It will be interesting to see how things play out over the next twelve to twenty four months from sub-prime and the credit squeeze. I'm not sure that anyone really knows. Necessarily there must be some impact on China, though I agree with Joel that I think that the long-term picture remains in tact.
The question that comes to mind for me re the takeover talk on this forum around UMC relates to whether the directors foresee problems in raising cash to fund future exploration and capital requirements at significant discounts to what they perhaps might have budgeted. This is not unique to UMC but all juniors going forward IMO and will be interesting to see what the impact on the junior mining sector overall will be.
The other issue that is of interest is whether the divestiture is not something that has been planned from the outset. I raise this question as it was put to me at least eight months ago that it had never been the intention of the directors to take the iron ore operation through to production. The point was put to me from someone that I trust.
Not saying that this last point is correct, but perhaps interesting in light of these recent discussions.
Until the new multi-user berths in Hedland come on line in 2012, and in the absence of a takeover, perhaps the gaining of port slots will be as difficult (if not more difficult) than getting the product to port. That is, unless the company is able to offer FMG something that makes it worthwhile for them to give up shipping slots.
One million tonnes per annum is one ship a quarter. Doesn't sound like a lot, but could be potentially: particularly as FMG ramps up and there is a squeeze with the other junior producers looking to come into production at the same time and also seeking FMG shipping slots prior to 2012. Obviously, that is predicated on the basis that there are no mine gate sales to a Rio or BHP.
What I do like about UMC is the quality of the orebody. So, if everything does continue to turn to #$%^ with the global economy, and access to cash continues to be difficult, the high grades of their product offset the fact that they are some way off production: an advantage that perhaps some of the other juniors don't have.
Have been progressively topping up during dips recently. More to come over next few weeks: hopefully if we get a few more dips.
BUSH
UMC Price at posting:
$1.30 Sentiment: Buy Disclosure: Held
