www.gunson.com.au
Gunson Resources is focused on exploration for and development of mineral deposits in Australia. Since its public listing in 2000, Gunson has discovered then completed a Definitive Feasibility Study, in January 2010, on its Coburn Zircon Project in Western Australia and completed a Pre Feasibility Study, in October 2009, on its Mount Gunson Copper Project in South Australia.
A 15 month Bankable Feasibility Study on the Mount Gunson commenced at the end of 2009, with strong interest being shown by several commodity trading houses in funding this Study and the subsequent mine development.
Gunson Resources advances Coburn zircon mineral sands project
Gunson Resources (ASX: GUN) has provided an update on progress at its Coburn zircon mineral sands project in Western Australia with a review of project capital costs, drilling and financing.
With urbanisation of developing economies on the rise and demand for zircon and titanium dioxide increasing at a time of limited supply, the financial attractiveness of the Coburn project has likely never looked so good.
Goldman Sachs have forecast zircon prices to reach US$2,000/tonne and demand for ceramic tiles and paints in housing in developing economies should boost Gunson's valuation.
Gunson’s engineering contractor for the project, Sedgman Limited, has reviewed its late 2009 capital cost estimate reported as part of the Definitive Feasibility Study (DFS) release in January 2010.
This review has shown a modest 6% increase in the capital cost estimate from 2009, with reductions in the cost of fabricated steel supplied from South East Asia due to the strong Australian dollar offsetting increases in electrical and labour costs.
The company said this is a very favourable outcome in the current environment, with a relatively small impact on the NPV and IRR of the project.
Global mineral sand market consultant TZMI recently revised its price forecasts following the further tightening in the markets.
With the new price forecasts, the pre tax IRR for the Coburn Project would increase by 50% to 32% and the net present value (NPV) of the project would increase by 39% to $A301 million.
A "critical path item" for the development timetable of the project is the provision of water for road construction, as access to the proposed mine site requires the construction of a new sealed road west of the Coburn station homestead.
Contractor Bunbury Drilling is scheduled to drill and pump test a 180 metre production water bore on the road route in early August 2011.
The company is also progressing its drilling campaign and completed the 166 holes for 3837 metres infill and extensional drilling program yesterday.
The drilling was designed to test for ore extensions to the south east of proposed open Pit E and to upgrade the inferred resource in the northern third of the project.
Gunson said samples will be submitted for assay next week but results may not be available for several months due to a large backlog in the laboratory.
The rig is drilling about 60 holes at Pit A, the first open pit scheduled for production, to provide an estimated 7 tonne bulk sample for recovery of additional zircon and titanium mineral samples for potential offtake customers. Following completion the rig will be released from the project.
With regard to financing, along with its corporate advisors RFC Corporate Finance Ltd. (RFC), the company continues to progress discussions with potential strategic funding and offtake partners, as well as capital market participants.
The improvement in the economics of the project due to the rise in mineral sand commodity prices has seen a substantial increase in interest from parties wishing to participate in funding of the project, with indicative proposals having now been received from several parties.
Significantly, actual and forecast prices have nearly doubled since early 2010 due to the inability of existing producers to meet the extra demand and the very limited “pipeline” of new mine development projects.
Gunson has expanded RFC’s mandate to now encompass offtake-related funding, equity and debt finance, in addition to the option of attracting direct strategic investment in the project.
As supply shortages become increasingly acute debt finance options being canvassed are being designed to not only establish the most appropriate gearing and term parameters for the project but also to maximise the commodity price upside.
Gunson is now well placed for its construction ready Coburn zircon mineral sands project to be in production in 2013, subject to the project funding decision.
once the project finance is finalised there could be potential upside to Gunson's "light" market valuation of around $50 million.
