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Friday 28 April, 2006

Union Resources Ltd

3rd Quarter Results

Union Resources Limited
28 April 2006

news release

                                UNION RESOURCES



Union Resources Limited ('Union') is focused on the Mehdiabad Base Metal Project
('The Project') located in Central Iran. This project comprises one of the
largest undeveloped zinc deposits in the world.

A Feasibility Study ('FS') prepared by Aker Kvaerner Australia (AKAU), has been
completed and is expected to be issued in early May. The study demonstrates the
viability of a long life mining and processing operation at Mehdiabad.

The FS provides a comprehensive summary of the geology, resource, mining,
geotechnical, metallurgical and pilot plant studies completed to date. It also
includes preliminary process plant design and engineering, infrastructure and
environmental studies. The FS provides the basis of planning the next phase of
the project.

In addition, a new resource estimate has been completed by Hellman and Schofield
and an interim mining reserve estimate has been prepared by Australian Mining
Design and Development Company.

An economic study prepared by CPK Consulting based on the results of the FS
report has concluded that the optimum plant capacity is 300,000 tonnes per annum
('TPA') of zinc metal to be produced at the site, with up to a further 100,000
TPA of metal to be produced in concentrates for sale to others. The maximum zinc
production would be therefore 400,000 TPA. Instead of building this plant in
stages as previously proposed, the report recommends building the full plant
upfront. The proposed plant would also produce an additional 97,000 TPA of lead
in concentrate and 4 million ozs of silver per annum.

The initial mine life is 20 years, and subject to further geotechnical studies,
may be as high as 40 years.

The doubling of the size of the plant and recent rises in construction costs has
substantially increased the total estimated project development cost to US$
1,645 million spread over a three year period.

However, the increase in size has also substantially reduced the cost of zinc
metal production to an average under US$ 300 / tonne (net of lead/silver

It is likely that Mehdiabad will ultimately become one of the world's largest
zinc mines for a considerable period of time, with a zinc production cost in the
lowest quartile.

The challenge now is to finance the development of the Project and upgrade the
Project to achieve a full international bankable stage.


A total of 3123m was drilled at Mehdiabad during the quarter, essentially
completing the drilling required for resource estimation to FS standard.
Significant results included:-

Hole     Northing    Easting    From    Intersection    %Zn     %Pb     g/t Ag
 No          m          m         m           m

 8429        8220      11400     183              25    7.38    1.63        23
 8430        8400      11365     216              13    5.36    1.75         8
 8430        8400      11365     232               3   13.06    4.33       103
 8432        9600      10599     293               8    4.99    2.86        88
 8432        9600      10599   305.2            17.8    4.95    6.22       117
(Note: all holes drilled vertically)

Two duplicate holes are currently being drilled to obtain better core recovery
from the high grade cavity zone of the ore body.

During the quarter copper mineralisation was intersected in hole No.8432:-
Hole       Northing   Easting   From   Intersection  %Cu    %Zn    %Pb   g/t Ag
 No            m         m        m          m

    8432       9600     10599     154       233.8     0.36
(includes)                        186       81        0.56   1.75   0.72     60

                                  320       11        0.66   2.08   3.67     58
(Note: all holes drilled vertically)

Copper mineralisation has been now intersected in several holes in the vicinity
of the Black Hill Fault. Initial studies indicate that copper can be recovered
utilising the AKAU designed plant proposed in the FS, adding significant 'by
product' revenues to the project. A study into the extent of the copper present
within the pit limits is underway.


A new zinc, lead and silver resource estimate was announced on the 3rd April
2006. The resource estimation work was completed by Dr Phillip Hellman, a
director of Hellman & Schofield Pty Ltd. Dr Hellman qualifies as a Competent
Person according to the 2004 JORC Code.

The resource estimate is at a cut off grade of 2% zinc as tabulated below.

Table 1: Resource Estimate
Category    Mt      Zinc %   Lead %   Silver      Approximate Recoverable Metal
                                                  Zn (Mt)   Pb (Mt)   Ag (M oz)

Measured      140      4.1      1.6          34       4.1       1.2         45
Indicated     222      4.2      1.6          36       6.5       1.9         78
Measured +
Indicated     362      4.2      1.6          35      10.6       3.1        123
Inferred       32      4.5      1.4          38       1.0       0.2         11
    TOTAL     394      4.2      1.6          36      11.6       3.3        134
Mt = million tonnes, M oz = million ounces

It should be noted that over 90% of the resources are in the measured and
indicated categories, reflecting a high level of confidence in the resource

Whilst the in-ground metal associated with this estimate comprises 16.4 Mt of
zinc, 6.2 Mt of lead and 460 M oz of silver, not all of that metal content can
be recovered by the planned metallurgical processing route.

The 'Recovered Metal' has been calculated by using the following recoveries: 66%
for oxide zinc; 72% for sulphide zinc/lead and 40% for sulphide silver. No
recoverable lead or silver applies to the oxide mineralization.

The metallurgically recoverable metal within the resource is therefore estimated
at 11.6 Mt zinc, 3.3 Mt lead and 134 M oz silver.

The zinc resource is made up of both oxide and sulphide mineralogy, that will be
processed in one integrated processing plant.

Approximately 25 % of the resource is oxide and 75% sulphide.

Whilst a 2% cut off zinc grade has been selected for the resource estimate,
there is approximately a further 100 Mt of Measured and Indicated mineralization
between 1% and 2% zinc that falls within a preliminary optimum pit. Whilst it is
presently uncertain whether this material will contribute to the Project's
economics, it is likely to form a significant separate low grade stockpile.


Australian Mine Design and Development Limited ('AMDAD') have completed the
Whittle Pit Optimisation, mine design and mine production scheduling, required
for the FS report. AMDAD completed an interim mining reserve estimate, based on
the Hellman & Schofield resource model and geotechnical information generated by
consultants Coffey's International. The mining reserve, which has been prepared
for the purpose of the FS, is in accordance with the guidelines of the 2004
Australasian Code for the Reporting of Resources and Reserves ('the JORC Code').

The mine design is based on an expected 20 year mine life, largely due to
geotechnical restraints. The extension of the pit beyond 20 years will require
further geotechnical studies as the pit deepens and may require a major waste
removal program ('cut back') to ensure the stability of the pit walls beyond 20
years. Subject to geotechnical and economic restraints the resource is
potentially sufficient for up to a 40 year mine life.

In addition AMDAD has also prepared a preliminary design for a waste rock
stockpile to feasibility level, to be located to the east of the open pit to
minimize the haul distance.


Site Geotechnical investigations have been completed, with recommendations from
a number of consultants incorporated in the FS. This work included detailed
slope stability analysis on the proposed open pit, which has been used in the
mine design, as well as investigations of the proposed plant and tailings
storage facility sites.


The Environmental Impact baseline work has been completed at the mine site and
the reports are currently being assessed. In the next stage of the project the
preparation of Environmental Impact Statements will be required.


The oxide variability testwork investigating changes in metallurgical recovery
within the orebody has been completed, and a similar program is still in
progress for the sulphide section of the orebody. The preliminary variability
results have been used to fine tune the mine design, process design, and
production scheduling sections of the FS. However, a more definitive report is
expected on the testwork shortly.


The oxide metallurgical testing program culminated in a successful pilot plant
campaign completed in September 2005 in Spain. The sulphide metallurgical test
work has advanced to bulk testing. A bulk sulphide concentrate is currently
being prepared at Lakefield Oretest Laboratories in Perth, for acid leach
testwork by HRL.


The economic study associated with the FS report concluded that a plant capacity
of 300,000 TPA of zinc metal to be produced at the site, with up to a further
100,000 TPA of metal in concentrates for sale to zinc smelters in Iran or
overseas, provided an optimum return for the project. An additional 97,000
tonnes of lead in concentrate and 4m ozs of silver will be produced per annum
over the initial 20 year life of the operation.


An 'Integrated Oxide/Sulphide Processing Plant' at Mehdiabad has been designed
by AKAU in association with Tecnicas Reuindas (TR), to a level required by the
FS. The combined treatment of oxide and sulphide ore streams results in a number
of synergies and cost savings in comparison with treating either ore type by


Discussions are well advanced with the relevant Iranian Authorities on the
supply of power and water to the site. Power costs in Iran are substantially
cheaper than those available to other major zinc projects. The planned use of
treated effluent water has been well received by the Yazd Water Board as this
resource is presently unutilised.

Discussions are also underway to finalise the necessary rail, road and port
requirements of the operation. The mine is fortunately located within 25km of
both the railway and a bituminised highway.


AKAU estimates of the development cost of the 400,000 TPA zinc metal production
option includes the following:

a)      Direct cost of the process plant, mine development and both the on site
        and off site infrastructure: US$ 862 million.
b)      The indirect costs of engineering, construction, commissioning and
        working capital: US$ 250 million.
c)      Mining equipment which could be provided by a contractor: US$ 270
d)      Contingency: US$ 200 million.
e)      Estimated owners costs: US$ 63 million.

The total development cost is estimated by AKAU to be US$ 1,645 million.

The next stage of the project will examine ways to reduce the development costs.


At an average metal price of US$ 1500/tonne zinc, US$ 900/tonne lead and US $ 8/
oz silver the Project's average cash operating costs is estimated at US$ 291/
tonne of zinc metal (net of silver and lead credits). At the above metal prices
the NPV is well in excess of US$ 1000 million.


The Project is operated through an Iranian Joint Venture Company, Mehdiabad Zinc
Company (MZC). The initial shareholders of MZC at the formation of the company
were Union 25% Itok GmbH 25% and the Government partner (now IMIDRO) 50%. Under
the Joint Venture Agreements IMIDRO was given a US$ 10 million credit as a loan
convertible to equity in the accounts of MZC. Union and Itok were then required
to spend a matching US$ 10 million on the project. By the end of March 2006
Union has spent more than US$ 14 million and Itok less than US$ 0.5 million on
the project.

The parties have agreed that all the expenditure and reports prepared up until
the end of the FS, will now be reviewed by two independent experts (one from
Australia and one from Iranian), who will then prepare a single report,
determining whether each part of the expenditure is 'fair and reasonable', as
measured against the deliverable outcomes. This report will be binding on the
MZC shareholders, with respect to the conversion of the loans to new equity in
MZC. Following conversion of the loans Union would expect to have equity in
excess of 45% in MZC.

The other parties then have the right to elect whether to contribute at the same
equity levels to all further MZC costs or dilute their ownership. Once the
future ownership is finalised, then the project can move to the next stage,
which will include the conversion of the FS to a fully international financing
document and the development and implementation of a financing plan.


Sale of Union's indirect interest in Philippines telecommunication company
('ETPI') was completed during the quarter. A total of A$.5.4 million after costs
was raised by the sale. A further amount of around A$ 300,000 is expected once
all the taxes associated with the transaction are finalised.


A placement of shares made during the quarter raised (approximately) a further

The mineral resources information in this Report is based on, and accurately
reflects, information compiled by competent consultants and verified by Mr Rob
Murdoch who is a Corporate Member of the Australasian Institute of Mining and
Metallurgy. Mr Murdoch has the relevant experience in relation to the
mineralisation being reported upon to qualify as a Competent Person as defined
in the Australasian Code for Reporting of Identified Mineral Resources and Ore

                                                                        Rule 5.3

                                   Appendix 5B

                   Mining exploration entity quarterly report

Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001.

Name of entity
Union Resources Limited

ABN                          Quarter ended ('current quarter')
-------------------          ------------------
40 002 118 872               31/03/06
-------------------          ------------------

Consolidated statement of cash flows
Cash flows related to operating activities            Current       Year to
                                                      quarter       date
                                                      $A'000        (9 months)
 1.1   Receipts from product sales and related                  0            0
 1.2   Payments for 
       (a) exploration and evaluation                       (3035)      (8,326)
       (b) development                                          0            0
       (c) production                                           0            0
       (d) administration                                    (416)      (1,232)
 1.3   Dividends received                                       0            0
 1.4   Interest and other items of a similar nature            27          104
 1.5   Interest and other costs of finance paid                 0            0
 1.6   Income taxes and GST paid/refunded                     205          462
 1.7   Other Bonds
       Net Operating Cash Flows                            (3,219)      (8,992)
       Cash flows related to investing activities
 1.8   Payment for purchases of: 
       (a) prospects                                            0            0
       (b) equity investments                                   0            0
       (c) other fixed assets                                 (16)         (30)
 1.9   Proceeds from sale of: (a) prospects                     0            0
       (b) equity investments                               5,630        5,630
       (c) other fixed assets                                   0            0
1.10   Loans to other entities                                  0            0
1.11   Loans repaid by other entities                           0            0
1.12   Other                                                    0            0
       Net investing cash flows                             5,614        5,600
1.13   Total operating and investing cash flows             2,395       (3,392)
       (carried forward)                                

1.13   Total operating and investing cash flows             2,395       (3,392)
       (brought forward)                               
       Cash flows related to financing activities
1.14   Proceeds from issues of shares, options, etc.        1,107        8,889
1.15   Proceeds from sale of forfeited shares                   0            0
1.16   Proceeds from borrowings                                 0            0
1.17   Repayment of borrowings                                  0            0
1.18   Other - AIM Listing costs                                0         (140)
1.19   Issue costs                                            (48)        (137)
       Net financing cash flows                             1,058        8,611
       Net increase (decrease) in cash held                 3,454        5,220
1.20   Cash at beginning of quarter/year to date            3,564        1,798
1.21   Exchange rate adjustments to item 1.20
1.22   Cash at end of quarter                               7,018        7,018

Payments to directors of the entity and associates of the directors
Payments to related entities of the entity and associates of the related
1.23   Aggregate amount of payments to the parties included in              84
       item 1.2                                                    -------------
1.24   Aggregate amount of loans to the parties included in item             -
1.25   Explanation necessary for an understanding of the transactions
       Consultancy Fees, Directors Fees, Salaries and Reimbursement of

Non-cash financing and investing activities

2.1   Details of financing and investing transactions which have had a material
      effect on consolidated assets and liabilities but did not involve cash

2.2   Details of outlays made by other entities to establish or increase their
      share in projects in which the reporting entity has an interest

Financing facilities available

Add notes as necessary for an understanding of the position.
                                    Amount available          Amount used
                                    $A'000                    $A'000
3.1   Loan facilities                                     -                  -
3.2   Credit standby arrangements                         -                  -

Estimated cash outflows for next quarter

4.1   Exploration and evaluation                                         2,190
4.2   Development                                                            -

Reconciliation of cash
Reconciliation of cash at the end of the quarter (as  Current      Previous
shown in the consolidated statement of cash flows) to quarter      quarter
the related items in the accounts is as follows.
                                                      $A'000       $A'000
5.1   Cash on hand and at bank                             6,953         3,499
5.2   Deposits at call                                         -             -
5.3   Bank overdraft                                           -             -
5.4   Other Bank Guarantee                                    65            65
      Total: cash at end of quarter (item 1.22)            7,018         3,564

Changes in interests in mining tenements

                             Tenement    Nature of       Interest at  Interest
                             reference   interest        beginning of at end of
                                         (note (2))      quarter      quarter
6.1   Interests in mining            -               -            -          -
      relinquished, reduced
      or lapsed
6.2   Interests in mining            -               -            -          -
      tenements acquired or     

Issued and quoted securities at end of current quarter

Description includes rate of interest and any redemption or conversion rights
together with prices and dates.

                              Total         Number        Issue      Amount
                              number        quoted        price per  paid up
                                                          security   per
                                                          (see note  security
                                                          3) ($)     (see note
                                                                     3) ($)
 7.1   Preference +securities           -             -          -          -
       (description)          --------------------------------------------------
 7.2   Changes during
       (a) Increases through
       (b) Decreases through
       returns of capital,     
 7.3   +Ordinary securities   777,011,727   777,011,727   (refer     (refer
                                                          appendix A appendix A
                                                          attached)  attached)

 7.4   Changes during          17,417,461    17,417,461     $0.063     $0.063
       (a) Increases through
 7.5   +Convertible debt                -             -          -          -
 7.6   Changes during                   -             -          -          -
       (a) Increases through            -             -          -          -
       (b) Decreases through
       securities matured,      
 7.7   Options (description   One ordinary  One ordinary  Exercise   Expiry
       and conversion factor) share for     share for     price      date
                              each option   each option
                              held          held
                              246,040,340   246,040,340    $0.0982   March 31,
                              Listed        Listed           $0.10   March 31,
                              UCLOA         UCLOA                    2009
                              254,430,711   254,430,711
                              Listed        Listed
                              UCLOB         UCLOB  
 7.8   Issued during          2,000,000     2,000,000      $0.10     March 31,
       quarter                Listed        Listed                   2009
                              UCLOB         UCLOB       
 7.9   Exercised during
       quarter                --------------------------------------------------
7.10   Expired during         4,000,000     4,000,000      $0.10     March 31,
       quarter                Unlisted      Unlisted                 2006
                              UCL03         UCL03        
7.11   Debentures                       -             -
       (totals only)
7.12   Unsecured notes                  -             -
       (totals only)          --------------------------------------------------


1 The quarterly report provides a basis for informing the market how the
entity's activities have been financed for the past quarter and the effect on
its cash position. An entity wanting to disclose additional information is
encouraged to do so, in a note or notes attached to this report.

2 The 'Nature of interest' (items 6.1 and 6.2) includes options in respect of
interests in mining tenements acquired, exercised or lapsed during the reporting
period. If the entity is involved in a joint venture agreement and there are
conditions precedent which will change its percentage interest in a mining
tenement, it should disclose the change of percentage interest and conditions
precedent in the list required for items 6.1 and 6.2.

3 Issued and quoted securities The issue price and amount paid up is not
required in items 7.1 and 7.3 for fully paid securities.

4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive
Industries and AASB 1026: Statement of Cash Flows apply to this report.

5 Accounting Standards ASX will accept, for example, the use of International
Accounting Standards for foreign entities. If the standards used do not address
a topic, the Australian standard on that topic (if any) must be complied with.

                                 == == == == ==

Appendix A - Ordinary Shares

Description                                  Number               Issue Price $
Opening Balance 01/01/06                  759,594,266
Placement                                  17,417,461                   $0.063
Total                                     777,011,727


For further information:

Union Resources Limited (Tel: 00 61 7 3833 3833)
Rob Murdoch - Managing Director

Westhouse Securities LLP (Tel: 020 7601 6100)
Richard Morrison

Bankside Consultants (Tel: 020 7367 8888)
Keith Irons
Simon Rothschild

                      This information is provided by RNS
            The company news service from the London Stock Exchange