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Gunson Resources Adds A$2.4m To Its Coffers, Steps On The Gas At Coburn

Gunson Resources (ASX: GUN) has successfully raised A$2.4 million to further advance its Coburn Zircon Project in Western Australia.

With permitting in place and a Feasibility Study completed, Gunson has been stepping on the throttle in its bid to start construction at Coburn.

Coburn is strategically located, with regional infrastructure nearby including a major highway, natural gas pipeline and port, with the project 250 kilometres north of Geraldton, an established mineral sand port with available capacity.

The project is development ready with full permitting and a Definitive Feasibility Study completed.

The updated Coburn Definitive Feasibility Study model shows a capital cost of A$179 million and with the latest product price forecasts, an internal rate of return of 28.3% and a net present value (8%) of A$223.7 million.

Coburn is one of only a few significant advanced mineral sands projects in the world.

To date Gunson has awarded a contract commissioning a front-end engineering, design and approvals study to DBP Services.

The study will include the design as well as construction and capital cost information for a 110 kilometre long lateral gas pipeline from the main Dampier to Bunbury Natural Gas Pipeline (DBNGP) to the proposed Coburn power station.

This pipeline will be built by DBNGP owner Duet Group, which will recoup the cost through transmission charges.

Importantly, negotiations for offtake contracts for Gunson's proposed equity share of mine products are advanced.

Coburn catches investors' eye

Gunson recently executed a non-binding term sheet with a major East Asian industrial group, allowing the group to earn a large minority joint venture interest in Coburn.

The deal provides Gunson with an attractive funding path in the current difficult financial market.

Both companies are targeting completion of due diligence and legal documentation in February 2012.

Cash-backed

At the end of the December quarter Gunson had around $4.3 million cash in the bank. With the additional $2.4 million raised the company is now sufficiently funded to advance Coburn.

Strong Demand

Supply shortages and rising demand for zircon and titanium dioxide raw materials have improved the financial attractiveness of the Coburn project.

While Iluka Resources (ASX: ILU) recently reported a softening in zircon demand in China, it anticipates more favourable medium to longer term supply/demand of zircon and high grade titanium dioxide feedstocks for the pigment and titanium metal industries.

This leaves Gunson well positioned to take advantage of future increased demand as the company approaches production in 2013.

The placement of 12 million shares at $0.20 each to major and institutional shareholders will close on 7 February and was made under Gunson's 15% placement capacity.