UPDATE 2.25pm: Gindalbie Metals has warned it will need yet another cash injection because of problems with the dry tailings management system at the company's flagship Karara magnetite iron ore project in the State's Mid-West.
The extra cash is most likely to come from the company's joint venture partner, China's Ansteel, in the form of bank loans.
Delays at Karara have already forced its owners to inject more than $200 million in working capital so far this year, the bulk in loans from Ansteel.
Gindalbie said in a statement this morning it had identified an engineering solution to the recent problem at Karara, which would take about three months to complete and implement.
It warned the concentrator would operate at a reduced rate and grades while the solution was implemented.
Gindalbie managing director Tim Netscher said the problem related specifically to tailings and not the concentration process itself.
Gindalbie said the problem meant it would need more cash to continue operating to the end of the year as re-estimated capital requirements would exceed the forecasts it announced in May.
"Discussions are advanced with Karara's Chinese banking partners regarding a suitable funding solution," Gindalbie said in a statement.
Karara reduced first-half production guidance to 1.5-2 million tonnes of magnetite concentrate and 1.9-2.1 million tonnes of direct shipping ore (hematite).
"Gindalbie will provide updated guidance on full-year production once the Karara concentrator achieves nameplate throughput of 8mtpa and steady-state production," the company said.Gindalbie shares closed down 1.5 cents, or 10 per cent, at 13.5 cents.