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Gindalbie Metals Ltd (ASX:GBG) has awarded a $120 million power line contract to Downer EDI Ltd (ASX:DOW).

The contract is for the construction of a key power transmission line that will facilitate the development of the $1.9 billion Karara iron ore project.

Gindalbie says the high voltage power line represents a key infrastructure investment, and Karara is on track to achieve its target of first production next year.

Together with rail, water and port facilities, the miner says additional capacity is being built into the project with a view to expand Karara's production levels.

Karara was initially expected to produce 10 million tonnes per annum. Having since increased the budget of the project, a larger power line than first planned is expected to increase production of more than 36 million tonnes per annum.

Gindalbie recently awarded Macmahon Holdings Ltd (ASX:MAH) an $86 million contract for earthworks and track laying for the 85km rail spur line for the development of the Karara project.

Gindalbie Metals reported a loss of $2.5 billion for the twelve months to 30 June 2010.