Iron ore - Gindalbie and Ansteel join to develop Karara iron ore project

Gindalbie Metals has entered a landmark two stage joint venture and project funding agreement with Anshan Iron & Steel Group Corporation (AnSteel) for the development of its Karara iron ore project in Western Australia"s Mid West region.

Ansteel is China 's second largest steel producer.

As part of the first stage of the agreement, AnSteel and Gindalbie have committed to complete the ongoing Definitive Feasibility Studies being undertaken under the Karara Project Alliance with Thiess Pty Ltd and Promet during this year for both the magnetite and hematite phases of the project on a 50:50 basis.

It is expected the definitive feasibility study for the Karara concentrate/pellet project will be completed by February 2007 and a decision to mine is expected soon after.

The second stage of the agreement involves the construction of the 7 million tonne per

annum Karara concentrate/pellet project.

While the final funding requirements for the project will be determined by the definitive feasibility study currently in progress, it is estimated that the capital cost will be in the order of A$1 billion, with the debt/equity ratio structured on a 70% debt:30% equity basis.

Before the second stage of the agreement starts, operating joint venture agreements, sales and marketing agreements for all the expected output and all necessary financing arrangements will be put in place.

Once the project financing is completed, AnSteel will earn its 50% interest in the project.

The key terms of the second stage of the agreement are that AnSteel will provide 75% of the equity funding component of the Karara concentrate/pellet project and assist Gindalbie in securing its 25% share of equity funding, if requested by Gindalbie. AnSteel has indicated its willingness to provide all necessary debt funding for the project if debt funding is unable to be secured from the international debt markets.

Another significant feature of the agreement is that AnSteel will purchase the total output of iron products - including hematite, pellets and concentrate from the Karara Iron Ore Project, including Gindalbie's share of production.

The joint venture agreement represents a major step for Gindalbie towards its objective of becoming a substantial new Australian iron ore producer and iron pellet exporter.

The agreement with AnSteel also provides Gindalbie with a long-term commitment to jointly develop and fund a substantial new iron ore production centre on terms which leave Gindalbie with a strong level of ownership and a minimal requirement to raise new capital.

AnSteel is currently China 's second largest steel producer and the major steel producer in the north-east region of China , with crude steel production of 11.3 million tonnes in 2004 and annual sales revenues in excess of US$8 billion.

As one of China 's oldest (first established in 1916) and world's most influential steel companies, AnSteel has recently announced a merger with Benxi Steel (7 million tonnes of crude steel production in 2004), also based in Liaoning Province , with completion of this merger expected later this year under the merged name of Anben Steel Group Company.

Anben is expected to have total steel production capacity of 30 million tonnes per annum by 2010.

Under current Chinese Central Government policies, AnSteel is considered to be one of the country's key growth companies and has strong support in securing new sources of long-term iron ore supply through international investment. It reports that it has financial support for its investments with the China National Development Bank.

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