Part 2:UCLPrice: $0.026Shares on issue: about 900 millionMarket...

Part 2:

UCL
Price: $0.026
Shares on issue: about 900 million
Market cap: about $ 23 million
Options: about 510 million

Basics about UCL:

Projects:
- about 48% interest in Mehdiabad zinc project in Iran. This is the world’s largest undeveloped zinc mine but has been subject to a dispute with the Iranian government partner for about 18 months. UCL’s share of NPV is at least US$700 million by right but the dispute means that it is sensibly not recognised by the market.
- Sandpiper offshore phosphate project in Namibia just secured motivating today’s price action and potential renewal of UCL.

Sandpiper Phosphate project:
- Located in waters approximately 60km offshore of Namibia.
- Namibia neighbours South Africa and is one of the more stable African states from an investor perspective.
- The 2 EPLs being acquired cover 200,000 hectares or about 2000km2. They are located in the middle of a region proven to be enriched phosphates in historical studies – probably the best for concentration in the region.
- The initial target zone appears to cover an area of at least 1000km2 with drilled P2O5 grades in the range of 15-20%.
- Of holes drilled only 15% contain no phosphate.
- Currently undertaking analysis of historical data to bring it up to JORC code standards with aim of having completed in the next two months.
- A desktop study has been completed indicating that subsea recovery should be technically viable and economically cost effective.
- UCL intends to identify a strategic partner in the area of submarine material recovery with hope of recovering around 3 million tpa of material which is the same initial target of MAK too.

Historic resource base/zone:
The project has also been through a number of hands during periods when it was not considered viable. The South African company Gencor appears to have done the most work and produced sampling core data between 1992 and 1994.

- The resource target itself is unconsolidated sediment on the seafloor.
- Gencor’s study involved 50 holes covering the area mentioned of at least 1000 km2.
- Whilst a small number of holes for the area they do have a high strike rate suggesting continuity. It seems to be considered that most of the sediment in this region contains phosphates.
- This data at a cutoff of 10% P2O5 yields a crude average of 3.2m thickness at average 17.16%. For the sake of a possible comparison I am going to guesstimate an extremely rough global resource base in this area. It is purely speculative and not to be relied upon by anyone – purely a guess at what global resource might be possible.

Guesstimate on possible global resource.
The above 10% cutoff holes represent 66% of the drill holes so I’ll use that as a first cut off.
- 66% of 1000km2 = 666km2 (oops for those religiously superstitious amongst us!) = 666,000,000 m2
- Average depth of 3.2 gives volume of 666 mill * 3.2 = 2.131 billion m3
- At a specific gravity of 1.8 that gives 3.836 billion tonnes of sediment at 17.16% P2O5.

A remarkable figure but probably way excessive. If my cutoff was 1/3 of the area, or 22% of the area known to contain phosphate it would still represent 1.278 billion tonnes of sediment at 17.16% P2O5 as a possible global resource.

Within the 50 cores an area of 8km * 8km or 64km2 yielded 11 holes averaging 4.6m at 17%. Adjacent to it was a larger area of greater than 310km2 evidencing phosphate. This would give a combined initial target area of 374km2+ or some 50% or so of my initial guesstimate.

It is possible that there could be a major deposit awaiting exploitation. It hasn’t been to date for similar reasons to MAK. In this case the relatively simple nature of the resource ie unconsolidated sediment on the seafloor is complicated by being underwater at a depth of around 250-300m. In the past this was not economic to recover however dredging technology now apparently handles 500m depths routinely and beneficiation appears to be technically simple. Of course the soaring price of phosphates has brought this region in to play, first through BON and now UCL which appears to have been backed up by both these company’s desktop studies to date.