INTERVIEW WITH MR. DAVID HARLEY, MANAGING DIRECTOR OF GUNSON RESOURCES LIMITED (GUN)

“Coburn Zircon Project”

http://www.brr.com.au/event/52134

TUESDAY, OCTOBER 7, 2008, 2:00 PM.

            BRR    Today Boardroom Radio speaks with the Managing Director of Gunson Resources, Mr. David Harley.

10

                        David, thanks very much for your time today.

            GUN    Thank you.

            BRR    You know David, the latest announcement in regards to the Coburn Zircon

15                    Project announces that you have engaged The Balloch Group to assist in the discussions with the Chinese groups.  David, why do you engage this group for discussions in China?

            GUN    Thanks James.  Well, the primary reason was that we have been discussing with a Chinese engineering company in building materials that was taking a

20                    long time to come to (inaudible).  We first started talking to these people in March last year after they have visited Perth in January of last year.  We signed two Memoranda of Understanding with them in 2007.  There were some timelines put on those particular Memoranda of Understanding but they were not achieved not by a long shot.  We felt that the market was getting

25                    frustrated with this… the slowed progress as we were and we brought the Balloch Group in to help speed things up and also to widen the search for finance from China. 

                        The Balloch Group is a boutique merchant bank.  It’s headed by the former

30                    Canadian Ambassador to China, Howard Balloch.  He was the ambassador in China for six years from 1996 to 2001, very well connected into the public service in Beijing, that’s where he’s based, and he has about 60 staff, a lot of whom have worked in large companies in China or in the resources industry and that’s been a very clever strategy on his part.  So he has a lot of contacts

35                    and certainly from our visit, it looks like he’s paying dividends already.

            BRR    Now David from the announcement it appears that there has been bipartisan agreement on the steps that can be made to achieve efficiency in the development plans for the project.  Is the project still progressing well and

40                    what was hoped in the outcomes agreed upon in these meetings?

            GUN    To answer your question, the project it is progressing well and it’s certainly taking a pretty significant leap forward with the dropping of the exchange rate with the US dollar because that translates to the revenue side very quickly, but as the announcements said, we’ve divided up responsibility for looking at

45                    cutting down the capital cost of this project.  CTIEC, the people we’ve been talking to for 18 months now, have taken on the core areas of the production of zircon that applies to processing the sand at the mine site through a wet concentrator, then applies to separating the magnetics from a non-magnetic heavy minerals, also at the mine and in the processing plant in China.  All up, that’s about 60% of total capital cost.  The remaining is largely infrastructure and that’s what we’re looking at.  So there, they’ve observed the price of steel has dropped quite a bit just in the last couple of months in China and that wouldn’t surprise anyone, I don’t think.  They also observed that a lot of

5                      engineering companies are now got less work than they had two months ago and that’s certainly is reflected in Australia also, so it is a good time to start looking at where we can cut cost.

            BRR    David, looking forward, what are the next steps that need to be taken to

10                    further progress the project and when do you aim to have these steps completed?

            GUN    Well, the steps are to reprice the capital cost by late October and then to meet with CTIEC in China in mid-November, and at the same time of course we’ll be meeting with other companies as well.  So in terms of timelines, we’re

15                    now getting much closer to the inaudible and we’re aided significantly by first of all, a quite positive development in the zircon market.  The market is very tight at the moment.  There is more demand than there is supply and that is a function of lack of investment, a new capacity for over the last decade, and as (inaudible) starting to bite and the other big thing on the

20                    supply side is that Indonesian production which at one stage we’re supplying nearly 50% of China’s zircon needs this halved in this year.  So that combined with the drop in the exchange rate, US dollar to Australian, has made a big difference.  There’s been significant price rises already in the zircon market initiated by Aluka and Aluka’r of have no secret of the fact that

25                    the price are going to go up again in 2009, so it does look good for us.

            BRR    David, thank you very much for taking the time to speak with us today and give us an update on the latest progress from Gunson Resources and we look forward to following developments in the new term.

30        GUN    Thank you.

            BRR    That was the Managing Director of Gunson Resources, Mr. David Harley.  If you have any questions for David in regards to this broadcast or any other broadcast from Gunson Resources, please send your emails to

35                    brr@brr.com.au.

                        I’m James Marlay.  Thanks for listening to Boardroom Radio.

INTERVIEW CONCLUDED

Contact brr@brr.com.au for more information

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