Gindalbie Metals Ltd plans to raise $162 million through a share placement to Chinese project partner AnSteel to cover its final payment towards the $1.8 billion Karara iron ore joint venture.
Gindalbie Metals Ltd plans to raise $162 million through a share placement to Chinese project partner AnSteel to cover its final payment towards the $1.8 billion Karara iron ore joint venture.
A Gindalbie spokesperson told WA Business News the trading halt will remain in place until the board passes down its decision on the placement, expected within days.
Shares in Gindalbie last traded at 41.5 cents.
Both companies were due to make final payments of $143.68 million each towards the Karara joint venture last month.
So far AnSteel has contributed $228 million towards Karara, with its final payment to be delayed until the placement is completed, the spokesperson said.
Gindalbie had previously exercised its right, under the JV terms, to request AnSteel to arrange finance for its share of the final equity contributions.
The $162 million placement proposal will cover Gindalbie's final Karara payment plus the first payment of $18.4 million.
In a statement, Gindalbie said shares in the placement will be at a substantial premium to the current share price.
"In the current market this is a very positive alternative as it would leave Gindalbie itself debt-free," Gindalbie chairman George Jones said.
"We expect to conclude a suitable arrangement with Ansteel for Gindalbie's share of the final equity contribution to meet the final contribution as soon as reasonably practicable."
At the end of the September quarter, Gindalbie had $129.8 million in the bank.
The announcement is pasted below:
Gindalbie Metals Limited (ASX: GBG - "Gindalbie") advises that it has received an alternative funding proposal in connection with its final equity contribution to the Karara Iron Ore Project from its joint venture partner, Anshan Iron & Steel Group Corporation (AnSteel).
Under the previously announced agreed payment schedule for equity payments, Ansteel has made three payments to date totaling A$228.4 million and Gindalbie has made one payment of A$18.38 million. The final equity payment, of A$143.68 million each, was due to be made in October.
Gindalbie had previously exercised its right, under the terms of the Karara Joint Venture Development Agreement (JVDA), to request AnSteel to arrange finance for Gindalbie's share of the final equity contributions to the Project. Under the terms of the agreements, AnSteel is required to arrange this finance as debt on acceptable terms.
AnSteel has now proposed an alternative funding arrangement to Gindalbie, which is being considered and assessed by the Board of Gindalbie. The alternative proposal would involve Gindalbie issuing shares to Ansteel at a substantial premium to the current share price for a total fund raising of A$162.06 million, which would cover the final equity contribution plus the earlier contribution already made by Gindalbie out of its existing cash reserves. Any placement would require the approvals of Gindalbie shareholders, Foreign Investment Review Board,and Chinese regulatory approvals and would require an independent expert's report.
In light of these developments the final equity payments by AnSteel and Gindalbie have been deferred until a final resolution has been reached on the equity funding arrangements. AnSteel has advised Gindalbie that it has the funds available in Australia to make its final equity payment and has also reaffirmed its full support for the rapid development of Karara and the continued feasibility of expansion opportunities.
The joint venture company, Karara Mining Limited (KML), currently has almost A$200 million in cash reserves from earlier equity payments and the decision has no impact on the ongoing engineering, design and development work for the Project. In addition, discussions are advancing well with China Development Bank to provide project finance to KML in the order of A$1.4 billion at competitive rates. All other rights and obligations associated with the Joint Venture Development Agreement are preserved such as Ansteel taking 100% offtake from Karara at benchmark prices and in particular for concentrate, at benchmark plus a premium.
"These equity funding discussions confirm AnSteel's commitment to the project and highlight the strength of the long-term relationship Gindalbie has with its joint venture partner. In the current market this is a very positive alternative as it would leave Gindalbie itself debt-free," said Gindalbie's Chairman, Mr George Jones.
"We expect to conclude a suitable arrangement with Ansteel for Gindalbie's share of the final equity contribution to meet the final contribution as soon as reasonably practicable."
While the Board of Gindalbie is assessing the proposal it has requested its securities remain subject to a trading halt.
