Gunson Resources' Coburn Project Update
Edison | Jan 10, 2013 11:46PM ET
On 21 December 2012, Gunson (GUN.AX) reported a further update on the construction-ready Coburn zircon project in Western Australia. Following meetings with POSCO and a Korean resource investment fund, execution of the Joint Venture Agreement (JVA) was again delayed, but has now been confirmed subject to a commercial condition relating to the project’s operational budget being satisfied by 28 February 2013.
Gunson expects to meet the condition requiring final resolution of the operating budget in its previously announced pit optimisation study, which is scheduled for completion in February 2013. The JV also requires Gunson to raise A$88m, which is its 60% share of the mine development costs less the A$7m initial payment and the A$21m POSCO SPV earn-in contribution, by end-March 2013. The existing financing timetable is unchanged.
When the JVA is executed, we will review our forecasts and the production schedules of our August 2012 NPV 10% project valuation (A$0.51/share adjusted for subsequent equity issue), which is already a multiple of the current price.
This further JVA negotiation delay has been another setback to investor support in the validity of the Coburn project and the current share price reflects these concerns. The new investment hurdle relates to minimum after-tax IRR return and Gunson management is confident that conditions will be satisfied. Given the company has made progress with the JVA and is nearing completion of funding negotiations, positive newsflow could justify a turning point in market confidence.
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