The period between 2004 to 2012 saw unprecedented growth in the resources sector driven primarily by massive increases in the demand for steel making minerals in China. Over the past four years the sector has transitioned from project construction and expansion to a focus on maximising production volumes and reducing operating costs. Softer commodity prices in the bulk commodities are both a function of increased supply and the slowdown of demand growth in China. However, demand from China remains strong. In 2010, Western Australia’s share of the iron ore market in China was 43.5% or 270 million tonnes, in 2015 it was 64%, which equated to 607 million tonnes.

While iron ore prices strengthened in late 2016 and early 2017, extreme volatility remains a defining trait of the iron ore market. Since mid-2016, prices for the most commonly quoted 62% Fe material have ranged between US$55-90 per tonne. Gindalbie’s exposure to the iron ore sector is a result of its remaining minority shareholding in KML and the Karara Project. Although Gindalbie retains its investment in the Karara Project, based on current price forecasts and KML’s very significant gearing levels, the Company does not currently anticipate that the Karara Project will deliver a positive financial return to Gindalbie’s shareholders in the foreseeable future. Gindalbie also retains exposure to the Project via parent company guarantees provided to the Karara Project, primarily during the commissioning phase. In November 2015, Gindalbie’s shareholders voted to no longer guarantee these loans. Whilst Ansteel maintains operations at Karara, there will be no call on these guarantees.