PROJECT SUMMARY This report provides a summary on the progress...

PROJECT SUMMARY
This report provides a summary on the progress of the Mehdiabad Zinc Project (the Project), effective March 2005.

The Project is located in Yazd Province in Central Iran and is operated as an incorporated Joint Venture (JV) through the private Iranian stock company Mehdiabad Zinc Company (MZC).

Union Resources Limited (UCL) is both a shareholder in MZC and the project manager. UCL partners in the Project are the Government of Iran (IMPASCO) and a private Iranian Company (Itok GmbH).

The initial focus of the JV was on the exploration of the Mehdiabad Deposit (the Deposit). This effort recognised an oxide deposit lying above the sulphides and significantly extended the sulphide mineralisation southwards. A Pre-Feasibility Study was conducted which demonstrated the viability of the oxide and sulphide deposit using open cut methods and on site zinc metal processing. In the last 12 months the Project has advanced to the Bankable Feasibility Study Stage.

Development of the Project is scheduled to commence next year with the construction of the mine and a 160,000 tpa zinc plant and with further expansion as the sulphide is exposed and mined production is planned to reach 500,000 tpa of zinc metal with lead concentrate production.

Mehdiabad is a giant Early Cretaceous carbonate hosted zinc-lead and silver deposit, occurring within a broad north-south orientated half graben. Outcrop occurs on the eastern side along East Ridge and is terminated at shallow depth on the western side by a major fault zone (Black Hill Fault). The central part of deposit is covered by thick alluvium.

The Deposit has been evaluated by more than 42,500 metres of diamond core drilling. The work has successful outlined an in ground zinc resource of 15.5 million tonnes of zinc, 5 million tonnes lead and 350 million ounces of silver, making the Project the largest undeveloped zinc resource in the world.

The resource is still open on the northern most drill section, over a width of 1300 metres and thickness up to 40 metres.

The Bankable Feasibility Study (BFS) is being undertaken by the major engineering firm Aker Kvaerner (Kvaerner). The BFS is expected to be completed by the end of 2005.

The Deposit will be mined by large scale open cut methods. The upper third of the Deposit comprises zinc oxide mineralisation and the lower two-thirds as sulphide minerals. Separate processing plants will be needed for the treatment of the oxide ore and the sulphide ore.

The first plant (Oxide Plant) will involve the direct acid leaching of the ore, with purification and recovery of the zinc metal by solvent extraction and electrowinning (SX-EW).

The second plant (Sulphide Plant) will be constructed around five years after the Oxide Plant and it will produce a zinc sulphide concentrate, which will be open tank acid leached to produce zinc metal at site. The Sulphide Plant will also produce a lead-silver concentrate for sale.

Fully developed the Project is capable of producing 6% of the world’s zinc at relatively low cost. The Project is expected to produce 500,000 tonnes of SHG zinc metal and 180,000 tonnes of lead-silver concentrates

A review of the project economics by UCL at the end of Phase 2 of the BFS suggests that the total operating cost will be around US$600 per tonne of zinc metal produced.

The project NPV at current zinc prices is above US$1000 million. The IRR is close to 30%.