PERTH (miningweekly.com) – Iron-ore developer Gindalbie Metals has solved its funding woes after its joint venture (JV) partner, Ansteel, stepped in to fund a $230-million delay at the Karara project.

Earlier this month, the iron-ore firm warned shareholders that it would require additional funding for Karara, following recent delays in ramping up production.

The ASX-listed miner on Wednesday reported that it had signed a memorandum of understanding (MoU) with Ansteel to supply funding for the delay, in two stages. The first $100-million in immediate funding would be in the form of a concentrate pre-sale agreement with the Kagara project, under similar terms and conditions as the two previous pre-sale agreements executed earlier this year.

In the second step of funding, the Bank of China would provide a $130-million term loan to Kagara, subject to receiving an unconditional guarantee from Ansteel. In turn, Gindalbie would provide Ansteel with a corporate cross-guarantee for a percentage of the loan facility, proportionate to Gindalbie’s equity share in the Kagara project.

The approval of the term-loan facility would be subject to various conditions precedent, including government approval and consent from Kagara’s existing banking syndicate.

Ansteel would have an option to subscribe for new equity in the project to provide the JV vehicle with sufficient funds to repay the debt. If the debt facilities were converted to equity, Kagara shares would be issued at a price of A$3.02 each.

The new $230-million funding was in addition to two previous cash injections by Ansteel earlier this year, consisting of $84-million and $30-million respectively to cover working capital requirements and to fund previous debt.

Meanwhile, Gindalbie reported that work at Kagara was progressing to implement the engineering solutions necessary to address the bottleneck at the tailings management system. This work would likely be completed within three months.

Product shipments were also continuing with total exports of around 4.2-million tonnes of direct shipping ore (DSO) hematite and 1.5-million tonnes of magnetite concentrate.

For the six months to December, the Kagara project was expected to produce between 1.5-million and 2-million tonnes of magnetite concentrate, and between 1.9-million and 2-million tonnes of DSO.