Gindalbie Metals Ltd says its growing war chest is the positive outcome of a large share placement to Chinese steel making giant AnSteel.
The junior iron ore explorer's balance sheet will be boosted by $162.1 million from AnSteel in return for new shares that will lift the Chinese company's 12.6 per cent stake to 36.28 per cent.
AnSteel requested the move earlier this month as an alternative to arranging debt financing for Gindalbie.
Chairman George Jones defended the share issue to China's second largest steel mill at the company's annual general meeting in Perth on Thursday.
"I think it's fair to say that none of us anticipated that both debt and equity markets would come under such pressure ... making the terms and conditions for a $162 million loan highly unattractive to us from a corporate risk perspective," Mr Jones said.
"I do acknowledge shareholder concerns regarding the dilution that occurs with share placements.
"But I firmly believe that having AnSteel as both a partner and big shareholder will give Gindalbie a greater opportunity to grow into a significant resources group."
AnSteel will make a final equity payment early next year of $143.7 million towards a 50 per cent stake in Gindalbie's $1.8 billion Karara project in Western Australia.
The joint venture company, Karara Mining Ltd, then will have cash resources of about $450 million, up from $200 million currently from earlier equity payments.
Mr Jones said Gindalbie would be debt-free "at the corporate level" with uncommitted cash reserves of about $40 million.
"This provides a buffer from any unforeseen future market events while also giving us the flexibility to develop other projects within our Mid West portfolio," he said.
Gindalbie shares were down 1.5 cents, or 4.11 per cent, to 35 cents at 1230 AEDT on Thursday.
