Chinese-owned steel producer Ansteel has confirmed an agreement to kick in $119 million to help Gindalbie Metals raise $209 million in additional funds required to develop the $2.57 billion Karara iron ore joint venture in the Mid West.
Gindalbie announced today it was seeking to raise the funds through a one-for-three non renounceable entitlement offer to shareholders at 67 cents per share.
The entitlement offer will comprise an institutional placement of around $119 million to Ansteel and a $90 million retail component.
Gindalbie managing director Tim Netscher said Ansteel had already indicated its commitment to support the equity raising to maintain its 36 per cent stake in the company.
"The last time we raised equity we had to seek shareholder approval for Ansteel's participation and Chinese approval was subsequently received," Mr Netscher said.
"In addition we now have a very strong and loyal base of both institutional and retail shareholders, which is why we have decided on a capital raising structure that is fair and equitable to all shareholders."
The aspiring iron ore mine announced a revised production cost estimate for Karara of $2.57 billion last month, which required a further $600 million investment by the Karara joint venture partners.
The extra costs, Gindalbie said, were due to the changed scope of the project, higher costs of materials, labour and fuel, and a requirement for greater quantities of materials to construct a plant to process magnetite iron ore.
Gindalbie said its share of the extra cost would be funded through the $209 million equity raising and existing cash reserves, which currently total around $143.9 million.
The Karara project is currently at an advanced stage of construction. Earlier this year Gindalbie began trial mining hematite iron ore and has exported 568,000 tonnes to date.
It plans to mine both hematite and magnetite ore by next year.
Gindalbie shares last traded at 75 cents, before entering a trading halt this morning.
