PERTH (miningweekly.com) – Iron-ore developer Gindalbie Metals and its joint venture (JV) partner Ansteel have agreed to restructure the ownership of the Karara project, in Western Australia.

Under the terms of the transaction, Gindalbie’s stake in the Karara JV vehicle would decrease from 50% to 47.84%, as Ansteel undertook to provide all the required bridging loan finance to the JV vehicle, to fund expected cash shortfalls over the next 12 months.

Gindalbie announced, in May, that the Karara JV was on the hunt for capital to assist with the short-term working capital requirements of the project. The shortfall in capital has been attributed to delays in the general ramp-up of the project and product shipment rates being below internal forecasts.

The miner said on Tuesday that subject to certain conditions, including Foreign Investment Review Board approval and Chinese regulatory approval, Ansteel would undertake to provide all the working capital requirements of the Karara project until a new long-term working capital facility could be secured with the China Development Bank or other third-party lenders.

Gindalbie and Ansteel have both previously advanced separate A$30-million loans to the Karara JV for working capital, with Ansteel subsequently agreeing to advance a further A$30-million loan to allow for the repayment of Gindlabie’s loan.

Ansteel further granted Gindalbie the option to buy its second A$30-million loan, in exchange for Ansteel converting all or part of both of its loans into Karara JV equity.

Gindalbie MD Tim Netscher said the new funding arrangements represented a major breakthrough for the Karara project, and a strong vindication of the strength and durability of the JV.

“The combination of short-term bridging finance and a long-term working capital facility secures Karara’s financial position, putting the project on a much stronger footing for the future.”

Netscher noted that, from Gindalbie’s perspective, the agreement removed the overhang of an impending equity raising, leaving the company with cash of over A$35-million and no debt, while enabling it to retain at least 47.84% ownership of the iron-ore project.

“The advantage of this arrangement is that it avoids the need for us to call on shareholders or the market for more funding for Karara’s ramp-up and effectively marks the beginning of a new chapter for Gindalbie.”

Gindalbie said it expected to reach nameplate capacity of eight-million tons a year by July, allowing the Karara JV to become cash flow positive during the September quarter.

Meanwhile, Gindalbie has also announced the appointment of Tang Fuping to its board as a nonexecutive director, replacing Ansteel representative Shao Anlin.

Tang is currently the VP of Ansteel Group Corporation, the GM of Ansteel Group in Anshan and the chairperson of Ansteel Corporation.