High-flying ore explorer s back to earth

THE trading frenzy in mineral sands explorer Epsilon Energy began once again after a two-day trading halt, but this time the traffic was in the opposite direction.
On Wednesday Perth-based Epsilon announced a 1 billion-tonne iron ore target for its Mardie project in the Pilbara, and its share price soared from 17¡é to 87¡é on the news. It was at 68¡é when directors finally called a trading halt.
But Epsilon's share price was pummelled after its return to the boards. It opened at 44¡é, down 34%, and closed at 36.5¡é ¡ª down 58% from its peak on Wednesday.
Managing director Matthew Gauci said the target was based on "geophysical data, geological mapping and computer modelling" of the tenement. No drilling has been done to define or confirm the existence of a mineral resource. Also, Epsilon is yet to be granted rights to the Mardie tenement, and has an application pending.
Before the controversial investor briefing was released, Epsilon had just $1.4 million of cash in the bank, a market capitalisation of $16 million and 42 million shares on issue. Just over an hour before returning to the boards yesterday, Epsilon issued a statement confirming the ore target, revising the estimate to between 0.96 billion and 1.2 billion tonnes or iron ore.
While many who this week bought into Epsilon may be burned by yesterday's price collapse, the overall rise in the company's share price is certainly good news for Epsilon's founders, directors and associates.
Together they hold 30% of the company's 42 million shares on issue, and even after the fall the company's share price has more than doubled.
Epsilon was spun out of nickel explorer Heron Resources in 2006, floated at 20¡é a share and holds a portfolio of seven projects across four states.