euroz initiating coverage

Noted, This is not on the UMC web site - For those of you who have not yet seen it. Below is the key bullet point extract.


United Minerals Corporation is an emerging iron ore developer with projects located in the
heart of the Pilbara Iron Ore mining province with 4 major operating mines in close proximity.
Drilling underneath the 20-40m thick Quaternary Cover sequence has identifi ed high grade Marra
Mamba mineralisation over a strike length and width of +1km at the Railway Prospect.
Spectacular intersections include 100m at 61.1% Fe from 57m and 80m at 64.4% Fe from 70m.
An initial inferred global resource for Railway is slated for August’08 and we estimate this could be ~
80mt.
Within this resource a higher grade subset of +60% Fe will be reported and could comprise ~ 50% of
the total resource – ie 40mt @ 62% Fe direct ship ore (‘DSO’).
A recent site trip confi rmed the excellent infrastructure with both RIO and BHP rail lines within 10-15km
of the tenements and the main highway traversing through its ground.
�� A desktop study looking at a 2mtpa DSO road haulage, a 5mtpa DSO rail and 10mtpa rail scenario and
mine gate sales has been completed and will be announced in the back of the initial resource.
We estimate operating costs of say $50-60/t for the road haulage option scenario – potentially
generating cashfl ow of $80-100m pa.
The new draft guidelines for rail access for 3rd party does have positive implications for UMC and
the potential of negotiating access with either RIO or BHP or alternatively building a 100km rail line to
FMG’s multi user facility.
Whilst too early for any formal dcf valuations as no resource/scoping study has been announced we
believe a ‘back of the envelope’ target a price of $4.00/sh is not unreasonable assuming a resource of
80mt is defi ned.
This suggests an Enterprise value per resource of ~ $8/t versus sector average of $12/t and a EBITDA
multiple of 4-5x assuming some rough capital and operating cost estimates.
UMC have identifi ed another 14 exploration targets in the project area with three priority targets;
Jumbo Junction, Railway East and Yandi Headwaters.
The Jumbo Junction prospect is interpreted to contain the down plunge component of the Area C
mineralisation and appears to be an excellent target. This will be drilled shortly.
We initiate coverage with a Speculative Buy recommendation. We are attracted to the high quality
mineralisation, excellent infrastructure and exploration upside. The initial resource and scoping study
should provide a base to more formally value the stock but we see potential for the ultimate resource
to grow to well in excess of 100mt. Speculative Buy.