small find could have big impact on gun sp

Fairfax Business Day

June 22, 2009

Even a small find could have a big impact on the share price.
FINGERS are crossed for Dave Harley's Gunson Resources (GUN) as it punches a deep exploration hole beneath the gibber plains of its Mount Gunson copper prospect in South Australia's Olympic Dam copper/gold province.
It is the sort of high-risk, high-reward stuff that on Friday fired up the imagination of punters in Red Metals (RDM).
Red Metals shot 3.5¢, or 18 per cent, higher to 22.5¢ on the strength of a start to drilling of a 1.7 kilometre-deep hole at its Pernatty Lagoon prospect in the province, one that takes its name from BHP Billiton's monster copper/uranium/gold deposit.
The planned weekend start to a somewhat shallower but still deep 1.1 kilometre drill hole at Gunson's Emmie Bluff prospect at Mount Gunson means that the punters have another high-risk, high-reward play in which to dabble.
Gunson closed on Friday at all of 8.9¢ a share, giving it a market capitalisation of $12 million. So it is not going to take much more than a sniff at Emmie Bluff to generate some interest in the stock.
Drilling at Emmie Bluff is a joint venture with Xstrata, with Xstrata funding the program. The drill hole will test the top of a gravity geophysical anomaly missed by three widely spaced holes drilled in the 1980s by MIM, which was taken over by Xstrata in 2003.
An infill gravity survey conducted in May this year showed that the gravity peak is centred 250 metres west of where it was thought to be in the 1980s, due to the much wider spaced and less sensitive gravity readings at that time.
The hope is that the latest drill hole will hit a dense iron oxide pipe (the gravity anomaly peak) that could be rich in copper, as opposed to the surrounding, less-dense iron oxide (hematite) mineralisation with the sub-economic copper-gold around it intersected in the old MIM holes.
Emmie Bluff is believed to one of the biggest of the iron oxide targets in the Olympic Dam copper/gold belt, one that stretches 500 kilometres from Moonta on the Yorke Peninsula to Coober Pedy. The belt is home to 75 per cent of Australia's known copper resources and, thanks to the magical mix at Olympic Dam, is Australia's uranium version of Saudi Arabia's oil riches.
The Xstrata/Gunson plan after the Emmie Bluff hole is to move the drill rig over to the Con Ryan area, another prospect that was drilled a long time ago by some interesting old MIM holes.
While we don't yet know what Emmie Bluff is hiding, it has to be said that Gunson is not totally reliant on it coming up with the goods. Followers of the stock know all too well that it has a second leg, its Coburn zircon project in Western Australia.
Gunson spent nearly two years trying to get Coburn to the starting line with China's state-controlled CTIEC. But the Chinese insisted that they had to be the engineering contractor for the mine's construction as a prerequisite to investing in the project and buying the zircon.
The problem was, the Chinese planned to make a big profit out of the engineering to help pay for their investment. Gunson had no choice but to say thanks, but no thanks. So it was back to the drawing boards for Coburn.
Gunson retendered the engineering contract out to Australian engineering groups earlier this year and recently settled on Sedgman-Intermet Engineering, which is completing a design definition study.
The aim of the study is to reduce the capital and projected operating costs. Given deflation in the cost of most things needed to construct and operate mining projects, the hope is that Gunson can get serious about making a go-ahead decision in the last quarter, with commissioning starting in late 2010.
All that is subject to financing and striking a zircon offtake agreement. Despite the problems with CTIEC, Gunson still has two big Chinese companies interested. It is also exploring the potential of tapping in to Middle East interest in mineral sands projects.