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Union Resources LTD (URL)

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Monday 30 April, 2007

Union Resources LTD

Quarterly Report

                            Union Resources Limited                            



Union Resources Limited (Union) is focused on the development of the Mehdiabad
Base Metal Project (Project) located in Central Iran.

Union has to date invested in excess of US$ 15 million towards exploration and
feasibility activities relating to the Project in line with joint venture
arrangements made in a series of five agreements signed between Union, Ministry
of Industry and Mines of the Government of the Islamic Republic of Iran, the
Iranian government partner's operating companies, Iranian Mines and Mining
Industries Development and Renovation Organisation (IMIDRO), Iranian Mines
Procurement and Supply Company (IMPASCO) and private partner Itok GmbH between
1999 and 2003. The joint venture operates through an Iranian registered company
Mehdiabad Zinc Company (MZC).

Exploration carried out through the joint venture, and based on funding and
expertise provided by Union, outlined a world class zinc, lead and silver
resource totaling 394 million tonnes at 4.2% zinc (Zn), 1.6% lead (Pb) and 36 g
/t silver (Ag), of which over 90% is either Measured or Indicated under the
JORC Code. In addition there is a copper resource associated with the deposit
of 72 million tonnes at 0.54% Copper(Cu), located above one section of the zinc
resource, and contained within material considered as "waste" to be removed
from the optimum open pit associated with the development.

A Feasibility Study has been completed by Aker Kvaerner Australia (AKAU) which
has indicated that the optimum development is a major open pit mine, with a
mine life of 20-40 years, and a large solvent extraction-electrowinning (SX-EW)
acid leach plant, designed to produce zinc metal at the site.

Whilst the study indicated that a production rate of up to 400,000 tonnes of
zinc metal per annum, provided the best economic return, it is felt that a
smaller production rate of around 200,000 tpa zinc metal is the optimum
project, due to limitations in the infrastructure, such as power and water,
required for the development.

AKAU estimated the capital cost (capex) of the optimum project will be in
excess of US$1,000 million. Union is of the view that such a financing would
not be possible at this time and hence the optimum project may need to await
more attractive investment conditions for Iran.

Meanwhile Union is also of the view that a lower capex development would be
possible. As a result Union is currently evaluating the possibility of heap
leaching both the zinc oxide ore, that makes up the top 25% of the zinc
resource and also the copper oxide ore. A scoping engineering study by AKAU has
indicated that the capex for a viable heap leach could be in the order of US$
100 million and would therefore be much more financeable. Column leach tests,
that simulate a heap leach in a laboratory environment, have successfully
leached more than 80% zinc from representative material crushed to -6.25 mm. A
flow sheet to recover zinc from the leachate has been designed and further test
work on this option is in progress.

Whilst heap leaching has not been used commercially for zinc before, it has
been successfully used for gold and copper extraction for some years and more
recently for nickel extraction, and offers Union a viable alternative.


Union received a letter from IMIDRO in December 2006, purporting to terminate
four of the five agreements relating to the joint venture and Project, namely
the Foundation Agreement, Basic Agreement, the Management Agreement and the
Engineering Agreement. Union is firmly of the view that the notice of
termination was invalid.

At the same time Union received a further letter from IMIDRO confirming that
the Shareholders Agreement which controls the activities of MZC, remains valid.
In addition the Iranian Ministry of Finance confirmed that Union's investment
of US$14 million to March 2006, is fully protected under Iran's Foreign
Investment Laws.

IMIDRO claimed that Union has breached Article 9.2.2 of the Basic Agreement
which requires MZC to deliver a Feasibility Study that determines the "optimum
mine plan" and "optimum process route" for the Project within two years of the
closing of the agreement, which would have been at the end of 2001. However,
Article 9.2.2 is subject to Article 5.2.4 which states that "if MZC has worked
continuously on the Project and for valid technical reasons needs more time to
complete the Study, then the parties will agree to a reasonable extension".

Union is firmly of the view that extensions have not only been given, but in
any case are technically justified given both the nature of the Project that
was discovered in the first two years of the joint venture and the complexities
of preparing a Study relating to the Project which would enable international
finance to be raised.

Since receiving the letter of purported termination, Union has sought to
protect its investment and enforce its legal rights by invoking the dispute
resolution provisions contained in the Basic Agreement. Meetings to try to
resolve the dispute were held in February and April. Other Iranian government
stakeholders attended the February meetings and support the parties finding a

Whilst there is a desire to resolve the issues, the position of the parties is

 a. Union requires IMIDRO to withdraw the termination letter, arrange for its
    wholly owned subsidiary IMPASCO to transfer the Exploitation Licence for
    the Project to MZC in accordance with the agreements and to allow MZC to
    proceed with the development of the Project.
 b. IMIDRO insists that IMPASCO retain the Exploitation Licence and undertake
    the mining. IMIDRO suggest that MZC build the process plant, and that
    IMIDRO provide MZC with a guaranteed supply of ore for the plant. IMIDRO's
    approach is not envisaged in the Agreements and in Union's view is not
Union continues to assert that the Agreements require that MZC must control
both the mining and processing of the ore and that compliance with the
procedures stipulated in the Agreements is the most efficient way of developing
the Project.

Further meetings to try to resolve the issues so that the Project can move to
the next stage are expected in the coming months.


During the quarter, Aker Kvaerner Australia (AKAU) advised that the proposed
process configuration at a capacity of 50,000 tpa zinc from oxide ore and
150,000 tpa zinc from sulphide resources (50:150k option) represents the
optimum flowsheet for the Mehdiabad zinc project, and that the Project as a
whole is considered to meet AKAU standard for a Feasibility Study with the
following exceptions:

 a. Granting of tenure and conditions of the Exploitation Licence.
 b. Environmental approvals.
 c. Water Supply
 d. An indication of commitment to the Project and its stakeholders by the
    Iranian Government.
These conditions are considered to be outside the commitments given by Union to
the joint venture.

AKAU is of the view that upon resolution of these outstanding issues, the
Project (at the 50k:150K option) will be ready to move to the next stage of
development, which would involve a Definitive Study, Invitation to Bid and
Front End Engineering and Design (FEED) phases.

On completion of these phases and with the project funding available the
Project could move to the "Engineering, Procurement and Construction Management
(EPCM) Stage".


In anticipation of resolution of the dispute and an ultimate development, Union
appointed Dr Frank Reid to the position of Managing Director and Chief
Executive Officer of the Company, from early April 2007. Dr Reid has had a
lifetime's experience in the mining and resources industries and has extensive
knowledge in managing projects in the Middle East. Prior to joining Union Dr
Reid was a senior advisor to Ma'adan, the Saudi Arabian Government owned mining
company responsible for US$9 billion in resource projects. Prior to that Dr
Reid had senior management experience with Western Mining Corporation and with
US based capital funds.

Dr Reid's background in major mining companies and private equity funds, and
technical experienced in bringing projects from the conceptual stage to
development and start up, makes him well qualified to undertake the leadership
of the next stage of the Project development.

                                  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    
       40 002 118 872                                31 March 2007       

Consolidated statement of cash flows

Cash flows related to operating activities   Current quarter  Year to date 
                                                 $A'000        (9 months)  
1.1    Receipts from product sales and       -                      -             
       related debtors                                                     
1.2    Payments for (a) exploration and      (543)               (2,045)       
                                             -                      -             
       (b) development                                                     
                                             -                      -             
       (c) production                                                      
                                             (356)               (1,228)       
       (d) administration                                                  
1.3    Dividends received                                                  
1.4    Interest and other items of a similar 56                     148           
       nature received                                                     
1.5    Interest and other costs of finance   -                      -             
1.6    Income taxes and GST paid/refunded    46                     161           
1.7    Other                                 -                      -             
       Net Operating Cash Flows              (797)               (2,964)       
       Cash flows related to investing                                     
1.8    Payment for purchases of: (a)         -                      -             
                                             -                      -             
       (b) equity investments                                              
                                             (8)                  (22)          
       (c) other fixed assets                                              
1.9    Proceeds from sale of: (a) prospects  -                      -             
       (b) equity investments                336                   336           
       (c) other fixed assets                -                      -             
1.10   Loans to other entities               -                      -             
1.11   Loans repaid by other entities        -                      -             
1.12   Other                                 -                      -             
       Net investing cash flows              328                   314           
1.13   Total operating and investing cash    (469)               (2,650)       
       flows (carried forward)                                             

1.13   Total operating and investing cash   (469)                (2,650)        
       flows (brought forward)                                             
       Cash flows related to financing                                     
1.14   Proceeds from issues of shares,      -                       -              
       options, etc.                                                       
1.15   Proceeds from sale of forfeited      -                       -              
1.16   Proceeds from borrowings             -                       -              
1.17   Repayment of borrowings              -                       -              
1.18   Dividends paid                       -                       -              
1.19   Other                                -                       -              
       Net financing cash flows             -                       -              
       Net increase (decrease) in cash held (469)                (2,650)        
1.20   Cash at beginning of quarter/year to 3,157                 5,338          
1.21   Exchange rate adjustments to item    (1)                    (1)            
1.22   Cash at end of quarter               2,687                 2,687          

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           96            
       in item 1.2                                                         
1.24   Aggregate amount of loans to the parties included in            -             
       item 1.10                                                           
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 flows                                                    

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                                      478             
4.2   Development                                                      -               
      Total                                                           478             

Reconciliation of cash

Reconciliation of cash at the end of the      Current quarter  Previous quarter
quarter (as shown in the consolidated                                          
statement of cash flows) to the related items      $A'000           $A'000     
in the accounts is as follows.                                                 
5.1    Cash on hand and at bank                    2,687            3,157           
5.2    Deposits at call                              -                -               
5.3    Bank overdraft                                -                -               
5.4    Other                                         -                -               
       Total: cash at end of quarter (item         2,687            3,157           

Changes in interests in mining tenements

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

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   Number quoted    Issue price  Amount paid 
                                                      per security up per      
                                                      (see note 3) security    
                                                      ($)          (see note 3)
7.1   Preference +         -                -              -            -
7.2   Changes during       -                                           
      (a) Increases                                                            
      through issues                                                           
      (b) Decreases                                                            
      through returns                                                          
      of capital,                                                              
7.3   +Ordinary       777,171,727   777,171,727       fully paid   fully paid 
7.4   Changes during      -                                                        
      (a) Increases                                                            
      through issues                                                           
      (b) Decreases                                                            
      through returns                                                          
      of capital,                                                              
7.5   +Convertible           -            -               -            -
      debt securities                                                          
7.6   Changes during         -            -               -            -
                             -            -               -            -
      (a) Increases                                                            
      through issues                                                           
      (b) Decreases                                                            
7.7   Options            246,040,340      246,040,340     Exercise  Expiry date
      One ordinary      Listed UCLOA     Listed UCLOA                 March 31,
      share for each                                       $0.0982         2009
      option held        264,430,711      264,430,711                          
                                                             $0.10    March 31,
      One ordinary      Listed UCLOB     Listed UCLOB                      2009
      share for each                                        $0.075             
      option held         90,000,000                                  March 31,
      One ordinary          Unlisted                                           
      share for each                                                           
      option held                                                              
7.8   Issued during                -                                           
7.9   Exercised                    -                                           
      during quarter                                                           
7.10  Expired during               -                                           
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.

The previous Managing Director Mr Rob Murdoch will cease to be an Executive
Director of the Company on 28 April 2007, in accordance with his consulting
company's three month notice of termination of its management agreement with
Union, dated 29 January 2007. The Company will retain access to Mr Murdoch
whose extensive knowledge of the Project will be of great benefit to Union.

Union is pleased to report that an orderly handover of management functions has
successfully taken place during April, and Dr Reid has been well received in

The information contained in this report that relates to Exploration Results,
Mineral Resources and Ore Reserves is based on information compiled by Mr Rob
Murdoch, Director of Union Resources Limited. Mr Murdoch is a Member of the
Australasian Institute of Mining and Metallurgy and has the relevant experience
in relation to the mineralization being reported upon to qualify as a Competent
Person as defined in the 2004 Edition of the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves. Mr Murdoch consents to
the inclusion in the report of the matters based on his information in the form
and context in which it appears.


Dr Frank Reid
Managing Director

For further information contact:

Australia: Union Resources Limited
Dr Frank Reid/John Lemon
Phone: +61 (07) 3833 3833

London: Hanson Westhouse Limited
Bill Staple or Martin Davison
0207 7601 6100