Western Australian iron ore company Gindalbie Metals plans to raise around $62m in equity to further develop its flagship Karara project.

Karara Mining is a 50:50 joint venture between Gindalbie and Chinese firm AnSteel and is undertaking the construction and commissioning currently underway at the Karara iron ore project in Queensland.

In a bid to strengthen its balance sheet prior to the project’s commissioning, Gindalbie announced a $40m fully underwritten placement to institutional shareholders at a price of $0.255 a share with a 13.6% discount on the last share closing price.

Additionally, a conditional $22m placement to AnSteel enables the major shareholder to maintain its approximate 36% stake in Gindalbie.

The Ansteel Placement is subject to various approvals, particularly from the Treasurer under the Foreign Acquisitions and Takeovers Act and the legal and regulatory approvals from the Chinese authorities.

Karara is projected to produce eight million tonnes of magnetite before June 2013 at a current forecast cost of A$72 to A$76 ($75.13-$79.31) per tonne.

The company began shipping the project’s first magnetite concentrate in October 2012 and expects to increase production and shipments to two million tons a year by December 2012.

Proceeds from the raised capital will provide liquidity to address any unforeseen cash requirements during the six-month commissioning phase for the magnetite concentrator.

Gindalbie managing director Tim Netscher said that proceeds of the equity raising would also allow the company to continue to fund studies or key growth initiatives.

"We want to make sure that the company and the project remain in the strongest possible position during the commissioning process, with sufficient liquidity to address any unexpected events and the ability to weather any adverse developments in global markets," Netscher said.