THE BOURSE WHISPERER: Gunson Resources has struck a major funding deal with Korean steel producer POSCO in regards to Gunson’s Coburn zircon project.
The Board of POSCO has approved an investment in the project, which will be within an unincorporated joint venture structure, through a special purpose investment vehicle (POSCO SPV), majority owned by POSCO, with a minority interest held by a Korean-based resource investment fund.
Once the deal has been finalised the POSCO SPV will have a 40 per cent interest in the Gunson project by contributing its proportionate share of mine development expenditure and ongoing operating costs.
It will earn its 40 per cent interest by making a $7 million initial payment to Gunson and then contributing the first $21 million of Gunson’s share of mine development expenditure.
Each joint venture party will be entitled to its proportional share of the proposed production from the project.
This production will involve zircon – providing an estimated 65 per cent of revenue, chloride ilmenite (20 per cent) and HiTi90, a mixture of rutile and leucoxene (15 per cent).
“Gunson is to be the project manager, with the POSCO SPV, represented by POSCO, to have equal representation on the Joint Venture Management Committee,” Gunson Resources explained in its ASX announcement.
“Whilst Gunson will have a higher percentage voting interest, all material decisions of the Joint Venture Management Committee will require unanimous approval.”
The POSCO SPV’s investment in the project is dependent upon Gunson raising its 60 per cent equity share of the mine development costs, less the $28 million earn-in expenditure by the POSCO SPV, by the end of 2012.
It is also subject to the formal approval by the Korean fund, which Gunson said it expects will be finalised by the time the JV Agreement is signed off as it has completed its technical due diligence, receiving favourable results.
Gunson currently has a FEED/Value Engineering study being undertaken by its engineers, Sedgman Metals Engineering, which is focused on providing more definitive capital costs and construction schedule.
This is anticipated to be completed in mid-September 2012.
Once Sedgman Metals Engineering has finished its FEED/Value Engineering study, Gunson said it will move to complete its debt and equity financing package for the project by the end of 2012.