Gunson Resources granted one year extension for construction of Coburn zircon project

Gunson Resources (ASX: GUN) has received a one year extension of the five year time limit on the commencement of construction at the Coburn zircon mineral sands project in Western Australia.

The extension was granted by the Western Australian Environment Minister. The company has also provided an update on progress with bulk sample and infill drilling at the project.

This progress is significant as it addresses important information and/or risk areas for Gunson’s ongoing discussions with potential funding providers for the development of the project.

A Definitive Feasibility Study (DFS) announced in early 2010 revealed that Coburn Project has the potential to support a high volume, low cost, long life mining operation producing quality mineral products.

The company has completed drilling to obtain a representative bulk sample from proposed Pit A and processing of an estimated 7 tonnes of bulk sample will commence next week.

Pit A is the first open pit scheduled for production, and this further bulk sample material will provide additional zircon and titanium mineral samples for potential offtake customers.

Gunson has also begun assaying of samples from the infill / extensional drilling program reported on 20 May 2011, with about 10% now complete.

Importantly, the company expects these assays to facilitate an upgrade to the Inferred Resource in the northern third of the project and to test potential ore extensions to the south east of proposed open Pit E.

Gunson continues to progress discussions with funding providers and technical, legal and financial due diligence by several potential strategic partners is now in advanced stages.

Mineral sand commodity prices 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.

The zircon and titanium mineral price rises for the third quarter of 2011 recently announced by Iluka Resources (ASX: ILU), are ahead of the price forecasts used in the Coburn financial model, which are based on the most recent forecasts of global mineral sand market consultant TZMI.

After TZMI releases its next price forecast update, which is expected in late July 2011, Gunson will provide an update on the Coburn Project economics.

Gunson believes that the price rises are sustainable and “structural” in nature, reflecting the ongoing demand growth and lack of new supply of both zircon and titanium mineral products.

According to TZMI's June 2011 monthly Mineral Sands Report, senior industry participants on both the supply and demand side of the mineral sand markets cannot remember a time when pricing pressures were so high, despite some spikes in the past.

Supported by a supply shortage rather than an event-driven deficit, pricing power is now clearly with the producers.

The tightness in supply of high-grade titanium dioxide ore is expected by the industry to last for at least 3 to 5 years.

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.

With zircon prices forecast by Goldman Sachs to reach US$2,000/tonne, Gunson's Coburn project is well placed.

As demand for ceramic tiles and paints in housing in developing economies is forecast to rise, Gunson's valuation of around $40 million should receive a boost once the project finance is finalised.