Perth based Gindalbie Metals Limited (GBG) has a portfolio of exploratory iron ore assets in Western Australia but the company’s immediate future rests with the Karara iron ore project, a joint venture with Chinese steel and iron ore giant, AnSteel. With a market cap of only $386 million, the partnership with AnSteel gives Gindalbie a decided funding advantage. The company has no long term debt following successful capital raises in 2011 and 2012. The Karara mine is in production and the company expects to reach 5 million tonnes yearly production by FY 2014.
Major analyst opinion on the stock ranges from moderately skeptical to bullish, despite the dramatic 2 year growth forecast of 98.3%. On 16 January 2013 BA Merrill-Lynch upgraded GBG to a BUY recommendation based on better iron ore prices and production growth. UBS maintained a BUY rating and target price of $0.38 in the belief the Karara expansion is proceeding according to plan. JP Morgan is the major skeptic with an UNDERWEIGHT recommendation and a “wait and see attitude” regarding the successful ramp up at the Karara project.
Despite the strong balance sheet with zero debt and $40 million total cash, the share price of Gindalbie has continued its slide from 2012 into 2013. Here is the company’s one month chart:
Investors may be focusing on Gindalbie’s single commodity focus and dependence on increasing Chinese demand for steel.