Karara boosts magnetite production

The Karara magnetite joint venture between Chinese steelmaker Ansteel and Australian iron ore producer Gindalbie Metals has increased concentrate production by a third to 1.26mn t in the July-September quarter compared with the previous quarter.

The Western Australian (WA) plant is still operating well below its nameplate capacity of 8mn t/yr. Continuing remedial work means that Gindalbie is unable to give any production guidance for the remainder of the year or give any forecast on when the project will start producing cash flow.

Karara shipped 2.18mn t of iron ore in the July-September quarter, comprising 1.14mn t of 66.2pc Fe concentrate and 1.04mn t of direct shipping haematite that was largely bought from third-party suppliers to allow full use of Karara's rail and port infrastructure.

Karara expects to ship more of its own haematite once its Hinge iron ore project starts production this quarter. Hinge contains 3.5mn t of haematite ore.

The slow ramp-up of the Karara magnetite project has put the future of Gindalbie in jeopardy, with the company warning in August that it might be unable to continue as a going concern if Karara were to default on any of its debts.

Magnetite projects usually have higher costs than hematite projects because the ore requires additional processing to create concentrate or pellet. Australia's sole long-term magnetite supplier is Grange Resources' Savage River mine in Tasmania. Karara and Chinese state-controlled firm Citic Pacific's 24mn t/yr Sino Iron magnetite project in WA's Pilbara have run into significant technical difficulties.

The problems have been compounded by a prolonged slide in iron ore prices. Prices of 62pc Fe iron ore were last assessed at $78.35/t cfr China against $132.90/t at the start of the year.

joc/rjd

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