A Bankable Feasibilty Study has confirmed the financial viability of the Karara Magnetite Project in Western Australia"s Mid West.

The project is being developed by a 50/50 joint venture between Western Australian iron ore group Gindalbie Metals and its Chinese partner Anshan Iron & Steel Group Corporation (Ansteel).

The study has laid the foundations for the Aus$1.6 billion development of a world-class iron ore business.

Gindalbie says that the study confirms the technical and financial viability of a long-life project which is expected to generate substantial returns for the joint venture and deliver significant benefits to the region and Western Australia. The Karara project is 225km east of the port of Geraldton.

The study concluded that based on a JORC-compliant ore resource of 1.43 billion tonnes at 36.3% iron and an initial ore reserve defined as part of the study of 497 million tonnes at 36.3% iron, the Karara project would generate an initial after tax free cash flow of Aus$9.3 billion from the first 25 years of operations and an indicative annual cash surplus after tax of Aus$360 million.

The substantial size of the resource, 1.43 billion tonnes, with 929 million tonnes at 36.3% iron of Indicated and Inferred Resources outside of the initial pit design, and the scope for further resource additions, reinforces the potential for production to be increased significantly above this level.

Gindalbie's managing director Garret Dixon says: "Ansteel has expressed its desire to expand production from Karara to meet its own growth requirements at its new steel-making facilities in China, and we therefore view the study as very much a base case for what we envisage will in time become a much larger project."