Gindalbie Metals Ltd. (GBG.AU) has gone against the tide of companies threatening to shelve projects in the wake of Australia's proposed resource profits "super tax", saying Thursday that it hopes to raise A$206.4 million in equity for a proposed iron ore project it's building with a Chinese partner.

"Life has to go on," Gindalbie Managing Director Garret Dixon told Dow Jones Newswires. "We've got a great project we're building, there's 250 people on site, so we've got to get on with our business and the stuff we can control."

Gindalbie and China's second largest steelmaker, Ansteel, want their 50/50 Karara development in the mid-western part of Western Australia state to go live next year at a rate of 11 million metric tons a year. If it does, production will commence just ahead of the new 40% tax on "super" profits, currently slated to kick in from 2012.

The project will generate about A$1 billion in annual export revenues, assuming an iron ore price around US$100 per metric ton, building to A$3 billion as the project grows, Gindalbie said.

Gindalbie hasn't finished calculating precise numbers on how the project might be affected by the tax, but Dixon said he's aware of analysts' suggestions that some project's net present values could decrease by anywhere between 5%-15%. "But Karara will still be going ahead as a project, it's a great project," he said.

"But you would think that (the tax) is perhaps refined as people start to realize some of the consequences, and we look forward to being part of that process," he added.

For the tax to pass into law it will have to get through both Australian houses of parliament and the Liberal-National coalition opposition has already voiced its strong disapproval.

Dixon said demand for iron ore is still strong and there are signs that the U.S. economy is recovering, while demand from developing Asian economies like China remains robust.

BHP Billiton Ltd. (BHP) Chief Executive Marius Kloppers said Sunday that spot iron prices could remain at their current high levels this year amid a continued under supply in the market.

Ansteel also owns 36.12% of Gindalbie, which has launched an A$111.8 million institutional share placement, priced via a bookbuild, an up to A$20 million retail share purchase plan, and a placement to AnSteel of between A$63.2 million and A$74.6 million.

The issue to AnSteel will be adjusted to ensure the Chinese group maintains its 36.12% stake in Gindalbie, depending on retail investor demand for the share issue.

Proceeds from the raising will help fund Gindalbie's 50% share of the project's A$1.975 billion construction cost and related A$430 million working capital facility.

The estimated construction cost was revised upwards on May 5 by 20% from previous guidance delivered in September 2007, to account for an increase in capacity of a related power line, improved rail haulage capacity, and improved iron ore storage capacity.

Gindalbie said at the time it would assess all potential funding alternatives to cover the cost increase.

-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; ross.kelly@dowjones.com

 
 
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