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Union Resources LTD (URL)

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Thursday 31 January, 2008

Union Resources LTD

Quarterly Activities Statement

                              Union Resources Ltd                              



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.

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. On 7 December 2006 Union announced that IMIDRO had
purported to terminate the agreements governing the Project.

At that time, and subsequently, Union has consistently and strongly asserted
that the purported termination of the Agreements is invalid. Subsequent to
receipt of the purported termination notice Union has endeavoured, and
continues to endeavour, to negotiate a settlement of the dispute in order that
development of the Project can continue.

One of the Project agreements which IMIDRO purported to terminate was the
"Basic Agreement" between Union, IMIDRO and Itok. The Basic Agreement provides
that upon Union and Itok contributing US$10million in project expenditure
between them they shall be entitled to that proportion of 50% in the Project
represented by their expenditure. Further, IMIDRO must then elect whether to
contribute equally with Union and Itok in respect of further Project
expenditure, or have its 50% equity in the Project diluted in proportion to
further Project expenditure contributed by Union and Itok.

Union has now received notification that Project expenditure by it and Itok of
US$9,695,992 and US$463,179 respectively has been approved by the MZC Board.
Whilst the sum of $US$9,695,992 represents only part of what Union claims is
its legitimate Project expenditure, the significance of the MZC Board's
determination is that it constitutes formal recognition that Union and Itok
have met their initial "earn-in" expenditure commitment under the Project
agreements. The effect of this is that Union is entitled to have its Project
expenditure through MZC converted to an approximately 47.7% equity in MZC (with
Itok entitled to an approximately 2.3% equity). This will prove to be of
significant benefit if a resolution of the current dispute can be achieved.


In its notice of termination, IMIDRO claimed that Union had 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 and i ncreased size of
the Project that was discovered in the first two years of the joint venture.
The exploration work has effectively increased the complexities of preparing a
Study relating to the Project which would enable 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.

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 will be
    very difficult to implement. Nevertheless, as Union has sought ways to
    implement the project it has in good faith eneterd into negotiations to
    ascertain whether this option is viable., Union has made it clear that it
    does so without prejudice to its rights under the original Project
There has been no substantial progress made by negotiations to resolve the
dispute during the quarter. 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.

The Company has engaged legal counsel to prepare for arbitration.


At the time of the purported termination Union held a political risk insurance
policy in respect of its investment in Iran ("the Policy") and notified the
Australian Government Export Finance and Insurance Corporation ("EFIC") of the
purported termination. The limit of liability under the Policy is

Union advises that due to time limits for lodging a claim under the policy the
Company has now lodged a claim for compensation under the Policy arising out of
the expropriation of Union's interest in the Project, evidenced by the
purported termination of the relevant Project agreements and the subsequent
refusal by the relevant Iranian parties to negotiate a settlement of the
dispute. Although Union is continuing to endeavor to negotiate a settlement of
the dispute it nevertheless believes it has grounds for lodging a claim under
the Policy. Union will provide all reasonable assistance to EFIC as it (EFIC)
assesses Union's claim.


The Company previously advised that the Rt Hon Lord Lamont of Lerwick had
agreed to become a director of the Company, subject to his appointment being
approved by the Company's shareholders at the Company's annual general meeting
held on 23 November 2007.

The Company is very pleased that Lord Lamont was duly elected as a director of
the Company at the annual general meeting. The Union 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 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 Chairman of Jupiter Adria Plc
and the East European Food Fund, and a director of RAB Capital Plc.


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. If
substantial progress towards a resolution of the dispute is not made in the
first quarter 2008 (calendar year), the Company is ready to commence
arbitration proceedings.

We are also evaluating other mineral investment opportunities that fit
strategically with Mehdiabad in respect of location and commodity.


Dr Frank Reid
Managing Director

For further information contact:

Australia: Union Resources Limited
Frank Reid - Managing Director
Phone: +61 07 3833 3833

London: Hanson Westhouse Limited
Louis Castro or Martin Davison
0207 7601 6100

Bankside Consultants
Simon Rothschild or Louise Mason
020 7367 8888

                                  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 December 2007       

Consolidated statement of cash flows

Cash flows related to operating        Current quarter      Year to date   
                                          $A'000           (6 months)    
1.1   Receipts from product sales and     -                  -                 
      related debtors                                                          
1.2   Payments for (a) exploration and    (96)               (242)             
                                          -                  -                 
      (b) development                                                          
                                          -                  -                 
      (c) production                                                           
                                          (522)              (1,384)           
      (d) administration                                                       
1.3   Dividends received                  -                  -                 
1.4   Interest and other items of a       51                 77                
      similar nature received                                                  
1.5   Interest and other costs of finance -                  -                 
1.6   Income taxes paid                   9                  9                 
1.7   Other (provide details if material) (26)               25                
      Net Operating Cash Flows            (584)              (1,515)           
      Cash flows related to investing                                          
1.8   Payment for purchases of: (a)       -                  -                 
                                          -                  -                 
      (b) equity investments                                                   
                                          (15)               (15)              
      (c) other fixed                                                          
1.9   Proceeds from sale of: (a)          -                  -                 
                                          2                  2                 
      (b) equity                                                               
                                          -                  -                 
       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            (13)               (13)              
1.13  Total operating and investing cash  (597)              (1,528)           
      flows (carried forward)                                                  

1.13  Total operating and investing cash  (597)              (1,528)           
      flows (brought forward)                                                  
      Cash flows related to financing                                          
1.14  Proceeds from issues of shares,     (12)               2,393             
      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 (provide details if material) -                  -                 
      Net financing cash flows            (12)               2,393             
      Net increase (decrease) in cash     (609)              865               
1.20  Cash at beginning of quarter/year   3,077              1,602             
      to date                                                                  
1.21  Exchange rate adjustments to item   (5)                (4)               
1.22  Cash at end of quarter              2,463              2,463             

Payments to directors of the entity and associates of the directors

Payments to related entities of the entity and associates of the related

                                                             Current quarter   
1.23   Aggregate amount of payments to the parties included  183               
       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          
       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       
                                          $A'000             $A'000            
3.1   Loan facilities                     -                  -                 
3.2   Credit standby arrangements         -                  -                 

Estimated cash outflows for next quarter

4.1   Exploration and evaluation                    100                        
4.2   Development                                   -                          
      Total                                         108                        

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                 463               1,077              
5.2   Deposits at call                         2,000             2,000              
5.3   Bank overdraft                           -                 -                  
5.4   Other (provide details)                  -                 -                  
      Total: cash at end of quarter (item      2,463             3,077              

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 up 
                                                 per security   per security   
                                                 (see note 3)   (see note 3)   
                                                 (cents)        (cents)        
7.1   Preference +                                                             
7.2   Changes                    
      (a) Increases                                                            
      through           -             -              -              -              
      (b) Decreases     -             -              -              -                 
      returns of                                                               
7.3   +Ordinary     898,373,543   898,373,543    Fully paid     Fully paid     
7.4   Changes          
      (a) Increases                                                          
      through         4,588,777     4,588,777      Nil          Fully paid        
      issues                                   (bonus shares)                         
      (b) Decreases                                                            
      through           -             -              -             - 
      returns of                                                               
7.5   +Convertible      -             -              -              -              
7.6   Changes                   
      (a) Increases                                                            
      through           -             -              -              -            
      (b) Decreases                                                            
      through           -             -              -              -          
7.7   Options       246,040,340   246,040,340    Exercise price   Expiry date  
      and           UCLOA         UCLOA          9.82            31 March 2009 
      factor)       264,428,911   264,428,911    10.00           31 March 2009  
                    UCLOB         UCLOB     
                    90,000,000    -               7.50            31 March 2009 
                    6,000,000     -              2.00            31 March 2013 
                    5,333,332     -              2.10            31 March 2015
                    2,666,666     -              By reference    31 March 2015 
                    Unlisted                     to future                     
                                                 market price                  
7.8   Issued during 6,000,000     -              2.00            31 March 2013 
      quarter       Unlisted                                                           
                    5,333,332     -              2.10            31 March 2015 
                    2,666,666     -              By reference    31 March 2015 
                    Unlisted                     to future                     
                                                 market price                  
7.9   Exercised     -             -              -              -              
7.10  Expired       -             -              -              -              
7.11  Debentures    -             -                                            
      (totals only)                                                            
7.12  Unsecured     -             -                                            

Compliance statement

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.

Date: 31 January 2008

Dr Frank Reid


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.