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Australian mining company Gindalbie's shares just collapsed to almost zero

A construction site in Beijing. Kevin Frayer/Getty Images

The future of Australia miner Gindalbie Metals is in doubt over uncertainty that China’s state-run Ansteel will continue to support a joint magnetite project as global prices for iron ore continue to fall.

At the close of trade, the shares were down more than 57% to $0.009.

Gindalbie’s problems centre around the $3 billion Karara mine in Western Australia and whether the China steel maker Ansteel, which has 52% of the project, will continue to fund losses.

Mine staff were told in a memo that Ansteel is unable to continue funding support to Karara due to the economic and industry downturn.

Keith Jones, chairman of Gindalbie, says Ansteel has engaged a third party to review the viability of operations as well as potential options.

“A decision by Ansteel to withdraw funding support could lead to claims under various operating and financing guarantees against Gindalbie which, if successful, could cast doubt on Gindalbie‚Äôs ability to continue as a going concern,” Jones says.

“Gindalbie has requested a formal notification from Ansteel on their decision regarding ongoing funding support for the Karara project and has yet to receive a response.”

Karara has been significantly increasing production but low prices have still meant losses at the mine.

Iron ore fell for the fifth consecutive session overnight to $41.31 a tonne.

In April last year, Atlas Iron announced it was mothballing its mines because it cost more to dig up the ore than buyers were willing to pay.

It later did deals with its suppliers, and raised more capital, so it could continue production.

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