Gindalbie Metals Ltd

( ASX:GBG ) - Materials


Gindalbie Under Pressure At Karara

China’s Ansteel has increased the funding offer for the joint venture with Gindalbie Metals (GBG) at Karara, Western Australia, but the announcement has opened a can of worms for brokers. The Karara project is running at reduced rates while work is being done to overcome bottlenecks in tailings management. The work should be finished in three months. These delays are stretching the joint venture’s balance sheet. Hence, Ansteel has come up with more money, having already injected $200m in extra funding since the start of FY14.

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Gindalbie In Need Of A Sizeable Capital Raising

Gindalbie Metals (GBG) is an emerging iron ore producer, owning the Karara project in Western Australia with joint venture partner AnSteel. Karara began shipping hematite lump and fines ore last month and is expected to reach 10Mtpa in shipments by the end of this year. The eventual target is production of 16Mtpa.

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Analyst Views

GBG – UBS rates the stock as Neutral

Quarterly magnetite shipments fell a little short of UBS and that’s with the company buying in some third party ore in order to avoid penalties from active take or pay agreements. Problems with the tailings circuit leading to reduced plant throughput was blamed for the shortfall.

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GBG – UBS rates the stock as Buy

The company has come cap in hand to shareholders to contribute $300m in equity towards the Karara project’s revised construction cost estimate and UBS analysts estimate this will dilute shareholders by some 11% at the Net Present Value (NPV) level. As such, the price target has fallen to $1.20 from $1.40.

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