For immediate release: 31st October 2007
Union Resources Limited
A.B.N. 40 002 118 872
QUARTERLY ACTIVITIES STATEMENT FOR PERIOD ENDED 30 SEPTEMBER 2007
OVERVIEW OF THE MEHDIABAD PROJECT
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 "Project Agreements"). The joint venture operates
through an Iranian registered company, Mehdiabad Zinc Company (MZC).
Exploration carried out in the area subject to the joint venture, utilising
funding and expertise provided by Union, outlined one of the largest
undeveloped Zinc resources in the world.
The Feasibility Study was accepted by the Board of MZC as bankable during the
quarter subject to the granting of the requisite licences, support from the
government sector and commitment of financing.
Union considers MZC's acceptance of the Feasibility Study Report to be a
significant development as Union has now completed its commitments under the
various Project Agreements and the project is ready to progress to development
once the purported termination of the agreements has been resolved (refer
STATUS OF NEGOTIATIONS TO RESOLVE PURPORTED TERMINATION DISPUTE
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.
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 finance to be
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.
While 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
Further meetings to resolve the issues and investigate the viability of option
(b) above so that the Project can move to the next stage of development are in
process. If the issues are not able to be satisfactorily resolved, the
Agreements allow for International Chamber of Commerce arbitration hearings to
be held, in order to resolve the dispute.
APPOINTMENT OF LORD LAMONT
Subsequent to the end of the quarter, the Company announced that The Rt. Hon.
Lord Lamont of Lerwick ("Lord Lamont") has agreed to become a director of the
Company, subject to his appointment being approved by the Company's
Lord Lamont is a British citizen and lives in London in the United Kingdom. He
worked as an investment banker in London before entering Politics. He entered
the British Parliament in 1972 and became Parliamentary Under Secretary of
State in 1979 under Prime Minister Margaret Thatcher. He was appointed to the
British Cabinet in 1979 before serving as Chancellor of the Exchequer in the
John Major Government from 1990 to 1993. Lord Lamont is the current Chairman of
the British Iranian Chamber of Commerce and is a director of Balli Group Plc,
which has extensive interests in Iran. He is also a director of RAB Capital
Plc, Scottish Re Group Ltd, and is Chairman of the East European Food Fund.
The Company's Board of Directors is delighted that Lord Lamont has agreed to
serve as a director of the Company. The Board is of the view that Lord Lamont's
combined business, political and financial experience and acumen will be of
great benefit to the Company.
Lord Lamont will stand for election as a director of the Company at the
Company's annual general meeting to be held on 23 November 2007.
The Company established an office in Dubai in the United Arab Emirates. The
Company's Managing Director, Dr Frank Reid, is based in the Dubai office.
The Dubai office is located in the Silicon Oasis Free Zone in Dubai. The
location of the office in a "Free Zone" provides certain financial and
logistical advantages to the Company.
The fact that Dr Reid is based in Dubai means that he will be in close
proximity to Iran where the Mehdiabad zinc-silver-lead deposit is located. This
will greatly assist in Dr Reid's ongoing negotiations with relevant Iranian
parties in order to progress the development of the Mehdiabad Project.
The Company will also maintain its office in Brisbane, Australia.
During the quarter, the Company raised $2.4 million from the Share Purchase
Plan ($0.4 million) and placement of shares to RAB Capital Special Situations,
Lundin Mining AB and Kestrel Assets Limited. The placements were for a total
101,500,000 shares at an issue price of 2 cents per ordinary share to raise a
total of $2,030,000.
Based on the current level of activity, these funds should be sufficient to
fund the operations of the Company for the next twelve months.
The Company has made an offer of bonus shares to those shareholders who
participated in the Share Purchase Plan. This was in recognition of the higher
subscription price paid by participating shareholders compared to shareholders
participated in the later private share placement by the Company.
Union continues to negotiate to resolve the dispute relating to the purported
termination. Once the termination dispute is resolved and the exploitation
licence transferred to MZC, the Mehdiabad project is ready to proceed to
If the dispute is not able to be resolved, the agreements call for arbitration
hearings in Tehran under International Chamber of Commerce rules.
The Company is preparing for both eventualities.
We are also evaluating other mineral investment opportunities that fit
strategically with Mehdiabad in respect of location and commodity.
UNION RESOURCES LIMITED
Dr Frank Reid
Australia: Union Resources Limited
Dr Frank Reid - Managing Director
Phone: +61 07 3833 3833
London: Hanson Westhouse Limited
Bill Staple or Martin Davison
0207 7601 6100
Simon Rothschild / Louise Mason
0207 367 8888
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 30 September 2007
Consolidated statement of cash flows
Cash flows related to operating Current quarter Year to date
$A'000 (3 months)
1.1 Receipts from product sales and - -
1.2 Payments for (a) exploration and (464) (464)
1.3 Dividends received - -
1.4 Interest and other items of a 26 26
similar nature received
1.5 Interest and other costs of finance - -
1.6 Income taxes paid - -
1.7 Other (provide details if material) 51 51
Net Operating Cash Flows (954) (954)
Cash flows related to investing
1.8 Payment for purchases of: (a) - -
(b) equity investments
(c) other fixed
1.9 Proceeds from sale of: (a) - -
c. other fixed
1.10 Loans to other entities - -
1.11 Loans repaid by other entities - -
1.12 Other (provide details if material) - -
Net investing cash flows - -
1.13 Total operating and investing cash (954) (954)
flows (carried forward)
1.13 Total operating and investing cash (954) (954)
flows (brought forward)
Cash flows related to financing
1.14 Proceeds from issues of shares, 2,405 2,405
1.15 Proceeds from sale of forfeited - -
1.16 Proceeds from borrowings - -
1.17 Repayment of borrowings - -
1.18 Dividends paid - -
1.19 Other (provide details if material) - -
Net financing cash flows 2,405 2,405
Net increase (decrease) in cash 1,451 1,451
1.20 Cash at beginning of quarter/year 1,626 1,626
1.21 Exchange rate adjustments to item 1 1
1.22 Cash at end of quarter 3,077 3,077
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 256
in item 1.2
1.24 Aggregate amount of loans to the parties included in -
1.25 Explanation necessary for an understanding of the transactions
Salaries and directors fees
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
3.1 Loan facilities - -
3.2 Credit standby arrangements - -
Estimated cash outflows for next quarter
4.1 Exploration and evaluation 108
4.2 Development -
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 $A'000 $A'000
items in the accounts is as follows.
5.1 Cash on hand and at bank 1,077 626
5.2 Deposits at call 2,000 1,000
5.3 Bank overdraft - -
5.4 Other (provide details) - -
Total: cash at end of quarter (item 3,077 1,626
Changes in interests in mining tenements
Tenement Nature of interest Interest Interest
reference (note (2)) at beginning at end of
of quarter quarter
6.1 Interests in mining - - - -
reduced or lapsed
6.2 Interests in mining - - - -
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 up
per security per security
(see note 3) (see note 3)
7.1 Preference +
7.2 Changes - - - -
quarter - - - -
7.3 +Ordinary 792,284,766 792,284,766 Fully paid Fully paid
7.4 Changes 101,500,000 101,500,000 2.00 2.00
quarter 15,111,239 15,111,239 2.70 2.70
(a) Increases 800 800 10.00 10.00
issues - - - -
7.5 +Convertible - - - -
7.6 Changes - - - -
quarter - - - -
7.7 Options Exercise price Expiry date
and 246,040,340 246,040,340 9.82 31 March 2009
factor) UCLOA UCLOA
264,428,911 264,428,911 10.00 31 March 2009
7.50 31 March 2009
7.8 Issued during - - - -
7.9 Exercised 800 800 10.00 10.00
7.10 Expired - - - -
7.11 Debentures - -
7.12 Unsecured - -
1 This statement has been prepared under accounting policies which comply with
accounting standards as defined in the Corporations Act or other standards
acceptable to ASX (see note 4).
2 This statement does give a true and fair view of the matters disclosed.
Print name: Dr Frank Reid (Director) Date: 31 October2007
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