trading pattern, page-35

Joel

My view is that Matt and Barry have already done their homework on these 2 points you have raised and that 2MT per annum up the Great Northern Highway will be a reality. UMC will have a developmental process along the lines of - You have to crawl before you can walk then you have to walk before you can run. This allows the company to progress with the least amount of debt and or shareholder dilution as possible while developing infrastructure.

My thoughts on this are as follows.

1.Truck 2MT per annum up to Port Hedland whilst building a train load out facility 110 klms to the north at FMGs multi-user rail line.

2.Truck 2 to 5 MT per annum 110 klms up to the newly established train load out facility at FMGs multi-user rail line whilst constructing a 110 klm rail spur line up to FMGs multi user railway. Also the construction of a new train load out facility on UMC's mine site.

3. Rail freight 5 to 10 MT plus per annum direct from UMC's mine site.

The main risk to my investment is the thought of being taken over by an opportunistic predator at our immature stage of development due to such a low market capitalisation that UMC has. We could be a sitting Peking duck if we don't put on some more weight.

Below is a very pertinent passage from the Ocean Equities Report which I think is worth considering.

UMC has four primary options in common with other junior hematite producers, to transport its ore to port. These are; 1.Mine Gate Sale (“MGS”) with a major, 2. JV with a major, 3. concluding a rail haulage agreement with either BHP, Rio Tinto or most likely Fortescue, and 4. road haulage. While at this stage access to Rio Tinto and BHP’s rail networks is unlikely (neither are yet to agree 3rd party access to their existing infrastructure) conditions precedent for the development of Fortescue’s Cloud Break rail network require it to be an open access carrier of 3rd party ore (subject to agreeing terms and conditions with Fortescue).

We believe the worst case scenario for UMC would be trucking 2mt pa of DSO to Port Hedland and using the multi access port facility at Port Hedland. Under this scenario we expect operations would be significantly cash flow positive with an estimated trucking cost of between A$25-30/t. The drawback of this scenario would be the reduced scale of production that UMC could achieve due to a bottleneck in transport. However, it would still represent a very attractive project.

The preferred options for UMC would be to agree a rail haulage agreement, MGS or JV with a major and we believe UMC is in a relatively favourable position once it begins full negotiations. If, as identified by Prodemas, UMC has a resource of 100mt of high grade in-situ Marra Mamba mineralisation at the Railway prospect then UMC will have a significant deposit of a comparable high grade and low impurity ore to that of BHP’s neighbouring Area C operations and Rio Tinto’s surrounding operations, which would be suitable for blending.