Transformational - 3 parts in one post

Hi all. I've put the 3 threads together in case any would prefer to read and comment that way. It's a long post, apologies. Also apologies if that appears a bit conceited, just aiming to be as helpful as possible.
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Wow! Bill Bloking has been busy and I’m excited. This is going to be a long post so I’ll split it into 3 parts under this thread heading.
I’ve been spending some time reading through and digesting all the information in this radical news. It excites me greatly as it has potential to resolve all of our near term critical issues and transform the whole future of the company.

Firstly the cons.

1.    It’s not done yet. I’m definitely supporting it for reasons I’ll outline below but it’s all subject to shareholder vote so it may not happen. Also the capital raisings may not be fully supported.
2.    The price of the deal. I’d like it higher for sure and Landzt raised the issue about valuation of Coburn with $30 million expenditure behind. The reality is we have to deal with the reality that is and that is our current market cap. Strandline are buying us as much as we are buying them so we have to deal from our current position. Philosophically, it is what it is.
3.    Whilst I’m excited and very positive about this news, there’s always a price to be paid for any good news. In this case it sums up as dilution. Basically if it goes all ahead, full raising is completed and a shareholder does not participate then they will be diluted to 53.5% of their current position. I won’t be allowing that to happen for me however if I were then I would not be perturbed as my reading of this is that the potential of the pie has gotten significantly larger and much more secure – that’s worth the price of 46.5% dilution if someone doesn’t want to participate.

Now the Pros:

1.    Capital, Capital, Capital.

This deal recapitalises the company with sufficient cash behind it to get through at least 12 months of activity. This addresses the very pressing problem of lack of financial strength. We’ve been on the back foot for ages trying to stay afloat while getting somewhere with our assets and it’s significantly weakened our hand in negotiations. The time that buys will, I believe, be dramatically valuable for GUN shareholders assuming the following:

   a.    Mt Gunson JV with Torrens Mining will be getting towards the end stages of feasibility studies which I expect to be very positive.
   b.   Mineral sands markets should be stronger than the current trough they have been in for the last couple of years
   c,    The AUD is expected to be lower which improves the economics of our Australian assets in international terms
   d.   We’ll have at least 6 and up to 12 months of further exploration of our assets to drive us up the value chain

Transformational – Part 2 Personnel

1.    Personnel.

There’s a complete transformation of the company here with Bill Bloking stepping down as MD in which I think he has done a top job. His replacement, Mike Folwell, is a former Managing Director of Iluka Resources. This is a major development for us. As our friend Peppie has correctly pointed out, Mineral Sands is a tough game best exploited by specialists, I think the ex MD of Iluka qualifies! In addition the team brings quality mineral sands geological expertise from Rio Tinto background to cover the whole gamut of the industry.

I have always had to agree with Peppie that if we wanted to be a mineral sands miner then we needed to get relevant experience into the team. I’m delighted that BB has that personal insight and the wisdom to follow through. Well done BB. An important question will be, if the Strandline deal doesn’t go through, can we keep the Mike Folwell anyway.

The second aspect of having Mike Folwell relates to finding partners for Coburn. I expect his background and industry exposure will be an asset on that particular quest for which a successful outcome will drive immediate value into our market price.

I think that the Broker presentation is making a reasonable statement when it describes the new team as World Class. It is in the context of mineral sands. This is a radical and positive transformation in the face and skill set of the company.

Transformational – Part 3 Assets

1.    Assets.

I’ll be interested to get Peppie’s comments in regard to the Tanzanian assets that Strandline bring to the table. To me they sound very interesting – they’ve managed to tie up a massive amount of exploration territory in a stable friendly country and the results so far are indicative of strong grades. It looks like there is a large valuable asset base there in roughly the same region as Base Resource’s Kwale deposit which is now shipping. Big blue sky potential here from what I can see.

This new asset base diversifies/balances our exposure to the various mineral sands products. In my opinion, assuming viability in Tanzania, it will also give the new entity insurance along the lines of Iluka’s ability to idle and speed up select deposits as suits market conditions. It’s encouraging to read that the resource targets appear to be able to be explored and delineated quickly and cheaply.

Apart from the Strandline Assets I think there is significant upside from this announcement for our existing assets.

a. Coburn.
As mentioned already, in totum these developments should increase our ability to get a deal done, if a deal can be done, through greater exposure to the mineral sands industry and supply chains. I do note though that the price is cutting Strandline in on the asset – not much of a pain at this point given it’s currently a stranded asset, they strengthen our prospect of getting it up and it will still be highly leverage to recovery in mineral sands prices

b. Fowlers Bay.
A tit bit of very important information has slipped into this Strandline announcement and presentation. I’m very excited by the statement in the docs that GUN are currently in advanced farm out negotiations to explore Fowlers Bay. This is a seriously interesting site and with nickel prices being strong, blue sky speculative potential is ripe to be tested. If the farm in completes, It’s fair to point out that Strandline aren’t offering anything here therefore they’d be getting a bit of a windfall. That’s part of the dilutive effect. The plus side is that having capital strengthens us for a farm in to be able to meet our commitments and thus mitigate potential future dilutions in the farm in. I’d prefer we weren’t sharing it off but on balance I think it’s positive and I’m very keen to see Fowler’s Bay under way.

c. Mt Gunson
Similar comments to Fowlers Bay. Strandline don’t contribute anything here and gain exposure to the upside however having capital will be valuable in progressing the Feasibility Studies. One possibility that comes to mind relates to Torrens and their recently mooting the possibility of going public. It seems to me that with plenty of capital we would have the option of contributing to Torren’s commitment in some way that gains us a share in them and bolsters the company’s position in the tenement.

1.    Conclusion

As stated at the top, I’ll be supporting this direction and supporting the placement. I will be buying in the placement and I will also look to extract opportunity out of the marketplace if gives me a chance to leverage my position at minimal risk. I think the deal is indeed transformational, underwrites our future and we’d be mad, as a company, not to run with a good opportunity when it brings in:
i.   Capital
ii.  Top quality personnel
iii. Very interesting assets
iv. And strengthens our capacity to exploit what we already have, especially improving our strength in negotiations