(14/07/2008) Feedback: New Project Dear Sirs,it still amazes me...

(14/07/2008)



Feedback: New Project


Dear Sirs,

it still amazes me how you came up with the "flavor of the month" (fertilizer) proto-project in Namibia . You communicated before that you will be looking for projects in the areas of your expertise that would potentially create synergies with Mehdiabad (geographical location or geological/ mineral similarities). Actually buying some hopeful license in Nam (I wouldn't call it a project yet) for 40.000 EUR isn't really fitting that. How can the shareholders trust the managers of this company?

For the merits of "sandpiper" - please let us all now how you come to the conclusion by desk research that submarine production (water depth of 300m!) of phosphate can be economically done? A citation of the fairy tale (it cannot be a more substantial assessment) would be helpful.

What are the major shareholders, Lundin (a metal producer!), RAB Special Situations and Austex Mining think about it?

Cheers
Joerg




Union Resources Reply:



Dear Mr Baeur

With regard to your comments on "flavour of the month", you seem to hold the opinion that these projects gestate overnight. This is misguided. We have been pursuing this project, among others, since 2007, well before Phosphate became "flavour of the month" to use you term. You should be aware that the market for new projects has been very fully priced over the last few years and while Union management identified the risk of having a single project in Iran , they do not consider it prudent to pay economic rent in an overheated market for possible future speculative gain.

As a result, each initiative is evaluated individually and we ensure that we have the skill base available, either in-house or externally, to address the project at hand, and that the project has real potential to be developed. The Sandpiper Project in Namibia is no different. The due diligence we have undertaken has, among many other issues, led us to consult the best dredging contractors in the world over the last months, one of whom produced the desktop study to which you so disdainfully refer. They believe a technical solution is economically available in the short term, and we are working diligently to confirm that as quickly as possible. If you have any credible evidence that it is not, we would appreciate hearing it.

Nowhere have we given the impression that we were about to start a fertiliser business. While it is true that 85% of world phosphate goes into fertiliser, that 85% segments naturally into 3 economically distinguishable sectors, namely Rock Phosphate, Phosphoric Acid and finally fertilizer. At this stage we have not made any decision about where in this chain we will position ourselves, as this decision is far too premature at this time.

Your critique does seem, however, to have missed some of the most important variables in successful Phosphate development, one of which is that an off-take agreement is essential to the economics of any project which is not fully vertically integrated. The second is the positioning of the deposit from a logistical (transport) point of view. Furthermore, I note that you do not seem concerned about the reactivity of the material, its composition or its process behaviour, features which are also critical to the economic development of the ore body. I am surprised that you did not fault us for that as well.

The tone of your query suggests that you may be best advised to sell any holding you have in Union and reinvest it elsewhere. If you want to know the opinions of other shareholders, you should contact them.

Regards
Dr Frank Reid
Managing Director