Gindalbie Minerals-Ansteel to settle this week

All those claims that Rio Tinto's rejection of Chinalco, the Chinese Government-controlled aluminium giant, would see investment from China halted, have proven to be false.

Chinese steel company, Ansteel says it will move quickly now to increase its stake in Australian iron ore explorer Gindalbie Metals and get a big new West Australian ore project up and running.

If the Chinese Government had really been upset about the Chinalco deal with Rio falling apart, it would have found a way of delaying Ansteel's cash contribution, or some other delay to illustrate its concerns.

That China chose not to doesn't necessarily mean it is over the rejection for Chinalco; but the Ansteel deal does show sophistication in handling offshore deals.

The strategic nature of the Ansteel deal in investing in a new iron ore mine destined to supply China, and a controlling minority stake in the mine promoter shows how the Government sees where its real longer term interest lie: in secure suppliers of a key raw material, not a public spat with a growing trading partner.

China will no doubt find a way to make its point to the Federal Government about Chinalco.

The approval, last Tuesday, allowed the Anshan Iron and Steel Group (Ansteel) in northeast China's Liaoning Province to increase its interest in Gindalbie from 12.6% to 36.28% to become its biggest shareholder.

According to the spokesman of Ansteel, quoted on the Xinhua website in China, the purchase will be finished within a week. Then the two sides will invest a total of $A534-million in the Karara iron ore project in western Australia, with a 50-50 ownership.

Once the share placement is completed, AnSteel and Gindalbie will be able to make the final equity contributions, of $A143.68 million each, to complete the entire $534 million equity component of the funding package for the project.

The rest of the capital required for the project will be provided through a Project Loan Facility of up to US$1.2 billion to be provided by the China Development Bank (CDB).

Gindalbie says that after the placement to Ansteel, it will have approximately 704.6 million shares on issue, including Ansteel's 36% stake.

Gindalbie says that after its equity contribution it will free cash reserves of approximately $42 million, no debt and minimal cash spend.

The joint venture company, Karara Mining Limited, will have approximately $350 million in cash reserves, having already spent almost $200 million on long-lead items, pre-development activities and other items required for project development.

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