Ann: Appointment of New Managing Director , page-15

This article today from Minesite.com

Enjoy the read, fellow long-suffering shareholders. Is there light at the end of the tunnel??? Mmmmmmm.

Desmond.



MINESITE.COM
August 14, 2013

Gunson Gets Ready To Take A Different Tack, With The Appointment Of An Oil Man As CEO

By Our Man in Oz


In the end, David Harley ran out of time. That’s the best way to describe the departure of the man who founded ASX-listed Gunson Resources but who stepped down as a director last week, to assume instead a short-term consultancy with the titanium minerals and zircon project developer which appears to be heading for a future in the oil and gas industry.



The possible switch from sands to liquids has been flagged in the recruitment of Bill Bloking, an oil and gas specialist, as Gunson’s new chief executive.



Officially, Bill will pick up where David is leaving off by focussing on the Coburn titanium and zircon project on the coast of Western Australia.



Unofficially, there is a coded message in the announcement of Bill’s appointment which could signal the sale of Coburn.



Gunson’s chairman, David Craig, used his skills as a lawyer and stockbroker to praise the work of both men when announcing Bill’s recruitment. His final paragraph contained interesting phraseology regarding Bill: “we look forward to his contribution as we move to realise the greatest possible value for all shareholders from the company’s assets and, in particular, the Coburn zircon project”.



One word in that sentence, “realise”, caught the eye of Minesite’s Man in Oz who was quick to reach for his ancient copy of Roget’s Thesaurus to double check the many meanings of realise, one of which is “sell”.



There are other meanings of realise - such as to discover and to think - but when you’re referring to a hard physical asset such as a deposit of minerals the obvious option is sell.



It will take time for the new man to reveal his plans for Gunson, but most aspects of his past career smells of petroleum, as does his entry on the Bloomberg/BusinessWeek website, where the 62 year-old is said to be “a leading energy expert” with 39 years of industry experience mainly with ExxonMobil and BHP Billiton’s petroleum division.



His most recent work was as managing director of a company called Eureka Energy which was active in the unconventional (shale oil and gas) industry of Texas. Eureka was acquired last year - another hint as to Bill’s preparedness to “monetise” an asset by selling it rather than spending too much time and effort on production.



It is possible, just, that Bill sees the next stage of his career as the developer of a zircon and titanium sand mining venture near the remote Shark Bay heritage zone, though there is nothing in his background to support that belief.



It is far more likely that the major shareholders of Gunson have drawn a line in the sand, literally and metaphorically, recognising that their small business will have a lot of difficulty developing Coburn without bringing in a major new partner with deep pockets.



The size of the challenge can be measured through a few numbers, including a likely capital cost for developing Coburn of A$192 million, which is more than 100-times bigger than Gunson’s cash balance of around A$1.5 million, and 34-times the size of Gunson’s stock market value.



It was Gunson’s status as a minnow with ownership of a big mining project which made life difficult for David over the past five years, because while Coburn is a potential world-class development it always needed a strong financial and marketing partnership for its development.



David thought he had that with a potential Chinese partner but was dismayed to discover that the Chinese only wanted the construction work. He also thought he might have found an associate in Korea’s big steel maker, Posco, until the Koreans raised doubts about the potential financial returns from Coburn, even after a fine-tuning of design and production targets.



The final straw in the current life of Coburn was last year’s downturn in titanium mineral and zircon prices which saw major producers of the material such as Iluka Resources cut output in order to try and force up prices.



By March, there was a whiff of rebellion in the air at Gunson as it became obvious that all avenues had been exhausted, even if the necessary government approvals were now in place.



Calls for David to depart were toned down when he agreed that that end of the road had been reached and that it had become impossible for him to continue working with investors desperate for a financial return on their shares which have fallen to around A2 cents.



A gentleman’s deal was struck to permit David an honourable exit while the Gunson board called in an investment bank to advise on future plans, and to help find a new CEO.



Enter Bill Bloking, a mechanical engineer by academic training, and man with deep business experience, but without any obvious knowledge of the titanium or zircon industries.



If Minesite’s Man in Oz is reading the clues accurately then investors might find it useful to watch Gunson over the next few months. Because even if it could not develop Coburn it’s a fair bet that someone will, since ultimately it’s hard to ignore 308 million tonnes of ore assaying 1.2% heavy minerals.



When developed Coburn will be capable of producing 49,000 tonnes of zircon a year, plus 109,000 tonnes of ilmenite and 23,500 tonnes of upgraded ilmenite.



And there’s no question that reserves and possible rates of production at Coburn are worth a lot more than the company’s current stock market value of A$5.6 million.



Bill, the new boy in charge, will have learned a lot about extracting value from assets during his oil and gas years, and assuming he has little interest in digging sand on Australia’s west coast it will probably be his job to find a buyer with a taste for sand. And when he does that it could do wonders for Gunson’s share price.



As for Gunson’s life after Coburn, assuming it is sold, that could be quite interesting, especially if a handy pile of fresh capital is injected into the company and oil and gas opportunities are pursued.