PERTH (miningweekly.com) – China’s Ansteel has offered up to a A$30-million loan to its joint venture (JV) vehicle with ASX-listed metals miner Gindalbie to repay a loan on the Karara project.

During the March quarter, Gindalbie and Ansteel each contributed A$50-million in interest-free loans to the JV company, Karara Mining, to assist with short-term capital requirements.

The JV partners subsequently also each advanced a further A$30-million loan to Karara Mining on similar terms, with Gindalbie making its payments from existing cash reserves.

The miner said on Wednesday that Ansteel had now agreed, subject to Foreign Investment Review Board approval, to advance Karara Mining a second A$30-million loan to allow for the repayment of Gindalbie’s A$30-million debt.

Ansteel had also granted Gindalbie an option to purchase a second A$30-million loan, which the company said would replenish its cash reserves to more comfortable levels.

In the event that Gindalbie failed to exercise its option to buy the loan within 12 months, the JV partners have agreed that Ansteel could convert all or part of its two loans to Karara Mining – totalling A$60-million – into Karara Mining shares, subject to the necessary approvals.

“We are grateful to our JV partner and major shareholder for this interim financial support they have provided,” said Gindalbie MD Tim Netscher.

“This gives us sufficient headroom and we now have a number of options in front of us over the 12-month period to allow us to repay the loan and maintain our 50% interest in Karara Mining.”

Netscher noted that the options included pushing ahead with the development of the Shine direct shipping ore project, which would generate a healthy return, or the sale of its Lodestone magnetite project.

Meanwhile, Gindalbie also on Tuesday reported that production at the Karara mine continued to ramp up, with the project currently running at 70% of its capacity.

During the three months to March, the Karara project shipped 283 000 t of magnetite, as well as 20 shipments of hematite, equalling 1.2-million tons.

Commissioning of the final polishing circuit had started and the project was forecast to achieve its nampelate capacity of eight-million tons a year during the June quarter.

“Considering its size, the commissioning and ramp-up of the Karara project is proceeding extremely well and we expect to be cash flow positive within months.

“Given this outstanding progress and the fact that we are now on the cusp of generating surplus cash flow, we are determined to ensure that Gindalbie is not hit by the headwinds of turbulent global commodity and equity markets, just as we are about to complete this journey,” said Netscher.