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Gindalbie overcomes delays to ship first ore

Gindalbie Metals has shipped its first cargo of magnetite from Western Australia, clearing a key hurdle for one of two multi-billion dollar iron ore projects being closely watched by China after long delays and cost overruns.

Gindalbie's $3 billion Karara project, about two years behind schedule, is the first major magnetite producer in Western Australia's Mid West, a region that Chinese and other Asian steel mills have long hoped would break the stranglehold of the mega miners in the Pilbara region further north.

The project, 50-50 owned by China's Angang Steel , is on track to reach its full capacity of 8 million tonnes a year by April, Gindalbie Managing Director Tim Netscher said today.

"I am confident that the underlying value of our project will flow through over the coming year," he said in a statement.

Shares in Gindalbie, more than one-third owned by Angang Steel, surged 14 per cent to 28 cents on making its first magnetite shipment, outpacing the broader market.

The company raised its production cost estimate in November by about 11 per cent to $72-$76 a tonne, which it said reflected general cost inflation and the impact of Australia's carbon tax.


A big factor behind cost increases on the project has been a 39 per cent rise in the Aussie dollar against the US dollar since the feasibility study was done in 2007.

A smooth ramp-up of the Karara project's magnetite concentrator, a large and complex plant, is key and is being closely watched by the rival $8 billion Sino Iron project, owned by China's CITIC Pacific.

Magnetite ore, a steelmaking ingredient, typically has lower iron content than hematite ore and needs to be processed using huge magnets to produce export-grade ore that is equivalent to hematite. China is the world's top iron ore consumer.

Bankers and lawyers have said the start-up of Karara and Sino Iron projects could help ease Chinese government concerns about funding multi-billion dollar iron ore projects and acquisitions after facing sharp cost increases and delays on Australian iron ore investments.

One key development at stake is the Mbalam iron ore project that privately owned Hanlong is set to take over on the border of Cameroon and the Republic of Congo.