneck the plant, and intends to minimise capital expenditure.

The project is majority owned by China’s Ansteel, while Gindalbie has a 47.8 per cent stake.

Karara exported its first magnetite concentrate in January 2013 and predicted at the time that it would reach full production capacity of 8mtpa by the end of April 2013.

The project was developed on the basis it would also ship 2mtpa of hematite ore.

Perth-based Gindalbie said that in light of the current market conditions, production levels at Karara and the company’s low share price, it was reviewing its strategy and investment options.

It is also reviewing its exploration tenements and divesting those it believes have little prospectivity.

It has further reduced administration costs and eliminated committee fees paid to directors.

Gindalbie’s shares are currently trading at 2 cents per share, giving it a market value of $30 million.

By comparison, the company had term deposits of $40 million and cash reserves of $1.39 million at the end of December.

 

 

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