AnSteel (Anshan Iron & Steel Group) will take a strategic equity position in Gindalbie Metals

The proposed investment will strengthen the relationship between Gindalbie and AnSteel, and represents a vote of confidence by AnSteel in the joint development of Karara.

The Share Subscription Agreement will see Gindalbie issue 65 million shares at 60 cents each to AnSteel's Hong Kong investment vehicle, Angang Group Hong Kong, to raise A$39 million. Following completion of the share placement, AnSteel will become Gindalbie's second largest shareholder with a 12.94% interest.

The agreement is conditional upon AnSteel receiving approval and sign-off from relevant Chinese regulatory authorities, which are expected within two months. After completion of the placement, AnSteel will be invited to nominate a representative to join Gindalbie's Board, with the timing of this appointment to be jointly determined by Gindalbie and AnSteel.

Funds raised through the placement to AnSteel will be applied to continued development of the Karara Magnetite Project and the Mungada Hematite Project, which are being developed through the 50:50 Joint Venture between Gindalbie and AnSteel.

Following completion of the placement, Gindalbie will have cash reserves in excess of $60 million, providing a strong platform to start development of Mungada this year and to complete the Bankable Feasibility Study on Karara, which is scheduled to be finalised by the end of August.

Development of Mungada is scheduled to begin in the second half of 2007 at an initial production rate of 2mt/annum in 2008.

Gindalbie executive chairman George Jones says: "I am very pleased that AnSteel has agreed to take up this strategic investment in Gindalbie, which represents another important chapter in our relationship. I believe that AnSteel has sent a very clear message, not only about their commitment to the development of the Karara project, but also about their confidence in Gindalbie's future as a rapidly growing Australian iron ore company."

AnSteel president Zhang Xiaogang says: "We have been working closely with Gindalbie over the last 18 months to advance the Karara project to a position where we are very confident in the capacity of this project to be able to deliver a long-term supply of high-quality iron ore for us. This strategic investment in the Australian resource sector is a very important step by Ansteel into the international capital and metals markets."

AnSteel and Gindalbie will make a final decision to proceed with Karara following completion and delivery of the Bankable Feasibility Study, with the overall project targeted to begin production at the rate of 8mt/annum of blast furnace quality pellets and concentrate by early 2010.