ucl projects

Sandpiper-Meob Phosphate Project, Namibia

EPLs 3323, 4009, 4010, 4021,4059, 3414 and 3415.
MLA 170 (lodged 11 November 2010)

The project is a Joint Venture between Union Resources Limited, Minemakers Limited and a Namibian owned company Tungeni Investments cc, established in accordance with the Shareholders Agreement and incorporated in the company Namibian Marine Phosphate Pty Limited, registered in Namibia.

The ownership structure is as follows:

Union Resources Limited 42.5%
Minemakers Limited 42.5%
Tungeni Investments cc 15.0% Namibian Partner

The Joint Venture Agreement (?JVA?) was signed in October 2008 to jointly develop the companies' respective and adjacent Meob and Sandpiper marine phosphate projects. Union Resources Limited is pleased to advise its wholly owned Namibian subsidiary, Sea Phosphates (Namibia) (Pty) Ltd, has entered into a Shareholders Agreement dated 30 July 2010 with Joint Venture (?JV?) partners Minemakers Namibia (Pty) Ltd, a wholly owned subsidiary of Minemakers Limited, and Tungeni Investments cc to govern the operation of the Namibian JV company Namibian Marine Phosphate (Pty) Ltd.

The JV is well placed to rapidly develop a new phosphate province in Namibia and controls a substantial part of the most prospective areas. The JV tenements lie in waters approximately 60km off the coast of Namibia and cover a combined area of approximately 7,000km2 in the regional phosphate enriched province to the south of Walvis Bay in water depths of 180?300m. The JV area incorporates phosphate enriched province to the south of Walvis Bay and specifically includes all of the central enriched core area, where published regional mapping shows phosphate concentration of more than 20% by weight. These deposits were delineated during regional scientific studies in the 1970s but have remained undeveloped. The deposits occur as unconsolidated sea floor sediments, which now lie within the reach and capability of currently available dredging technology.

An initial Resource development programme was completed in 2009 and as at February 2010 independent estimates of the phosphate Mineral Resources now stand at:

Indicated Category - 73.9Mt 20.57% P2O5
Inferred Category - 1,507Mt 18.7 % P2O5
Total - 1,581Mt 18. 8% P2O5

Scoping Study Highlights

* The Namibian marine phosphate project is potentially economic.
* Operating costs have been estimated at US$57.76/t FOB Walvis Bay for an operation on beneficiated material, ramping up to 3Mtpa.
* Start-up capital costs are estimated as US$144M.
* The beneficiated material is indicated to be suitable for marketing to fertiliser producers and for the manufacturer of phosphoric acid by the Joint Venture.

Mehdiabad Zinc Project, Iran

The Mehdiabad Project is being developed by Union Resources Limited (?Union?), Iranian Mines and Mining Industries Development and Renovation Organization ("IMIDRO") and the company Itok GmbH ("Itok") through an incorporated Iranian joint venture company, Mehdiabad Zinc Company ("MZC").

IMIDRO purported to terminate several agreements governing the Project in December 2006. As a consequence of the purported termination and having fully funded its contribution to MZC, Union Resources has ceased all exploration and development funding to the project but still maintains a representative office, at minimal cost, in Tehran to assist in ongoing deliberations. Union Resources has filed insurance claims and is currently considering all of its alternative options including commencement of arbitration proceedings.

In December 2009 the Company?s Directors, following discussion with the Company?s auditors on the interpretation of relevant accounting standards, and taking note of the recent perceived deteriorating economic and political situation in Iran, decided to impair the carrying value of the Company?s expenditure on exploration associated with the Mehdiabad Project. This means that the exploration expenditure to date, which has previously been treated as an asset in the Company?s balance sheet, will be shown as a loss item in the Company?s consolidated statement of comprehensive income for the year ended 30 June 2010. The Directors? decision to do this is in accordance with applicable accounting standards to reflect the perceived uncertainty surrounding the Mehdiabad Project and thereby the Company?s ability to recoup all exploration expenditure associated with the Project. It is important to note, however, that this accounting treatment does not constitute the writing off of the Mehdiabad Project expenditure and that the impairment does not change the strategy of the Company in its continued efforts to achieve a positive outcome in relation to the Project.

Union has continued to explore the possibility of resolving the matter through arbitration and has made initial preparations for instituting arbitration proceedings should that become necessary.

In the event the dispute is resolved, and given the poor prospects of significant foreign funding becoming available, Union has continued to explore the possibility of a staged development of the Project.

The exploration status of the Project remains unchanged from 2008 and is summarised below. The exploration activities at Mehdiabad have included over 52,000 metres of diamond drilling which has outlined a zinc (Zn), lead (Pb) and silver (Ag) resource totalling 394 million tonnes.

Resource Classification

Measured: 140mt 4.1% Zn, 1.6% Pb, 34g/t Ag
Indicated: 222mt 4.2% Zn, 1.6 % Pb, 36g/t Ag
Inferred: 43mt 4.5% Zn, 1.4% Pb, 38g/t Ag
Total: 394mt, 4.2% Zn, 1.6% Pb, 36g/t Ag

NB: this resource was calculated utilising a 2% Zn cut-off grade.

Union remains committed to the development of the world class Mehdiabad zinc-lead-silver resource. However, pending the outcome of the current negotiations and given the current political environment in Iran, it may be some time before the development of the Mehdiabad Project can proceed and add value to the Company. Nevertheless, given the quality of the resource, the Company?s commitment to the Project and the possibility of an improving political situation in Iran, Union management is of the view that it is worth maintaining an interest in the Project at this stage.